As Filed with the Securities and Exchange Commission on June 11, 1998
Registration No. 333-45727
811-08635
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 [X]
Variable Account A
(Exact Name of Registrant)
Keyport Benefit Life Insurance Company
(Name of Depositor)
125 High Street, Boston, Massachusetts 02110
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: 617-526-1400
Bernard R. Beckerlegge, Esq.
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110
(Name and Address of Agent for Service)
Copies to:
Joan E. Boros, Esq.
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( ) on [date] pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a)(1) of Rule 485
( ) on [date] pursuant to paragraph (a)(1) of Rule 485
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Title of Securities Being Registered: Variable Portion of the Contracts
Funded Through the Separate Account.
No filing fee is due because an indefinite amount of securities is deemed to
have been registered in reliance on Section 24(f) of the Investment Company
Act of 1940.
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Exhibit List on Page ____
CONTENTS OF REGISTRATION STATEMENT
The Facing Sheet
The Contents Page
Cross-Reference Sheet
PART A
Prospectus
PART B
Statement of Additional Information
PART C
Items 24 - 32
The Signatures
Exhibits
VARIABLE ACCOUNT A
KEYPORT BENEFIT LIFE INSURANCE COMPANY
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-4
N-4 Item Caption in Prospectus
1. Cover Page
2. Glossary of Special Terms
3. Summary of Expenses
4. Performance Information
5. Keyport Benefit and the Variable Account
Eligible Funds
6. Deductions
7. Allocations of Purchase Payments
Transfer of Variable Account Value
Substitution of Eligible Funds and Other Variable Account
Changes
Modification of the Certificate
Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Certificate Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Benefits
Suspension of Payments
Inquiries by Certificate Owners
8. Annuity Provisions
9. Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Annuity Options
10. Purchase Payments and Applications
Variable Account Value
Valuation Periods
Net Investment Factor
Sales of the Certificates
11. Partial Withdrawals and Surrender
Option A: Income For a Fixed Number of Years
Right to Revoke
12. Tax Status
13. Legal Proceedings
14. Table of Contents - Statement of Additional Information
Caption in Statement of Additional Information
15. Cover Page
16. Table of Contents
17. Keyport Benefit Life Insurance Company
18. Safekeeping of Assets, Experts
19. Not applicable
20. Principal Underwriter
21. Investment Performance
22. Variable Annuity Benefits
23. Financial Statements
PART A
June 24, 1998 Prospectus for
NEW YORK
MANNING & NAPIER VARIABLE ANNUITY
Including Eligible Fund Prospectuses for
MANNING & NAPIER INSURANCE FUND, INC.:
Manning & Napier Moderate Growth Portfolio
Manning & Napier Growth Portfolio
Manning & Napier Maximum Horizon Portfolio
Manning & Napier Small Cap Portfolio
Manning & Napier Equity Portfolio
Manning & Napier Bond Portfolio
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Money Market Fund, Variable Series
Distributed by:
Keyport Financial Services Corp.
125 High Street, Boston, MA 02110-2712
Issued by:
Keyport Benefit Life Insurance Company
100 Manhattanville Road, Purchase, NY 10577
Keyport Benefit Service Office
125 High Street, Boston, MA 02110-2712
[ ] Yes. I would like to receive the New York Manning & Napier Variable
Annuity Statement of Additional Information.
[ ] Yes. I would like to receive the Manning & Napier Insurance Fund, Inc.
Statement of Additional Information.
[ ] Yes. I would like to receive the SteinRoe Variable Investment Trust
Statement of Additional Information.
Name
Address
City, State Zip
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 6719 BOSTON, MA
POSTAGE WILL BE PAID BY ADDRESSEE
KEYPORT BENEFIT SERVICE OFFICE
125 HIGH STREET
BOSTON, MA 02110-2712
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES.
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
Variable Account A
OF
KEYPORT BENEFIT LIFE INSURANCE COMPANY
This Prospectus offers Group Variable Annuity Contracts (the "Contracts") and
the related Certificates (the "Certificates") that are designed to fund
benefits under certain group arrangements including those that qualify for
special tax treatment under the Internal Revenue Code of 1986 (the "Code").
As required by certain states, the Certificates may be offered as individual
contracts. Unless otherwise noted or the context so requires all references
to the Certificates include the Contracts and the individual Contracts. The
Certificates are offered on a flexible payment basis.
The variable annuity Contract (form number DVA(1)NY) and the Certificates
described in this prospectus provide for accumulation of Certificate Values
on a variable basis, and payments of periodic annuity payments on either a
variable or a fixed basis. The Certificates are designed for use by
individuals for retirement planning purposes.
This Prospectus generally describes the variable features of the Certificate.
Purchase Payments will be allocated to a segregated investment account of
Keyport Benefit Life Insurance Company ("Keyport Benefit"), designated
Variable Account A ("Variable Account").
The Variable Account invests in shares of the following Eligible Funds of
Manning & Napier Insurance Fund, Inc. ("Manning & Napier Insurance Fund") at
their net asset value: Manning & Napier Moderate Growth Portfolio ("MNMGP"),
Manning & Napier Growth Portfolio ("MNGP"), Manning & Napier Maximum Horizon
Portfolio ("MNMHP"), Manning & Napier Small Cap Portfolio ("MNSCP"), Manning
& Napier Equity Portfolio ("MNEP"), and Manning & Napier Bond Portfolio
("MNBP"). The Variable Account also invests in shares of the following
Eligible Fund of SteinRoe Variable Investment Trust ("SteinRoe Trust") at its
net asset value: Stein Roe Money Market Fund, Variable Series ("SRMMF").
The Variable Account may offer other forms of the Contracts and Certificates
with features, and fees and charges which vary from the Certificates, and
that provide for investment in other Sub-Accounts which invest in different
or additional mutual funds. Other Contracts and Certificates will be
described in separate prospectuses and statements of additional information.
The agent selling the Contracts and Certificates has information concerning
the eligibility for and the availability of the other forms of the Contracts
and Certificates.
A Statement of Additional Information dated the same as this prospectus has
been filed with the Securities and Exchange Commission and is herein
incorporated by reference. It is available, at no charge, by writing the
Principal Underwriter, Keyport Financial Services Corp. at 125 High Street,
Boston, MA 02110, by calling Keyport Benefit's Service Office at (800) 437-
4466, or by returning the postcard on the back cover of this prospectus. It
may also be obtained by writing Manning & Napier Insurance Fund, Inc. at P.O.
Box 40610, Rochester, New York 14604, or calling (800) 466-3863. A table of
contents for the Statement of Additional Information is on Page 17.
The Certificates may be sold by or through banks or other depository
institutions. The Contract and Certificates: are not insured by the FDIC; are
not a deposit or other obligation of, or guaranteed by, the depository
institution; and are subject to investment risks, including the possible loss
of principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH THE INFORMATION A PROSPECTIVE INVESTOR SHOULD KNOW
BEFORE INVESTING. THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE OR JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED BY
KEYPORT BENEFIT TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THIS OFFERING,
AND IF GIVEN OR MADE, SUCH UNAUTHORIZED INFORMATION OR REPRESENTATIONS SHOULD
NOT BE RELIED UPON.
The date of this prospectus is June 24, 1998
TABLE OF CONTENTS
Page
Glossary of Special Terms 3
Summary of Expenses 4
Synopsis 5
Performance Information 5
Keyport Benefit and the Variable Account 6
Year 2000 Matters 6
Purchase Payments and Applications 6
Investments of the Variable Account 7
Allocations of Purchase Payments 7
Eligible Funds 7
Transfer of Variable Account Value 8
Substitution of Eligible Funds and Other
Variable Account Changes 9
Deductions 9
Deductions for Certificate Maintenance Charge 9
Deductions for Mortality and Expense Risk Charge 10
Deductions for Transfers of Variable Account Value 10
Deductions for Premium Taxes 10
Deductions for Income Taxes 10
Total Variable Account Expenses 10
Other Services 11
The Certificates 10
Variable Account Value 10
Valuation Periods 11
Net Investment Factor 11
Modification of the Certificate 11
Right to Revoke 11
Death Provisions for Non-Qualified Certificates 11
Death Provisions for Qualified Certificates 12
Certificate Ownership 12
Assignment 13
Partial Withdrawals and Surrender 13
Annuity Provisions 13
Annuity Benefits 13
Income Date and Annuity Option 13
Change in Income Date and Annuity Option 13
Annuity Options 13
Variable Annuity Payment Values 14
Proof of Age, Sex, and Survival of Annuitant 14
Suspension of Payments 14
Tax Status 15
Introduction 15
Taxation of Annuities in General 15
Qualified Plans 16
Individual Retirement Annuities 16
Variable Account Voting Privileges 16
Sales of the Certificates 17
Legal Proceedings 17
Inquiries by Certificate Owners 17
Table of Contents_Statement of Additional Information 17
Appendix A_Telephone Instructions 18
GLOSSARY OF SPECIAL TERMS
Accumulation Unit: An accounting unit of measure used to calculate Variable
Account Value.
Annuitant: The Annuitant is the natural person to whom any annuity payments
will be made starting on the Income Date. The Annuitant may not be over age
80 on the Certificate Date (age 75 for Qualified Certificates and age 90 for
Roth IRA Qualified Certificates).
Certificate Anniversary: The same month and day as the Certificate Date in
each subsequent year of the Certificate.
Certificate Date: The effective date of the Certificate; it is shown on Page
3 of the Certificate Schedule.
Certificate Owner: The person (or persons in the case of joint ownership) who
possesses all the ownership rights under the Certificate. The primary
Certificate Owner may not be over age 80 on the Certificate Date (age 75 for
Qualified Certificates, age 90 for Roth IRA Qualified Certificates and age 85
for a joint Owner).
Certificate Value: The Variable Account Value.
Certificate Withdrawal Value: The Certificate Value less any premium taxes
and Certificate Maintenance Charge.
Certificate Year: Any period of 12 months commencing with the Certificate
Date and each Certificate Anniversary thereafter shall be a Certificate Year.
Designated Beneficiary: The person who may be entitled to receive benefits
following the death of the Annuitant, Certificate Owner, or joint Certificate
Owner. The Designated Beneficiary will be the first person among the
following who is alive on the date of death: primary Certificate Owner; joint
Certificate Owner; primary beneficiary; contingent beneficiary; and if none
of the above is alive, the primary Certificate Owner's estate. If the
primary Certificate Owner and joint Certificate Owner are both alive, they
will be the Designated Beneficiary together.
Eligible Funds: The mutual funds that are eligible investments for the
Variable Account under the Certificates.
In Force: The status of the Certificate before the Income Date so long as it
is not totally surrendered, the Certificate Value under a Certificate does
not go to zero, and there has not been a death of the Annuitant or any
Certificate Owner that will cause the Certificate to end within at most five
years of the date of death.
Income Date: The date on which annuity payments are to begin.
Non-Qualified Certificate: Any Certificate that is not issued under a
Qualified Plan.
Office: Keyport Benefit's executive office which is 125 High Street, Boston,
Massachusetts 02110.
Qualified Certificate: Certificates issued under Qualified Plans.
Qualified Plan: A retirement plan established pursuant to the provisions of
Section 408(b) or 408A of the Internal Revenue Code.
Service Office: Keyport Benefit's service office which is 125 High Street,
Boston, Massachusetts 02110.
Variable Account: A separate investment account of Keyport Benefit into which
Purchase Payments under the Certificates may be allocated. The Variable
Account is divided into Sub-Accounts ("Sub-Account") that correspond to the
Eligible Funds in which they invest.
Variable Account Value: The value of all Variable Account amounts accumulated
under the Certificate prior to the Income Date.
Written Request: A request written on a form satisfactory to Keyport Benefit,
signed by the Certificate Owner and a disinterested witness, and filed at
Keyport Benefit's Service Office.
SUMMARY OF EXPENSES
The expense summary format below, including the examples, was adopted by the
Securities and Exchange Commission to assist the owner of a variable annuity
certificate in understanding the transaction and operating expenses the owner
will directly or indirectly bear under a certificate. The values reflect
expenses of the Variable Account as well as the Eligible Funds under the
Certificates. The expenses shown for the Eligible Funds and the examples
should not be considered a representation of future expenses.
Certificate Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Contingent Deferred Sales Charge
(as a percentage of Purchase Payments): 0%
Maximum Total Certificate Owner Transaction Expenses1
(as a percentage of Purchase Payments): 0%
Annual Certificate Maintenance Charge $35
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: .35%
Total Variable Account Annual Expenses: .35%
Manning & Napier Insurance Fund and SteinRoe Trust Annual Expenses2
(as a percentage of average net assets)
Total
Fund Operating
Management Other Expenses (After
Fees Expenses Any Reimbursement)3
MNMGP 0.00% 1.20% 1.20%(14.16%)3
MNGP 0.00% 1.20% 1.20%(10.98%)3
MNMHP 0.00% 1.20% 1.20%(12.76%)3
MNSCP 0.00% 1.20% 1.20%(12.53%)3
MNEP 0.00% 1.20% 1.20%(12.44%)3
MNBP 0.00% .85% .85%(14.27%)3
SRMMF .35% .25% .60%
THE ABOVE EXPENSES FOR THE ELIGIBLE FUNDS WERE PROVIDED BY MANNING & NAPIER
INSURANCE FUND AND STEINROE TRUST. KEYPORT BENEFIT HAS NOT INDEPENDENTLY
VERIFIED THE ACCURACY OF THE INFORMATION.
Example _ Whether the Certificate stays in force through the periods shown or
is surrendered or annuitized4 at the end of the periods shown, a $1,000
investment in each Sub-Account listed would be subject to the expenses shown,
assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
MNMGP $15 $49 $89 $220
MNGP 15 49 89 220
MNMHP 15 49 89 220
MNSCP 15 49 89 220
MNEP 15 49 89 220
MNBP 12 38 69 172
SRMMF 9 30 55 136
1Keyport Benefit reserves the right to impose a transfer fee after prior
notice to Certificate Owners, but currently does not impose any charge.
Premium taxes are not shown. Keyport Benefit deducts the amount of premium
taxes, if any, when paid unless Keyport Benefit elects to defer such
deduction.
2All Manning & Napier Insurance Fund and SteinRoe Trust expenses are for
1997. The Manning & Napier Insurance Fund expenses reflect the manager's
agreement to reimburse expenses above certain limits (see footnote 3).
3The managers of Manning & Napier Insurance Fund and SteinRoe Trust have
agreed to reimburse all expenses, including management fees, in excess of the
following percentage of the average annual net assets of each Eligible Fund,
so long as such reimbursement would not result in the Eligible Fund's
inability to qualify as a regulated investment company under the Internal
Revenue Code: MNMGP 1.2%, MNGP 1.2%, MNMHP 1.2%, MNSCP 1.2%, MNEP 1.2%, MNBP
.85%, SRMMF .65%. The Manning & Napier Insurance Fund manager's fee waiver
and assumption of expenses agreement is voluntary and may be terminated at
any time. The SteinRoe Trust manager's fee waiver and assumption of expenses
agreement is effective until April 30, 1999. The SteinRoe Trust's manager was
not required to reimburse expenses as of the date of this Prospectus. The
total percentages shown in the table for MNMHP, MNSCP, MNEP, MNGP, MNMGP, and
MNBP are after expense reimbursement. Each percentage shown in the
parentheses is what the total expenses would be in the absence of expense
reimbursement: for MNMGP--14.16%; for MNGP--10.98%; for MNMHP--12.76%; for
MNSCP--12.53%; for MNEP--12.44%; and for MNBP--14.27%.
4The annuity is designed for retirement planning purposes. Surrenders prior
to the Income Date are not consistent with the long-term purposes of the
Certificate and the applicable tax laws.
The example should not be considered a representation of past or future
expenses and charges of the Sub-Accounts. Actual expenses may be greater or
less than those shown. Similarly, the assumed 5% annual rate of return is
not an estimate or a guarantee of future investment performance. See
"Deductions" in this Prospectus, "Management" in the prospectus for Manning &
Napier Insurance Fund, and "How the Funds are Managed" in the prospectus for
SteinRoe Trust.
SYNOPSIS
The following Synopsis should be read in conjunction with the detailed
information in this Prospectus and the Statement of Additional Information.
Please refer to the Glossary of Special Terms for the meaning of certain
defined terms. Variations from the information appearing in this Prospectus
due to individual state requirements are described in supplements which are
attached to this Prospectus, or in endorsements to the Certificates, as
appropriate.
The Certificate allows Certificate Owners to allocate Purchase Payments to
the Variable Account. The Variable Account is a separate investment account
maintained by Keyport Benefit. Certificate Owners may allocate payments to,
and receive annuity payments from the Variable Account. If the Certificate
Owner allocates payments to the Variable Account, the accumulation values and
annuity payments will fluctuate according to the investment experience of the
Sub-Accounts chosen.
The Certificate permits Purchase Payments to be made on a flexible Purchase
Payment basis. The minimum initial payment is $5,000 and $2,000 for
individual retirement annuities. The minimum amount for each subsequent
payment is $1,000 or such lesser amount as Keyport Benefit may permit from
time to time. (See "Purchase Payments and Applications" on Page 6.)
There are no deductions made from Purchase Payments for sales charges at the
time of purchase or upon surrender.
Keyport Benefit deducts a Mortality and Expense Risk Charge, which is equal
on an annual basis to .35% of the average daily net asset values in the
Variable Account attributable to the Certificates. (See "Deductions for
Mortality and Expense Risk Charge" on Page 10.)
Keyport Benefit deducts an annual Contract Maintenance Charge (currently
$35.00) from the Variable Account Value for administrative expenses. Prior
to the Income Date, Keyport Benefit reserves the right to change this charge
for future years. (See "Deductions for Certificate Maintenance Charge" on
Page 9.)
Keyport Benefit reserves the right to deduct a charge of $25 for each
transfer in excess of 12 per Certificate Year but currently does not do so.
Premium taxes will be charged against the Certificate Value. Currently such
premium taxes range from 0% to 5.0%. (See "Deductions for Premium Taxes" on
Page 10.)
There are no federal income taxes on increases in the value of a Certificate
until a distribution occurs, in the form of a lump sum payment, annuity
payments, or the making of a gift or assignment of the Certificate. A
federal penalty tax (currently 10%) may also apply. (See "Tax Status" on
Page 15.)
The Certificate allows the Certificate Owner to revoke the Certificate
generally within 10 days of delivery (see "Right to Revoke" on Page 11).
Since Keyport Benefit will refund the Certificate Value, the Certificate
Owner will bear the investment risk during the revocation period.
The Certificates described in this prospectus have not previously been made
available for sale. Therefore, no condensed financial information is
provided. The full financial statements for Keyport Benefit are in the
Statement of Additional Information.
PERFORMANCE INFORMATION
The Variable Account may from time to time advertise certain performance
information concerning its various Sub-Accounts.
Performance information is not intended to indicate either past performance
under an actual Certificate or future performance.
The Sub-Accounts may advertise total return information for various periods
of time. Total return performance information is based on the overall
percentage change in value of a hypothetical investment in the specific Sub-
Account over a given period of time.
Average annual total return information shows the average percentage change
in the value of an investment in the Sub-Account from the beginning date of
the measuring period to the end of that period. This standardized version of
average annual total return reflects all historical investment results, less
all charges and deductions applied against the Sub-Account and a Certificate.
Average total return does not take into account any premium taxes and would
be lower if these taxes were included.
In order to calculate average annual total return, Keyport Benefit divides
the change in value of a Sub-Account under a Certificate surrendered on a
particular date by a hypothetical $1,000 investment in the Sub-Account made
by the Certificate Owner at the beginning of the period illustrated. The
resulting total rate for the period is then annualized to obtain the average
annual percentage change during the period. Annualization assumes that the
application of a single rate of return each year during the period will
produce the ending value, taking into account the effect of compounding.
The Sub-Accounts may present additional total return information computed on
a different basis.
The Sub-Accounts may present total return information calculated by dividing
the change in a Sub-Account's Accumulation Unit value over a specified time
period by the Accumulation Unit value of that Sub-Account at the beginning of
the period. This computation results in a 12-month change rate or, for
longer periods, a total rate for the period which Keyport Benefit annualizes
in order to obtain the average annual percentage change in the Accumulation
Unit value for that period. The change percentages do not take into account
the Certificate Maintenance Charge and premium tax charges. The percentages
would be lower if these charges were included.
The SRMMF Sub-Account is a money market Sub-Account that also may advertise
yield and effective yield information. The yield of the Sub-Account refers
to the income generated by an investment in the Sub-Account over a
specifically identified 7-day period. This income is annualized by assuming
that the amount of income generated by the investment during that week is
generated each week over a 52-week period and is shown as a percentage. The
yield reflects the deduction of all charges assessed against the Sub-Account
and a Certificate but does not take into account premium tax charges. The
yield would be lower if these charges were included.
The effective yield of the SRMMF Sub-Account is calculated in a similar
manner but, when annualizing such yield, income earned by the Sub-Account is
assumed to be reinvested. This compounding effect causes effective yield to
be higher than yield.
KEYPORT BENEFIT AND THE VARIABLE ACCOUNT
Keyport Benefit Life Insurance Company was organized under the laws of the
State of New York in 1987 as a stock life insurance company, and is a wholly-
owned subsidiary of Keyport Life Insurance Company. The executive offices of
Keyport Benefit are at 125 High Street, Boston, Massachusetts 02110. The home
office is located at 100 Manhattanville Road, Purchase, New York 10577.
Keyport Benefit is admitted to conduct life insurance business in New York
and Rhode Island.
The Variable Account was established by Keyport Benefit pursuant to the
provisions of New York Law on February 6, 1998. The Variable Account meets
the definition of "separate account" under the federal securities laws. The
Variable Account is registered with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940. Such
registration does not involve supervision of the management of the Variable
Account or Keyport Benefit by the Securities and Exchange Commission.
Keyport Benefit is a member of the Insurance Marketplace Standards
Association ("IMSA"), and as such may use the IMSA logo and membership in
IMSA in advertisements. Being a member means that Keyport Benefit has chosen
to participate in IMSA's Life Insurance Ethical Market Conduct Program.
Keyport Benefit is one of the Liberty Financial Companies. Keyport Benefit is
ultimately controlled by Liberty Mutual Insurance Company of Boston,
Massachusetts, a multi-line insurance and financial services institution.
Obligations under the Certificates are the obligations of Keyport Benefit.
Although the assets of the Variable Account are the property of Keyport
Benefit, these assets are held separately from the other assets of Keyport
Benefit and are not chargeable with liabilities arising out of any other
business Keyport Benefit may conduct. Income, capital gains and/or capital
losses, whether or not realized, from assets allocated to the Variable
Account are credited to or charged against the Variable Account without
regard to the income, capital gains, and/or capital losses arising out of any
other business Keyport Benefit may conduct. Thus, Keyport Benefit does not
guarantee the investment performance of the Variable Account. The Variable
Account Value and the amount of variable annuity payments will vary with the
investment performance of the investments in the Variable Account.
YEAR 2000 MATTERS
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the
year 2000. This potential problem has become known as the "Year 2000 issue".
The Year 2000 issue affects virtually all companies and organizations.
Computer applications which are affected by the Year 2000 issue could impact
Keyport Benefit's business functions in various ways, ranging from a complete
inability to perform critical business functions to a loss of productivity in
varying degrees. Likewise, the failure of some computer applications could
have no impact on critical business functions.
Keyport Benefit is assessing and addressing the Year 2000 issue by
implementing a four-step plan. The first two steps involve inventorying all
the computer applications which support Keyport Benefit's business functions
and prioritizing computer applications which are affected by the Year 2000
issue based upon the degree of impact each has on the functioning of Keyport
Benefit's business units. The first two steps of the plan are substantially
complete.
The final two steps of the four-step plan involve remediation of affected
computer applications (i.e., repairing or replacing programs, including those
which interface with third-party computer applications that have unremediated
Year 2000 issues, and appropriate testing) and reinstallation of computer
applications. For computer applications which are "mission critical" (i.e.,
their failure would result in the complete inability to perform critical
business functions), Keyport Benefit expects to complete the final two steps
of the plan by December 31, 1998. Remediation and reinstallation of non-
critical computer applications is scheduled to be completed by December 31,
1999.
Keyport Benefit believes that the Year 2000 issue could have a material
impact on Keyport Benefit's operations if the four-step plan is not timely
implemented. However, based upon the progress that is being made, Keyport
Benefit believes that the timetable for implementing the plan will be met and
that the Year 2000 issue will not pose significant operational problems for
its computer systems.
Keyport Benefit does not expect that the cost of addressing the Year 2000
issue will be material to its financial condition or its results of
operations.
PURCHASE PAYMENTS AND APPLICATIONS
The initial Purchase Payment is due on the Certificate Date. The minimum
initial Purchase Payment is $5,000 and $2,000 for individual retirement
annuities. Additional Purchase Payments can be made at the Certificate
Owner's option. Each subsequent Purchase Payment must be at least $1,000 or
such lesser amount as Keyport Benefit may permit from time to time. Keyport
Benefit may reject any Purchase Payment.
If the application for a Certificate is in good order and it calls for
amounts to be allocated to the Variable Account, Keyport Benefit will apply
the initial Purchase Payment to the Variable Account and credit the
Certificate with Accumulation Units within two business days of receipt. If
the application for a Certificate is not in good order, Keyport Benefit will
attempt to get it in good order within five business days. If it is not
complete at the end of this period, Keyport Benefit will inform the applicant
of the reason for the delay and that the Purchase Payment will be returned
immediately unless the applicant specifically consents to Keyport Benefit's
keeping the Purchase Payment until the application is complete. Once the
application is complete, the Purchase Payment will be applied within two
business days of its completion. Keyport Benefit has reserved the right to
reject any application.
Keyport Benefit confirms, in writing, to the Certificate Owner the allocation
of all Purchase Payments and the re-allocation of values after any requested
transfer. Keyport Benefit must be notified immediately by the Certificate
Owner of any processing error.
Keyport Benefit will permit others to act on behalf of an applicant in
certain instances, including the following two examples. First, Keyport
Benefit will accept an application for a Certificate that contains a
signature signed under a power of attorney if a copy of that power of
attorney is submitted with the application. Second, Keyport Benefit will
issue a Certificate that is replacing an existing life insurance or annuity
policy that was issued by Keyport Benefit or an affiliated company, without
having previously received a signed application from the applicant. Certain
dealers or other authorized persons such as employers and Qualified Plan
fiduciaries will inform Keyport Benefit of an applicant's answers to the
questions in the application by telephone or by order ticket and cause the
initial Purchase Payment to be paid to Keyport Benefit. If the information
is in good order, Keyport Benefit will issue the Certificate with a copy of
an application completed with that information. The Certificate will be
delivered to the Certificate Owner with a letter from Keyport Benefit that
will give the Certificate Owner an opportunity to respond to Keyport Benefit
if any of the application information is incorrect. Alternatively, Keyport
Benefit's letter may request the Certificate Owner to confirm the correctness
of the information by signing either a copy of the application or a
Certificate delivery receipt that ratifies the application in all respects
(in either case, a copy of the signed document would be returned to Keyport
Benefit for its permanent records). All purchases are confirmed, in writing,
to the applicant by Keyport Benefit. Keyport Benefit's liability under a
Certificate extends only to amounts so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
Purchase Payments applied to the Variable Account will be invested in one or
more of the Eligible Fund Sub-Accounts designated as permissible investments
in accordance with the selection made by the Certificate Owner in the
application. Any selection must specify the percentage of the Purchase
Payment that is allocated to each Sub-Account. The percentage for each Sub-
Account, if not zero, must be at least 10% and must be a whole number. A
Certificate Owner may change the allocation percentages without fee, penalty
or other charge. Allocation changes must be made by Written Request unless
the Certificate Owner has by Written Request authorized Keyport Benefit to
accept telephone allocation instructions from the Certificate Owner or from a
person acting for the Certificate Owner as an attorney-in-fact under a power
of attorney. By authorizing Keyport Benefit to accept telephone changes, a
Certificate Owner agrees to accept and be bound by the conditions and
procedures established by Keyport Benefit from time to time. The current
conditions and procedures are in Appendix A and Certificate Owners
authorizing telephone allocation instructions will be notified, in advance,
of any changes.
The Variable Account is segmented into Sub-Accounts. Each Sub-Account
contains the shares of one of the Eligible Funds and such shares are
purchased at net asset value. Eligible Funds and Sub-Accounts may be added
or withdrawn as permitted by applicable law. The Sub-Accounts in the
Variable Account and the corresponding Eligible Funds currently are as
follows:
Eligible Funds of Manning & Napier Insurance Fund Sub-Accounts
Manning & Napier Moderate Growth Portfolio ("MNMGP") MNMGP Sub-Account
Manning & Napier Growth Portfolio ("MNGP") MNGP Sub-Account
Manning & Napier Maximum Horizon Portfolio ("MNMHP") MNMHP Sub-Account
Manning & Napier Small Cap Portfolio ("MNSCP") MNSCP Sub-Account
Manning & Napier Equity Portfolio ("MNEP") MNEP Sub-Account
Manning & Napier Bond Portfolio ("MNBP") MNBP Sub-Account
Eligible Fund of SteinRoe Trust Sub-Account
Stein Roe Money Market Fund, Variable Series ("SRMMF") SRMMF Sub-Account
(formerly named Cash Income Fund)
Eligible Funds
The Eligible Funds which are the permissible investments of the Variable
Account are the separate funds of Manning & Napier Insurance Fund, the
separate funds of SteinRoe Trust, and any other mutual funds with which
Keyport Benefit and the Variable Account may enter into a participation
agreement for the purpose of making such mutual funds available as Eligible
Funds under certain Certificates.
Manning & Napier Insurance Fund is an open-end management investment company
that offers separate series (Portfolios). Manning & Napier Advisors, Inc.
("Manning & Napier Advisors"), 1100 Chase Square, Rochester, New York 14604,
acts as Manning & Napier Insurance Fund's investment adviser. Mr. William
Manning controls the Advisor by virtue of his ownership of the securities of
the Advisor. Manning & Napier Advisors also is generally responsible for
supervision of the overall business affairs of Manning & Napier Insurance
Fund, including supervision of service providers to the Fund and direction of
Manning & Napier Advisors' directors, officers or employees who may be
elected as officers of Manning & Napier Insurance Fund to serve as such.
Stein Roe & Farnham Incorporated ("Stein Roe"), One South Wacker Drive,
Chicago, Illinois 60606, is the investment adviser for the Eligible Fund of
SteinRoe Trust. In 1986, Stein Roe was organized and succeeded to the
business of Stein Roe & Farnham, a partnership. Stein Roe is an affiliate of
Keyport Benefit. Stein Roe and its predecessor have provided investment
advisory and administrative services since 1932.
The investment objectives of the Eligible Funds are briefly described below.
More detailed information, including investor considerations related to the
risks of investing in a particular Eligible Fund, may be found in the current
prospectus for that Fund. An investor should read that prospectus carefully
before selecting a Sub-Account that invests in an Eligible Fund. The
prospectus is available, at no charge, from a salesperson or by writing the
Principal Underwriter, Keyport Financial Services Corp. at 125 High Street,
Boston, MA 02110 or by calling (800) 437-4466. The prospectus may also be
obtained by writing Manning & Napier Insurance Fund, Inc., at P.O. Box 40610,
Rochester, NY 14604, or calling (800) 466-3863.
Eligible Funds of Manning & Napier Insurance
Fund and Variable Account Sub-Accounts Investment Objective
Manning & Napier Moderate Growth Portfolio
(MNMGP Sub-Account) Seeks with equal emphasis
long-term growth and
preservation of capital.
Manning & Napier Growth Portfolio
(MNGP Sub-Account) Seeks long-term growth of
capital. The secondary
objective is the
preservation of capital.
Manning & Napier Maximum Horizon Portfolio
(MNMHP Sub-Account) Seeks to achieve the high
level of long-term
capital growth typically
associated with the stock
market.
Manning & Napier Small Cap Portfolio
(MNSCP Sub-Account) Seeks to achieve long-term
growth of capital by
investing principally in
the equity securities of
small issuers.
Manning & Napier Equity Portfolio
(MNEP Sub-Account) Seeks long-term growth of
capital.
Manning & Napier Bond Portfolio
(MNBP Sub-Account) Seeks to maximize total
return in the form of
both income and capital
appreciation by investing
in fixed income
securities without regard
to maturity.
Eligible Fund of SteinRoe Trust and
Variable Account Sub-Account Investment Objective
Stein Roe Money Market Fund, Variable Series Seeks to provide high
(SRMMF Sub-Account) current income from
short-term money market
instruments while
emphasizing preservation
of capital and
maintaining excellent
liquidity.
There is no assurance that the Eligible Funds will achieve their stated
objectives.
The Manning & Napier Insurance Fund and SteinRoe Trust are funding vehicles
for variable annuity contracts and variable life insurance policies offered
by separate accounts of Keyport Benefit and of insurance companies affiliated
and unaffiliated with Keyport Benefit. The risks involved in this "mixed and
shared funding" are disclosed in the Manning & Napier Insurance Fund and in
the SteinRoe Trust prospectuses under the captions "Sales And Redemptions"
and "The Trust", respectively.
Transfer of Variable Account Value
Certificate Owners may transfer Variable Account Value from one Sub-Account
to another Sub-Account.
The Certificate allows Keyport Benefit to charge a transfer fee and to limit
the number of transfers that can be made in a specified time period.
Certificate Owners should be aware that transfer limitations may prevent a
Certificate Owner from making a transfer on the date he or she wants to, with
the result that the Certificate Owner's future Certificate Value may be lower
than it would have been had the transfer been made on the desired date.
Currently, Keyport Benefit has no limit on the number or frequency of
transfers and it is not charging a transfer fee of $25 for each transfer in
excess of 12 per Certificate Year. For transfers under different Certificates
that are being requested under powers of attorney with a common attorney-in-
fact or that are, in Keyport Benefit's determination, based on the
recommendation of a common investment adviser or broker/dealer, there is a
transfer limitation of one transfer every 30 days or such other time period
as Keyport Benefit may permit.
Keyport Benefit is also limiting each transfer to a maximum of $500,000 or
such greater amount as Keyport Benefit may permit. All transfers requested
for a Certificate on the same day will be treated as a single transfer and
the total combined transfer amount will be subject to the $500,000
limitation. If the $500,000 limitation is exceeded, no amount of the
transfer will be executed by Keyport Benefit.
In applying the $500,000 limitation, Keyport Benefit may treat as one
transfer all transfers requested by a Certificate Owner for multiple
Certificates he or she owns. If the $500,000 limitation is exceeded for
multiple transfers requested on the same day that are treated as a single
transfer, no amount of the transfer will be executed by Keyport Benefit.
In applying the $500,000 limitation to transfers requested by a common
attorney-in-fact or investment adviser, Keyport Benefit will treat as one
transfer all transfers requested under different Certificates that are being
requested under powers of attorney with a common attorney-in-fact or that
are, in Keyport Benefit's determination, based on the recommendation of a
common investment adviser or broker/dealer. If the $500,000 limitation is
exceeded for multiple transfers requested on the same day that are treated as
a single transfer, no amount of the transfer will be executed by Keyport
Benefit. If a transfer is executed under one Certificate and, within the
next 30 days, a transfer request for another Certificate is determined by
Keyport Benefit to be related to the executed transfer under this paragraph's
rules, the transfer request will not be executed by Keyport Benefit. In order
for it to be executed, it would need to be requested again after the 30 day
period has expired and it, along with any other transfer requests that are
collectively treated as a single transfer, would need to total less than
$500,000.
Keyport Benefit's interest in applying these limitations is to protect the
interests of both Certificate Owners who are not engaging in significant
transfer activity and Certificate Owners who are engaging in such activity.
Keyport Benefit has determined that the actions of Certificate Owners
engaging in significant transfer activity among Sub-Accounts may cause an
adverse effect on the performance of the Eligible Fund for the Sub-Account
involved. The movement of Sub-Account values from one Sub-Account to another
may prevent the appropriate Eligible Fund from taking advantage of investment
opportunities because it must maintain a liquid position in order to handle
redemptions. Such movement may also cause a substantial increase in Fund
transaction costs which must be indirectly borne by Certificate Owners.
Certificate Owners will be notified, in advance, of the imposition of any
transfer fee or of a change in the limitation on the number of transfers. The
fee will not exceed $25.
Transfers must be made by Written Request unless the Certificate Owner has by
Written Request authorized Keyport Benefit to accept telephone transfer
requests from the Certificate Owner or from a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney. By
authorizing Keyport Benefit to accept telephone transfer instructions, a
Certificate Owner agrees to accept and be bound by the conditions and
procedures established by Keyport Benefit from time to time. The current
conditions and procedures are in Appendix A and Certificate Owners
authorizing telephone transfers will be notified, in advance, of any changes.
Written transfer requests may be made by a person acting for the Certificate
Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Keyport Benefit before the close of trading on
the New York Stock Exchange (currently 4:00 PM Eastern Time) will be
initiated at the close of business that day. Any requests received later
will be initiated at the close of the next business day. Each request from a
Certificate Owner to transfer value will be executed by both redeeming and
acquiring Accumulation Units on the day Keyport Benefit initiates the
transfer.
If 100% of any Sub-Account's value is transferred and the allocation formula
for Purchase Payments includes that Sub-Account, then the allocation formula
for future Purchase Payments will automatically change unless the Certificate
Owner instructs otherwise. For example, if the allocation formula is 50% to
Sub-Account A and 50% to Sub-Account B and all of Sub-Account A's value is
transferred to Sub-Account B, the allocation formula will change to 100% to
Sub-Account B unless the Certificate Owner instructs otherwise.
Substitution of Eligible Funds and Other Variable Account Changes
If the shares of any of the Eligible Funds should no longer be available for
investment by the Variable Account or if in the judgment of Keyport Benefit's
management further investment in such fund shares should become inappropriate
in view of the purpose of the Certificate, Keyport Benefit may add or
substitute shares of another Eligible Fund or of another mutual fund for
Eligible Fund shares already purchased under the Certificate. No
substitution of Fund shares in any Sub-Account may take place without prior
approval of the Securities and Exchange Commission and notice to Certificate
Owners, to the extent required by the Investment Company Act of 1940.
Keyport Benefit has also reserved the right, subject to compliance with the
law as currently applicable or subsequently changed: (a) to operate the
Variable Account in any form permitted under the Investment Company Act of
1940 or in any other form permitted by law; (b) to take any action necessary
to comply with or obtain and continue any exemptions from the Investment
Company Act of 1940 or to comply with any other applicable law; (c) to
transfer any assets in any Sub-Account to another Sub-Account, or to one or
more separate investment accounts, or to Keyport Benefit's general account;
or to add, combine or remove Sub-Accounts in the Variable Account; and (d) to
change the way Keyport Benefit assesses charges, so long as the aggregate
amount is not increased beyond that currently charged to the Variable Account
and the Eligible Funds in connection with the Certificates.
DEDUCTIONS
Deductions for Certificate Maintenance Charge
Keyport Benefit has responsibility for all administration of the Certificates
and the Variable Account. This administration includes, but is not limited
to, preparation of the Certificates, maintenance of Certificate Owners'
records, and all accounting, valuation, regulatory and reporting
requirements. Keyport Benefit makes a Certificate Maintenance Charge for
such services during the accumulation and annuity payment periods. At the
present time the Certificate Maintenance Charge is $35 per Certificate Year.
PRIOR TO THE INCOME DATE THE CERTIFICATE MAINTENANCE CHARGE IS NOT GUARANTEED
AND MAY BE CHANGED BY KEYPORT BENEFIT.
Prior to the Income Date, the full amount of the charge will be deducted from
the Variable Account Value on each Certificate Anniversary and on the date of
any total surrender not falling on the Certificate Anniversary. On the
Income Date, a pro-rata portion of the charge due on the next Certificate
Anniversary will be deducted from the Variable Account Value. This pro-rata
charge covers the period from the prior Certificate Anniversary to the Income
Date. For example, if the Income Date occurs 73 days after that prior
anniversary, then one-fifth (i.e., 73 days/365 days) of the annual charge
would be deducted on the Income Date. The charge will be deducted from each
Sub-Account in the proportion that the value of each bears to the Variable
Account Value.
Once annuity payments begin on the Income Date or once they begin after
surrender benefits are applied under a settlement option, the yearly cost of
the Certificate Maintenance Charge for a payee's annuity will be the same as
the yearly amount in effect immediately before the annuity payments begin.
Keyport Benefit may not later change the amount of the Certificate
Maintenance Charge deducted from the annuity payments. The charge will be
deducted on a pro-rata basis from each annuity payment. For example, if
annuity payments are monthly, then one-twelfth of the annual charge will be
deducted from each payment.
Deductions for Mortality and Expense Risk Charge
Although variable annuity payments made to Annuitants will vary in accordance
with the investment performance of the investments of the Variable Account,
they will not be affected by the mortality experience (death rate) of persons
receiving such payments or of the general population. Keyport Benefit
guarantees the Death Benefits described below (see "Death Benefit"). Keyport
Benefit assumes an expense risk since the Certificate Maintenance Charge
after the Income Date will stay the same and not be affected by variations in
expenses.
To compensate it for assuming these mortality and expense risks, for each
Valuation Period Keyport Benefit deducts from each Sub-Account a Mortality
and Expense Risk Charge equal on an annual basis to .35% of the average daily
net asset value of the Sub-Account. The charge is deducted during both the
accumulation and annuity periods (i.e., both before and after the Income
Date). Less than the full charge will be deducted from Sub-Account values
attributable to Certificates issued to employees of Keyport Benefit and other
persons specified in "Sales of the Certificates".
Deductions for Transfers of Variable Account Value
The Certificate allows Keyport Benefit to charge a transfer fee. Currently
no fee is being charged. Certificate Owners will be notified, in advance, of
the imposition of any fee. The fee will not exceed $25.
Deductions for Premium Taxes
Keyport Benefit deducts the amount of any premium taxes levied by any state
or governmental entity when paid unless Keyport Benefit elects to defer such
deduction. Such premium taxes depend, among other things, on the type of
Certificate (Qualified or Non-Qualified), on the state of residence of the
Certificate Owner, the state of residence of the Annuitant, the status of
Keyport Benefit within such states, and the insurance tax laws of such
states. For New York Certificates, the current premium tax rate is 0%.
Deductions for Income Taxes
Keyport Benefit will deduct from any amount payable under the Certificate any
income taxes that a governmental authority requires Keyport Benefit to
withhold with respect to that amount. See "Income Tax Withholding".
Total Variable Account Expenses
The Variable Account's total expenses in relation to the Certificate will be
the Certificate Maintenance Charge and the Mortality and Expense Risk Charge.
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and therefore the deductions from and expenses paid out
of the assets of the Eligible Funds. These deductions and expenses are
described in the Eligible Fund prospectus.
OTHER SERVICES
The Program. Keyport Benefit offers the following investment related program
which is available only prior to the Income Date: Systematic Withdrawal
Program. This Program has its own requirements, as discussed below. Keyport
Benefit reserves the right to terminate the Program.
If the Certificate Owner has submitted the required telephone authorization
form, certain changes may be made by telephone. The current conditions and
procedures are described in Appendix A.
Systematic Withdrawal Program. To the extent permitted by law, Keyport
Benefit will make monthly, quarterly, semi-annual or annual distributions of
a predetermined dollar amount to a Certificate Owner that has enrolled in the
Systematic Withdrawal Program. Under the Program, all distributions will be
made directly to the Certificate Owner and will be treated for federal tax
purposes as any other withdrawal or distribution of Certificate Value. (See
"Tax Status".) A Certificate Owner may specify the amount of each partial
withdrawal, subject to a minimum of $100.
Unless the Certificate Owner specifies the Sub-Account or Sub-Accounts from
which withdrawals of Certificate Value shall be made or if the amount in a
specified Sub-Account is less than the predetermined amount, Keyport Benefit
will make withdrawals under the Program from the Sub-Accounts in amounts
proportionate to the amounts in the Sub-Accounts. All withdrawals under the
Program will be effected by canceling the number of Accumulation Units equal
in value to the amount to be distributed to the Certificate Owner.
THE CERTIFICATES
Variable Account Value
The Variable Account Value for a Certificate is the sum of the value of each
Sub-Account to which values are allocated under a Certificate. The value of
each Sub-Account is determined at any time by multiplying the number of
Accumulation Units attributable to that Sub-Account by the Accumulation Unit
value for that Sub-Account at the time of determination. The Accumulation
Unit value is an accounting unit of measure used to determine the change in
an Accumulation Unit's value from Valuation Period to Valuation Period.
Each Purchase Payment that is made results in additional Accumulation Units
being credited to the Certificate and the appropriate Sub-Account thereunder.
The number of additional units for any Sub-Account will equal the amount
allocated to that Sub-Account divided by the Accumulation Unit value for that
Sub-Account at the time of investment.
Valuation Periods
The Variable Account is valued each Valuation Period using the net asset
value of the Eligible Fund shares. A Valuation Period is the period
commencing at the close of trading on the New York Stock Exchange on each
Valuation Date and ending at the close of trading for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock
Exchange is open for business. The New York Stock Exchange is currently
closed on weekends, New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Net Investment Factor
The Variable Account Value will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect value, Keyport Benefit utilizes an Accumulation Unit
value. Each Sub-account has its own Accumulation Units and value per Unit.
The Unit value applicable during any Valuation Period is determined at the
end of that period.
When Keyport Benefit first purchased Eligible Fund shares on behalf of the
Variable Account, Keyport Benefit valued each Accumulation Unit at a
specified dollar amount. The Unit value for each Sub-Account in any
Valuation Period thereafter is determined by multiplying the value for the
prior period by a net investment factor. This factor may be greater or less
than 1.0; therefore, the Accumulation Unit may increase or decrease from
Valuation Period to Valuation Period. Keyport Benefit calculates a net
investment factor for each Sub-Account by dividing (a) by (b) and then
subtracting (c) (i.e., (a/b) _ c), where:
(a) is equal to:
(i) the net asset value per share of the Eligible Fund at the end of
the Valuation Period; plus
(ii) the per share amount of any distribution made by the Eligible Fund
if the "ex-dividend" date occurs during that same Valuation Period.
(b) is the net asset value per share of the Eligible Fund at the end of the
prior Valuation Period.
(c) is equal to:
(i) the Valuation Period equivalent of the daily Mortality and Expense
Risk Charge; plus
(ii) a charge factor, if any, for any tax provision established by
Keyport Benefit as a result of the operations of that Sub-Account.
Modification of the Certificate
Only Keyport Benefit's President or Secretary may agree to alter the
Certificate or waive any of its terms. Any changes must be made in writing
and with the Certificate Owner's consent, except as may be required by
applicable law.
Right to Revoke
The Certificate Owner may return the Certificate within 10 days after he or
she receives it by delivering or mailing it to either Keyport Benefit's
Service Office or Manning & Napier Insurance Fund, Inc. 1100 Chase Square,
P.O. Box 40610, Rochester, New York, 14604. The return of the Certificate by
mail will be effective when the postmark is affixed to a properly addressed
and postage-prepaid envelope. The returned Certificate will be treated as if
Keyport Benefit never issued it and Keyport Benefit will refund the
Certificate Value.
DEATH PROVISIONS FOR NON-QUALIFIED CERTIFICATES
Death of Primary Owner, Joint Owner or Certain Non-Owner Annuitant
These provisions apply if, before the Income Date while the Certificate is In
Force, the primary Certificate Owner or any joint Certificate Owner dies
(whether or not the decedent is also the Annuitant) or the Annuitant dies
under a Certificate with a non-natural Certificate Owner such as a trust. The
Designated Beneficiary will control the Certificate after such a death.
If the decedent's surviving spouse (if any) is the sole Designated
Beneficiary, the surviving spouse will automatically become the new sole
primary Certificate Owner as of the decedent's date of the death. And, if
the Annuitant is the decedent, the new Annuitant will be any living
contingent annuitant, otherwise the surviving spouse. The Certificate may
continue until another death occurs (i.e., until the death of the Annuitant,
primary Certificate Owner or joint Certificate Owner). Except for this
paragraph, all "Death Provisions" will apply to that subsequent death.
In all other cases, the Certificate can continue up to five years from the
date of death. During this period, the Designated Beneficiary may exercise
all ownership rights, including the right to make transfers or partial
surrenders or the right to totally surrender the Certificate for its
Surrender Value. If the Certificate is still in effect at the end of the
five-year period, Keyport Benefit will automatically end it then by paying
the Certificate Value to the Designated Beneficiary. If the Designated
Beneficiary is not alive then, Keyport Benefit will pay any person(s) named
by the Designated Beneficiary in a Written Request; otherwise the Designated
Beneficiary's estate.
The covered person under this paragraph shall be the primary Certificate
Owner or, if there is a non-natural Certificate Owner such as a trust, the
Annuitant shall be the covered person. If the covered person dies, the
Certificate Value will be increased, as provided below, if it is less than
the Death Benefit Amount ("DBA"). The DBA is:
The DBA at issue is the initial Purchase Payment. Thereafter, it is the prior
death benefit plus any additional Purchase Payments, less any partial
withdrawals, including any applicable surrender charge.
When Keyport Benefit receives due proof of the covered person's death,
Keyport Benefit will compare, as of the date of death, the Certificate Value
to the DBA. If the Certificate Value was less than the DBA, Keyport Benefit
will increase the current Certificate Value by the amount of the difference.
Note that while the amount of the difference is determined as of the date of
death, that amount is not added to the Certificate Value until Keyport
Benefit receives due proof of death. The amount to be credited will be
allocated to the Variable Account based on the Purchase Payment allocation
selection that is in effect when Keyport Benefit receives due proof of death.
If the Certificate is not surrendered, it will continue for the time period
specified above.
Payment of Benefits. Instead of receiving a lump sum, the Certificate Owner
or any Designated Beneficiary may direct by Written Request that Keyport
Benefit pay any benefit of $5,000 or more under an annuity payment option
that meets the following: (a) the first payment to the Designated Beneficiary
must be made no later than one year after the date of death; (b) payments
must be made over the life of the Designated Beneficiary or over a period not
extending beyond that person's life expectancy; and (c) any payment option
that provides for payments to continue after the death of the Designated
Beneficiary will not allow the successor payee to extend the period of time
over which the remaining payments are to be made.
Death of Certain Non-Certificate Owner Annuitant. These provisions apply if,
before the Income Date while the Certificate is In Force, (a) the Annuitant
dies, (b) the Annuitant is not a Certificate Owner, and (c) the Certificate
Owner is a natural person. The Certificate will continue in force after the
Annuitant's death. The new Annuitant will be any living contingent
annuitant, otherwise the primary Certificate Owner. If the Annuitant is the
first to die of the Certificate's primary Certificate Owner, Joint
Certificate Owner and Annuitant, then the Annuitant is the Covered Person and
the Certificate Value will be increased, as provided below, if it is less
than the Death Benefit Amount ("DBA"), as defined above. When Keyport Benefit
receives due proof of the Annuitant's death, Keyport Benefit will compare, as
of the date of death, the Certificate Value to the DBA. If the Certificate
Value was less than the DBA, Keyport Benefit will increase the current
Certificate Value by the amount of the difference. Note that while the
amount of the difference is determined as of the date of death, that amount
is not added to the Certificate Value until Keyport Benefit receives due
proof of death. The amount to be credited will be allocated to the Variable
Account based on the Purchase Payment allocation selection that is in effect
when Keyport Benefit receives due proof of death.
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
Death of Annuitant. If the Annuitant dies before the Income Date while the
Certificate is In Force, the Designated Beneficiary will control the
Certificate after such a death. The Certificate Value will be increased, as
provided below, if it is less than the Death Benefit Amount ("DBA") as
defined above. When Keyport Benefit receives due proof of the Annuitant's
death, Keyport Benefit will compare, as of the date of death, the Certificate
Value to the DBA. If the Certificate Value was less than the DBA, Keyport
Benefit will increase the current Certificate Value by the amount of the
difference. Note that while the amount of the difference is determined as of
the date of death, that amount is not added to the Certificate Value until
Keyport Benefit receives due proof of death. The amount to be credited will
be allocated to the Variable Account based on the Purchase Payment allocation
selection that is in effect when Keyport Benefit receives due proof of death.
If the Certificate is not surrendered, it may continue for the time period
permitted by the Internal Revenue Code provisions applicable to the
particular Qualified Plan. During this period, the Designated Beneficiary
may exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to totally surrender the Certificate for its
Certificate Withdrawal Value. If the Certificate is still in effect at the
end of the period, Keyport Benefit will automatically end it then by paying
the Certificate Withdrawal Value to the Designated Beneficiary. If the
Designated Beneficiary is not alive then, Keyport Benefit will pay any
person(s) named by the Designated Beneficiary in a Written Request; otherwise
the Designated Beneficiary's estate.
Payment of Benefits. Instead of receiving a lump sum, the Certificate Owner
or any Designated Beneficiary may direct by Written Request that Keyport
Benefit pay any benefit of $5,000 or more under an annuity payment option
that meets the following: (a) the first payment to the Designated Beneficiary
must be made no later than one year after the date of death; (b) payments
must be made over the life of the Designated Beneficiary or over a period not
extending beyond that person's life expectancy; and (c) any payment option
that provides for payments to continue after the death of the Designated
Beneficiary will not allow the successor payee to extend the period of time
over which the remaining payments are to be made.
CERTIFICATE OWNERSHIP
The Certificate Owner shall be the person designated in the application. The
Certificate Owner may exercise all the rights of the Certificate. Joint
Certificate Owners are permitted but not contingent Certificate Owners.
The Certificate Owner may by Written Request change the Certificate Owner,
primary beneficiary, contingent beneficiary or contingent annuitant. An
irrevocably-named person may be changed only with the written consent of such
person.
Because a change of Certificate Owner by means of a gift (i.e., a transfer
without full and adequate consideration) may be a taxable event, a
Certificate Owner should consult a competent tax adviser as to the tax
consequences resulting from such a transfer.
Any Qualified Certificate may have limitations on transfer of ownership. A
Certificate Owner should consult the Plan Administrator and a competent tax
adviser as to the tax consequences resulting from such a transfer.
ASSIGNMENT
The Certificate Owner may assign the Certificate at any time. A copy of any
assignment must be filed with Keyport Benefit. The Certificate Owner's
rights and those of any revocably-named person will be subject to the
assignment. Any Qualified Certificate may have limitations on assignability.
Because an assignment may be a taxable event, a Certificate Owner should
consult a competent tax adviser as to the tax consequences resulting from any
such assignment.
PARTIAL WITHDRAWALS AND SURRENDER
The Certificate Owner may make partial withdrawals from the Certificate.
Keyport Benefit must receive a Written Request and the minimum amount to be
withdrawn must be at least $300 or such lesser amount as Keyport Benefit may
permit in conjunction with a Systematic Withdrawal Program. If the
Certificate Value after a partial withdrawal would be below $2,500, Keyport
Benefit will treat the request as a withdrawal of only the excess amount over
$2,500. Unless the request specifies otherwise, the total amount withdrawn
will be deducted from all Sub-Accounts of the Variable Account in the ratio
that the value in each Sub-Account bears to the total Variable Account Value.
The Certificate Owner may totally surrender the Certificate by making a
Written Request. Surrendering the Certificate will end it. Upon surrender,
the Certificate Owner will receive the Certificate Withdrawal Value.
Keyport Benefit will pay the amount of any surrender within seven days of
receipt of such request. Alternatively, the Certificate Owner may purchase
for himself or herself an annuity option with any surrender benefit of at
least $5,000. Keyport Benefit's consent is needed to choose an option if the
Certificate Owner is not a natural person.
Annuity Options based on life contingencies cannot be surrendered after
annuity payments have begun. Option A, which is not based on life
contingencies, may be surrendered if a variable payout has been selected.
Because of the potential tax consequences of a full or partial surrender, a
Certificate Owner should consult a competent tax adviser regarding a
surrender.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Income Date and the Certificate is In Force,
payments will begin under the annuity option or options the Certificate Owner
has chosen. The amount of the payments will be determined by applying the
Certificate Value (less any premium taxes not previously deducted and less
any applicable Certificate Maintenance Charge) on the Income Date in
accordance with the option selected.
Income Date and Annuity Option
The Certificate Owner may select an Income Date and Annuity Option at the
time of application. If the Certificate Owner does not select an Annuity
Option, Option B will automatically be designated. If the Certificate Owner
does not select an Income Date for the Annuitant, the Income Date will
automatically be the ealier of (i) the later of the Annuitant's 90th birthday
and the 10th Certificate Anniversary and (ii) any maximum date permitted
under state law.
Change in Income Date and Annuity Option
The Certificate Owner may choose or change an Annuity Option or the Income
Date by making a Written Request to Keyport Benefit at least 30 days prior to
the Income Date. However, any Income Date must be: (a) for fixed annuity
options, not earlier than the first Certificate Anniversary; and (b) not
later than the earlier of (i) the later of the Annuitant's 90th birthday and
the 10th Certificate Anniversary and (ii) any maximum date permitted under
state law.
Annuity Options
The Annuity Options are:
Option A: Income for a Fixed Number of Years;
Option B: Life Income with 10 Years of Payments Guaranteed; and
Option C: Joint and Last Survivor Income.
Other options may be arranged by mutual consent. Each option is available in
two forms--as a variable annuity for use with the Variable Account and as a
fixed annuity for use with Keyport Benefit's general account. Variable
annuity payments will fluctuate while fixed annuity payments will not. The
dollar amount of each fixed annuity payment will be determined by deducting
from the Certificate Value any premium taxes not previously deducted and any
applicable Certificate Maintenance Charge and then dividing the remainder by
$1,000 and multiplying the result by the greater of: (a) the applicable
factor shown in the appropriate table in the Certificate; or (b) the factor
currently offered by Keyport Benefit at the time annuity payments begin.
This current factor may be based on the sex of the payee unless to do so
would be prohibited by law.
If no Annuity Option is selected, Option B will automatically be applied.
Unless the Certificate Owner chooses otherwise, Variable Account Value, less
any premium taxes not previously deducted and less any applicable Certificate
Maintenance Charge will be applied to a variable annuity option. Whether
variable or fixed, the same Certificate Value applied to each option will
produce a different initial annuity payment as well as different subsequent
payments.
The payee is the person who will receive the sum payable under an annuity
option. Any annuity option that provides for payments to continue after the
death of the payee will not allow the successor payee to extend the period of
time over which the remaining payments are to be made.
If the amount available to apply under any variable or fixed option is less
than $5,000, Keyport Benefit has reserved the right to pay such amount in one
sum to the payee in lieu of the payment otherwise provided for.
Annuity payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by Written Request. However, if any payment provided for
would be or becomes less than $100, Keyport Benefit has the right to reduce
the frequency of payments to such an interval as will result in each payment
being at least $100.
Option A: Income For a Fixed Number of Years. Keyport Benefit will pay an
annuity for a chosen number of years, not fewer than 5 nor over 50 (a period
of years over 30 may be chosen only if it does not exceed the difference
between age 100 and the Annuitant's age on the date of the first payment).
Option A is referred to as Preferred Income Plan (PIP). At any time while
variable annuity payments are being made, the payee may elect to receive the
following amount: the present value of the remaining payments, commuted at
the interest rate used to create the annuity factor for this option (this
interest rate is 5% per year, unless 3% per year is chosen by Written Request
at the time the option is selected). Instead of receiving a lump sum, the
payee can elect another payment option. If, at the death of the payee,
Option A payments have been made for less than the chosen number of years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity,
this interest rate is 5% per year, unless 3% per year had been chosen by
the payee at the time the option was selected.
The Mortality and Expense Risk Charge is deducted during the Option A payment
period if a variable payout has been selected, but Keyport Benefit has no
mortality risk during this period.
Keyport Benefit has available a "level monthly" payment option that can be
chosen for variable payments under Option A. Under this option, the monthly
payment amount changes every twelve months instead of every month as would be
the case under the standard monthly payment frequency. The "level monthly"
option converts an annual payment amount into twelve equal monthly payments
as follows. Each annual payment will be determined as described below in
"Variable Annuity Payment Values". Each annual payment will then be placed
in Keyport Benefit's general account, from which it will be paid out in
twelve equal monthly payments. The sum of the twelve monthly payments will
exceed the annual payment amount because of an interest rate factor used by
Keyport Benefit that will vary from year to year. If the payments are
commuted, (1) the commutation method described above for calculating the
present value of remaining payments applies to any remaining annual payments
and (2) any unpaid monthly payments out of the current twelve will be
commuted at the interest rate that was used to determine those twelve current
monthly payments.
See "Annuity Payments" for the manner in which Option A may be taxed.
Option B: Life Income with 10 Years of Payments Guaranteed. Keyport Benefit
will pay an annuity during the lifetime of the payee. If, at the death of
the payee, payments have been made for less than 10 years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity,
this interest rate is 5% per year, unless 3% per year had been chosen by
the payee at the time the option was selected.
The amount of the annuity payments will depend on the age of the payee on
the Income Date and it may also depend on the payee's sex.
Option C: Joint and Last Survivor Income. Keyport Benefit will pay an
annuity for as long as either the payee or a designated second natural person
is alive. The amount of the annuity payments will depend on the age of both
persons on the Income Date and it may also depend on each person's sex. IT
IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF BOTH
PAYEES DIE AFTER THE RECEIPT OF THE FIRST PAYMENT OR TO RECEIVE ONLY TWO
ANNUITY PAYMENTS IF BOTH PAYEES DIE AFTER RECEIPT OF THE SECOND PAYMENT AND
SO ON.
Variable Annuity Payment Values
The amount of the first variable annuity payment is determined by Keyport
Benefit using an annuity purchase rate that is based on an assumed annual
investment return of 5% per year, unless 3% is chosen by Written Request.
Subsequent variable annuity payments will fluctuate in amount and reflect
whether the actual investment return of the selected Sub-Account(s) (after
deducting the Mortality and Expense Risk Charge) is better or worse than the
assumed investment return. The total dollar amount of each variable annuity
payment will be equal to: (a) the sum of all Sub-Account payments; less (b)
the pro-rata amount of the annual Certificate Maintenance Charge. Currently,
a payee can instruct Keyport Benefit to change the Sub-Account(s) used to
determine the amount of the variable annuity payments once every 6 months.
Proof of Age, Sex, and Survival of Annuitant
Keyport Benefit may require proof of age, sex or survival of any payee upon
whose age, sex or survival payments depend. If the age or sex has been
misstated, Keyport Benefit will compute the amount payable based on the
correct age and sex. If income payments have begun, any underpayments Keyport
Benefit may have made will be paid in full with the next annuity payment.
Any overpayments, unless repaid in one sum, will be deducted from future
annuity payments until Keyport Benefit is repaid in full.
SUSPENSION OF PAYMENTS
Keyport Benefit reserves the right to suspend or postpone any type of payment
from the Variable Account for any period when: (a) the New York Stock
Exchange is closed other than customary weekend or holiday closings; (b)
trading on the Exchange is restricted; (c) an emergency exists as a result of
which it is not reasonably practicable to dispose of securities held in the
Variable Account or determine their value; or (d) the Securities and Exchange
Commission permits delay for the protection of security holders. The
applicable rules and regulations of the Securities and Exchange Commission
shall govern as to whether the conditions described in (b) and (c) exist.
TAX STATUS
Introduction
The Certificate is designed for use by individuals in retirement plans which
may or may not be Qualified Plans under the provisions of the Internal
Revenue Code (the "Code"). The ultimate effect of federal income taxes on
the Certificate Value, on annuity payments, and on the economic benefit to
the Certificate Owner, Annuitant or Designated Beneficiary depends on the
type of retirement plan for which the Certificate is purchased and upon the
tax and employment status of the individual concerned. The discussion
contained herein is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax adviser. No attempt is
made to consider any applicable state or other tax laws. Moreover, the
discussion herein is based upon Keyport Benefit's understanding of current
federal income tax laws as they are currently interpreted. No representation
is made regarding the likelihood of continuation of those current federal
income tax laws or of the current interpretations by the Internal Revenue
Service.
Taxation of Annuities in General
Section 72 of the Code governs taxation of annuities in general. There are
no income taxes on increases in the value of a Certificate until a
distribution occurs, in the form of a full surrender, a partial surrender, an
assignment or gift of the Certificate, or annuity payments.
Surrenders, Assignments and Gifts. A Certificate Owner who fully surrenders
his or her Certificate is taxed on the portion of the payment that exceeds
his or her cost basis in the Certificate. For Non-Qualified Certificates,
the cost basis is generally the amount of the Purchase Payments made for the
Certificate and the taxable portion of the surrender payment is taxed as
ordinary income. For Qualified Certificates, the cost basis is generally
zero and the taxable portion of the surrender payment is generally taxed as
ordinary income subject to special 5-year income averaging. A Designated
Beneficiary receiving a lump sum surrender benefit after the death of the
Annuitant or Certificate Owner is taxed on the portion of the amount that
exceeds the Certificate Owner's cost basis in the Certificate. If the
Designated Beneficiary elects to receive annuity payments within 60 days of
the decedent's death, different tax rules apply. See "Annuity Payments"
below. For Non-Qualified Certificates, the tax treatment applicable to
Designated Beneficiaries may be contrasted with the income-tax-free treatment
applicable to persons inheriting and then selling mutual fund shares with a
date-of-death value in excess of their basis.
Partial withdrawals received under Non-Qualified Certificates prior to
annuitization are first included in gross income to the extent Certificate
Value exceeds Purchase Payments. Then, to the extent the Certificate Value
does not exceed Purchase Payments, such withdrawals are treated as a non-
taxable return of principal to the Certificate Owner. For partial
withdrawals under a Qualified Certificate, payments are treated first as a
non-taxable return of principal up to the cost basis and then a taxable
return of income. Since the cost basis of Qualified Certificates is generally
zero, partial surrender amounts will generally be fully taxed as ordinary
income.
A Certificate Owner who assigns or pledges a Non-Qualified Certificate is
treated as if he or she had received the amount assigned or pledged and thus
is subject to taxation under the rules applicable to partial withdrawals or
surrenders. A Certificate Owner who gives away the Certificate (i.e.,
transfers it without full and adequate consideration) to anyone other than
his or her spouse is treated for income tax purposes as if he or she had
fully surrendered the Certificate.
A special computational rule applies if Keyport Benefit issues to the
Certificate Owner, during any calendar year, (a) two or more Certificates or
(b) one or more Certificates and one or more of Keyport Benefit's other
annuity contracts. Under this rule, the amount of any distribution
includable in the Certificate Owner's gross income is to be determined under
Section 72(e) of the Code by treating all the Keyport Benefit contracts as
one contract. Keyport Benefit believes that this means the amount of any
distribution under one Certificate will be includable in gross income to the
extent that at the time of distribution the sum of the values for all the
Certificates or contracts exceeds the sum of the cost bases for all the
contracts.
Annuity Payments. The non-taxable portion of each variable annuity payment
is determined by dividing the cost basis of the Certificate by the total
number of expected payments while the non-taxable portion of each fixed
annuity payment is determined by an "exclusion ratio" formula which
establishes the ratio that the cost basis of the Certificate bears to the
total expected value of annuity payments for the term of the annuity. The
remaining portion of each payment is taxable. Such taxable portion is taxed
at ordinary income rates. For Qualified Certificates, the cost basis is
generally zero. With annuity payments based on life contingencies, the
payments will become fully taxable once the payee lives longer than the life
expectancy used to calculate the non-taxable portion of the prior payments.
Because variable annuity payments can increase over time and because certain
payment options provide for a lump sum right of commutation, it is possible
that the IRS could determine that variable annuity payments should not be
taxed as described above but instead should be taxed as if they were received
under an agreement to pay interest. This determination would result in a
higher amount (up to 100%) of certain payments being taxable.
With respect to the "level monthly" payment option available under Annuity
Option A, pursuant to which each annual payment is placed in Keyport
Benefit's general account and paid out with interest in twelve equal monthly
payments, it is possible the IRS could determine that receipt of the first
monthly payout of each annual payment is constructive receipt of the entire
annual payment. Thus, the total taxable amount for each annual payment would
be accelerated to the time of the first monthly payout and reported in the
tax year in which the first monthly payout is received.
Penalty Tax. Payments received by Certificate Owners, Annuitants, and
Designated Beneficiaries under Certificates may be subject to both ordinary
income taxes and a penalty tax equal to 10% of the amount received that is
includable in income. The penalty tax is not imposed on amounts received:
(a) after the taxpayer attains age 59 1/2; (b) in a series of substantially
equal payments made for life or life expectancy; (c) after the death of the
Certificate Owner (or, where the Certificate Owner is not a human being,
after the death of the Annuitant); (d) if the taxpayer becomes totally and
permanently disabled; or (e) under a Non-Qualified Certificate's annuity
payment option that provides for a series of substantially equal payments,
provided only one Purchase Payment is made to the Certificate, the
Certificate is not issued as a result of a Section 1035 exchange, and the
first annuity payment begins in the first Certificate Year.
Income Tax Withholding. Keyport Benefit is required to withhold federal
income taxes on taxable amounts paid under Certificates unless the recipient
elects not to have withholding apply. Keyport Benefit will notify recipients
of their right to elect not to have withholding apply.
Section 1035 Exchanges. A Non-Qualified Certificate may be purchased with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is Keyport Benefit's understanding that in such an event: (a)
the new Certificate will be subject to the distribution-at-death rules
described in "Death Provisions for Non-Qualified Certificates"; (b) Purchase
Payments made between August 14, 1982 and January 18, 1985 and the income
allocable to them will, following an exchange, no longer be covered by a
"grandfathered" exception to the penalty tax for a distribution of income
that is allocable to an investment made over ten years prior to the
distribution; and (c) Purchase Payments made before August 14, 1982 and the
income allocable to them will, following an exchange, continue to receive the
following "grandfathered" tax treatment under prior law: (i) the penalty tax
does not apply to any distribution; (ii) partial withdrawals are treated
first as a non-taxable return of principal and then a taxable return of
income; and (iii) assignments are not treated as surrenders subject to
taxation. Keyport Benefit's understanding of the above is principally based
on legislative reports prepared by the Staff of the Congressional Joint
Committee on Taxation.
Diversification Standards. The U.S. Secretary of the Treasury has issued
regulations that set standards for diversification of the investments
underlying variable annuity contracts (other than pension plan contracts).
The Eligible Funds are designed to be managed to meet the diversification
requirements for the Certificate as those requirements may change from time
to time. If the diversification requirements are not satisfied, the
Certificate would not be treated as an annuity contract. As a consequence to
the Certificate Owner, income earned on a Certificate would be taxable to the
Certificate Owner in the year in which diversification requirements were not
satisfied, including previously non-taxable income earned in prior years. As
a further consequence, Keyport Benefit would be subjected to federal income
taxes on assets in the Variable Account.
The Secretary of the Treasury announced in September 1986 that he expects to
issue regulations which will prescribe the circumstances in which a
Certificate Owner's control of the investments of a segregated asset account
may cause the Certificate Owner, rather than the insurance company, to be
treated as the owner of the assets of the account. The regulations could
impose requirements that are not reflected in the Certificate. Keyport
Benefit, however, has reserved certain rights to alter the Certificate and
investment alternatives so as to comply with such regulations. Since the
regulations have not been issued, there can be no assurance as to the content
of such regulations or even whether application of the regulations will be
prospective. For these reasons, Certificate Owners are urged to consult with
their own tax advisers.
Qualified Plans
The Certificate is designed for use with Qualified Plans. The tax rules
applicable to participants in Qualified Plans vary according to the type of
plan and the terms and conditions of the plan itself. Therefore, no attempt
is made herein to provide more than general information about the use of the
Certificate with Qualified Plans. Participants under a Qualified Plan as
well as Certificate Owners, Annuitants, and Designated Beneficiaries are
cautioned that the rights of any person to any benefits under a Qualified
Plan may be subject to the terms and conditions of the plan regardless of the
terms and conditions of the Certificate issued in connection therewith.
Following is a brief description of the type of Qualified Plans offered and
of the use of the Certificate in connection therewith. Purchasers of the
Certificate should seek competent advice concerning the terms and conditions
of the particular Qualified Plan and use of the Certificate with that Plan.
Individual Retirement Annuities
Sections 408(b) and 408A of the Code permit eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" and "Roth IRA", respectively. These individual retirement
annuities are subject to limitations on the amount which may be contributed,
the persons who may be eligible, and on the time when distributions may
commence. In addition, distributions from certain types of Qualified Plans
may be placed on a tax-deferred basis into a Section 408(b) Individual
Retirement Annuity.
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with its view of present applicable law, Keyport Benefit will
vote the shares of the Eligible Funds held in the Variable Account at regular
and special meetings of the shareholders of the Eligible Funds in accordance
with instructions received from persons having the voting interest in the
Variable Account. Keyport Benefit will vote shares for which it has not
received instructions in the same proportion as it votes shares for which it
has received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation thereof should change, and
as a result Keyport Benefit determines that it is permitted to vote the
shares of the Eligible Funds in its own right, it may elect to do so.
The person having the voting interest under a Certificate prior to the Income
Date shall be the Certificate Owner. The number of shares held in each Sub-
Account which are attributable to each Certificate Owner is determined by
dividing the Certificate Owner's Variable Account Value in each Sub-Account
by the net asset value of the applicable share of the Eligible Fund. The
person having the voting interest after the Income Date under an annuity
payment option shall be the payee. The number of shares held in the Variable
Account which are attributable to each payee is determined by dividing the
reserve for the annuity payments by the net asset value of one share. During
the annuity payment period, the votes attributable to a payee decrease as the
reserves underlying the payments decrease.
The number of shares in which a person has a voting interest will be
determined as of the date coincident with the date established by the
respective Eligible Fund for determining shareholders eligible to vote at the
meeting of the Fund and voting instructions will be solicited by written
communication prior to such meeting in accordance with the procedures
established by the Eligible Fund.
Each person having the voting interest in the Variable Account will receive
periodic reports relating to the Eligible Fund(s) in which he or she has an
interest, proxy material and a form with which to give such voting
instructions with respect to the proportion of the Eligible Fund shares held
in the Variable Account corresponding to his or her interest in the Variable
Account.
SALES OF THE CERTIFICATES
Keyport Financial Services Corp. ("KFSC") serves as the Principal Underwriter
for the Certificate described in this Prospectus. The Certificate will be
sold by salespersons who represent Keyport Benefit Life Insurance Company, an
affiliate of KFSC, as variable annuity agents and who are registered
representatives of broker/dealers who have entered into distribution
agreements with KFSC. KFSC is registered under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers,
Inc. It is located at 125 High Street, Boston, Massachusetts 02110. A dealer
selling the Certificate receives no commission.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the Principal
Underwriter are a party. Keyport Benefit is engaged in various kinds of
routine litigation which in its judgment is not of material importance in
relation to the total capital and surplus of Keyport Benefit.
INQUIRIES BY CERTIFICATE OWNERS
Certificate Owners with questions about their Certificates may either write
Keyport Benefit's Service Office, 125 High Street, Boston, MA 02110, or call
(800) 367-3653 or write Manning & Napier Insurance Fund, Inc. at P.O. Box
40610 Rochester, New York 14604 or call (800) 466-3863.
TABLE OF CONTENTS_STATEMENT OF ADDITIONAL INFORMATION
Page
Keyport Benefit Life Insurance Company 2
Variable Annuity Benefits 2
Variable Annuity Payment Values 2
Re-Allocating Sub-Account Payments 3
Safekeeping of Assets 4
Principal Underwriter 4
Experts 4
Investment Performance 4
Yields for Stein Roe Money Market Fund (SRMMF) Sub-Account 6
Financial Statements 6
Keyport Benefit Life Insurance Company 7
APPENDIX A
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are joint Certificate Owners, both must authorize Keyport
Benefit and Manning & Napier Insurance Fund, Inc. ("Manning & Napier
Insurance Fund") to accept telephone instructions but either Certificate
Owner can give telephone instructions.
2. All callers will be required to identify themselves. Keyport Benefit
reserves the right to refuse to act upon any telephone instructions in cases
where the caller has not sufficiently identified himself/herself to Keyport
Benefit's or Manning & Napier Insurance Fund's satisfaction.
3. Neither Keyport Benefit, Manning & Napier Insurance Fund, nor any person
acting on its behalf shall be subject to any claim, loss, liability, cost or
expense if it or such person acted in good faith upon a telephone
instruction, including one that is unauthorized or fraudulent; however,
Keyport Benefit and/or Manning & Napier Insurance Fund will employ reasonable
procedures to confirm that a telephone instruction is genuine and, if Keyport
Benefit and/or Manning & Napier Insurance Fund does not, Keyport Benefit
and/or Manning & Napier Insurance Fund may be liable for losses due to an
unauthorized or fraudulent instruction. The Certificate Owner thus bears the
risk that an unauthorized or fraudulent instruction that is executed may
cause the Certificate Value to be lower than it would be had no instruction
been executed.
4. All conversations will be recorded with disclosure at the time of the
call.
5. The application for the Certificate may allow a Certificate Owner to
create a power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, such power will be treated as
durable in nature and shall not be affected by the subsequent incapacity,
disability or incompetency of the Certificate Owner. Either Keyport Benefit,
Manning & Napier Insurance Fund or the authorized person may cease to honor
the power by sending written notice to the Certificate Owner at the
Certificate Owner's last known address. Neither Keyport Benefit, Manning &
Napier Insurance Fund nor any person acting on its behalf shall be subject to
liability for any act executed in good faith reliance upon a power of
attorney.
6. Telephone authorization shall continue in force until (a) Keyport
Benefit and/or Manning & Napier Insurance Fund receives the Certificate
Owner's written revocation, (b) Keyport Benefit and/or Manning & Napier
Insurance Fund discontinues the privilege, or (c) Keyport Benefit and/or
Manning & Napier Insurance Fund receives written evidence that the
Certificate Owner has entered into a market timing or asset allocation
agreement with an investment adviser or with a broker/dealer.
7. Telephone transfer instructions received by Keyport Benefit at 800-367-
3653 and/or Manning & Napier Insurance Fund at (800) 466-3863 before the
close of trading on the New York Stock Exchange (currently 4:00 P.M. Eastern
Time) will be initiated that day based on the unit value prices calculated at
the close of that day. Instructions received after the close of trading on
the NYSE will be initiated the following business day.
8. Once instructions are accepted by Keyport Benefit and/or Manning &
Napier Insurance Fund, they may not be canceled.
9. All transfers must be made in accordance with the terms of the
Certificate and current prospectus. If the transfer instructions are not in
good order, Keyport Benefit and/or Manning & Napier Insurance Fund will not
execute the transfer and will notify the caller within 48 hours.
10. If 100% of any Sub-Account's value is transferred and the allocation
formula for Purchase Payments includes that Sub-Account, then the allocation
formula for future Purchase Payments will change accordingly unless Keyport
Benefit receives telephone instructions to the contrary. For example, if the
allocation formula is 50% to Sub-Account A and 50% to Sub-Account B and all
of Sub-Account A's value is transferred to Sub-Account B, the allocation
formula will change to 100% to Sub-Account B unless Keyport Benefit is
instructed otherwise.
Telephone Changes to Purchase Payment Allocation Percentages
Numbers 1-6 above are applicable.
PART B
STATEMENT OF ADDITIONAL INFORMATION
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT A
OF
KEYPORT BENEFIT LIFE INSURANCE COMPANY ("Keyport Benefit")
This Statement of Additional Information (SAI) is not a prospectus but it
relates to, and should be read in conjunction with, the Manning & Napier
variable annuity prospectus dated June 24, 1998. The SAI is incorporated by
reference into the prospectus. The prospectus is available, at no charge, by
writing Keyport Financial Services Corp. at 125 High Street, Boston, MA 02110
or by calling (800) 437-4466. It may also be obtained by writing Manning &
Napier Insurance Fund, Inc. at P.O. Box 40610, Rochester, New York 14604, or
by calling (800) 466-3868.
TABLE OF CONTENTS
Page
Keyport Benefit Life Insurance Company.....................................2
Variable Annuity Benefits..................................................2
Variable Annuity Payment Values..........................................2
Re-Allocating Sub-Account Payments.......................................3
Safekeeping of Assets......................................................4
Principal Underwriter......................................................4
Experts....................................................................4
Investment Performance.....................................................4
Yields for Stein Roe Money Market Fund (SRMMF) Sub-Account...............6
Financial Statements.......................................................6
Keyport Benefit Life Insurance Company...................................7
The date of this statement of additional information is June 24, 1998.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
Liberty Mutual Insurance Company ("Liberty Mutual"), a multi-line insurance
company, is the ultimate corporate parent of Keyport Benefit. Liberty Mutual
ultimately controls Keyport Benefit through the following intervening holding
company subsidiaries: Liberty Mutual Equity Corporation, LFC Holdings Inc.,
Liberty Financial Companies, Inc. ("LFC"), SteinRoe Services, Inc. and
Keyport Life Insurance Company. Liberty Mutual, as of December 31, 1997,
owned, indirectly, approximately 73% of the combined voting power of the
outstanding stock of LFC (with the balance being publicly held). For
additional information about Keyport Benefit, see page 8 of the prospectus.
VARIABLE ANNUITY BENEFITS
Variable Annuity Payment Values
For each variable payment option, the total dollar amount of each periodic
payment will be equal to: (a) the sum of all Sub-Account payments; less (b)
the pro-rata amount of the annual Certificate Maintenance Charge.
The first payment for each Sub-Account will be determined by deducting any
applicable Certificate Maintenance Charge and any applicable state premium
taxes and then dividing the remaining value of that Sub-Account by $1,000 and
multiplying the result by the greater of: (a) the applicable factor from the
Certificate's annuity table for the particular payment option; or (b) the
factor currently offered by Keyport Benefit at the time annuity payments
begin. This current factor may be based on the sex of the payee unless to do
so would be prohibited by law.
The number of Annuity Units for each Sub-Account will be determined by
dividing such first payment by the Sub-Account Annuity Unit value for the
Valuation Period that includes the date of the first payment. The number of
Annuity Units remains fixed for the annuity payment period. Each Sub-Account
payment after the first one will be determined by multiplying (a) by (b),
where: (a) is the number of Sub-Account Annuity Units; and (b) is the Sub-
Account Annuity Unit value for the Valuation Period that includes the date of
the particular payment.
Variable annuity payments will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect annuity payments, Keyport Benefit uses an Annuity Unit
value. Each Sub-Account has its own Annuity Units and value per Unit. The
Annuity Unit value applicable during any Valuation Period is determined at
the end of such period.
When Keyport Benefit first purchased Eligible Fund shares on behalf of the
Variable Account, Keyport Benefit valued each Annuity Unit for each Sub-
Account at a specified dollar amount. The Unit value for each Sub-Account in
any Valuation Period thereafter is determined by multiplying the value for
the prior period by a net investment factor. This factor may be greater or
less than 1.0; therefore, the Annuity Unit may increase or decrease from
Valuation Period to Valuation Period. For each assumed annual investment
rate (AIR), Keyport Benefit calculates a net investment factor for each Sub-
Account by dividing (a) by (b), where:
(a) is equal to the net investment factor as defined in the
prospectus; and
(b) is the assumed investment factor for the current Valuation Period.
The assumed investment factor adjusts for the interest assumed
in determining the first variable annuity payment. Such factor for
any Valuation Period shall be the accumulated value, at the end of
such period, of $1.00 deposited at the beginning of such period at
the assumed annual investment rate (AIR). The AIR for Annuity
Units based on the Contract's annuity tables is 5% per year. An AIR
of 3% per year is also currently available upon Written Request.
With a particular AIR, payments after the first one will increase or decrease
from month to month based on whether the actual annualized investment return
of the selected Sub-Account(s) (after deducting the Mortality and Expense
Risk Charge) is better or worse than the assumed AIR percentage. If a given
amount of Sub-Account value is applied to a particular payment option, the
initial payment will be smaller if a 3% AIR is selected instead of a 5% AIR
but, all other things being equal, the subsequent 3% AIR payments have the
potential for increasing in amount by a larger percentage and for decreasing
in amount by a smaller percentage. For example, consider what would happen
if the actual annualized investment return (see the first sentence of this
paragraph) is 9%, 5%, 3%, or 0% between the time of the first and second
payments. With an actual 9% return, the 3% AIR and 5% AIR payments would
both increase in amount but the 3% AIR payment would increase by a larger
percentage. With an actual 5% return, the 3% AIR payment would increase in
amount while the 5% AIR payment would stay the same. With an actual return
of 3%, the 3% AIR payment would stay the same while the 5% AIR payment would
decrease in amount. Finally, with an actual return of 0%, the 3% AIR and 5%
AIR payments would both decrease in amount but the 3% AIR payment would
decrease by a smaller percentage. Note that the changes in payment amounts
described above are on a percentage basis and thus do not illustrate when, if
ever, the 3% AIR payment amount might become larger than the 5% AIR payment
amount. Note though that if Option A (Income for a Fixed Number of Years) is
selected and payments continue for the entire period, the 3% AIR payment
amount will start out being smaller than the 5% AIR payment amount but
eventually the 3% AIR payment amount will become larger than the 5% AIR
payment amount.
Re-Allocating Sub-Account Payments
The number of Annuity Units for each Sub-Account under any variable annuity
option will remain fixed during the entire annuity payment period unless the
payee makes a written request for a change. Currently, a payee can instruct
Keyport Benefit to change the Sub-Account(s) used to determine the amount of
the variable annuity payments 1 time every 6 months. The payee's request
must specify the percentage of the annuity payment that is to be based on the
investment performance of each Sub-Account. The percentage for each Sub-
Account, if not zero, must be at least 10% and must be a whole number. At
the end of the Valuation Period during which Keyport Benefit receives the
request, Keyport Benefit will: (a) value the Annuity Units for each Sub-
Account to create a total annuity value; (b) apply the new percentages the
payee has selected to this total value; and (c) recompute the number of
Annuity Units for each Sub-Account. This new number of units will remain
fixed for the remainder of the payment period unless the payee requests
another change.
SAFEKEEPING OF ASSETS
Keyport Benefit is responsible for the safekeeping of the assets of the
Variable Account.
Keyport Benefit has responsibility for providing all administration of the
Certificates and the Variable Account. This administration includes, but is
not limited to, preparation of the Contracts and Certificates, maintenance of
Certificate Owners' records, and all accounting, valuation, regulatory and
reporting requirements. Keyport Benefit has contracted with Keyport Life
Insurance Company, its corporate parent, to provide all administration for
the Contracts and Certificates, as its agent. Keyport Benefit pays Keyport
Life Insurance Company for the costs it incurs for providing those
administrative services.
PRINCIPAL UNDERWRITER
The Contracts and Certificates, which are offered continuously, are
distributed by Keyport Financial Services Corp. ("KFSC"), which is an
affiliate of Keyport Benefit.
EXPERTS
The statutory-basis financial statements of Keyport Benefit Life Insurance
Company (formerly American Benefit Life Insurance Company) as of December 31,
1997 and 1996, and for each of the three years in the period ended December
31, 1997 appearing in this Statement of Additional Information have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting
and auditing.
INVESTMENT PERFORMANCE
The Variable Account may from time to time quote performance information
concerning its various Sub-Accounts. A Sub-Account's performance may also be
compared to the performance of sub-accounts used with variable annuities
offered by other insurance companies. This comparative information may be
expressed as a ranking prepared by Financial Planning Resources, Inc. of
Miami, FL (The VARDS Report), Lipper Analytical Services, Inc., or by
Morningstar, Inc. of Chicago, IL (Morningstar's Variable Annuity Performance
Report), which are independent services that compare the performance of
variable annuity sub-accounts. The rankings are done on the basis of changes
in accumulation unit values over time and do not take into account any
charges (such as sales charges or administrative charges) that are deducted
directly from contract values.
Ibbotson Associates of Chicago, IL provides historical returns from 1926 on
capital markets in the United States. The Variable Account may quote the
performance of its Sub-Accounts in conjunction with the long-term performance
of capital markets in order to illustrate general long-term risk versus
reward investment scenarios. Capital markets tracked by Ibbotson Associates
include common stocks, small company stocks, long-term corporate bonds, long-
term government bonds, U.S. Treasury Bills, and the U.S. inflation rate.
Historical total returns are determined by Ibbotson Associates for: Common
Stocks, represented by the Standard and Poor's Composite Price Index (an
unmanaged weighted index of 90 stocks prior to March 1957 and 500 stocks
thereafter of industrial, transportation, utility and financial companies
widely regarded by investors as representative of the stock market); Small
Company Stocks, represented by the fifth capitalization quintile (i.e., the
ninth and tenth deciles) of stocks on the New York Stock Exchange for 1926-
1981 and by the performance of the Dimensional Fund Advisors Small Company
9/10 (for ninth and tenth deciles) Fund thereafter; Long Term Corporate
Bonds, represented beginning in 1969 by the Salomon Brothers Long-Term High-
Grade Corporate Bond Index, which is an unmanaged index of nearly all Aaa and
Aa rated bonds, represented for 1946-1968 by backdating the Salomon Brothers
Index using Salomon Brothers' monthly yield data with a methodology similar
to that used by Salomon Brothers in computing its Index, and represented for
1925-1945 through the use of the Standard and Poor's monthly High-Grade
Corporate Composite yield data, assuming a 4% coupon and a 20-year maturity;
Long-Term Government Bonds, measured each year using a portfolio containing
one U.S. government bond with a term of approximately twenty years and a
reasonably current coupon; U.S. Treasury Bills, measured by rolling over each
month a one-bill portfolio containing, at the beginning of each month, the
shortest-term bill having not less than one month to maturity; Inflation,
measured by the Consumer Price Index for all Urban Consumers, not seasonably
adjusted, since January, 1978 and by the Consumer Price Index before then.
The stock capital markets may be contrasted with the corporate bond and U.S.
government securities capital markets. Unlike an investment in stock, an
investment in a bond that is held to maturity provides a fixed rate of
return. Bonds have a senior priority to common stocks in the event the
issuer is liquidated and interest on bonds is generally paid by the issuer
before it makes any distributions to common stock owners. Bonds rated in the
two highest rating categories are considered high quality and present minimal
risk of default. An additional advantage of investing in U.S. government
bonds and Treasury bills is that they are backed by the full faith and credit
of the U.S. government and thus have virtually no risk of default. Although
government securities fluctuate in price, they are highly liquid.
Yields for Stein Roe Money Market Fund (SRMMF) Sub-Account
Yield and effective yield percentages for the SRMMF Sub-Account are
calculated using the method prescribed by the Securities and Exchange
Commission. Both yields reflect the deduction of the annual 0.35% asset-
based Certificate charge. Both yields also reflect, on an allocated basis,
the Certificate's annual $35 Certificate Maintenance Charge. Both yields do
not reflect premium tax charges. The yields would be lower if these charges
were included. The following are the standardized formulas:
Yield equals: (A - B - 1) X 365
C 7
Effective Yield Equals: (A - B)365/7 - 1
C
Where:
A = the Accumulation Unit value at the end of the 7-day period.
B = hypothetical Certificate Maintenance Charge for the 7-day period. The
assumed annual SRMMF Sub-Account charge is equal to the $35
Certificate charge multiplied by a fraction equal to the average number of
Certificates with SRMMF Sub-Account value during the 7-day period
divided by the average total number of Certificates during the
7-day period. This annual amount is converted to a 7-day charge by
multiplying it by 7/365. It is then equated to an Accumulation Unit
size basis by multiplying it by a fraction equal to the average
value of one SRMMF Sub-Account Accumulation Unit during the 7-day period
divided by the average Certificate Value in SRMMF Sub-Account
during the 7-day period.
C = the Accumulation Unit value at the beginning of the 7-day period.
The yield formula assumes that the weekly net income generated by an
investment in the SRMMF Sub-Account will continue over an entire year. The
effective yield formula also annualizes seven days of net income but it
assumes that the net income is reinvested over the year. This compounding
effect causes effective yield to be higher than the yield.
FINANCIAL STATEMENTS
The Variable Account has not yet commenced operations and therefore no
financial statements are included. The financial statements of Keyport
Benefit are provided as relevant to its ability to meet its financial
obligations under the Certificates.
Report of Independent Auditors
The Board of Directors and Stockholder
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
We have audited the accompanying statutory-basis balance sheets of Keyport
Benefit Life Insurance Company (formerly American Benefit Life Insurance
Company, a wholly-owned subsidiary of American Republic Insurance Company) as
of December 31, 1997 and 1996, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New York, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting principles,
the financial position of Keyport Benefit Life Insurance Company at December
31, 1997 and 1996, or the results of its operations or its cash flows for
each of the three years in the period ended December 31, 1997.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Keyport Benefit
Life Insurance Company at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New York.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Des Moines, Iowa
March 13, 1998
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Balance Sheets - Statutory-Basis
December 31
1997 1996
Admitted assets
Bonds D at amortized cost $2,995,943 $ 8,416,743
Cash and cash equivalents:
Short-term investments 2,498,556 210,000
Cash 952,919 74,858
3,451,475 284,858
Total cash and investments 6,447,418 8,701,601
Investment income due and accrued 86,829 152,615
Receivable from securities sold - 873
Other admitted assets 9 151
Separate account assets 2,777,522 3,690,792
Total admitted assets $9,311,778 $12,546,032
Liabilities and capital and surplus
Liabilities:
Policy reserves:
Annuity $ 73,095 $ 88,053
Accident and health 95,961 79,526
169,056 167,579
Policy and contract claims 47,460 45,600
Due to parent under tax allocation agreement 87,449 132,559
Transfer to separate accounts due or accrued, net (3,214) (10,285)
Asset valuation reserve - 58,296
Interest maintenance reserve 38,672 20,116
Other liabilities 105,833 20,825
Separate account liabilities 2,777,522 3,690,792
Total liabilities 3,222,778 4,125,482
Lease commitment (Note 9)
Capital and surplus:
Common Stock, par value $2,000
per share D 1,000 shares authorized,
issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 2,500,000 5,000,000
Separate account contingency reserve - 92,270
Unassigned surplus 1,589,000 1,328,280
Total capital and surplus 6,089,000 8,420,550
Total liabilities and capital and surplus $9,311,778 $12,546,032
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Operations - Statutory-Basis
Year ended December 31
1997 1996 1995
Premiums and other considerations:
Annuity deposits $ 37,387 $ 43,705 $ 51,449
Accident and health - 9,100 18,200
37,387 52,805 69,649
Net investment income 562,822 590,018 570,073
Miscellaneous income 7,902 7,651 134,395
608,111 650,474 774,117
Benefits and expenses:
Benefits paid or provided for:
Surrender benefits 1,312,171 1,804,050 3,285,960
Annuity and other benefits 27,546 86,818 58,768
Accident and health benefits 27,420 - 37,326
Decrease in policy reserves 1,477 (30,370) (131,774)
1,368,614 1,860,498 3,250,280
Insurance expenses:
Commissions 3,149 4,479 6,175
General insurance expenses 389,107 327,700 300,049
Insurance taxes, licenses and fees 27,001 7,749 7,039
Net transfers from separate account (1,356,208)(1,895,913)(3,230,846)
(936,951)(1,555,985)(2,917,583)
431,663 304,513 332,697
Gain from operations before federal
income taxes and net realized capital
gains 176,448 345,961 441,420
Federal income taxes 66,328 118,372 130,420
Net gain from operations before net
realized capital gains 110,120 227,589 311,000
Net realized capital gains, net of
federal income taxes (1997 - $14,672;
1996 D $1,628; 1995 D $1,580) and amounts
transferred to interest maintenance
reserve (1997 D $27,249; 1996 D $3,024;
1995 D $2,934) - - -
Net income $110,120 $227,589 $311,000
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Changes in Capital and Surplus - Statutory-Basis
Separate
Additional Account
Common Paid-In Contingency Unassigned
Stock Capital Reserve Surplus Total
Balance at
January 1,
1995 $2,000,000 $5,000,000 $185,557 $ 769,276 $7,954,833
Net income - - - 311,000 311,000
Decrease in
asset
valuation
reserve - - - 3,917 3,917
Decrease in
nonadmitted
assets - - - 356 356
Decrease in
surplus of
separate
account - - - (69,062) (69,062)
Transfer of
contingency
reserve back
to unassigned
surplus - - (57,755) 57,755 -
Other - - - (7,522) (7,522)
Balance at
December 31,
1995 2,000,000 5,000,000 127,802 1,065,720 8,193,522
Net income - - - 227,589 227,589
Increase in
asset valuation
reserve - - - (751) (751)
Decrease in
nonadmitted
assets - - - 190 190
Transfer of
contingency
reserve back to
unassigned
surplus - - (35,532) 35,532 -
Balance at
December 31,
1996 2,000,000 5,000,000 92,270 1,328,280 8,420,550
Net income - - - 110,120 110,120
Decrease in
asset valuation
reserve - - - 58,296 58,296
Decrease in
nonadmitted
assets - - - 34 34
Transfer of
contingency
reserve back
to unassigned
surplus - - (92,270) 92,270 -
Dividend paid
to parent - (2,500,000) - - (2,500,000)
Balance at
December 31,
1997 $2,000,000 $2,500,000 $ - $1,589,000 $6,089,000
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Cash Flows - Statutory-Basis
Year ended December 31
1997 1996 1995
Operating activities
Premiums and other
considerations $ 37,529 $ 52,808 $ 69,504
Investment income, less expenses 648,361 598,768 599,720
Miscellaneous income (792) 186 126,915
Accident and health claims (25,560) - (43,526)
Annuity surrenders (1,312,171) (1,804,050) (3,285,960)
Annuity and other benefits paid (27,546) (86,818) (58,768)
Insurance expenses (340,984) (344,366) (326,057)
Federal income taxes paid (126,110) (119,441) (65,501)
Net transfers from separate account 1,363,279 1,910,019 3,230,846
Net cash provided by operating
activities 216,006 207,106 247,173
Investing activities
Proceeds from bonds sold,
matured or repaid 5,743,126 2,978,253 1,692,370
Cost of bonds acquired (293,966) (3,388,068) (1,826,241)
Dividend paid to parent (2,500,000) - -
Other 1,451 49,070 1
Net cash provided by (used in)
investing activities 2,950,611 (360,745) (133,870)
Increase (decrease) in cash and
cash equivalents 3,166,617 (153,639) 113,303
Cash and cash equivalents at
beginning of year 284,858 438,497 325,194
Cash and cash equivalents at end
of year $3,451,475 $ 284,858 $ 438,497
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements
December 31, 1997
1. Organization and Significant Accounting Policies
Organization
Through December 31, 1997, Keyport Benefit Life Insurance Company (formerly
American Benefit Life Insurance Company) was wholly owned by American
Republic Insurance Company (American Republic), a mutual life insurance
company. The Company was sold on January 2, 1998 to Keyport Life Insurance
Company including the assumption of all responsibilities related to the
Separate Account. The name of the Company was changed in conjunction with the
sale from American Benefit Life Insurance Company to Keyport Benefit Life
Insurance Company. The Company offers flexible premium annuities and long-
term care products. The Company is licensed in the State of New York.
Basis of Presentation
The accompanying financial statements of Keyport Benefit Life Insurance
Company (formerly American Benefit Life Insurance Company) have been prepared
in conformity with accounting practices prescribed or permitted by the
Insurance Department of the State of New York, which practices differ from
generally accepted accounting principles ("GAAP").
Prescribed statutory accounting practices include state laws, regulations and
general administrative rules, as well as a variety of publications of the
National Association of Insurance Commissioners (NAIC). Permitted statutory
accounting practices encompass all accounting practices that are not
prescribed. Such practices may differ from state to state, may differ from
company to company within a state and may change in the future.
The NAIC is in the process of codifying statutory accounting practices
(Codification). Codification will likely change, to some extent, prescribed
statutory accounting practices and may result in changes to the accounting
practices that the Company uses to prepare its statutory-basis financial
statements. Codification, which was approved by the NAIC in March 1998, will
require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within
those states. Accordingly, before Codification becomes effective for the
Company, the State of Iowa must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis
results to the Insurance Division. At this time, it is unclear whether the
State of Iowa will adopt Codification.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
The more significant differences between statutory accounting practices and
GAAP are as follows: (a) investments in bonds are reported at amortized cost
or market value based on their NAIC rating. For GAAP purposes, such
investments in debt securities are designated at purchase as held-to-
maturity, trading or available-for-sale. Held-to-maturity investments in debt
securities are reported at amortized cost. The remaining investments in debt
securities are reported at fair value with the unrealized holding gains and
losses reported in operations for those designated as trading and as a
separate component of equity for those designated as available-for-sale; (b)
the costs of acquiring and renewing business are charged to current
operations as incurred rather than deferred and amortized over the premium-
paying period or in proportion to the present value of expected gross profit
margins; (c) policy reserves on certain annuity contracts use discounting
methodologies utilizing statutory interest rates rather than full account
values; (d) deferred federal income taxes are not provided for the difference
between the financial reporting and income tax bases of assets and
liabilities for statutory purposes, whereas, they are required for GAAP; (e)
under a formula determined by the NAIC, the Company defers in the Interest
Maintenance Reserve (IMR) the portion of realized gains and losses on sales
of bonds attributable to changes in the general level of interest rates and
amortizes those deferrals over the remaining period to maturity. Realized
capital gains and losses are reported in operations net of federal income
taxes and transfers to the IMR rather than reported in the statements of
operations on a pretax basis in the period that the asset giving rise to the
gain or loss is sold; (f) declines in the estimated realizable value of
investments are provided for through the establishment of a formula
determined statutory asset valuation reserve (carried as a liability) with
changes charged directly to surplus, rather than through recognition in the
statements of operations for declines in value, when such declines are judged
to be other than temporary; (g) certain assets designated as "non-admitted
assets" have been charged directly to surplus rather than being reported as
assets; and (h) revenues for annuity deposits consist of premiums received
rather than policy charges for the cost of insurance, policy initiation and
administration, surrender charges and other fees that have been assessed
against policy account values.
The effects of the foregoing variances from GAAP on the accompanying
statutory-basis financial statements have not been determined, but are
presumed to be material.
Use of Estimates
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
Investments
Investments in bonds and short-term investments are stated at cost adjusted
for amortization of premiums or accrual of discounts. The discounts or
premiums on bonds are amortized using the scientific (interest) method, which
results in a constant yield over the 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 Republic's 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)
** (5a) Form of Application for a Group Variable Annuity Contract
** (5b) Form of Application for a Group Variable Annuity Certificate
(6a) Articles of Incorporation of Keyport Benefit Life Insurance
Company
(6b) By-Laws of Keyport Benefit Life Insurance Company
(7) Not applicable
** (8a) Form of Participation Agreement
(8b) Form of Participation Agreement Among Manning & Napier
Insurance Fund, Inc., Manning & Napier Investor Services, Inc.,
Manning & Napier Advisors, Inc., and Keyport Benefit Life
Insurance Company
(8c) Participation Agreement By and Among Keyport Benefit Life
Insurance Company, Keyport Financial Services Corp., and
SteinRoe Variable Investment Trust
** (9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
*** (13) Schedule for Computations of Performance Quotations
* (15) Chart of Affiliations
** (16) Powers of Attorney
** (17) Specimen Tax-Sheltered Annuity Acknowledgement
** (18) Form of Administrative Services Agreement
(27) Financial Data Schedule
* Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement (Files No. 333-1043; 811-7543) filed on or about
February 6, 1998.
** Incorporated by reference to Registration Statement (Files No. 333-
45727; 811-08635) filed on or about February 6, 1998.
*** To be Filed by Amendment.
Item 25. Officers and Directors of the Depositor.
Name and Position and Offices
Business Address* with Depositor
William P. Donohue Director
Senior Advisor
Bentley Associates LP
1155 Avenue of the Americas
New York, NY 10036
Peter M. Lehrer Director
Opus Three Ltd.
550 Mamaroneck Ave.
Harrison, NY 10528
Jeff S. Liebmann Director
Partner
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019-6092
Christopher C. York Director
Principal
C.C. York Company
200 Rector Place, 18-E
New York, NY 11280-1101
John W. Rosensteel Chairman of the Board, Director, President and
Chief Executive Officer
Stephen B. Bonner Director and Executive Vice President
Paul H. LeFevre, Jr. Director and Executive Vice President
Bernard R. Beckerlegge Director, Senior Vice President and General
Counsel
Bernhard M. Koch Director, Senior Vice President and Chief
Financial Officer
Stewart R. Morrison Senior Vice President and Chief Investment
Officer
Francis E. Reinhart Senior Vice President and Chief Information
Officer
Mark R. Tully Senior Vice President and Chief Sales Officer
Garth A. Bernard Vice President
Daniel C. Bryant Vice President and Assistant Secretary
James P. Greaton Vice President and Corporate Actuary
Jacob M. Herschler Vice President
Kenneth M. Hughes Vice President
James J. Klopper Vice President and Secretary
Jeffrey J. Lobo Vice President-Risk Management
Suzanne E. Lyons Vice President-Human Resources
Jeffery J. Whitehead Vice President and Treasurer
John G. Bonvouloir Assistant Vice President and Assistant
Treasurer
Alan R. Downey Assistant Vice President
Scott E. Morin Assistant Vice President and Controller
Edward M. Shea Assistant Vice President
Donald A. Truman Assistant Secretary
Daniel Yin Assistant Vice President
*125 High Street, Boston, Massachusetts 02110, unless noted otherwise
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
The Depositor controls the Registrant, and is a wholly-owned subsidiary
of Keyport Life Insurance Company, which controls KMA Variable Account,
Keyport 401 Variable Account, Keyport Variable Account I, and Keyport
Variable Account II.
The Depositor is under common control with Keyport Financial Services
Corp. (KFSC), a Massachusetts corporation functioning as a broker/dealer of
securities. KFSC files separate financial statements.
The Depositor is under common control with Liberty Advisory Services
Corp. (LASC), a Massachusetts corporation functioning as an investment
adviser. LASC files separate financial statements.
The Depositor is under common control with Independence Life and Annuity
Company ("Independence Life"), a Rhode Island corporation functioning as a
life insurance company. Independence Life files separate financial
statements.
Chart for the affiliations of the Depositor is incorporated by reference
to Post-Effective Amendment No. 7 to the Registration Statement (Files No.
333-1043; 811-7543) filed on or about February 6, 1998.
Item 27. Number of Contract Owners.
None.
Item 28. Indemnification.
Directors and officers of the Depositor and the principal underwriter
are covered persons under Directors and Officers/Errors and Omissions
liability insurance policies. Insofar as indemnification for liability
arising under the Securities Act of 1933 may be permitted to directors and
officers under such insurance policies, or otherwise, the Depositor has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Depositor of expenses
incurred or paid by a director or officer in the successful defense of any
action, suit or proceeding) is asserted by such director or officer in
connection with the variable annuity contracts, the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
Keyport Financial Services Corp. (KFSC) is principal underwriter of the
SteinRoe Variable Investment Trust and the Liberty Variable Investment Trust,
which offer eligible funds for variable annuity and variable life insurance
contracts. KFSC is the principal underwriter for Variable Account A of
Keyport Benefit Life Insurance Company. KFSC is also principal underwriter
for Variable Account J and Variable Account K of Liberty Life Assurance
Company of Boston and for the KMA Variable Account, Variable Account A and
Keyport Variable Account-I of Keyport Life Insurance Company and for the
Independence Variable Annuity Account and Independence Variable Life Account
of Independence Life and Annuity Company, which are affiliated companies of
Keyport Benefit.
The directors and officers are:
Name and Principal Position and Offices
Business Address* with Underwriter
John W. Rosensteel Chairman of the Board and President
James J. Klopper Director and Clerk
Francis E. Reinhart Director and Vice President-Administration
Rogelio P. Japlit Treasurer
Paul T. Holman Assistant Clerk
Donald A. Truman Assistant Clerk
*125 High Street, Boston, Massachusetts 02110.
Item 30. Location of Accounts and Records.
Keyport Benefit Life Insurance Company, 125 High St., Boston, MA 02110
Keyport Life Insurance Company, 125 High St., Boston, MA 02110
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the
audited financial statements in the Registration Statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
The Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2)
a post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of
Additional Information.
The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
Registrant represents that it is relying on the November 28, 1988 no-
action letter (Ref. No. IP-6-88) relating to variable annuity contracts
offered as funding vehicles for retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code. Registrant further represents
that it has complied with the provisions of paragraphs (1) - (4) of that
letter. Specimen of acknowledgement form used to comply with paragraph (4)
is included as Exhibit 17 in this Registration Statement.
Representation
Depositor represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Depositor. Further, this representation applies to each form of the contract
described in a prospectus and statement of additional information included in
this Registration Statement.
SIGNATURES
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it has duly caused this Registration
Statement to be signed on its behalf, in the City of Boston and Commonwealth
of Massachusetts, on this 11th day of June, l998.
Variable Account A
(Registrant)
By: Keyport Benefit Life Insurance Company
(Depositor)
By: /s/ John W. Rosensteel*
John W. Rosensteel
President
*BY: /s/James J. Klopper June 11, 1998
James J. Klopper Date
Attorney-in-Fact
* James J. Klopper has signed this document on the indicated date on behalf
of Mr. Rosensteel pursuant to power of attorney duly executed by him and
included as part of Exhibit 16 in the Registration Statement on Form N-4
filed on or about February 6, 1998 (Files No. 333-45727; 811-08635).
As required by the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.
/s/JOHN W. ROSENSTEEL* /s/JOHN W. ROSENSTEEL*
JOHN W. ROSENSTEE. JOHN W. ROSENSTEEL
Chairman of the Board President
/s/BERNARD R. BECKERLEGGE* /s/BERNHARD M. KOCH*
BERNARD R. BECKERLEGGE BERNHARD M. KOCH
Director Chief Financial Officer
/s/STEPHEN B. BONNER*
STEPHEN B. BONNER
Director
/s/WILLIAM P. DONOHUE*
WILLIAM P. DONOHUE
Director
/s/BERNHARD M. KOCH*
BERNHARD M. KOCH
Director
/s/PAUL H. LEFEVRE, JR.*
PAUL H. LEFEVRE, JR.
Director
*BY: /s/James J. Klopper June 11, 1998
/s/PETER M. LEHRER* James J. Klopper Date
PETER M. LEHRER Attorney-in-Fact
Director
/s/JEFF S. LIEBMANN*
JEFF S. LIEBMANN
Director
/s/CHRISTOPHER C. YORK*
CHRISTOPHER C. YORK
Director
* James J. Klopper has signed this document on the indicated date on behalf
of each of the above Directors and Officers of the Depositor pursuant to
powers of attorney duly executed by such persons and included as Exhibit 16
in the Registration Statement on Form N-4 filed on or about February 6, 1998
(Files No. 333-45727; 811-08635).
EXHIBIT INDEX
Exhibit Page
(4h) Specimen Group Variable Annuity Contract of Keyport Benefit Life
Insurance Company (M&N)
(4i) Specimen Variable Annuity Certificate of Keyport Benefit Life
Insurance Company (M&N)
(6a) Articles of Incorporation of Keyport Benefit Life Insurance
Company
(6b) By-Laws of Keyport Benefit Life Insurance Company
(8b) Form of Participation Agreement Among Manning & Napier Insurance
Fund, Inc., Manning & Napier Investor Services, Inc., Manning
& Napier Advisors, Inc., and Keyport Benefit Life Insurance Company
(8c) Participation Agreement By and Among Keyport Benefit Life Insurance
Company, Keyport Financial Services Corp., and SteinRoe Variable
Investment Trust
(10) Consent of Independent Auditors
(27) Financial Data Schedule
EXHIBIT 4(h)
KEYPORT BENEFIT LIFE INSURANCE COMPANY
Read this Contract carefully. This document is a description of the legal
contract between the Group Contract Owner and Us.
A Certificate Owner may return a Certificate to Us within 10 days after
receipt by delivering or mailing it to Our Office. The return of the
Certificate by mail will be effective when the postmark is affixed to a
properly addressed and postage prepaid envelope. This returned Certificate
will be treated as if We never issued it and We will refund the Certificate
Value plus any amount deducted from the purchase payment before it was
allocated to the Variable Account. The Certificate Value will be determined
as of the date of surrender (i.e., for a mailed contract, the postmark date).
The Group Contract, as issued to the Group Contract Owner by Us with
any riders or endorsements, alone makes up the agreement under which benefits
are paid. The Group Contract may be inspected at the office of the Group
Contract Owner. In consideration of any application for a Certificate and
the payment of purchase payments, We agree, subject to the terms and
conditions of the Group Contract, to provide the benefits described in the
Certificate to the Certificate Owner. If a Certificate is In Force on the
Income Date, We will begin making income payments to the Annuitant. We will
make such payments according to the terms of the Certificate and Group
Contract.
Signed for the Company on the Issue Date at Our Executive Office, 100
Manhattanville Road, Purchase, New York 10577:
_________________________ _________________________
Secretary President
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase payment
flexibility. This contract is nonparticipating with no dividends.
Annuity payments and other values provided by this certificate when based
on the investment experience of a separate account, may increase or decrease
and are not guaranteed as to dollar amount. Variable annuity payments will
not decrease over time if the separate account (before deduction of the
annual .35% asset charge) has an annualized investment return of at least
5.0%. See pages 12-13 and 19 for further explanation. Certificate assets
allocated to the separate account incur charges of .35% before annuity
payments begin and .35% once annuity payments begin. Income, capital gains,
and/or losses whether or not realized, from assets allocated to the separate
account are credited to or charges against the separate account without
regard to income, capital gains, and/or losses arising out of any other
business the company may conduct.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
100 Manhattanville Road, Purchase, New York 10577
Service Office
125 High Street, 11th Floor
Boston, Massachusetts 02110
Contract Schedule
GROUP CONTRACT OWNER Keyport Benefit Insurance Trust I
GROUP CONTRACT NUMBER DVA(NY)001
GROUP CONTRACT ISSUE DATE 10/1/97
MINIMUM INITIAL PAYMENT $5,000
MINIMUM ADDITIONAL PAYMENT $1,000
Charges
Distribution Charge We deduct 0.000411% of the assets in each Variable
Account Sub-Account on a daily basis (equivalent to an annual rate of 0.15%)
to compensate Us for a portion of Our distribution costs.
Administrative Charge We deduct 0.000411% of the assets in each Variable
Account Sub-account on a daily basis (equivalent to an annual rate of 0.15%)
to compensate Us for a portion of Our administrative expenses.
Mortality and Expense Risk Charge We deduct 0.003403% of the assets in each
Variable Account Sub-account on a daily basis (equivalent to an annual rate
of 1.25%) for Our mortality and expense risks.
Certificate Maintenance Charge We charge $36 to cover a portion of Our
ongoing Certificate maintenance expenses. The charge is incurred at the
beginning of the Certificate Year and is deducted from the assets of the
Variable Account on each Certificate Anniversary and at the time of total
surrender. We reserve the right to charge up from the assets of the Variable
Account $100 per year. This charge will not apply after annuitization.
Transfer Charge Currently none, however, We reserve the right to charge $25
for a transfer if a Certificate Owner makes more than 12 transfers per
Certificate Year.
Surrender Charge At the time of each partial withdrawal or at total surrender
a contingent deferred sales charge is imposed as a percentage of each
Purchase Payment during the seven years after the date of its payment, as
follows:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
7% 6% 5% 4% 3% 2% 1%
Thereafter 0%.
Initial Purchase Payment Allocation
Currently, Certificate Owners can select 7 Sub-accounts and the Fixed
Account. We reserve the right to increase or decrease the number of
available Sub-accounts. The minimum a Certificate Owner may allocate to any
Sub-account or the Fixed Account is 10% of any Purchase Payment. An initial
Purchase Payment may be invested as follows:
Manning & Napier Moderate Growth x%
Manning & Napier Growth x%
Manning & Napier Maximum Horizon x%
Manning & Napier Small Cap x%
Manning & Napier Equity x%
Manning & Napier Bond x%
SteinRoe Cash Income x%
Interest Rate at Issue
Fixed Account - 1 Year x% ____%
Transfer Guidelines
Number of Transfers and Transfer Charge: Currently, Certificate Owners are
permitted 12 transfers per Certificate Year during the Accumulation Period
and 1 transfer every 6 months during the Annuity Period. We reserve the
right to change, upon notice, the frequency of transfers a Certificate Owner
can make. We also reserve the right to impose a charge for any transfer in
excess of 12 per Certificate Year. The transfer charge is shown in the
Charges section of the Schedule.
Minimum amount to be transferred: None
Minimum amount which must remain in a Sub-account after transfer: None
Limitations on transfers from Fixed Account: Transfers during a Certificate
Year from the Fixed Account to the Variable Account are limited to 25% of the
Fixed Account Value at the beginning of the Certificate Year. This
limitation will be waived if a systematic program of monthly transfers has
been established.
Partial Withdrawals
A Certificate Owner may make partial withdrawals during the Accumulation
Period without incurring a Surrender Charge, as follows:
(1) In any Certificate Year a Certificate Owner may withdraw an aggregate
amount not to exceed, at the time of withdrawal:
(a) the Certificate Value, less
(b) the portion of the Purchase Payments not previously withdrawn by
that Certificate Owner; and
(2) In any Certificate Year after the first, a Certificate Owner may
also withdraw the positive difference, if any, between the amount
withdrawn pursuant to (1) above in any such subsequent year and 10%
of the Certificate Value as of the preceding Certificate
Anniversary.We will collect the Surrender Charge shown on the
Schedule with respect to partial withdrawals in excess of the
amounts described in (1) and (2) above.
Minimum withdrawal amount: $300, unless the withdrawal is made pursuant to
Our Systematic Withdrawal Program described below, in which case the minimum
withdrawal is $100.
Minimum Certificate Value which must remain after a partial withdrawal:
$2,000, provided no additional Purchase Payments have been made within the 3
years preceding the partial withdrawal.
Death Benefits
Adjustment of Certificate Value
When We receive due proof of death of the Certificate Owner, any Joint
Certificate Owner, or the Annuitant if the Certificate Owner is a non-natural
Person, We will compare, as of the date of death, the Certificate Value to
the Death Benefit amount defined in the Certificate Schedule. If the
Certificate Value is less than the Death Benefit, We will increase the
current Certificate Value by the amount of the difference. Any amount
credited will be allocated to the Variable Account and/or the Fixed Account
based on the Purchase Payment allocation selection that is in effect when We
receive due proof of death.
Waiver of Surrender Charges
If the Certificate is surrendered within 90 days of the date of death of the
Certificate Owner, any Joint Certificate Owner, or the Annuitant if the
Certificate Owner is a non-natural Person, any applicable Surrender Charges
will not be deducted from the Certificate Withdrawal Value.
Death Benefit Amount
A Certificate Schedule will contain one or more of the following Death
Benefit provisions.
Purchase Payment Death Benefit
On the Certificate Date the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) Start with the Death Benefit from the prior Valuation Date;
(2) Add to (1) any additional Purchase Payments paid during the current
Valuation Period and subtract from (1) any partial withdrawals
(including any associated Surrender Charge incurred) made during the
current Valuation Period.
Certificate Anniversary Death Benefit
On the Certificate Date, the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) (a) Start with the Death Benefit from the Certificate Date;
(b) Add to (a) any additional Purchase Payments paid since the
Certificate Date and subtract from (a) any partial withdrawals
(including any associated Surrender Charge incurred) made since
the Certificate Date;
(2) (a) Determine the Certificate Value for each Certificate Anniversary
(the "Anniversary Value") before the 81st birthday of the
Certificate Owner or, if the Certificate Owner is a non-natural
Person, the Annuitant;
(b) Increase each "Anniversary Value" by any Purchase Payments made
after that Value's Anniversary;
(c) Decrease each "Anniversary Value" by the following amount
calculated at the time of each partial withdrawal made after
that Value's Anniversary: (i) the partial withdrawal amount
(including any associated Surrender Charge incurred) divided by
the Certificate Value immediately preceding the withdrawal, (ii)
multiplied by the "Anniversary Value" immediately preceding the
withdrawal;
(d) Select the highest "Anniversary Value" after the adjustments in
(b) and (c) above;
(3) Set the Death Benefit equal to the greater of (1) and (2).
If there is a change of Certificate Owner, the new Certificate Owner's age
will be used to determine the amount in (2) above.
The Variable Separate Accounts
Sub-accounts investing in shares of mutual funds
Variable Account J is a unit investment trust variable separate account,
organized in and governed by the laws of the State of Massachusetts, Our
state of domicile. Variable Account J is divided into Sub-accounts. Each
Sub-account listed below invests in shares of the corresponding Portfolio of
the Eligible Fund shown.
Sub-account Eligible Fund and Portfolio
Manning & Napier Insurance Fund, Inc.
Moderate Growth Manning & Napier Moderate Growth Portfolio
Sub-account -seeks with equal emphasis long-term
growth and preservation of capital.
Growth Sub-account Manning & Napier Growth Portfolio - seeks
long-term growth of capital. The
secondary objective is the preservation of
capital.
Maximum Horizon account Manning & Napier Maximum Horizon Portfolio
- seeks to achieve the high level of long-
term capital growth typically associated
with the stock market.
Small Cap Sub- Manning & Napier Small Cap Portfolio -
account seeks to achieve long term growth of
capital by investing principally in the
equity securities of small issuers.
Equity Sub-account Manning & Napier Equity Portfolio - seeks
long-term growth of capital.
Bond Sub-account Manning & Napier Bond Portfolio - seeks to
maximize total return in the form of both
income and capital appreciate by investing
in fixed income securities without regard
to maturity.
Stein Roe Money Market Stein Roe Money Market Fund - seeks high
Sub-account current income from short-term money
("Money Market" Sub-account) market instruments while emphasizing
preservation of capital and maintaining
excellent liquidity.
Variable Account M is an investment company variable separate account which
invests directly in securities, organized in and governed by the laws of the
State of Massachusetts, Our state of domicile. Variable Account M is divided
into Sub-accounts. The investment advisor to each Sub-account is set forth
opposite each Sub-account shown below:
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 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
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 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 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 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 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. 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.
Systematic Withdrawal Program. Keyport Benefit 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.
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.
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 2 FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $4.45 $4.34 47 $5.05 $4.78 64 $6.54 $5.98 80 $9.14 $8.67
31 4.47 4.35 48 5.11 4.82 65 6.68 6.10 81 9.29 8.86
32 4.50 4.37 49 5.17 4.87 66 6.82 6.22 82 9.44 9.05
33 4.52 4.39 50 5.23 4.92 67 6.97 6.35 83 9.57 9.23
34 4.55 4.41 51 5.29 4.97 68 7.12 6.49 84 9.69 9.40
35 4.57 4.43 52 5.36 5.02 69 7.28 6.63 85 9.81 9.55
36 4.60 4.45 53 5.43 5.08 70 7.44 6.79 86 9.91 9.69
37 4.63 4.47 54 5.50 5.13 71 7.61 6.95 87 10.01 9.82
38 4.67 4.49 55 5.58 5.20 72 7.78 7.12 88 10.10 9.94
39 4.70 4.52 56 5.67 5.27 73 7.95 7.30 89 10.17 10.04
40 4.74 4.55 57 5.76 5.34 74 8.12 7.48 90 10.24 10.13
41 4.78 4.57 58 5.85 5.41 75 8.30 7.67 91 10.30 10.21
42 4.82 4.60 59 5.95 5.49 76 8.47 7.87 92 10.35 10.27
43 4.86 4.64 60 6.06 5.58 77 8.65 8.07 93 10.39 10.33
44 4.91 4.67 61 6.17 5.67 78 8.82 8.27 94 10.43 10.37
45 4.95 4.70 62 6.29 5.77 79 8.98 8.47 96 10.45 10.41
46 5.00 4.74 63 6.41 5.87
TABLE 3: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 3 FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30 $4.24$4.28$4.31$4.34$4.36$4.38$4.40$4.42$4.43$4.44$4.45 $4.45 $4.45 $4.46
35 4.26 4.30 4.35 4.39 4.43 4.47 4.50 4.52 4.54 4.56 4.57 4.57 4.58 4.58
40 4.28 4.33 4.39 4.45 4.51 4.56 4.61 4.65 4.68 4.71 4.73 4.74 4.75 4.75
M 45 4.29 4.35 4.42 4.50 4.58 4.66 4.74 4.80 4.86 4.90 4.93 4.96 4.97 4.98
A 50 4.30 4.37 4.46 4.55 4.66 4.77 4.88 4.98 5.07 5.14 5.20 5.23 5.25 5.27
L 55 4.31 4.39 4.48 4.59 4.73 4.87 5.03 5.18 5.32 5.44 5.53 5.59 5.63 5.65
E 60 4.32 4.40 4.50 4.63 4.78 4.97 5.18 5.40 5.61 5.80 5.96 6.07 6.13 6.17
65 4.33 4.41 4.52 4.65 4.83 5.05 5.31 5.61 5.92 6.23 6.50 6.70 6.83 6.90
A 70 4.33 4.42 4.53 4.68 4.87 5.11 5.42 5.80 6.23 6.70 7.14 7.50 7.75 7.90
G 75 4.34 4.42 4.54 4.69 4.89 5.16 5.50 5.95 6.50 7.15 7.83 8.45 8.92 9.23
E 80 4.34 4.43 4.54 4.70 4.91 5.19 5.56 6.06 6.71 7.55 8.52 9.50 10.34 10.93
85 4.34 4.43 4.55 4.71 4.92 5.21 5.60 6.13 6.86 7.85 9.10 10.52 11.87 12.93
90 4.34 4.43 4.55 4.71 4.93 5.22 5.62 6.18 6.96 8.06 9.55 11.39 13.34 15.05
95 4.34 4.43 4.55 4.71 4.93 5.23 5.64 6.21 7.02 8.20 9.86 12.09 14.69 17.20
TABLE 4: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION A FOR EACH $1,000
APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $17.91 12 $8.24 19 $5.73 25 $4.71
6 15.14 13 7.71 20 5.51 26 4.59
7 13.16 14 7.26 21 5.32 27 4.47
8 11.68 15 6.87 22 5.15 28 4.37
9 10.53 16 6.53 23 4.99 29 4.27
10 9.61 17 6.23 24 4.84 30 4.18
11 8.86 18 5.96
TABLE 5: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION B FOR EACH $1,000
APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $3.12 $2.99 47 $3.82 $3.53 64 $5.40 $4.83 80 $8.15 $7.66
31 3.15 3.01 48 3.88 3.58 65 5.55 4.96 81 8.32 7.86
32 3.18 3.03 49 3.94 3.63 66 5.69 5.08 82 8.47 8.06
33 3.21 3.06 50 4.01 3.68 67 5.85 5.22 83 8.61 8.25
34 3.24 3.08 51 4.08 3.74 68 6.01 5.37 84 8.75 8.43
35 3.27 3.11 52 4.15 3.80 69 6.18 5.52 85 8.87 8.60
36 3.31 3.13 53 4.23 3.86 70 6.35 5.68 86 8.98 8.75
37 3.34 3.16 54 4.31 3.93 71 6.52 5.85 87 9.08 8.88
38 3.38 3.19 55 4.39 4.00 72 6.70 6.03 88 9.18 9.01
39 3.42 3.22 56 4.48 4.07 73 6.89 6.21 89 9.26 9.12
40 3.46 3.25 57 4.58 4.15 74 7.07 6.41 90 9.33 9.21
41 3.51 3.29 58 4.68 4.23 75 7.26 6.61 91 9.40 9.30
42 3.55 3.32 59 4.78 4.32 76 7.44 6.81 92 9.45 9.37
43 3.60 3.36 60 4.89 4.41 77 7.63 7.02 93 9.49 9.43
44 3.65 3.40 61 5.01 4.50 78 7.81 7.23 94 9.53 9.47
45 3.71 3.44 62 5.14 4.61 79 7.98 7.45 95 9.55 9.51
46 3.76 3.49 63 5.27 4.72
TABLE 6: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION C FOR EACH $1,000
APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30 $2.88$2.93$2.97$3.01$3.04$3.07$3.08$3.10$3.11$3.12$3.12 $3.12 $3.13 $3.13
35 2.91 2.97 3.03 3.09 3.14 3.18 3.21 3.23 3.25 3.26 3.27 3.27 3.28 3.28
40 2.93 3.01 3.09 3.17 3.24 3.30 3.35 3.39 3.42 3.44 3.46 3.46 3.47 3.47
45 2.95 3.04 3.14 3.24 3.34 3.43 3.51 3.58 3.63 3.66 3.69 3.71 3.72 3.72
M 50 2.96 3.06 3.17 3.30 3.43 3.56 3.68 3.79 3.87 3.94 3.98 4.01 4.03 4.03
A 55 2.97 3.07 3.20 3.34 3.50 3.68 3.85 4.02 4.16 4.27 4.34 4.39 4.42 4.44
L 60 2.98 3.09 3.22 3.38 3.56 3.78 4.01 4.25 4.47 4.66 4.80 4.89 4.95 4.98
E 65 2.98 3.09 3.23 3.40 3.61 3.86 4.15 4.48 4.81 5.12 5.37 5.55 5.66 5.72
70 2.99 3.10 3.24 3.42 3.64 3.92 4.26 4.67 5.13 5.60 6.04 6.38 6.60 6.73
A 75 2.99 3.10 3.25 3.43 3.66 3.96 4.34 4.81 5.39 6.06 6.75 7.35 7.79 8.07
G 80 2.99 3.11 3.25 3.44 3.68 3.99 4.39 4.92 5.60 6.45 7.44 8.42 9.23 9.79
E 85 2.99 3.11 3.26 3.44 3.69 4.00 4.42 4.98 5.73 6.74 8.01 9.44 10.77 11.81
90 2.99 3.11 3.26 3.45 3.69 4.01 4.44 5.02 5.82 6.93 8.43 10.29 12.25 13.95
95 2.99 3.11 3.26 3.45 3.70 4.02 4.45 5.04 5.87 7.05 8.73 10.97 13.58 16.11
Endorsements
To be inserted only by Us
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase payment
flexibility. This Contract is non participating with no dividends.
EXHIBIT 4(i)
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
.35% asset charge) has an annualized investment return of at least 5.35%. See
pages 12-13 and 19 for further explanation. Certificate assets allocated to
the separate account incur charges of .35% before annuity payments begin and
.35% once annuity payments begin. Income, capital gains, and/or losses
whether or not realized, from assets allocated to the separate account are
credited to or 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)001
CERTIFICATE NUMBER 0200999999-01
CERTIFICATE OWNER John Q Public
JOINT CERTIFICATE OWNER Jane Q Public
CERTIFICATE OWNER DOB 12/07/45
JOINT CERTIFICATE OWNER DOB 10/31/47
ANNUITANT John Q Public
ANNUITANT DOB 12/07/45
CERTIFICATE DATE February 28, 1997
INCOME DATE 03/01/2030
INITIAL PURCHASE PAYMENT $10,000.00
MINIMUM INITIAL PAYMENT $5,000
MINIMUM ADDITIONAL PAYMENT $1,000
ISSUE STATE NY
IRS PLAN TYPE Non-Qualified
Charges
Distribution Charge: None
Administrative Charge: None
Mortality and Expense Risk Charge: We deduct .000957% of the assets in each
Variable Account Sub-account on a daily basis (equivalent to an annual rate
of 0.35%) for Our mortality and expense risks.
Certificate Maintenance Charge: We charge $35 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: None
Initial Purchase Payment Allocation
Currently, Certificate Owners can select 7 Sub-accounts. We reserve the
right to increase or decrease the number of available Sub-accounts. The
minimum You may allocate to any Sub-account is 10% of any Purchase Payment.
Your initial Purchase Payment has been invested as follows:
Manning & Napier Moderate Growth x%
Manning & Napier Growth x%
Manning & Napier Maximum Horizon x%
Manning & Napier Small Cap x%
Manning & Napier Equity x%
Manning & Napier Bond x%
SteinRoe Cash Income x%
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 You can make. We
also reserve the right to impose a charge for any transfer in excess of 12
per Certificate Year. The transfer charge is shown in the Charges section of
the Schedule.
Minimum amount to be transferred: None
Minimum amount which must remain in a Sub-account after transfer: None
Partial Withdrawals
You may make partial withdrawals during the Accumulation Period without
incurring a surrender charge.
Minimum withdrawal amount: $300.
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, 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 based on the
Purchase Payment allocation selection that is in effect when We receive due
proof of death.
Death Benefit Amount
Purchase Payment Death Benefit
On the Certificate Date the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) Start with the Death Benefit from the prior Valuation Date;
(2) Add to (1) any additional Purchase Payments paid during the current
Valuation Period and subtract from (1) any Partial Withdrawals
(including any associated surrender charge incurred) made during
the current Valuation Period.
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 Keyport Benefit 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
Manning & Napier Insurance Fund, Inc.
Moderate Growth Manning & Napier Moderate Growth Portfolio -
Sub-account seeks with equal emphasis long-term growth and
preservation of capital.
Growth Sub-account Manning & Napier Growth Portfolio - seeks
long-term growth of capital. The secondary
objective is the preservation of capital.
Maximum Horizon account Manning & Napier Maximum Horizon Portfolio -
seeks to achieve the high level of long-term
capital growth typically associated with the
stock market.
Small Cap Sub- Manning & Napier Small Cap Portfolio - seeks
account to achieve long term growth of capital by
investing principally in the equity securities
of small issuers.
Equity Sub-account Manning & Napier Equity Portfolio - seeks
long-term growth of capital.
Bond Sub-account Manning & Napier Bond Portfolio - seeks to
maximize total return in the form of both
income and capital appreciate by investing in
fixed income securities without regard to
maturity.
SteinRoe Variable Investment Trust
CIF Sub-account Cash Income Fund - seeks high current income
("Money Market" Sub-account) from short-term money market investments while
emphasizing preservation of capital and
maintaining excellent liquidity.
Sub-accounts investing directly in securities - None
The Fixed Account - None
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 11.81
90 2.99 3.11 3.26 3.45 3.69 4.01 4.44 5.02 5.82 6.93 8.43 10.29 12.25 13.95
95 2.99 3.11 3.26 3.45 3.70 4.02 4.45 5.04 5.87 7.05 8.73 10.97 13.58 16.11
Endorsements
To be inserted only by Us
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CERTIFICATE with limited purchase payment
flexibility. This certificate is nonparticipating with no dividends.
EXHIBIT 6(a)
AMENDED AND RESTATED
CHARTER
of
KEYPORT BENEFIT LIFE INSURANCE COMPANY
A NEW YORK CORPORATION
ARTICLE I
The name of the Corporation shall be Keyport Benefit Life Insurance
Company.
ARTICLE II
The principal office of the Corporation shall be located in the
City of Purchase, County of Westchester and State of New York.
ARTICLE III
The Corporation is formed for the purpose of transacting the
following kinds of insurance business as defined in Paragraphs 1, 2 and 3 of
subsection (a) of Section 1113 of the Insurance Law of the State of New York:
1. "Life Insurance" means every insurance upon the lives of human
beings, and every insurance appertaining thereto, including the granting
of endowment benefits, additional benefits in the event of death by
accident, additional benefits to safeguard the contract from lapse,
accelerated payments of part or all of the death benefit or a special
surrender value upon diagnosis (A) of terminal illness defined as life
expectancy of twelve months or less, or (B) of a medical condition
requiring extraordinary medical care or treatment regardless of life
expectancy, or provide a special surrender value, upon total and
permanent disability of the insured, and optional modes of settlement of
proceeds. "Life Insurance" also includes additional benefits to
safeguard the contract against lapse in the event of unemployment of the
insured. Amounts paid the insurer for life insurance and proceeds
applied under optional modes of settlement or under dividend options may
be allocated by the insurer to one or more separate accounts pursuant to
section four thousand two hundred forty of this chapter.
2. "Annuities" meaning all agreements to make periodical payments for
a period certain or where the making or continuance of all or some of a
series of such payments, or the amount of any such payment, depends upon
the continuance of human life, except payments made under the authority
of paragraph one hereof. Amounts paid the insurer to provide annuities
and proceeds applied under the optional modes of settlement or dividend
options may be allocated by the insurer to one or more separate accounts
pursuant to section four thousand two hundred forty of this chapter.
3. "Accident and health insurance" means (i) insurance against death
or personal injury by accident or by any specified kind or kinds of
accident and insurance against sickness, ailment or bodily injury,
including insurance providing disability benefits pursuant to article
nine of the workers' compensation law, except as specified in item (ii)
hereof; and (iii) non-cancellable disability insurance, meaning
insurance against disability resulting from sickness, ailment or bodily
injury (but excluding insurance solely against accidental injury) under
any contract which does not give insurer the option to cancel or
otherwise terminate the contract at or after one year from its effective
date or renewal date.
ARTICLE IV
The amount of the capital shall be Two Million Dollars ($2,000,000)
to consist of one thousand shares of Capital Stock of the par value of Two
Thousand Dollars ($2,000.00) each.
ARTICLE V
Section 1. The corporate powers shall be exercised by a Board of
nine directors, provided that the number of directors shall be increased to
thirteen within one year following the end of the calendar year in which the
admitted assets of the Corporation exceed one and one-half billion dollars.
Section 2. At all times, the majority of Directors shall be
citizens and residents of the United States and not less than three thereof
shall be residents of the State of New York, and none shall be less than
eighteen years of age. Directors need not be Stockholders.
Section 3. A minimum of one-third of the Board of Directors shall
be Outside Directors (as hereinafter defined), provided that if the size of
the Board of Directors as set forth in this Charter is less than thirteen
directors, then four members of the Board of Directors shall be Outside
Directors. For purposes of this Article V, the term "Outside Directors"
shall mean a director who is not an officer or salaried employee of the
Corporation or any entity controlled by, controlling or under common control
with the Corporation and who is not a beneficial owner of a controlling
interest in the voting stock of the Corporation or any such entity.
ARTICLE VI
Section 1. The Directors shall be elected by Stockholders, as
prescribed by the laws of the State of New York or by by-laws not
inconsistent with this charter or the laws of the State of New York. An
election of Directors shall be held annually on the first Thursday of March,
if not a legal holiday, and, if a legal holiday, then on the next succeeding
business day not a legal holiday, at a place designated in the Notice of
Meeting. The Stockholders by a majority vote of outstanding shares at a
meeting may remove any Directors with or without cause. Any Director may be
removed by the Board of Directors for cause, at any time, or whenever such
action is requested by the Superintendent of Insurance of the State of New
York.
Section 2. Whenever any vacancy or vacancies shall occur in the
Board of Directors by death, resignation, removal or otherwise, a majority of
the remaining members of the Board, at a meeting called for that purpose, or
at any regular meeting, may elect a Director or Directors to fill the vacancy
or vacancies thus occasioned and each Director so elected shall serve until
his or her successor is selected and is qualified. In the event of any
vacancy or vacancies in the Board of Directors, the Corporation shall not for
that reason be dissolved, but every Director shall continue to hold office
and discharge his or her duties until his or her successor shall have been
elected and qualified.
Section 3. Vacancies in any office may be filled for the remainder
of the term in which the same shall occur by a majority vote of the Board of
Directors.
ARTICLE VII
Section 1. The Board of Directors, may appoint from its own
membership an Executive Committee of not less than three members which shall
act for the Board of Directors between the meetings of said Board, during
which time the Executive Committee shall exercise all of the powers and
duties of the Board of Directors except that it shall not have the power or
authority to alter or amend the By-Laws, or to remove, or change the
compensation of, any officer or director. The Executive Committee shall meet
at stated times or on notice to all by any of its own members. It shall fix
its own rules of procedure. A majority of the members, but in no event less
than three members, shall constitute a quorum. The Executive Committee shall
keep regular minutes of its proceedings and report the same to the Board of
Directors at its next regular meeting.
Section 2. In the event a vacancy occurs on the Executive
Committee in the interim between meetings of the Board of Directors, the
Chairman of the Board is authorized and empowered to appoint a member of the
Board of Directors as a successor who shall serve until the next regular
meeting of the Board of Directors at which time the Board of Directors shall
fill the vacancy.
ARTICLE VIII
- RESERVED -
ARTICLE IX
Section 1. The officers of the Corporation shall be a President
and a Secretary, and any other officer or officers as may be chosen by the
Board of Directors, as prescribed by by-laws not inconsistent with this
Charter or the laws of the State of New York. Each officer shall be elected
annually by the Board of Directors and shall hold office for such term as the
Board of Directors shall determine.
Section 2. In the event a vacancy occurs in the office of
President or Secretary, the Board of Directors shall, at the earliest
practicable date, elect a successor who shall hold office for the unexpired
term of his or her predecessor. Any vacancy in any other office may be
filled for the unexpired portion of the term by the Board of Directors at any
regular or special meeting.
Section 3. Any officer may be removed at any time by the
affirmative vote of not less than a majority of the entire Board of
Directors.
Section 4. Except for the offices of President and Secretary, any
number of offices may be held by the same person.
Section 5. The duties of the officers shall be those customarily
pertaining to their respective offices or positions, elective or appointive,
together with such other duties as may be prescribed by law or assigned by
the Board of Directors.
ARTICLE X
Alterations, amendments or restatements of this Charter may be made
upon the approval of a majority of the entire Board of Directors and upon the
consent of the holders of two-thirds of the outstanding shares of the
Corporation. No such alteration, amendment or restatement shall be
effective, however, unless its adoption and consent has been made in
compliance with applicable provisions of the New York Insurance Law.
ARTICLE XI
The duration of the corporation existence of the Corporation shall
be perpetual.
EXHIBIT 6(b)
BY-LAWS
of
KEYPORT BENEFIT LIFE INSURANCE COMPANY
A NEW YORK CORPORATION
Amended and Adopted August 28, 1987
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of the shareholders of the
Corporation shall be held at the registered office of the Corporation or at
such places, within or without the State of New York, as may be fixed from
time to time by the Board of Directors.
Section 2. Annual Meeting. Commencing in the year 1987, the annual
meeting of shareholders shall be held on the first Thursday in March of every
year, if not a legal holiday, and if a legal holiday, then on the next
following business day not a legal holiday, at 11:00 a.m., or at such other
date and time as may be fixed by the Board of Directors. At each annual
meeting of stockholders the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of each annual
meeting of stockholders, stating the place, date and hour of the meeting,
shall be given in the manner set forth in Article IV of these By-Laws not
less than ten nor more than fifty days before the date of the meeting to each
stockholder entitled to vote at the meeting.
Section 4. Special Meetings. Special meetings of shareholders may be
called at any time for any purpose or purposes, by the Board of Directors, or
by the President, and shall be called by the President or the Secretary upon
the written request of a majority of the Board of Directors, or upon the
written request of a shareholder or shareholders holding of record at least
50% of the outstanding shares of stock of the Corporation entitled to vote at
such meeting. Such request shall state the purpose or purposes of the
proposed meeting.
Section 5. Notice of Special Meeting. Notice of each special meeting
of shareholders shall be given in the manner set forth in Article IV of these
By-Laws not less than ten nor more than fifty days before the date of the
meeting to each shareholder entitled to vote at such meeting. Each such
notice shall state the place, date and hour of the meeting, and the purpose
or purposes for which the meeting is called and indicate by whom it is being
called.
Section 6. Quorum. Except as otherwise required by law or the
Certificate of Incorporation, the presence in person or by proxy of the
holders of record of a majority of the shares entitled to vote at a meeting
of shareholders shall be necessary, and shall constitute a quorum, for the
transaction of business at such meeting. If a quorum is not present or
represented by proxy at any meeting of stockholders, the holders of a
majority of the shares entitled to vote at the meeting who are present in
person or represented by proxy may adjourn the meeting from time to time
until a quorum is present. An adjourned meeting may be held later without
notice other than announcement at the meeting, except that if after the
adjournment a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given in the manner set forth in Article IV to
each stockholder entitled to vote at the adjourned meeting. At any such
adjourned meeting at which a quorum is present any business may be transacted
which might have been transacted at the meeting as originally called.
Section 7. Qualification of Voters. The only persons entitled to
notice of or to vote at any meeting of shareholders shall be the persons
shown as shareholders of the Corporation on the stock records of the
Corporation on the record date fixed by the Board of Directors, or, in the
absence thereof, at the close of business on the date the notice of the
meeting is given.
Section 8. Voting. At any meeting of stockholders each shareholder
having the right to vote shall be entitled to vote in person or by proxy.
Except as otherwise provided by law or the Charter, each shareholder shall be
entitled to one vote for each share of stock entitled to vote standing in his
name on the books of the Corporation. All elections of directors shall be
determined by plurality votes. Except as otherwise provided by law or in the
Charter or By-Laws, any other matter shall be determined by the vote of the
holders of a majority of the shares voting on it.
Section 9. Action Without a Meeting. Except as otherwise provided by
the Charter, whenever the vote of shareholders is required or permitted in
connection with any corporate action, such action may be taken without a
meeting on written consent setting forth the action so taken, signed by the
holders of all outstanding shares entitled to vote thereon.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Function. The Board of Directors shall manage the business
of the Corporation, except as otherwise provided by law, the Charter or these
By-Laws.
Section 2. Number and Term of Office. The number of directors
constituting the entire Board of Directors shall be such number, not less
than thirteen, as shall be determined by resolution of the Board of Directors
from time to time. At all times a majority of the entire Board of Directors
shall be citizens and residents of the United States and not less than three
thereof shall be residents of the State of New York, and none shall be less
than eighteen years of age. At least five Directors shall be neither officers
nor salaried employees of the Corporation. Directors need not be
stockholders. Except as otherwise provided by law, the Charter or these By-
Laws, the term of office of each director shall be from the time of the
director's election and qualification until the annual meeting of
shareholders next succeeding the director's election and until the successor
shall have been duly elected and qualified.
Section 3. Removal of Directors. Except as otherwise provided by law,
any of the directors may be removed for cause by the vote of a majority of
the entire Board. Except as otherwise provided by law, any director may be
removed with or without cause, at any time, by the vote of the holders of
record of a majority of the shares entitled to vote for the election of
directors.
Section 4. Vacancies. Newly created directorships resulting from an
increase in the number of directors and vacancies occurring in the Board for
any reason may be filled by the vote of a majority of the directors then in
office, even if less than a quorum exists, or by the shareholders of the
Corporation at the next annual meeting or any special meeting called for the
purpose, and each director so elected shall hold office until the next annual
election of directors, and until his/her successor shall be duly elected and
qualified.
Section 5. Resignation. Any director of the Corporation may resign at
any time by giving written notice of his/her resignation to the Board of
Directors, the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein or, if no time is
specified therein, at the time of receipt thereof, and the acceptance of such
resignation shall not be necessary to make it effective.
Section 6. Executive Committee. By the affirmative vote of a majority
of the entire Board, the Board of Directors may designate from among its
members an Executive Committee and other committees, each consisting of at
least five members. At least two members must be neither officers nor
salaried employees of the Corporation. The Executive Committee shall have
all the authority of the Board of Directors except as otherwise provided by
Section 712 of the New York Business Corporation Law or other applicable
statute. Any other committees shall have such authority as the Board of
Directors shall provide. The Board of Directors may designate one or more
directors as alternate members of the Executive Committee or any other
committee to replace absent members. Members of all committees shall serve
at the pleasure of the Board of Directors.
Section 7. Committee of Independent Directors. The Board of Directors
shall establish one committee comprised solely of Directors who are not
officers or salaried employees of the Corporation or any entity controlling,
controlled by, or under common control with the Corporation and who are not
beneficial owners of a controlling interest in the voting stock of the
Corporation or of any such entity. Such committee shall have responsibility
for recommending the selection of independent certified public accountants,
reviewing the Corporation's financial condition, the scope and results of the
independent audit and any internal audit, nominating candidates for director
for election by shareholders or policyholders, and evaluating the performance
of officers deemed to be principal officers of the Corporation and
recommending to the Board of Directors the selection and compensation of such
principal officers.
Section 8. Action by Unanimous Written Consent. Any action required or
permitted to be taken by the Board of Directors or any committee thereof may
be taken without a meeting if all members of the Board or the committee
consent in writing to the adoption of a resolution authorizing the action.
The resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board
or committee.
ARTICLE III
MEETINGS OF DIRECTORS
Section 1. First Meeting. The first meeting of each newly elected
Board of Directors shall be held immediately following each annual meeting of
shareholders. If the meeting is held at the place of the meeting of
shareholders, no notice of the meeting need be given to the newly elected
directors. If the first meeting is not so held, it shall be held at a time
and place specified in a notice given in the manner provided for notice of
special meetings of the Board of Directors.
Section 2. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice, or without notice, at such places and
at such times as shall from time to time be determined by the Board. If any
day fixed for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting will be held at that place at the
same hour on the next business day which is not a legal holiday.
Section 3. Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the President, or by the
Secretary, at the written request of any two directors. Notice of each such
meeting, stating the time and place of the meeting, shall be given in the
manner set forth in Article IV of these By-Laws not less than forty-eight
hours before the time such meeting is to be held. Notice of a meeting need
not be given to any director who submits a signed waiver of notice whether
before or after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to the director. A
notice, or waiver of notice, need not specify the purpose of any meeting of
the Board of Directors, unless otherwise provided by these By-Laws.
Section 4. Place of Meeting. The Board of Directors may hold its
meetings and keep the books and records of its proceedings at such place or
places within or without the State of New York as the Board may from time to
time determine.
Section 5. Quorum; Action by the Board. A majority of the entire Board
shall constitute a quorum for the transaction of business. Except as
otherwise provided by these By-Laws, or required by law, the affirmative vote
of a majority of the directors present at any meeting at which a quorum is
present shall be required for the taking of any action by the Board of
Directors. If a quorum is not present at any meeting of directors, a
majority of the directors present at the meeting may adjourn the meeting from
time to time until a quorum is present, without notice of the adjourned
meeting other than announcement at the meeting.
ARTICLE IV
NOTICES
Section 1. Notice to a Stockholder. Any notice to a stockholder shall
be in writing and either given personally or by mail. If mailed, a notice
will be deemed given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his/her address as it appears on the
records of stockholders or, if the stockholder shall have filed with the
Secretary of the Corporation a written request that notices to him/her be
mailed to some other address, then addressed to him/her at that other
address.
Section 2. Notice to a Director. Any notice to a director may be given
personally, by telephone or by mail, telegram, cable or similar
instrumentality. A notice will be deemed given when actually given in person
or by telephone, or seventy-two hours after having been deposited in the
United States mails or with the communications company through which it is
given, directed to the director at his/her business address or at such other
address as the director may have designated to the Secretary in writing as
the address to which notices should be sent.
Section 3. Waiver of Notice. Any person may waive notice of any
meeting by signing a written waiver, whether before or after the meeting. In
addition, attendance by a stockholder at a meeting in person or by proxy will
be deemed a waiver of notice unless the stockholder protests prior to the
conclusion of the meeting the lack of notice thereof. Attendance by a
director at a meeting will be deemed a waiver of notice unless the director
protests, prior to the meeting or at its commencement, the lack of notice
thereof.
ARTICLE V
OFFICERS
Section 1. Number. The officers of the Corporation shall be a
President, a Secretary, and a Treasurer, and the Board of Directors may also
elect one or more Vice Presidents, such Assistant Secretaries, Assistant
Treasurers and such other officers as it may from time to time deem
advisable. Any two or more offices, except the offices of President and
Secretary, may be held by the same person. No officer need be a director of
the Corporation.
Section 2. Election and Term of Office. Each officer shall be elected
by the Board of Directors and shall hold office for such term, if any, as the
Board of Directors shall determine. Any officer may be removed at any time,
either with or without cause, by the vote of a majority of the entire Board
of Directors.
Section 3. Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President. Such
resignation shall take effect at the time specified therein or, if no time is
specified therein, at the time of receipt thereof, and the acceptance of such
resignation shall not be necessary to make it effective.
Section 4. President. The President shall be the Chief Executive
Officer of the Corporation and, subject to the Board of Directors, shall have
charge of the affairs of the Corporation. The President shall keep the Board
of Directors fully informed and shall freely consult them concerning the
business of the Corporation in the President's charge. The President may
sign, execute and deliver in the name of the Corporation all deeds,
mortgages, bonds, contracts or other instruments authorized by the Board of
Directors, except in cases where the signing, execution or delivery thereof
shall be expressly delegated by the Board of Directors or by these By-Laws to
some other officer or agent of the Corporation or where any of them shall be
required by law otherwise to be signed, executed or delivered and he/she may
affix the seal of the Corporation to any instrument which shall require it.
Except as otherwise provided by these By-Laws, the President shall appoint
and remove, employ and discharge and fix the compensation of all servants,
agents, employees and clerks of the Corporation. The President shall, if
present, preside at all meetings of the Board of Directors and of the
shareholders and shall have the power to call special meetings of the
shareholders and of the Board of Directors and in addition to the powers
usually incident to the office of President as herein provided, shall have
such other powers and shall perform such other duties as may be assigned to
the President by the Board of Directors.
Section 5. Vice Presidents. The Vice Presidents, if any, shall perform
such duties as shall from time to time be assigned to them by the Board of
Directors, or the President. In the absence or in the event of the
disability of the President, the Vice Presidents shall, in the order
designated by the Board, perform the duties of the President.
Section 6. Secretary. The Secretary shall keep the minutes of all
meetings of the shareholders and of the Board of Directors in books provided
for that purpose. The Secretary shall attend to the giving and serving of
all notices of the Corporation. The Secretary shall affix the seal of the
Corporation to all contracts and instruments requiring the same. The
Secretary shall have charge of the seal of the Corporation and of such books
and papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to the examination by any director upon application
at the office of the Corporation during business hours, and shall in general
perform all the duties incident to the office of the Secretary, or which may
from time to time be assigned to him by the Board of Directors.
Section 7. Assistant Secretaries. The Assistant Secretaries, if any,
shall assist the Secretary in the performance of the Secretary's duties and
perform such duties as shall from time to time be assigned to them by the
Board of Directors or the President. In the absence of or in the event of
the disability of the Secretary, the Assistant Secretaries shall, in the
order designated by the Board, perform the duties of the Secretary.
Section 8. Treasurer. The Treasurer shall have custody of all funds,
securities and other property of the Corporation, and shall keep or cause to
be kept full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories
as may be designated by the Board of Directors. The Treasurer shall disburse
the funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the
President and the Board of Directors, when the President or the Board of
Directors so requires, an account of all transactions as Treasurer and of the
financial condition of the Corporation. In general the Treasurer shall
perform all the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to the Treasurer by the Board of
Directors.
Section 9. Assistant Treasurers. The Assistant Treasurers, if any,
shall assist the Treasurer in the performance of the Treasurer's duties and
perform such duties as shall from time to time be assigned to them by the
Board of Directors or the President. In the absence of or in the event of
the disability of the Treasurer, the Assistant Treasurers shall, in the order
designated by the Board, perform the duties of the Treasurer.
Section 10. Compensation. The compensation of the officers shall be
fixed from time to time by the Board of Directors or in such manner as it may
provide.
Section 11. Security. The Board of Directors may require any officer,
agent or employee to give security for the faithful performance of his/her
duties.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 1. Certificates. The shares of stock of the Corporation shall
be represented by certificates, in such form as the Board of Directors may
from time to time prescribe, signed by the President or a Vice President and
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary; however, unless otherwise provided by the Certificate of
Incorporation, the Board of Directors may provide by resolution that some or
all of any or all classes and series of shares in the Corporation shall be
uncertified shares, provided that any such resolution shall not apply to
shares represented by a certificate until such certificate has been
surrendered to the Corporation.
Section 2. Signatures on Certificates. Each certificate shall be
signed by the President or a Vice President and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation and
shall be sealed with the seal of the Corporation; or, where such certificates
are countersigned by a transfer agent and registered by a registrar, the
signatures of such officers and the seal of the Corporation may be in
facsimile. If any officer who has signed or whose facsimile signature has
been placed upon a certificate shall cease to be such officer before such
certificate is issued, it may be issued by the Corporation with the same
effect as if he/she were such officer at the date of issue.
Section 3. Lost or Destroyed Certificates. The Board of Directors may
direct that a new certificate be issued in place of any certificate issued by
the Corporation which is alleged to have been lost or destroyed. When doing
so, the Board of Directors may prescribe such terms and conditions precedent
to the issuance of the new certificate as it deems expedient, and may require
a bond sufficient to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss or destruction of the
certificate or the issuance of the new certificate.
Section 4. Record Date. The Board of Directors may fix in advance a
date as the record date for determination of the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to express consent
to, or dissent from, any proposal without a meeting, or to receive payment of
any dividend or allotment of any rights, or to take or be the subject of any
other action. Such date shall be not less than ten nor more than fifty days
before the date of such meeting, nor more than fifty days prior to any other
action. If no record date is so fixed, the record date shall be as provided
by law. A determination of stockholders entitled to notice of or to vote at
any meeting of stockholders which has been made as provided in this Section
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date for the adjourned meeting.
Section 5. Ownership. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of
shares to receive dividends, to vote, or to exercise any of the other rights
or privileges of an owner with regard to those shares.
Section 6. Rules and Regulations. The Board of Directors shall have
power and authority to make such rules and regulations as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
ARTICLE VII
CORPORATE SEAL
The Board of Directors shall provide a suitable seal containing the name of
the Corporation, which seal shall be in the charge of the Secretary. A
duplicate seal may be kept and used.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall end at the close of business on the
thirty-first day of December in each year.
ARTICLE IX
AMENDMENTS
Any and all By-Laws of the Corporation shall be subject to amendment or
repeal, in whole or in part, and new By-Laws not inconsistent with the laws
of the State of New York or any provision of the Certificate of Incorporation
may be adopted, by the affirmative vote of the holders of record of a
majority of the outstanding stock of the Corporation present in person, or
represented by proxy and entitled to vote in respect thereof, given at an
annual meeting or at any special meeting at which a quorum shall be present,
or by the affirmative vote of a majority of the entire Board of Directors
given at any meeting if, in each case, notice of the proposed amendment,
repeal, or adoption of new By-Laws has been included in the notice of such
meeting. Any By-Laws adopted by the Board of Directors may be altered or
repealed by the stockholders. If any By-Law regulating an impending election
of directors is adopted, amended or repealed by the Board of Directors, there
shall be set forth in the notice of the next meeting of shareholders for the
election of directors the By-Law so adopted, amended or repealed and a
concise statement of the changes made.
EXHIBIT 8(b)
FORM OF
PARTICIPATION AGREEMENT
AMONG
MANNING & NAPIER INSURANCE FUND, INC.
MANNING & NAPIER INVESTOR SERVICES, INC.
MANNING & NAPIERS ADVISORS, INC.
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; Manning
& Napier Insurance Fund, Inc. (the "Fund"), a Maryland Corporation; Manning &
Napier Investor Services, Inc. ("Distributor"), a New York corporation; and
Manning & Napier Advisors, Inc. ("Advisor"), a New York corporation.
WHEREAS, the Fund engages in business as an open-end investment manage
ment 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
Distributor substantially identical to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is 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 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
separate and variable life insurance 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 investment management
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Manning & Napier Advisors, Inc. (the "Advisor") is duly
registered as an investment advisor under the federal Investment Advisors Act
of 1940 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 a duly organized, and validly
existing segregated asset account as shown on Schedule B attached hereto (the
"Separate Account") established by resolution of the Boards 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, Distributor is registered as a broker-dealer with 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. (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.
Distributor 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 and the Distributor agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 Distributor 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 the 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 its Separate Account on those days on which the
Fund calculates its net asset value pursuant to rules of the SEC. 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 Distributor 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). The
Company agrees that all net amounts available under the Variable Insurance
Products with the form number(s) that are listed on Schedule B attached
hereto and incorporated herein by this reference, as such Schedule B may be
amended from time to time hereafter by mutual written agreement of all the
parties hereto (the "Contracts"), shall be invested in the Fund, in such
other Funds advised by Stein, Roe & Farnham Incorporated or the Advisor as
may be mutually agreed to in writing by the parties hereto, or in the
Company's general accounts, or in such other funds as the parties hereto
agree in writing.
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 Funds' 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 Distributor.
2.4 The Fund 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. 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 Distributor 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 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 Companies advise the Fund, in writing, of
such laws or any changes in such laws.
2.7 Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
Distributor 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 Advisor is and shall
remain duly registered under all applicable federal and state securities laws
and that the Advisor shall perform its obligations for the Fund in compliance
in all material respects with the applicable laws of the State of New York
and any applicable state and federal securities laws.
2.10 The Fund represents and warrants that all of its Directors,
officers, employees, investment advisors, and other individuals/entities
dealing with the money and/or to securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage in an amount not less than the minimal coverage as required
currently by Rule 17g-(1) of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisors, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund, 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. The Company agrees
to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to notify the
Fund and Distributor in the event such coverage no longer applies.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1 The Fund and the Advisor shall provide the Company with as many
copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request in connection with delivery
of the prospectus to shareholders and purchasers of Variable Insurance
Products. If requested by Company in lieu thereof, the Fund or the Advisor
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 the Company and the Fund as the parties agree to
in writing. In the event that the Company requests that the Fund or the
Advisor 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 prospectus.
3.2 The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from Distributor and the Company, and
at its expense, shall provide a final copy of such Statement of Additional
Information to Distributor 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 of Variable Insurance Products
(hereinafter "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 advisor is named, at
least ten (10) Business Days prior to its use. No such material shall be used
if the Fund or its designee reasonably objects to such use within five (5)
Business Days after receipt of its material.
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 ten (10) Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects
to such use within five (5) Business Days after receipt of such material.
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 fee or other compensation to the Company
under this Agreement (except for items covered in Article III), except that
if the Fund or any Portfolio adopts and implements a plan pursuant to Rule
12b-1 to finance distribution expenses, then Distributor may make payments to
the Company for the Variable Insurance Products if and in amounts agreed to
by Distributor in writing and such payments will be made out of existing fees
payable to Distributor, past profits of Distributor or other resources
available to Distributor. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
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 Fund's
proxy materials and reports to Owners.
ARTICLE VI. Potential Conflicts
6.1 The parties acknowledge that the Fund presently intends to file an
application with the SEC to request an order granting relief from various
provisions of the 1940 Act and the rules thereunder to the extent necessary
to permit the Fund shares to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and Qualified Plans. It is anticipated that
the Exemptive Order, when and if issued, shall require the Fund and each
Participating Insurance Company to comply with conditions and undertakings
substantially as provided in this Section 6. If the Exemptive Order imposes
conditions materially different from those provided for in this Section 6,
the conditions and undertakings imposed by the Exemptive Order shall govern
this Agreement and the parties hereto agree to amend this Agreement
consistent with the Exemptive Order. The Fund will not enter into a
participation agreement with any other Participating Insurance Company unless
it imposed the same conditions and undertakings as are imposed on the
Company.
6.2 The Board 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.
6.3 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 to the
interests of the Owners.
6.4 If it is determined by a majority of the Board, 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 directors), 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.
6.5 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); 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 shall be carried out with a view only to the
interests of the Owners. Any such withdrawal and termination must take place
within six (6) months after the Fund gives written notice that this provision
is being implemented, and until the end of that six (6) month period
Distributor and the Fund shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Fund.
6.6 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 within six (6) months 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. Until the end of the foregoing six (6)
month period, Distributor and the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Fund.
6.7 For purposes of Sections 6.4 through 6.7 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 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 by any such material irreconcilable conflict as determined by a
majority of the disinterested Members of the Board.
6.8 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, 6.2, 6.3,
6.4, 6.5, and 6.6 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 Distributor,
the Advisor, 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 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 Advisor
7.2(a) The Advisor shall indemnify and hold harmless the Company, and
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 Advisor, Distributor
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 Advisor,
Distributor or persons under its control) or wrongful conduct of
one or both of the Fund or the Advisor 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 Advisor to
provide the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the diversifica
tion 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 Advisor 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, Distributor or each
Separate Account, whichever is applicable.
7.2(c) The Advisor 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 Advisor 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 Advisor
of any such claim shall not relieve the Advisor 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 Advisor will be
entitled to participate, at its own expense, in the defense thereof. The
Advisor also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Advisor
to such party of the Advisor'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 Advisor 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 Advisor 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 Advisor may
otherwise have.
7.3 Indemnification by the Distributor
7.3(a) The Distributor 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 Distributor,
Advisor, Fund or persons under its control) or wrongful conduct of
the Distributor 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 Distributor, or
(iii) arise out of or result from any failure by the
Distributor 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 Distributor in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Distributor;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof.
7.3(b) The Distributor 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 Distributor 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 Distributor 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
Distributor of any such claim shall not relieve the Distributor 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 Distributor
will be entitled to participate, at its own expense, in the defense thereof.
The Distributor also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Distributor 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 Distributor 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 Distributor 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 Distributor 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 New York.
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 six months' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Distributor 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 and
the Distributor 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 and
the Distributor 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 Distributor by written
notice to the Company, if either one or both of the Fund or the
Distributor 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 is 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
Distributor concerning the reason for notice of termination
hereunder; or
(f) termination by the Company by written notice to the Fund and
the Distributor, if the Company shall determine, in its sole
judgement exercised in good faith, that either the Fund or the
Distributor 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
Company has been afforded a reasonable opportunity to respond to a
statement by the Fund or the Distributor concerning the reason for
notice of termination hereunder.
(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, of if the Fund reasonably believes
that the Variable Insurance Products may fail to so qualify.
Termination shall be effective upon receipt of notice by the
Company.
(h) At the option of the Company, upon the Fund's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of the Company within ten (10) days after
written notice of such breach is delivered to the Fund.
(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.
(j) At the option of the Company, if the Variable Insurance
Products are not sold in accordance with applicable federal and/or
state law by the Distributor. Termination shall be effective
immediately upon such occurrence without notice.
(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 Distributor 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
Distributor be required to make additional shares available to Existing
Contracts for more that 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 Distributor the opinion of counsel for the Company (which
counsel shall be reasonably satisfactory to the Fund and the Distributor) 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 Distributor ninety (90)
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:
c/o Manning & Napier Insurance Fund, Inc.
1100 Chase Square
Rochester, NY 14604
Attention: Corporate Secretary
If to the Company:
Keyport Benefit Life Insurance Company
Service Office
125 High Street
Boston, MA 02110
Attention: General Counsel
If to Distributor:
Manning & Napier Investor Services, Inc.
1100 Chase Square
Rochester, NY 14604
Attention: Secretary
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 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Distributor may assign the Agreement or
any rights or obligations hereunder to any affiliate of or company under
common control with the Distributor (but in such event the Distributor shall
continue to be liable under Article VII of this Agreement for any
indemnification due to the Company, and assignee shall also be liable), if
such assignee is duly licensed and registered to perform the obligations of
the Distributor under this Agreement.
11.9 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 Distributor 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:
MANNING & NAPIER INVESTOR SERVICES, INC.
By its authorized officer,
By:
Title:
Date:
MANNING & NAPIER INSURANCE FUND, INC.
By its authorized officer,
By:
Title:
Date:
MANNING & NAPIER ADVISORS, INC.
By its authorized officer,
By:
Title:
Date:
Schedule A
Manning & Napier Insurance Fund
Manning & Napier Moderate Growth Portfolio
Manning & Napier Growth Portfolio
Manning & Napier Equity Portfolio
Manning & Napier Small Cap Portfolio
Manning & Napier Bond Portfolio
Manning & Napier Maximum Horizon Portfolio
Schedule B
Separate Accounts Selected Funds
Variable Account A Manning & Napier Moderate Growth Portfolio
Manning & Napier Growth Portfolio
Manning & Napier Equity Portfolio
Manning & Napier Small Cap Portfolio
Manning & Napier Bond Portfolio
Manning & Napier Maximum Horizon Portfolio
_________________________________________________________________
Contract - Form Number
DVA(1)/NY (Group Master Contract)
DVA(1)/CERT/NY (Group Certificate)
EXHIBIT 8(c)
PARTICIPATION AGREEMENT
AMONG
KEYPORT BENEFIT LIFE INSURANCE COMPANY,
KEYPORT FINANCIAL SERVICES CORP.,
and
STEINROE 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, SteinRoe 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, Stein Roe & Farnham Incorporated. ("Stein Roe") 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 intends 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., Stein Roe 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 Stein Roe 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 Stein Roe is and shall
remain duly registered as an investment adviser in all material aspects under
all applicable federal and state securities laws and that Stein Roe 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 Companies shall be responsible for assuring that each
of their Separate Accounts participating in the Trust calculates voting
privileges in a manner consistent with the standards to be provided in
writing to the Participating Insurance Companies.
3.5. The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders. The Trust reserves the right to take all actions,
including but not limited to, the dissolution, merger, and sale of all assets
of the Trust upon the sole authorization of its Trustees, to the extent
permitted by the laws of the Commonwealth of Massachusetts and the 1940 Act.
ARTICLE IV. Sales Material and Information
4.1. The 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 Stein Roe, 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 they determine 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 they
may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the 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 their
respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Trust.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts provided, however, that if such laws or any of the provisions
of this Agreement conflict with applicable provisions of the 1940 Act, the
latter shall control.
9.2. This Agreement shall be made subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one (1) year advance written notice
to the other parties; provided, however such notice shall not be given
earlier than one (1) year following the date of this Agreement; or
(b) at the option of 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 their 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
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, or Stein Roe 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
STEINROE 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 Pre-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 9, 1998
EXHIBIT 27
[ARTICLE] 7
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[DEBT-HELD-FOR-SALE] 0
[DEBT-CARRYING-VALUE] 2,995,943
[DEBT-MARKET-VALUE] 0
[EQUITIES] 0
[MORTGAGE] 0
[REAL-ESTATE] 0
[TOTAL-INVEST] 0
[CASH] 3,451,475
[RECOVER-REINSURE] 0
[DEFERRED-ACQUISITION] 0
[TOTAL-ASSETS] 9,311,778
[POLICY-LOSSES] 0
[UNEARNED-PREMIUMS] 0
[POLICY-OTHER] 169,056
[POLICY-HOLDER-FUNDS] 0
[NOTES-PAYABLE] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 2,000,000
[OTHER-SE] 4,089,000
[TOTAL-LIABILITY-AND-EQUITY] 9,311,778
[PREMIUMS] 37,387
[INVESTMENT-INCOME] 562,822
[INVESTMENT-GAINS] 0
[OTHER-INCOME] 7,902
[BENEFITS] 1,368,614
[UNDERWRITING-AMORTIZATION] 0
[UNDERWRITING-OTHER] <936,951>
[INCOME-PRETAX] 176,448
[INCOME-TAX] 66,328
[INCOME-CONTINUING] 110,120
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 110,120
[EPS-PRIMARY] 0
[EPS-DILUTED] 0
[RESERVE-OPEN] 45,600
[PROVISION-CURRENT] 0
[PROVISION-PRIOR] 38,984
[PAYMENTS-CURRENT] 0
[PAYMENTS-PRIOR] 25,560
[RESERVE-CLOSE] 59,024
[CUMULATIVE-DEFICIENCY] 0
</TABLE>
