As Filed with the Securities and Exchange Commission on July 1, 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. [ ]
Post-Effective Amendment No. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 [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
(X) 60 days after filing pursuant to paragraph (a)(1) of Rule 485
( ) on [date] pursuant to paragraph (a)(1) of Rule 485
Title of Securities Being Registered: Variable Portion of the Contracts
Funded Through the Separate Account.
No filing fee is due because an indefinite amount of securities is deemed
to have been registered in reliance on Section 24(f) of the Investment
Company Act of 1940.
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Exhibit List on Page ____
CONTENTS OF REGISTRATION STATEMENT
The Facing Sheet
The Contents Page
Cross-Reference Sheet
PART A
Prospectus
PART B
Statement of Additional Information
PART C
Items 24 - 32
The Signatures
Exhibits
VARIABLE ACCOUNT 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
This Amendment to the registration statement on Form N-4 which became
effective on June 25, 1998 (the "Registration Statement") is being filed
pursuant to Rule 485(a) under the Securities Act of 1933, as amended, to
supplement the Registration Statement with a separate prospectus and
statement of additional information ("SAI"), and related exhibits,
describing a particular form of the Group Flexible Premium Deferred Annuity
Contract. This Amendment relates only to the prospectus, SAI, and exhibits
included in this Amendment and does not otherwise delete, amend, or
supersede any information contained in the Registration Statement.
PART A
July 15, 1998 Prospectus for
KEYPORT BENEFIT
KEYPORT ADVISOR VARIABLE ANNUITY
Including Fund Prospectuses for
THE ALGER AMERICAN FUND
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
LIBERTY VARIABLE INVESTMENT TRUST
MFS VARIABLE INSURANCE TRUST
STEINROE VARIABLE INVESTMENT TRUST
Annuities are:
not insured by the FDIC;
not a deposit or other obligation of, or
guaranteed by, the depository institution;
subject to investment risks, including the
possible loss of principal amount invested.
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 05077
Keyport Benefit Service Office
125 High Street, Boston, MA 02110-2712
Service Hotline 800-367-3653 (Press 3)
KBLVAP 7/98
____Yes.I would like to receive the Keyport Benefit Advisor Variable
Annuity Statement of Additional Information.
____Yes.I would like to receive the Statement of Additional Information for
the Eligible Funds of:
____ The Alger American Fund
____ Alliance Variable Products Series Fund, Inc.
____ Liberty Variable Investment Trust
____ MFS Variable Insurance Trust
____ SteinRoe Variable Investment Trust
Name
Address
City State Zip
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 6719 BOSTON, MA
POSTAGE WILL BE PAID BY ADDRESSEE
KEYPORT BENEFIT LIFE INSURANCE COMPANY
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 also on a fixed basis, and payments of periodic
annuity payments on either a variable or a fixed basis. The Certificates
are designed for use by individuals for retirement planning purposes.
This prospectus generally describes only the variable features of the
Certificate (for a summary of the fixed features, see Appendix A on Page
28). If the Certificate Owner elects to have Certificate Values accumulated
on a variable basis, Purchase Payments will be allocated to a segregated
investment account of Keyport Benefit Life Insurance Company ("Keyport
Benefit"), designated Variable Account A ("Variable Account").
The Variable Account invests in shares of the following Eligible Funds at
their net asset value: The Alger American Fund ("Alger American Fund")-
Alger American Growth Portfolio ("Alger Growth") and Alger American Small
Capitalization Portfolio ("Alger Small Cap"); Alliance Variable Products
Series Fund, Inc. ("Alliance Series Fund") -- Global Bond Portfolio
("Alliance Global Bond") and Premier Growth Portfolio ("Alliance Premier
Growth"); Liberty Variable Investment Trust ("Liberty Trust") -- Colonial
Growth and Income Fund, Variable Series ("Colonial Growth and Income");
Colonial International Fund for Growth, Variable Series ("Colonial Int'l
Fund for Growth"); Colonial Strategic Income Fund, Variable Series
("Colonial Strategic Income"); Colonial U.S. Stock Fund, Variable Series
("Colonial U.S. Stock"); Liberty All-Star Equity Fund, Variable Series
("Liberty All-Star Equity"); Newport Tiger Fund, Variable Series ("Newport
Tiger"); and Stein Roe Global Utilities Fund, Variable Series ("Stein Roe
Global Utilities"); MFS Variable Insurance Trust ("MFS Trust") -- MFS
Emerging Growth Series ("MFS Emerging Growth") and MFS Research Series
("MFS Research"); and SteinRoe Variable Investment Trust ("SteinRoe Trust")
- -- Stein Roe Balanced Fund, Variable Series ("Stein Roe Balanced"); Stein
Roe Growth Stock Fund, Variable Series ("Stein Roe Growth Stock"); Stein
Roe Money Market Fund, Variable Series ("Stein Roe Money Market"); Stein
Roe Mortgage Securities Fund, Variable Series ("Stein Roe Mortgage
Securities"); and Stein Roe Special Venture Fund, Variable Series ("Stein
Roe Special Venture").
The Variable Account may offer other forms of the Contracts and
Certificates with features, and fees and charges which vary from the
Certificates, and provide for investment in other Sub-Accounts which may
invest in different or additional mutual funds. Other Contracts and
Certificates will be described in separate prospectuses and statements of
additional information. The agent selling the Contracts and Certificates
has information concerning the eligibility for and the availability of the
other forms of the Contracts and Certificates.
A Statement of Additional Information dated the same as this prospectus has
been filed with the Securities and Exchange Commission and is herein
incorporated by reference. It is available, at no charge, by writing 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. A
table of contents for the Statement of Additional Information is on Page
27.
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 July 15, 1998
TABLE OF CONTENTS
Page
Glossary of Special Terms 3
Summary of Expenses 4
Synopsis 7
Performance Information 8
Keyport Benefit and the Variable Account 9
Year 2000 Matters 10
Purchase Payments and Applications 10
Investments of the Variable Account 10
Allocations of Purchase Payments 10
Eligible Funds 11
Transfer of Variable Account Value 13
Substitution of Eligible Funds and Other Variable
Account Changes 14
Deductions 14
Deductions for Certificate Maintenance Charge 14
Deductions for Mortality and Expense Risk Charge 15
Deductions for Daily Distribution Charge 15
Deductions for Contingent Deferred Sales Charge 15
Deductions for Transfers of Variable Account Value 16
Deductions for Premium Taxes 16
Deductions for Income Taxes 17
Total Variable Account Expenses 17
Other Services 17
The Certificates 18
Variable Account Value 18
Valuation Periods 18
Net Investment Factor 19
Modification of the Certificate 19
Right to Revoke 19
Death Provisions for Non-Qualified Certificates 19
Death Provisions for Qualified Certificates 20
Certificate Ownership 21
Assignment 21
Partial Withdrawals and Surrender 21
Annuity Provisions 21
Annuity Benefits 21
Income Date and Annuity Option 22
Change in Income Date and Annuity Option 22
Annuity Options 22
Variable Annuity Payment Values 23
Proof of Age, Sex, and Survival of Annuitant 23
Suspension of Payments 23
Tax Status 23
Introduction 23
Taxation of Annuities in General 24
Qualified Plans 25
Tax-Sheltered Annuities 25
Individual Retirement Annuities 26
Corporate Pension and Profit-Sharing Plans 26
Deferred Compensation Plans with Respect to Service
for State and Local Governments 26
Variable Account Voting Privileges 26
Sales of the Certificates 26
Legal Proceedings 27
Inquiries by Certificate Owners 27
Table of Contents_Statement of Additional Information 27
Appendix A_The Fixed Account (also known as the Modified
Guaranteed Annuity Account) 28
Appendix B_Telephone Instructions 31
GLOSSARY OF SPECIAL TERMS
Accumulation Unit: An accounting unit of measure used to calculate Variable
Account Value.
Annuitant: The Annuitant is the natural person to whom any annuity payments
will be made starting on the Income Date. The Annuitant may not be over
age 90 on the Certificate Date (age 75 for Qualified Certificates and age
90 for Roth IRA Qualified Certificates).
Certificate Anniversary: The same month and day as the Certificate Date in
each subsequent year of the Certificate.
Certificate Date: The effective date of the Certificate; it is shown on
the Certificate Schedule.
Certificate Owner: The person (or persons in the case of joint ownership)
who possesses all the ownership rights under the Certificate. The primary
Certificate Owner may not be over age 90 on the Certificate Date (age 75
for Qualified Certificates, age 90 for Roth IRA Qualified Certificates and
age 90 for a joint Owner).
Certificate Value: The sum of the Variable Account Value and the Fixed
Account Value.
Certificate Withdrawal Value: The Certificate Value increased or decreased
by a limited Market Value Adjustment less any premium taxes and Certificate
Maintenance Charge and applicable Contingent Deferred Sales Charges.
Certificate Year: Any period of 12 months commencing with the Certificate
Date and each Certificate Anniversary thereafter shall be a Certificate
Year.
Covered Person: The person(s) identified on the Certificate Schedule whose
death may result in an Adjustment of Certificate Value, a waiver of any
Contingent Deferred Sales Charges and a waiver of any Market Value
Adjustment or whose medically necessary stay in a hospital or nursing
facility may allow the Certificate Owner to be eligible for either a total
or partial waiver of the Contingent Deferred Sales Charge.
Designated Beneficiary: The person who may be entitled to receive benefits
following the death of the Annuitant, Certificate Owner, or joint
Certificate Owner. The Designated Beneficiary will be the first person
among the following who is alive on the date of death: primary Certificate
Owner; joint Certificate Owner; primary beneficiary; contingent
beneficiary; and if none of the above is alive, the primary Certificate
Owner's estate. If the primary Certificate Owner and joint Certificate
Owner are both alive, they will be the Designated Beneficiary together.
Eligible Funds: The mutual funds that are eligible investments for the
Variable Account under the Certificates.
Fixed Account: Part of Keyport Benefit's general account to which Purchase
Payments may be allocated or Certificate Values may be transferred.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under the Certificate prior to the Income Date.
Guarantee Period Anniversary: An anniversary of a Guarantee Period's Start
Date.
Guarantee Period Month: The first Guarantee Period Month is the monthly
period which begins on the Start Date. Subsequent Guarantee Period Months
begin on the same day in the ensuing months.
Guarantee Period Year: The first Guarantee Period Year is the annual
period which begins on the Start Date. Subsequent Guarantee Period Years
begin on each Guaranteed Period Anniversary.
In Force: The status of the Certificate before the Income Date so long as
it is not totally surrendered, the Certificate Value under a Certificate
does not go to zero, and there has not been a death of the Annuitant or any
Certificate Owner that will cause the Certificate to end within at most
five years of the date of death.
Income Date: The date on which annuity payments are to begin.
Non-Qualified Certificate: Any Certificate that is not issued under a
Qualified Plan.
Office: Keyport 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
Sections 401, 403(b), 408(b), or 408A of the Internal Revenue Code.
Keyport Benefit treats Section 457 plans as Qualified Plans.
Service Office: Keyport Benefit's Service Office which is 125 High Street,
Boston, Massachusetts 02110.
Start Date: The date an amount is first allocated to a Guarantee Period.
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): 7%1
Years from Date of Payment Sales Charge
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or later 0%
Maximum Total Certificate Owner Transaction Expenses2
(as a percentage of Purchase Payments): 7%
Annual Certificate Maintenance Charge3 $36
The Certificate Maintenance Charge will be waived before the Income Date
if:
(i) it is the first Certificate Anniversary;
(ii) the Certificate Value is greater than or equal to $40,000 on the
Certificate Anniversary date this charge is imposed, or
(iii) Purchase Payments of at least $2,000 have been made in the prior
Certificate Year and there has been no partial withdrawal in the prior
Certificate Year.
The Certificate Maintenance Charge will be waived on and after the Income
Date for the current year if:
(i) variable annuity Option A (Income for a Fixed Number of Years) is
applicable; and
(ii) at the time of the first payment of the year, the present value
of all the remaining payments (see "Option A" on Page 28) is greater than
or equal to $40,000.
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: 1.25%
Distribution Charge: .15%
Total Variable Account Annual Expenses: 1.40%
Alger American Fund, Alliance Series Fund, Liberty Trust, MFS Trust, and
SteinRoe Trust Annual Expenses4
(as a percentage of average net assets)
Management Other Total Fund
Fees Expenses Operating
(After Any (After Any Expenses (After
Waiver and/or Waiver and/or Any Waiver and/or
Fund Reimbursement)5 Reimbursement)5
Reimbursement)5
Alger Growth .75% .04% .79%
Alger Small Cap .85% .04% .89%
Alliance Global Bond .56%(.65%) .38% .94%(1.03%)
Alliance Premier Growth 1.00% .08% 1.08%
Colonial Growth & Income .65% .14% .79%
Colonial Int'l Fund for Growth .90% .44% 1.34%
Colonial Strategic Income .65% .15%(.17%) .80%(.82%)
Colonial U.S. Stock .80% .14% .94%
Liberty All-Star Equity .80% .20%(.65%) 1.00%(1.45%)
Newport Tiger .90% .35% 1.25%
Stein Roe Global Utilities .65% .18% .83%
MFS Emerging Growth .75% .12% .87%
MFS Research .75% .13% .88%
Stein Roe Balanced .45% .21% .66%
Stein Roe Growth Stock .50% .21% .71%
Stein Roe Money Market .35 .25% .60%
Stein Roe Mortgage Securities .40% .30% .70%
Stein Roe Special Venture .50% .23% .73%
THE ABOVE EXPENSES FOR THE ELIGIBLE FUNDS WERE PROVIDED BY THE FUNDS.
KEYPORT BENEFIT HAS NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE
INFORMATION.
Example #1 _ Assuming surrender of the Certificate at the end of the
periods shown.6
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Alger Growth $ 93 $122 $162 $319
Alger Small Cap 94 125 167 331
Alliance Global Bond 94 127 170 338
Alliance Premier Growth 94 127 171 340
Colonial Growth & Income 93 122 162 319
Colonial Int'l Fund for Growth 99 141 195 395
Colonial Strategic Income 93 123 162 321
Colonial U.S. Stock 94 127 171 340
Liberty All-Star Equity 94 127 170 337
Newport Tiger 97 137 188 379
Stein Roe Global Utilities 93 123 163 322
MFS Emerging Growth 95 129 174 346
MFS Research 95 129 174 346
Stein Roe Balanced 91 119 155 304
Stein Roe Growth Stock 92 120 159 312
Stein Roe Money Market 91 118 154 301
Stein Roe Mortgage Securities 92 120 157 308
Stein Roe Special Venture 92 121 160 314
Example #2 _ Assuming annuitization of the Certificate at the end of the
periods shown.6
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Alger Growth 23 73 132 319
Alger Small Cap 24 76 137 331
Alliance Global Bond 24 78 140 338
Alliance Premier Growth 24 78 141 340
Colonial Growth & Income 23 73 132 319
Colonial Int'l Fund for Growth 29 93 165 395
Colonial Strategic Income 23 74 132 321
Colonial U.S. Stock 24 78 141 340
Liberty All-Star Equity 24 78 140 337
Newport Tiger 27 88 158 379
Stein Roe Global Utilities 23 74 133 322
MFS Emerging Growth 25 80 144 346
MFS Research 25 80 144 346
Stein Roe Balanced 21 70 125 304
Stein Roe Growth Stock 22 71 129 312
Stein Roe Money Market 21 69 124 301
Stein Roe Mortgage Securities 22 70 127 308
Stein Roe Special Venture 22 72 130 314
Example #3 _ Assuming the Certificate stays in force through the periods
shown.
A $1,000 investment in each Sub-Account listed would be subject to the same
expenses shown in Example #2, assuming 5% annual return on assets.
1Contingent Deferred Sales Charges are deducted only if the Certificate is
totally or partially surrendered. A surrender will not incur the Charge
percentage shown as follows:
1. In any Certificate Year, Certificate Owners may withdraw an aggregate
amount, not to exceed, at the time of withdrawal, the Certificate's
earnings, which equal: (a) the Certificate Value, less (b) the portion of
the Purchase Payments not previously withdrawn.
2. In any Certificate Year after the first, Certificate Owners may
withdraw, in addition to the amount available in 1., the amount by which
10% of the Certificate Value as of the preceding Certificate Anniversary
exceeds the amount available in 1.
2Keyport 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.
3This charge will be waived on the first Certificate Anniversary and in
certain other instances (see "Deductions for Certificate Maintenance
Charge").
4All Trust and Fund expenses are for 1997, except for Alliance Premier
Growth which has been restated to reflect current charges. The Alliance
Series Fund (Alliance Global Bond only) and Liberty Trust (Colonial
Strategic Income and Liberty All-Star Equity only) expenses reflect such
Fund's or Trust's adviser's agreement to reimburse expenses above certain
limits (see footnote 5).
5The manager of Alger American Fund has agreed to reimburse each Eligible
Fund to the extent that its annual operating expenses, excluding interest,
taxes, fees for brokerage services and extraordinary expenses exceed 1.50%
of its average daily net assets for any fiscal year. The Alger American
Fund's manager was not required to reimburse expenses as of the date of
this Prospectus.
The manager of Alliance Series Fund has agreed to continue voluntary
expense reimbursements for Alliance Global Bond for the foreseeable future.
Each percentage shown in the parentheses is what the expenses would be in
the absence of expense reimbursement: for Alliance Global Bond--.65% for
management fees and 1.03% for total expenses. For Alliance Premier Growth,
the fees have been restated to reflect the discontinuation of expense
reimbursements effective 5/1/98 (see footnote 4). The expenses for 1997
were .95% and, in the absence of expense reimbursement, total expenses
would have been 1.10%.
The manager of Liberty Trust has agreed until 4/30/99 to reimburse all
expenses, including management fees, but excluding interest, taxes,
brokerage, and other expenses which are capitalized in accordance with
accepted accounting procedures, and extraordinary expenses, in excess of
the following percentage of average net asset value per annum: 1.00% for
Colonial Growth & Income, Colonial U.S. Stock, Liberty All-Star Equity, and
Stein Roe Global Utilities; 1.75% for Colonial Int'l Fund for Growth and
Newport Tiger; and .80% for Colonial Strategic Income. Each percentage
shown in the parentheses is what the expenses would be in the absence of
expense reimbursement: for Colonial Strategic Income--.17% for other
expenses and .82% for total expenses; and for Liberty All-Star Equity--.65%
for other expenses and 1.45% for total expenses.
The manager of SteinRoe Trust has agreed until 4/30/99 to reimburse all
expenses, including management fees, in excess of the following percentage
of the average 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: for
Stein Roe Balanced--.75%; for Stein Roe Growth Stock and Stein Roe Special
Venture--.80%; for Stein Roe Mortgage Securities--.70%; and for Stein Roe
Money Market--.65%. The SteinRoe Trust's manager was not required to
reimburse expenses as of the date of this Prospectus.
6The annuity is designed for retirement planning purposes. Surrenders
prior to the Income Date are not consistent with the long-term purposes of
the Certificate and the applicable tax laws.
The examples should not be considered a representation of past or future
expenses and charges of the Sub-Accounts. Actual expenses may be greater
or less than those shown. Similarly, the assumed 5% annual rate of return
is not an estimate or a guarantee of future investment performance. See
"Deductions" in this prospectus, "Management of the Fund" in the
prospectuses for Alger American Fund and the Alliance Series Fund, "Trust
Management Organizations" and "Expenses of the Funds" in the prospectus for
Liberty Trust, "Management of the Series" and "Expenses" in the prospectus
for MFS Trust, and "How the Funds are Managed" in the prospectus for
SteinRoe Trust.
SYNOPSIS
The following Synopsis should be read in conjunction with the detailed
information in this prospectus and the Statement of Additional Information.
Please refer to the Glossary of Special Terms for the meaning of certain
defined terms. Variations from the information appearing in this prospectus
due to individual state requirements are described in supplements which are
attached to this prospectus, or in endorsements to the Certificates, as
appropriate.
The Certificate allows Certificate Owners to allocate Purchase Payments to
the Variable Account and also to the Fixed Account. The Variable Account
is a separate investment account maintained by Keyport Benefit. The Fixed
Account is part of Keyport Benefit's "general account", which consists of
all Keyport Benefit's assets except the Variable Account and the assets of
other separate investment accounts maintained by Keyport Benefit.
Certificate Owners may allocate payments to, and receive annuity payments
from the Variable Account and/or the Fixed Account. If the Certificate
Owner allocates payments to the Variable Account, the accumulation values
and annuity payments will fluctuate according to the investment experience
of the Sub-Accounts chosen. If the Certificate Owner allocates payments to
the Fixed Account, the accumulation values will increase at guaranteed
interest rates and annuity payments will be of a fixed amount. Fixed
Account Values are subject to a limited market value adjustment. (See
Appendix A on Page 28 for more information on the Fixed Account.) If the
Certificate Owner allocates payments to both Accounts, then the
accumulation values and annuity payments will be variable in part and fixed
in part.
The Certificate permits Purchase Payments to be made on a flexible Purchase
Payment basis. The minimum initial payment is $5,000 and $2,000 for
individual retirement annuities. The minimum amount for each subsequent
payment is $1,000 or such lesser amount as Keyport Benefit may permit from
time to time (currently $250). (See "Purchase Payments and Applications"
on Page 9.)
There are no deductions made from Purchase Payments for sales charges at
the time of purchase. A Contingent Deferred Sales Charge may be deducted
in the event of a total or partial surrender (see "Partial Withdrawals and
Surrender" on Page 21). The Contingent Deferred Sales Charge is based on a
graded table of charges. The charge will not exceed 7% of that portion of
the amount surrendered that represents Purchase Payments made during the
seven years immediately preceding the request for surrender. (See
"Deductions for Contingent Deferred Sales Charge" on Page 15.)
Keyport Benefit deducts a Mortality and Expense Risk Charge, which is equal
on an annual basis to 1.25% of the average daily net asset values in the
Variable Account attributable to the Certificates. (See "Deductions for
Mortality and Expense Risk Charge" on Page 14.) Keyport Benefit also
deducts a daily distribution charge which is equal on an annual basis to
.15% of the same values. (See "Deductions for Daily Distribution Charge"
on Page 15.)
Keyport Benefit deducts an annual Certificate Maintenance Charge (currently
$36.00) 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. Keyport Benefit will in certain instances waive
this charge. (See "Deductions for Certificate Maintenance Charge" on Page
14.)
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 16.)
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 23.)
The Certificate allows the Certificate Owner to revoke the Certificate
generally within 10 days of delivery (see "Right to Revoke" on Page 19).
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.
Certain of the Eligible Funds have been available for Keyport Benefit
and/or non-Keyport Benefit variable annuity contracts for periods prior to
the commencement of the offering of the Certificates described in this
prospectus. Any performance information for such periods will be based on
the historical results of the Eligible Funds being applied to the
Certificate for the specified time periods.
Performance information is not intended to indicate either past performance
under an actual Certificate or future performance.
The Sub-Accounts may advertise total return information for various periods
of time. Total return performance information is based on the overall
percentage change in value of a hypothetical investment in the specific Sub-
Account over a given period of time.
Average annual total return information shows the average percentage change
in the value of an investment in the Sub-Account from the beginning date of
the measuring period to the end of that period. This standardized version
of average annual total return reflects all historical investment results,
less all charges and deductions applied against the Sub-Account and a
Certificate (including any Contingent Deferred Sales Charge that would
apply if a Certificate Owner surrendered the Certificate at the end of each
period indicated). Average total return does not take into account any
premium taxes and would be lower if these taxes were included.
In order to calculate average annual total return, 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.
First, the Sub-Accounts may present total return information computed on
the same basis as described above, except deductions will not include the
Contingent Deferred Sales Charge. This presentation assumes that the
investment in the Certificate continues beyond the period when the
Contingent Deferred Sales Charge applies, consistent with the long-term
investment and retirement objectives of the Certificate. The total return
percentage will thus be higher under this method than the standard method
described above.
Second, the Sub-Accounts may present total return information calculated by
dividing the change in a Sub-Account's Accumulation Unit value over a
specified time period by the Accumulation Unit value of that Sub-Account at
the beginning of the period. This computation results in a 12-month change
rate or, for longer periods, a total rate for the period which Keyport
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 Contingent Deferred Sales Charge, the Certificate
Maintenance Charge and premium tax charges. The percentages would be lower
if these charges were included.
The Stein Roe Money Market Sub-Account is a money market Sub-Account that
also may advertise yield and effective yield information. The yield of the
Sub-Account refers to the income generated by an investment in the Sub-
Account over a specifically identified 7-day period. This income is
annualized by assuming that the amount of income generated by the
investment during that week is generated each week over a 52-week period
and is shown as a percentage. The yield reflects the deduction of all
charges assessed against the Sub-Account and a Certificate but does not
take into account Contingent Deferred Sales Charges and premium tax
charges. The yield would be lower if these charges were included.
The effective yield of the Stein Roe Money Market 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
(currently $250). 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 or must specify the
asset allocation model selected. (See "Other Services, the Programs" on
Page 16). The percentage for each Sub-Account, if not zero, must be at
least 5% and must be a whole number. A Certificate Owner may change the
allocation percentages without fee, penalty or other charge. Allocation
changes must be made by Written Request unless the Certificate Owner has by
Written Request authorized 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 B and Certificate Owners authorizing
telephone allocation instructions will be notified, in advance, of any
changes.
The Variable Account is segmented into Sub-Accounts. Each Sub-Account
contains the shares of one of the Eligible Funds and such shares are
purchased at net asset value. Eligible Funds and Sub-Accounts may be added
or withdrawn as permitted by applicable law. The Sub-Accounts in the
Variable Account and the corresponding Eligible Funds currently are as
follows:
Eligible Funds of Alger American Fund Sub-Accounts
Alger Growth Alger Growth Sub-Account
Alger Small Cap Alger Small Cap Sub-Account
Eligible Funds of Alliance Series Fund Sub-Accounts
Alliance Global Bond Alliance Global Bond Sub-
Account
Alliance Premier Growth Alliance Premier Growth Sub-
Account
Eligible Funds of Liberty Trust Sub-Accounts
Colonial Growth & Income Colonial Growth & Income
Sub-Account
Colonial Int'l Fund for Growth Colonial Int'l Fund for
Growth Sub-Account
Colonial Strategic Income Colonial Strategic Income
Sub-Account
Colonial U.S. Stock Colonial U.S. Stock Sub-
Account
Liberty All-Star Equity Liberty All-Star Equity Sub-
Account
Newport Tiger Newport Tiger Sub-Account
Stein Roe Global Utilities Stein Roe Global Utilities
Sub-Account
Eligible Funds of MFS Trust Sub-Accounts
MFS Emerging Growth MFS Emerging Growth Sub-
Account
MFS Research MFS Research Sub-Account
Eligible Funds of SteinRoe Trust Sub-Accounts
Stein Roe Balanced Stein Roe Balanced Sub-
Account
Stein Roe Growth Stock Stein Roe Growth Stock Sub-
Account
Stein Roe Money Market Stein Roe Money Market Sub-
Account
Stein Roe Mortgage Securities Stein Roe Mortgage
Securities Sub-Account
Stein Roe Special Venture Stein Roe Special Venture
Sub-Account
Eligible Funds
The Eligible Funds which are the permissible investments of the Variable
Account are the separate funds listed above of Alger American Fund,
Alliance Series Fund, Liberty Trust, MFS Trust and 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.
Fred Alger Management, Inc. ("Alger Management") is the investment manager
for both Eligible Funds of Alger American Fund. Alger Management has been
in the business of providing investment advisory services since 1964.
Alliance Capital Management L.P. is the investment advisor for both
Eligible Funds of Alliance Series Fund. AIGAM International Limited serves
as sub-adviser for Alliance Global.
Liberty Advisory Services Corp. ("LASC"), an affiliate of Keyport Benefit,
is the manager for Liberty Trust and its Eligible Funds. Colonial
Management Associates, Inc. ("Colonial"), an affiliate of Keyport Benefit,
serves as sub-adviser for the Eligible Funds (except for Newport Tiger,
Stein Roe Global Utilities and Liberty All-Star Equity). Colonial has
provided investment advisory services since 1931. Newport Fund Management,
Inc., an affiliate of Keyport Benefit, serves as sub-adviser for Newport
Tiger. Liberty Asset Management Company, an affiliate of Keyport Benefit,
serves as sub-adviser for Liberty All-Star Equity and the current portfolio
managers are J.P. Morgan Investment Management Inc., Oppenheimer Capital,
Wilke/Thompson Capital Management Inc., Westwood Management Corp. and
Boston Partners Asset Management, L.P.
Massachusetts Financial Services Company ("MFS") is the investment advisor
for both Eligible Funds of MFS Trust. MFS is America's oldest mutual fund
organization. MFS and its predecessor organizations have a history of money
management dating from 1924 and the founding of the first mutual fund in
the United States, Massachusetts Investors Trust.
Stein Roe & Farnham Incorporated ("Stein Roe") is the investment adviser
for each Eligible Fund of SteinRoe Trust and sub-adviser for Stein Roe
Global Utilities. 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 fund for investing. The
prospectus is available, at no charge, from a salesperson or by writing
Keyport Benefit's Service Office at the address shown on Page 1 or by
calling (800) 437-4466.
Eligible Funds of Alger
American Fund and Variable Account
Sub-Accounts Investment Objective
Alger Growth Long-term capital appreciation
(Alger Growth Sub-Account)
Alger Small Cap Long-term capital appreciation.
(Alger Small Cap Sub-Account)
Eligible Funds of Alliance Series
Fund and Variable Account
Sub-Accounts Investment Objective
Alliance Global Bond A high level of return from a
(Alliance Global Bond combination of current income and
Sub-Account) capital appreciation by investing
in a globally diversified portfolio
of high quality debt securities
denominated in the U.S. Dollar and
a range of foreign currencies.
Alliance Premier Growth Growth of capital rather than
(Alliance Premier Growth current income.
Sub-Account)
Eligible Funds of Liberty Trust
and Variable Account
Sub-Accounts Investment Objective
Colonial Growth & Income Primarily income and long-term
(Colonial Growth & Income capital growth and, secondarily,
Sub- Account) preservation of capital.
Colonial Int'l Fund for Growth Long-term capital growth, by
(Colonial Int'l Fund for Growth investing primarily in non-U.S.
Sub-Account) equity securities.
Colonial Strategic Income A high level of current income, as
(Colonial Strategic Income is consistent with prudent risk and
Sub-Account) maximizing total return, by
diversifying investments primarily
in U.S. and foreign government and
high yield, high risk corporate
debt securities.
Colonial U.S. Stock Long-term capital growth by
(Colonial U.S. Stock Sub Account) investing primarily in large
capitalization equity securities.
Liberty All-Star Equity Total investment return, comprised
(Liberty All-Star Equity Sub-Account) of long-term capital appreciation
and current income, through
investment primarily in a
diversified portfolio of equity
securities.
Newport Tiger
(Newport Tiger Sub-Account) Long term capital growth by
investing primarily in equity
securities of companies located in
the nine Tigers of Asia (Hong Kong,
Singapore, South Korea, Taiwan,
Malaysia, Thailand, Indonesia,
China and the Philippines).
Stein Roe Global Utilities
(Stein Roe Global Utilities Current income and long-term growth
Sub-Account) of capital and income.
Eligible Funds of MFS Trust
and Variable Account
Sub-Accounts Investment Objective
MFS Emerging Growth Long-term growth of capital.
(MFS Emerging Growth Sub-Account)
MFS Research Long-term growth of capital and
(MFS Research Sub-Account) future income.
Eligible Funds of SteinRoe Trust
and Variable Account
Sub-Accounts Investment Objective
Stein Roe Balanced High total investment return
(Stein Roe Balanced through investment in a changing
Sub-Account) mix of securities.
Stein Roe Growth Stock Long-term growth of capital through
(Stein Roe Growth Stock investment primarily in common
Sub-Account) stocks.
Stein Roe Money Market High current income from short-term
(Stein Roe Money Market money market instruments while
Sub-Account) emphasizing preservation of capital
and maintaining excellent
liquidity.
Stein Roe Mortgage Securities Highest possible level of current
(Stein Roe Mortgage Securities income consistent with safety of
Sub-Account) principal and maintenance of
liquidity through investment
primarily in mortgage-backed
securities.
Stein Roe Special Venture Capital growth by investing
(Stein Roe Special Venture primarily in common stocks,
Sub-Account) convertible securities, and other
securities selected for prospective
capital growth.
There is no assurance that the Eligible Funds will achieve their stated
objectives.
All the Eligible Funds are funding vehicles for variable annuity contracts
and variable life insurance policies offered by separate accounts of
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 Eligible Fund prospectuses under the following captions:
Alger American Fund - "Participating Insurance Companies and Plans";
Alliance Series Fund - "Introduction to the Fund"; Liberty Trust - "The
Trust"; MFS Trust - "Investment Concept of the Trust"; and SteinRoe Trust -
"The Trust".
Transfer of Variable Account Value
Certificate Owners may transfer Variable Account Value from one Sub-Account
to another Sub-Account and/or to the Fixed Account.
The Certificate allows 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 shorter 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 B and Certificate Owners
authorizing telephone transfers will be notified, in advance, of any
changes. Written transfer requests may be made by a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Keyport 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 $36 per Certificate
Year. PRIOR TO THE INCOME DATE THE CERTIFICATE MAINTENANCE CHARGE IS NOT
GUARANTEED AND MAY BE CHANGED BY KEYPORT BENEFIT.
The Certificate Maintenance Charge will be waived before the Income Date
if:
(i) it is the first Certificate Anniversary,
(ii) the Certificate Value is greater than or equal to $40,000 on the
Certificate Anniversary date this charge is imposed, or
(iii) Purchase Payments of at least $2,000 have been made in the prior
Certificate Year and there has been no partial withdrawal in the
prior Certificate Year.
The Certificate Maintenance Charge will be waived on and after the Income
Date for the current year if:
(i) variable annuity Option A is applicable; and
(ii) at the time of the first payment of the year, the present value of all
of the remaining payments (see "Option A" on Page 22) is greater than
or equal to $40,000.
Prior to the Income Date, the full amount of the charge will be deducted
from the Variable Account Value on each Certificate Anniversary and on the
date of any total surrender not falling on the Certificate Anniversary. On
the Income Date, a pro-rata portion of the charge due on the next
Certificate Anniversary will be deducted from the Variable Account Value.
This pro-rata charge covers the period from the prior Certificate
Anniversary to the Income Date. For example, if the Income Date occurs 73
days after that prior anniversary, then one-fifth (i.e., 73 days/365 days)
of the annual charge would be deducted on the Income Date. The charge will
be deducted from each Sub-Account in the proportion that the value of each
bears to the Variable Account Value.
Once annuity payments begin on the Income Date or once they begin after
surrender benefits are applied under a settlement option, the yearly cost
of the Certificate Maintenance Charge for a payee's annuity will be the
same as the yearly amount in effect immediately before the annuity payments
begin. Keyport 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 Benefits"). 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 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 1.25% of the average
daily net asset value of the Sub-Account. The charge is deducted during
both the accumulation and annuity periods (i.e., both before and after the
Income Date). Less than the full charge will be deducted from Sub-Account
values attributable to Certificates issued to employees of Keyport Benefit
and other persons specified in "Sales of the Certificates".
Deductions for Daily Distribution Charge
Keyport Benefit also deducts from each Sub-Account each Valuation Period a
daily Distribution Charge equal on an annual basis to 0.15% of the average
daily net asset value of the Sub-Account. This charge compensates Keyport
Benefit for certain sales distribution expenses relating to the
Certificate.
This charge will not be deducted from Sub-Account values attributable to
Certificates that have reached the maximum cumulative distribution charge
limit defined below and to Certificates issued to employees of Keyport
Benefit and other persons specified in "Sales of the Certificates". The
charge is also not deducted from Sub-Account values attributable to Annuity
Units. Keyport Benefit may decide not to deduct the charge from Sub-Account
values attributable to a Certificate issued in an internal exchange or
transfer of an annuity contract of Keyport Benefit's general account.
Deductions for Contingent Deferred Sales Charge
A sales charge is not deducted from the Certificate's Purchase Payments
when initially received. However, a Contingent Deferred Sales Charge may
be deducted upon a surrender.
In order to determine whether a Contingent Deferred Sales Charge will be
due upon a partial or total surrender, Keyport Benefit maintains a separate
set of records. These records identify the date and amount of each
Purchase Payment made to the Certificate and the Certificate Value over
time.
Certificate Owners will be permitted to make partial surrenders during the
Accumulation Period without incurring a Contingent Deferred Sales Charge,
as follows:
1. In any Certificate Year, Certificate Owners may withdraw an aggregate
amount not to exceed, at the time of the withdrawal, the Certificate's
earnings, which equal: (a) the Certificate Value, less (b) the portion of
the Purchase Payments not previously withdrawn.
2. In any Certificate Year after the first, Certificate Owners may
withdraw, in addition to the amount available in 1., the amount by which
10% of the Certificate Value as of the preceding Certificate Anniversary
exceeds the amount available in 1.
Contingent Deferred Sales Charges, as discussed below, will be deducted
with respect to withdrawals in excess of these amounts.
In computing the applicable charge amounts, the amount of any surrender in
any Certificate Year after the first as set forth in 2. above, will be
deducted from the Purchase Payments in chronological order from the oldest
to the most recent until the amount is fully deducted. Any amount so
deducted will not be subject to a charge.
The following additional amounts will be deducted from the Purchase
Payments in the same chronological order: the amount of any surrender in
the first Certificate Year in excess of the amount set forth in 1. above
and the amount of any surrender in any later Certificate Year in excess of
the combined amount set forth in 1. and 2. above. The Contingent Deferred
Sales Charge for each Purchase Payment from which a deduction is made will
be equal to (a) multiplied by (b), where:
(a) is the amount so deducted; and
(b) is the applicable percentage for the number of years that have
elapsed from the date of that payment to the date of surrender.
Years are measured from the month and day of payment to the same
month and day in each subsequent calendar year. The percentages
applicable to each Purchase Payment during the seven years after
the date of its payment are: 7% during year 1; 6% during year 2; 5%
during year 3; 4% during year 4; 3% during year 5; 2% during year
6; 1% during year 7; and 0% thereafter.
The applicable Contingent Deferred Sales Charges for each Purchase Payment
are then totaled. The lesser of this total amount and the Certificate's
maximum cumulative distribution charge will be deducted from the
Certificate Value in the same manner as the surrender amount. The maximum
cumulative distribution charge is equal to (a) less (b), where (a) is 9% of
the total Purchase Payments made to the Certificate and (b) is the sum of
all prior Contingent Deferred Sale Charge deductions from the Certificate
Value and all prior Variable Account daily distribution charges applicable
to the Certificate from the 0.15% distribution charge factor. After each
surrender, Keyport Benefit's records will be adjusted to reflect any
deductions made from the applicable Purchase Payments.
Example: Two Purchase Payments were made one year apart for $5,000 and
$7,000. The Certificate Value has grown to an assumed $13,200 when the
Certificate Owner decides to withdraw $8,000. The Certificate Value at the
beginning of the Certificate Year of surrender was $13,000. The Contingent
Deferred Sales Charge percentages at the time of surrender are an assumed
5% for the $5,000 payment and 6% for the $7,000 payment. The portion of
the surrender representing the Certificate's earnings ($13,200 less
$12,000, or $1,200) would not be subject to charges. Since $1,200 is less
than the amount guaranteed not to have charges (10% of $13,000, or $1,300),
an additional $100 would not be subject to charges. This $100 would be
deducted from the oldest Purchase Payment, reducing it from $5,000 to
$4,900. The $1,200 increase in value plus the additional $100 leaves
$6,700 ($8,000 - 1,200 - 100) to be deducted. This $6,700 would be
deducted from the $4,900 of the first payment still left and $1,800 of the
second payment. The total Contingent Deferred Sales Charge would be $4,900
multiplied by the applicable 5% and $1,800 times the applicable 6%, or a
total of $353. The distribution charge records would now reflect $0 for
the 1st payment and $5,200 for the 2nd payment. The $8,000 requested plus
the $353 charge would be deducted from Certificate Values under the rules
specified in "Partial Withdrawals and Surrender" on Page 21.
The Contingent Deferred Sales Charge, when it is applicable, will be used
to cover the expenses of selling the Certificate, including compensation
paid to selling dealers and the cost of sales literature. Any expenses not
covered by the charge will be paid from Keyport Benefit's general account,
which may include monies deducted from the Variable Account for the
Mortality and Expense Risk Charge. A dealer selling the Certificate may
receive up to 6.00% of Purchase Payments with additional compensation later
based on the Certificate Value of those payments. During certain time
periods selected by Keyport Benefit and Keyport Financial Services Corp.,
the percentage may increase to 6.25%.
The Contingent Deferred Sales Charge will be waived in the event a Covered
Person is confined in a medical facility in accordance with the provisions
and conditions of an endorsement relating to such confinements.
The Contingent Deferred Sales Charge will be eliminated under Certificates
issued to employees of Keyport Benefit and other persons specified in
"Sales of the Certificates".
Keyport Benefit may reduce or change to 0% any Contingent Deferred Sales
Charge percentage under a Certificate issued in an internal exchange or
transfer of an annuity contract of Keyport Benefit's general account.
Keyport Benefit may allow, under the Systematic Withdrawal Program and
under other permitted circumstances, all or part of the amount in 2. above
to also be available in the first Certificate Year. If so, the amount in 2.
above will be calculated by substituting the initial Purchase Payment for
the Certificate Value.
Deductions for Transfers of Variable Account Value
The Certificate allows 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" and
"Tax-Sheltered Annuities".
Total Variable Account Expenses
The Variable Account's total expenses in relation to the Certificate will
be the Certificate Maintenance Charge, the Mortality and Expense Risk
Charge, and the Daily Sales Charge.
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and therefore the deductions from and expenses paid
out of the assets of the Eligible Funds. These deductions and expenses are
described in the Eligible Fund prospectuses.
OTHER SERVICES
The Programs. Keyport Benefit offers several investment related programs
which are available only prior to the Income Date: Asset Allocation;
Dollar Cost Averaging; Systematic Investment; and Systematic Withdrawal
Programs. A Rebalancing Program is available prior to and after the Income
Date. Under each Program that utilizes transfers, the related transfers
between and among Sub-Accounts and the Fixed Account are not counted as one
of the twelve free transfers. Each of the Programs has its own
requirements, as discussed below. Keyport Benefit reserves the right to
terminate any Program.
If the Certificate Owner has submitted the required telephone authorization
form, certain changes may be made by telephone. For those Programs
involving transfers, Owners may change instructions by telephone with
regard to which Sub-Accounts or the Fixed Account Certificate Value may be
transferred. The current conditions and procedures are described in
Appendix B.
Dollar Cost Averaging Program. Keyport Benefit offers a Dollar Cost
Averaging program that Certificate Owners may participate in by Written
Request. The program periodically transfers Accumulation Units from the
Stein Roe Money Market Sub-Account or the One-Year Guarantee Period of the
Fixed Account to other Sub-Accounts selected by the Certificate Owner. The
program allows a Certificate Owner to invest in Variable Sub-Accounts over
time rather than having to invest in those Sub-Accounts all at once. The
program is available for initial and subsequent Purchase Payments and for
Certificate Value transferred into the Stein Roe Money Market Sub-Account
or the One-Year Guarantee Period. Under the program, Keyport Benefit makes
automatic transfers on a periodic basis out of the Stein Roe Money Market
Sub-Account or the One-Year Guarantee Period into one or more of the other
available Sub-Accounts (Keyport Benefit reserves the right to limit the
number of Sub-Accounts the Certificate Owner may choose but there are
currently no limits).
The Certificate Owner by Written Request must specify the Stein Roe Money
Market Sub-Account or the One Year Guarantee Period from which the
transfers are to be made, the monthly amount to be transferred (minimum
$100) and the Sub-Account(s) to which the transfers are to be made. The
first transfer will occur at the close of the Valuation Period that
includes the 30th day after the receipt of the Certificate Owner's Written
Request. Each succeeding transfer will occur one month later (e.g., if the
30th day after the receipt date is April 8, the second transfer will occur
at the close of the Valuation Period that includes May 8). When the
remaining value is less than the monthly transfer amount, that remaining
value will be transferred and the program will end. Before this final
transfer, the Certificate Owner may extend the program by allocating
additional Purchase Payments to the Stein Roe Money Market Sub-Account or
the One Year Guarantee Period or by transferring Certificate Value to the
Stein Roe Money Market Sub-Account or the One Year Guarantee Period. The
Certificate Owner may, by Written Request or by telephone, change the
monthly amount to be transferred, change the Sub-Account(s) to which the
transfers are to be made, or end the program. The program will
automatically end if the Income Date occurs. Keyport Benefit reserves the
right to end the program at any time by sending the Certificate Owner a
notice one month in advance.
Written or telephone instructions must be received by Keyport Benefit by
the end (currently 4:00 PM Eastern Time) of the business day preceding the
next scheduled transfer in order to be in effect for that transfer.
Telephone instructions are subject to the conditions and procedures
established by Keyport Benefit from time to time. The current conditions
and procedures appear in Appendix B, and Certificate Owners in a dollar
cost averaging program will be notified, in advance, of any changes.
Asset Allocation Program. Certificate Owners may select from five asset
allocation model portfolios separately developed by Ibbotson Associates and
Standard & Poor's (Model A - Capital Preservation, Model B - Income and
Growth, Model C - Moderate Growth, Model D - Growth, and Model E -
Aggressive Growth). If a Certificate Owner elects one of the models,
initial and subsequent Purchase Payments will automatically be allocated
among the Sub-Accounts in the model. Only one model may be used in a
Certificate at a time. Certificate Owners may use a questionnaire and
scoring system to determine the model which corresponds to their risk
tolerance and time horizons.
Periodically Ibbotson Associates and Standard & Poor's will review the
models and may determine that a reconfiguration of the Sub-Accounts and
percentage allocations among those Sub-Accounts is appropriate. Certificate
Owners will receive notification prior to any reconfiguration.
The Fixed Account is not available in any asset allocation model. A
Certificate Owner may allocate initial or subsequent Purchase Payments, or
Certificate Value, between an asset allocation model and the Fixed Account.
Rebalancing Program. In accordance with the Certificate Owner's election
of the relative Purchase Payment percentage allocations, Keyport Benefit
will automatically rebalance the Certificate Value of each Sub-Account
either monthly, quarterly, semi-annually, or annually. On the last day of
the period selected, Keyport Benefit will automatically rebalance the
Certificate Value in each of the Sub-Accounts to match the current Purchase
Payment percentage allocations. The Program may be terminated at any time
and the percentages may be altered by Written Request. The requested change
must be received at the Service Office ten (10) days prior to the end of
the period selected. Certificate Value allocated to the Fixed Account is
not subject to automatic rebalancing. After the Income Date, automatic
rebalancing applies only to variable annuity payments and Keyport Benefit
will rebalance the number of Annuity Units in each Sub-Account. Annuity
Units are used to calculate the amount of each Sub-Account annuity payment;
see "Variable Annuity Benefits" in the Statement of Additional Information.
Systematic Investment Program. Purchase Payments under Non-Qualified
Certificates may be made by monthly deductions from the bank account or
payroll of any Certificate Owner who has completed and returned to Keyport
Benefit a Systematic Investment Program application and authorization form.
The application and authorization form may be obtained from Keyport Benefit
or from the sales representative. Each Systematic Investment Program
Purchase Payment is subject to a current minimum of $50.
Systematic Withdrawal Program. To the extent permitted by law, Keyport
Benefit will make monthly, quarterly, semi-annually 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. Systematic
withdrawals may be made from the Sub-Accounts and the One-Year Guarantee
Period of the Fixed Account. In each Certificate Year, portions of
Certificate Value may be withdrawn without the imposition of any Contingent
Deferred Sales Charge ("Free Withdrawal Amount"). If withdrawals pursuant
to the Program are greater than the Free Withdrawal Amount, the amount of
the withdrawals greater than the Free Withdrawal Amount will be subject to
the applicable Contingent Deferred Sales Charge. Any unrelated voluntary
partial withdrawal a Certificate Owner makes during a Certificate Year will
be aggregated with withdrawals pursuant to the Program to determine the
applicability of any Contingent Deferred Sales Charge under the Certificate
provisions regarding partial withdrawals.
Unless the Certificate Owner specifies the Sub-Account or Sub-Accounts or
the Fixed Account from which withdrawals of Certificate Value shall be made
or if the amount in a specified Sub-Account is less than the predetermined
amount, Keyport Benefit will make withdrawals under the Program from the
Sub-Accounts and the Fixed Account in amounts proportionate to the amounts
in the Sub-Accounts and the Fixed Account. 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 and
any applicable Contingent Deferred Sales Charge.
The Program may be combined with all other Programs except the Systematic
Investment Program.
It may not be advisable to participate in the Systematic Withdrawal Program
and incur a Contingent Deferred Sales Charge when making additional
Purchase Payments under the Certificate.
THE CERTIFICATES
Variable Account Value
The Variable Account Value for a Certificate is the sum of the value of
each Sub-Account to which values are allocated under a Certificate. The
value of each Sub-Account is determined at any time by multiplying the
number of Accumulation Units attributable to that Sub-Account by the
Accumulation Unit value for that Sub-Account at the time of determination.
The Accumulation Unit value is an accounting unit of measure used to
determine the change in an Accumulation Unit's value from Valuation Period
to Valuation Period.
Each Purchase Payment that is made results in additional Accumulation Units
being credited to the Certificate and the appropriate Sub-Account
thereunder. The number of additional units for any Sub-Account will equal
the amount allocated to that Sub-Account divided by the Accumulation Unit
value for that Sub-Account at the time of investment.
Valuation Periods
The Variable Account is valued each Valuation Period using the net asset
value of the Eligible Fund shares. A Valuation Period is the period
commencing at the close of trading on the New York Stock Exchange on each
Valuation Date and ending at the close of trading for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock
Exchange is open for business. The New York Stock Exchange is currently
closed on weekends, New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Net Investment Factor
Variable Account Value will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect value, Keyport 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 Mortality and Expense Risk
Charge; plus
(ii) the Valuation Period equivalent of the daily Distribution Charge;
plus
(iii) a charge factor, if any, for any tax provision established by
Keyport Benefit as a result of the operations of that Sub-Account.
If a Certificate ever reaches the maximum cumulative sales charge limit
defined in "Deductions for Contingent Deferred Sales Charge", the daily
distribution charge in (c)(ii) above is eliminated. For Certificates
issued to employees of Keyport Benefit and other persons specified in
"Sales of the Certificates", the Mortality and Expense Risk Charge is .35%,
and the daily Distribution Charge in (c)(ii) above is eliminated. The daily
Distribution Charge in (c)(ii) above may be eliminated for certain
Certificates issued in an internal exchange or transfer (see "Deductions
for Daily Distribution Charge").
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 Keyport Benefit's Service
Office. The return of the Certificate by mail will be effective when the
postmark is affixed to a properly addressed and postage-prepaid envelope.
The returned Certificate will be treated as if 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 death. And, if the
Annuitant is the decedent, the new Annuitant will be any living contingent
annuitant, otherwise the surviving spouse. The Certificate may continue
until another death occurs (i.e., until the death of the Annuitant, primary
Certificate Owner or joint Certificate Owner). Except for this paragraph,
all of "Death Provisions" will apply to that subsequent death.
In all other cases, the Certificate may continue up to five years from the
date of death. During this period, the Designated Beneficiary may exercise
all ownership rights, including the right to make transfers or partial
surrenders or the right to totally surrender the Certificate for its
Surrender Value. If the Certificate is still in effect at the end of the
five-year period, Keyport Benefit will automatically end it then by paying
the Certificate Value to the Designated Beneficiary. If the Designated
Beneficiary is not then alive, 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 decedent if he or she
is the first to die of the primary Certificate Owner, Joint Certificate
Owner, Annuitant, or, if there is a non-natural Certificate Owner such as a
trust, the Annuitant shall be the Covered Person. If the Covered Person
dies, the Certificate Value will be increased, as provided below, if it is
less than the Death Benefit Amount ("DBA"). The DBA is:
The DBA at issue is the initial Purchase Payment. Thereafter, the DBA is
calculated for each Valuation Period by adding any additional Purchase
Payments, and deducting any partial withdrawals, including any applicable
surrender charge. This resulting amount is the "net Purchase Payment death
benefit". The Certificate Value for each Certificate Anniversary (the
"Anniversary Value") before the 81st birthday of the Covered Person is
determined. Each Anniversary Value is increased by any Purchase Payments
made after that anniversary. This resultant value is then decreased by an
amount calculated at the time of any partial withdrawal made after that
anniversary. The amount is calculated by taking the amount of any partial
withdrawal, and dividing by the Certificate Value immediately preceding the
partial withdrawal, and then multiplying by the Anniversary Value
immediately preceding the withdrawal. The greatest Anniversary Value, as
so adjusted, (the "greatest Anniversary Value") is the DBA unless the net
Purchase Payment death benefit is higher. The net Purchase Payment death
benefit will be the DBA if such amount is higher than the greatest
Anniversary Value.
When 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 and/or the Fixed Account
based on the Purchase Payment allocation selection that is in effect when
Keyport Benefit receives due proof of death. Whether or not the
Certificate Value is increased because of this minimum death provision, the
Designated Beneficiary may, by the later of the 90th day after the Covered
Person's death and the 60th day after Keyport Benefit is notified of the
death, surrender the Certificate for the Certificate Withdrawal Value
without any applicable Contingent Deferred Sales Charge being deducted.
For a surrender after the applicable 90 or 60 day period and for a
surrender at any time after the death of a non-Covered Person, any
applicable Contingent Deferred Sales Charge would be deducted. If the
Certificate is not surrendered, it will continue for the time period
specified above.
Payment of Benefits. Instead of receiving a lump sum, the Certificate
Owner or any Designated Beneficiary may direct by Written Request that
Keyport 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 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 and/or the Fixed Account based on the Purchase Payment
allocation selection that is in effect when Keyport Benefit receives due
proof of death. Whether or not the Certificate Value is increased because
of this minimum death provision, the Certificate Owner may surrender the
Certificate within 90 days of the date of the Annuitant's death for the
Certificate Withdrawal Value without any applicable Contingent Deferred
Sales Charge being deducted. For a surrender after 90 days, any applicable
Contingent Deferred Sales Charge would be deducted.
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
Death of Annuitant. If the Annuitant dies before the Income Date while the
Certificate is In Force, the Designated Beneficiary will control the
Certificate after such a death. The Certificate Value will be increased,
as provided below, if it is less than the Death Benefit Amount ("DBA") as
defined above. When Keyport 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 and/or the
Fixed Account based on the Purchase Payment allocation selection that is in
effect when Keyport Benefit receives due proof of death. Whether or not
the Certificate Value is increased because of this minimum death provision,
the Designated Beneficiary may, by the later of the 90th day after the
Annuitant's death and the 60th day after Keyport Benefit is notified of the
death, surrender the Certificate for the Certificate Withdrawal Value
without any applicable Contingent Deferred Sales Charge being deducted.
For a surrender after the applicable 90 or 60 day period, any applicable
Contingent Deferred Sales Charge would be deducted.
If the Certificate is not surrendered, it may continue for the time period
permitted by the Internal Revenue Code provisions applicable to the
particular Qualified Plan. During this period, the Designated Beneficiary
may exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to totally surrender the Certificate for
its Certificate Withdrawal Value. If the Certificate is still in effect at
the end of the period, Keyport Benefit will automatically end it then by
paying the Certificate Withdrawal Value (without the deduction of any
applicable Contingent Deferred Sales Charge) to the Designated Beneficiary.
If the Designated Beneficiary is not alive then, Keyport 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. The amount withdrawn will include any applicable Contingent
Deferred Sales Charge and therefore the amount actually withdrawn may be
greater than the amount of the surrender check requested. Unless the
request specifies otherwise, the total amount withdrawn will be deducted
from all Sub-Accounts of the Variable Account in the ratio that the value
in each Sub-Account bears to the total Variable Account Value. If there is
no value, or insufficient value, in the Variable Account, then the amount
surrendered, or the insufficient portion, will be deducted from the Fixed
Account in the ratio that each Guarantee Period's value bears to the total
Fixed Account Value.
The Certificate Owner may totally surrender the Certificate by making a
Written Request. Surrendering the Certificate will end it. Upon
surrender, the Certificate Owner will receive the Certificate Withdrawal
Value.
Keyport 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 increased or decreased by a
limited Market Value Adjustment of Fixed Account Value described in
Appendix A (less any premium taxes not previously deducted and less any
applicable Certificate Maintenance Charge) on the Income Date in accordance
with the option selected.
Income Date and Annuity Option
The Certificate Owner may select an Income Date and an Annuity Option at
the time of application. If the Certificate Owner does not select an
Annuity Option, Option B will automatically be designated. If the
Certificate Owner does not select an Income Date for the Annuitant, the
Income Date will automatically be the earlier of (i) the later of the
Annuitant's 90th birthday and the 10th Certificate Anniversary and (ii) any
maximum date permitted under state law.
Change in Income Date and Annuity Option
The Certificate Owner may choose or change an Annuity Option or the Income
Date by making a Written Request to Keyport 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 Fixed
Account. Variable annuity payments will fluctuate while fixed annuity
payments will not. The dollar amount of each fixed annuity payment will be
determined by deducting from the Certificate Value increased or decreased
by a limited Market Value Adjustment described in Appendix A any premium
taxes not previously deducted and any applicable Certificate Maintenance
Charge and then dividing the remainder by $1,000 and multiplying the result
by the greater of: (a) the applicable factor shown in the appropriate table
in the Certificate; or (b) the factor currently offered by Keyport 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 applicable premium taxes not previously deducted and less any
applicable Certificate Maintenance Charge will be applied to a variable
annuity option and Fixed Account Value increased or decreased by a limited
Market Value Adjustment described in Appendix A less any premium taxes not
previously deducted will be applied to a fixed 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: (a) the present value of the remaining
payments, commuted at the interest rate used to create the annuity factor
for this option (this interest rate is 5% per year, unless 3% per year is
chosen by Written Request at the time the option is selected); less (b) any
Contingent Deferred Sales Charge due by treating the value defined in (a)
as a total surrender. (See "Deductions for Contingent Deferred Sales
Charge".) Instead of receiving a lump sum, the payee may elect another
payment option and the amount applied to the option will not be reduced by
the charge defined in (b) above. If, at the death of the payee, Option A
payments have been made for fewer than the chosen number of years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used
to create the annuity factor for this option. For the variable
annuity, this interest rate is 5% per year, unless 3% per year had
been chosen by the payee at the time the option was selected.
The Mortality and Expense Risk Charge is deducted during the Option A
payment period if a variable payout has been selected, but 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" on Page 24 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 fewer than 10 years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used
to create the annuity factor for this option. For the variable
annuity, this interest rate is 5% per year, unless 3% per year was
chosen by the Payee's Written Request.
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 may instruct Keyport Benefit to change the Sub-
Account(s) used to determine the amount of the variable annuity payments
unlimited times every 12 months.
Proof of Age, Sex, and Survival of Annuitant
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 postpone surrender payments from the
Fixed Account for up to six months. 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.
See "Tax-Sheltered Annuities" (TSAs) for an alternative type of withholding
that may apply to distributions from TSAs that are eligible for rollover to
another TSA or an individual retirement annuity or account (IRA).
Section 1035 Exchanges. A Non-Qualified Certificate may be purchased with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is Keyport 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 several types of Qualified Plans.
The tax rules applicable to participants in such Qualified Plans vary
according to the type of plan and the terms and conditions of the plan
itself. Therefore, no attempt is made herein to provide more than general
information about the use of the Certificate with the various types of
Qualified Plans. Participants under such Qualified Plans as well as
Certificate Owners, Annuitants, and Designated Beneficiaries are cautioned
that the rights of any person to any benefits under such Qualified Plans
may be subject to the terms and conditions of the plans themselves
regardless of the terms and conditions of the Certificate issued in
connection therewith. Following are brief descriptions of the various
types of Qualified Plans and of the use of the Certificate in connection
therewith. Purchasers of the Certificate should seek competent advice
concerning the terms and conditions of the particular Qualified Plan and
use of the Certificate with that Plan.
Tax-Sheltered Annuities
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts
and, subject to certain contribution limitations, exclude the amount of
Purchase Payments from gross income for tax purposes. However, such
Purchase Payments may be subject to Social Security (FICA) taxes. This
type of annuity contract is commonly referred to as a "Tax-Sheltered
Annuity" (TSA).
Section 403(b)(11) of the Code contains distribution restrictions.
Specifically, benefits may be paid, through surrender of the Certificate or
otherwise, only (a) when the employee attains age 59-1/2, separates from
service, dies or becomes totally and permanently disabled (within the
meaning of Section 72(m)(7) of the Code) or (b) in the case of hardship. A
hardship distribution must be of employee contributions only and not of any
income attributable to such contributions. Section 403(b)(11) does not
apply to distributions attributable to assets held as of December 31, 1988.
Thus, it appears that the law's restrictions would apply only to
distributions attributable to contributions made after 1988, to earnings on
those contributions, and to earnings on amounts held as of 12/31/88. The
Internal Revenue Service has indicated that the distribution restrictions
of Section 403(b)(11) are not applicable when TSA funds are being
transferred tax-free directly to another TSA issuer, provided the
transferred funds continue to be subject to the Section 403(b)(11)
distribution restrictions.
Keyport Benefit will notify a Certificate Owner who has requested a
distribution from a Certificate if all or part of such distribution is
eligible for rollover to another TSA or to an individual retirement annuity
or account (IRA). Any amount eligible for rollover treatment will be
subject to mandatory federal income tax withholding at a 20% rate if the
Certificate Owner receives the amount rather than directing Keyport Benefit
by Written Request to transfer the amount as a direct rollover to another
TSA or IRA.
Individual Retirement Annuities
Sections 408(b) and 408A of the Code permit eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" and "Roth IRA", respectively. These individual
retirement annuities are subject to limitations on the amount which may be
contributed, the persons who may be eligible, and on the time when
distributions may commence. In addition, distributions from certain types
of Qualified Plans may be placed on a tax-deferred basis into a Section
408(b) Individual Retirement Annuity.
Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such retirement
plans may permit the purchase of the Certificate to provide benefits under
the plans.
Deferred Compensation Plans With Respect to Service for State and Local
Governments
Section 457 of the Code, while not actually providing for a Qualified Plan
as that term is normally used, provides for certain deferred compensation
plans that enjoy special income tax treatment with respect to service for
tax-exempt organizations, state governments, local governments, and
agencies and instrumentalities of such governments. The Certificate can be
used with such plans. Under such plans, a participant may specify the form
of investment in which his or her participation will be made. However, all
such investments are owned by and subject to the claims of general
creditors of the sponsoring employer.
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with its view of present applicable law, Keyport 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.
Certificates may be sold with lower or no dealer compensation (1) to a
person who is an officer, director, or employee of Keyport Benefit, or an
affiliate of Keyport Benefit, a trustee or officer of an Eligible Fund, an
employee of the investment adviser or sub-investment adviser of an Eligible
Fund, or an employee or associated person of an entity which has entered
into a sales agreement with the Principal Underwriter for the distribution
of Certificates, or (2) to any Qualified Plan established for such a
person. Such Certificates may be different from the Certificates sold to
others in that (1) they are not subject to the deduction for the
Certificate Maintenance Charge, the asset-based Sales charge or the
Contingent Deferred Sales Charge and (2) they have a Mortality and Expense
Risk Charge of 0.35% per year.
Certificates may be sold with lower or no dealer compensation as part of an
exchange program for other variable annuity contracts previously issued by
Keyport Benefit ("Old VA"). Such a Certificate will be issued with an
exchange endorsement. One effect of the endorsement is that no Contingent
Deferred Sales Charge will be assessed under the Old VA at the time of the
exchange and that any Contingent Deferred Charge assessed under the
Certificate in relation to the initial Purchase Payment (i.e., the amount
exchanged) will be calculated based on the actual time of each purchase
payment under the Old VA. The endorsement also provides that the refund
amount described in "Right to Revoke" will not be made if the Certificate
is returned. Instead, Keyport Benefit will return the Old VA to the owner
and treat it as if no exchange had occurred.
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 write
Keyport Benefit Service Office, 125 High Street, Boston, MA 02110, or call
(800) 367-3653.
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 Sub-Account 5
Financial Statements 6
Keyport Benefit Life Insurance Company 7
APPENDIX A
THE FIXED ACCOUNT (ALSO KNOWN AS THE MODIFIED GUARANTEED ANNUITY ACCOUNT)
Introduction
This Appendix describes the Fixed Account option available under the
Certificate.
FIXED ACCOUNT VALUES PROVIDED BY THE CERTIFICATE ARE SUBJECT TO A MARKET
VALUE ADJUSTMENT, THE OPERATION OF WHICH MAY RESULT IN UPWARD OR DOWNWARD
ADJUSTMENTS IN AMOUNTS TRANSFERRED AND AMOUNTS PAID (INCLUDING WITHDRAWALS,
SURRENDERS, DEATH BENEFITS, AND AMOUNTS APPLIED TO PURCHASE ANNUITY
PAYMENTS) TO A CERTIFICATE OWNER OR OTHER PAYEE. IN NO EVENT WILL THE
DOWNWARD MARKET VALUE ADJUSTMENT ELIMINATE INTEREST AT THE RATE OF 3% PER
YEAR APPLIED TO THE AMOUNT ALLOCATED TO A GUARANTEED PERIOD. PAYMENTS MADE
FROM FIXED ACCOUNT VALUES AT THE END OF THEIR GUARANTEE PERIOD ARE NOT
SUBJECT TO THE MARKET VALUE ADJUSTMENT.
Purchase Payments allocated to the Fixed Account option become part of
Keyport Benefit's general account. Because of applicable exemptive and
exclusionary provisions, interests in the Fixed Account options have not
been registered under the Securities Act of 1933 ("1933 Act"), nor is the
general account an investment company under the Investment Company Act.
Accordingly, neither the general account, the Fixed Account option, nor any
interest therein, is subject to regulation under the 1933 Act or the
Investment Company Act. Keyport Benefit understands that the Securities
and Exchange Commission has not reviewed the disclosure in the prospectus
relating to the general account and the Fixed Account option.
Investments in the Fixed Account and Capital Protection Plus
Purchase Payments will be allocated to the Fixed Account in accordance with
the selection made by the Certificate Owner in the application. Any
selection must specify that percentage of the Purchase Payment that is to
be allocated to each Guarantee Period of the Fixed Account. The
percentage, if not zero, must be at least 10%. The Certificate Owner may
change the allocation percentages without fee, penalty or other charge.
Allocation changes must be made by Written Request unless the Certificate
Owner has by Written Request authorized Keyport Benefit to accept telephone
allocation instructions from the Certificate Owner. 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 B and Certificate Owners authorizing telephone allocation
instructions will be notified, in advance, of any changes.
Keyport Benefit currently offers Guarantee Periods of 1, 3, 5, and 7 years.
Keyport Benefit may change at any time the number of Guarantee Periods it
offers under newly-issued and in-force Certificates, as well as the length
of those Guarantee Periods. If Keyport Benefit stops offering a particular
Guarantee Period, existing Fixed Account Value in such Guarantee Period
would not be affected until the end of the Period (at that time, a Period
of the same length would not be a transfer option). Each Guarantee Period
currently offered is available for initial and subsequent Purchase Payments
and for transfers of Certificate Value.
Keyport Benefit offers a Capital Protection Plus program that a Certificate
Owner may request. Under this program, Keyport Benefit will allocate part
of the Purchase Payment to the Guarantee Period selected by the Certificate
Owner so that such part, based on that Guarantee Period's interest rate in
effect on the date of allocation, will equal at the end of the Guarantee
Period the total Purchase Payment. The rest of the Purchase Payment will be
allocated to the Sub-Account(s) of the Variable Account based on the
Certificate Owner's allocation. If any part of the Fixed Account Value is
surrendered or transferred before the end of the Guarantee Period, the
Value at the end of that Period will not equal the original Purchase
Payment amount.
For an example of Capital Protection Plus, assume Keyport Benefit receives
a Purchase Payment of $10,000 when the interest rate for the 7-year
Guarantee Period is 6.75% per year. Keyport Benefit will allocate $6,331
to that Guarantee Period because $6,331 will increase at that interest rate
to $10,000 after 7 years. The remaining $3,669 of the payment will be
allocated to the Sub-Account(s) selected by the Certificate Owner.
Fixed Account Value
The Fixed Account Value at any time is equal to:
(a) all Purchase Payments allocated to the Fixed Account plus the
interest subsequently credited on those payments; plus
(b) any Variable Account Value transferred to the Fixed Account plus the
interest subsequently credited on the transferred value; less
(c) any prior partial withdrawals from the Fixed Account, including any
charges therefor; less
(d) any Fixed Account Value transferred to the Variable Account.
Interest Credits
Keyport Benefit will credit interest daily (based on an annual compound
interest rate) to Purchase Payments allocated to the Fixed Account at rates
declared by Keyport Benefit for Guarantee Periods of one or more years from
the month and day of allocation. Any rate set by Keyport Benefit will be
at least 3% per year.
Keyport Benefit's method of crediting interest means that Fixed Account
Value might be subject to different rates for each Guarantee Period the
Certificate Owner has selected in the Fixed Account. For purposes of this
section, Variable Account Value transferred to the Fixed Account and Fixed
Account Value renewed for another Guarantee Period shall be treated as a
Purchase Payment allocation.
Application of Market Value Adjustment
Any surrender, withdrawal, transfer, or application to an Annuity Option of
Fixed Account Value from a Guarantee Period of three years or more is
subject to a limited Market Value Adjustment, unless: (1) the effective
date of the transaction is at the end of the Guarantee Period; or (2) the
effective date of a surrender is within 90 days of the date of death of the
first Covered Person to die.
If a Market Value Adjustment applies to either a surrender or the
application to an Annuity Option, then any negative Market Value Adjustment
amount will be deducted from the Certificate Value and any positive Market
Value Adjustment amount will be added to the Certificate Value. If a Market
Value Adjustment applies to either a partial withdrawal or a transfer, then
any negative Market Value Adjustment amount will be deducted from the
partial withdrawal or transfer amount after the withdrawal or transfer
amount has been deducted from the Fixed Account Value, and any positive
Market Value Adjustment amount will be added to the applicable amount after
it has been deducted from the Fixed Account Value.
No Market Value Adjustment is ever applicable to Guarantee Periods of fewer
than three years.
Effect of Market Value Adjustment
A Market Value Adjustment reflects the change in prevailing current
interest rates since the beginning of a Guarantee Period. The Market Value
Adjustment may be positive or negative, but any negative Adjustment may be
limited in amount (see Market Value Adjustment Factor below).
Generally, if the Treasury Rate for the Guarantee Period is lower than the
Treasury Rate for a new Guarantee Period with a length equal to the time
remaining in the Guarantee Period, then the application of the limited
Market Value Adjustment will result in a reduction of the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Option.
Similarly, if the Treasury Rate for the Guarantee Period is higher than the
Treasury Rate for a new Guarantee Period with a length equal to the time
remaining in the Guarantee Period, then the application of the Market Value
Adjustment will result in an increase in the amount being surrendered,
withdrawn, transferred, or applied to an Annuity Option.
The Market Value Adjustment will be applied before the deduction of any
applicable surrender charges or applicable taxes.
Market Value Adjustment Factor
The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to a Payment Option, by the
Market Value Adjustment Factor. The Market Value Adjustment Factor is
calculated as the larger of Formula (1) or (2):
(1) (1+a)/(1+b)(n/12) - 1
where:
"a" is the Treasury Rate for the number of Guarantee Period Years in the
Guarantee Period;
"b" is the Treasury Rate for a period equal to the time remaining (rounded
up to the next whole number of Guarantee Period Years) to the expiration of
the Guarantee Period; and
"n" is the number of complete Guarantee Period Months remaining before the
expiration of the Guarantee Period.
(2) (1.03)/(1+i)(y+d/#) - 1
where:
"i" is the Guaranteed Interest Rate for the Guarantee Period;
"y" is the number of complete Guarantee Period Years that have elapsed in Your
Guarantee Period;
"d" is the number of days since the last Guarantee Period Anniversary or,
if "y" is zero, the number of days since the start of the Guarantee Period;
and
"#" is the number of days in the current Guarantee Period Year (i.e., the
sum of "d" and the number of days until the next Guarantee Period
Anniversary).
In Formulas (1) and (2), all references to Guarantee Period, Guarantee
Period Anniversary, Guarantee Period Month, and Guarantee Period Year
relate to the Guarantee Period from which is being taken the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Option.
As stated above, the Formula (2) amount will apply only if it is greater
than the Formula (1) amount. This will occur only when the Formula (1)
amount is negative and the Formula (2) amount is a smaller negative number.
Formula (2) thus ensures that a full (normal) negative Market Value
Adjustment of Formula (1) will not apply to the extent it would decrease
the Guarantee Period's Fixed Account Value (before the deduction of any
applicable surrender charges or any applicable taxes) below the following
amount:
(a) the amount allocated to the Guarantee Period; less
(b) any prior systematic or partial withdrawal amounts; less
(c) any prior amounts transferred to the Variable Account or to
another Guarantee Period in the Fixed Account; plus
(d) interest on the above items (a) through (c) credited annually at a
rate of 3% per year.
Treasury Rates
The Treasury Rate for a Guarantee Period is the interest rate in the
Treasury Constant Maturity Series, as published by the Federal Reserve
Board, for a maturity equal to the number of years specified in "a" and "b"
in Formula (1) above. Weekly Series are published at the beginning of the
following week. To determine "a", Keyport Benefit uses the weekly Series
first published on or after the most recent Determination Date which occurs
on or before the Start Date for the Guarantee Period, except that if the
Start Date is the same as the Determination Date or the date of
publication, or any date in between, Keyport Benefit instead uses the
weekly Series first published after the prior Determination Date. To
determine "b", Keyport Benefit uses the Weekly Series first published on or
after the most recent Determination Date which occurs on or before the date
on which the Market Value Adjustment Factor is calculated, except that if
the calculation date is the same as the Determination Date or the date of
publication, or any date in between, Keyport Benefit instead uses the
weekly Series first published after the prior Determination Date. The
Determination Dates are the last business day prior to the first and
fifteenth of each calendar month.
If the number of years specified in "a" or "b" is not equal to a maturity
in the Treasury Constant Maturity Series, the Treasury Rate will be
determined by straight line interpolation between the interest rates of the
next highest and next lowest maturities.
If the Treasury Constant Maturity Series becomes unavailable, Keyport
Benefit will adopt a comparable constant maturity index or, if such a
comparable index also is not available, Keyport Benefit will replicate
calculation of the Treasury Constant Maturity Series Index based on U.S.
Treasury Security coupon rates.
End of A Guarantee Period
Keyport Benefit will notify a Certificate Owner in writing at least 30 days
prior to the end of a Guarantee Period. At the end of the Guarantee Period,
Keyport Benefit will automatically transfer the Guarantee Period's Fixed
Account Value to the Money Market Sub-Account of the Variable Account
unless Keyport Benefit previously received a Certificate Owner's Written
Request of: (1) election of a new Guarantee Period from among those being
offered by Keyport Benefit at that time; or (2) instructions to transfer
the ending Guarantee Period's Fixed Account Value to one or more Sub-
accounts of the Variable Account. A new Guarantee Period cannot be longer
than the number of years remaining until the Income Date.
Transfers of Fixed Account Value
The Certificate Owner may transfer Fixed Account Value from one Guarantee
Period to another or to one or more Sub-Accounts of the Variable Account
subject to any applicable Market Value Adjustment. If the Fixed Account
Value represents multiple Guarantee Periods, the transfer request must
specify from which values the transfer is to be made.
The Certificate allows Keyport Benefit to limit the number of transfers
that can be made in a specified time period. Currently, Keyport Benefit is
limiting Variable Account and Fixed Account transfers to generally
unlimited transfers per calendar year with a $500,000 per transfer dollar
limit. See "Transfer of Variable Account Value". Transfers from the Fixed
Account to the Variable Account at limited to 110% of the Fixed Account
Value at the beginning of the Certificate Year. This limitation will be
waived if a Systematic Withdrawal Program is in effect. These limitations
will not apply to any transfer made at the end of a Guarantee Period.
Certificate Owners will be notified, in advance, of a change in the
limitation on the number of transfers.
Transfer requests must be by Written Request unless the Certificate Owner
has authorized Keyport Benefit by Written Request to accept telephone
transfer instructions from the Certificate Owner or from a person acting
for the Certificate Owner as an attorney-in-fact under a power of attorney.
By authorizing Keyport 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 B and Certificate Owners
authorizing telephone transfers will be notified, in advance, of any
changes. Written transfer requests may be made by a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Keyport Benefit before the close of trading
on the New York Stock Exchange (currently 4:00 PM Eastern Time) will be
executed at the close of business that day. Any requests received later
will be executed at the close of the next business day.
The amount of the transfer will be deducted from the specified values in
the manner stated in the next section below.
If 100% of a Guarantee Period's value is transferred and the current
allocation for Purchase Payments includes that Guarantee Period, then the
allocation formula for future Purchase Payments will automatically change
unless the Certificate Owner instructs otherwise. For example, if the
allocation formula is 50% to the one-year Guarantee Period and 50% to Sub-
Account A and all Fixed Account Value is transferred to Sub-Account A, the
allocation formula will change to 100% to Sub-Account A.
APPENDIX B
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are Joint Certificate Owners, both must authorize Keyport
Benefit to accept telephone instructions but either Certificate Owner may
give Keyport Benefit 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 satisfaction.
3. Neither Keyport Benefit 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 will employ reasonable
procedures to confirm that a telephone instruction is genuine and, if
Keyport Benefit does not, Keyport Benefit 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 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 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 receives the Certificate Owner's written revocation, (b) Keyport
Benefit discontinues the privilege, or (c) Keyport Benefit 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 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, 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 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 Keyport Benefit
Advisor variable annuity prospectus dated July 15, 1998. The SAI is
incorporated by reference into the prospectus. The prospectus is available,
at no charge, by writing Keyport Benefit at 125 High Street, Boston, MA
02110 or by calling (800) 437-4466.
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 Sub-Account.........................5
Financial Statements....................................................6
Keyport Benefit Life Insurance Company................................7
The date of this statement of additional information is July 15, 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
without any deduction for the sales charge defined in (c)(ii) of
the
net investment factor formula; and
(b) is the assumed investment factor for the current Valuation Period.
The assumed investment factor adjusts for the interest assumed in
determining the first variable annuity payment. Such factor for
any
Valuation Period shall be the accumulated value, at the end of such
period, of $1.00 deposited at the beginning of such period at the
assumed annual investment rate (AIR). The AIR for Annuity Units
based on the 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 12 months. The
payee's request must specify the percentage of the annuity payment that is
to be based on the investment performance of each Sub-Account. The
percentage for each Sub-Account, if not zero, must be at least 5% and must
be a whole number. At the end of the Valuation Period during which Keyport
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 Contract 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 Stock Price Index (an unmanaged weighted index of 90 stocks prior
to March 1957 and 500 stocks thereafter of industrial, transportation,
utility and financial companies widely regarded by investors as
representative of the stock market); Small Company Stocks, represented by
the fifth capitalization quintile (i.e., the ninth and tenth deciles) of
stocks on the New York Stock Exchange for 1926-1981 and by the performance
of the Dimensional Fund Advisors Small Company 9/10 (for ninth and tenth
deciles) Fund thereafter; Long Term Corporate Bonds, represented beginning
in 1969 by the Salomon Brothers Long-Term High-Grade Corporate Bond Index,
which is an unmanaged index of nearly all Aaa and Aa rated bonds,
represented for 1946-1968 by backdating the Salomon Brothers Index using
Salomon Brothers' monthly yield data with a methodology similar to that
used by Salomon Brothers in computing its Index, and represented for 1925-
1945 through the use of the Standard and Poor's monthly High-Grade
Corporate Composite yield data, assuming a 4% coupon and a 20-year
maturity; Long-Term Government Bonds, measured each year using a portfolio
containing one U.S. government bond with a term of approximately twenty
years and a reasonably current coupon; U.S. Treasury Bills, measured by
rolling over each month a one-bill portfolio containing, at the beginning
of each month, the shortest-term bill having not less than one month to
maturity; Inflation, measured by the Consumer Price Index for all Urban
Consumers, not seasonably adjusted, since January, 1978 and by the Consumer
Price Index before then. The stock capital markets may be contrasted with
the corporate bond and U.S. government securities capital markets. Unlike
an investment in stock, an investment in a bond that is held to maturity
provides a fixed rate of return. Bonds have a senior priority to common
stocks in the event the issuer is liquidated and interest on bonds is
generally paid by the issuer before it makes any distributions to common
stock owners. Bonds rated in the two highest rating categories are
considered high quality and present minimal risk of default. An additional
advantage of investing in U.S. government bonds and Treasury bills is that
they are backed by the full faith and credit of the U.S. government and
thus have virtually no risk of default. Although government securities
fluctuate in price, they are highly liquid.
Yield for Stein Roe Money Market Sub-Account
Yield for the Stein Roe Money Market Sub-Account is calculated using the
method prescribed by the Securities and Exchange Commission. Yield
reflects the deduction of the annual 1.40% asset-based Certificate charge
and, on an allocated basis, the Certificate's annual $36 Certificate
Maintenance Charge. The yield does not reflect Contingent Deferred Sales
Charges and premium tax charges. The yield would be lower if these charges
were included. The following is the standardized formula:
Yield equals: (A - B - 1) X 365
C 7
Where:
A = the Accumulation Unit value at the end of the 7-day period.
B = hypothetical Certificate Maintenance Charge for the 7-day
period. The assumed annual Stein Roe Money Market Sub-Account
charge is equal to the $36 Certificate charge multiplied by a
fraction equal to the average number of Certificates with Stein
Roe Money Market 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 Stein Roe Money Market Sub-
Account Accumulation Unit during the 7-day period divided by
the
average Certificate Value in Stein Roe Money Market 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 Stein Roe Money Market Sub-Account will continue over an
entire year.
FINANCIAL STATEMENTS
The Variable Account has not yet commenced operations and therefore no
financial statements are included. The financial statements of Keyport
Benefit are included in the statement of additional information. 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 investments' 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 Company's 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 Company's 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 Company's 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 Company's 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 Company's annuity policy reserves (including separate account
liabilities) relate to liabilities established on a variety of the
Company's 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)
(4j) Specimen Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company (KA)
(4k) Specimen Variable Annuity Certificate of Keyport Benefit
Life Insurance Company (KA)
** (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
(8d) Participation Agreement Among MFS Variable Insurance Trust,
Keyport Benefit Life Insurance Company, and Massachusetts
Financial Services Corp.
(8e) Participation Agreement Among The Alger American Fund,
Keyport Benefit Life Insurance Company, and Fred Alger and
Company, Incorporated
(8f) Form of Participation Agreement Among Alliance Variable
Products Series Fund, Inc., Alliance Fund Distributors,
Inc.,
Alliance Capital Management L.P., and Keyport Benefit Life
Insurance Company
(8g) Participation Agreement By and Among Keyport Benefit Life
Insurance Company, Keyport Financial Services Corp., and
Liberty 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.
*** Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement (Files No. 333-45727; 811-08635) filed on or
about June 11, 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 has caused this Registration Statement to be
signed on its behalf, in the City of Boston and Commonwealth of
Massachusetts, on this 1st day of July, 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 July 1, 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. ROSENSTEEL 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 July 1, 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
(4j) Specimen Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company (KA)
(4k) Specimen Variable Annuity Certificate of Keyport Benefit
Life Insurance Company (KA)
(8d) Participation Agreement Among MFS Variable Insurance Trust,
Keyport Benefit Life Insurance Company, and Massachusetts
Financial Services Corp.
(8e) Participation Agreement Among The Alger American Fund,
Keyport Benefit Life Insurance Company, and Fred Alger and
Company, Incorporated
(8f) Form of Participation Agreement Among Alliance Variable Products
Series Fund, Inc., Alliance Fund Distributors, Inc., Alliance
Capital Management L.P., and Keyport Benefit Life Insurance
Company
(8g) Participation Agreement By and Among Keyport Benefit Life
Insurance Company, Keyport Financial Services Corp., and
Liberty Variable Investment Trust
(10) Consent of Independent Auditors
EXHIBIT 4j
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, 125
High Street, Boston, Massachusetts 02110:
_________________________ _________________________
Secretary President
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase
payment flexibility. This contract is nonparticipating with no dividends.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN
BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND
ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. VARIABLE ANNUITY PAYMENTS WILL NOT
DECREASE OVER TIME IF THE SEPARATE ACCOUNT (AFTER DEDUCTION OF THE ANNUAL
[1.55%] ASSET CHARGE) HAS AN ANNUALIZED INVESTMENT RETURN OF AT LEAST 5.0%.
SEE PAGES 12-13 AND 19 FOR FURTHER EXPLANATION. CONTRACT ASSETS ALLOCATED
TO THE SEPARATE ACCOUNT INCUR CHARGES OF [1.55%] BEFORE ANNUITY PAYMENTS
BEGIN AND [1.40%] ONCE ANNUITY PAYMENTS BEGIN. INCOME, CAPITAL GAINS,
AND/OR LOSSES WHETHER OR NOT REALIZED, FROM ASSETS ALLOCATED TO THE
SEPARATE ACCOUNT ARE CREDITED TO OR CHARGED AGAINST THE SEPARATE ACCOUNT
WITHOUT REGARD TO INCOME, CAPITAL GAINS, AND/OR LOSSES ARISING OUT OF ANY
OTHER BUSINESS THE COMPANY MAY CONDUCT.
Table of Contents
Page
Right to Examine Certificate 1
Definitions 2
Contract Schedule 3
General Provisions 5
Variable Account Provisions 10
Transfers 13
Partial Withdrawals and Total Surrender 14
Death Provisions 15
Annuity Provisions 16
Endorsements (if any) are before page 22
Definitions
Accumulation Period: The period prior to the Income Date during which
Purchase Payments may be made by a Certificate Owner.
Accumulation Unit: An accounting unit used to calculate a Certificate
Owner's interest in a Sub-account of the Variable Account during the
Accumulation Period.
Adjusted Certificate Value: The Certificate Value less any applicable
taxes relating to a Certificate and Certificate Maintenance Charge. This
amount is applied to the applicable Annuity Tables to determine Annuity
Payments.
Annuitant: The natural person on whose life Annuity Payments are based,
and to whom any Annuity Payments will be made starting on the Income Date.
Annuity Options: Options available for Annuity Payments.
Annuity Payments: The series of payments made to the Annuitant, starting
on the Income Date, under the Annuity Option selected.
Annuity Period: The period after the Income Date during which Annuity
Payments are made.
Annuity Unit: An accounting unit used to calculate Variable Annuity
Payments during the Annuity Period.
Beneficiary: The person(s) or entity(ies) who controls the Certificate if
any Certificate Owner dies before the Income Date.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
125 High Street, Boston, MA 02110
Service Office
125 High Street, 11th Floor
Boston, MA 02110
Contract Schedule
GROUP CONTRACT OWNER Keyport Benefit Insurance Trust I
GROUP CONTRACT NUMBER DVA(NY)002
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 None
Mortality and Expense Risk Charge We deduct 0.003403% of the assets in each
Variable Account Sub-account on a daily basis (equivalent to an annual rate
of 1.25%) for Our mortality and expense risks.
Certificate Maintenance Charge We charge $36 to cover a portion of Our
ongoing Certificate maintenance expenses. The charge is incurred at the
beginning of the Certificate Year and is deducted from the assets of the
Variable Account on each Certificate Anniversary and at the time of total
surrender. We reserve the right to charge up from the assets of the
Variable Account $100 per year. 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 18 Sub-accounts and the Fixed
Account. We reserve the right to increase or decrease the number of
available Sub-accounts. The minimum a Certificate Owner may allocate to
any Sub-account or the Fixed Account is 5% of any Purchase Payment. An
initial Purchase Payment may be invested as follows:
Alger Growth x%
Alger Small Cap x%
Alliance Global Bond x%
Alliance Premier Growth x%
Colonial Growth & Income x%
Colonial Int'l Fund for Growth x%
Newport Tiger x%
Colonial Strategic Income x%
Colonial U.S. Stock x%
Liberty All-Star Equity x%
Stein Roe Global Utilities x%
MFS Emerging Growth x%
MFS Research x%
SteinRoe Special Venture x%
Stein Roe Money Market x%
Stein Roe Balanced x%
Stein Roe Growth Stock x%
Stein Roe Mortgage Securities 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.
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 A is a unit investment trust variable separate account,
organized in and governed by the laws of the State of New York, Our state
of domicile. Variable Account A is divided into Sub-accounts. Each Sub-
account listed below invests in shares of the corresponding Portfolio of
the Eligible Fund shown.
Sub-account Eligible Fund and Portfolio
The Alger American Fund
Alger Growth Alger American Growth Portfolio - seeks
Sub-account long-term capital appreciation.
Alger Small Cap Alger American Small Capitalization
Sub-account Portfolio - seeks long-term capital
appreciation.
Alliance Variable Products Series Fund, Inc.
Alliance Global Bond Global Bond Portfolio - seeks a high level of
Sub-account return from a combination of current income
and capital appreciation by investing in a
globally diversified portfolio of high
quality
debt securities denominated in the U.S.
Dollar
and a range of foreign currencies.
Alliance Premier Growth Premier Growth Portfolio - seeks growth of
Sub-account capital rather than current income.
Keyport Variable Investment Trust
Colonial Growth & Income Colonial Growth and Income
Sub-account Fund - seeks primarily income and long-
term capital growth and, secondarily,
preservation of capital.
Colonial Int'l Fund for Colonial International Fund for Growth -
Growth Sub-account seeks long-term capital growth, by investing
primarily in non-U.S. equity securities.
Newport Tiger Newport Tiger Fund - seeks long-
Sub-account term capital growth by investing primarily
in equity securities of companies located in
the nine Tigers of Asia (Hong Kong,
Singapore,
South Korea and Taiwan, Malaysia, Thailand,
Indonesia, China and the Philippines).
Colonial Strategic Income Colonial Strategic Income Fund - seeks a high
Sub-account level of current income, as is consistent
with
prudent risk and maximizing total return, by
diversifying investments primarily in U.S.
and
foreign government and high yield, high risk
corporate debt securities.
Colonial U.S. Stock Colonial U.S. Stock Fund - seeks long-term
Sub-account growth by investing primarily in large
capitalization securities.
Liberty All-Star Equity Liberty All-Star Equity Fund - seeks total
Sub-account investment return, comprised of long-term
capital appreciation and current income,
through investment primarily in a diversified
portfolio of equity securities.
Stein Roe Global Utilities Stein Roe Global Utilities Fund - seeks
Sub-account current income and long-term growth of
capital
and income.
MFS Variable Insurance Trust
MFS Emerging Growth MFS Emerging Growth Series - seeks to provide
Sub-account long-term growth of capital.
MFS Research MFS Research Series - seeks to provide long-
Sub-account term growth of capital and future income.
SteinRoe Variable Investment Trust
SteinRoe Special Venture Stein Roe Special Venture Fund - seeks
Sub-account capital growth by investing primarily in
common stocks, convertible securities, and
other securities selected for prospective
capital growth.
Stein Roe Money Market Stein Roe Money Market Fund - seeks high
Sub-account current income from short-term money market
("Money Market" Sub-account) instruments while emphasizing preservation of
capital and maintaining excellent liquidity.
Stein Roe Balanced Stein Roe Balanced Fund - seeks high total
Sub-account investment return through investment in a
changing mix of securities.
Stein Roe Growth Stock Stein Roe Growth Stock Fund - seeks long-term
Sub-account growth of capital through investment
primarily in common stocks.
Stein Roe Mortgage Securities Stein Roe Mortgage Securities Fund - seeks
Income Sub-account highest possible level of current income
consistent with safety of principal and
maintenance of liquidity through investment
primarily in mortgage-backed securities.
Variable Account A is an investment company variable separate account which
invests directly in securities, organized in and governed by the laws of
the State of New York, 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:
Sub-account Investment Advisor
Currently, none Currently, none
The Fixed Account
The Fixed Account is part of Our General Account, which consists of all of
Our assets except the assets of the Variable Account and the assets of
other separate accounts that We maintain. Subject to applicable law, We
have sole discretion over investments of the assets of the Fixed Account.
If a Certificate Owner allocates assets to the Fixed Account, the
Certificate Owner's accumulation values and annuity payments will have
guaranteed minimums.
Before the Income Date, a Certificate Owner's interest in the Fixed Account
is measured by the Fixed Account Value. When annuity payments begin, the
payee's interest in the Fixed Account is measured by the amount of each
periodic payment.
Benefits from the Fixed Account will not be less than the minimum values
required by any law of the jurisdiction where the Certificate is delivered.
Purchase Payments will be allocated to the Fixed Account in accordance with
a Certificate Owner's selection at the Certificate Date. A Certificate
Owner may change such selection by Written Request.
The Fixed Account Value at any time is equal to:
(1) all Purchase Payments allocated to the Fixed Account plus the
interest subsequently credited on those payments; plus
(2) any Variable Account value transferred to the Fixed Account
plus the interest subsequently credited on the transferred
value; less
(3) any prior partial withdrawals from the Fixed Account; less
(4) any Fixed Account Value transferred to the Variable Account.
We will credit interest to Purchase Payments allocated to the Fixed Account
at rates declared by Us for Guarantee Periods of one or more years from the
month and day of allocation. The minimum Guaranteed Interest Rate is 3%
per year.
Certificate Owner Services
The Programs. Keyport Benefit Life offers the following investment related
programs which is are available only prior to the Income Date: Dollar Cost
Averaging; Capital Protection Plus; and Systematic Withdrawal Programs. A
Rebalancing Program is available prior to and after the Income Date. Under
each this Program, the related transfers between and among Sub-Accounts and
the Fixed Account are not counted as one of the twelve free transfers.
Each Programs has its own requirements, as discussed below. Keyport Benefit
Life reserves the right to terminate any Program.
Dollar Cost Averaging Program. The program periodically transfers
Accumulation Units from the SteinRoe Cash Income Sub-Account or the One-
Year Guarantee Period of the Fixed Account to other Sub-Accounts selected
by the Certificate Owner. The program allows a Certificate Owner to invest
in Variable Sub-Accounts over time rather than having to invest in those
Sub-Accounts all at once. The program is available for initial and
subsequent Purchase Payments and for Certificate Value transferred into the
SteinRoe Cash Income Sub-Account or the One-Year Guarantee Period. Under
the program, Keyport Benefit Life makes automatic transfers on a periodic
basis out of the SteinRoe Cash Income Sub-Account or the One-Year Guarantee
Period into one or more of the other available Sub-Accounts (Keyport
Benefit Life reserves the right to limit the number of Sub-Accounts the
Certificate Owner may choose but there are currently no limits). The
program will automatically end if the Income Date occurs. Keyport Benefit
Life reserves the right to end the program at any time by sending the
Certificate Owner a notice one month in advance.
Rebalancing Program. In accordance with the Certificate Owner's election
of the relative Purchase Payment percentage allocations, Keyport Benefit
Life will automatically rebalance the Certificate Value of each Sub-Account
either monthly, quarterly, semi-annually, or annually. On the last day of
the period selected, Keyport Benefit Life will automatically rebalance the
Certificate Value in each of the Sub-Accounts to match the current Purchase
Payment percentage allocations. The Program may be terminated at any time
and the percentages may be altered by Written Request. Certificate Value
allocated to the Fixed Account is not subject to automatic rebalancing.
After the Income Date, automatic rebalancing applies only to variable
annuity payments and Keyport Benefit Life will rebalance the number of
Annuity Units in each Sub-Account.
Systematic Withdrawal Program. Keyport Benefit Life will make monthly,
quarterly, semi-annually or annual distributions of a predetermined dollar
amount to the Certificate Owner that has enrolled in the Systematic
Withdrawal Program. The Certificate Owner may specify the amount of each
partial withdrawal, subject to a minimum of $100. Systematic withdrawals
may only be made from the Sub-Accounts and the One Year Guarantee Period of
the Fixed Account. In each Certificate Year, portions of Certificate Value
may be withdrawn without the imposition of any Contingent Deferred Sales
Charge ("Free Withdrawal Amount"). If withdrawals pursuant to the Program
are greater than the Free Withdrawal Amount, the amount of the withdrawals
greater than the Free Withdrawal Amount will be subject to the applicable
Contingent Deferred Sales Charge. Any unrelated voluntary partial
withdrawal a Certificate Owner makes during a Certificate Year will be
aggregated with withdrawals pursuant to the Program to determine the
applicability of any Contingent Deferred Sales Charge under the Certificate
provisions regarding partial withdrawals.
Definitions (continued)
Certificate: The document issued to a Certificate Owner to evidence a
Certificate Owner's participation under the Group Contract. The
Certificate summarizes the benefits and provisions of the Group Contract.
Certificate Anniversary: An anniversary of the Certificate Date.
Certificate Date: The date a Certificate is issued to a Certificate Owner.
The Certificate Date is shown on the Certificate Schedule.
Certificate Owner: The person who owns a Certificate under the Group
Contract. Any Joint Certificate Owners and the Certificate Owner own the
Certificate equally with rights of survivorship. All Owners must exercise
ownership rights and privileges together, including the signing of Written
Requests.
Certificate Value: The sum of the Certificate Owner's interest in the Sub-
accounts of the Variable Account and the Fixed Account during the
Accumulation Period.
Certificate Year: The first Certificate Year is the annual period which
begins on the Certificate Date. Subsequent Certificate Years begin on each
Certificate Anniversary.
Eligible Fund: An investment entity shown on the Certificate Schedule.
Fixed Account: The account We establish to support Fixed Allocations. The
Contract Schedule shows whether the Fixed Account is available under the
Certificates.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under a Certificate prior to the Income Date.
Fixed Allocation: An amount allocated to the Fixed Account that is
credited with a Guaranteed Interest Rate for a specified Guarantee Period.
Fixed Annuity: An annuity with a series of payments made during the
Annuity Period which are guaranteed as to dollar amount by Us.
General Account: Our general investment account which contains all of Our
assets except those in the Variable Account and Our other separate
accounts.
Group Contract Owner: The person or entity to which the Group Contract is
issued.
Guaranteed Interest Rate: The effective annual interest rate which We will
credit for a specified Guarantee Period.
Guarantee Period: The period of year(s) a rate of interest is guaranteed
to be credited within the Fixed Account.
Income Date: The date on which Annuity Payments begin. The Income Date is
shown on the Certificate Schedule.
In Force: The status of a Certificate before the Income Date so long as it
has not been totally surrendered and there has not been a death of a
Certificate Owner or Joint Certificate Owner that will cause the
Certificate to end within five years of the date of death.
Office: Our service office shown on the Certificate Schedule.
Person: A human being, trust, corporation, or any other legally recognized
entity.
Portfolio: A series of an Eligible Fund which constitutes a separate and
distinct class of shares.
Purchase Payment: A payment made by or on behalf of a Certificate Owner
with respect to a Certificate.
Sub-account: Variable Account assets are divided into Sub-accounts.
Assets of each Sub-account will be invested in shares of a Portfolio of an
Eligible Fund, or directly in portfolio securities.
Valuation Date: Each day on which We and the New York Stock Exchange
("NYSE") are open for business, or any other day that the Securities and
Exchange Commission requires that mutual funds, unit investment trusts or
other investment portfolios be valued.
Valuation Period: The period of time beginning at the close of business of
the NYSE on each Valuation Date and ending at the close of business on the
next succeeding Valuation Date.
Variable Account: Our Variable Account(s) shown on the Certificate
Schedule.
Variable Annuity: An annuity with payments which vary as to dollar amount
in relation to the investment performance of specified Sub-accounts of the
Variable Account.
We, Us, Our: Keyport Benefit Life Insurance Company.
Written Request: A request in writing, in a form satisfactory to Us, and
received by Us at Our Office.
General Provisions
Purchase Payments
The initial Purchase Payment is due on the Certificate Date. It must be
paid at Our Office in United States currency. Coverage under a Certificate
does not take effect until We have accepted the initial Purchase Payment
during a Certificate Owner's lifetime. Each Purchase Payment after the
Certificate Date must be at least the amount shown on the Certificate
Schedule. Provided the Certificate Value under a Certificate does not go
to zero, a Certificate will stay in force until the Income Date even if a
Certificate Owner make no payments after the initial one. We reserve the
right to reject any subsequent Purchase Payment.
Allocation of Purchase Payments
An initial Purchase Payment is allocated to the Sub-accounts of the
Variable Account, and to the Fixed Account if available, in accordance with
the selections made by a Certificate Owner at the Certificate Date. Unless
otherwise changed by a Certificate Owner, subsequent Purchase Payments are
allocated in the same manner as the initial Purchase Payment. Allocation
of Purchase Payments is subject to the terms and conditions imposed by Us.
We reserve the right to allocate initial Purchase Payments to the Money
Market Sub-account until the expiration of the Right to Examine Certificate
period set forth on the first page of the Group Contract and the
Certificate.
The Contract
The Group Contract, including the application, if any, and any attached
rider or endorsement constitute the entire contract between the Group
Contract Owner and Us. All statements made by the Group Contract Owner,
any Certificate Owner or any Annuitant will be deemed representations and
not warranties. No such statement will be used in any contest unless it is
contained in the application signed by the Group Contract Owner or in a
written instrument signed by the Certificate Owner, a copy of which has
been furnished to the Certificate Owner, the Beneficiary or to the Group
Contract Owner.
Only Our President or Secretary may agree to change any of the terms of the
Group Contract. Any changes must be in writing. Any change to the terms
of a Certificate must be in writing and with Certificate Owner's consent,
unless provided otherwise by the Group Contract and the Certificate.
To assure that the Group Contract and the Certificate will maintain their
status as a variable annuity under the Internal Revenue Code, We reserve
the right to change the Group Contract and any Certificate issued
thereunder to comply with future changes in the Internal Revenue Code, any
regulations or rulings issued thereunder, and any requirements otherwise
imposed by the Internal Revenue Service. The Group Contract Owner and the
affected Certificate Owner will be sent a copy of any such amendment.
We reserve the right, subject to the approval of the New York
Superintendent of Insurance and compliance with U.S. Laws as currently
applicable or subsequently changed, to: (a) operate the Variable Account
in any form permitted under the Investment Company Act of 1940, as
amended, (the "1940 Act"), or in any other form permitted by law; (b) take
any action necessary to comply with or obtain and continue any exemptions
from the 1940 Act, or to comply with any other applicable law; (c) transfer
any assets in any Sub-account to another Sub-account, or to one or more
separate investment accounts, or the General Account; or to add, combine or
remove Sub-accounts in the Variable Account; and (d) change the way We
assess charges, so long as We do not increase the aggregate amount beyond
that currently charged to the Variable Account and the Eligible Funds in
connection with a Certificate. If the shares of any of the Eligible Funds
should become unavailable for investment by the Variable Account or if in
Our judgment further investment in such Portfolio shares should become
inappropriate in view of the purpose of the Certificate, We may add or
substitute shares of another mutual fund for the Portfolio shares already
purchased under the Certificate. No substitution of Portfolio shares in
any Sub-account may take place without prior approval of the Securities and
Exchange Commission and notice to the affected Certificate Owners, to the
extent required by the 1940 Act.
Certificate Owner
A Certificate Owner has all rights and may receive all benefits under a
Certificate. A Certificate Owner is the person designated as such on the
Certificate Date, unless changed. A Certificate Owner may exercise all
rights of a Certificate while it is In Force, subject to the rights of (a)
any assignee under an assignment filed with Us, and (b) any irrevocably
named Beneficiary.
Joint Certificate Owner
A Certificate can be owned by Joint Certificate Owners. Upon the death of
any Certificate Owner or Joint Certificate Owner, the surviving owner(s)
will be the primary Beneficiary(ies). Any other beneficiary designation
will be treated as a Contingent Beneficiary unless otherwise indicated in a
Written Request filed with Us.
Annuitant
The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by a Certificate Owner at the
Certificate Date, unless changed prior to the Income Date. Any change of
Annuitant is subject to Our underwriting rules then in effect. The
Annuitant may not be changed in a Certificate which is owned by a non-
natural person. A Certificate Owner may name a Contingent Annuitant. The
Contingent Annuitant becomes the Annuitant if the Annuitant dies while a
Certificate is In Force. If the Annuitant dies and no Contingent Annuitant
has been named, We will allow a Certificate Owner sixty days to designate
someone other than the Certificate Owner as Annuitant. The Certificate
Owner will be the Contingent Annuitant unless the Certificate Owner names
someone else. If the Certificate is owned by a non-natural person, the
death of the Annuitant will be treated as the death of the Certificate
Owner and a new Annuitant may not be designated.
Beneficiary
The Beneficiary is the person who controls the Certificate if any
Certificate Owner dies prior to the Income Date. If the Certificate is
owned by Joint Certificate Owners, upon the death of any Certificate Owner
or Joint Certificate Owner, the surviving owner(s) will become the primary
Beneficiary. Any other beneficiary designation will be treated as a
Contingent Beneficiary unless otherwise indicated in a Written Request
filed with Us. If a Certificate Owner names more than one Person as
Primary Beneficiary or as Contingent Beneficiary, and does not state
otherwise on an application or in a Written Request to Us, any non-
survivors will not receive a benefit. The survivors will receive equal
shares. Subject to the rights of any irrevocable Beneficiary(ies), a
Certificate Owner may change primary or contingent Beneficiary(ies). A
change must be made by Written Request and will be effective as of the date
the Written Request is signed. We will not be liable for any payment We
make or action We take before We receive the Written Request.
Group Contract Owner
The Group Contract Owner has title to the Group Contract. The Group
Contract and any amount accumulated under any Certificate are not subject
to the claims of the Group Contract Owner or any of its creditors. The
Group Contract Owner may transfer ownership of this Group Contract. Any
transfer of ownership terminates the interest of any existing Group
Contract Owner. It does not change the rights of any Certificate Owner.
Nothing in the Group Contract shall invalidate or impair any rights granted
to the Certificate Owner by the Certificate or New York law.
Change of Certificate Owner, Beneficiary or Contingent Annuitant
While a Certificate is In Force, a Certificate Owner may by Written Request
change the primary Certificate Owner, Joint Certificate Owner, primary
Beneficiary, Contingent Beneficiary, Contingent Annuitant, or in certain
instances, the Annuitant. An irrevocably named Person may be changed only
with the written consent of such Person. The change will be effective,
following Our receipt of the Written Request, as of the date the Written
Request is signed. The change will not affect any payments We make or
actions We take prior to the time We receive the Written Request.
Assignment of the Certificate
A Certificate Owner may assign a Certificate at any time while it is In
Force. The assignment must be in writing and a copy must be filed at Our
Office. A Certificate Owner's rights and those of any revocably named
Person will be subject to the assignment. An assignment will not affect
any payments We make or actions We take before We receive the assignment.
We are not responsible for the validity of any assignment.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any payee has been misstated, We will
compute the amount payable based on the correct age and sex. If Annuity
Payments have begun, any underpayment(s) that have been made plus interest
at a rate of 5% per year will be paid in full with the next Annuity
Payment. Any overpayment plus interest at a rate of 5% per year, unless
repaid to Us in one sum, will be deducted from future Annuity Payments
otherwise due until We are repaid in full.
Non-Participating
A Certificate does not participate in Our divisible surplus.
Evidence of Death, Age, Sex or Survival
If a Certificate provision relates to the death of a natural Person, We
will require proof of death before We will act under that provision. Proof
of death shall be: (a) a certified death certificate; or (b) a certified
decree of a court of competent jurisdiction as to the finding of death; or
(c) a written statement by a medical doctor who attended the deceased; or
(d) any other document constituting due proof of death under applicable
state law. If Our action under a Certificate provision is based on the
age, sex, or survival of any Person, We may require evidence of the
particular fact before We act under that provision.
Protection of Proceeds
No Beneficiary or payee may commute or assign any payments under a
Certificate before they are due. To the extent permitted by law, no
payments shall be subject to the debts of any Beneficiary or payee or to
any judicial process for payment of those debts.
Reports
We will send Certificate Owners a report that shows the Certificate Value
at least once each Certificate Year. We will send any other reports that
may be required by law.
Taxes
Any taxes paid to any governmental entity relating to a Certificate will be
deducted from the Purchase Payments or Certificate Value. We may, in Our
sole discretion, delay the deduction until a later date. By not deducting
tax payments at the time of Our payment, We do not waive any right We may
have to deduct amounts at a later date. We will, in Our sole discretion,
determine when taxes relate to a Certificate or to the operation of the
Variable Account. We reserve the right to establish a provision for
federal income taxes if We determine, in Our sole discretion, that We will
incur a tax as a result of the operation of the Variable Account. Such a
provision will be reflected in the Accumulation and Annuity Unit Values.
We will deduct for any income taxes incurred by Us as a result of the
operation of the Variable Account whether or not there was a provision for
taxes and whether or not it was sufficient. We will deduct from any
payment under a Certificate any withholding taxes required by applicable
law.
Regulatory Requirements
All values payable under a Certificate will not be less than the minimum
benefits required by the laws and regulations of the states in which the
Certificate is delivered.
Suspension or Deferral of Payments
We reserve the right to suspend or postpone payments for a withdrawal,
transfer, surrender or death benefit for any period when:
(1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); or
(2) trading on the New York Stock Exchange is restricted; or
(3) an emergency exists as a result of which valuation or disposal
of the assets and securities of the Variable Account is not
reasonably practicable; or
(4) the Securities and Exchange Commission, by order or
pronouncement, so permits for the protection of Certificate
Owners;
provided that applicable rules and regulations of the Securities and
Exchange Commission govern as to whether the conditions described in (2)
and (3) above exist.
We reserve the right to delay payment of amounts allocated to the Fixed
Account for up to six months.
Variable Account Provisions
The Variable Account
The Variable Account(s) is designated on the Certificate Schedule and
consists of assets set aside by Us, which are kept separate from Our
general assets and all other variable account assets We maintain. We own
the assets of the Variable Account. Variable Account assets equal to
reserves and other contract liabilities will not be chargeable with
liabilities arising out of any other business We may conduct. We may
transfer to Our General Account assets which exceed the reserves and other
liabilities of the Variable Account. Income and realized and unrealized
gains or losses from assets in the Variable Account are credited to or
charged against the account without regard to other income, gains or losses
in Our other investment accounts.
The Variable Account assets are divided into Sub-accounts. The Sub-
accounts which are available under the Certificate are shown on the
Certificate Schedule. The assets of the Sub-accounts of the unit
investment trust variable separate account are allocated to the Eligible
Fund(s) and the Portfolio(s), if applicable, within an Eligible Fund shown
on the Certificate Schedule. The assets of the Sub-accounts of the
investment company variable separate account, if applicable, are invested
in portfolios of securities designed to meet the objectives of the Sub-
Account shown on the Certificate Schedule. We may, from time to time, add
additional Sub-accounts, Eligible Funds or Portfolios to those shown on the
Certificate Schedule. A Certificate Owner may be permitted to transfer
Certificate Values or allocate Purchase Payments to the additional Sub-
Accounts, Eligible Funds or Portfolios. However, the right to make such
transfers or allocations will be limited by the terms and conditions
imposed by Us.
We also have the right to eliminate Sub-accounts from the Variable Account,
to combine two or more Sub-accounts or to substitute a new Portfolio for
the Portfolio in which a Sub-account invests. A substitution may become
necessary if, in Our discretion, a Portfolio or Sub-account no longer suits
the purposes of the Group Contract. This may happen: due to a change in
laws or regulations or a change in a Portfolio's investment objectives or
restrictions; because the Portfolio or Sub-account is no longer available
for investment; or for some other reason. We will obtain any prior
approvals that may be required from the insurance department of Our state
of domicile, the New York Superintendent of Insurance and from the SEC or
any other governmental entity before making such a substitution.
When permitted by law, We reserve the right to:
(1) Deregister a Variable Account under the 1940 Act;
(2) Operate a Variable Account as a management company under the 1940
Act, if it is operating as a unit investment trust;
(3) Operate a Variable Account as a unit investment trust under the 1940
Act, if it is operating as a management company;
(4) Restrict or eliminate any voting rights as to the account;
(5) Combine the Variable Account with any other variable account.
Valuation of Assets
The assets of the Variable Account are valued at their fair market value in
accordance with Our procedures.
Accumulation Units
A Certificate Owner's Variable Account value will fluctuate in accordance
with the investment results of the Sub-accounts to which the Certificate
Owner has allocated his or her Purchase Payments or Certificate Value. In
order to determine how these fluctuations affect a Certificate Owner's
Certificate Value, We use an Accumulation Unit value. Accumulation Units
are used to account for all amounts allocated to or withdrawn from the Sub-
accounts of the Variable Account as a result of Purchase Payments, partial
withdrawals, transfers, or charges deducted from the Certificate Value.
We determine the number of Accumulation Units of a Sub-account purchased or
canceled by dividing the amount allocated to, or withdrawn from, the Sub-
account by the dollar value of one Accumulation Unit of the Sub-account as
of the end of the Valuation Period during which We receive the request for
the transaction.
Accumulation Unit Value
The Accumulation Unit Value for each Sub-account was initially set at $10.
Subsequent Accumulation Unit Values for each Sub-account are determined by
multiplying the Accumulation Unit Value for the immediately preceding
Valuation Period by a net investment factor for the Sub-account for the
current period. This factor may be greater or less than 1.0; therefore,
the Accumulation Unit Value may increase or decrease from Valuation Period
to Valuation Period.
We calculate the net investment factor for each Sub-account investing in
shares of mutual funds by dividing (a) by (b) and then subtracting (c)
where:
(a) is equal to:
(i) the net asset value per share of the Portfolio in which the Sub-
account invests at the end of the Valuation Period; plus
(ii) any dividend per share declared for the Portfolio that has an ex-
dividend date within the current Valuation Period.
(b) is the net asset value per share of the Portfolio at the end of the
preceding Valuation Period.
(c) is equal to:
(i) the sum of each Valuation Period equivalent of the annual rate for
the Mortality and Expense Risk Charge, for the Administrative
Charge,
and for the Distribution Charge, if any, which are shown on the
Certificate Schedule; plus
(ii) a charge factor, if any, for any tax provision established by Us a
result of the operation of the Sub-account.
We calculate the net investment factor for each Sub-account investing
directly in securities with the same formula, except:
(a) is equal to:
(i) the value of the assets in the Sub-account at the end of the
preceding Valuation Period; plus
(ii) any investment income and capital gains, realized or
unrealized, credited to the assets during the current
Valuation Period; less
(iii) any capital losses, realized or unrealized, charged against
the assets during the current Valuation Period; less
(iv) all operating and investment expenses relating to the assets
that are incurred during the current Valuation Period.
(b) is the value of the assets in the Sub-account at the end of the
preceding Valuation Period.
Mortality and Expense Risk Charge
Each Valuation Period We deduct a Mortality and Expense Risk Charge from
each Sub-account of the Variable Account which is equal, on an annual
basis, to the amount shown on the Certificate Schedule. The Mortality and
Expense Risk Charge compensates Us for assuming the mortality and expense
risks with respect to the Certificates We issue. We guarantee the dollar
amount of each Annuity Payment after the first Annuity Payment will not be
affected by variations in mortality or expense experience.
Administrative Charge
Each Valuation Period We deduct an Administrative Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Administrative Charge compensates Us for the
costs associated with administration of the Variable Account and the
Certificates We issue.
Distribution Charge
Each Valuation Period We deduct a Distribution Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Distribution Charge compensates Us for the costs
associated with the distribution of the Certificates We issue.
Certificate Maintenance Charge
We deduct a Certificate Maintenance Charge from the Certificate Value by
canceling Accumulation Units from each applicable Sub-account to reimburse
Us for expenses relating to the maintenance of the Certificate. We will
deduct the Certificate Maintenance Charge from the Sub-accounts of the
Variable Account in the same proportion that the amount of Certificate
Value in each Sub-account bears to the Certificate Value. The Certificate
Maintenance Charge is shown on the Certificate Schedule. The Certificate
Maintenance Charge will be deducted from the Certificate Value on each
Certificate Anniversary during the Accumulation Period.
If a total surrender is made on a date other than a Certificate
Anniversary, the Certificate Maintenance Charge will be deducted at the
time of surrender.
During the Annuity Period, the Certificate Maintenance Charge will be
deducted on a pro-rata basis from each Annuity Payment.
Transfers
Transfers: Subject to any limitation We impose on the number of
transfers permitted in a Certificate Year, a Certificate Owner may transfer
all or part of Certificate Owner's Certificate Value among the Sub-accounts
and the Fixed Account, if any, by Written Request or by telephone without
the imposition of any fees or charges. Transfers among the Sub-accounts
and the Fixed Account are permitted only during the Accumulation Period.
The number of permitted transfers, and the charge for transfers in excess
of that number, are shown on the Certificate Schedule. All transfers are
subject to the following:
(1) If more than the number of free transfers, shown on the
Certificate Schedule, are made in a Certificate Year, We will deduct a
transfer charge, shown on the Certificate Schedule, for each subsequent
transfer. The transfer fee will be deducted from the Sub-account from
which the transfer is made. However, if Certificate Owner transfers his or
her entire interest in a Sub-account, the transfer fee will be deducted
from the amount transferred. If a Certificate Owner makes a transfer from
more than one Sub-account, any transfer fee will be allocated pro-rata
among such Sub-accounts in proportion to the amount transferred from each.
The deduction of any fees We impose on such transfers will not exceed the
maximum listed on page 3.
(2) During the Annuity Period, transfers of values between Sub-
accounts will be made by converting the number of Annuity Units being
transferred to the number of Annuity Units in the Sub-account to which a
transfer is made, so that the next Annuity Payment, if it were made at that
time, would be the same amount that it would have been without the
transfer. Thereafter, Annuity Payments will reflect changes in the value
of the new Annuity Units.
(3) The minimum amount which can be transferred is shown on the
Certificate Schedule. The minimum amount which must remain in a Sub-
account after a transfer is shown on the Certificate Schedule.
(4) If 100% of the value of any Sub-account is transferred and the
current allocation for Purchase Payments includes that Sub-account, the
allocation for future Purchase Payments will change to reflect a
Certificate Owner's allocation of Certificate Value following the transfer.
(5) We reserve the right, at any time and without prior notice to
any party, to terminate, suspend or modify the transfer privileges
described above.
We will not be liable for transfers made in accordance with a Certificate
Owner's instructions. All amounts and Accumulation Units will be
determined as of the end of the Valuation Period in which We receive the
request for transfer.
Partial Withdrawals and Total Surrender
Partial Withdrawals
During the Accumulation Period while the Certificate is In Force, a
Certificate Owner may, upon Written Request, make a partial withdrawal,
subject to the provisions and limitations shown on the Certificate
Schedule. For purposes of determining whether a Surrender Charge is
applicable to a partial withdrawal:
(1) A partial withdrawal will first be taken from the portion of a
Certificate Owner's Certificate Value which is in excess of
Purchase Payments, and then from Purchase Payments; and
(2) We will allocate partial withdrawals to Purchase Payments in the
order in which the Purchase Payments were made, starting with
the
first.
A withdrawal will result in the cancellation of Accumulation Units from
each applicable Sub-account in the ratio that a Certificate Owner's
interest in the Sub-account bears to his or her Certificate Value in all
the Sub-accounts. A Certificate Owner must specify by Written Request in
advance if he or she wants Accumulation Units to be canceled in a manner
other than the method described above. If there is no value or
insufficient value in the Variable Account, then the amount withdrawn, or
the insufficient portion, will be deducted from the Fixed Account. If a
Certificate Owner has multiple Guarantee Periods, We will deduct such
amount from each Guarantee Period's values in the ratio that each Period's
values bears to the total Fixed Account Value. A Certificate Owner must
specify by Written Request in advance if he or she wants multiple Guarantee
Periods to be reduced in a manner other than the method described above.
Any amount deducted from the fixed account value may be subject to a market
value adjustment, if applicable.
Each partial withdrawal must be for an amount not less than the amount
shown on the Certificate Schedule. The Certificate Value which must remain
in a Certificate is shown on the Certificate Schedule. The Certificate
Schedule also shows any charge.
Total Surrender
During the Accumulation Period while the Certificate is In Force, a
Certificate Owner may, upon Written Request, make a total surrender of the
Certificate Withdrawal Value. The Certificate Withdrawal Value is:
(1) the Certificate Value as of the end of the Valuation Period
during which We receive a Written Request for a withdrawal or
surrender; less
(2) any applicable taxes not previously deducted; less
(3) any Surrender Charge; less
(4) any Certificate Maintenance Charge.
The Fixed Account Value, which is a component of the Certificate Value, may
be subject to a market value adjustment, if applicable.
We will pay the amount of any withdrawal or surrender within seven days
unless the Suspension or Deferral of Payments Provision is in effect.
Death Provisions
Death of Certificate Owner
These provisions apply if, during the Accumulation Period while the
Certificate is In Force, the Certificate Owner or any Joint Certificate
Owner dies (whether or not the decedent is also the Annuitant) or the
Annuitant dies under a Certificate owned by a non-natural Person. The
"designated beneficiary" will control the Certificate after such a death.
This "designated beneficiary" will be the first Person among the following
who is alive on the date of death: Certificate Owner; Joint Certificate
Owner; primary Beneficiary; Contingent Beneficiary; and Certificate Owner's
estate. If the Certificate Owner and Joint Certificate Owner are both
alive, they shall be the "designated beneficiary" together.
If the decedent's surviving spouse (if any) is the sole "designated
beneficiary", the surviving spouse will automatically become the new sole
Certificate Owner as of the date of the death. And, if the Annuitant is
the decedent, the new Annuitant will be any living Contingent Annuitant,
otherwise the surviving spouse. The Certificate may stay in force until
another death occurs (i.e., until the death of the Certificate Owner or
Joint Certificate Owner). Except for this paragraph, all of "Death
Provisions" will apply to that subsequent death.
In all other cases, the Certificate may stay in force up to five years from
the date of death. During this period, the "designated beneficiary" may
exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to surrender the Certificate for its
Certificate Withdrawal Value. If this Certificate is still in force at the
end of the five-year period, We will automatically end it then by paying to
the "designated beneficiary" the Certificate Withdrawal Value without the
deduction of any applicable Surrender Charges. If the "designated
beneficiary" is not alive then, We will pay any Person(s) named by the
"designated beneficiary" in a Written Request; otherwise the "designated
beneficiary's" estate.
Death of Annuitant
These provisions apply if during the Accumulation Period while the
Certificate is In Force, (a) the Annuitant dies, (b) the Annuitant is not
an Owner, and (c) the Owner is a natural person. The Certificate will
continue In Force after the Annuitant's death. The new Annuitant will be
any living Contingent Annuitant, otherwise the Certificate Owner.
Payment of Benefits
Instead of receiving a lump sum, a Certificate Owner or any "designated
beneficiary" may by Written Request direct that We pay any benefit of
$2,000 or more under an Annuity Option that meets the following: (a) the
first payment to the "designated beneficiary" must be made no later than
one year after the date of death; (b) payments must be made over the life
of the "designated beneficiary" or over a period not extending beyond that
person's life expectancy; and (c) any Annuity Option that provides for
payments to continue after the death of the "designated beneficiary" will
not allow the successor payee to extend the period of time over which the
remaining payments are to be made.
Annuity Provisions
General
If the Certificate is In Force on the Income Date, the Adjusted Certificate
Value will be applied under the Annuity Option selected by a Certificate
Owner. Annuity Payments may be made on a fixed or variable basis or both.
Income Date
The Income Date may be selected by a Certificate Owner. It is shown on the
Certificate Schedule. The Income Date can be any time after the
Certificate Date for variable payments and any time after the first
Certificate Anniversary for fixed payments. The Income Date may not be
later than the earlier of when the Annuitant reaches attained age 90 or
that required under state law. If no Income Date is selected, it will be
the earlier of when the Annuitant reaches attained age 90 or the maximum
date permitted under state law, if any.
Prior to the Income Date, a Certificate Owner may change the Income Date by
Written Request. Any change must be requested at least 30 days prior to
the new Income Date.
Selection of an Annuity Option
An Annuity Option may be selected by a Certificate Owner. If no Annuity
Option is selected, Option B will automatically be applied. Prior to the
Income Date, a Certificate Owner can change the Annuity Option selected by
Written Request. Any change must be requested at least 30 days prior to
the Income Date.
Frequency and Amount of Annuity Payments
Annuity Payments are paid in monthly installments unless quarterly, semi-
annual or annual payments are chosen. The Adjusted Certificate Value is
applied to the Annuity Table for the Annuity Option selected. If the
Adjusted Certificate Value to be applied under an Annuity Option is less
than $2,000, We reserve the right to make a lump sum payment in lieu of
Annuity Payments. If the Annuity Payment would be or becomes less than
$100, We will reduce the frequency of payments to a longer interval which
will result in each payment being at least $100.
Annuity Options
The following Annuity Options or any other Annuity Option acceptable to Us
may be selected:
OPTION A. ANNUITY FOR A FIXED NUMBER OF YEARS: Annuity Payments for a
chosen number of years, not less than 5. If the payee dies during the
payment period and the Beneficiary does not desire payments to continue for
the remainder of the period, he/she may elect to have the present value of
the remaining payments commuted and paid in a lump sum. During the payment
period of a Variable Annuity, the payee may elect by Written Request to
receive the following amount: (a) the present value of the remaining
payments commuted; less (b) any Surrender Charge that may be due by
treating the value defined in (a) as a surrender. Instead of receiving a
lump sum, the payee may elect another Annuity Option. The amount applied
to that Option would not be reduced by the charge defined in (b).
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 10 YEARS: Annuity
Payments during the lifetime of the payee and in any event for 10 years
certain. If the payee dies during the guaranteed payment period and the
Beneficiary does not desire payments to continue for the remainder of the
guaranteed period, he/she may elect to have the present value of the
guaranteed payments remaining commuted and paid in a lump sum.
OPTION C. JOINT AND SURVIVOR ANNUITY: Annuity Payments payable during
the joint lifetime of the payee and a designated second natural person and
then during the lifetime of the survivor.
Unless the Annuity Option provides for commutation by the payee, a payee
may not withdraw or otherwise end an Annuity Option after it begins.
Payments will end upon the payee's death unless the Annuity Option provides
for payments continuing to a successor payee. No successor payee may
extend the period of time over which the remaining payments are to be made.
Annuity
If a Certificate Owner selects a Fixed Annuity, the Adjusted Certificate
Value is allocated to the General Account and the Annuity is paid as a
Fixed Annuity. If the Certificate Owner selects a Variable Annuity, the
Adjusted Certificate Value will be allocated to the Sub-accounts of the
Separate Account in accordance with the selection he or she makes, and the
Annuity will be paid as a Variable Annuity. A Certificate Owner can also
select a combination of a Fixed and Variable Annuity and the Adjusted
Certificate Value will be allocated accordingly. If a Certificate Owner
does not select between a Fixed Annuity and a Variable Annuity, any
Adjusted Certificate Value in the Variable Account will be applied to a
Variable Annuity and any Adjusted Certificate Value in the Fixed Account
will be applied to a Fixed Annuity.
The Adjusted Certificate Value will be applied to the applicable Annuity
Table contained in the Certificate based upon the Annuity Option a
Certificate Owner selects. If, as of the Income Date, the current Annuity
Option rates applicable to the class of Certificates issued under the Group
Contract provide an initial Annuity Payment greater than the initial
Annuity Payment guaranteed under the applicable Annuity Table in the
Certificate, the greater payment will be made.
Fixed Annuity
The minimum dollar amount of each Fixed Annuity Payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. After the
initial Fixed Annuity payment, the payments will not change regardless of
investment, mortality or expense experience.
Variable Annuity
Variable Annuity Payments reflect the investment performance of the
Variable Account in accordance with the allocation of the Adjusted
Certificate Value to the Sub-accounts during the Annuity Period. Variable
Annuity payments are not guaranteed as to dollar amount.
The dollar amount of the first Variable Annuity payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. The dollar
amount of Variable Annuity payments for each applicable Sub-account after
the first Variable Annuity Payment is determined as follows:
(1) the dollar amount of the first Variable Annuity payment is
divided
by the value of an Annuity Unit for each applicable Sub-account
as
of the Income Date. This sets the number of Annuity Units for
each monthly payment for the applicable Sub-account. The number
of Annuity Units for each applicable Sub-account remains fixed
during the Annuity Period;
(2) the fixed number of Annuity Units per payment in each Sub-account
is multiplied by the Annuity Unit Value for that Sub-account for
the Valuation Period for which the payment is due. This result
is
the dollar amount of the payment for each applicable Sub-account.
The total dollar amount of each Variable Annuity payment is the sum of all
Sub-account Variable Annuity payments reduced by the applicable portion of
the Certificate Maintenance Charge.
Annuity Unit
The value of any Annuity Unit for each Sub-Account of the Separate Account
was initially set at $10.
The Sub-account Annuity Unit Value at the end of any subsequent Valuation
Period is determined as follows:
(1) the net investment factor calculated as set forth on pages 11-12
(but without the Distribution Charge, if any) for the current
Valuation Period is multiplied by the value of the Annuity Unit
for the Sub-account for the immediately preceding Valuation
Period.
(2) the result in (1) is then divided by the Assumed Investment Rate
Factor which equals 1.00 plus the Valuation Period equivalent of
the Assumed Investment Rate for the number of days in the current
Valuation Period. The Assumed Investment Rate is equal to 6% per
year.
The value of an Annuity Unit may increase or decrease from Valuation Period
to Valuation Period.
Using the Tables
Tables 2, 3, 5, and 6 are age-dependent. The amount of the first annuity
payment will be based on an age a specified number of years younger than
the person's then-attained age (i.e., age last birthday). This age setback
is as follows:
Date of First Payment Age Setback
1996-1999 1 year
2000-2009 2 years
2010-2019 4 years
2020-2029 5 years
2030 or later 6 years
We will calculate the amount for a payment frequency other than monthly and
for any ages not shown in Tables 2, 3, 5, and 6 in accordance with the next
section. Upon request, We will tell a Certificate Owner any such amount.
Basis of Calculation
Tables 1 and 4 are based on interest at 5% and 3%, respectively. Tables 2,
3, 5, and 6 are based on the 1983 Individual Annuity Valuation Tables (sex
distinct), with interest at 5% (Tables 2 and 3) and 3% (Tables 5 and 6),
projected dynamically with Projection Scale G.
TABLE 1: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 1 FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years
Payment
5 $18.74 12 $9.16 19 $6.71 25 $5.76
6 15.99 13 8.64 20 6.51 26 5.65
7 14.02 14 8.20 21 6.33 27 5.54
8 12.56 15 7.82 22 6.17 28 5.45
9 11.42 16 7.49 23 6.02 29 5.36
10 10.51 17 7.20 24 5.88 30 5.28
11 9.77 18 6.94
TABLE 2: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION B FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $4.45 $4.34 47 $5.05 $4.78 64 $6.54 $5.98 80 $9.14 $8.67
31 4.47 4.35 48 5.11 4.82 65 6.68 6.10 81 9.29 8.86
32 4.50 4.37 49 5.17 4.87 66 6.82 6.22 82 9.44 9.05
33 4.52 4.39 50 5.23 4.92 67 6.97 6.35 83 9.57 9.23
34 4.55 4.41 51 5.29 4.97 68 7.12 6.49 84 9.69 9.40
35 4.57 4.43 52 5.36 5.02 69 7.28 6.63 85 9.81 9.55
36 4.60 4.45 53 5.43 5.08 70 7.44 6.79 86 9.91 9.69
37 4.63 4.47 54 5.50 5.13 71 7.61 6.95 87 10.01 9.82
38 4.67 4.49 55 5.58 5.20 72 7.78 7.12 88 10.10 9.94
39 4.70 4.52 56 5.67 5.27 73 7.95 7.30 89 10.17 10.04
40 4.74 4.55 57 5.76 5.34 74 8.12 7.48 90 10.24 10.13
41 4.78 4.57 58 5.85 5.41 75 8.30 7.67 91 10.30 10.21
42 4.82 4.60 59 5.95 5.49 76 8.47 7.87 92 10.35 10.27
43 4.86 4.64 60 6.06 5.58 77 8.65 8.07 93 10.39 10.33
44 4.91 4.67 61 6.17 5.67 78 8.82 8.27 94 10.43 10.37
45 4.95 4.70 62 6.29 5.77 79 8.98 8.47 96 10.45 10.41
46 5.00 4.74 63 6.41 5.87
TABLE 3: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 3 FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90
95
30$4.24$4.28$4.31$4.34$4.36$4.38$4.40$4.42$4.43$4.44$4.45 $4.45 $4.45
$4.46
35 4.26 4.30 4.35 4.39 4.43 4.47 4.50 4.52 4.54 4.56 4.57 4.57 4.58
4.58
40 4.28 4.33 4.39 4.45 4.51 4.56 4.61 4.65 4.68 4.71 4.73 4.74 4.75
4.75
M45 4.29 4.35 4.42 4.50 4.58 4.66 4.74 4.80 4.86 4.90 4.93 4.96 4.97
4.98
A50 4.30 4.37 4.46 4.55 4.66 4.77 4.88 4.98 5.07 5.14 5.20 5.23 5.25
5.27
L55 4.31 4.39 4.48 4.59 4.73 4.87 5.03 5.18 5.32 5.44 5.53 5.59 5.63
5.65
E60 4.32 4.40 4.50 4.63 4.78 4.97 5.18 5.40 5.61 5.80 5.96 6.07 6.13
6.17
65 4.33 4.41 4.52 4.65 4.83 5.05 5.31 5.61 5.92 6.23 6.50 6.70 6.83
6.90
A70 4.33 4.42 4.53 4.68 4.87 5.11 5.42 5.80 6.23 6.70 7.14 7.50 7.75
7.90
G75 4.34 4.42 4.54 4.69 4.89 5.16 5.50 5.95 6.50 7.15 7.83 8.45 8.92
9.23
E80 4.34 4.43 4.54 4.70 4.91 5.19 5.56 6.06 6.71 7.55 8.52 9.50 10.34
10.93
85 4.34 4.43 4.55 4.71 4.92 5.21 5.60 6.13 6.86 7.85 9.10 10.52 11.87
12.93
90 4.34 4.43 4.55 4.71 4.93 5.22 5.62 6.18 6.96 8.06 9.55 11.39 13.34
15.05
95 4.34 4.43 4.55 4.71 4.93 5.23 5.64 6.21 7.02 8.20 9.86 12.09 14.69
17.20
TABLE 4: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION A FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $17.91 12 $8.24 19 $5.73 25 $4.71
6 15.14 13 7.71 20 5.51 26 4.59
7 13.16 14 7.26 21 5.32 27 4.47
8 11.68 15 6.87 22 5.15 28 4.37
9 10.53 16 6.53 23 4.99 29 4.27
10 9.61 17 6.23 24 4.84 30 4.18
11 8.86 18 5.96
TABLE 5: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION B FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $3.12 $2.99 47 $3.82 $3.53 64 $5.40 $4.83 80 $8.15 $7.66
31 3.15 3.01 48 3.88 3.58 65 5.55 4.96 81 8.32 7.86
32 3.18 3.03 49 3.94 3.63 66 5.69 5.08 82 8.47 8.06
33 3.21 3.06 50 4.01 3.68 67 5.85 5.22 83 8.61 8.25
34 3.24 3.08 51 4.08 3.74 68 6.01 5.37 84 8.75 8.43
35 3.27 3.11 52 4.15 3.80 69 6.18 5.52 85 8.87 8.60
36 3.31 3.13 53 4.23 3.86 70 6.35 5.68 86 8.98 8.75
37 3.34 3.16 54 4.31 3.93 71 6.52 5.85 87 9.08 8.88
38 3.38 3.19 55 4.39 4.00 72 6.70 6.03 88 9.18 9.01
39 3.42 3.22 56 4.48 4.07 73 6.89 6.21 89 9.26 9.12
40 3.46 3.25 57 4.58 4.15 74 7.07 6.41 90 9.33 9.21
41 3.51 3.29 58 4.68 4.23 75 7.26 6.61 91 9.40 9.30
42 3.55 3.32 59 4.78 4.32 76 7.44 6.81 92 9.45 9.37
43 3.60 3.36 60 4.89 4.41 77 7.63 7.02 93 9.49 9.43
44 3.65 3.40 61 5.01 4.50 78 7.81 7.23 94 9.53 9.47
45 3.71 3.44 62 5.14 4.61 79 7.98 7.45 95 9.55 9.51
46 3.76 3.49 63 5.27 4.72
TABLE 6: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION C FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90
95
30$2.88$2.93$2.97$3.01$3.04$3.07$3.08$3.10$3.11$3.12$3.12 $3.12 $3.13
$3.13
35 2.91 2.97 3.03 3.09 3.14 3.18 3.21 3.23 3.25 3.26 3.27 3.27 3.28
3.28
40 2.93 3.01 3.09 3.17 3.24 3.30 3.35 3.39 3.42 3.44 3.46 3.46 3.47
3.47
45 2.95 3.04 3.14 3.24 3.34 3.43 3.51 3.58 3.63 3.66 3.69 3.71 3.72
3.72
M50 2.96 3.06 3.17 3.30 3.43 3.56 3.68 3.79 3.87 3.94 3.98 4.01 4.03
4.03
A55 2.97 3.07 3.20 3.34 3.50 3.68 3.85 4.02 4.16 4.27 4.34 4.39 4.42
4.44
L60 2.98 3.09 3.22 3.38 3.56 3.78 4.01 4.25 4.47 4.66 4.80 4.89 4.95
4.98
E65 2.98 3.09 3.23 3.40 3.61 3.86 4.15 4.48 4.81 5.12 5.37 5.55 5.66
5.72
70 2.99 3.10 3.24 3.42 3.64 3.92 4.26 4.67 5.13 5.60 6.04 6.38 6.60
6.73
A75 2.99 3.10 3.25 3.43 3.66 3.96 4.34 4.81 5.39 6.06 6.75 7.35 7.79
8.07
G80 2.99 3.11 3.25 3.44 3.68 3.99 4.39 4.92 5.60 6.45 7.44 8.42 9.23
9.79
E85 2.99 3.11 3.26 3.44 3.69 4.00 4.42 4.98 5.73 6.74 8.01 9.44 10.77
11.81
90 2.99 3.11 3.26 3.45 3.69 4.01 4.44 5.02 5.82 6.93 8.43 10.29 12.25
13.95
95 2.99 3.11 3.26 3.45 3.70 4.02 4.45 5.04 5.87 7.05 8.73 10.97 13.58
16.11
Endorsements
To be inserted only by Us
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase payment
flexibility. This Contract is non participating with no dividends.
EXHIBIT 4k
KEYPORT BENEFIT LIFE INSURANCE COMPANY
Read this Certificate carefully. This document is a description of
the legal contract between the Group Contract Owner and Us.
You may return this Certificate within 10 days after You receive it
by delivering or mailing it to Our Office. The return of this Certificate
by mail will be effective when the postmark is affixed to a properly
addressed and postage prepaid envelope. We will refund any purchase
payments allocated to the Fixed Account and the Certificate Value plus any
amount deducted from Your purchase payment before it was allocated to the
Variable Account, including the Certificate Maintenance charge. The
Certificate Value will be determined as of the date of surrender (i.e., for
a mailed contract, the postmark date).
This Certificate describes the benefits and provisions of the Group
Contract. The Group Contract, as issued to the Group Contract Owner by Us
with any riders or endorsements, alone makes up the agreement under which
benefits are paid. The Group Contract may be inspected at the office of
the Group Contract Owner. In consideration of any application for this
Certificate and the payment of purchase payments, We agree, subject to the
terms and conditions of the Group Contract, to provide the benefits
described in this Certificate to the Certificate Owner.
If this Certificate is In Force on the Income Date, We will begin
making income payments to the Annuitant. We will make such payments
according to the terms of the Certificate and Group Contract.
Signed for the Company on the Issue Date at Our Home Office, 100
Manhattanville Road, Purchase, New York 10577.
Read This Contract Carefully.
Signed: ________________________ ________________________
Secretary President
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CERTIFICATE with limited purchase
payment flexibility. This contract is nonparticipating with no dividends.
Annuity payments and other values provided by this certificate when
based on the investment experience of a separate account, 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 1.25% asset charge) has an annualized investment
return of at least 6.4%. See pages 12-13 and 19 for further explanation.
Certificate assets allocated to the separate account incur charges of 1.40%
before annuity payments begin and 1.25% once annuity payments begin.
Income, capital gains, and/or losses whether or not realized, from assets
allocated to the separate account are credited to or charged against the
separate account without regard to income, capital gains, and/or losses
arising out of any other business the company may conduct.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
100 Manhattanville Road, Purchase, New York 10577
Service Office
125 High Street, 11th Floor
Boston, Massachusetts 02110
Certificate Schedule
GROUP CONTRACT OWNER Keyport Benefit Insurance Trust
GROUP CONTRACT NUMBER DVA(NY)002
CERTIFICATE NUMBER 0200999999-01
CERTIFICATE OWNER John Q Public, male, 12/07/45
JOINT CERTIFICATE OWNER Jane Q Public, female, 10/31/47
ANNUITANT John Q Public, male, 12/07/45
COVERED PERSONS John Q Public, Jane Q Public
ISSUE STATE NY
IRS PLAN TYPE Non-Qualified
CERTIFICATE DATE February 28, 1997
INCOME DATE March 1, 2030
INITIAL PURCHASE PAYMENT $10,000.00
MINIMUM INITIAL PAYMENT $5,000
MINIMUM ADDITIONAL PAYMENT $250
Charges
Distribution Charge: We deduct 0.000411% of the assets in each Variable
Account Sub-Account on a daily basis (equivalent to an annual rate of
0.15%) to compensate Us for a portion of Our distribution costs.
Administrative Charge: None.
Mortality and Expense Risk Charge: We deduct 0.003403% of the assets in
each Variable Account Sub-account on a daily basis (equivalent to an annual
rate of 1.25%) for Our mortality and expense risks.
Certificate Maintenance Charge: We charge $36 to cover a portion of Our
ongoing Certificate maintenance expenses. The charge is incurred at the
beginning of the Certificate Year and is deducted on each Certificate
Anniversary and at the time of total surrender. This charge will not apply
after annuitization.
Transfer Charge: Currently none; however, We reserve the right to charge
$25 for a transfer if You make more than 12 transfers per Certificate Year.
Surrender Charge: At the time of each partial withdrawal or at total
surrender a contingent deferred sales charge is imposed as a percentage of
each Purchase Payment during the seven years after the date of its payment,
as follows:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
7% 6% 5% 4% 3% 2% 1%
Thereafter 0%.
Initial Purchase Payment Allocation
Currently, Certificate Owners may select 18 Sub-accounts and the Fixed
Account. We reserve the right to increase or decrease the number of
available Sub-accounts. The minimum You may allocate to any Sub-account or
the Fixed Account is 5% of any Purchase Payment. Your initial Purchase
Payment has been invested as follows:
Alger Growth x%
Alger Small Cap x%
Alliance Global Bond x%
Alliance Premier Growth x%
Colonial Growth & Income x%
Colonial Int'l Fund for Growth x%
Colonial Strategic Income x%
Colonial U.S. Fund for Growth x%
Colonial Utilities x%
Liberty All-Star x%
MFS Emerging Growth x%
MFS Research x%
Newport Tiger x%
SteinRoe Cap Appreciation x%
SteinRoe Cash Income x%
SteinRoe Managed Assets x%
SteinRoe Managed Growth Stock x%
SteinRoe Mortgage Sec Income x%
Fixed Account - 1 Year x%
Transfer Guidelines
Number of Transfers and Transfer Charge: Currently, Certificate Owners are
permitted unlimited transfers per Certificate Year during the Accumulation
Period and unlimited transfers every 12 months during the Annuity Period.
We reserve the right to change, upon notice, the frequency of transfers You
may make. We also reserve the right to impose a charge for any transfer in
excess of 12 per Certificate Year. The transfer charge is shown in the
Charges section of the Schedule.
Minimum amount to be transferred: None.
Minimum amount which must remain in a Sub-account after transfer: None.
Partial Withdrawals
You may make partial withdrawals during the Accumulation Period without
incurring a surrender charge, as follows:
(1) In any Certificate Year You may withdraw an aggregate amount not
to exceed, at the time of withdrawal:
(a) the Certificate Value, less
(b) the portion of Your Purchase Payments not previously
withdrawn; and
(2) In any Certificate Year after the first, You may also withdraw
the positive difference, if any, between the amount withdrawn pursuant to
(1) above in any such subsequent year and 10% of Your Certificate Value as
of the preceding Certificate Anniversary.
We will collect the surrender charge shown on the Schedule with respect to
partial withdrawals in excess of the amounts described in (1) and (2)
above.
Minimum withdrawal amount: $300, unless the withdrawal is made pursuant to
Our systematic withdrawal program, in which case the minimum withdrawal is
$100.
Minimum Certificate Value which must remain after a partial withdrawal:
$2,500.
Death Benefits
Adjustment of Certificate Value
When We receive due proof of death of the Certificate Owner, any Joint
Certificate Owner, or the Annuitant if the Certificate Owner is a non-
natural Person, We will compare, as of the date of death, the Certificate
Value to the Death Benefit amount defined in this Schedule. If the
Certificate Value is less than the Death Benefit, We will increase the
current Certificate Value by the amount of the difference. If the
Certficate Value is greater than the Death Benefit, the Certificate Value
will be the Death Benefit. Any amount credited will be allocated to the
Variable Account and/or the Fixed Account based on the Purchase Payment
allocation selection that is in effect when We receive due proof of death.
Waiver of Surrender Charges
If the Certificate is surrendered within 90 days of the date of death of
the Certificate Owner, any Joint Certificate Owner, or the Annuitant if the
Certificate Owner is a non-natural Person, any applicable surrender charges
will not be deducted from the Certificate Withdrawal Value.
Death Benefit Amount
Certificate Anniversary Death Benefit
On the Certificate Date, the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) (a) Start with the Death Benefit from the Certificate Date;
(b) Add to (a) any additional Purchase Payments paid since
the Certificate Date and subtract from (a) any partial
withdrawals (including any associated surrender charge
incurred) made since the Certificate Date;
(2) (a) Determine the Certificate Value for each Certificate
Anniversary (the "Anniversary Value") before the 81st
birthday of the Certificate Owner or, if the Certificate
Owner is a non-natural Person, the Annuitant;
(b) Increase each "Anniversary Value" by any Purchase
Payments made after that Value's Anniversary;
(c) Decrease each "Anniversary Value" by the following amount
calculated at the time of each partial withdrawal made
after that Value's Anniversary: (i) the partial
withdrawal amount (including any associated surrender
charge incurred) divided by the Certificate Value
immediately preceding the withdrawal, (ii) multiplied by
the "Anniversary Value" immediately preceding the
withdrawal;
(d) Select the highest "Anniversary Value" after the
adjustments in (b) and (c) above;
(3) Set the Death Benefit equal to the greater of (1) and (2).
If there is a change of Certificate Owner, the new Certificate Owner's age
will be used to determine the amount in (2) above.
The Variable Separate Account
Sub-accounts investing in shares of mutual funds
Variable Account J is a unit investment trust variable separate account,
organized in and governed by the laws of the State of Massachusetts, the
home state of Liberty Life. Variable Account J is divided into Sub-
accounts. Each Sub-account listed below invests in shares of the
corresponding Portfolio of the Eligible Fund shown.
Sub-account Eligible Fund and Portfolio
The Alger American Fund
Alger Growth Alger American Growth Portfolio - seeks
Sub-account long-term capital appreciation.
Alger Small Cap Alger American Small Capitalization
Sub-account Portfolio - seeks long-term capital
appreciation.
Alliance Variable Products Series Fund, Inc.
Alliance Global Bond Global Bond Portfolio - seeks a high level of
Sub-account return from a combination of current income
and capital appreciation by investing in a
globally diversified portfolio of high quality
debt securities denominated in the U.S. Dollar
and a range of foreign currencies.
Alliance Premier Growth Premier Growth Portfolio - seeks growth of
Sub-account capital rather than current income.
Keyport Variable Investment Trust
Colonial Growth & Income Colonial Growth and Income
Sub-account Fund - seeks primarily income and long-
term capital growth and, secondarily,
preservation of capital.
Colonial Int'l Fund for Colonial International Fund for Growth -
Growth Sub-account seeks long-term capital growth, by investing
primarily in non-U.S. equity securities.
Newport Tiger Newport Tiger Fund - seeks long-term capital
Sub-account growth by investing primarily in equity
securities of companies located in
the nine Tigers of Asia (Hong Kong, Singapore,
South Korea and Taiwan, Malaysia, Thailand,
Indonesia, China and the Philippines).
Colonial Strategic Income Colonial Strategic Income Fund - seeks a high
Sub-account level of current income, as is consistent with
prudent risk and maximizing total return, by
diversifying investments primarily in U.S. and
foreign government and high yield, high risk
corporate debt securities.
Colonial U.S. Stock Colonial U.S. Stock Fund - seeks long-term
Sub-account growth by investing primarily in large
capitalization securities.
Liberty All-Star Equity Liberty All-Star Equity Fund - seeks total
Sub-account investment return, comprised of long-term
capital appreciation and current income,
through investment primarily in a diversified
portfolio of equity securities.
Stein Roe Global Utilities Stein Roe Global Utilities Fund - seeks
Sub-account current income and long-term growth of capital
and income.
MFS Variable Insurance Trust
MFS Emerging Growth MFS Emerging Growth Series - seeks to provide
Sub-account long-term growth of capital.
MFS Research MFS Research Series - seeks to provide long-
Sub-account term growth of capital and future income.
SteinRoe Variable Investment Trust
SteinRoe Special Venture Stein Roe Special Venture Fund - seeks capital
Sub-account growth by investing primarily in common
stocks, convertible securities, and other
securities selected for prospective capital
growth.
Stein Roe Money Market Stein Roe Money Market Fund - seeks high
Sub-account current income from short-term money market
("Money Market" Sub-account) instruments while emphasizing preservation of
capital and maintaining excellent liquidity.
Stein Roe Balanced Stein Roe Balanced Fund - seeks high total
Sub-account investment return through investment in a
changing mix of securities.
Stein Roe Growth Stock Stein Roe Growth Stock Fund - seeks long-term
Sub-account growth of capital through investment primarily
in common stocks.
Stein Roe Mortgage Stein Roe Mortgage Securities Fund - seeks
Securities Income highest possible level of current income
Sub-account consistent with safety of principal
and maintenance of liquidity through
investment primarily in mortgage-backed
securities.
Sub-accounts investing directly in securities - None.
The Fixed Account
The Fixed Account is part of Our General Account, which consists of all of
Our assets except the assets of the Variable Account and the assets of
other separate accounts that We maintain. Subject to applicable law, We
have sole discretion over investments of the assets of the Fixed Account.
If You allocate assets to the Fixed Account, Your accumulation values and
annuity payments will have guaranteed minimums.
Before the Income Date, Your interest in the Fixed Account is measured by
the Fixed Account Value. When annuity payments begin, the payee's interest
in the Fixed Account is measured by the amount of each periodic payment.
Benefits from the Fixed Account will not be less than the minimum values
required by any law of the jurisdiction where the Certificate is delivered.
Purchase Payments will be allocated to the Fixed Account in accordance with
Your selection at the Certificate Date. You may change such selection by
Written Request.
The Fixed Account Value at any time is equal to:
(1) all Purchase Payments allocated to the Fixed Account plus
the interest subsequently credited on those payments; plus
(2) any Variable Account Value transferred to the Fixed Account
plus the interest subsequently credited on the transferred
value; less
(3) any prior partial withdrawals from the Fixed Account; less
(4) any Fixed Account Value transferred to the Variable Account.
We will credit interest to Purchase Payments allocated to the Fixed Account
at rates declared by Us for Guarantee Periods of one or more years from the
month and day of allocation. The minimum Guaranteed Interest Rate is 3%
per year.
Certificate Owner Services
The Programs. Liberty Life offers the following investment related
programs which are available only prior to the Income Date: Dollar Cost
Averaging and Systematic Withdrawal Programs. A Rebalancing Program is
available prior to and after the Income Date. Under this Program, the
related transfers between and among Sub-Accounts and the Fixed Account are
not counted as one of the twelve free transfers. Each Program has its own
requirements, as discussed below. Liberty Life reserves the right to
terminate any Program.
Dollar Cost Averaging Program. The program periodically transfers
Accumulation Units from the SteinRoe Cash Income Sub-Account or the One-
Year Guarantee Period of the Fixed Account to other Sub-Accounts selected
by the Certificate Owner. The program allows a Certificate Owner to invest
in Variable Sub-Accounts over time rather than having to invest in those
Sub-Accounts all at once. The program is available for initial and
subsequent Purchase Payments and for Certificate Value transferred into the
SteinRoe Cash Income Sub-Account or the One-Year Guarantee Period. Under
the program, Liberty Life makes automatic transfers on a periodic basis out
of the SteinRoe Cash Income Sub-Account or the One-Year Guarantee Period
into one or more of the other available Sub-Accounts (Liberty Life reserves
the right to limit the number of Sub-Accounts the Certificate Owner may
choose but there are currently no limits). The program will automatically
end if the Income Date occurs. Liberty Life reserves the right to end the
program at any time by sending the Certificate Owner a notice one month in
advance.
Rebalancing Program. In accordance with the Certificate Owner's election
of the relative Purchase Payment percentage allocations, Liberty Life will
automatically rebalance the Certificate Value of each Sub-Account either
monthly, quarterly, semi-annually, or annually. On the last day of the
period selected, Liberty Life will automatically rebalance the Certificate
Value in each of the Sub-Accounts to match the current Purchase Payment
percentage allocations. The Program may be terminated at any time and the
percentages may be altered by Written Request. Certificate Value allocated
to the Fixed Account is not subject to automatic rebalancing. After the
Income Date, automatic rebalancing applies only to variable annuity
payments and Liberty Life will rebalance the number of Annuity Units in
each Sub-Account.
Systematic Withdrawal Program. Liberty Life will make monthly, quarterly,
semi-annual or annual distributions of a predetermined dollar amount to the
Certificate Owner that has enrolled in the Systematic Withdrawal Program.
The Certificate Owner may specify the amount of each partial withdrawal,
subject to a minimum of $100. Systematic withdrawals may only be made from
the Sub-Accounts and the One Year Guarantee Period of the Fixed Account.
In each Certificate Year, portions of Certificate Value may be withdrawn
without the imposition of any Contingent Deferred Sales Charge ("Free
Withdrawal Amount"). If withdrawals pursuant to the Program are greater
than the Free Withdrawal Amount, the amount of the withdrawals greater than
the Free Withdrawal Amount will be subject to the applicable Contingent
Deferred Sales Charge. Any unrelated voluntary partial withdrawal a
Certificate Owner makes during a Certificate Year will be aggregated with
withdrawals pursuant to the Program to determine the applicability of any
Contingent Deferred Sales Charge under the Certificate provisions regarding
partial withdrawals.
Table of Contents
Page
Right to Examine Certificate...........................................1
Certificate Schedule...................................................2
Definitions............................................................3
General Provisions.....................................................5
Variable Account Provisions............................................9
Transfers.............................................................12
Partial Withdrawals and Total Surrender...............................13
Death Provisions......................................................14
Annuity Provisions....................................................15
Endorsements (if any) are before page.................................21
Definitions
Accumulation Period: The period prior to the Income Date during which
Purchase Payments may be made by a Certificate Owner.
Accumulation Unit: An accounting unit used to calculate a Certificate
Owner's interest in a Sub-account of the Variable Account during the
Accumulation Period.
Adjusted Certificate Value: The Certificate Value less any applicable
taxes relating to a Certificate and Certificate Maintenance Charge. This
amount is applied to the applicable Annuity Tables to determine Annuity
Payments.
Annuitant: The natural person on whose life Annuity Payments are based,
and to whom any Annuity Payments will be made starting on the Income Date.
Annuity Options: Options available for Annuity Payments.
Annuity Payments: The series of payments made to the Annuitant, starting
on the Income Date, under the Annuity Option selected.
Annuity Period: The period after the Income Date during which Annuity
Payments are made.
Annuity Unit: An accounting unit used to calculate Variable Annuity
Payments during the Annuity Period.
Beneficiary: The person(s) or entity(ies) who controls the Certificate if
any Certificate Owner dies before the Income Date.
Definitions (continued)
Certificate: The document issued to a Certificate Owner to evidence a
Certificate Owner's participation under the Group Contract. The
Certificate summarizes the benefits and provisions of the Group Contract.
Certificate Anniversary: An anniversary of the Certificate Date.
Certificate Date: The date a Certificate is issued to a Certificate Owner.
The Certificate Date is shown on the Certificate Schedule.
Certificate Owner: The person who owns a Certificate under the Group
Contract. Any Joint Certificate Owners and the Certificate Owner own the
Certificate equally with rights of survivorship.
Certificate Value: The sum of the Certificate Owner's interest in the Sub-
accounts of the Variable Account and the Fixed Account during the
Accumulation Period.
Certificate Year: The first Certificate Year is the annual period which
begins on the Certificate Date. Subsequent Certificate Years begin on each
Certificate Anniversary.
Eligible Fund: An investment entity shown on the Certificate Schedule.
Fixed Account: The account We establish to support Fixed Allocations. The
Certificate Schedule shows whether the Fixed Account is available under the
Certificate.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under this Certificate prior to the Income Date.
Fixed Allocation: An amount allocated to the Fixed Account that is
credited with a Guaranteed Interest Rate for a specified Guarantee Period.
Fixed Annuity: An annuity with a series of payments made during the
Annuity Period which are guaranteed as to dollar amount by Us.
General Account: Our general investment account which contains all of Our
assets except those in the Variable Account and Our other separate
accounts.
Group Contract Owner: The person or entity to which the Group Contract is
issued.
Guaranteed Interest Rate: The effective annual interest rate which We will
credit for a specified Guarantee Period.
Guarantee Period: The period of year(s) a rate of interest is guaranteed
to be credited within the Fixed Account.
Income Date: The date on which Annuity Payments begin. The Income Date is
shown on the Certificate Schedule.
In Force: The status of a Certificate before the Income Date so long as it
has not been totally surrendered and there has not been a death of a
Certificate Owner or Joint Certificate Owner that will cause the
Certificate to end within five years of the date of death.
Office: Our service office shown on the Certificate Schedule.
Person: A human being, trust, corporation, or any other legally recognized
entity.
Portfolio: A series of an Eligible Fund which constitutes a separate and
distinct class of shares.
Purchase Payment: A payment made by or on behalf of a Certificate Owner
with respect to a Certificate.
Sub-account: Variable Account assets are divided into Sub-accounts.
Assets of each Sub-account will be invested in shares of a Portfolio of an
Eligible Fund, or directly in portfolio securities.
Valuation Date: Each day on which We and the New York Stock Exchange
("NYSE") are open for business, or any other day that the Securities and
Exchange Commission requires that mutual funds, unit investment trusts or
other investment portfolios be valued.
Valuation Period: The period of time beginning at the close of business of
the NYSE on each Valuation Date and ending at the close of business on the
next succeeding Valuation Date.
Variable Account: Our Variable Account(s) shown on the Certificate
Schedule.
Variable Annuity: An annuity with payments which vary as to dollar amount
in relation to the investment performance of specified Sub-accounts of the
Variable Account.
We, Us, Our: Keyport Benefit Life Insurance Company of Boston.
Written Request: A request in writing, in a form satisfactory to Us, and
received by Us at Our Office.
You, Your: The Certificate Owner and any Joint Certificate Owners.
General Provisions
Purchase Payments
The initial Purchase Payment is due on the Certificate Date. It must be
paid at Our Office in United States currency. Coverage under a Certificate
does not take effect until We have accepted the initial Purchase Payment
during Your lifetime. Each Purchase Payment after the Certificate Date
must be at least the amount shown on the Certificate Schedule. Provided
the Certificate Value under a Certificate does not go to zero, a
Certificate will stay in force until the Income Date even if You make no
payments after the initial one. We reserve the right to reject any
subsequent Purchase Payment.
Allocation of Purchase Payments
Your initial Purchase Payment is allocated to the Sub-accounts of the
Variable Account, and to the Fixed Account if available, in accordance with
the selections made by You at the Certificate Date. Unless otherwise
changed by You, subsequent Purchase Payments are allocated in the same
manner as the initial Purchase Payment. Allocation of Purchase Payments is
subject to the terms and conditions imposed by Us. We reserve the right to
allocate initial Purchase Payments to the Money Market Sub-account until
the expiration of the Right to Examine Certificate period set forth on the
first page of the Certificate.
The Contract
The Group Contract, including the application, if any, and any attached
rider or endorsement constitute the entire contract between the Group
Contract Owner and Us. All statements made by the Group Contract Owner,
any Certificate Owner or any Annuitant will be deemed representations and
not warranties. No such statement will be used in any contest unless it is
contained in the application signed by the Group Contract Owner or in a
written instrument signed by the Certificate Owner, a copy of which has
been furnished to the Certificate Owner, the Beneficiary or to the Group
Contract Owner.
Only Our President or Secretary may agree to change any of the terms of the
Group Contract. Any changes must be in writing. Any change to the terms
of a Certificate must be in writing and with Your consent, unless provided
otherwise by the Group Contract and the Certificate.
To assure that the Group Contract and the Certificate will maintain their
status as a variable annuity under the Internal Revenue Code, We reserve
the right to change the Group Contract and any Certificate issued
thereunder to comply with future changes in the Internal Revenue Code, any
regulations or rulings issued thereunder, and any requirements otherwise
imposed by the Internal Revenue Service. The Group Contract Owner and the
affected Certificate Owner will be sent a copy of any such amendment.
We reserve the right, subject to the approval of the New York
Superintendent of Insurance and compliance with U.S. laws as currently
applicable or subsequently changed, to: (a) operate the Variable Account
in any form permitted under the Investment Company Act of 1940, as
amended, (the "1940 Act"), or in any other form permitted by law; (b) take
any action necessary to comply with or obtain and continue any exemptions
from the 1940 Act, or to comply with any other applicable law; (c) transfer
any assets in any Sub-account to another Sub-account, or to one or more
separate investment accounts, or the General Account; or to add, combine or
remove Sub-accounts in the Variable Account; and (d) change the way We
assess charges, so long as We do not increase the aggregate amount beyond
that currently charged to the Variable Account and the Eligible Funds in
connection with this Certificate. If the shares of any of the Eligible
Funds should become unavailable for investment by the Variable Account or
if in Our judgment further investment in such Portfolio shares should
become inappropriate in view of the purpose of the Certificate, We may add
or substitute shares of another mutual fund for the Portfolio shares
already purchased under the Certificate. No substitution of Portfolio
shares in any Sub-account may take place without prior approval of the
Securities and Exchange Commission and notice to the affected Certificate
Owners, to the extent required by the 1940 Act.
Certificate Owner
You are the Certificate Owner of this Certificate. You have all rights and
may receive all benefits under a Certificate. A Certificate Owner is the
person designated as such on the Certificate Date, unless changed. You may
exercise all rights of this Certificate while it is In Force, subject to
the rights of (a) any assignee under an assignment filed with Us, and (b)
any irrevocably named Beneficiary.
Joint Certificate Owner
A Certificate can be owned by Joint Certificate Owners. Upon the death of
any Certificate Owner or Joint Certificate Owner, the surviving owner(s)
will be the primary Beneficiary(ies). Any other beneficiary designation
will be treated as a Contingent Beneficiary unless otherwise indicated in a
Written Request filed with Us.
Annuitant
The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by You at the Certificate Date, unless
changed prior to the Income Date. Any change of Annuitant is subject to
Our underwriting rules then in effect. The Annuitant may not be changed in
a Certificate which is owned by a non-natural person. You may name a
Contingent Annuitant. The Contingent Annuitant becomes the Annuitant if
the Annuitant dies while this Certificate is In Force. If the Annuitant
dies and no Contingent Annuitant has been named, We will allow You sixty
days to designate someone other than Yourself as Annuitant. You will be
the Contingent Annuitant unless You name someone else. If the Certificate
is owned by a non-natural person, the death of the Annuitant will be
treated as the death of the Certificate Owner and a new Annuitant may not
be designated.
Beneficiary
The Beneficiary is the person who controls the Certificate if any
Certificate Owner dies prior to the Income Date. If the Certificate is
owned by Joint Certificate Owners, upon the death of any Certificate Owner
or Joint Certificate Owner, the surviving owner(s) will become the primary
Beneficiary. Any other beneficiary designation will be treated as a
Contingent Beneficiary unless otherwise indicated in a Written Request
filed with Us. If You name more than one Person as Primary Beneficiary or
as Contingent Beneficiary, and do not state otherwise on an application or
in a Written Request to Us, any non-survivors will not receive a benefit.
The survivors will receive equal shares. Subject to the rights of any
irrevocable Beneficiary(ies), You may change primary or contingent
Beneficiary(ies). A change must be made by Written Request and will be
effective as of the date the Written Request is signed. We will not be
liable for any payment We make or action We take before We receive the
Written Request.
Group Contract Owner
The Group Contract Owner has title to the Group Contract. The Group
Contract and any amount accumulated under any Certificate are not subject
to the claims of the Group Contract Owner or any of its creditors. The
Group Contract Owner may transfer ownership of this Group Contract. Any
transfer of ownership terminates the interest of any existing Group
Contract Owner. It does not change the rights of any Certificate Owner.
Nothing in the Group Contract shall invalidate or impair any right granted
to the Certificate Owner by the Certificate or New York law.
Change of Certificate Owner, Beneficiary or Contingent Annuitant
While this Certificate is In Force, You may by Written Request change the
primary Certificate Owner, Joint Certificate Owner, primary Beneficiary,
Contingent Beneficiary, Contingent Annuitant, or in certain instances, the
Annuitant. An irrevocably named Person may be changed only with the
written consent of such Person. The change will be effective, following
Our receipt of the Written Request, as of the date the Written Request is
signed. The change will not affect any payments We make or actions We take
prior to the time We receive the Written Request.
Assignment of the Certificate
You may assign this Certificate at any time while it is In Force. The
assignment must be in writing and a copy must be filed at Our Office. Your
rights and those of any revocably named Person will be subject to the
assignment. An assignment will not affect any payments We make or actions
We take before We receive the assignment. We are not responsible for the
validity of any assignment.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any payee has been misstated, We will
compute the amount payable based on the correct age and sex. If Annuity
Payments have begun, any underpayment(s) that have been made plus interest
thereon at a rate of 5% per year will be paid in full with the next
Annuity Payment. Any overpayment plus interest thereon at a rate of 5% per
year, unless repaid to Us in one sum, will be deducted from future Annuity
Payments otherwise due until We are repaid in full.
Non-Participating
This Certificate does not participate in Our divisible surplus.
Evidence of Death, Age, Sex or Survival
If a Certificate provision relates to the death of a natural Person, We
will require proof of death before We will act under that provision. Proof
of death shall be: (a) a certified death certificate; or (b) a certified
decree of a court of competent jurisdiction as to the finding of death; or
(c) a written statement by a medical doctor who attended the deceased; or
(d) any other document constituting due proof of death under applicable
state law. If Our action under a Certificate provision is based on the
age, sex, or survival of any Person, We may require evidence of the
particular fact before We act under that provision.
Protection of Proceeds
No Beneficiary or payee may commute or assign any payments under a
Certificate before they are due. To the extent permitted by law, no
payments shall be subject to the debts of any Beneficiary or payee or to
any judicial process for payment of those debts.
Reports
We will send Certificate Owners a report that shows the Certificate Value,
the Certificate Withdrawal Value and the Death Benefit at least once each
Certificate Year. We will send any other reports that may be required by
law.
Taxes
Any taxes paid to any governmental entity relating to a Certificate will be
deducted from the Purchase Payments or Certificate Value. We may, in Our
sole discretion, delay the deduction until a later date. By not deducting
tax payments at the time of Our payment, We do not waive any right We may
have to deduct amounts at a later date. We will, in Our sole discretion,
determine when taxes relate to a Certificate or to the operation of the
Variable Account. We reserve the right to establish a provision for
federal income taxes if We determine, in Our sole discretion, that We will
incur a tax as a result of the operation of the Variable Account. Such a
provision will be reflected in the Accumulation and Annuity Unit Values.
We will deduct for any income taxes incurred by Us as a result of the
operation of the Variable Account whether or not there was a provision for
taxes and whether or not it was sufficient. We will deduct from any
payment under this Certificate any withholding taxes required by applicable
law.
Regulatory Requirements
All values payable under a Certificate will not be less than the minimum
benefits required by the laws and regulations of the state in which the
Certificate is delivered.
Suspension or Deferral of Payments
We reserve the right to suspend or postpone payments for a withdrawal,
transfer or surrender for any period when:
(1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); or
(2) trading on the New York Stock Exchange is restricted; or
(3) an emergency exists as a result of which valuation or disposal
of the assets and securities of the Variable Account is not
reasonably practicable; or
(4) the Securities and Exchange Commission, by order or
pronouncement, so permits for the protection of Certificate
Owners;
provided that applicable rules and regulations of the Securities and
Exchange Commission govern as to whether the conditions described in (2)
and (3) above exist.
We reserve the right to delay payment of amounts allocated to the Fixed
Account for up to six months.
Variable Account Provisions
The Variable Account
The Variable Account(s) is designated on the Certificate Schedule and
consists of assets set aside by Us, which are kept separate from Our
general assets and all other variable account assets We maintain. We own
the assets of the Variable Account. Variable Account assets equal to
reserves and other contract liabilities will not be chargeable with
liabilities arising out of any other business We may conduct. Income and
realized and unrealized gains or losses from assets in the Variable Account
are credited to or charged against the account without regard to other
income, gains or losses in Our other investment accounts.
The Variable Account assets are divided into Sub-accounts. The Sub-
accounts which are available under the Certificate are shown on the
Certificate Schedule. The assets of the Sub-accounts of the unit
investment trust variable separate account are allocated to the Eligible
Fund(s) and the Portfolio(s), if applicable, within an Eligible Fund shown
on the Certificate Schedule. The assets of the Sub-accounts of the
investment company variable separate account, if applicable, are invested
in portfolios of securities designed to meet the objectives of the Sub-
Account shown on the Certificate Schedule. We may, from time to time, add
additional Sub-accounts, Eligible Funds or Portfolios to those shown on the
Certificate Schedule. You may be permitted to transfer Certificate Values
or allocate Purchase Payments to the additional Sub-Accounts, Eligible
Funds or Portfolios. However, the right to make such transfers or
allocations will be limited by the terms and conditions imposed by Us.
We also have the right to eliminate Sub-accounts from the Variable Account,
to combine two or more Sub-accounts or to substitute a new Portfolio for
the Portfolio in which a Sub-account invests. A substitution may become
necessary if, in Our discretion, a Portfolio or Sub-account no longer suits
the purposes of the Group Contract. This may happen: due to a change in
laws or regulations or a change in a Portfolio's investment objectives or
restrictions; because the Portfolio or Sub-account is no longer available
for investment; or for some other reason. We will obtain any prior
approvals that may be required from the insurance department of Our state
of domicile, the New York Superintendent of Insurance and from the SEC or
any other governmental entity before making such a substitution.
When permitted by law, We reserve the right to:
(1) Deregister a Variable Account under the 1940 Act;
(2) Operate a Variable Account as a management company under the
1940 Act, if it is operating as a unit investment trust;
(3) Operate a Variable Account as a unit investment trust under the
1940 Act, if it is operating as a management company;
(4) Restrict or eliminate any voting rights as to the account;
(5) Combine the Variable Account with any other variable account.
Valuation of Assets
The assets of the Variable Account are valued at their fair market value in
accordance with Our procedures.
Accumulation Units
Your Variable Account value will fluctuate in accordance with the
investment results of the Sub-accounts to which You have allocated Your
Purchase Payments or Certificate Value. In order to determine how these
fluctuations affect Your Certificate Value, We use an Accumulation Unit
value. Accumulation Units are used to account for all amounts allocated to
or withdrawn from the Sub-accounts of the Variable Account as a result of
Purchase Payments, partial withdrawals, transfers, or charges deducted
from the Certificate Value. We determine the number of Accumulation Units
of a Sub-account purchased or canceled by dividing the amount allocated to,
or withdrawn from, the Sub-account by the dollar value of one Accumulation
Unit of the Sub-account as of the end of the Valuation Period during which
We receive the request for the transaction.
Accumulation Unit Value
The Accumulation Unit Value for each Sub-account was initially set at $10.
Subsequent Accumulation Unit Values for each Sub-account are determined by
multiplying the Accumulation Unit Value for the immediately preceding
Valuation Period by a net investment factor for the Sub-account for the
current period. This factor may be greater or less than 1.0; therefore,
the Accumulation Unit Value may increase or decrease from Valuation Period
to Valuation Period.
We calculate the net investment factor for each Sub-account investing in
shares of mutual funds by dividing (a) by (b) and then subtracting (c)
where:
(a) is equal to:
(i) the net asset value per share of the Portfolio in which the
Sub-account invests at the end of the Valuation Period;
plus
(ii) any dividend per share declared for the Portfolio that has
an ex-dividend date within the current Valuation Period.
(b) is the net asset value per share of the Portfolio at the end of
the preceding Valuation Period.
(c) is equal to:
(i) the sum of each Valuation Period equivalent of the annual
rate for the Mortality and Expense Risk Charge, for the
Administrative Charge, and for the Distribution Charge, if
any, which are shown on the Certificate Schedule; plus
(ii) a charge factor, if any, for any tax provision established
by Us a result of the operation of the Sub-account.
We calculate the net investment factor for each Sub-account investing
directly in securities with the same formula, except:
(a) is equal to:
(i) the value of the assets in the Sub-account at the end of
the preceding Valuation Period; plus
(ii) any investment income and capital gains, realized or
unrealized, credited to the assets during the current
Valuation Period; less
(iii) any capital losses, realized or unrealized, charged against
the assets during the current Valuation Period; less
(iv) all operating and investment expenses relating to the
assets that are incurred during the current Valuation
Period.
(b) is the value of the assets in the Sub-account at the end of the
preceding Valuation Period.
Mortality and Expense Risk Charge
Each Valuation Period We deduct a Mortality and Expense Risk Charge from
each Sub-account of the Variable Account which is equal, on an annual
basis, to the amount shown on the Certificate Schedule. The Mortality and
Expense Risk Charge compensates Us for assuming the mortality and expense
risks with respect to the Certificates We issue. We guarantee the dollar
amount of each Annuity Payment after the first Annuity Payment will not be
affected by variations in mortality or expense experience.
Administrative Charge
Each Valuation Period We deduct an Administrative Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Administrative Charge compensates Us for the
costs associated with administration of the Variable Account and the
Certificates We issue.
Distribution Charge
Each Valuation Period We deduct a Distribution Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Distribution Charge compensates Us for the costs
associated with the distribution of the Certificates We issue.
Certificate Maintenance Charge
We deduct a Certificate Maintenance Charge from the Certificate Value by
canceling Accumulation Units from each applicable Sub-account to reimburse
Us for expenses relating to the maintenance of the Certificate. We will
deduct the Certificate Maintenance Charge from the Sub-accounts of the
Variable Account in the same proportion that the amount of Certificate
Value in each Sub-account bears to the Certificate Value. The Certificate
Maintenance Charge is shown on the Certificate Schedule. The Certificate
Maintenance Charge will be deducted from the Certificate Value on each
Certificate Anniversary during the Accumulation Period.
If a total surrender is made on a date other than a Certificate
Anniversary, the Certificate Maintenance Charge will be deducted at the
time of surrender.
Transfers
Subject to any limitation We impose on the number of transfers permitted in
a Certificate Year, You may transfer all or part of Your Certificate Value
among the Sub-accounts and the Fixed Account, if any, by Written Request or
by telephone without the imposition of any fees or charges. Transfers
among the Sub-accounts and the Fixed Account are permitted only during the
Accumulation Period. The number of permitted transfers, and the charge for
transfers in excess of that number, are shown on the Certificate Schedule.
All transfers are subject to the following:
(1) If more than the number of free transfers, shown on the
Certificate Schedule, are made in a Certificate Year, We will deduct a
transfer charge, shown on the Certificate Schedule, for each subsequent
transfer. The transfer fee will be deducted from the Sub-account from
which the transfer is made. However, if You transfer Your entire interest
in a Sub-account, the transfer fee will be deducted from the amount
transferred. If You make a transfer from more than one Sub-account, any
transfer fee will be allocated pro-rata among such Sub-accounts in
proportion to the amount transferred from each. The deduction of any fees
We impose on such transfers will not exceed the maximum listed on page 3.
(2) During the Annuity Period, transfers of values between Sub-
accounts will be made by converting the number of Annuity Units being
transferred to the number of Annuity Units in the Sub-account to which a
transfer is made, so that the next Annuity Payment, if it were made at that
time, would be the same amount that it would have been without the
transfer. Thereafter, Annuity Payments will reflect changes in the value
of the new Annuity Units.
(3) The minimum amount which can be transferred is shown on the
Certificate Schedule. The minimum amount which must remain in a Sub-
account after a transfer is shown on the Certificate Schedule.
(4) If 100% of the value of any Sub-account is transferred and the
current allocation for Purchase Payments includes that Sub-account, the
allocation for future Purchase Payments will change to reflect Your
allocation of Certificate Value following the transfer.
(5) We reserve the right, at any time and without prior notice to any
party, to terminate, suspend or modify the transfer privileges described
above.
We will not be liable for transfers made in accordance with Your
instructions. All amounts and Accumulation Units will be determined as of
the end of the Valuation Period in which We receive the request for
transfer.
Partial Withdrawals and Total Surrender
Partial Withdrawals
During the Accumulation Period while the Certificate is In Force, You may,
upon Written Request, make a partial withdrawal, subject to the provisions
and limitations shown on the Certificate Schedule. For purposes of
determining whether a surrender charge is applicable to Your partial
withdrawal:
(1) Your partial withdrawal will first be taken from the portion of
Your Certificate Value which is in excess of Your Purchase
Payments, and then from Your Purchase Payments; and
(2) We will allocate partial withdrawals to Purchase Payments in the
order in which the Purchase Payments were made, starting with the
first.
A withdrawal will result in the cancellation of Accumulation Units from
each applicable Sub-account in the ratio that Your interest in the Sub-
account bears to Your Certificate Value in all the Sub-accounts. You must
specify by Written Request in advance if You want Accumulation Units to be
canceled in a manner other than the method described above. If there is no
value or insufficient value in the Variable Account, then the amount
withdrawn, or the insufficient portion, will be deducted from the Fixed
Account. If You have multiple Guarantee Periods, We will deduct such
amount from each Guarantee Period's values in the ratio that each Period's
values bears to the total Fixed Account Value. You must specify by Written
Request in advance if You want multiple Guarantee Periods to be reduced in
a manner other than the method described above. [Any amount deducted from
the Fixed Account Value may be subject to a market value adjustment, if
applicable.]
Each partial withdrawal must be for an amount not less than the amount
shown on the Certificate Schedule. The Certificate Value which must remain
in a Certificate is shown on the Certificate Schedule. The Certificate
Schedule also shows any charge.
Total Surrender
During the Accumulation Period while the Certificate is In Force, You may,
upon Written Request, make a total surrender of the Certificate Withdrawal
Value. The Certificate Withdrawal Value is:
(1) the Certificate Value as of the end of the Valuation Period during
which We receive a Written Request for a withdrawal or surrender;
less
(2) any applicable taxes not previously deducted; less
(3) any Surrender Charge; less
(4) any Certificate Maintenance Charge.
[The Fixed Account Value, which is a component of the Certificate Value,
may be subject to a market value adjustment, if applicable.]
We will pay the amount of any withdrawal or surrender within seven days
unless the Suspension or Deferral of Payments Provision is in effect.
Death Provisions
Death of Certificate Owner
These provisions apply if, during the Accumulation Period while the
Certificate is In Force, the Certificate Owner or any Joint Certificate
Owner dies (whether or not the decedent is also the Annuitant) or the
Annuitant dies under a Certificate owned by a non-natural Person. The
"designated beneficiary" will control the Certificate after such a death.
This "designated beneficiary" will be the first Person among the following
who is alive on the date of death: Certificate Owner; Joint Certificate
Owner; primary Beneficiary; Contingent Beneficiary; and Certificate Owner's
estate. If the Certificate Owner and Joint Certificate Owner are both
alive, they shall be the "designated beneficiary" together.
If the decedent's surviving spouse (if any) is the sole "designated
beneficiary", the surviving spouse will automatically become the new sole
Certificate Owner as of the date of the death. And, if the Annuitant is
the decedent, the new Annuitant will be any living Contingent Annuitant,
otherwise the surviving spouse. The Certificate may stay in force until
another death occurs (i.e., until the death of the Certificate Owner or
Joint Certificate Owner). Except for this paragraph, all of "Death
Provisions" will apply to that subsequent death.
In all other cases, the Certificate may stay in force up to five years from
the date of death. During this period, the "designated beneficiary" may
exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to surrender the Certificate for its
Certificate Withdrawal Value. If this Certificate is still in force at the
end of the five-year period, We will automatically end it then by paying to
the "designated beneficiary" the Certificate Withdrawal Value without the
deduction of any applicable surrender charges. If the "designated
beneficiary" is not alive then, We will pay any Person(s) named by the
"designated beneficiary" in a Written Request; otherwise the "designated
beneficiary's" estate.
Death of Annuitant
These provisions apply if during the Accumulation Period while the
Certificate is In Force, (a) the Annuitant dies, (b) the Annuitant is not
an Owner, and (c) the Owner is a natural person. The Certificate will
continue In Force after the Annuitant's death. The new Annuitant will be
any living Contingent Annuitant, otherwise the Certificate Owner.
Payment of Benefits
Instead of receiving a lump sum, You or any "designated beneficiary" may by
Written Request direct that We pay any benefit of $2,000 or more under an
Annuity Option that meets the following: (a) the first payment to the
"designated beneficiary" must be made no later than one year after the date
of death; (b) payments must be made over the life of the "designated
beneficiary" or over a period not extending beyond that person's life
expectancy; and (c) any Annuity Option that provides for payments to
continue after the death of the "designated beneficiary" will not allow the
successor payee to extend the period of time over which the remaining
payments are to be made.
Annuity Provisions
General
If the Certificate is In Force on the Income Date, the Adjusted Certificate
Value will be applied under the Annuity Option selected by You. Annuity
Payments may be made on a fixed or variable basis or both.
Income Date
The Income Date may be selected by You. It is shown on the Certificate
Schedule. The Income Date can be any time after the Certificate Date for
variable payments and any time after the first Certificate Anniversary for
fixed payments. The Income Date may not be later than the earlier of when
the Annuitant reaches attained age 90 or that required under state law. If
no Income Date is selected, it will be the earlier of when the Annuitant
reaches attained age 90 or the maximum date permitted under state law, if
any.
Prior to the Income Date, You may change the Income Date by Written
Request. Any change must be requested at least 30 days prior to the new
Income Date.
Selection of an Annuity Option
An Annuity Option may be selected by You. If no Annuity Option is
selected, Option B will automatically be applied. Prior to the Income
Date, You may change the Annuity Option selected by Written Request. Any
change must be requested at least 30 days prior to the Income Date.
Frequency and Amount of Annuity Payments
Annuity Payments are paid in monthly installments unless quarterly, semi-
annual or annual payments are chosen. The Adjusted Certificate Value is
applied to the Annuity Table for the Annuity Option selected. If the
Adjusted Certificate Value to be applied under an Annuity Option is less
than $2,000, We reserve the right to make a lump sum payment in lieu of
Annuity Payments. If the Annuity Payment would be or becomes less than
$100, We will reduce the frequency of payments to a longer interval which
will result in each payment being at least $100.
Annuity Options
The following Annuity Options or any other Annuity Option acceptable to Us
may be selected:
OPTION A. ANNUITY FOR A FIXED NUMBER OF YEARS: Annuity Payments for a
chosen number of years, not less than 5. If the payee dies during the
payment period and the Beneficiary does not desire payments to continue for
the remainder of the period, he/she may elect to have the present value of
the remaining payments commuted and paid in a lump sum. During the payment
period of a Variable Annuity, the payee may elect by Written Request to
receive the following amount: (a) the present value of the remaining
payments commuted using a 3% interest rate for fixed payments and a 5%
interest rate for variable payments; less (b) any surrender charge that may
be due by treating the value defined in (a) as a surrender. Instead of
receiving a lump sum, the payee may elect another Annuity Option. The
amount applied to that Option would not be reduced by the charge defined in
(b).
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 10 YEARS: Annuity Payments
during the lifetime of the payee and in any event for 10 years certain. If
the payee dies during the guaranteed payment period and the Beneficiary
does not desire payments to continue for the remainder of the guaranteed
period, he/she may elect to have the present value of the guaranteed
payments remaining commuted using a 3% interest rate for fixed payments and
a 5% interest rate for variable payments and paid in a lump sum.
OPTION C. JOINT AND SURVIVOR ANNUITY: Annuity Payments payable during
the joint lifetime of the payee and a designated second natural person and
then during the lifetime of the survivor.
Unless the Annuity Option provides for commutation by the payee, a payee
may not withdraw or otherwise end an Annuity Option after it begins.
Payments will end upon the payee's death unless the Annuity Option provides
for payments continuing to a successor payee. No successor payee may
extend the period of time over which the remaining payments are to be made.
Annuity
If You select a Fixed Annuity, the Adjusted Certificate Value is allocated
to the General Account and the Annuity is paid as a Fixed Annuity. If You
select a Variable Annuity, the Adjusted Certificate Value will be allocated
to the Sub-accounts of the Separate Account in accordance with the
selection You make, and the Annuity will be paid as a Variable Annuity.
You can also select a combination of a Fixed and Variable Annuity and the
Adjusted Certificate Value will be allocated accordingly. If You don't
select between a Fixed Annuity and a Variable Annuity, any Adjusted
Certificate Value in the Variable Account will be applied to a Variable
Annuity and any Adjusted Certificate Value in the Fixed Account will be
applied to a Fixed Annuity.
The Adjusted Certificate Value will be applied to the applicable Annuity
Table contained in the Certificate based upon the Annuity Option You
select. If, as of the Income Date, the current Annuity Option rates or the
rates for a single premium consideration for any immediate annuity
applicable to the class of Certificates issued under the Group Contract
provide an initial Annuity Payment greater than the initial Annuity Payment
guaranteed under the applicable Annuity Table in the Certificate, the
greater payment will be made.
Fixed Annuity
The minimum dollar amount of each Fixed Annuity Payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. After the
initial Fixed Annuity payment, the payments will not change regardless of
investment, mortality or expense experience.
Variable Annuity
Variable Annuity Payments reflect the investment performance of the
Variable Account in accordance with the allocation of the Adjusted
Certificate Value to the Sub-accounts during the Annuity Period. Variable
Annuity payments are not guaranteed as to dollar amount.
The dollar amount of the first Variable Annuity payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. The dollar
amount of Variable Annuity payments for each applicable Sub-account after
the first Variable Annuity Payment is determined as follows:
(1) the dollar amount of the first Variable Annuity payment is
divided by the value of an Annuity Unit for each applicable Sub-
account as of the Income Date. This sets the number of Annuity
Units for each monthly payment for the applicable Sub-account.
The number of Annuity Units for each applicable Sub-account
remains fixed during the Annuity Period;
(2) the fixed number of Annuity Units per payment in each Sub-
account is multiplied by the Annuity Unit Value for that Sub-
account for the Valuation Period for which the payment is due.
This result is the dollar amount of the payment for each
applicable Sub-account.
The total dollar amount of each Variable Annuity payment is the sum of all
Sub-account Variable Annuity payments.
Annuity Unit
The value of any Annuity Unit for each Sub-Account of the Separate Account
was initially set at $10.
The Sub-account Annuity Unit Value at the end of any subsequent Valuation
Period is determined as follows:
(1) the net investment factor calculated as set forth on pages 11-12
(but without the Distribution Charge, if any) for the current
Valuation Period is multiplied by the value of the Annuity Unit
for the Sub-account for the immediately preceding Valuation
Period.
(2) the result in (1) is then divided by the Assumed Investment Rate
Factor which equals 1.00 plus the Valuation Period equivalent of
the Assumed Investment Rate for the number of days in the
current Valuation Period. The Assumed Investment Rate is equal
to 5% per year.
The value of an Annuity Unit may increase or decrease from Valuation Period
to Valuation Period.
Using the Tables
Tables 2, 3, 5, and 6 are age-dependent. The amount of the first annuity
payment will be based on an age a specified number of years younger than
the person's then-attained age (i.e., age last birthday). This age setback
is as follows:
Date of First Payment Age Setback
1996-1999 1 year
2000-2009 2 years
2010-2019 4 years
2020-2029 5 years
2030 or later 6 years
We will calculate the amount for a payment frequency other than monthly and
for any ages not shown in Tables 2, 3, 5, and 6 in accordance with the next
section. Upon request, We will tell You any such amount.
Basis of Calculation
Tables 1 and 4 are based on interest at 5% and 3%, respectively. Tables 2,
3, 5, and 6 are based on the 1983 Individual Annuity Valuation Tables (sex
distinct) with interest at 5% (Tables 2 and 3) and 3% (Tables 5 and 6),
projected dynamically with Projection Scale G.
TABLE 1: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 1 FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years
Payment
5 $18.74 12 $9.16 19 $6.71 25 $5.76
6 15.99 13 8.64 20 6.51 26 5.65
7 14.02 14 8.20 21 6.33 27 5.54
8 12.56 15 7.82 22 6.17 28 5.45
9 11.42 16 7.49 23 6.02 29 5.36
10 10.51 17 7.20 24 5.88 30 5.28
11 9.77 18 6.94
TABLE 2: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION B FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $4.45 $4.34 47 $5.05 $4.78 64 $6.54 $5.98 80 $9.14 $8.67
31 4.47 4.35 48 5.11 4.82 65 6.68 6.10 81 9.29 8.86
32 4.50 4.37 49 5.17 4.87 66 6.82 6.22 82 9.44 9.05
33 4.52 4.39 50 5.23 4.92 67 6.97 6.35 83 9.57 9.23
34 4.55 4.41 51 5.29 4.97 68 7.12 6.49 84 9.69 9.40
35 4.57 4.43 52 5.36 5.02 69 7.28 6.63 85 9.81 9.55
36 4.60 4.45 53 5.43 5.08 70 7.44 6.79 86 9.91 9.69
37 4.63 4.47 54 5.50 5.13 71 7.61 6.95 87 10.01 9.82
38 4.67 4.49 55 5.58 5.20 72 7.78 7.12 88 10.10 9.94
39 4.70 4.52 56 5.67 5.27 73 7.95 7.30 89 10.17 10.04
40 4.74 4.55 57 5.76 5.34 74 8.12 7.48 90 10.24 10.13
41 4.78 4.57 58 5.85 5.41 75 8.30 7.67 91 10.30 10.21
42 4.82 4.60 59 5.95 5.49 76 8.47 7.87 92 10.35 10.27
43 4.86 4.64 60 6.06 5.58 77 8.65 8.07 93 10.39 10.33
44 4.91 4.67 61 6.17 5.67 78 8.82 8.27 94 10.43 10.37
45 4.95 4.70 62 6.29 5.77 79 8.98 8.47 96 10.45 10.41
46 5.00 4.74 63 6.41 5.87
TABLE 3: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 3 FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30$4.24$4.28$4.31$4.34$4.36$4.38$4.40$4.42$4.43$4.44$4.45 $4.45 $4.45
$4.46
35 4.26 4.30 4.35 4.39 4.43 4.47 4.50 4.52 4.54 4.56 4.57 4.57 4.58
4.58
40 4.28 4.33 4.39 4.45 4.51 4.56 4.61 4.65 4.68 4.71 4.73 4.74 4.75
4.75
M45 4.29 4.35 4.42 4.50 4.58 4.66 4.74 4.80 4.86 4.90 4.93 4.96 4.97
4.98
A50 4.30 4.37 4.46 4.55 4.66 4.77 4.88 4.98 5.07 5.14 5.20 5.23 5.25
5.27
L55 4.31 4.39 4.48 4.59 4.73 4.87 5.03 5.18 5.32 5.44 5.53 5.59 5.63
5.65
E60 4.32 4.40 4.50 4.63 4.78 4.97 5.18 5.40 5.61 5.80 5.96 6.07 6.13
6.17
65 4.33 4.41 4.52 4.65 4.83 5.05 5.31 5.61 5.92 6.23 6.50 6.70 6.83
6.90
A70 4.33 4.42 4.53 4.68 4.87 5.11 5.42 5.80 6.23 6.70 7.14 7.50 7.75
7.90
G75 4.34 4.42 4.54 4.69 4.89 5.16 5.50 5.95 6.50 7.15 7.83 8.45 8.92
9.23
E80 4.34 4.43 4.54 4.70 4.91 5.19 5.56 6.06 6.71 7.55 8.52 9.50 10.34
10.93
85 4.34 4.43 4.55 4.71 4.92 5.21 5.60 6.13 6.86 7.85 9.10 10.52 11.87
12.93
90 4.34 4.43 4.55 4.71 4.93 5.22 5.62 6.18 6.96 8.06 9.55 11.39 13.34
15.05
95 4.34 4.43 4.55 4.71 4.93 5.23 5.64 6.21 7.02 8.20 9.86 12.09 14.69
17.20
TABLE 4: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION A FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $17.91 12 $8.24 19 $5.73 25 $4.71
6 15.14 13 7.71 20 5.51 26 4.59
7 13.16 14 7.26 21 5.32 27 4.47
8 11.68 15 6.87 22 5.15 28 4.37
9 10.53 16 6.53 23 4.99 29 4.27
10 9.61 17 6.23 24 4.84 30 4.18
11 8.86 18 5.96
TABLE 5: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION B FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $3.12 $2.99 47 $3.82 $3.53 64 $5.40 $4.83 80 $8.15 $7.66
31 3.15 3.01 48 3.88 3.58 65 5.55 4.96 81 8.32 7.86
32 3.18 3.03 49 3.94 3.63 66 5.69 5.08 82 8.47 8.06
33 3.21 3.06 50 4.01 3.68 67 5.85 5.22 83 8.61 8.25
34 3.24 3.08 51 4.08 3.74 68 6.01 5.37 84 8.75 8.43
35 3.27 3.11 52 4.15 3.80 69 6.18 5.52 85 8.87 8.60
36 3.31 3.13 53 4.23 3.86 70 6.35 5.68 86 8.98 8.75
37 3.34 3.16 54 4.31 3.93 71 6.52 5.85 87 9.08 8.88
38 3.38 3.19 55 4.39 4.00 72 6.70 6.03 88 9.18 9.01
39 3.42 3.22 56 4.48 4.07 73 6.89 6.21 89 9.26 9.12
40 3.46 3.25 57 4.58 4.15 74 7.07 6.41 90 9.33 9.21
41 3.51 3.29 58 4.68 4.23 75 7.26 6.61 91 9.40 9.30
42 3.55 3.32 59 4.78 4.32 76 7.44 6.81 92 9.45 9.37
43 3.60 3.36 60 4.89 4.41 77 7.63 7.02 93 9.49 9.43
44 3.65 3.40 61 5.01 4.50 78 7.81 7.23 94 9.53 9.47
45 3.71 3.44 62 5.14 4.61 79 7.98 7.45 95 9.55 9.51
46 3.76 3.49 63 5.27 4.72
TABLE 6: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION C FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90
95
30$2.88$2.93$2.97$3.01$3.04$3.07$3.08$3.10$3.12$3.12$3.12 $3.12 $3.13$3.13
35 2.91 2.97 3.03 3.09 3.14 3.18 3.21 3.23 3.25 3.26 3.27 3.27 3.28 3.28
40 2.93 3.01 3.09 3.17 3.24 3.30 3.35 3.39 3.42 3.44 3.46 3.46 3.47 3.47
M45 2.95 3.04 3.14 3.24 3.34 3.43 3.51 3.58 3.63 3.66 3.69 3.71 3.72 3.72
A50 2.96 3.06 3.17 3.30 3.43 3.56 3.68 3.79 3.87 3.94 3.98 4.01 4.03 4.03
L55 2.97 3.07 3.20 3.34 3.50 3.68 3.85 4.02 4.16 4.27 4.34 4.39 4.42 4.44
E60 2.98 3.09 3.22 3.38 3.56 3.78 4.01 4.25 4.47 4.66 4.80 4.89 4.95 4.98
65 2.98 3.09 3.23 3.40 3.61 3.86 4.15 4.48 4.81 5.12 5.37 5.55 5.66 5.72
A70 2.99 3.10 3.24 3.42 3.64 3.92 4.26 4.67 5.13 5.60 6.04 6.38 6.60 6.73
G75 2.99 3.10 3.25 3.43 3.66 3.96 4.34 4.81 5.39 6.06 6.75 7.35 7.79 8.07
E80 2.99 3.11 3.25 3.44 3.68 3.99 4.39 4.92 5.60 6.45 7.44 8.42 9.23 9.79
85 2.99 3.11 3.26 3.44 3.69 4.00 4.42 4.98 5.73 6.74 8.01 9.44 10.77 1.81
90 2.99 3.11 3.26 3.45 3.69 4.01 4.44 5.02 5.82 6.93 8.43 10.29 12.25 3.95
95 2.99 3.11 3.26 3.45 3.70 4.02 4.45 5.04 5.87 7.05 8.73 10.97 13.58 6.11
Endorsements
To be inserted only by Us
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CERTIFICATE with limited purchase payment
flexibility. This certificate is nonparticipating with no dividends.
EXHIBIT 8d
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
KEYPORT BENEFIT LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 3rd day of June 1998 , by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), KEYPORT BENEFIT LIFE INSURANCE COMPANY, a New York corporation
(the "Company") on its own behalf and on behalf of each of the segregated
asset accounts of the Company set forth in Schedule A hereto, as may be
amended from time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940
Act"), and its shares are registered or will be registered under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each,
a "Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state
securities law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or,
collectively, the "Policies") which, if required by applicable law, will be
registered under the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid
variable annuity and/or variable life insurance contracts that are allocated
to the Accounts (the Policies and the Accounts covered by this Agreement,
and each corresponding Portfolio covered by this Agreement in which the
Accounts invest, is specified in Schedule A attached hereto as may be
modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC")
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD");
WHEREAS, Keyport Financial Services Corp., the underwriter for the
individual variable annuity and the variable life policies, is registered as
a broker-dealer with the SEC under the 1934 Act and is a member in good
standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf
of the Accounts to fund the Policies, and the Trust intends to sell such
Shares to the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such orders by
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates. The Trust and MFS will not sell Trust shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles III and VII of this
Agreement is in effect to govern such sales. The Company will not
resell the Shares except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy holders on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m. New
York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on a Portfolio's Shares in additional Shares of that Portfolio. The
Trust shall notify the Company of the number of Shares so issued as
payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value information, the Trust shall make an
adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any
material error in the calculation or reporting of net asset value per
share, dividend or capital gains information shall be reported promptly
upon discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold,
and distributed in compliance in all material respects with all
applicable state and federal laws, including without limitation the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act. The Company further represents and warrants
that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established
the Account as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Policies, will
register the Accounts as unit investment trusts in accordance with the
provisions of the 1940 Act (unless exempt therefrom) to serve as
segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding.
The Company shall amend the registration statements under the 1933 Act
for the Policies and the registration statements under the 1940 Act for
the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies
for sales accordance with the securities laws of the various states
only if and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contract under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the
Policies have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that Keyport Financial
Services Corp., the underwriter for the individual variable annuity and
the variable life policies, is a member in good standing of the NASD
and is a registered broker-dealer with the SEC. The Company represents
and warrants that the Company and Keyport Financial Services Corp. will
sell and distribute such policies in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The
Trust shall register and qualify the Shares for sale in accordance with
the laws of the various states only if and to the extent deemed
necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
any applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The Commonwealth of Massachusetts. MFS
represents and warrants that it is not subject to state securities laws
other than the securities laws of The Commonwealth of Massachusetts and
that it is exempt from registration as an investment adviser under the
securities laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares
and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, that the Company
shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus
in a "camera ready" or diskette format, the Trust shall be responsible
for providing the prospectus in the format in which it or MFS is
accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus in such format (e.g., typesetting expenses),
and the Company shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by
the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received
in the same proportion as the Shares of such Portfolio for
which instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. The Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order. The Trust
and MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to
such use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information may be amended or supplemented
from time to time, or in reports or proxy statements for the Trust, or
in sales literature or other promotional material approved by the
Trust, MFS or their respective designees, except with the permission of
the Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning
the Trust, MFS or any of their affiliates which is intended for use
only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy holders or prospective
Policy holders) is so used, and neither the Trust, MFS nor any of their
affiliates shall be liable for any losses, damages or expenses relating
to the improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional informtion for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least
one complete copy of all registration statements, prospectuses,
statements of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Policies, or to the Trust or its
Shares, prior to or contemporaneously with the filing of such document
with the SEC or other regulatory authorities. The Company and the
Trust shall also each promptly inform the other or the results of any
examination by the SEC (or other regulatory authorities) that relates
to the Policies, the Trust or its Shares, and the party that was the
subject of the examination shall provide the other party with a copy of
relevant portions of any "deficiency letter" or other correspondence or
written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited
to advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expense initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports and proxy materials
to Policy owners. The Company shall bear all expenses associated with
the registration, qualification, and filing of the Policies under
applicable federal securities and state insurance laws; the cost of
preparing, printing and distributing the Policy prospectus and
statement of additional information; and the cost of preparing,
printing and distributing annual individual account statements for
Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h)
(1) of the Code and Treas. Reg. 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts, as they may be amended from time to time (and any
revenue rulings, revenue procedures, notices, and other published
announcements of the Internal Revenue Service interpreting these
sections), as if those requirements applied directly to each such
Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information necessary
for the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if
a material irreconcilable conflict arises, it will at its own cost
remedy such conflict up to and including (a) withdrawing the assets
allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or
submitting to a vote of all affected contract owners whether to
withdraw assets from the Trust or any Portfolio and reinvesting such
assets in a different investment medium and, as appropriate,
segregating the assets attributable to any appropriate group of
contract owners that votes in favor of such segregation, or offering to
any of the affected contract owners the option of segregating the
assets attributable to their contracts or policies, and (b)
establishing a new registered management investment company and
segregating the assets underlying the Policies, unless a majority of
Policy owners materially adversely affected by the conflict have voted
to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shares funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed Shared Funding Exemptive Order, then (a)
the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4
of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust, MFS,
any affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within
the meaning of Section 15 of the 1933 Act, and any agents or employees
of the foregoing (each an "Indemnified Party," or collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or expenses
(including reasonable counsel fees) to which an Indemnified Party may
become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Policies or contained in the
Policies or sales literature or other promotional material
for the Policies (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
commission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reasonable reliance upon and in
conformity with information furnished to the Company or its
designee by or on behalf of the Trust or MFS for use in the
registration statement, prospectus or statement of additional
information for the Policies or in the Policies or sales
literature or other promotional material (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust not supplied by the Company or this designee, or
persons under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or
any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act,
and any agents or employees of the foregoing (each an "Indemnified
Party," or collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to
the Trust, MFS, the Underwriter or their respective designees
by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information
for the Trust or in sales literature or other promotional
material for the Trust (or any amendment or supplement) or
otherwise for use in connection with the sale of the Policies
or Shares; or
(b) arise out of or as a result of statements or representations
(other than statement or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
for the Policies not supplied by the Trust, MFS, the
Underwriter or any of their respective designees or persons
under their respective control and on which any such entity
has reasonably relied) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of this
Agreement by the Trust; or
(d) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset
value per share or dividend or capital gain distribution
rate; or
(e) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company
or any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of commencement of action, such Indemnified Party will, if a claim
in respect thereof is to be made against the indemnifying party under
this section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any Indemnified
Party otherwise than under this section. In case any such action is
brought against any Indemnified Party, and it notified the indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish,
assume the defense thereof, with counsel satisfactory to such
Indemnified Party. After notice from the indemnifying party of its
intention to assume the defense of an action, the Indemnified Party
shall bear the expenses of any additional counsel obtained by it, and
the indemnifying party shall not be liable to such Indemnified Party
under this section for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of
its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution
of any formal proceedings brought against such party or its designees by the
NASD, the SEC, or any insurance department or any other regulatory body
regarding such party's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts,
or one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing,
the Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article
VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or 6e-
3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause
shall be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body regarding the Trust's or MFS' duties under
this Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt
of any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment media. The Company will give thirty (30) days'
prior written notice to the Trust of the Date of any proposed
vote or other action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice to
the Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations,
financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement;
or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios,
Policies and, if applicable, the Accounts as to which the Agreement is
to be terminated.
11.3. It is understood and agreed that the right of any party
hereto to terminate this Agreement pursuant to Section 11.1(a) may be
exercised for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust
and MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the
Existing Policies shall be permitted to transfer or reallocate
investment under the Policies, redeem investments in any Portfolio
and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110
Attn: Bernard R. Beckerlegge, General Counsel
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time,
is incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with
the Secretary of State of The Commonwealth of Massachusetts. The
Company acknowledges that the obligations of or arising out of this
instrument are not binding upon any of the Trust's trustees, officers,
employees, agents or shareholders individually, but are binding solely
upon the assets and property of the Trust in accordance with its
proportionate interest hereunder. The Company further acknowledges
that the assets and liabilities of each Portfolio are separate and
distinct and that the obligations of or arising out of this instrument
are binding solely upon the assets or property of the Portfolio on
whose behalf the Trust has executed this instrument. The Company also
agrees that the obligations of each Portfolio hereunder shall be
several and not joint, in accordance with its proportionate interest
hereunder, and the Company agrees not to proceed against any Portfolio
for the obligations of another Portfolio.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of
the date specified above.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/Jacob M. Herschler
Title: Vice President
MFS VARIABLE INSURANCE TRUST, on behalf of the Portfolios
By its authorized officer and not individually,
By: /s/James R. Bordewick
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/Arnold D. Scott
Arnold D. Scott
Senior Executive Vice President
As of 6/3/98
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
Name of Separate Policies Funded Portfolios
Account and Date by Separate Account Applicable to Policies
Established by Board
of Directors
Variable Account A Variable Annuity MFS Research Series
January 9, 1980 MFS Emerging Growth Series
MFS Bond Series
EXHIBIT 8e
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 20th day of May, 1998, by and among The
Alger American Fund (the "Trust"), an open-end management investment
company organized as a Massachusetts business trust, Keyport Benefit Life
Insurance Company, a life insurance company organized as a corporation
under the laws of the State of New York, (the "Company"), on its own behalf
and on behalf of each segregated asset account of the Company set forth in
Schedule A, as may be amended from time to time (the "Accounts"), and Fred
Alger and Company, Incorporated, a Delaware corporation, the Trust's
distributor (the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and
has an effective registration statement relating to the offer and sale of
the various series of its shares under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be
used as an investment vehicle for separate accounts established for
variable life insurance policies and variable annuity contracts to be
offered by life insurance companies which have entered into fund
participation agreements with the Trust (the "Participating Insurance
Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into
the following series which are available for purchase by the Company for
the Accounts: Alger American Small Capitalization Portfolio, Alger
American Growth Portfolio, Alger American Income & Growth Portfolio, Alger
American Balanced Portfolio, Alger American MidCap Growth Portfolio, and
Alger American Leveraged AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of
Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Portfolios of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (the "Shared Funding
Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933
Act certain variable life insurance policies and variable annuity contracts
to be issued by the Company under which the Portfolios are to be made
available as investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from
registration under the 1940 Act is available and the Trust has been so
advised;
WHEREAS, the Company desires to use shares of one or more Portfolios
as investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's
agent for the receipt from each account of purchase orders and
requests for redemption pursuant to the Contracts relating to each
Portfolio, provided that the Company notifies the Trust of such
purchase orders and requests for redemption by 9:30 a.m. Eastern time
on the next following Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the
Accounts at the net asset value next computed after receipt of a
purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the
Trust describing Portfolio purchase procedures. The Company will
transmit orders from time to time to the Trust for the purchase and
redemption of shares of the Portfolios. The Trustees of the Trust
(the "Trustees") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the
Trustees acting in good faith and in light of their fiduciary duties
under federal and any applicable state laws, such action is deemed in
the best interests of the shareholders of such Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio
on behalf of an Account with federal funds to be transmitted by wire
to the Trust, with the reasonable expectation of receipt by the Trust
by 2:00 p.m. Eastern time on the next Business Day after the Trust (or
its agent) receives the purchase order. Upon receipt by the Trust of
the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of
the Trust for this purpose. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which the
Trust calculates its net asset value pursuant to the rules of the
Commission.
1.4. The Trust will redeem for cash any full or fractional shares of
any Portfolio, when requested by the Company on behalf of an Account,
at the net asset value next computed after receipt by the Trust (or
its agent) of the request for redemption, as established in accordance
with the provisions of the then current prospectus of the Trust
describing Portfolio redemption procedures. The Trust shall make
payment for such shares in the manner established from time to time by
the Trust. Proceeds of redemption with respect to a Portfolio will
normally be paid to the Company for an Account in federal funds
transmitted by wire to the Company by order of the Trust with the
reasonable expectation of receipt by the Company by 2:00 p.m. Eastern
time on the next Business Day after the receipt by the Trust (or its
agent) of the request for redemption. Such payment may be delayed if,
for example, the Portfolio's cash position so requires or if
extraordinary market conditions exist, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
The Trust reserves the right to suspend the right of redemption,
consistent with Section 22(e) of the 1940 Act and any rules
thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by
the Company under Section 1.3 and payments for the redemption of
shares of the Trust's Portfolios under Section 1.4 on any Business Day
may be netted against one another for the purpose of determining the
amount of any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by
book entry only. Stock certificates will not be issued to the Company
or the Accounts. Portfolio Shares purchased from the Trust will be
recorded in the appropriate title for each Account or the appropriate
subaccount of each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date,
notice to the Company of any income dividends or capital gain
distributions payable on the shares of any Portfolio of the Trust.
The Company hereby elects to receive all such income dividends and
capital gain distributions as are payable on a Portfolio's shares in
additional shares of that Portfolio. The Trust shall notify the
Company of the number of shares so issued as payment of such dividends
and distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio
on each Business Day, as defined in Section 1.3. The Trust shall make
the net asset value per share for each Portfolio available to the
Company or its designated agent on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available
to the Company by 6:30 p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as
may be permitted by Section 817(h) of the Code, the regulations
hereunder, or judicial or administrative interpretations thereof. No
shares of any Portfolio will be sold directly to the general public.
The Company agrees that it will use Trust shares only for the purposes
of funding the Contracts through the Accounts listed in Schedule A, as
amended from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through
voting and conflicts of interest corresponding materially to those
contained in Section 2.9 and Article IV of this Agreement.
ARTICLE II.
Obligations of the Parties
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall
bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the
issuance and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements
and periodic reports of the Trust to the Contract owners as required
to be distributed to such Contract owners under applicable federal or
state law.
2.3. The Trust shall provide such documentation (including a final
copy of the Trust's prospectus as set in type or in camera-ready copy)
and other assistance as is reasonably necessary in order for the
Company to print together in one document the current prospectus for
the Contracts issued by the Company and the current prospectus for the
Trust. The Trust shall bear the expense of printing copies of its
current prospectus that will be distributed to existing Contract
owners, and the Company shall bear the expense of printing copies of
the Trust's prospectus that are used in connection with offering the
Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's
expense, one copy of the Trust's current Statement of Additional
Information ("SAI") to the Company and to any Contract owner who
requests such SAI, (2) at the Company's expense, such additional
copies of the Trust's current SAI as the Company shall reasonably
request and that the Company shall require in accordance with
applicable law in connection with offering the Contracts issued by the
Company.
2.5. The Trust, at its expense, shall provide the Company with copies
of its proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably require for purposes of distributing to Contract owners.
The Trust, at the Company's expense, shall provide the Company with
copies of its periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably request for use in connection with offering the Contracts
issued by the Company. If requested by the Company in lieu thereof,
the Trust shall provide such documentation (including a final copy of
the Trust's proxy materials, periodic reports to shareholders and
other communications to shareholders, as set in type or in
camera-ready copy) and other assistance as reasonably necessary in
order for the Company to print such shareholder communications for
distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the
sole owner of the name and mark "Alger" and that all use of any
designation comprised in whole or part of such name or mark under this
Agreement shall inure to the benefit of the Distributor. Except as
provided in Section 2.5, the Company shall not use any such name or
mark on its own behalf or on behalf of the Accounts or Contracts in
any registration statement, advertisement, sales literature or other
materials relating to the Accounts or Contracts without the prior
written consent of the Distributor. Upon termination of this
Agreement for any reason, the Company shall cease all use of any such
name or mark as soon as reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust
or its designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or request
for no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the
Commission. The Company shall furnish, or shall cause to be
furnished, to the Trust or its designee each piece of sales literature
or other promotional material in which the Trust or the Distributor is
named, at least five Business Days prior to its use. No such material
shall be used if the Trust or its designee reasonably objects to such
use within three Business Days after receipt of such material.
2.8. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the
Trust or the Distributor in connection with the sale of the Contracts
other than information or representations contained in and accurately
derived from the registration statement or prospectus for the Trust
shares (as such registration statement and prospectus may be amended
or supplemented from time to time), annual and semi-annual reports of
the Trust, Trust-sponsored proxy statements, or in sales literature or
other promotional material approved by the Trust or its designee,
except as required by legal process or regulatory authorities or with
the prior written permission of the Trust, the Distributor or their
respective designees. The Trust and the Distributor agree to respond
to any request for approval on a prompt and timely basis. The Company
shall adopt and implement procedures reasonably designed to ensure
that "broker only" materials including information therein about the
Trust or the Distributor are not distributed to existing or
prospective Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios
and the Distributor, in such form as the Company may reasonably
require, as the Company shall reasonably request in connection with
the preparation of registration statements, prospectuses and annual
and semi-annual reports pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented
from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional
materials, except as required by legal process or regulatory
authorities or with the prior written permission of the Company. The
Company agrees to respond to any request for approval on a prompt and
timely basis.
2.11. So long as, and to the extent that, the Commission interprets the
1940 Act to require pass-through voting privileges for Contract
owners, the Company will provide pass-through voting privileges to
Contract owners whose cash values are invested, through the registered
Accounts, in shares of one or more Portfolios of the Trust. The Trust
shall require all Participating Insurance Companies to calculate
voting privileges in the same manner and the Company shall be
responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each
registered Account, the Company will vote shares of each Portfolio of
the Trust held by a registered Account and for which no timely voting
instructions from Contract owners are received in the same proportion
as those shares for which voting instructions are received. The
Company and its agents will in no way recommend or oppose or interfere
with the solicitation of proxies for Portfolio shares held to fund the
Contacts without the prior written consent of the Trust, which consent
may be withheld in the Trust's sole discretion. The Company reserves
the right, to the extent permitted by law, to vote shares held in any
Account in its sole discretion.
2.12. The Company and the Trust will each provide to the other
information about the results of any regulatory examination relating
to the Contracts or the Trust, including relevant portions of any
"deficiency letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by
the Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust,
the Accounts or both.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the
State of Rhode Island and that it has legally and validly established
each Account as a segregated asset account under such law as of the
date set forth in Schedule A, and that Keyport Financial Services
Corp., the principal underwriter for the Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a
member in good standing of the National Association of Securities
Dealers, Inc.
3.2. The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each
Account as a unit investment trust in accordance with the provisions
of the 1940 Act and cause each Account to remain so registered to
serve as a segregated asset account for the Contracts, unless an
exemption from registration is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws; and the sale of
the Contracts shall comply in all material respects with state
insurance law suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and
validly existing under the laws of the Commonwealth of Massachusetts
and that it does and will comply in all material respects with the
1940 Act and the rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and
the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and
qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations thereunder, including without
limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any Portfolio
has ceased to comply or might not so comply and will immediately take
all reasonable steps to adequately diversify the Portfolio to achieve
compliance within the grace period afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified
as a "regulated investment company" under Subchapter M of the Code,
that it will make every effort to maintain such qualification and will
notify the Company immediately upon having a reasonable basis for
believing it has ceased to so qualify or might not so qualify in the
future.
3.8. The Trust represents and warrants that it, its directors,
officers, employees and others dealing with the money or securities,
or both, of a Portfolio shall at all times be covered by a blanket
fidelity bond or similar coverage for the benefit of the Trust in an
amount not less than the minimum coverage required by Rule 17g-1 or
other applicable regulations under the 1940 Act. Such bond shall
include coverage for larceny and embezzlement and be issued by a
reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of
1934 and is a member in good standing of the National Association of
Securities Dealers, Inc.
ARTICLE IV.
Potential Conflicts
4.1. The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies.
In such event, the Trustees will monitor the Trust for the existence
of any material irreconcilable conflict between the interests of the
contract owners of all Participating Insurance Companies. A material
irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax
or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d)
the manner in which the investments of any Portfolio are being
managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of
contract owners. The Trust shall promptly inform the Company of any
determination by the Trustees that a material irreconcilable conflict
exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will
assist the Trustees in carrying out their responsibilities under the
Shared Funding Exemptive Order by providing the Trustees with all
information reasonably necessary for and requested by the Trustees to
consider any issues raised including, but not limited to, information
as to a decision by the Company to disregard Contract owner voting
instructions. All communications from the Company to the Trustees may
be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority
of the disinterested Trustees, that a material irreconcilable conflict
exists that affects the interests of contract owners, the Company
shall, in cooperation with other Participating Insurance Companies
whose contract owners are also affected, at its own expense and to the
extent reasonably practicable (as determined by the Trustees) take
whatever steps are necessary to remedy or eliminate the material
irreconcilable conflict, which steps could include: (a) withdrawing
the assets allocable to some or all of the Accounts from the Trust or
any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust,
or submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed
separate account.
4.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting
instructions and that decision represents a minority position or would
preclude a majority vote, the Company may be required, at the Trust's
election, to withdraw the affected Account's investment in the Trust
and terminate this Agreement with respect to such Account; provided,
however that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such
withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being
implemented. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the
Company will withdraw the affected Account's investment in the Trust
and terminate this Agreement with respect to such Account within six
(6) months after the Trustees inform the Company in writing that the
Trust has determined that such decision has created a material
irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Until the end of such six (6) month period,
the Trust shall continue to accept and implement orders by the Company
for the purchase and redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any
proposed action adequately remedies any material irreconcilable
conflict, but in no event will the Trust be required to establish a
new funding medium for any Contract. The Company shall not be
required to establish a new funding medium for the Contracts if an
offer to do so has been declined by vote of a majority of Contract
owners materially adversely affected by the material irreconcilable
conflict. In the event that the Trustees determine that any proposed
action does not adequately remedy any material irreconcilable
conflict, then the Company will withdraw the Account's investment in
the Trust and terminate this Agreement within six (6) months after the
Trustees inform the Company in writing of the foregoing determination;
provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3
is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the
Shared Funding Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rule 6e-3(T), as amended, or
Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V.
Indemnification
5.1. Indemnification By the Company. The Company agrees to indemnify
and hold harmless the Distributor, the Trust and each of its Trustees,
officers, employees and agents and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved
by the Company on behalf of the Contracts or Accounts (or any
amendment or supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this indemnity shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived
from written information furnished to the Company by or on behalf
of the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under its
control, with respect to the sale or acquisition of the Contracts
or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents
as defined in Section 5.2(a) or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately
derived from written information furnished to the Trust by or on
behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company to
the Trust of insufficient or incorrect information regarding the
purchase or sale of shares of any Portfolio, or the failure of
the Company to provide such information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to
indemnify and hold harmless the Company and each of its directors,
officers, employees, and agents and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for the purposes of this
Section 5.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Distributor, which consent shall not be unreasonably withheld) or
expenses (including the reasonable costs of investigating or defending
any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust Documents"
for the purposes of this Article V), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and was accurately derived from written
information furnished to the Distributor or the Trust by or on
behalf of the Company for use in Trust Documents or otherwise for
use in connection with the sale of the Contracts or Trust shares
and; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful conduct of
the Distributor or persons under its control, with respect to the
sale or acquisition of the Contracts or Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of
the Trust; or
(d) arise out of or result from any failure by the Distributor
or the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the
Trust in this Agreement or arise out of or result from any other
material breach of this Agreement by the Distributor or the
Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed against an
Indemnified Party that arise from such Indemnified Party's willful
misfeasance, bad faith or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any claim made against an Indemnified
party unless such Indemnified Party shall have notified the other
party in writing within a reasonable time after the summons, or other
first written notification, giving information of the nature of the
claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent),
but failure to notify the party against whom indemnification is sought
of any such claim shall not relieve that party from any liability
which it may have to the Indemnified Party in the absence of Sections
5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party,
the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named in the action. After
notice from the indemnifying party to the Indemnified Party of an
election to assume such defense, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under
this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
ARTICLE VI.
Termination
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written
notice to the other parties, unless a shorter time is agreed to
by the parties;
(b) at the option of the Trust or the Distributor if the
Contracts issued by the Company cease to qualify as annuity
contracts or life insurance contracts, as applicable, under the
Code or if the Contracts are not registered, issued or sold in
accordance with applicable state and/or federal law; or
(c) at the option of any party upon a determination by a
majority of the Trustees of the Trust, or a majority of its
disinterested Trustees, that a material irreconcilable conflict
exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD, the
SEC, or any state securities or insurance department or any other
regulatory body regarding the Trust's or the Distributor's duties
under this Agreement or related to the sale of Trust shares or
the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio
fails to meet the diversification requirements specified in
Section 3.6 hereof; or.
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares
of the Portfolio are not registered, issued or sold in accordance
with applicable state and/or federal law, or such law precludes
the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to
qualify as a Regulated Investment Company under Subchapter M of
the Code; or
(i) at the option of the Distributor if it shall determine in
its sole judgment exercised in good faith, that the Company
and/or its affiliated companies has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available
additional shares of any Portfolio and redeem shares of any Portfolio
pursuant to the terms and conditions of this Agreement for all
Contracts in effect on the effective date of termination of this
Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of the
Trust are held on behalf of Contract owners in accordance with Section
6.2.
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110
Attn: Bernard R. Beckerlegge, General Counsel
ARTICLE VIII.
Miscellaneous
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each
of which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New
York. It shall also be subject to the provisions of the federal
securities laws and the rules and regulations thereunder and to any
orders of the Commission granting exemptive relief therefrom and the
conditions of such orders. Copies of any such orders shall be
promptly forwarded by the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly,
under this Agreement, of any and every nature whatsoever, shall be
satisfied solely out of the assets of the Trust and no Trustee,
officer, agent or holder of shares of beneficial interest of the Trust
shall be personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the National Association of Securities Dealers, Inc. and
state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the prior written approval of
the other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by any other party
hereto, and shall not disclose such confidential information without
the written consent of the affected party unless such information has
become publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year
first above written.
Fred Alger and Company, Incorporated
By: Gregory S. Duch
Name: Gregory S. Duch
Title: Executive Vice President
Alger American Fund
By: Gregory S. Duch
Name: Gregory S. Duch
Title: Treasurer
Keyport Benefit Life Insurance Company
By: Jacob M. Herschler
Name: Jacob Herschler
Title: Vice President
SCHEDULE A
The Alger American Fund:
Alger American Growth Portfolio
Alger American Small Capitalization Portfolio
EXHIBIT 8f
FORM OF
PARTICIPATION AGREEMENT
AMONG
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
ALLIANCE FUND DISTRIBUTORS, INC.
ALLIANCE CAPITAL MANAGEMENT L.P.
AND
KEYPORT BENEFIT LIFE INSURANCE COMPANY
This Agreement, made and entered into this day of May, 1998 by
and among Keyport Benefit Life Insurance Company, a New York corporation,
(referred to as the "Company"), on its own behalf and on behalf of its
Separate Account, which is a segregated asset account of the Company;
Alliance Variable Products Series Fund, Inc. (the "Fund"), a corporation
organized under the laws of the State of Maryland; Alliance Capital
Management L.P., ("Adviser"), a Delaware limited partnership and Alliance
Fund Distributors, Inc. ("Underwriter"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts ("Variable Insurance Products") to be offered by
insurance companies which have entered into participation agreements with
the Fund and Adviser on substantially the same terms as in this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the shares of the Fund are divided into several series of
shares (such series being hereinafter referred to individually as a
"Portfolio" or collectively as the "Portfolios") as shown on Schedule A
attached hereto; and
WHEREAS, the Fund has been granted or currently intends to apply for
an order from the Securities and Exchange Commission ("SEC"), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as
amended (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance
companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the federal Investment Advisers Act of 1940, as amended and any applicable
state securities law; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, the Company has established duly organized, a validly
existing segregated asset account as shown on Schedule B attached hereto
(the "Separate Account") established by resolution of the Board of
Directors of the Company, and divided such Separate Account into
subaccounts to set aside and invest assets attributable to aforesaid
variable annuity contracts; and
WHEREAS, the Company has registered or will register the certain
Separate Account as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange
Act of 1934, as amended, (hereinafter the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD"); and
WHEREAS, Keyport Financial Services Corporation ("KFSC"), the
underwriter for the individual variable annuity and the variable life
policies, is registered as a broker-dealer with the SEC under the 1934 Act
and is a member in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of the Separate Account to fund certain Variable Insurance Products.
Underwriter is authorized to sell such shares to unit investment trusts
such as the Separate Account at net asset value, and acts as distributor of
the Portfolio shares.
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund, the Adviser and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter shall sell to the Company those shares of the
Fund which the Separate Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for shares of the Fund. For purposes of this Section
1.1, the Company shall be the designee of the Fund for receipt of such
orders from the Separate Account and receipt by such designee shall
constitute receipt by the Fund provided that each Company receives the
order by 4:00 p.m. New York time and the Fund receives notice from the
Company, as the Company and Fund may agree, by 9:00 a.m. New York time on
the next Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange is open for regular trading and on which the Fund
calculates its net asset value pursuant to the rules of the SEC.
1.2 The Fund agrees subject to the terms of this Agreement, to make
its shares available indefinitely for purchase at the applicable net asset
value per share by the Company and the Separate Account on those days on
which the Fund calculates its net asset value pursuant to rules of the SEC
and the Fund shall use reasonable efforts to calculate such net asset value
on each day on which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Directors of the Fund
(hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good
faith and in light of its fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.3 The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts which have
agreed to participate in the Fund to fund their Separate Accounts and/or
certain qualified plans, all in accordance with the requirements of Section
817(h) of the Internal Revenue Code of 1986, as amended (hereinafter
"Code") and Treasury Regulation 1.817-5. No shares of any Portfolio will be
sold to the general public.
1.4 The Fund and Adviser will not sell Fund shares to any insurance
company or separate account unless an agreement containing substantially
similar provisions as Articles I, III, V, VI and Sections 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Fund will redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of redemption requests. For purposes
of this Section 1.5, the Company shall be the designee of the Fund for
receipt of requests for redemption from the Separate Account, and receipt
by such designee should constitute receipt by the Fund; provided that the
Company receives the request for redemption by 4:00 p.m. New York time, and
the Fund receives notice from the Company, as the Company and Fund may
agree, by 9:00 a.m. New York time on the next Business Day.
Subject to the applicable rules and regulations, if any, of the SEC,
the Fund may pay the redemption price for shares of any Portfolio in whole
or in part by a distribution in kind of securities from the Portfolio of
the Fund allocated to such Portfolio in lieu of money, valuing such
securities at their value employed for determining net asset value
governing such redemption price, and selecting such securities in a manner
the Board may determine in good faith to be fair and equitable.
1.6 The Fund may suspend the redemption of any full or fractional
shares of the Fund (1) for any period (a) during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings) or
(b) during which trading on the New York Stock Exchange is restricted; (2)
for any period during which an emergency exists as a result of which (a)
disposal by the Fund of securities owned by it is not reasonably
practicable or (b) it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or (3) for such other periods as the
SEC may by order permit for the protection of shareholders of the Fund.
1.7 The Company will purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund in accordance with the
provisions of such prospectus and statement of additional information
("SAI") (collectively referred to as "Prospectus," unless otherwise
provided).
1.8 The Company shall pay for Fund shares on the same Business Day as
an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by
wire, or may otherwise be provided by separate agreement. For purpose of
Section 2.10 and 2.11, upon receipt by the Fund of the federal funds so
wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.9 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Separate
Account. Shares ordered from the Fund will be recorded in an appropriate
title for the Separate Account or the appropriate subaccount of the
Separate Account.
1.10 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the shares of any Portfolio. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares
of that Portfolio. The Company reserves the right to revoke this election
and to receive all such income, dividends and capital gain distributions in
cash. The Fund shall notify the Company of the number of shares so issued
as payment of such income, dividends and capital gains distributions.
1.11 The Fund shall make the net asset value per share for each
Series available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use
its best efforts to make such net asset value per share available by 7
p.m., New York time.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act to the extent required by the 1933
Act; that the Contracts will be issued and distributed in compliance in all
material respects with all applicable federal and state laws and that the
sale of the Contracts shall comply in all material respects with state
insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good
standing under applicable law and that prior to any issuance or sale of any
Contract it has legally and validly established the Separate Account as a
segregated asset account under the applicable state insurance laws and has
registered or, prior to any issuance or sale of the Contracts, will
register the Separate Account as a unit investment trust in accordance with
the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Company represents and warrants that KFSC, the underwriter
for the individual variable annuity and the variable life policies, is a
member in good standing of the NASD and is a registered broker-dealer with
the SEC. The Company represents and warrants that the Company and KFSC will
issue and distribute such policies in accordance in all material respects
with all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.3 The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of the State of Maryland,
and all applicable federal and any state securities laws and that the Fund
is and shall remain registered under the 1940 Act. The Fund shall amend the
registration statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of
its shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Adviser.
2.4 The Fund represents that it does or intends to qualify as a
Regulated Investment Company under Subchapter M of the Code and that it
will make every effort to maintain such qualification (under Subchapter M
or any successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased
to so qualify or that it might not so qualify in the future. The Fund
represents and warrants that each Portfolio will comply with the
diversification requirements set forth in Section 817(h) of the Code, and
the rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify the Company immediately upon having a
reasonable basis for believing any Fund has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately
diversify the Fund to achieve compliance within the grace period afforded
by Regulation 1.817-5. The Fund acknowledges that any failure to qualify as
a Regulated Investment Company will eliminate the ability of the
subaccounts to avail themselves of the "look through" provisions of section
817(h) of the Code, and that as a result the Contracts will almost
certainly fail to qualify as annuity contracts under section 817(h) of the
Code.
2.5 The Company represents that the Contracts are currently treated
as endowment or annuity contracts under applicable provisions of the Code
and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Adviser immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that
they might not be so treated in the future.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states except that the Fund represents that it believes it currently
complies in all material respects and intends at all times to comply in all
material respects with the applicable insurance laws of the domiciliary
states of the Participating Insurance Companies to the extent that the
Participating Insurance Companies advise the Fund, in writing, of such laws
or any changes in such laws.
2.7 The Adviser represents and warrants that the Underwriter is a
member in good standing of the NASD and is registered as a broker-dealer
with the SEC. The Underwriter further represents that it will sell and
distribute the Fund's shares in accordance with applicable state and
federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.9 The Fund represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities
laws and that the Adviser shall perform its obligations for the Fund in
compliance in all material respects with the applicable laws of the State
of Delaware and any applicable state and federal securities laws.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1 The Fund and the Adviser shall provide the Company with as many
copies of the Fund's current prospectus and Statement of Additional
Information (describing only the Portfolios listed in Schedule A) as the
Company may reasonably request in connection with delivery of the
prospectus to shareholders of Variable Insurance Products. If requested by
Company in lieu thereof, the Fund or the Adviser shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of Company, as a diskette in the form sent to
the financial printer) and other assistance as is reasonably necessary in
order for the parties hereto once a year (or more frequently if the
prospectus for the shares is supplemented or amended) to have the
prospectus for the Variable Insurance Products and the prospectus for the
Fund shares printed together in one document the expenses of such printing
will be apportioned between (a) the Company (b)Fund in proportion to the
number of pages of the Policy and Shares prospectuses, taking into account
other relevant factors affecting the cost of printing such as covers,
columns, graphs, and charts; the Fund to bear the cost with printing the
Shares' prospectus portion of such document and the Company to bear the
expenses of printing the portion with such documents relating to the
Accounts. The Company will bear all printing costs when the prospectuses
are used for distribution to prospective purchasers. In the event that the
Company requests that the Fund or the Adviser provide the Fund's prospectus
in a "camera ready" or diskette format, the Fund shall be responsible for
providing the prospectus in the format in which it is accustomed to
formatting prospectuses and shall bear the expense of providing the
prospectus in such format (e.g. typesetting expenses) and the Company shall
bear the expense of adjusting or changing the format to conform with any of
its prospectuses.
3.2 The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from Fund and the Company,
and at the Fund's expense, the Fund shall provide a final copy of such
Statement of Additional Information to Company for duplication and
provision to any Owner of a Variable Insurance Product or prospective owner
who requests it.
3.3 The Fund, at its expense, shall provide the Company with copies
of its proxy materials, reports to shareholders and other communications
(except for prospectus and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company
shall reasonably require for distribution to Owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Owners;
(ii) vote the Fund shares in accordance with instructions received
from Owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular Separate Account in the same proportion
as Fund shares of such Portfolio for which instructions have been
received in that Separate Account, so long and to the extent that
the SEC continues to interpret the 1940 Act to require pass-
through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their Separate Accounts
participating in the Fund calculates voting privileges in a
manner consistent with the standards to be provided in writing to
the Participating Insurance Companies.
3.5 The Fund shall comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of
that Act) as well as with Section 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation of
the requirements of Section 16(a) with respect to periodic elections of
directors and with whatever rules the Commission may promulgate with
respect thereto.
ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, the form of each piece of sales literature or other
promotional material in which the Fund or its investment adviser is named,
at least three (3) Business Days prior to its use. No such material shall
be used unless the Fund or its designee approves such use within three (3)
Business Days after receipt of its material, which approval shall not be
unreasonably withheld.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund
in connection with the sale of Variable Insurance Products other than the
information or representations contained in the registration statement or
Prospectus for the Fund shares, as such registration statement and
Prospectus may be amended or supplemented from time to time, or in reports
or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee, except with the
permission of the Fund or its designee.
4.3 The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or its Separate
Account(s), are named at least three (3) Business Days prior to its use.
No such material shall be used unless the Company or its designee approves
of such use within three (3) Business Days after receipt of such material,
which approval shall not be unreasonably withheld.
4.4 The Fund shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, each Separate Account, or the Variable Insurance Products other
than the information or representations contained in or accurately derived
from a registration statement or prospectus for such Variable Insurance
Products, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for such Separate
Account which are in the public domain or approved by the Company for
distribution to Owners, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company.
4.5 The Fund shall provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such document with the SEC
or other regulatory authorities.
4.6 The Company shall provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Variable Insurance Products or any Separate Account,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other
communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, Statements
of Additional Information, shareholder reports, and proxy materials and any
other material constituting sales literature or advertising under the 1933
Act, the 1940 Act or NASD rules.
ARTICLE V. Fees and Expenses
5.1 The Fund shall pay no compensation to the Company under this
Agreement (except for items covered in Article III).
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with
applicable federal law and if and to the extent deemed advisable by the
Fund, in accordance with applicable state laws prior to their sale. The
Fund shall bear the expenses of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and
registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required
by any federal or state law, and all taxes on the issuance or transfer of
the Fund's shares.
5.3 The Company shall bear the expenses of distributing the Share's
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Fund's Shareholder reports and proxy materials to
Policy owners. The Company shall bear all expenses associated with the
registration, qualification, and filing of the Policies under applicable
federal securities and state insurance laws; the cost of preparing,
printing and distributing annual individual account statements for Policy
owners as required by state insurance laws.
5.4 Nothing herein shall prevent the parties hereto from otherwise
agreeing to perform, and arranging appropriate compensation for, other
services relating to the Fund, the Separate Accounts or both.
ARTICLE VI. Potential Conflicts
6.1 The Fund agrees that the Board, constituted with a majority of
disinterested directors, shall monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the Owners of
separate accounts of Participating Insurance Companies investing in the
Fund. A material irreconcilable conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
policy Owners; (f) a decision by an insurer to disregard the voting
instructions of Owners; or (g) if applicable, a decision of a Qualified
Plan to disregard the voting instructions of plan participants. The Board
shall promptly inform the Company if it determines that a material
irreconcilable conflict exists and the implications thereof.
6.2 The Company will report any potential or existing conflicts
(including the occurrence of any event specified in paragraph 6.1 which may
give rise to such a conflict) of which it is aware to the Board. The
Company will assist the Board in carrying out their responsibilities under
the Shared Funding Exemptive Order, by providing the Board with all
information reasonably necessary for the Board to consider any issues
raised. This includes, but is not limited to, an obligation by the Company
to inform the Board whenever Owner voting instructions are disregarded. The
responsibilities of the Company will be carried out with a view only to the
interests of the Owners.
6.3 If it is determined by a majority of the Board, or a majority of
its disinterested directors, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at
their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested trustees), take whatever steps are necessary
to remedy or eliminate the material irreconcilable conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the
separate accounts of Participating Insurance Companies from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting
the question whether such segregation should be implemented to a vote of
all affected Owners and, as appropriate, segregating the assets of any
particular group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Owners the option of making such a change; and (2) establishing a
new registered management investment company or managed separate account.
6.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Owner voting instructions and that
decision represents a minority position or would preclude a majority vote,
the Company shall be required, at the Fund's election, to withdraw the
affected Separate Account's (or subaccount's) investment in the Fund and
terminate this Agreement with respect to such Separate Account (or
subaccount) and no charge or penalty will be imposed as a result of such
withdrawal; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the
Board. The responsibility to take such remedial action in the event of a
Board determination of a material irreconcilable conflict and to bear the
cost of such remedial action os the obligation of each Participating
Insurance Company and the Company agrees to carry out its responsibilities
with a view only to the interests of the Owners.
6.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts
with the majority of other state regulators, then the Company will withdraw
the affected Separate Account's investment in the Fund and terminate this
Agreement promptly after the Board informs the Company in writing that it
has determined that such decision has created a irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested members of the
Board.
6.6 For purposes of Sections 6.3 through 6.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether
any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new
funding medium for the Variable Insurance Products. The Company shall not
be required by Section 6.4 to establish a new funding medium for the
Variable Insurance Products if an offer to do so has been declined by vote
of a majority of Owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict,
then the Company shall withdraw the affected Separate Account's investment
in the Fund and terminate this Agreement promptly provided, however, that
such withdrawal and termination shall be limited to the extent required by
any such material irreconcilable conflict as determined by a majority of
the disinterested Members of the Board.
6.7 If and to the extent that Rule 6e-2 or Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared
Funding Exemptive Order, then (a) the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such Rules are applicable; and (b) Sections 3.4,
3.5, 6.1, 6.2, 6.3, 6.4, and 6.5 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VII. Indemnification
7.1 Indemnification By the Company
7.1(a) The Company shall indemnify and hold harmless the
Underwriter, the Adviser, the Fund and each member of the Board and
officers and each person, if any, who controls the Fund within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent
of the Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale of the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Variable Insurance
Products or in the sales literature for the Variable Insurance
Products (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to the
Company by or on behalf of the Fund for use in the registration
statement or prospectus for the Variable Insurance Products or in
the sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable
Insurance Products or Fund shares; or
(ii) arise out of or are based upon statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
Fund not supplied by the Company, or persons under its control)
or wrongful conduct of the Company or persons under its control,
with respect to the sale or distribution of the Variable
Insurance Products; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result from any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 7.1(b) and 7.1(c)
hereof.
7.1(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is applicable.
7.1(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against an Indemnified Party, the Company
shall be entitled to participate, at its own expense, in the defense of
such action. The Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from the Company to such party of the election of one or both of the
Company to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company
will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.1(d) The Indemnified Parties shall promptly notify the Company of
the commencement of any litigation or proceeding against them in connection
with the issuance or sale of Variable Insurance Products or the operation
of the Fund. This indemnification shall be in addition to any liability
which the Company may otherwise have.
7.2 Indemnification By the Fund
7.2(a) The Fund shall indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section 7.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including
legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the operations of the Fund and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus or sales literature for the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to the
Adviser, Underwriter or the Fund by or on behalf of the Company
for use in the registration statement or prospectus for the Fund
or in the sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of Fund shares;or
(ii) arise out of or are based upon statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
Variable Insurance Products not supplied by the Adviser,
Underwriter or persons under its control) or wrongful conduct of
one or both of the Fund or the Adviser or persons under its
control, with respect to the sale or distribution of Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Variable
Insurance Products, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund;
or
(iv) arise out of or result from any failure by the Fund to
provide the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the
diversification requirements specified in Article II of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
7.2(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Fund, the Underwriter or
each Separate Account, whichever is applicable.
7.2(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Fund of any such claim shall not relieve the Fund from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any
such action is brought against and Indemnified Party, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The
Fund also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Fund
to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Fund will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
7.2(d) The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with this Agreement, the issuance or
sale of the Variable Insurance Products or the operation of the Account.
This indemnification shall be in addition to any liability which the Fund
may otherwise have.
7.3 Indemnification by the Underwriter
7.3(a) The Underwriter shall indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.3)
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of
the Fund's shares and:
(i) arise out of or are based upon statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Variable Insurance Products not supplied by the Underwriter,
Advisor, Fund or persons under its control) or wrongful conduct
of the Underwriter or persons under its control, with respect to
the sale or distribution of the Fund shares; or
(ii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in sales literature of the
Variable Insurance Products, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon and in conformity
with information furnished to the Company by the Underwriter, or
(iii) arise out of or result from any failure by the
Underwriter to provide the services and furnish the materials
under the terms of this Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof.
7.3(b) The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to the Company or the
Separate Account, whichever is applicable.
7.3(c) The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but
failure to notify the Underwriter of any such claim shall not relieve the
Underwriter from any liability which it may have to the Indemnified Party
against and whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, the Underwriter will be entitled to participate, at its
own expense, in the defense thereof. The Underwriter also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Underwriter to such party of the
Distributor's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
7.3(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against them or any of their
respective officers or directors in connection with this Agreement, the
issuance or sale of the Variable Insurance Products or the operation of
either Account. This indemnification shall be in addition to any liability
which the Underwriter may otherwise have.
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of Massachusetts.
8.2 This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE XI. Termination
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty days'
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund
with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts or not
consistent with the Company's obligations to Owners; or
(c) termination by the Company by written notice to the Fund
with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use
of such shares as the underlying investments media of the
Variable Insurance Products issued or to be issued by the
Company; or
(d) termination by the Company by written notice to the Fund
with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or any independent or resulting failure
under Section 817 of the Code, or under any successor or similar
provision of either, or if the Company reasonably believes that
the Fund may fail to so qualify; or
(e) termination by either the Fund or the Adviser by written
notice to the Company, if either one or both of the Fund or the
Adviser respectively, shall determine, in their sole judgement
exercised in good faith, that the Company has suffered a material
adverse change in their business, operations, financial condition
or prospects since the date of this Agreement or are the subject
of material adverse publicity; but no termination shall be
effective under this subsection (e) until the Company has been
afforded a reasonable opportunity to respond to a statement by
the Fund or the Adviser concerning the reason for notice of
termination hereunder; or
(f) termination by the Company by written notice to the Fund and
the Adviser, if the Company shall determine, in its sole
judgement exercised in good faith, that either the Fund or the
Adviser has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
but no termination shall be effective under this subsection (f)
until the Fund or Adviser has been afforded a reasonable
opportunity to respond to a statement by the Company concerning
the reason for notice of termination hereunder; or
(g) at the option of the Fund, if the Variable Insurance
Products cease to qualify as annuity contracts or life insurance
contracts, as applicable, under the Code, or if the Fund
reasonably believes that the Variable Insurance Products may fail
to so qualify; or
(i) at the option of the Fund, upon the Company's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of the Fund within ten (10) days after
written notice of such breach is delivered to the Company; or
(j) upon assignment of this Agreement, unless made with the
written consent of the parties hereto; or
(k) at the option of the Fund, if the Variable Insurance
Products are not registered and issued in accordance with
applicable federal and/or state law. Termination shall be
effective immediately upon such occurrence without notice.
9.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the
terms and conditions of this Agreement, for all Variable Insurance Products
in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the Owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 9.2 shall not
apply to any terminations under Article VI and the effect of such Article
VI terminations shall be governed by Article VI of this Agreement.
(However, in no event shall the Fund and the Underwriter be required to
make additional shares available to Existing Contracts for more than six
(6) months after the date of termination of the Agreement).
9.3 The Company shall not redeem Fund shares attributable to the
Variable Insurance Products (as opposed to Fund shares attributable to the
Company's assets held in the Separate Account) except (i) as necessary to
implement Owner initiated or approved transactions, or (ii) as required by
state and/or federal laws or regulations or judicial or other legal
precedent of general application (hereinafter referred to as a "Legally
Required Redemption") or (iii) as permitted by an order of the SEC pursuant
to Section 26(b) of the 1940 Act. Upon request, the Company will promptly
furnish to the Fund and the Underwriter the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the Fund and the
Underwriter) to the effect that any redemption pursuant to the clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Variable Insurance Products, and as may be
in the best interests of Owners, as determined by the Company, the Company
shall not prevent Owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the Fund or
the Underwriter sixty (60) days notice of its intention to do so.
9.4 Notwithstanding any termination of this Agreement for any reason,
the terms and conditions of the following provisions of this Agreement
shall remain in effect with respect to any Existing Contract, for so long
as such Existing Contract has assets invested in the Fund: Section 1.3 to
1.10 of Article I (governing the pricing and redemption of shares); Article
II (Representations and Warranties); Sections 3.1 through 3.3 and 3.5 of
Article III (Prospectus and Proxy Statements, and Voting); Articles IV and
VIII (Sales Material and Information; Fees and Expenses, Diversification;
Potential Conflicts; Indemnification; and Applicable Law); Article X
(Notices); and Sections 11.1, 11.2, and 11.5 through 11.8 of Article XI
(Miscellaneous). Further, notwithstanding any termination of this Agreement
for any reason, the terms and conditions of the following provisions of
this Agreement shall remain in effect with regard to Variable Insurance
Products previously invested in the Fund: Article II (Representations and
Warranties); and Article VIII (Indemnification).
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Attn: Edmund Bergen
If to the Company:
Keyport Benefit Life Insurance Company
Service Office
125 High Street
Boston, MA 02110
Attention: General Counsel
If to Adviser:
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Attn: Edmund Bergen
If to Underwriter:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attn: Edmund Bergen
ARTICLE XI. Miscellaneous
11.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for any obligations entered into on behalf of the Fund.
11.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the Owners and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted
by this Agreement, shall not disclose, disseminate or utilize such names
and addresses and other confidential information until such time as it may
come into the public domain without the express written consent of the
affected party.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the
same instrument.
11.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
11.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
11.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
11.8 No provision of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by
the Fund, the Adviser and the Company.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of
the date specified below.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
By its authorized officer,
By:
Title:
Date:
ALLIANCE VARIABLE PRODUCTS SERIES
FUND, INC.
By its authorized officer,
By:
Title:
Date:
ALLIANCE CAPITAL MANAGEMENT L.P.
By its authorized officer,
By:
Title:
Date:
ALLIANCE FUND DISTRIBUTORS, INC.
By its authorized officer,
By:
Title:
Date:
Schedule A
Alliance Variable Products Series Fund, Inc.
Premier Growth Portfolio
Global Bond Portfolio
Growth and Income Portfolio
Real Estate Investment Portfolio
As of _____________
Schedule B
Separate Accounts Selected Funds
Variable Account A Premier Growth Portfolio
(Est. 1998)
Global Bond Portfolio
Growth and Income Portfolio
Real Estate Investment Portfolio
EXHIBIT 8g
PARTICIPATION AGREEMENT
AMONG
KEYPORT BENEFIT LIFE INSURANCE COMPANY,
KEYPORT FINANCIAL SERVICES CORP.,
and
LIBERTY VARIABLE INVESTMENT TRUST
This Agreement, made and entered into as of this 8th day of May, 1998
by and among Keyport Benefit Life Insurance Company (the "Company"), on its
own behalf and on behalf of its Separate Account(s), each of which is a
segregated asset account of the Company, Liberty Variable Investment Trust
(the "Trust"), and Keyport Financial Services Corp. ("KFSC").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares (such series being hereinafter referred to individually as
a "Series" or collectively as the "Series"); and
WHEREAS, the Trust relies on an order from the Securities and Exchange
Commission ("SEC"), dated July 1, 1988 (File No. 812-7044), granting life
insurance companies and variable annuity and variable life insurance
separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a), and 15(b) of the Investment Company Act of 1940, as amended (the
"1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder to the
extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Liberty Advisory Services Corp. ("LASC") is duly registered
as an investment adviser under the federal Investment Advisers Act of 1940
("Advisers Act") and any applicable state securities law; and
WHEREAS, Colonial Management Associates, Inc. ("Colonial") is duly
registered as an investment adviser under the Advisers Act and applicable
state securities laws; and provides certain administrative services; and
WHEREAS, Liberty Investment Services, Inc. ("LIS") serves as transfer
agent to the Trust; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, the Company has established duly organized, validly existing
segregated asset accounts (the "Separate Accounts") by resolution of the
Board of Directors of the Company; and
WHEREAS, the Company has registered or will register certain Separate
Accounts as unit investment trusts under the 1940 Act; and
WHEREAS, the Company relies on certain provisions of the 1940 and 1933
Acts that exempt certain Separate Accounts and Variable Insurance Products
from the registration requirements of the Acts in connection with the sale
of Variable Insurance Products under certain tax-advantaged retirement
programs, described in Article II., Section 2.12. and as provided for by
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, KFSC is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intend to purchase shares of the Trust on behalf
of each Separate Account to fund certain Variable Insurance Products and
KFSC is authorized to sell such shares to unit investment trusts such as
each Separate Account at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the
Company, KFSC and the Trust agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. KFSC will sell to the Company those shares of the Trust which
each Separate Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Separate Accounts of
purchase payments or for the business day on which transactions under
Variable Insurance Products are effected by the Separate Accounts. For
purposes of this Section 1.1., LIS shall be the designee of the Trust for
receipt of such orders from each Separate Account and receipt by such
designee shall constitute receipt by the Trust. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and any
other day on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust will make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Separate Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall use reasonable
efforts to calculate such net asset value on each Business Day.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Trustees") may refuse to sell shares of any Series to any person, or
suspend or terminate the offering of shares of any Series if such action is
required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Series.
1.3. The Trust and KFSC agree that shares of the Trust will be sold
only to Participating Insurance Companies and their Separate Accounts. No
shares of any Series will be sold to the general public.
1.4. The Trust and KFSC will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles I., III., V., VII. and Sections 2.5. and
2.12. of Article II. of this Agreement is in effect to govern such sales.
1.5. The Trust will redeem for cash, at the Company's request, any
full or fractional shares of the Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after
receipt by the Separate Accounts of redemption requests or for the Business
Day on which transactions under Variable Insurance Products are effected by
the Separate Accounts. For purposes of this Section 1.5., Colonial shall
be the designee of the Trust for receipt of requests for redemption for
each Separate Account.
Subject to the applicable rules and regulations, if any, of the SEC,
the Trust may pay the redemption price for shares of any Series in whole or
in part by a distribution in kind of securities from the portfolio of the
Trust allocated to such Series in lieu of money, valuing such securities at
their value employed for determining net asset value governing such
redemption price, and selecting such securities in a manner the Trustees
may determine in good faith to be fair and equitable.
1.6. The Trust may suspend the redemption of any full or fractional
shares of the Trust (1) for any period (a) during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings) or
(b) during which trading on the New York Stock Exchange is restricted; (2)
for any period during which an emergency exists as a result of which (a)
disposal by the Trust of securities owned by it is not reasonably
practicable or (b) it is not reasonably practicable for the Trust fairly to
determine the value of its net assets; or (3) for such other periods as the
SEC may by order permit for the protection of shareholders of the Trust.
1.7. The Company will purchase and redeem the shares of each Series
offered by the then current prospectus of the Trust and in accordance with
the provisions of such prospectus and statement of additional information
(the "SAI") (collectively referred to as "Prospectus," unless otherwise
provided). The Company agrees that all net amounts available under the
Variable Insurance Products with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as
such Schedule A may be amended from time to time hereafter by mutual
written agreement of all the parties hereto (the "Contracts"), shall be
invested in the Trust, in such other trusts advised by LASC as may be
mutually agreed to in writing by the parties hereto, or in the Company's
general accounts, provided that such amounts may also be invested in an
investment company other than the Trust if (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of each
of the Series of the Trust; or (b) the Company gives the Trust and KFSC
forty-five (45) days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs
the Trust and KFSC prior to its signing this Agreement; or (d) the Trust or
KFSC consents to the use of such other investment company.
1.8. The Company shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1. hereof. Payment shall be in federal funds
transmitted by wire, or may otherwise be provided by separate agreement.
1.9. Issuance and transfer of the Trusts' shares will be by book entry
only. Stock certificates will not be issued to either the Company or the
Separate Accounts. Shares ordered from the Trust will be recorded in an
appropriate title for each Separate Account or the appropriate subaccount
of each Separate Account.
1.10. The Trust, through its designee LIS, shall furnish same day
notice (by wire or telephone, followed by written confirmation) to the
Company of any income dividends or capital gain distributions payable on
the shares of any Series. The Company hereby elects to receive all such
income, dividends and capital gain distributions as are payable on the
shares of each Series in additional shares of that Series. The Company
reserves the right to revoke this election and to receive all such income,
dividends and capital gain distributions in cash. The Trust shall notify
the Company through its designee, LIS, of the number of shares so issued as
payment of such income, dividends and distributions.
1.11. The Trust shall make the net asset value per share for each
Series available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use
its best efforts to make such net asset value per share available by 7
p.m., Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act to the extent required by the 1933
Act; that the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws and that the
sale of the Contracts shall comply in all material respects with state
insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good
standing under applicable law and that prior to any issuance or sale of any
Contract it has legally and validly established each Separate Account as a
segregated asset account under the applicable state insurance laws and has
registered or, prior to any issuance or sale of the Contracts, will
register each Separate Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment
account for the Contracts, to the extent required by the 1940 Act.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act to the extent
required by the 1933 Act, duly authorized for issuance and sold in
compliance with the laws of the Commonwealth of Massachusetts and all
applicable federal and any state securities laws and that the Trust is and
shall remain registered under the 1940 Act to the extent required by the
1940 Act. The Trust shall amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as required in order
to effect the continuous offering of its shares. The Trust shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or KFSC.
2.3. The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Code and that it will make
every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased
to so qualify or that it might not so qualify in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Trust and KFSC immediately upon
having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.5. The Trust currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future consistent with
applicable law. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Trust undertakes to have its Trustees,
a majority of whom are not interested persons of the Trust, formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states except that the Trust represents that it is currently in compliance
and shall at all times remain in compliance with the applicable insurance
laws of the domiciliary states of the Participating Insurance Companies to
the extent that the Participating Insurance Company advises the Trust, in
writing, of such laws or any changes in such laws.
2.7. KFSC represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the SEC. KFSC
further represents that it will sell and distribute the Trust shares in
accordance with the laws of the Commonwealth of Massachusetts and all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Trust represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material aspects with the 1940 Act.
2.9. The Trust represents and warrants that LASC is and shall remain
duly registered as an investment adviser in all material aspects under all
applicable federal and state securities laws and that LASC shall perform
its obligations for the Trust in compliance in all material respects with
the applicable laws of the Commonwealth of Massachusetts and any applicable
state and federal securities laws.
2.10. The Trust represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
having access to securities or funds of the Trust are and shall continue to
be at all times covered by a joint fidelity bond in an amount not less than
three million seven hundred fifty thousand dollars ($3,750,000) with no
deductible amount. The aforesaid bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable fidelity insurance
company.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities having access to securities or funds of the Trust are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust, in an amount not less than
ten million dollars ($10,000,000) with no deductible amount. The aforesaid
bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable fidelity insurance company.
2.12. The Company represents and warrants that it will not, without
the prior written consent of KFSC, purchase Trust shares with Separate
Account assets derived from the sale of Contracts to individuals or
entities which qualify under current or future state or federal law for any
type of tax advantage (whether by a reduction or deferral of, deduction or
exemption from, or credit against income or otherwise). Examples of such
types of funds under current law include: any tax-advantaged retirement
program, whether maintained by an individual, employer, employee
association or otherwise (including, without limitation, retirement
programs which qualify under Sections 401(a), 401(k), 403(a), 403(b), 408
and 457 of the Code), and any retirement programs maintained for employees
of the Government of the United States or by the government of any state or
political subdivision thereof, or by any agency or instrumentality of any
of the foregoing.
2.13. The Company represents and warrants that it will not
transfer or otherwise convey shares of the Trust, without the prior written
consent of KFSC.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. KFSC shall provide the Company with as many copies of the Trust's
current prospectus, excluding the SAI, as the Company may reasonably
request in connection with delivery of the prospectus, excluding the SAI,
to shareholders and purchasers of Variable Insurance Products. If
requested by the Company in lieu thereof, the Trust shall provide such
documentation (including a final copy of the new prospectus, excluding the
SAI, as set in type at the Trust's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Trust is amended) to have the
prospectus for the Contracts and the Trust's prospectus, excluding the SAI,
printed together in one document (such printing to be at the Company's
expense).
3.2. The Trust's prospectus shall state that the SAI for the Trust is
available from KFSC and the Trust, at its expense, shall provide final copy
of such SAI to KFSC for duplication and provision to any prospective owner
who requests the SAI and to any owner of a Variable Insurance Product
("Owners").
3.3. The Trust, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to Owners.
3.4. If and to the extent required by law, the Company and, so long as
and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for Owners, the Trust shall:
(i) solicit voting instructions from Owners;
(ii) vote the Trust shares in accordance with
instructions received from Owners; and
(iii) vote Trust shares for which no instructions
have been received in the same proportion as Trust shares of
such Series for which instructions have been received;
The Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
Participating Insurance Company shall be responsible for assuring that each
of its Separate Accounts participating in the Trust calculates voting
privileges in a manner consistent with the standards to be provided in
writing to the Participating Insurance Companies.
3.5. The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders. The Trust reserves the right to take all
actions, including but not limited to, the dissolution, merger, and sale of
all assets of the Trust upon the sole authorization of its Trustees, to the
extent permitted by the laws of the Commonwealth of Massachusetts and the
1940 Act.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or LASC, or any sub-adviser ("Sub-Adviser"), or
KFSC is named, at least fifteen (15) days prior to its use. No such
material shall be used if the Trust or its designee object to such use
within fifteen (15) days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the
Trust in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
Prospectus for the Trust shares, as such registration statement and
Prospectus may be amended or supplemented from time to time, or in reports
or proxy statements for the Trust, or in sales literature or other
promotional material approved by the Trust or its designee or by KFSC,
except with the permission of the Trust or KFSC or the designee of either.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designees, each piece of sales literature
or other promotional material in which the Company and/or its Separate
Account(s), are named at least fifteen (15) days prior to its use. No such
material shall be used if the Company or its designee object to such use
within fifteen (15) days after receipt of such material.
4.4. The Trust and KFSC shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, any Separate Account, or the Variable Insurance Products other
than the information or representations contained in a registration
statement or prospectus for such Variable Insurance Products, as such
registration statement and prospectus may be amended or supplemented from
time to time, or in published reports for such Separate Account which are
in the public domain or approved by the Company for distribution to Owners,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5. The Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications
for exemption, requests for no-action letters, and all amendments to any of
the above, that relate to the Trust or its shares, contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all registration statements, prospectuses, SAIs, reports, solicitations
for voting instructions, sales literature and other promotional materials,
applications for exemption, requests for no-action letters, and all
amendments to any of the above, that relate to the Variable Insurance
Products or any Separate Account, contemporaneously with the filing of such
document with the SEC.
4.7. For purposes of this Article IV., the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other
communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, SAIs,
shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Trust and KFSC shall pay no fee or other compensation to the
Company under this Agreement, except that if the Trust or any Series adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then KFSC may make payments to the Company or to the underwriter
for the Variable Insurance Products if and in amounts agreed to by KFSC in
writing and such payments will be made out of existing fees payable to KFSC
by the Trust for this purpose. No such payments shall be made directly by
the Trust. Currently, no such plan pursuant to Rule 12b-1 or payments are
contemplated.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all
its shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the
Trust, in accordance with applicable state laws prior to their sale. The
Trust shall bear the expenses of registration and qualification of the
Trust's shares, preparation and filing of the Trust's prospectus and
registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required
by any federal or state law, and all taxes on the issuance or transfer of
the Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
proxy materials and reports to Owners.
ARTICLE VI. Diversification
6.1. The Trust will at all times invest money from the Variable
Insurance Products in such a manner as to ensure that, insofar as such
investment is required to assure such treatment, the Variable Insurance
Products will be treated as variable contracts under the Code and the
regulations issued thereunder. Without limiting the scope of the
foregoing, the Trust will at all times comply with Section 817(h) of the
Code and the Treasury Regulations thereunder relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such
Section or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the Owners of
separate accounts of the Company investing in the Trust. A material
irreconcilable conflict may arise for a variety of reasons, including: (a)
an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Series
are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance policy owners; or (f)
a decision by an insurer to disregard the voting instructions of Owners.
The Trustees shall promptly inform the Company if it determines that a
material irreconcilable conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts
(including the occurrence of any event specified in paragraph 7.1. which
may give rise to such a conflict) of which it is aware to the Trustees.
The Company will assist the Trustees in carrying out their responsibilities
under the Shared Funding Exemptive Order, by providing the Trustees with
all information reasonably necessary for the Trustees to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Trustees whenever Owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Trustees, or a majority
of its disinterested Trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at
their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Trustees), take whatever steps are necessary
to remedy or eliminate the material irreconcilable conflict, up to and
including: (1), withdrawing the assets allocable to some or all of the
separate accounts of Participating Insurance Companies from the Trust or
any Series and reinvesting such assets in a different investment medium,
including (but not limited to) another Series of the Trust, or submitting
the question whether such segregation should be implemented to a vote of
all affected Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Owners the option of making such a change; (2), establishing a new
registered management investment company or managed separate account; and
(3) obtaining SEC approval.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Owner voting instructions and that
decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Trust's election, to withdraw the
affected Separate Account's investment in the Trust and terminate this
Agreement; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Any
such withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being implemented,
and until the end of that six (6) month period KFSC and Trust shall
continue to accept and implement orders by the Company for the purchase
(and redemption) of shares of the Trust.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts
with the majority of other state regulators, then the Company will
withdraw the affected Separate Account's investment in the Trust and
terminate this Agreement within six (6) months after the Trustees inform
the Company in writing that they have determined that such decision has
created a material irreconcilable conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of
the disinterested Trustees. Until the end of the foregoing six (6) month
period, KFSC and Trust shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3. through 7.6. of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in no
event will the Trust be required to establish a new funding medium for the
Variable Insurance Products. The Company shall not be required by Section
7.3. to establish a new funding medium for the Variable Insurance Products
if an offer to do so has been declined by vote of a majority of Owners
materially adversely affected by the material irreconcilable conflict. In
the event that the Trustees determine that any proposed action does not
adequately remedy any material irreconcilable conflict, then the Company
will withdraw the affected Separate Account's investment in the Trust and
terminate this Agreement within six (6) months after the Trustees inform
the Company in writing of the foregoing determination, provided, however,
that such withdrawal and termination shall be limited to the extent
required by any such material irreconcilable conflict as determined by a
majority of the disinterested Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) or terms
and conditions materially different from those contained in the Shared
Funding Exemptive Order, then (a) the Trust and/or the Company, as
appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4., 3.5., 7.1., 7.2., 7.3., 7.4.,
and 7.5. of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1.(a). The Company will indemnify and hold harmless the Trust
and each of its Trustees and Officers and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section 8.1.) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Trust's shares or the Variable Insurance Products and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the registration statement or prospectus for
the Variable Insurance Products or contained in the sales
literature for the Variable Insurance Products (or any
amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of the
Trust for use in the registration statement or prospectus
for the Variable Insurance Products or in the Variable
Insurance Products or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Variable Insurance Products or Trust shares; or
(ii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, Prospectus or sales
literature of the Trust not supplied by the Company, or
persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the
sale or distribution of the Variable Insurance Products or
Trust shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, Prospectus, or sales literature of
the Trust or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in
writing to the Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the
Company to provide the services and furnish the materials
contemplated by this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company.
8.1.(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad
faith, or negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of obligations
or duties under this Agreement or to the Trust, whichever is applicable.
8.1.(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated agent),
but failure to notify the Company of any such claim shall not relieve the
Company from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its
own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Company to such party of
the election of the Company to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained
by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1.(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them
in connection with the issuance or sale of the Trust shares or the
Contracts or the operation of the Trust.
8.2. Indemnification By the Trust
8.2.(a). The Trust will indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2.)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Trust) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, regulation at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Trustees or any member
thereof, are related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to
provide the services and furnish the materials under the
terms of this Agreement (including a failure to comply with
the diversification requirements specified in Article VI. of
this Agreement); or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust;
as limited by and in accordance with the provisions of Sections 8.2.(b).
and 8.2.(c). hereof.
8.2.(b). The Trust shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise by
subject by reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to the Company, the Trust,
KFSC or each Separate Account, whichever is applicable.
8.2.(c). The Trust shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Trust in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have
served upon such Indemnified Party (or after such Indemnified party shall
have received notice of such service on any designated agent), but failure
to notify the Trust of any such claim shall not relieve the Trust from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
Parties, the Trust will be entitled to participate, at its own expense, in
the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Trust to such party of the Trust's election
to assume the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Trustees
will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable cases of
investigations.
8.2.(d). The Company and KFSC agree promptly to notify the Trust
of the commencement of any litigation or proceedings against them or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Trust.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts provided, however, that if such laws or any of the provisions
of this Agreement conflict with applicable provisions of the 1940 Act, the
latter shall control.
9.2. This Agreement shall be made subject to the provisions of
the 1933, 1934, and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant (including, but not limited to, the Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one (1) year advance written
notice to the other parties; provided, however such notice shall not be
given earlier than one (1) year following the date of this Agreement; or
(b) at the option of the Company to the extent that shares of
Series are not reasonably available to meet the requirements of the
Variable Insurance Products as determined by the Company, provided
however, that such termination shall apply only to the Series not
reasonably available. Prompt notice of the election to terminate for such
cause shall be furnished by the Company; or
(c) at the option of the Trust in the event that formal
administrative proceedings are instituted against the Company or KFSC by
the NASD, the SEC, the Insurance Commissioner or any other regulatory body
regarding the duties of the Company under this Agreement or related to the
sale of the Variable Insurance Products, with respect to the operation of a
Separate Account, or the purchase of the Trust shares, provided, however,
that the Trust determines in its sole judgement exercised in good faith,
that any such administrative proceedings will have a material adverse
effect upon the ability of the Company to perform its obligations under
this Agreement or of KFSC to perform its obligations under its underwriting
agreement with the Trust; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Trust by the NASD,
the SEC, or any state securities or insurance department or any other
regulatory body, provided, however, that the Company determine in its sole
judgement exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Trust to
perform its obligations under this Agreement; or
(e) with respect to a Separate Account, upon requisite authority
to substitute the shares of another investment company for shares of the
corresponding Series of the Trust in accordance with the terms of the
Variable Insurance Products for which those Series shares had been selected
to serve as the underlying investment media. The Company will give thirty
(30) days' prior written notice to the Trust of the date of any proposed
action to replace the Trust shares; or
(f) at the option of the Company, in the event any of the
Trust's shares are not registered, issued or sold in accordance with
applicable federal and any state law or such law precludes the use of such
shares as the underlying investment media of the Variable Insurance
Products issued or to be issued by the Company; or
(g) at the option of the Company, if the Trust ceases to
qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably
believes that the Trust may fail to so qualify; or
(h) at the option of the Company, if the Trust fails to meet the
diversification requirements specified in Article VI. hereof; or
(i) at the option of either the Trust or KFSC, if (1) the Trust
or KFSC, respectively, shall determine, in its sole judgement reasonably
exercised in good faith, that the Company has suffered a material adverse
change in its business or financial condition or is the subject of material
adverse publicity and such material adverse publicity will have a material
adverse impact upon the business and operations of either the Trust or
KFSC, (2) the Trust or KFSC shall notify the Company in writing of such
determination and its intent to terminate this Agreement, and (3) after
considering the actions taken by the Company and any other changes in
circumstances since the giving of such notice, such determination of the
Trust or KFSC shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth (60th) day shall be the effective
date of termination; or
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good faith, that
either the Trust or KFSC has suffered a material adverse change in its
business or financial condition or is the subject of material adverse
publicity and such material adverse publicity will have a material adverse
impact upon the business and operations of the Company, (2) the Company
shall notify the Trust and KFSC in writing of such determination and its
intent to terminate the Agreement, and (3) after considering the actions
taken by the Trust and/or KFSC and any other changes in circumstances since
the giving of such notice, such determination shall continue to apply on
the sixtieth (60th) day following the giving of such notice, which sixtieth
(60th) day shall be the effective date of termination; or
(k) at the option of either the Trust or KFSC, if the Company
gives the Trust and KFSC the written notice specified in Section 10.3.(a).
hereof and at the time such notice was given there was no notice of
termination outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1.(k). shall be
effective forty-five (45) days after the notice specified in 10.3.(a). was
given.
10.2. It is understood and agreed that the right of any party
hereto to terminate this Agreement pursuant to Section 10.1.(a). may be
exercised for any reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall
be effective unless and until the party terminating this Agreement gives
prior written notice to all other parties to this Agreement of its intent
to terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) in the event that any termination is based upon the
provisions of Article VII., or the provision of Section 10.1.(a).,
10.1.(i)., 10.1.(j). or 10.1.(k). of this Agreement, such prior written
notice shall be given in advance of the effective date of termination as
required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1.(c). or 10.1.(d). of this Agreement, such prior
written notice shall be given at least ninety (90) days before the
effective date of termination.
10.4. Effect of Termination. Notwithstanding any termination of
this Agreement, the Trust and KFSC shall at the option of the Company,
continue to make available additional shares of the Trust pursuant to the
terms and conditions of this Agreement, for all Variable Insurance Products
in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Products"). Specifically, without
limitation, the Owners of the Existing Products shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under
the Existing Products. The parties agree that this Section 10.4. shall not
apply to any terminations under Article VII. and the effect of such Article
VII. terminations shall be governed by Article VII. of this Agreement.
10.5. The Company shall not redeem Trust shares attributable to
the Variable Insurance Products (as opposed to Trust shares attributable to
the Company's assets held in a Separate Account) except (i) as necessary to
implement Owner initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption").
Upon request, the Company will promptly furnish to the Trust and KFSC the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and KFSC) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the
Variable Insurance Products, the Company shall not prevent Owners from
allocating payments to a Series that was otherwise available under the
Variable Insurance Products without first giving the Trustee or KFSC ninety
(90) days notice of their intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust:
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Secretary
If to the Company:
Keyport Benefit Life Insurance Company
Service Office
125 High Street
Boston, MA 02110
Attention: General Counsel
Liberty Life Assurance Company of Boston
175 Berkeley Street
Boston, MA 02117
Attention: General Counsel
If to KFSC:
Keyport Financial Services, Corp.
125 High Street
Boston, Massachusetts 02110
Attention: Secretary
ARTICLE XII. Miscellaneous
12.1. All persons dealing with Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust
hereunder and otherwise understand that neither the Trustees, officers,
agents or shareholders of the Trust have any personal liability for any
obligations entered into by or on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each Party hereto shall treat as confidential the names and
addresses of the Owners and all information reasonably identified as
confidential in writing be any other party hereto and, except as permitted
by this Agreement, shall not disclose, disseminate or utilize such names
and addresses and other confidential information until such time as it may
come into the public domain without the express written consent of the
affected party.
12.3. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and
the same instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be effected thereby.
12.6. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the
SEC, the NASD, the Internal Revenue Service and state insurance regulators)
and shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
12.7. The Trust and KFSC agree that to the extent any advisory or
other fees received by the Trust, KFSC, Colonial or LASC are determined to
be unlawful in appropriate legal or administrative proceedings, the Trust
shall indemnify and reimburse the Company for any out of pocket expenses
and actual damages the Company has incurred as a result of any such
proceeding, provided however that the provision of Section 8.2.(b). of this
and 8.2.(c). shall apply to such indemnification and reimbursement
obligation. Such indemnification and reimbursement obligation shall be in
addition to any other indemnification and reimbursement obligations of the
Trust under this Agreement.
12.8. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligation, at law or in equity, which the parties hereto are
entitled to under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of
the date specified below.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/Stephen B. Bonner
Title: Senior Vice President
Date: 5-11-98
KEYPORT FINANCIAL SERVICES CORP.
By its authorized officer,
By: /s/James J. Klopper
Title: Clerk
Date: 5-11-98
LIBERTY VARIABLE INVESTMENT TRUST
By its authorized officer,
By: /s/Kevin M. Carome
Title: Secretary
Date: 5/20/98
Schedule A
Individual and group variable annuity contracts and certificates.
Individual variable life contracts.
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Statement of Additional Information and to the use of our report dated
March 13, 1998, with respect to the financial statements of Keyport Benefit
Life Insurance Company (formerly American Benefit Life Insurance Company),
included in this Post-Effective Amendment No. 1 to the Registration
Statement (Form N-4, Nos. 333-45727 and 811-08635) and related prospectus
for the registration of its group annuity contracts.
/s/ERNST & YOUNG LLP
Des Moines, Iowa
June 29, 1998
