As Filed with the Securities and Exchange Commission on July 23, 1998
Registration No. 333-45727
811-08635
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 [X]
Variable Account A
(Exact Name of Registrant)
Keyport Benefit Life Insurance Company
(Name of Depositor)
125 High Street, Boston, Massachusetts 02110
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: 617-526-1400
Bernard R. Beckerlegge, Esq.
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110
(Name and Address of Agent for Service)
Copies to:
Joan E. Boros, Esq.
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( ) on [date] pursuant to paragraph (b) of Rule 485
(X) 60 days after filing pursuant to paragraph (a)(1) of Rule 485
( ) on [date] pursuant to paragraph (a)(1) of Rule 485
Title of Securities Being Registered: Variable Portion of the Contracts
Funded Through the Separate Account.
No filing fee is due because an indefinite amount of securities is deemed
to have been registered in reliance on Section 24(f) of the Investment
Company Act of 1940.
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Exhibit List on Page ____
CONTENTS OF REGISTRATION STATEMENT
The Facing Sheet
The Contents Page
Cross-Reference Sheet
PART A
Prospectus
PART B
Statement of Additional Information
PART C
Items 24 - 32
The Signatures
Exhibits
VARIABLE ACCOUNT A
KEYPORT BENEFIT LIFE INSURANCE COMPANY
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-4
N-4 Item Caption in Prospectus
1. Cover Page
2. Glossary of Special Terms
3. Summary of Expenses
4. Performance Information
5. Keyport Benefit and the Variable Account
Eligible Funds
6. Deductions
7. Allocations of Purchase Payments
Transfer of Variable Account Value
Substitution of Eligible Funds and Other Variable Account
Changes
Modification of the Certificate
Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Certificate Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Benefits
Suspension of Payments
Inquiries by Certificate Owners
8. Annuity Provisions
9. Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Annuity Options
10. Purchase Payments and Applications
Variable Account Value
Valuation Periods
Net Investment Factor
Sales of the Certificates
11. Partial Withdrawals and Surrender
Option A: Income For a Fixed Number of Years
Right to Revoke
12. Tax Status
13. Legal Proceedings
14. Table of Contents - Statement of Additional Information
Caption in Statement of Additional Information
15. Cover Page
16. Table of Contents
17. Keyport Benefit Life Insurance Company
18. Safekeeping of Assets, Experts
19. Not applicable
20. Principal Underwriter
21. Investment Performance
22. Variable Annuity Benefits
23. Financial Statements
This Amendment to the registration statement on Form N-4 which initially
became effective on June 25, 1998 (the "Registration Statement") is being
filed pursuant to Rule 485(a) under the Securities Act of 1933, as amended,
to supplement the Registration Statement with a separate prospectus and
statement of additional information ("SAI"), and related exhibits,
describing a particular form of the Group Flexible Premium Deferred Annuity
Contract. This Amendment relates only to the prospectus, SAI, and exhibits
included in this Amendment and does not otherwise delete, amend, or
supersede any information contained in the Registration Statement and Post-
Effective Amendment No. 1 to the Registration Statement.
PART A
August 3, 1998 Prospectus for
New York
Keyport Advisor Vista
Variable Annuity
Including Eligible Fund Prospectuses for
AIM VARIABLE INSURANCE FUNDS, INC.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
LIBERTY VARIABLE INVESTMENT TRUST
MFS VARIABLE INSURANCE TRUST
STEINROE VARIABLE INVESTMENT TRUST
Annuities are:
not insured by the FDIC;
not a deposit or other obligation of, or
guaranteed by, the depository institution;
subject to investment risks, including the
possible loss of principal amount invested.
Distributed by:
Keyport Financial Services Corp.
125 High Street, Boston, MA 02110-2712
Issued by:
Keyport Benefit Life Insurance Company
125 High Street, Boston, MA 02110-2712
K.B.A.VAP 7/98
Yes. I would like to receive the Keyport Benefit Advisor Vista Variable
Annuity Statement of Additional Information.
Yes. I would like to receive the Statement of Additional Information for
the Eligible Funds of:
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund, Inc.
Liberty Variable Investment Trust
MFS Variable Insurance Trust
SteinRoe Variable Investment Trust
Name
Address
City
State
Zip
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 6719 BOSTON, MA
POSTAGE WILL BE PAID BY ADDRESSEE
KEYPORT BENEFIT LIFE INSURANCE CO.
125 HIGH STREET
BOSTON, MA 02110-2712
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
Variable Account A
OF
KEYPORT BENEFIT LIFE INSURANCE COMPANY
This Prospectus offers Group Variable Annuity Contracts (the "Contracts")
and the related Certificates (the "Certificates") that are designed to fund
benefits under certain group arrangements including those that qualify for
special tax treatment under the Internal Revenue Code of 1986 (the "Code").
As required by certain states, the Certificates may be offered as
individual contracts. Unless otherwise noted or the context so requires all
references to the Certificates include the Contracts and the individual
Contracts. The Certificates are offered on a flexible payment basis.
The variable annuity Contract (form number DVA(1)NY) and the Certificates
described in this prospectus provide for accumulation of Certificate Values
on a variable basis, and also on a fixed basis, and payments of periodic
annuity payments on either a variable or fixed basis. The Certificates are
designed for use by individuals for retirement planning purposes.
This prospectus generally describes only the variable features of the
Certificate (for a summary of the fixed features, see Appendix A on Page
27). If the Certificate Owner elects to have Certificate Values accumulated
on a variable basis, Purchase Payments will be allocated to a segregated
investment account of Keyport Benefit Life Insurance Company ("Keyport
Benefit"), designated Variable Account A ("Variable Account").
The Variable Account invests in shares of the following Eligible Funds at
their net asset value: AIM Variable Insurance Funds, Inc. ("AIM Insurance
Funds")--AIM V.I. Capital Appreciation Fund ("AIM Capital Appreciation");
AIM V.I. Growth Fund ("AIM Growth") and AIM V.I. International Equity Fund
("AIM International Equity"); Alliance Variable Products Series Fund, Inc.
("Alliance Series Fund")--Global Bond Portfolio ("Alliance Global Bond");
Alliance Growth and Income Portfolio ("Alliance Growth and Income");
Premier Growth Portfolio ("Alliance Premier Growth") and Real Estate
Investment Portfolio ("Alliance Real Estate"); Liberty Variable Investment
Trust ("Liberty Trust")--Colonial Growth and Income Fund, Variable Series
("Colonial Growth and Income"); Colonial High Yield Securities Fund,
Variable Series ("Colonial High Yield Securities"); Colonial Small Cap
Value Fund, Variable Series ("Colonial Small Cap Value"); Colonial
Strategic Income Fund, Variable Series ("Colonial Strategic Income");
Colonial U.S. Stock Fund, Variable Series ("Colonial U.S. Stock"); Liberty
All-Star Equity Fund, Variable Series ("Liberty All-Star Equity"); and
Stein Roe Global Utilities Fund, Variable Series ("Stein Roe Global
Utilities"); MFS Variable Insurance Trust ("MFS Trust")--MFS Bond Series
("MFS Bond"); MFS Emerging Growth Series ("MFS Emerging Growth") and MFS
Research Series ("MFS Research"); and SteinRoe Variable Investment Trust
("SteinRoe Trust")--Stein Roe Balanced Fund, Variable Series ("Stein Roe
Balanced"); Stein Roe Growth Stock Fund, Variable Series ("Stein Roe Growth
Stock"); Stein Roe Money Market Fund, Variable Series ("Stein Roe Money
Market"); and Stein Roe Special Venture Fund, Variable Series ("Stein Roe
Special Venture").
The Variable Account may offer other forms of the Contracts and
Certificates with features, and fees and charges which vary from the
Certificates, and provide for investment in other Sub-Accounts which may
invest in different or additional mutual funds. Other Contracts and
Certificates will be described in separate prospectuses and statements of
additional information. The agent selling the Contracts and Certificates
has information concerning the eligibility for and the availability of the
other forms of the Contracts and Certificates.
A Statement of Additional Information dated the same as this prospectus has
been filed with the Securities and Exchange Commission and is herein
incorporated by reference. It is available, at no charge, by writing the
Principal Underwriter, Keyport Financial Services Corp., at 125 High
Street, Boston, MA 02110, by calling Keyport Benefit's Service Office at
(800) 437-4466, or by returning the postcard on the back cover of this
prospectus. A table of contents for the Statement of Additional Information
is on Page 26.
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 August 3, 1998
TABLE OF CONTENTS
Page
Glossary of Special Terms 3
Summary of Expenses 4
Synopsis 7
Performance Information 8
Keyport Benefit and the Variable Account 9
Year 2000 Matters 10
Purchase Payments and Applications 10
Investments of the Variable Account 10
Allocations of Purchase Payments 10
Eligible Funds 11
Transfer of Variable Account Value 13
Substitution of Eligible Funds and Other Variable Account Changes 14
Deductions 14
Deductions for Mortality and Expense Risk Charge 15
Deductions for Daily Administrative Charge 15
Deductions for Transfers of Variable Account Value 16
Deductions for Premium Taxes 17
Deductions for Income Taxes 17
Total Variable Account Expenses 17
Other Services 17
The Certificates 18
Variable Account Value 18
Valuation Periods 19
Net Investment Factor 19
Modification of the Certificate 19
Right to Revoke 19
Death Provisions for Non-Qualified Certificates 19
Death Provisions for Qualified Certificates 21
Certificate Ownership 21
Assignment 21
Partial Withdrawals and Surrender 21
Annuity Provisions 22
Annuity Benefits 22
Income Date and Annuity Option 22
Change in Income Date and Annuity Option 22
Annuity Options 22
Variable Annuity Payment Values 23
Proof of Age, Sex, and Survival of Annuitant 23
Suspension of Payments 24
Tax Status 24
Introduction 24
Taxation of Annuities in General 24
Qualified Plans 25
Tax-Sheltered Annuities 26
Individual Retirement Annuities 26
Corporate Pension and Profit-Sharing Plans 26
Deferred Compensation Plans with Respect to
Service for State and Local Governments 26
Variable Account Voting Privileges 26
Sales of the Certificates 27
Legal Proceedings 27
Inquiries by Certificate Owners 27
Table of Contents--Statement of Additional Information 27
Appendix A--The Fixed Account (also known as the Modified
Guaranteed Annuity Account) 28
Appendix B--Telephone Instructions 31
GLOSSARY OF SPECIAL TERMS
Accumulation Unit: An accounting unit of measure used to calculate Variable
Account Value.
Annuitant: The Annuitant is the natural person to whom any annuity payments
will be made starting on the Income Date. The Annuitant may not be over age
90 on the Certificate Date (age 75 for Qualified Certificates and age 90
for Roth IRA Qualified Certificates).
Certificate Anniversary: The same month and day as the Certificate Date in
each subsequent year of the Certificate.
Certificate Date: The effective date of the Certificate; it is shown on the
Certificate Schedule.
Certificate Owner: The person (or persons in the case of joint ownership)
who possesses all the ownership rights under the Certificate. The primary
Certificate Owner may not be over age 90 on the Certificate Date (age 75
for Qualified Certificates, age 90 for Roth IRA Qualified Certificates and
age 90 for a joint Owner).
Certificate Value: The sum of the Variable Account Value and the Fixed
Account Value.
Certificate Withdrawal Value: The Certificate Value increased or decreased
by a limited Market Value Adjustment less any premium taxes.
Certificate Year: Any period of 12 months commencing with the Certificate
Date and each Certificate Anniversary thereafter shall be a Certificate
Year.
Covered Person: The person(s) identified on the Certificate Schedule whose
death may result in an Adjustment of Certificate Value or a waiver of any
Market Value Adjustment.
Designated Beneficiary: The person who may be entitled to receive benefits
following the death of the Annuitant, Certificate Owner, or joint
Certificate Owner. The Designated Beneficiary will be the first person
among the following who is alive on the date of death: primary Certificate
Owner; joint Certificate Owner; primary beneficiary; contingent
beneficiary; and if none of the above is alive, the primary Certificate
Owner's estate. If the primary Certificate Owner and joint Certificate
Owner are both alive, they will be the Designated Beneficiary together.
Eligible Funds: The mutual funds that are eligible investments for the
Variable Account under the Certificates.
Fixed Account: Part of Keyport Benefit's general account to which Purchase
Payments may be allocated or Certificate Values may be transferred.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under the Certificate prior to the Income Date.
Guarantee Period Anniversary: An anniversary of a Guarantee Period's Start
Date.
Guarantee Period Month: The first Guarantee Period Month is the monthly
period which begins on the Start Date. Subsequent Guarantee Period Months
begin on the same day in the ensuing months.
Guarantee Period Year: The first Guarantee Period Year is the annual period
which begins on the Start Date. Subsequent Guarantee Period Years begin on
each Guaranteed Period Anniversary.
In Force: The status of the Certificate before the Income Date so long as
it is not totally surrendered, the Certificate Value under a Certificate
does not go to zero, and there has not been a death of the Annuitant or any
Certificate Owner that will cause the Certificate to end within at most
five years of the date of death.
Income Date: The date on which annuity payments are to begin.
Non-Qualified Certificate: Any Certificate that is not issued under a
Qualified Plan.
Office: Keyport Benefit's executive office, which is 125 High Street,
Boston, Massachusetts 02110.
Qualified Certificate: Certificates issued under Qualified Plans.
Qualified Plan: A retirement plan established pursuant to the provisions of
Sections 401, 403(b), 408(b) or 408A of the Internal Revenue Code. Keyport
Benefit treats Section 457 plans as Qualified Plans.
Service Office: Keyport Benefit's Service Office which is 125 High Street,
Boston, Massachusetts 02110.
Start Date: The date an amount is first allocated to a Guarantee Period.
Variable Account: A separate investment account of Keyport Benefit into
which Purchase Payments under the Certificates may be allocated. The
Variable Account is divided into Sub-Accounts ("Sub-Account") that
correspond to the Eligible Funds in which they invest.
Variable Account Value: The value of all Variable Account amounts
accumulated under the Certificate prior to the Income Date.
Written Request: A request written on a form satisfactory to Keyport
Benefit, signed by the Certificate Owner and a disinterested witness, and
filed at Keyport Benefit's Service Office.
SUMMARY OF EXPENSES
The expense summary format below, including the examples, was adopted by
the Securities and Exchange Commission to assist the owner of a variable
annuity certificate in understanding the transaction and operating expenses
the owner will directly or indirectly bear under a certificate. The values
reflect expenses of the Variable Account as well as the Eligible Funds
under the Certificates. The expenses shown for the Eligible Funds and the
examples should not be considered a representation of future expenses.
Certificate Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Contingent Deferred Sales Charge
(as a percentage of Purchase Payments): 0%
Maximum Total Certificate Owner Transaction Expenses1
(as a percentage of Purchase Payments): 0%
Annual Certificate Maintenance Charge $0
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: 1.25%
Administrative Charge: .15%
Total Variable Account Annual Expenses: 1.40%
AIM Insurance Funds, Alliance Series Fund, Liberty Trust,
MFS Trust, and SteinRoe Trust Annual Expenses2
(as a percentage of average net assets)
Management Other Total Fund
Fees Expenses Operating
(After Any (After Any Expenses (After
Waiver and/or Waiver and/or Any Waiver and/or
Fund Reimbursement)3 Reimbursement)3
Reimbursement)3
AIM Capital Appreciation .63% .05% .68%
AIM Growth .65% .08% .73%
AIM International Equity .75% .18% .93%
Alliance Global Bond .56%(.65%) .38% .94%(1.03%)
Alliance Growth and Income .63% .09% .72%
Alliance Premier Growth 1.00% .08% 1.08%
Alliance Real Estate .00%(.90%) .95%(1.41%) .95%(2.31%)
Colonial Growth and Income .65% .14% .79%
Colonial High Yield Securities .60% .20%(.55%) .80%(1.15%)
Colonial Small Cap Value .80% .20%(.55%) 1.00%(1.35%)
Colonial Strategic Income .65% .15%(.17%) .80%(.82%)
Colonial U.S. Stock .80% .14% .94%
Liberty All-Star Equity .80% .20%(.65%) 1.00%(1.45%)
Stein Roe Global Utilities .65% .18% .83%
MFS Bond .60% .40%(2.98%) 1.00%(3.58%)
MFS Emerging Growth .75% .12% .87%
MFS Research .75% .13% .88%
Stein Roe Balanced .45% .21% .66%
Stein Roe Growth Stock .50% .21% .71%
Stein Roe Money Market .35% .25% .60%
Stein Roe Special Venture .50% .23% .73%
THE ABOVE EXPENSES FOR THE ELIGIBLE FUNDS WERE PROVIDED BY THE FUNDS.
KEYPORT BENEFIT HAS NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE
INFORMATION.
Example -- 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
AIM Capital Appreciation 21 69 124 302
AIM Growth 22 71 127 308
AIM International Equity 24 76 137 331
Alliance Global Bond 23 76 136 329
Alliance Growth and Income 21 69 124 301
Alliance Premier Growth 25 80 144 346
Alliance Real Estate 24 76 137 330
Colonial Growth and Income 22 71 128 310
Colonial High Yield Securities 22 71 128 311
Colonial Small Cap Value 24 78 139 336
Colonial Strategic Income 22 71 128 311
Colonial U.S. Stock 23 76 136 329
Liberty All-Star Equity 24 78 139 336
Stein Roe Global Utilities 22 72 130 315
MFS Bond 24 78 139 336
MFS Emerging Growth 23 73 132 320
MFS Research 23 74 133 321
Stein Roe Balanced 21 67 120 293
Stein Roe Growth Stock 21 68 123 299
Stein Roe Money Market 20 65 117 285
Stein Roe Special Venture 21 69 124 302
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 Trust and Fund expenses are for 1997 except: expenses for Alliance
Premier Growth have been restated to reflect current charges; other
expenses for Alliance Real Estate are estimated, as Alliance Real Estate
commenced operations in January, 1997; and expenses for Colonial High Yield
Securities and Colonial Small Cap Value are estimated, as Colonial High
Yield Securities and Colonial Small Cap Value commenced operations in May,
1998. The AIM Insurance Funds, Alliance Series Fund (except Alliance
Premier Growth), Liberty Trust, MFS Trust (except MFS Emerging Growth and
MFS Research), and SteinRoe Trust expenses reflect the Fund's or Trust's
manager's agreement to reimburse expenses above certain limits (see
footnote 3).
3The manager of AIM Insurance Funds may from time to time waive all or a
portion of its advisory fees and/or assume certain expenses of the Eligible
Funds. Fee waivers or reductions, other than those contained in the AIM
Insurance Funds' advisory agreement, may be modified or terminated at any
time. The AIM Insurance Funds' manager did not waive advisory fees or
assume expenses as of the date of this Prospectus.
The manager of Alliance Series Fund has agreed to continue voluntary
expense reimbursements for Alliance Global Bond and Alliance Real Estate
for the foreseeable future. Each percentage shown in the parentheses is
what the expenses would be in the absence of expense reimbursement: for
Alliance Global Bond--.65% for management fees and 1.03% for total
expenses; and for Alliance Real Estate--.90% for management fees, 1.41% for
other expenses, and 2.31% for total expenses. For Alliance Premier Growth,
the fees have been restated to reflect the discontinuation of expense
reimbursements effective 5/1/98 (see footnote 2). The expenses for 1997
were .95% and, in the absence of expense reimbursement, total expenses
would have been 1.10%.
The manager of Liberty Trust has agreed until 4/30/99 to reimburse all
expenses, including management fees, but excluding interest, taxes,
brokerage, and other expenses which are capitalized in accordance with
accepted accounting procedures, and extraordinary expenses, in excess of
the following percentage of average net asset value per annum: 1.00% for
Colonial Growth & Income, Liberty All-Star Equity, Colonial Small Cap
Value, Stein Roe Global Utilities, and Colonial U.S. Stock; and .80% for
Colonial High Yield Securities and Colonial Strategic Income. Each
percentage shown in the parentheses is what the expenses would be in the
absence of expense reimbursement: for Colonial High Yield Securities--.55%
for other expenses and 1.15% for total expenses; for Colonial Small Cap
Value--55% for other expenses and 1.35% for total expenses; for Colonial
Strategic Income--.17% for other expenses and .82% for total expenses; and
for Liberty All-Star Equity--.65% for other expenses and 1.45% for total
expenses.
The manager of MFS Trust has agreed, subject to reimbursement, to bear
expenses, except for management fees, taxes, extraordinary expenses, and
brokerage and transaction costs, such that other expenses do not exceed
.40% of the average daily net assets of MFS Bond. The MFS Trust manager's
agreement to bear expenses is subject to termination or revision. Each
percentage shown in the parentheses is what the expenses would be in the
absence of this arrangement: for MFS Bond--2.98% for other expenses and
3.58% for total expenses.
The manager of SteinRoe Trust has agreed until 4/30/99 to reimburse all
expenses, including management fees, in excess of the following percentage
of the average net assets of each Eligible Fund, so long as such
reimbursement would not result in the Eligible Fund's inability to qualify
as a regulated investment company under the Internal Revenue Code: for
Stein Roe Balanced--.75%; for Stein Roe Growth Stock and Stein Roe Special
Venture--.80%; and for Stein Roe Money Market--.65%. The SteinRoe Trust's
manager was not required to reimburse expenses as of the date of this
Prospectus.
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 AIM
Insurance Funds, "Management of the Fund" in the prospectus for the
Alliance Series Fund, "Trust Management Organizations" and "Expenses of the
Funds" in the prospectus for Liberty Trust, "Management of the Series" and
"Expenses" in the prospectus for MFS Trust, and "How the Funds are Managed"
in the prospectus for SteinRoe Trust.
SYNOPSIS
The following Synopsis should be read in conjunction with the detailed
information in this prospectus and the Statement of Additional Information.
Please refer to the Glossary of Special Terms for the meaning of certain
defined terms. Variations from the information appearing in this prospectus
due to individual state requirements are described in supplements which are
attached to this prospectus, or in endorsements to the Certificates, as
appropriate.
The Certificate allows Certificate Owners to allocate Purchase Payments to
the Variable Account and also to the Fixed Account. The Variable Account is
a separate investment account maintained by Keyport Benefit. The Fixed
Account is part of Keyport Benefit's "general account", which consists of
all Keyport Benefit's assets except the Variable Account and the assets of
other separate investment accounts maintained by Keyport Benefit.
Certificate Owners may allocate payments to, and receive annuity payments
from the Variable Account and/or the Fixed Account. If the Certificate
Owner allocates payments to the Variable Account, the accumulation values
and annuity payments will fluctuate according to the investment experience
of the Sub-Accounts chosen. If the Certificate Owner allocates payments to
the Fixed Account, the accumulation values will increase at guaranteed
interest rates and annuity payments will be of a fixed amount. Fixed
Account Values are subject to a limited market value adjustment. (See
Appendix A on Page 27 for more information on the Fixed Account.) If the
Certificate Owner allocates payments to both Accounts, then the
accumulation values and annuity payments will be variable in part and fixed
in part.
The Certificate permits Purchase Payments to be made on a flexible Purchase
Payment basis. The minimum initial payment is $25,000. The minimum amount
for each subsequent payment is $1,000 or such lesser amount as Keyport
Benefit may permit from time to time (currently $250). (See "Purchase
Payments and Applications" on Page 9.)
There are no deductions made from Purchase Payments for sales charges at
the time of purchase.
Keyport Benefit deducts a Mortality and Expense Risk Charge, which is equal
on an annual basis to 1.25% of the average daily net asset values in the
Variable Account attributable to the Certificates. (See "Deductions for
Mortality and Expense Risk Charge" on Page 14.) Keyport Benefit also
deducts a Daily Administrative Charge which is equal on an annual basis to
.15% of the same values. (See "Deductions for Daily Administrative Charge"
on Page 14.)
Keyport Benefit reserves the right to deduct a charge of $25 for each
transfer in excess of 12 per Certificate Year but currently does not do so.
Premium taxes will be charged against the Certificate Value. Currently such
premium taxes range from 0% to 5.0%. (See "Deductions for Premium Taxes" on
Page 15.)
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 22.)
The Certificate allows the Certificate Owner to revoke the Certificate
generally within 10 days of delivery (see "Right to Revoke" on Page 18).
Since Keyport Benefit will refund the Certificate Value, the Certificate
Owner will bear the investment risk during the revocation period.
The Certificates described in this prospectus have not previously been made
available for sale. Therefore, no condensed financial information is
provided. The full financial statements for Keyport Benefit are in the
Statement of Additional Information.
PERFORMANCE INFORMATION
The Variable Account may from time to time advertise certain performance
information concerning its various Sub-Accounts.
Certain of the Eligible Funds have been available for Keyport Benefit
and/or non-Keyport Benefit variable annuity contracts for periods prior to
the commencement of the offering of the Certificates described in this
prospectus. Any performance information for such periods will be based on
the historical results of the Eligible Funds being applied to the
Certificate for the specified time periods.
Performance information is not intended to indicate either past performance
under an actual Certificate or future performance.
The Sub-Accounts may advertise total return information for various periods
of time. Total return performance information is based on the overall
percentage change in value of a hypothetical investment in the specific Sub-
Account over a given period of time.
Average annual total return information shows the average percentage change
in the value of an investment in the Sub-Account from the beginning date of
the measuring period to the end of that period. This standardized version
of average annual total return reflects all historical investment results,
less all charges and deductions applied against the Sub-Account and a
Certificate. Average total return does not take into account any premium
taxes and would be lower if these taxes were included.
In order to calculate average annual total return, Keyport Benefit divides
the change in value of a Sub-Account under a Certificate surrendered on a
particular date by a hypothetical $1,000 investment in the Sub-Account made
by the Certificate Owner at the beginning of the period illustrated. The
resulting total rate for the period is then annualized to obtain the
average annual percentage change during the period. Annualization assumes
that the application of a single rate of return each year during the period
will produce the ending value, taking into account the effect of
compounding.
The Sub-Accounts may present additional total return information computed
on a different basis.
First, the Sub-Accounts may present total return information computed on
the same basis as described above. This presentation assumes that the
investment in the Certificate continues, consistent with the long-term
investment and retirement objectives of the Certificate. The total return
percentage will thus be higher under this method than the standard method
described above.
Second, the Sub-Accounts may present total return information calculated by
dividing the change in a Sub-Account's Accumulation Unit value over a
specified time period by the Accumulation Unit value of that Sub-Account at
the beginning of the period. This computation results in a 12-month change
rate or, for longer periods, a total rate for the period which Keyport
Benefit annualizes in order to obtain the average annual percentage change
in the Accumulation Unit value for that period. The change percentages do
not take into account premium tax charges. The percentages would be lower
if these charges were included.
The Stein Roe Money Market Sub-Account is a money market Sub-Account that
also may advertise yield and effective yield information. The yield of the
Sub-Account refers to the income generated by an investment in the Sub-
Account over a specifically identified 7-day period. This income is
annualized by assuming that the amount of income generated by the
investment during that week is generated each week over a 52-week period
and is shown as a percentage. The yield reflects the deduction of all
charges assessed against the Sub-Account and a Certificate but does not
take into account premium tax charges. The yield would be lower if these
charges were included.
The effective yield of the Stein Roe Money Market Sub-Account is calculated
in a similar manner but, when annualizing such yield, income earned by the
Sub-Account is assumed to be reinvested. This compounding effect causes
effective yield to be higher than yield.
KEYPORT BENEFIT AND THE VARIABLE ACCOUNT
Keyport Benefit Life Insurance Company was organized under the laws of the
State of New York in 1987 as a stock life insurance company, and is a
wholly-owned subsidiary of Keyport Life Insurance Company. The executive
offices of Keyport Benefit are at 125 High Street, Boston, Massachusetts
02110. The home office is located at 100 Manhattanville Road, Purchase, New
York 10577. Keyport Benefit is admitted to conduct life insurance business
in New York and Rhode Island.
The Variable Account was established by Keyport Benefit pursuant to the
provisions of New York Law on February 6, 1998. The Variable Account meets
the definition of "separate account" under the federal securities laws. The
Variable Account is registered with the Securities and Exchange Commission
as a unit investment trust under the Investment Company Act of 1940. Such
registration does not involve supervision of the management of the Variable
Account or Keyport Benefit by the Securities and Exchange Commission.
Keyport Benefit is a member of the Insurance Marketplace Standards
Association ("IMSA"), and as such may use the IMSA logo and membership in
IMSA in advertisements. Being a member means that Keyport Benefit has
chosen to participate in IMSA's Life Insurance Ethical Market Conduct
Program.
Keyport Benefit is one of the Liberty Financial Companies. Keyport Benefit
is ultimately controlled by Liberty Mutual Insurance Company of Boston,
Massachusetts, a multi-line insurance and financial services institution.
Obligations under the Certificates are the obligations of Keyport Benefit.
Although the assets of the Variable Account are the property of Keyport
Benefit, these assets are held separately from the other assets of Keyport
Benefit and are not chargeable with liabilities arising out of any other
business Keyport Benefit may conduct. Income, capital gains and/or capital
losses, whether or not realized, from assets allocated to the Variable
Account are credited to or charged against the Variable Account without
regard to the income, capital gains, and/or capital losses arising out of
any other business Keyport Benefit may conduct. Thus, Keyport Benefit does
not guarantee the investment performance of the Variable Account. The
Variable Account Value and the amount of variable annuity payments will
vary with the investment performance of the investments in the Variable
Account.
YEAR 2000 MATTERS
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous
results by or at the year 2000. This potential problem has become known as
the "Year 2000 issue". The Year 2000 issue affects virtually all companies
and organizations.
Computer applications which are affected by the Year 2000 issue could
impact Keyport Benefit's business functions in various ways, ranging from a
complete inability to perform critical business functions to a loss of
productivity in varying degrees. Likewise, the failure of some computer
applications could have no impact on critical business functions.
Keyport Benefit is assessing and addressing the Year 2000 issue by
implementing a four-step plan. The first two steps involve inventorying all
the computer applications which support Keyport Benefit's business
functions and prioritizing computer applications which are affected by the
Year 2000 issue based upon the degree of impact each has on the functioning
of Keyport Benefit's business units. The first two steps of the plan are
substantially complete.
The final two steps of the four-step plan involve remediation of affected
computer applications (i.e., repairing or replacing programs, including
those which interface with third-party computer applications that have
unremediated Year 2000 issues, and appropriate testing) and reinstallation
of computer applications. For computer applications which are "mission
critical" (i.e., their failure would result in the complete inability to
perform critical business functions), Keyport Benefit expects to complete
the final two steps of the plan by December 31, 1998. Remediation and
reinstallation of non-critical computer applications is scheduled to be
completed by December 31, 1999.
Keyport Benefit believes that the Year 2000 issue could have a material
impact on Keyport Benefit's operations if the four-step plan is not timely
implemented. However, based upon the progress that is being made, Keyport
Benefit believes that the timetable for implementing the plan will be met
and that the Year 2000 issue will not pose significant operational problems
for its computer systems.
Keyport Benefit does not expect that the cost of addressing the Year 2000
issue will be material to its financial condition or its results of
operations.
PURCHASE PAYMENTS AND APPLICATIONS
The initial Purchase Payment is due on the Certificate Date. The minimum
initial Purchase Payment is $25,000. Additional Purchase Payments can be
made at the Certificate Owner's option. Each subsequent Purchase Payment
must be at least $1,000 or such lesser amount as Keyport Benefit may permit
from time to time (currently $250). Keyport Benefit may reject any Purchase
Payment.
If the application for a Certificate is in good order and it calls for
amounts to be allocated to the Variable Account, Keyport Benefit will apply
the initial Purchase Payment to the Variable Account and credit the
Certificate with Accumulation Units within two business days of receipt. If
the application for a Certificate is not in good order, Keyport Benefit
will attempt to get it in good order within five business days. If it is
not complete at the end of this period, Keyport Benefit will inform the
applicant of the reason for the delay and that the Purchase Payment will be
returned immediately unless the applicant specifically consents to Keyport
Benefit's keeping the Purchase Payment until the application is complete.
Once the application is complete, the Purchase Payment will be applied
within two business days of its completion. Keyport Benefit has reserved
the right to reject any application.
Keyport Benefit confirms, in writing, to the Certificate Owner the
allocation of all Purchase Payments and the re-allocation of values after
any requested transfer. Keyport Benefit must be notified immediately by the
Certificate Owner of any processing error.
Keyport Benefit will permit others to act on behalf of an applicant in
certain instances, including the following two examples. First, Keyport
Benefit will accept an application for a Certificate that contains a
signature signed under a power of attorney if a copy of that power of
attorney is submitted with the application. Second, Keyport Benefit will
issue a Certificate that is replacing an existing life insurance or annuity
policy that was issued by Keyport Benefit or an affiliated company without
having previously received a signed application from the applicant. Certain
dealers or other authorized persons such as employers and Qualified Plan
fiduciaries will inform Keyport Benefit of an applicant's answers to the
questions in the application by telephone or by order ticket and cause the
initial Purchase Payment to be paid to Keyport Benefit. If the information
is in good order, Keyport Benefit will issue the Certificate with a copy of
an application completed with that information. The Certificate will be
delivered to the Certificate Owner with a letter from Keyport Benefit that
will give the Certificate Owner an opportunity to respond to Keyport
Benefit if any of the application information is incorrect. Alternatively,
Keyport Benefit's letter may request the Certificate Owner to confirm the
correctness of the information by signing either a copy of the application
or a Certificate delivery receipt that ratifies the application in all
respects (in either case, a copy of the signed document would be returned
to Keyport Benefit for its permanent records). All purchases are confirmed,
in writing, to the applicant by Keyport Benefit. Keyport Benefit's
liability under a Certificate extends only to amounts so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
Purchase Payments applied to the Variable Account will be invested in one
or more of the Eligible Fund Sub-Accounts designated as permissible
investments in accordance with the selection made by the Certificate Owner
in the application. Any selection must specify the percentage of the
Purchase Payment that is allocated to each Sub-Account or must specify the
asset allocation model selected. (See "Other Services, The Programs".) The
percentage for each Sub-Account, if not zero, must be at least 5% and must
be a whole number. A Certificate Owner may change the allocation
percentages without fee, penalty or other charge. Allocation changes must
be made by Written Request unless the Certificate Owner has by Written
Request authorized Keyport Benefit to accept telephone allocation
instructions from the Certificate Owner or from a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney. By
authorizing Keyport Benefit to accept telephone changes, a Certificate
Owner agrees to accept and be bound by the conditions and procedures
established by Keyport Benefit from time to time. The current conditions
and procedures are in Appendix B and Certificate Owners authorizing
telephone allocation instructions will be notified, in advance, of any
changes.
The Variable Account is segmented into Sub-Accounts. Each Sub-Account
contains the shares of one of the Eligible Funds and such shares are
purchased at net asset value. Eligible Funds and Sub-accounts may be added
or withdrawn as permitted by applicable law. The Sub-Accounts in the
Variable Account and the corresponding Eligible Funds currently are as
follows:
Eligible Funds of AIM Insurance Funds Sub-Accounts
AIM Capital Appreciation AIM Capital Appreciation
Sub-Account
AIM Growth AIM Growth Sub-Account
AIM International Equity AIM International Equity
Sub-Account
Eligible Funds of Alliance Series Fund Sub-Accounts
Alliance Global Bond Alliance Global Bond Sub-
Account
Alliance Growth and Income Alliance Growth and Income
Sub-Account
Alliance Premier Growth Alliance Premier Growth Sub-
Account
Alliance Real Estate Alliance Real Estate Sub-
Account
Eligible Funds of Liberty Trust Sub-Accounts
Colonial Growth and Income Colonial Growth and Income
Sub-Account
Colonial High Yield Securities Colonial High Yield
Securities Sub-Account
Colonial Small Cap Value Colonial Small Cap Value
Sub-Account
Colonial Strategic Income Colonial Strategic Income
Sub-Account
Colonial U.S. Stock Colonial U.S. Stock Sub-
Account
Liberty All-Star Equity Liberty All-Star Equity Sub-
Account
Stein Roe Global Utilities Stein Roe Global Utilities
Sub-Account
Eligible Funds of MFS Trust Sub-Accounts
MFS Bond MFS Bond Sub-Account
MFS Emerging Growth MFS Emerging Growth Sub-
Account
MFS Research MFS Research Sub-Account
Eligible Funds of SteinRoe Trust Sub-Accounts
Stein Roe Balanced Stein Roe Balanced Sub-
Account
Stein Roe Growth Stock Stein Roe Growth Stock Sub-
Account
Stein Roe Money Market Stein Roe Money Market Sub-
Account
Stein Roe Special Venture Stein Roe Special Venture
Sub-Account
Eligible Funds
The Eligible Funds which are the permissible investments of the Variable
Account are the separate funds listed above of AIM Insurance Funds,
Alliance Series Fund, Liberty Trust, MFS Trust and SteinRoe Trust, and any
other mutual funds with which Keyport Benefit and the Variable Account may
enter into a participation agreement for the purpose of making such mutual
funds available as Eligible Funds under certain Certificates.
AIM Advisors Inc. ("AIM") serves as the investment adviser to each of the
Eligible Funds of the AIM Insurance Funds. AIM was organized in 1976, and,
together with its subsidiaries, manages or advises 46 investment portfolios
(including the Funds).
Alliance Capital Management L.P. is the investment adviser for each of the
Eligible Funds of Alliance Series Fund. AIGAM International Limited serves
as sub-adviser for Alliance Global.
Liberty Advisory Services Corp. ("LASC"), an affiliate of Keyport Benefit,
is the manager for Liberty Trust and its Eligible Funds. Colonial
Management Associates, Inc. ("Colonial"), an affiliate of Keyport Benefit,
serves as sub-adviser for the Eligible Funds (except for Stein Roe Global
Utilities and Liberty All-Star Equity). Colonial has provided investment
advisory services since 1931. Liberty Asset Management Company, an
affiliate of Keyport Benefit, serves as sub-adviser for Liberty All-Star
Equity and the current portfolio managers are J.P. Morgan Investment
Management Inc., Oppenheimer Capital, Wilke/Thompson Capital Management
Inc., Westwood Management Corp. and Boston Partners Asset Management, L.P.
Massachusetts Financial Services Company ("MFS") is the investment adviser
for the Eligible Funds of MFS Trust. MFS is America's oldest mutual fund
organization. MFS and its predecessor organizations have a history of money
management dating from 1924 and the founding of the first mutual fund in
the United States, Massachusetts Investors Trust.
Stein Roe & Farnham Incorporated ("Stein Roe") is the investment adviser
for each Eligible Fund of SteinRoe Trust and sub-adviser for Stein Roe
Global Utilities. In 1986, Stein Roe was organized and succeeded to the
business of Stein Roe & Farnham, a partnership. Stein Roe is an affiliate
of Keyport Benefit. Stein Roe and its predecessor have provided investment
advisory and administrative services since 1932.
The investment objectives of the Eligible Funds are briefly described
below. More detailed information, including investor considerations related
to the risks of investing in a particular Eligible Fund, may be found in
the current prospectus for that Fund. An investor should read that
prospectus carefully before selecting a fund for investing. The prospectus
is available, at no charge, from a salesperson or by writing Keyport
Benefit's Service Office at the address shown on Page 1 or by calling (800)
437-4466.
Eligible Funds of AIM Insurance
Funds and Variable Account
Sub-Accounts Investment Objective
AIM Capital Appreciation Capital appreciation through
(AIM Capital Appreciation investments in common stocks,
Sub-Account) with emphasis on medium-sized
and smaller emerging growth
companies.
AIM Growth Growth of capital through
(AIM Growth Sub-Account) investments primarily in
common stocks of leading U.S.
companies considered by AIM
to have strong earnings
momentum.
AIM International Equity Long-term growth of capital
(AIM International Equity by investing in international
Sub-Account) equity securities, the issuers
of which are considered by AIM
to have strong earnings
momentum.
Eligible Funds of Alliance Series
Fund and Variable Account
Sub-Accounts Investment Objective
Alliance Global Bond A high level of return from a
(Alliance Global Bond combination of current income and
Sub-Account) capital appreciation by investing
in a globally diversified portfolio
of high quality debt securities
denominated in the U.S. Dollar and
a range of foreign currencies.
Alliance Growth and Income Balance the objectives of
(Alliance Growth and Income reasonable current income and
Sub-Account) reasonable opportunities for
appreciation through investments
primarily in dividend-paying
common stocks of good quality.
Alliance Premier Growth Growth of capital rather than
(Alliance Premier Growth current income.
Sub-Account)
Alliance Real Estate Total return on its assets through
(Alliance Real Estate Sub- long-term growth of capital and
Account) income principally through
investing in a portfolio of equity
securities of issuers that are
primarily engaged in or related to
the real estate industry.
Eligible Funds of Liberty Trust
and Variable Account
Sub-Accounts Investment Objective
Colonial Growth and Income Primarily income and long-term
(Colonial Growth and Income capital growth and, secondarily,
Sub- Account) preservation of capital.
Colonial High Yield Securities High current income and total
(Colonial High Yield Securities return by investing primarily
Sub-Account) in lower rated corporate debt
securities.
Colonial Small Cap Value Long-term growth by investing
(Colonial Small Cap Value in smaller capitalization
Sub-Account) equity securities.
Colonial Strategic Income A high level of current income, as
(Colonial Strategic Income is consistent with prudent risk and
Sub-Account) maximizing total return, by
diversifying investments primarily
in U.S. and foreign government and
high yield, high risk corporate
debt securities.
Colonial U.S. Stock Long-term capital growth by
(Colonial U.S. Stock Sub-Account) investing primarily in large
capitalization equity securities.
Liberty All-Star Equity Total investment return, comprised
(Liberty All-Star Equity Sub-Account) of long-term capital appreciation
and current income, through
investment primarily in a
diversified portfolio of equity
securities.
Stein Roe Global Utilities Current income and long-term growth
(Stein Roe Global Utilities of capital and income.
Sub-Account)
Eligible Funds of MFS Trust
and Variable Account
Sub-Accounts Investment Objective
MFS Bond High level of current income
(MFS Bond Sub-Account) as is believed consistent
with prudent investment risk
and secondarily to protect
shareholders' capital.
MFS Emerging Growth Long-term growth of capital.
(MFS Emerging Growth Sub-Account)
MFS Research Long-term growth of capital and
(MFS Research Sub-Account) future income.
Eligible Funds of SteinRoe Trust
and Variable Account
Sub-Accounts Investment Objective
Stein Roe Balanced High total investment return
(Stein Roe Balanced through investment in a changing
Sub-Account) mix of securities.
Stein Roe Growth Stock Long-term growth of capital through
(Stein Roe Growth Stock investment primarily in common
Sub-Account) stocks.
Stein Roe Money Market High current income from short-term
(Stein Roe Money Market money market instruments while
Sub-Account) emphasizing preservation of capital
and maintaining excellent
liquidity.
Stein Roe Special Venture Capital growth by investing
(Stein Roe Special Venture primarily in common stocks,
Sub-Account) convertible securities, and other
securities selected for prospective
capital growth.
There is no assurance that the Eligible Funds will achieve their stated
objectives.
All the Eligible Funds are funding vehicles for variable annuity contracts
and variable life insurance policies offered by separate accounts of
Keyport Benefit and of insurance companies affiliated and unaffiliated with
Keyport Benefit. The risks involved in this "mixed and shared funding" are
disclosed in the Eligible Fund prospectuses under the following captions:
AIM Insurance Funds--"Purchase and Redemption of Shares"; Alliance Series
Fund--"Introduction to the Fund"; Liberty Trust--"The Trust"; MFS Trust--
"Investment Concept of the Trust"; and SteinRoe Trust--"The Trust".
Transfer of Variable Account Value
Certificate Owners may transfer Variable Account Value from one Sub-Account
to another Sub-Account and/or to the Fixed Account.
The Certificate allows Keyport Benefit to charge a transfer fee of $25 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 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 affect on the performance of the Eligible Fund for the Sub-Account
involved. The movement of Sub-Account values from one Sub-Account to
another may prevent the appropriate Eligible Fund from taking advantage of
investment opportunities because it must maintain a liquid position in
order to handle redemptions. Such movement may also cause a substantial
increase in Fund transaction costs which must be indirectly borne by
Certificate Owners.
Certificate Owners will be notified, in advance, of the imposition of any
transfer fee or of a change in the limitation on the number of transfers.
The fee will not exceed $25.
Transfers must be made by Written Request unless the Certificate Owner has
by Written Request authorized Keyport Benefit to accept telephone transfer
requests from the Certificate Owner or from a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney. By
authorizing Keyport Benefit to accept telephone transfer instructions, a
Certificate Owner agrees to accept and be bound by the conditions and
procedures established by Keyport Benefit from time to time. The current
conditions and procedures are in Appendix B and Certificate Owners
authorizing telephone transfers will be notified, in advance, of any
changes. Written transfer requests may be made by a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Keyport Benefit before the close of trading
on the New York Stock Exchange (currently 4:00 PM Eastern Time) will be
initiated at the close of business that day. Any requests received later
will be initiated at the close of the next business day. Each request from
a Certificate Owner to transfer value will be executed by both redeeming
and acquiring Accumulation Units on the day Keyport Benefit initiates the
transfer.
If 100% of any Sub-Account's value is transferred and the allocation
formula for Purchase Payments includes that Sub-Account, then the
allocation formula for future Purchase Payments will automatically change
unless the Certificate Owner instructs otherwise. For example, if the
allocation formula is 50% to Sub-Account A and 50% to Sub-Account B and all
of Sub-Account A's value is transferred to Sub-Account B, the allocation
formula will change to 100% to Sub-Account B unless the Certificate Owner
instructs otherwise.
Substitution of Eligible Funds and Other Variable Account Changes
If the shares of any of the Eligible Funds should no longer be available
for investment by the Variable Account or if in the judgment of Keyport
Benefit's management further investment in such fund shares should become
inappropriate in view of the purpose of the Certificate, Keyport Benefit
may add or substitute shares of another Eligible Fund or of another mutual
fund for Eligible Fund shares already purchased under the Certificate. No
substitution of Fund shares in any Sub-Account may take place without prior
approval of the Securities and Exchange Commission and notice to
Certificate Owners, to the extent required by the Investment Company Act of
1940.
Keyport Benefit has also reserved the right, subject to compliance with the
law as currently applicable or subsequently changed: (a) to operate the
Variable Account in any form permitted under the Investment Company Act of
1940 or in any other form permitted by law; (b) to take any action
necessary to comply with or obtain and continue any exemptions from the
Investment Company Act of 1940 or to comply with any other applicable law;
(c) to transfer any assets in any Sub-Account to another Sub-Account, or to
one or more separate investment accounts, or to Keyport Benefit's general
account; or to add, combine or remove Sub-Accounts in the Variable Account;
and (d) to change the way Keyport Benefit assesses charges, so long as the
aggregate amount is not increased beyond that currently charged to the
Variable Account and the Eligible Funds in connection with the
Certificates.
DEDUCTIONS
Deductions for Mortality and Expense Risk Charge
Although variable annuity payments made to Annuitants will vary in
accordance with the investment performance of the investments of the
Variable Account, they will not be affected by the mortality experience
(death rate) of persons receiving such payments or of the general
population. Keyport Benefit guarantees the Death Benefits described below
(see "Death Benefits"). Keyport Benefit assumes an expense risk that the
asset-based Administrative Charge will be insufficient to cover the
anticipated portion of Keyport Benefit's administrative expenses.
To compensate it for assuming mortality and expense risks, for each
Valuation Period Keyport Benefit deducts from each Sub-Account a Mortality
and Expense Risk Charge equal on an annual basis to 1.25% of the average
daily net asset value of the Sub-Account. The charge is deducted during
both the accumulation and annuity periods (i.e., both before and after the
Income Date). Less than the full charge will be deducted from Sub-Account
values attributable to Certificates issued to employees of Keyport Benefit
and other persons specified in "Sales of the Certificates".
Deductions for Daily Administrative Charge
Keyport Benefit also deducts from each Sub-Account each Valuation Period an
Administrative Charge equal on an annual basis to 0.15% of the average
daily net asset value of the Sub-Account. This charge compensates Keyport
Benefit for a portion of the administrative expenses relating to the
Contract and the Certificate.
Deductions for Transfers of Variable Account Value
The Certificate allows Keyport Benefit to charge a transfer fee. Currently
no fee is being charged. Certificate Owners will be notified, in advance,
of the imposition of any fee. The fee will not exceed $25.
Deductions for Premium Taxes
Keyport Benefit deducts the amount of any premium taxes levied by any state
or governmental entity when paid unless Keyport Benefit elects to defer
such deduction. Such premium taxes depend, among other things, on the type
of Certificate (Qualified or Non-Qualified), on the state of residence of
the Certificate Owner, the state of residence of the Annuitant, the status
of Keyport Benefit within such states, and the insurance tax laws of such
states. For New York Certificates, the current premium tax rate is 0%.
Deductions for Income Taxes
Keyport Benefit will deduct from any amount payable under the Certificate
any income taxes that a governmental authority requires Keyport Benefit to
withhold with respect to that amount. See "Income Tax Withholding" and "Tax-
Sheltered Annuities".
Total Variable Account Expenses
Total Variable Account expenses in relation to the Certificate will be the
Mortality and Expense Risk Charge and the Daily Administrative Charge.
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and therefore the deductions from and expenses paid
out of the assets of the Eligible Funds. These deductions and expenses are
described in the Eligible Fund prospectuses.
OTHER SERVICES
The Programs. Keyport Benefit offers several investment related programs
which are available only prior to the Income Date: Asset Allocation; Dollar
Cost Averaging; Systematic Investment; and Systematic Withdrawal Programs.
A Rebalancing Program is available prior to and after the Income Date.
Under each Program that utilizes transfers, the related transfers between
and among Sub-Accounts and the Fixed Account are not counted as one of the
twelve free transfers. Each of the Programs has its own requirements, as
discussed below. Keyport Benefit reserves the right to terminate any
Program.
If the Certificate Owner has submitted the required telephone authorization
form, certain changes may be made by telephone. For those Programs
involving transfers, Owners may change instructions by telephone with
regard to which Sub-Accounts or the Fixed Account Certificate Value may be
transferred. The current conditions and procedures are described in
Appendix B.
Dollar Cost Averaging Program. Keyport Benefit offers a Dollar Cost
Averaging Program that Certificate Owners may participate in by Written
Request. The program periodically transfers Accumulation Units from the
Stein Roe Money Market Sub-Account or the One-Year Guarantee Period of the
Fixed Account to other Sub-Accounts selected by the Certificate Owner. The
program allows a Certificate Owner to invest in Variable Sub-Accounts over
time rather than having to invest in those Sub-Accounts all at once. The
program is available for initial and subsequent Purchase Payments and for
Certificate Value transferred into the Stein Roe Money Market Sub-Account
or the One-Year Guarantee Period. Under the program, Keyport Benefit makes
automatic transfers on a periodic basis out of the Stein Roe Money Market
Sub-Account or the One-Year Guarantee Period into one or more of the other
available Sub-Accounts (Keyport Benefit reserves the right to limit the
number of Sub-Accounts the Certificate Owner may choose but there are
currently no limits).
The Certificate Owner by Written Request must specify the Stein Roe Money
Market Sub-Account or the One Year Guarantee Period from which the
transfers are to be made, the monthly amount to be transferred (minimum
$100) and the Sub-Account(s) to which the transfers are to be made. The
first transfer will occur at the close of the Valuation Period that
includes the 30th day after the receipt of the Certificate Owner's Written
Request. Each succeeding transfer will occur one month later (e.g., if the
30th day after the receipt date is April 8, the second transfer will occur
at the close of the Valuation Period that includes May 8). When the
remaining value is less than the monthly transfer amount, that remaining
value will be transferred and the program will end. Before this final
transfer, the Certificate Owner may extend the program by allocating
additional Purchase Payments to the Stein Roe Money Market Sub-Account or
the One Year Guarantee Period or by transferring Certificate Value to the
Stein Roe Money Market Sub-Account or the One Year Guarantee Period. The
Certificate Owner may, by Written Request or by telephone, change the
monthly amount to be transferred, change the Sub-Account(s) to which the
transfers are to be made, or end the program. The program will
automatically end if the Income Date occurs. Keyport Benefit reserves the
right to end the program at any time by sending the Certificate Owner a
notice one month in advance.
Written or telephone instructions must be received by Keyport Benefit by
the end (currently 4:00 PM Eastern Time) of the business day preceding the
next scheduled transfer in order to be in effect for that transfer.
Telephone instructions are subject to the conditions and procedures
established by Keyport Benefit from time to time. The current conditions
and procedures appear in Appendix B, and Certificate Owners in a dollar
cost averaging program will be notified, in advance, of any changes.
Asset Allocation Program. Certificate Owners may select from five asset
allocation model portfolios separately developed by Ibbotson Associates and
Standard & Poor's (Model A -- Capital Preservation, Model B -- Income and
Growth, Model C -- Moderate Growth, Model D -- Growth, and Model E --
Aggressive Growth). If a Certificate Owner elects one of the models,
initial and subsequent Purchase Payments will automatically be allocated
among the Sub-Accounts in the model. Only one model may be used in a
Certificate at a time. Certificate Owners may use a questionnaire and
scoring system to determine the model which corresponds to their risk
tolerance and time horizons.
Periodically Ibbotson Associates and Standard & Poor's will review the
models and may determine that a reconfiguration of the Sub-Accounts and
percentage allocations among those Sub-Accounts is appropriate. Certificate
Owners will receive notification prior to any reconfiguration.
The Fixed Account is not available in any asset allocation model. A
Certificate Owner may allocate initial or subsequent Purchase Payments, or
Certificate Value, between an asset allocation model and the Fixed Account.
Rebalancing Program. In accordance with the Certificate Owner's election of
the relative Purchase Payment percentage allocations, Keyport Benefit will
automatically rebalance the Certificate Value of each Sub-Account either
monthly, quarterly, semi-annually, or annually. On the last day of the
period selected, Keyport Benefit will automatically rebalance the
Certificate Value in each of the Sub-Accounts to match the current Purchase
Payment percentage allocations. The Program may be terminated at any time
and the percentages may be altered by Written Request. The requested change
must be received at the Service Office ten (10) days prior to the end of
the period selected. Certificate Value allocated to the Fixed Account is
not subject to automatic rebalancing. After the Income Date, automatic
rebalancing applies only to variable annuity payments and Keyport Benefit
will rebalance the number of Annuity Units in each Sub-Account Annuity
Units are used to calculate the amount of each Sub-Account annuity payment;
see "Variable Annuity Benefits" in the Statement of Additional Information.
Systematic Investment Program. Purchase Payments under Non-Qualified
Certificates may be made by monthly deductions from the bank account or
payroll of any Certificate Owner who has completed and returned to Keyport
Benefit a Systematic Investment Program application and authorization form.
The application and authorization form may be obtained from Keyport Benefit
or from the sales representative. Each Systematic Investment Program
Purchase Payment is subject to a current minimum of $50.
Systematic Withdrawal Program. To the extent permitted by law, Keyport
Benefit will make monthly, quarterly, semi-annually or annual distributions
of a predetermined dollar amount to the Certificate Owner that has enrolled
in the Systematic Withdrawal Program. Under the Program, all distributions
will be made directly to the Certificate Owner and will be treated for
federal tax purposes as any other withdrawal or distribution of Certificate
Value. (See "Tax Status".) The Certificate Owner may specify the amount of
each partial withdrawal, subject to a minimum of $100. Systematic
withdrawals may be made from the Sub-Accounts and the one, three, five, and
seven year Guarantee Periods of the Fixed Account.
Unless the Certificate Owner specifies the Sub-Account or Sub-Accounts or
the Fixed Account from which withdrawals of Certificate Value shall be made
or if the amount in a specified Sub-Account is less than the predetermined
amount, Keyport Benefit will make withdrawals under the Program from the
Sub-Accounts and the Fixed Account in amounts proportionate to the amounts
in the Sub-Accounts and the Fixed Account. All withdrawals under the
Program will be effected by canceling the number of Accumulation Units
equal in value to the amount to be distributed to the Certificate Owner.
The Program may be combined with all other Programs except the Systematic
Investment Program.
THE CERTIFICATES
Variable Account Value
The Variable Account Value for a Certificate is the sum of the value of
each Sub-Account to which values are allocated under a Certificate. The
value of each Sub-Account is determined at any time by multiplying the
number of Accumulation Units attributable to that Sub-Account by the
Accumulation Unit value for that Sub-Account at the time of determination.
The Accumulation Unit value is an accounting unit of measure used to
determine the change in an Accumulation Unit's value from Valuation Period
to Valuation Period.
Each Purchase Payment that is made results in additional Accumulation Units
being credited to the Certificate and the appropriate Sub-Account
thereunder. The number of additional units for any Sub-Account will equal
the amount allocated to that Sub-Account divided by the Accumulation Unit
value for that Sub-Account at the time of investment.
Valuation Periods
The Variable Account is valued each Valuation Period using the net asset
value of the Eligible Fund shares. A Valuation Period is the period
commencing at the close of trading on the New York Stock Exchange on each
Valuation Date and ending at the close of trading for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock
Exchange is open for business. The New York Stock Exchange is currently
closed on weekends, New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Net Investment Factor
Variable Account Value will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect value, Keyport Benefit utilizes an Accumulation Unit
value. Each Sub-Account has its own Accumulation Units and value per Unit.
The Unit value applicable during any Valuation Period is determined at the
end of that period.
When Keyport Benefit first purchased Eligible Fund shares on behalf of the
Variable Account, Keyport Benefit valued each Accumulation Unit at a
specified dollar amount. The Unit value for each Sub-Account in any
Valuation Period thereafter is determined by multiplying the value for the
prior period by a net investment factor. This factor may be greater or less
than 1.0; therefore, the Accumulation Unit may increase or decrease from
Valuation Period to Valuation Period. Keyport Benefit calculates a net
investment factor for each Sub-Account by dividing (a) by (b) and then
subtracting (c) (i.e., (a/b) - c), where:
(a) is equal to:
(i) the net asset value per share of the Eligible Fund at the end of the
Valuation Period; plus
(ii) the per share amount of any distribution made by the Eligible Fund if
the "ex-dividend" date occurs during that same Valuation Period.
(b) is the net asset value per share of the Eligible Fund at the end of the
prior Valuation Period.
(c) is equal to:
(i) the Valuation Period equivalent of the Mortality and Expense Risk
Charge; plus
(ii) the Valuation Period equivalent of the daily Administrative Charge;
plus
(iii) a charge factor, if any, for any tax provision established by Keyport
Benefit as a result of the operations of that Sub-Account.
For Certificates issued to employees of Keyport Benefit and other persons
specified in "Sales of the Certificates", the Mortality and Expense Risk
Charge in (c)(i) above is .35%, and the daily Administrative Charge in
(c)(ii) above is eliminated.
Modification of the Certificate
Only Keyport Benefit's President or Secretary may agree to alter the
Certificate or waive any of its terms. Any changes must be made in writing
and with the Certificate Owner's consent, except as may be required by
applicable law.
Right to Revoke
The Certificate Owner may return the Certificate within 10 days after he or
she receives it by delivering or mailing it to Keyport Benefit's Service
Office. The return of the Certificate by mail will be effective when the
postmark is affixed to a properly addressed and postage-prepaid envelope.
The returned Certificate will be treated as if Keyport Benefit never issued
it and Keyport Benefit will refund the Certificate Value.
DEATH PROVISIONS FOR NON-QUALIFIED CERTIFICATES
Death of Primary Owner, Joint Owner or Certain Non-Owner Annuitant. These
provisions apply if, before the Income Date while the Certificate is In
Force, the primary Certificate Owner or any Joint Certificate Owner dies
(whether or not the decedent is also the Annuitant) or the Annuitant dies
under a Certificate with a non-natural Certificate Owner such as a trust.
The Designated Beneficiary will control the Certificate after such a death.
If the decedent's surviving spouse (if any) is the sole Designated
Beneficiary, the surviving spouse will automatically become the new sole
primary Certificate Owner as of the decedent's date of death. And, if the
Annuitant is the decedent, the new Annuitant will be any living contingent
annuitant, otherwise the surviving spouse. The Certificate may continue
until another death occurs (i.e., until the death of the Annuitant, primary
Certificate Owner or joint Certificate Owner). Except for this paragraph,
all of "Death Provisions" will apply to that subsequent death.
In all other cases, the Certificate may continue up to five years from the
date of death. During this period, the Designated Beneficiary may exercise
all ownership rights, including the right to make transfers or partial
surrenders or the right to totally surrender the Certificate for its
Surrender Value. If the Certificate is still in effect at the end of the
five-year period, Keyport Benefit will automatically end it then by paying
the Certificate Value to the Designated Beneficiary. If the Designated
Beneficiary is not then alive, Keyport Benefit will pay any person(s) named
by the Designated Beneficiary in a Written Request; otherwise the
Designated Beneficiary's estate.
The Covered Person under this paragraph shall be the decedent if he or she
is the first to die of the primary Certificate Owner, Joint Certificate
Owner, Annuitant, or, if there is a non-natural Certificate Owner such as a
trust, the Annuitant shall be the Covered Person. If the Covered Person
dies, the Certificate Value will be increased, as provided below, if it is
less than the Death Benefit Amount ("DBA"). The DBA is:
The DBA at issue is the initial Purchase Payment. Thereafter, the DBA is
calculated for each Valuation period by adding any additional Purchase
Payments, and deducting any partial withdrawals. This resulting amount is
the "net Purchase Payment death benefit". The Certificate Value for each
Certificate Anniversary (the "Anniversary Value") before the 81st birthday
of the Covered Person is determined. Each Anniversary Value is increased by
any Purchase Payments made after that anniversary. This resultant value is
then decreased by an amount calculated at the time of any partial
withdrawal made after that anniversary. The amount is calculated by taking
the amount of any partial withdrawal, and dividing by the Certificate Value
immediately preceding the partial withdrawal, and then multiplying by the
Anniversary Value immediately preceding the withdrawal. The greatest
Anniversary Value, as so adjusted, (the "greatest Anniversary Value") is
the DBA unless the net Purchase Payment death benefit is higher. The net
Purchase Payment death benefit will be the DBA if such amount is higher
than the greatest Anniversary Value.
When Keyport Benefit receives due proof of the Covered Person's death,
Keyport Benefit will compare, as of the date of death, the Certificate
Value to the DBA. If the Certificate Value was less than the DBA, Keyport
Benefit will increase the current Certificate Value by the amount of the
difference. Note that while the amount of the difference is determined as
of the date of death, that amount is not added to the Certificate Value
until Keyport Benefit receives due proof of death. The amount to be
credited will be allocated to the Variable Account and/or the Fixed Account
based on the Purchase Payment allocation selection that is in effect when
Keyport Benefit receives due proof of death. Whether or not the Certificate
Value is increased because of this minimum death provision, the Designated
Beneficiary may, by the later of the 90th day after the Covered Person's
death and the 60th day after Keyport Benefit is notified of the death,
surrender the Certificate for the Certificate Withdrawal Value. If the
Certificate is not surrendered, it will continue for the time period
specified above.
Payment of Benefits. Instead of receiving a lump sum, the Certificate Owner
or any Designated Beneficiary may direct by Written Request that Keyport
Benefit pay any benefit of $5,000 or more under an annuity payment option
that meets the following: (a) the first payment to the Designated
Beneficiary must be made no later than one year after the date of death;
(b) payments must be made over the life of the Designated Beneficiary or
over a period not extending beyond that person's life expectancy; and (c)
any payment option that provides for payments to continue after the death
of the Designated Beneficiary will not allow the successor payee to extend
the period of time over which the remaining payments are to be made.
Death of Certain Non-Certificate Owner Annuitant. These provisions apply
if, before the Income Date while the Certificate is In Force, (a) the
Annuitant dies, (b) the Annuitant is not a Certificate Owner, and (c) the
Certificate Owner is a natural person. The Certificate will continue after
the Annuitant's death. The new Annuitant will be any living contingent
annuitant, otherwise the primary Certificate Owner. If the Annuitant is the
first to die of the Certificate's primary Certificate Owner, Joint
Certificate Owner and Annuitant, then the Annuitant is the Covered Person
and the Certificate Value will be increased, as provided below, if it is
less than the Death Benefit Amount ("DBA"), as defined above. When Keyport
Benefit receives due proof of the Annuitant's death, Keyport Benefit will
compare, as of the date of death, the Certificate Value to the DBA. If the
Certificate Value was less than the DBA, Keyport Benefit will increase the
current Certificate Value by the amount of the difference. Note that while
the amount of the difference is determined as of the date of death, that
amount is not added to the Certificate Value until Keyport Benefit receives
due proof of death. The amount to be credited will be allocated to the
Variable Account and/or the Fixed Account based on the Purchase Payment
allocation selection that is in effect when Keyport Benefit receives due
proof of death. Whether or not the Certificate Value is increased because
of this minimum death provision, the Certificate Owner may surrender the
Certificate within 90 days of the date of the Annuitant's death for the
Certificate Withdrawal Value.
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
Death of Annuitant. If the Annuitant dies before the Income Date while the
Certificate is In Force, the Designated Beneficiary will control the
Certificate after such a death. The Certificate Value will be increased, as
provided below, if it is less than the Death Benefit Amount ("DBA") as
defined above. When Keyport Benefit receives due proof of the Annuitant's
death, Keyport Benefit will compare, as of the date of death, the
Certificate Value to the DBA. If the Certificate Value was less than the
DBA, Keyport Benefit will increase the current Certificate Value by the
amount of the difference. Note that while the amount of the difference is
determined as of the date of death, that amount is not added to the
Certificate Value until Keyport Benefit receives due proof of death. The
amount to be credited will be allocated to the Variable Account and/or the
Fixed Account based on the Purchase Payment allocation selection that is in
effect when Keyport Benefit receives due proof of death. Whether or not the
Certificate Value is increased because of this minimum death provision, the
Designated Beneficiary may, by the later of the 90th day after the
Annuitant's death and the 60th day after Keyport Benefit is notified of the
death, surrender the Certificate for the Certificate Withdrawal Value.
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. If there is no value, or insufficient value, in the Variable
Account, then the amount surrendered, or the insufficient portion, will be
deducted from the Fixed Account in the ratio that each Guarantee Period's
value bears to the total Fixed Account Value.
The Certificate Owner may totally surrender the Certificate by making a
Written Request. Surrendering the Certificate will end it. Upon surrender,
the Certificate Owner will receive the Certificate Withdrawal Value.
Keyport Benefit will pay the amount of any surrender within seven days of
receipt of such request. Alternatively, the Certificate Owner may purchase
for himself or herself an annuity option with any surrender benefit of at
least $5,000. Keyport Benefit's consent is needed to choose an option if
the Certificate Owner is not a natural person.
Annuity options based on life contingencies cannot be surrendered after
annuity payments have begun. Option A, which is not based on life
contingencies, may be surrendered if a variable payout has been selected.
Because of the potential tax consequences of a full or partial surrender, a
Certificate Owner should consult a competent tax adviser regarding a
surrender.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Income Date and the Certificate is In
Force, payments will begin under the annuity option or options the
Certificate Owner has chosen. The amount of the payments will be determined
by applying the Certificate Value increased or decreased by a limited
Market Value Adjustment of Fixed Account Value described in Appendix A
(less any premium taxes not previously deducted) on the Income Date in
accordance with the option selected.
Income Date and Annuity Option
The Certificate Owner may select an Income Date and an Annuity Option at
the time of application. If the Certificate Owner does not select an
Annuity Option, Option B will automatically be designated. If the
Certificate Owner does not select an Income Date for the Annuitant, the
Income Date will automatically be the earlier of (i) the later of the
Annuitant's 90th birthday and the 10th Certificate Anniversary and (ii) any
maximum date permitted under state law.
Change in Income Date and Annuity Option
The Certificate Owner may choose or change an Annuity Option or the Income
Date by making a Written Request to Keyport Benefit at least 30 days prior
to the Income Date. However, any Income Date must be: (a) for fixed annuity
options, not earlier than the first Certificate Anniversary; and (b) not
later than the earlier of (i) the later of the Annuitant's 90th birthday
and the 10th Certificate Anniversary and (ii) any maximum date permitted
under state law.
Annuity Options
The Annuity Options are:
Option A: Income for a Fixed Number of Years;
Option B: Life Income with 10 Years of Payments Guaranteed; and
Option C: Joint and Last Survivor Income.
Other options may be arranged by mutual consent. Each option is available
in two forms - as a variable annuity for use with the Variable Account and
as a fixed annuity for use with Keyport Benefit's general account Fixed
Account. Variable annuity payments will fluctuate while fixed annuity
payments will not. The dollar amount of each fixed annuity payment will be
determined by deducting from the Certificate Value increased or decreased
by a limited Market Value Adjustment described in Appendix A, any premium
taxes not previously deducted and 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 will be applied to a
variable annuity option and Fixed Account Value increased or decreased by a
limited Market Value Adjustment described in Appendix A less any premium
taxes not previously deducted will be applied to a fixed annuity option.
Whether variable or fixed, the same Certificate Value applied to each
option will produce a different initial annuity payment as well as
different subsequent payments.
The payee is the person who will receive the sum payable under an annuity
option. Any annuity option that provides for payments to continue after the
death of the payee will not allow the successor payee to extend the period
of time over which the remaining payments are to be made.
If the amount available to apply under any variable or fixed option is less
than $5,000, Keyport Benefit has reserved the right to pay such amount in
one sum to the payee in lieu of the payment otherwise provided for.
Annuity payments will be made monthly unless quarterly, semi-annual or
annual payments are chosen by Written Request. However, if any payment
provided for would be or becomes less than $100, Keyport Benefit has the
right to reduce the frequency of payments to such an interval as will
result in each payment being at least $100.
Option A: Income For a Fixed Number of Years. Keyport Benefit will pay an
annuity for a chosen number of years, not fewer than 5 nor over 50 (a
period of years over 30 may be chosen only if it does not exceed the
difference between age 100 and the Annuitant's age on the date of the first
payment). Option A is referred to as Preferred Income Plan (PIP). At any
time while variable annuity payments are being made, the payee may elect to
receive the following amount: 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 may elect another payment option. If, at the death of
the payee, Option A payments have been made for fewer than the chosen
number of years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity, this
interest rate is 5% per year, unless 3% per year had been chosen by the
payee at the time the option was selected.
The Mortality and Expense Risk Charge is deducted during the Option A
payment period if a variable payout has been selected, but Keyport Benefit
has no mortality risk during this period.
Keyport Benefit has available a "level monthly" payment option that can be
chosen for variable payments under Option A. Under this option, the monthly
payment amount changes every twelve months instead of every month as would
be the case under the standard monthly payment frequency. The "level
monthly" option converts an annual payment amount into twelve equal monthly
payments as follows. Each annual payment will be determined as described
below in "Variable Annuity Payment Values". Each annual payment will then
be placed in Keyport Benefit's general account, from which it will be paid
out in twelve equal monthly payments. The sum of the twelve monthly
payments will exceed the annual payment amount because of an interest rate
factor used by Keyport Benefit that will vary from year to year. If the
payments are commuted, (1) the commutation method described above for
calculating the present value of remaining payments applies to any
remaining annual payments and (2) any unpaid monthly payments out of the
current twelve will be commuted at the interest rate that was used to
determine those twelve current monthly payments.
See "Annuity Payments" on Page 23 for the manner in which Option A may be
taxed.
Option B: Life Income with 10 Years of Payments Guaranteed. Keyport Benefit
will pay an annuity during the lifetime of the payee. If, at the death of
the payee, payments have been made for fewer than 10 years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity, this
interest rate is 5% per year, unless 3% per year was chosen by Payee's
Written Request.
The amount of the annuity payments will depend on the age of the payee on
the Income Date and it may also depend on the payee's sex.
Option C: Joint and Last Survivor Income. Keyport Benefit will pay an
annuity for as long as either the payee or a designated second natural
person is alive. The amount of the annuity payments will depend on the age
of both persons on the Income Date and it may also depend on each person's
sex. IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT
IF BOTH PAYEES DIE AFTER THE RECEIPT OF THE FIRST PAYMENT OR TO RECEIVE
ONLY TWO ANNUITY PAYMENTS IF BOTH PAYEES DIE AFTER RECEIPT OF THE SECOND
PAYMENT AND SO ON.
Variable Annuity Payment Values
The amount of the first variable annuity payment is determined by Keyport
Benefit using an annuity purchase rate that is based on an assumed annual
investment return of 5% per year, unless 3% is chosen by Written Request.
Subsequent variable annuity payments will fluctuate in amount and reflect
whether the actual investment return of the selected Sub-Account(s) (after
deducting the Mortality and Expense Risk Charge) is better or worse than
the assumed investment return. The total dollar amount of each variable
annuity payment will be equal to the sum of all Sub-Account payments.
Currently, a payee may instruct Keyport Benefit to change the Sub-
Account(s) used to determine the amount of the variable annuity payments
unlimited times every 12 months.
Proof of Age, Sex, and Survival of Annuitant
Keyport Benefit may require proof of age, sex or survival of any payee upon
whose age, sex or survival payments depend. If the age or sex has been
misstated, Keyport Benefit will compute the amount payable based on the
correct age and sex. If income payments have begun, any underpayments
Keyport Benefit may have made will be paid in full with the next annuity
payment. Any overpayments, unless repaid in one sum, will be deducted from
future annuity payments until Keyport Benefit is repaid in full.
SUSPENSION OF PAYMENTS
Keyport Benefit reserves the right to postpone surrender payments from the
Fixed Account for up to six months. Keyport Benefit reserves the right to
suspend or postpone any type of payment from the Variable Account for any
period when: (a) the New York Stock Exchange is closed other than customary
weekend or holiday closings; (b) trading on the Exchange is restricted; (c)
an emergency exists as a result of which it is not reasonably practicable
to dispose of securities held in the Variable Account or determine their
value; or (d) the Securities and Exchange Commission permits delay for the
protection of security holders. The applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the
conditions described in (b) and (c) exist.
TAX STATUS
Introduction
The Certificate is designed for use by individuals in retirement plans
which may or may not be Qualified Plans under the provisions of the
Internal Revenue Code (the "Code"). The ultimate effect of federal income
taxes on the Certificate Value, on annuity payments, and on the economic
benefit to the Certificate Owner, Annuitant or Designated Beneficiary
depends on the type of retirement plan for which the Certificate is
purchased and upon the tax and employment status of the individual
concerned. The discussion contained herein is general in nature and is not
intended as tax advice. Each person concerned should consult a competent
tax adviser. No attempt is made to consider any applicable state or other
tax laws. Moreover, the discussion herein is based upon Keyport Benefit's
understanding of current federal income tax laws as they are currently
interpreted. No representation is made regarding the likelihood of
continuation of those current federal income tax laws or of the current
interpretations by the Internal Revenue Service.
Taxation of Annuities in General
Section 72 of the Code governs taxation of annuities in general. There are
no income taxes on increases in the value of a Certificate until a
distribution occurs, in the form of a full surrender, a partial surrender,
an assignment or gift of the Certificate, or annuity payments.
Surrenders, Assignments and Gifts. A Certificate Owner who fully surrenders
his or her Certificate is taxed on the portion of the payment that exceeds
his or her cost basis in the Certificate. For Non-Qualified Certificates,
the cost basis is generally the amount of the Purchase Payments made for
the Certificate and the taxable portion of the surrender payment is taxed
as ordinary income. For Qualified Certificates, the cost basis is generally
zero and the taxable portion of the surrender payment is generally taxed as
ordinary income subject to special 5-year income averaging. A Designated
Beneficiary receiving a lump sum surrender benefit after the death of the
Annuitant or Certificate Owner is taxed on the portion of the amount that
exceeds the Certificate Owner's cost basis in the Certificate. If the
Designated Beneficiary elects to receive annuity payments within 60 days of
the decedent's death, different tax rules apply. See "Annuity Payments"
below. For Non-Qualified Certificates, the tax treatment applicable to
Designated Beneficiaries may be contrasted with the income-tax-free
treatment applicable to persons inheriting and then selling mutual fund
shares with a date-of-death value in excess of their basis.
Partial withdrawals received under Non-Qualified Certificates prior to
annuitization are first included in gross income to the extent Certificate
Value exceeds Purchase Payments. Then, to the extent the Certificate Value
does not exceed Purchase Payments, such withdrawals are treated as a non-
taxable return of principal to the Certificate Owner. For partial
withdrawals under a Qualified Certificate, payments are treated first as a
non-taxable return of principal up to the cost basis and then a taxable
return of income. Since the cost basis of Qualified Certificates is
generally zero, partial surrender amounts will generally be fully taxed as
ordinary income.
A Certificate Owner who assigns or pledges a Non-Qualified Certificate is
treated as if he or she had received the amount assigned or pledged and
thus is subject to taxation under the rules applicable to partial
withdrawals or surrenders. A Certificate Owner who gives away the
Certificate (i.e., transfers it without full and adequate consideration) to
anyone other than his or her spouse is treated for income tax purposes as
if he or she had fully surrendered the Certificate.
A special computational rule applies if Keyport Benefit issues to the
Certificate Owner, during any calendar year, (a) two or more Certificates
or (b) one or more Certificates and one or more of Keyport Benefit's other
annuity contracts. Under this rule, the amount of any distribution
includable in the Certificate Owner's gross income is to be determined
under Section 72(e) of the Code by treating all the Keyport Benefit
contracts as one contract. Keyport Benefit believes that this means the
amount of any distribution under one Certificate will be includable in
gross income to the extent that at the time of distribution the sum of the
values for all the Certificates or contracts exceeds the sum of the cost
bases for all the contracts.
Annuity Payments. The non-taxable portion of each variable annuity payment
is determined by dividing the cost basis of the Certificate by the total
number of expected payments while the non-taxable portion of each fixed
annuity payment is determined by an "exclusion ratio" formula which
establishes the ratio that the cost basis of the Certificate bears to the
total expected value of annuity payments for the term of the annuity. The
remaining portion of each payment is taxable. Such taxable portion is taxed
at ordinary income rates. For Qualified Certificates, the cost basis is
generally zero. With annuity payments based on life contingencies, the
payments will become fully taxable once the payee lives longer than the
life expectancy used to calculate the non-taxable portion of the prior
payments. Because variable annuity payments can increase over time and
because certain payment options provide for a lump sum right of
commutation, it is possible that the IRS could determine that variable
annuity payments should not be taxed as described above but instead should
be taxed as if they were received under an agreement to pay interest. This
determination would result in a higher amount (up to 100%) of certain
payments being taxable.
With respect to the "level monthly" payment option available under Annuity
Option A, pursuant to which each annual payment is placed in Keyport
Benefit's general account and paid out with interest in twelve equal
monthly payments, it is possible the IRS could determine that receipt of
the first monthly payout of each annual payment is constructive receipt of
the entire annual payment. Thus, the total taxable amount for each annual
payment would be accelerated to the time of the first monthly payout and
reported in the tax year in which the first monthly payout is received.
Penalty Tax. Payments received by Certificate Owners, Annuitants, and
Designated Beneficiaries under Certificates may be subject to both ordinary
income taxes and a penalty tax equal to 10% of the amount received that is
includable in income. The penalty tax is not imposed on amounts received:
(a) after the taxpayer attains age 59-1/2; (b) in a series of substantially
equal payments made for life or life expectancy; (c) after the death of the
Certificate Owner (or, where the Certificate Owner is not a human being,
after the death of the Annuitant); (d) if the taxpayer becomes totally and
permanently disabled; or (e) under a Non-Qualified Certificate's annuity
payment option that provides for a series of substantially equal payments,
provided only one Purchase Payment is made to the Certificate, the
Certificate is not issued as a result of a Section 1035 exchange, and the
first annuity payment begins in the first Certificate Year.
Income Tax Withholding. Keyport Benefit is required to withhold federal
income taxes on taxable amounts paid under Certificates unless the
recipient elects not to have withholding apply. Keyport Benefit will notify
recipients of their right to elect not to have withholding apply. See "Tax-
Sheltered Annuities" (TSAs) for an alternative type of withholding that may
apply to distributions from TSAs that are eligible for rollover to another
TSA or an individual retirement annuity or account (IRA).
Section 1035 Exchanges. A Non-Qualified Certificate may be purchased with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is Keyport Benefit's understanding that in such an event: (a)
the new Certificate will be subject to the distribution-at-death rules
described in "Death Provisions for Non-Qualified Certificates"; (b)
Purchase Payments made between August 14, 1982 and January 18, 1985 and the
income allocable to them will, following an exchange, no longer be covered
by a "grandfathered" exception to the penalty tax for a distribution of
income that is allocable to an investment made over ten years prior to the
distribution; and (c) Purchase Payments made before August 14, 1982 and the
income allocable to them will, following an exchange, continue to receive
the following "grandfathered" tax treatment under prior law: (i) the
penalty tax does not apply to any distribution; (ii) partial withdrawals
are treated first as a non-taxable return of principal and then a taxable
return of income; and (iii) assignments are not treated as surrenders
subject to taxation. Keyport Benefit's understanding of the above is
principally based on legislative reports prepared by the Staff of the
Congressional Joint Committee on Taxation.
Diversification Standards. The U.S. Secretary of the Treasury has issued
regulations that set standards for diversification of the investments
underlying variable annuity contracts (other than pension plan contracts).
The Eligible Funds are designed to be managed to meet the diversification
requirements for the Certificate as those requirements may change from time
to time. If the diversification requirements are not satisfied, the
Certificate would not be treated as an annuity contract. As a consequence
to the Certificate Owner, income earned on a Certificate would be taxable
to the Certificate Owner in the year in which diversification requirements
were not satisfied, including previously non-taxable income earned in prior
years. As a further consequence, Keyport Benefit would be subjected to
federal income taxes on assets in the Variable Account.
The Secretary of the Treasury announced in September 1986 that he expects
to issue regulations which will prescribe the circumstances in which a
Certificate Owner's control of the investments of a segregated asset
account may cause the Certificate Owner, rather than the insurance company,
to be treated as the owner of the assets of the account. The regulations
could impose requirements that are not reflected in the Certificate.
Keyport Benefit, however, has reserved certain rights to alter the
Certificate and investment alternatives so as to comply with such
regulations. Since the regulations have not been issued, there can be no
assurance as to the content of such regulations or even whether application
of the regulations will be prospective. For these reasons, Certificate
Owners are urged to consult with their own tax advisers.
Qualified Plans
The Certificate is designed for use with several types of Qualified Plans.
The tax rules applicable to participants in such Qualified Plans vary
according to the type of plan and the terms and conditions of the plan
itself. Therefore, no attempt is made herein to provide more than general
information about the use of the Certificate with the various types of
Qualified Plans. Participants under such Qualified Plans as well as
Certificate Owners, Annuitants, and Designated Beneficiaries are cautioned
that the rights of any person to any benefits under such Qualified Plans
may be subject to the terms and conditions of the plans themselves
regardless of the terms and conditions of the Certificate issued in
connection therewith. Following are brief descriptions of the various types
of Qualified Plans and of the use of the Certificate in connection
therewith. Purchasers of the Certificate should seek competent advice
concerning the terms and conditions of the particular Qualified Plan and
use of the Certificate with that Plan.
Tax-Sheltered Annuities
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts
and, subject to certain contribution limitations, exclude the amount of
Purchase Payments from gross income for tax purposes. However, such
Purchase Payments may be subject to Social Security (FICA) taxes. This type
of annuity contract is commonly referred to as a "Tax-Sheltered Annuity"
(TSA).
Section 403(b)(11) of the Code contains distribution restrictions.
Specifically, benefits may be paid, through surrender of the Certificate or
otherwise, only (a) when the employee attains age 59-1/2, separates from
service, dies or becomes totally and permanently disabled (within the
meaning of Section 72(m)(7) of the Code) or (b) in the case of hardship. A
hardship distribution must be of employee contributions only and not of any
income attributable to such contributions. Section 403(b)(11) does not
apply to distributions attributable to assets held as of December 31, 1988.
Thus, it appears that the law's restrictions would apply only to
distributions attributable to contributions made after 1988, to earnings on
those contributions, and to earnings on amounts held as of 12/31/88. The
Internal Revenue Service has indicated that the distribution restrictions
of Section 403(b)(11) are not applicable when TSA funds are being
transferred tax-free directly to another TSA issuer, provided the
transferred funds continue to be subject to the Section 403(b)(11)
distribution restrictions.
Keyport Benefit will notify a Certificate Owner who has requested a
distribution from a Certificate if all or part of such distribution is
eligible for rollover to another TSA or to an individual retirement annuity
or account (IRA). Any amount eligible for rollover treatment will be
subject to mandatory federal income tax withholding at a 20% rate if the
Certificate Owner receives the amount rather than directing Keyport Benefit
by Written Request to transfer the amount as a direct rollover to another
TSA or IRA.
Individual Retirement Annuities
Sections 408(b) and 408A of the Code permit eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" and "Roth IRA", respectively. These individual
retirement annuities are subject to limitations on the amount which may be
contributed, the persons who may be eligible, and on the time when
distributions may commence. In addition, distributions from certain types
of Qualified Plans may be placed on a tax-deferred basis into a Section
408(b) Individual Retirement Annuity.
Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such retirement
plans may permit the purchase of the Certificate to provide benefits under
the plans.
Deferred Compensation Plans With Respect to Service for State and Local
Governments
Section 457 of the Code, while not actually providing for a Qualified Plan
as that term is normally used, provides for certain deferred compensation
plans that enjoy special income tax treatment with respect to service for
tax-exempt organizations, state governments, local governments, and
agencies and instrumentalities of such governments. The Certificate can be
used with such plans. Under such plans, a participant may specify the form
of investment in which his or her participation will be made. However, all
such investments are owned by and subject to the claims of general
creditors of the sponsoring employer.
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with its view of present applicable law, Keyport Benefit will
vote the shares of the Eligible Funds held in the Variable Account at
regular and special meetings of the shareholders of the Eligible Funds in
accordance with instructions received from persons having the voting
interest in the Variable Account. Keyport Benefit will vote shares for
which it has not received instructions in the same proportion as it votes
shares for which it has received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation thereof should change,
and as a result Keyport Benefit determines that it is permitted to vote the
shares of the Eligible Funds in its own right, it may elect to do so.
The person having the voting interest under a Certificate prior to the
Income Date shall be the Certificate Owner. The number of shares held in
each Sub-Account which are attributable to each Certificate Owner is
determined by dividing the Certificate Owner's Variable Account Value in
each Sub-Account by the net asset value of the applicable share of the
Eligible Fund. The person having the voting interest after the Income Date
under an annuity payment option shall be the payee. The number of shares
held in the Variable Account which are attributable to each payee is
determined by dividing the reserve for the annuity payments by the net
asset value of one share. During the annuity payment period, the votes
attributable to a payee decrease as the reserves underlying the payments
decrease.
The number of shares in which a person has a voting interest will be
determined as of the date coincident with the date established by the
respective Eligible Fund for determining shareholders eligible to vote at
the meeting of the Fund and voting instructions will be solicited by
written communication prior to such meeting in accordance with the
procedures established by the Eligible Fund.
Each person having the voting interest in the Variable Account will receive
periodic reports relating to the Eligible Fund(s) in which he or she has an
interest, proxy material and a form with which to give such voting
instructions with respect to the proportion of the Eligible Fund shares
held in the Variable Account corresponding to his or her interest in the
Variable Account.
SALES OF THE CERTIFICATES
Keyport Financial Services Corp. ("KFSC") serves as the Principal
Underwriter for the Certificate described in this prospectus. The
Certificate will be sold by salespersons who represent Keyport Benefit Life
Insurance Company, an affiliate of KFSC, as variable annuity agents and who
are registered representatives of broker/dealers who have entered into
distribution agreements with KFSC. KFSC is registered under the Securities
Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. It is located at 125 High Street, Boston,
Massachusetts 02110.
A dealer selling the Certificate may receive up to 6.00% of Purchase
Payments with additional compensation later based on the Certificate Value
of those payments. During certain time periods selected by Keyport Benefit
and KFSC, the percentage may increase to 7.00%. In addition, under certain
circumstances, Keyport Benefit or certain of its affiliates, under a
marketing support agreement with KFSC may pay certain sellers for other
services not directly related to the sale of Certificates such as special
marketing support allowances.
Certificates may be sold with lower or no dealer compensation (1) to a
person who is an officer, director, or employee of Keyport Benefit or an
affiliate of Keyport Benefit or (2) to any Qualified Plan established for
such a person. Such Certificates may be different from the Certificates
sold to others in that (1) they are not subject to the deduction for the
asset-based Administrative charge and (2) they have a Mortality and Expense
Risk Charge of 0.35% per year.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the
Principal Underwriter are a party. Keyport Benefit is engaged in various
kinds of routine litigation which in its judgment is not of material
importance in relation to the total capital and surplus of Keyport Benefit.
INQUIRIES BY CERTIFICATE OWNERS
Certificate Owners with questions about their Certificates may write
Keyport Benefit's Service Office, 125 High Street, Boston, MA 02110, or
call (800) 367-3653.
TABLE OF CONTENTS--STATEMENT OF ADDITIONAL INFORMATION
Page
Keyport Benefit Life Insurance Company 2
Variable Annuity Benefits 2
Variable Annuity Payment Values 2
Re-Allocating Sub-Account Payments 3
Safekeeping of Assets 4
Principal Underwriter 4
Experts 4
Investment Performance 4
Yields for Stein Roe Money Market Sub-Account 5
Financial Statements 6
Keyport Benefit Life Insurance Company 7
APPENDIX A
THE FIXED ACCOUNT (ALSO KNOWN AS THE MODIFIED GUARANTEED ANNUITY ACCOUNT)
Introduction
This Appendix describes the Fixed Account option available under the
Certificate.
FIXED ACCOUNT VALUES PROVIDED BY THE CERTIFICATE ARE SUBJECT TO A MARKET
VALUE ADJUSTMENT, THE OPERATION OF WHICH MAY RESULT IN UPWARD OR DOWNWARD
ADJUSTMENTS IN AMOUNTS TRANSFERRED AND AMOUNTS PAID (INCLUDING WITHDRAWALS,
SURRENDERS, DEATH BENEFITS, AND AMOUNTS APPLIED TO PURCHASE ANNUITY
PAYMENTS) TO A CERTIFICATE OWNER OR OTHER PAYEE. IN NO EVENT WILL THE
DOWNWARD MARKET VALUE ADJUSTMENT ELIMINATE INTEREST AT THE RATE OF 3% PER
YEAR APPLIED TO THE AMOUNT ALLOCATED TO A GUARANTEED PERIOD. PAYMENTS MADE
FROM FIXED ACCOUNT VALUES AT THE END OF THEIR GUARANTEE PERIOD ARE NOT
SUBJECT TO THE MARKET VALUE ADJUSTMENT.
Purchase Payments allocated to the Fixed Account option become part of
Keyport Benefit's general account. Because of applicable exemptive and
exclusionary provisions, interests in the Fixed Account options have not
been registered under the Securities Act of 1933 ("1933 Act"), nor is the
general account an investment company under the Investment Company Act.
Accordingly, neither the general account, the Fixed Account option, nor any
interest therein, is subject to regulation under the 1933 Act or the
Investment Company Act. Keyport Benefit understands that the Securities and
Exchange Commission has not reviewed the disclosure in the prospectus
relating to the general account and the Fixed Account option.
Investments in the Fixed Account and Capital Protection Plus
Purchase Payments will be allocated to the Fixed Account in accordance with
the selection made by the Certificate Owner in the application. Any
selection must specify that percentage of the Purchase Payment that is to
be allocated to each Guarantee Period of the Fixed Account. The percentage,
if not zero, must be at least 5%. The Certificate Owner may change the
allocation percentages without fee, penalty or other charge. Allocation
changes must be made by Written Request unless the Certificate Owner has by
Written Request authorized Keyport Benefit to accept telephone allocation
instructions from the Certificate Owner. By authorizing Keyport Benefit to
accept telephone changes, a Certificate Owner agrees to accept and be bound
by the conditions and procedures established by Keyport Benefit from time
to time. The current conditions and procedures are in Appendix B and
Certificate Owners authorizing telephone allocation instructions will be
notified, in advance, of any changes.
Keyport Benefit currently offers Guarantee Periods of 1, 3, 5, and 7 years.
Keyport Benefit may change at any time the number of Guarantee Periods it
offers under newly-issued and in-force Certificates, as well as the length
of those Guarantee Periods. If Keyport Benefit stops offering a particular
Guarantee Period, existing Fixed Account Value in such Guarantee Period
would not be affected until the end of the Period (at that time, a Period
of the same length would not be a transfer option). Each Guarantee Period
currently offered is available for initial and subsequent Purchase Payments
and for transfers of Certificate Value.
Keyport Benefit offers a Capital Protection Plus program that a Certificate
Owner may request. Under this program, Keyport Benefit will allocate part
of the Purchase Payment to the Guarantee Period selected by the Certificate
Owner so that such part, based on that Guarantee Period's interest rate in
effect on the date of allocation, will equal at the end of the Guarantee
Period the total Purchase Payment. The rest of the Purchase Payment will be
allocated to the Sub-Account(s) of the Variable Account based on the
Certificate Owner's allocation. If any part of the Fixed Account Value is
surrendered or transferred before the end of the Guarantee Period, the
Value at the end of that Period will not equal the original Purchase
Payment amount.
For an example of Capital Protection Plus, assume Keyport Benefit receives
a Purchase Payment of $10,000 when the interest rate for the 7-year
Guarantee Period is 6.75% per year. Keyport Benefit will allocate $6,331 to
that Guarantee Period because $6,331 will increase at that interest rate to
$10,000 after 7 years. The remaining $3,669 of the payment will be
allocated to the Sub-Account(s) selected by the Certificate Owner.
Fixed Account Value
The Fixed Account Value at any time is equal to:
(a) all Purchase Payments allocated to the Fixed Account plus the interest
subsequently credited on those payments; plus
(b) any Variable Account Value transferred to the Fixed Account plus the
interest subsequently credited on the transferred value; less
(c) any prior partial withdrawals from the Fixed Account, including any
charges therefor; less
(d) any Fixed Account Value transferred to the Variable Account.
Interest Credits
Keyport Benefit will credit interest daily (based on an annual compound
interest rate) to Purchase Payments allocated to the Fixed Account at rates
declared by Keyport Benefit for Guarantee Periods of one or more years from
the month and day of allocation. Any rate set by Keyport Benefit will be at
least 3% per year.
Keyport Benefit's method of crediting interest means that Fixed Account
Value might be subject to different rates for each Guarantee Period the
Certificate Owner has selected in the Fixed Account. For purposes of this
section, Variable Account Value transferred to the Fixed Account and Fixed
Account Value renewed for another Guarantee Period shall be treated as a
Purchase Payment allocation.
Application of Market Value Adjustment
Any surrender, withdrawal, transfer, or application to an Annuity Option of
Fixed Account Value from a Guarantee Period of three years or more is
subject to a limited Market Value Adjustment, unless: (1) the effective
date of the transaction is at the end of the Guarantee Period; or (2) the
effective date of a surrender is within 90 days of the date of death of the
first Covered Person to die.
If a Market Value Adjustment applies to either a surrender or the
application to an Annuity Option, then any negative Market Value Adjustment
amount will be deducted from the Certificate Value and any positive Market
Value Adjustment amount will be added to the Certificate Value. If a Market
Value Adjustment applies to either a partial withdrawal or a transfer, then
any negative Market Value Adjustment amount will be deducted from the
partial withdrawal or transfer amount after the withdrawal or transfer
amount has been deducted from the Fixed Account Value, and any positive
Market Value Adjustment amount will be added to the applicable amount after
it has been deducted from the Fixed Account Value.
No Market Value Adjustment is ever applicable to Guarantee Periods of fewer
than three years.
Effect of Market Value Adjustment
A Market Value Adjustment reflects the change in prevailing current
interest rates since the beginning of a Guarantee Period. The Market Value
Adjustment may be positive or negative, but any negative Adjustment may be
limited in amount (see Market Value Adjustment Factor below).
Generally, if the Treasury Rate for the Guarantee Period is lower than the
Treasury Rate for a new Guarantee Period with a length equal to the time
remaining in the Guarantee Period, then the application of the limited
Market Value Adjustment will result in a reduction of the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Option.
Similarly, if the Treasury Rate for the Guarantee Period is higher than the
Treasury Rate for a new Guarantee Period with a length equal to the time
remaining in the Guarantee Period, then the application of the Market Value
Adjustment will result in an increase in the amount being surrendered,
withdrawn, transferred, or applied to an Annuity Option.
The Market Value Adjustment will be applied before the deduction of any
applicable surrender charges or applicable taxes.
Market Value Adjustment Factor
The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to a Payment Option, by the
Market Value Adjustment Factor. The Market Value Adjustment Factor is
calculated as the larger of Formula (1) or (2):
(1) (1+a)/(1+b)(n/12)-1
where:
"a" is the Treasury Rate for the number of Guarantee Period Years in the
Guarantee Period;
"b" is the Treasury Rate for a period equal to the time remaining (rounded
up to the next whole number of Guarantee Period Years) to the expiration of
the Guarantee Period; and
"n" is the number of complete Guarantee Period Months remaining before the
expiration of the Guarantee Period.
(2) (1.03)/(1+i)(y+d/#)-1
where:
"i" is the Guaranteed Interest Rate for the Guarantee Period;
"y" is the number of complete Guarantee Period Years that have elapsed in Your
Guarantee Period;
"d" is the number of days since the last Guarantee Period Anniversary or,
if "y" is zero, the number of days since the start of the Guarantee Period;
and
"#" is the number of days in the current Guarantee Period Year (i.e., the
sum of "d" and the number of days until the next Guarantee Period
Anniversary).
In Formulas (1) and (2), all references to Guarantee Period, Guarantee
Period Anniversary, Guarantee Period Month, and Guarantee Period Year
relate to the Guarantee Period from which is being taken the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Option.
As stated above, the Formula (2) amount will apply only if it is greater
than the Formula (1) amount. This will occur only when the Formula (1)
amount is negative and the Formula (2) amount is a smaller negative number.
Formula (2) thus ensures that a full (normal) negative Market Value
Adjustment of Formula (1) will not apply to the extent it would decrease
the Guarantee Period's Fixed Account Value (before the deduction of any
applicable surrender charges or any applicable taxes) below the following
amount:
(a) the amount allocated to the Guarantee Period; less
(b) any prior systematic or partial withdrawal amounts; less
(c) any prior amounts transferred to the Variable Account or to another
Guarantee Period in the Fixed Account; plus
(d) interest on the above items (a) through (c) credited annually at a
rate of 3% per year.
Treasury Rates
The Treasury Rate for a Guarantee Period is the interest rate in the
Treasury Constant Maturity Series, as published by the Federal Reserve
Board, for a maturity equal to the number of years specified in "a" and "b"
in Formula (1) above. Weekly Series are published at the beginning of the
following week. To determine "a", Keyport Benefit uses the weekly Series
first published on or after the most recent Determination Date which occurs
on or before the Start Date for the Guarantee Period, except that if the
Start Date is the same as the Determination Date or the date of
publication, or any date in between, Keyport Benefit instead uses the
weekly Series first published after the prior Determination Date. To
determine "b", Keyport Benefit uses the Weekly Series first published on or
after the most recent Determination Date which occurs on or before the date
on which the Market Value Adjustment Factor is calculated, except that if
the calculation date is the same as the Determination Date or the date of
publication, or any date in between, Keyport Benefit instead uses the
weekly Series first published after the prior Determination Date. The
Determination Dates are the last business day prior to the first and
fifteenth of each calendar month.
If the number of years specified in "a" or "b" is not equal to a maturity
in the Treasury Constant Maturity Series, the Treasury Rate will be
determined by straight line interpolation between the interest rates of the
next highest and next lowest maturities.
If the Treasury Constant Maturity Series becomes unavailable, Keyport
Benefit will adopt a comparable constant maturity index or, if such a
comparable index also is not available, Keyport Benefit will replicate
calculation of the Treasury Constant Maturity Series Index based on U.S.
Treasury Security coupon rates.
End of A Guarantee Period
Keyport Benefit will notify a Certificate Owner in writing at least 30 days
prior to the end of a Guarantee Period. At the end of the Guarantee Period,
Keyport Benefit will automatically transfer the Guarantee Period's Fixed
Account Value to the Money Market Sub-Account of the Variable Account
unless Keyport Benefit previously received a Certificate Owner's Written
Request of: (1) election of a new Guarantee Period from among those being
offered by Keyport Benefit at that time; or (2) instructions to transfer
the ending Guarantee Period's Fixed Account Value to one or more Sub-
accounts of the Variable Account. A new Guarantee Period cannot be longer
than the number of years remaining until the Income Date.
Transfers of Fixed Account Value
The Certificate Owner may transfer Fixed Account Value from one Guarantee
Period to another or to one or more Sub-Accounts of the Variable Account
subject to any applicable Market Value Adjustment. If the Fixed Account
Value represents multiple Guarantee Periods, the transfer request must
specify from which values the transfer is to be made.
The Certificate allows Keyport Benefit to limit the number of transfers
that can be made in a specified time period. Currently, Keyport Benefit is
limiting Variable Account and Fixed Account transfers to generally
unlimited transfers per calendar year with a $500,000 per transfer dollar
limit. See "Transfer of Variable Account Value". Transfers from the Fixed
Account to the Variable Account are limited to 50% of the Fixed Account
Value at the beginning of the Certificate Year. This limitation will be
waived if a Systematic Withdrawal Program is in effect. These limitations
will not apply to any transfer made at the end of a Guarantee Period.
Certificate Owners will be notified, in advance, of a change in the
limitation on the number of transfers.
Transfer requests must be by Written Request unless the Certificate Owner
has authorized Keyport Benefit by Written Request to accept telephone
transfer instructions from the Certificate Owner or from a person acting
for the Certificate Owner as an attorney-in-fact under a power of attorney.
By authorizing Keyport Benefit to accept telephone transfer instructions, a
Certificate Owner agrees to accept and be bound by the conditions and
procedures established by Keyport Benefit from time to time. The current
conditions and procedures are in Appendix B and Certificate Owners
authorizing telephone transfers will be notified, in advance, of any
changes. Written transfer requests may be made by a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Keyport Benefit before the close of trading
on the New York Stock Exchange (currently 4:00 PM Eastern Time) will be
executed at the close of business that day. Any requests received later
will be executed at the close of the next business day.
The amount of the transfer will be deducted from the specified values in
the manner stated in the next section below.
If 100% of a Guarantee Period's value is transferred and the current
allocation for Purchase Payments includes that Guarantee Period, then the
allocation formula for future Purchase Payments will automatically change
unless the Certificate Owner instructs otherwise. For example, if the
allocation formula is 50% to the one-year Guarantee Period and 50% to Sub-
Account A and all Fixed Account Value is transferred to Sub-Account A, the
allocation formula will change to 100% to Sub-Account A.
APPENDIX B
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are Joint Certificate Owners, both must authorize Keyport
Benefit to accept telephone instructions but either Certificate Owner may
give Keyport Benefit telephone instructions.
2. All callers will be required to identify themselves. Keyport Benefit
reserves the right to refuse to act upon any telephone instructions in
cases where the caller has not sufficiently identified himself/herself to
Keyport Benefit's satisfaction.
3. Neither Keyport Benefit nor any person acting on its behalf shall be
subject to any claim, loss, liability, cost or expense if it or such person
acted in good faith upon a telephone instruction, including one that is
unauthorized or fraudulent; however, Keyport Benefit will employ reasonable
procedures to confirm that a telephone instruction is genuine and, if
Keyport Benefit does not, Keyport Benefit may be liable for losses due to
an unauthorized or fraudulent instruction. The Certificate Owner thus bears
the risk that an unauthorized or fraudulent instruction that is executed
may cause the Certificate Value to be lower than it would be had no
instruction been executed.
4. All conversations will be recorded with disclosure at the time of the
call.
5. The application for the Certificate may allow a Certificate Owner to
create a power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, such power will be treated as
durable in nature and shall not be affected by the subsequent incapacity,
disability or incompetency of the Certificate Owner. Either Keyport Benefit
or the authorized person may cease to honor the power by sending written
notice to the Certificate Owner at the Certificate Owner's last known
address. Neither Keyport Benefit nor any person acting on its behalf shall
be subject to liability for any act executed in good faith reliance upon a
power of attorney.
6. Telephone authorization shall continue in force until (a) Keyport
Benefit receives the Certificate Owner's written revocation, (b) Keyport
Benefit discontinues the privilege, or (c) Keyport Benefit receives written
evidence that the Certificate Owner has entered into a market timing or
asset allocation agreement with an investment adviser or with a
broker/dealer.
7. Telephone transfer instructions received by Keyport Benefit at 800-367-
3653 before the close of trading on the New York Stock Exchange (currently
4:00 P.M. Eastern Time) will be initiated that day based on the unit value
prices calculated at the close of that day. Instructions received after the
close of trading on the NYSE will be initiated the following business day.
8. Once instructions are accepted by Keyport Benefit, they may not be
canceled.
9. All transfers must be made in accordance with the terms of the
Certificate and current prospectus. If the transfer instructions are not in
good order, Keyport Benefit will not execute the transfer and will notify
the caller within 48 hours.
10. If 100% of any Sub-Account's value is transferred and the allocation
formula for Purchase Payments includes that Sub-Account, then the
allocation formula for future Purchase Payments will change accordingly
unless Keyport Benefit receives telephone instructions to the contrary. For
example, if the allocation formula is 50% to Sub-Account A and 50% to Sub-
Account B and all of Sub-Account A's value is transferred to Sub-Account B,
the allocation formula will change to 100% to Sub-Account B unless Keyport
Benefit is instructed otherwise.
Telephone Changes to Purchase Payment Allocation Percentages
Numbers 1-6 above are applicable.
PART B
STATEMENT OF ADDITIONAL INFORMATION
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT A
OF
KEYPORT BENEFIT LIFE INSURANCE COMPANY ("Keyport Benefit")
This Statement of Additional Information (SAI) is not a prospectus but it
relates to, and should be read in conjunction with, the Keyport Benefit
Advisor Vista variable annuity prospectus dated August 3, 1998. The SAI is
incorporated by reference into the prospectus. The prospectus is available,
at no charge, by writing Keyport Benefit at 125 High Street, Boston, MA
02110 or by calling (800) 437-4466.
TABLE OF CONTENTS
Page
Keyport Benefit Life Insurance Company.................................2
Variable Annuity Benefits..............................................2
Variable Annuity Payment Values......................................2
Re-Allocating Sub-Account Payments...................................3
Safekeeping of Assets..................................................4
Principal Underwriter..................................................4
Experts................................................................4
Investment Performance.................................................4
Yields for Stein Roe Money Market Sub-Account........................5
Financial Statements...................................................6
Keyport Benefit Life Insurance Company...............................7
The date of this statement of additional information is August 3, 1998.
KBAV1998.SAI
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 7% 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 the sum of all Sub-Account payments.
The first payment for each Sub-Account will be determined by deducting 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 12 months. The
payee's request must specify the percentage of the annuity payment that is
to be based on the investment performance of each Sub-Account. The
percentage for each Sub-Account, if not zero, must be at least 5% and must
be a whole number. At the end of the Valuation Period during which Keyport
Benefit receives the request, Keyport Benefit will: (a) value the Annuity
Units for each Sub-Account to create a total annuity value; (b) apply the
new percentages the payee has selected to this total value; and (c)
recompute the number of Annuity Units for each Sub-Account. This new
number of units will remain fixed for the remainder of the payment period
unless the payee requests another change.
SAFEKEEPING OF ASSETS
Keyport Benefit is responsible for the safekeeping of the assets of the
Variable Account.
Keyport Benefit has responsibility for providing all administration of the
Certificates and the Variable Account. This administration includes, but is
not limited to, preparation of the Contracts and Certificates, maintenance
of Certificate Owners' records, and all accounting, valuation, regulatory
and reporting requirements. Keyport Benefit has contracted with Keyport
Life Insurance Company, its corporate parent, to provide all administration
for the Contracts and Certificates, as its agent. Keyport Benefit pays
Keyport Life Insurance Company for the costs it incurs for providing those
administrative services.
PRINCIPAL UNDERWRITER
The Contract and Certificates, which are offered continuously, are
distributed by Keyport Financial Services Corp. ("KFSC"), which is an
affiliate of Keyport Benefit.
EXPERTS
The statutory-basis financial statements of Keyport Benefit Life Insurance
Company (formerly American Benefit Life Insurance Company) as of December
31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, appearing in this Statement of Additional Information
have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
INVESTMENT PERFORMANCE
The Variable Account may from time to time quote performance information
concerning its various Sub-Accounts. A Sub-Account's performance may also
be compared to the performance of sub-accounts used with variable annuities
offered by other insurance companies. This comparative information may be
expressed as a ranking prepared by Financial Planning Resources, Inc. of
Miami, FL (The VARDS Report), Lipper Analytical Services, Inc., or by
Morningstar, Inc. of Chicago, IL (Morningstar's Variable Annuity
Performance Report), which are independent services that compare the
performance of variable annuity sub-accounts. The rankings are done on the
basis of changes in accumulation unit values over time and do not take into
account any charges (such as sales charges or administrative charges) that
are deducted directly from Contract values.
Ibbotson Associates of Chicago, IL provides historical returns from 1926 on
capital markets in the United States. The Variable Account may quote the
performance of its Sub-Accounts in conjunction with the long-term
performance of capital markets in order to illustrate general long-term
risk versus reward investment scenarios. Capital markets tracked by
Ibbotson Associates include common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, U.S. Treasury Bills, and the
U.S. inflation rate. Historical total returns are determined by Ibbotson
Associates for: Common Stocks, represented by the Standard and Poor's
Composite Stock Price Index (an unmanaged weighted index of 90 stocks prior
to March 1957 and 500 stocks thereafter of industrial, transportation,
utility and financial companies widely regarded by investors as
representative of the stock market); Small Company Stocks, represented by
the fifth capitalization quintile (i.e., the ninth and tenth deciles) of
stocks on the New York Stock Exchange for 1926-1981 and by the performance
of the Dimensional Fund Advisors Small Company 9/10 (for ninth and tenth
deciles) Fund thereafter; Long Term Corporate Bonds, represented beginning
in 1969 by the Salomon Brothers Long-Term High-Grade Corporate Bond Index,
which is an unmanaged index of nearly all Aaa and Aa rated bonds,
represented for 1946-1968 by backdating the Salomon Brothers Index using
Salomon Brothers' monthly yield data with a methodology similar to that
used by Salomon Brothers in computing its Index, and represented for 1925-
1945 through the use of the Standard and Poor's monthly High-Grade
Corporate Composite yield data, assuming a 4% coupon and a 20-year
maturity; Long-Term Government Bonds, measured each year using a portfolio
containing one U.S. government bond with a term of approximately twenty
years and a reasonably current coupon; U.S. Treasury Bills, measured by
rolling over each month a one-bill portfolio containing, at the beginning
of each month, the shortest-term bill having not less than one month to
maturity; Inflation, measured by the Consumer Price Index for all Urban
Consumers, not seasonably adjusted, since January, 1978 and by the Consumer
Price Index before then. The stock capital markets may be contrasted with
the corporate bond and U.S. government securities capital markets. Unlike
an investment in stock, an investment in a bond that is held to maturity
provides a fixed rate of return. Bonds have a senior priority to common
stocks in the event the issuer is liquidated and interest on bonds is
generally paid by the issuer before it makes any distributions to common
stock owners. Bonds rated in the two highest rating categories are
considered high quality and present minimal risk of default. An additional
advantage of investing in U.S. government bonds and Treasury bills is that
they are backed by the full faith and credit of the U.S. government and
thus have virtually no risk of default. Although government securities
fluctuate in price, they are highly liquid.
Yield for Stein Roe Money Market Sub-Account
Yield percentages for the Stein Roe Money Market Sub-Account are calculated
using the method prescribed by the Securities and Exchange Commission.
Yield reflects the deduction of the annual 1.40% asset-based Certificate
charges. Yield does not reflect premium tax charges. The yield would be
lower if these charges were included. The following is the standardized
formula:
Yield equals: (A - B - 1) X 365
C 7
Where:
A = the Accumulation Unit value at the end of the 7-day period.
B = $0.00.
C = the Accumulation Unit value at the beginning of the 7-day period.
The yield formula assumes that the weekly net income generated by an
investment in the Stein Roe Money Market Sub-Account will continue over an
entire year.
FINANCIAL STATEMENTS
The Variable Account has not yet commenced operations and therefore no
financial statements are included. The financial statements of Keyport
Benefit are provided as relevant to its ability to meet its financial
obligations under the Certificates.
Report of Independent Auditors
The Board of Directors and Stockholder
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
We have audited the accompanying statutory-basis balance sheets of Keyport
Benefit Life Insurance Company (formerly American Benefit Life Insurance
Company, a wholly-owned subsidiary of American Republic Insurance Company)
as of December 31, 1997 and 1996, and the related statutory-basis
statements of operations, changes in capital and surplus, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents
its financial statements in conformity with accounting practices prescribed
or permitted by the Insurance Department of the State of New York, which
practices differ from generally accepted accounting principles. The
variances between such practices and generally accepted accounting
principles also are described in Note 1. The effects on the financial
statements of these variances are not reasonably determinable but are
presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting
principles, the financial position of Keyport Benefit Life Insurance
Company at December 31, 1997 and 1996, or the results of its operations or
its cash flows for each of the three years in the period ended December 31,
1997.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Keyport Benefit
Life Insurance Company at December 31, 1997 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with accounting practices prescribed
or permitted by the Insurance Department of the State of New York.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Des Moines, Iowa
March 13, 1998
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Balance Sheets - Statutory-Basis
December 31
1997 1996
Admitted assets
Bonds D at amortized cost $2,995,943 $ 8,416,743
Cash and cash equivalents:
Short-term investments 2,498,556 210,000
Cash 952,919 74,858
3,451,475 284,858
Total cash and investments 6,447,418 8,701,601
Investment income due and accrued 86,829 152,615
Receivable from securities sold - 873
Other admitted assets 9 151
Separate account assets 2,777,522 3,690,792
Total admitted assets $9,311,778 $12,546,032
Liabilities and capital and surplus
Liabilities:
Policy reserves:
Annuity $ 73,095 $ 88,053
Accident and health 95,961 79,526
169,056 167,579
Policy and contract claims 47,460 45,600
Due to parent under tax allocation agreement 87,449 132,559
Transfer to separate accounts due or accrued, net (3,214) (10,285)
Asset valuation reserve - 58,296
Interest maintenance reserve 38,672 20,116
Other liabilities 105,833 20,825
Separate account liabilities 2,777,522 3,690,792
Total liabilities 3,222,778 4,125,482
Lease commitment (Note 9)
Capital and surplus:
Common Stock, par value $2,000
per share D 1,000 shares authorized,
issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 2,500,000 5,000,000
Separate account contingency reserve - 92,270
Unassigned surplus 1,589,000 1,328,280
Total capital and surplus 6,089,000 8,420,550
Total liabilities and capital and surplus $9,311,778 $12,546,032
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Operations - Statutory-Basis
Year ended December 31
1997 1996 1995
Premiums and other considerations:
Annuity deposits $ 37,387 $ 43,705 $ 51,449
Accident and health - 9,100 18,200
37,387 52,805 69,649
Net investment income 562,822 590,018 570,073
Miscellaneous income 7,902 7,651 134,395
608,111 650,474 774,117
Benefits and expenses:
Benefits paid or provided for:
Surrender benefits 1,312,171 1,804,050 3,285,960
Annuity and other benefits 27,546 86,818 58,768
Accident and health benefits 27,420 - 37,326
Decrease in policy reserves 1,477 (30,370) (131,774)
1,368,614 1,860,498 3,250,280
Insurance expenses:
Commissions 3,149 4,479 6,175
General insurance expenses 389,107 327,700 300,049
Insurance taxes, licenses and fees 27,001 7,749 7,039
Net transfers from separate account (1,356,208)(1,895,913)(3,230,846)
(936,951)(1,555,985)(2,917,583)
431,663 304,513 332,697
Gain from operations before federal
income taxes and net realized capital
gains 176,448 345,961 441,420
Federal income taxes 66,328 118,372 130,420
Net gain from operations before net
realized capital gains 110,120 227,589 311,000
Net realized capital gains, net of
federal income taxes (1997 - $14,672;
1996 D $1,628; 1995 D $1,580) and amounts
transferred to interest maintenance
reserve (1997 D $27,249; 1996 D $3,024;
1995 D $2,934) - - -
Net income $110,120 $227,589 $311,000
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Changes in Capital and Surplus - Statutory-Basis
Separate
Additional Account
Common Paid-In Contingency Unassigned
Stock Capital Reserve Surplus Total
Balance at
January 1,
1995 $2,000,000 $5,000,000 $185,557 $ 769,276 $7,954,833
Net income - - - 311,000 311,000
Decrease in
asset
valuation
reserve - - - 3,917 3,917
Decrease in
nonadmitted
assets - - - 356 356
Decrease in
surplus of
separate
account - - - (69,062) (69,062)
Transfer of
contingency
reserve back
to unassigned
surplus - - (57,755) 57,755 -
Other - - - (7,522) (7,522)
Balance at
December 31,
1995 2,000,000 5,000,000 127,802 1,065,720 8,193,522
Net income - - - 227,589 227,589
Increase in
asset valuation
reserve - - - (751) (751)
Decrease in
nonadmitted
assets - - - 190 190
Transfer of
contingency
reserve back to
unassigned
surplus - - (35,532) 35,532 -
Balance at
December 31,
1996 2,000,000 5,000,000 92,270 1,328,280 8,420,550
Net income - - - 110,120 110,120
Decrease in
asset valuation
reserve - - - 58,296 58,296
Decrease in
nonadmitted
assets - - - 34 34
Transfer of
contingency
reserve back
to unassigned
surplus - - (92,270) 92,270 -
Dividend paid
to parent - (2,500,000) - - (2,500,000)
Balance at
December 31,
1997 $2,000,000 $2,500,000 $ - $1,589,000 $6,089,000
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Cash Flows - Statutory-Basis
Year ended December 31
1997 1996 1995
Operating activities
Premiums and other
considerations $ 37,529 $ 52,808 $ 69,504
Investment income, less expenses 648,361 598,768 599,720
Miscellaneous income (792) 186 126,915
Accident and health claims (25,560) - (43,526)
Annuity surrenders (1,312,171) (1,804,050) (3,285,960)
Annuity and other benefits paid (27,546) (86,818) (58,768)
Insurance expenses (340,984) (344,366) (326,057)
Federal income taxes paid (126,110) (119,441) (65,501)
Net transfers from separate account 1,363,279 1,910,019 3,230,846
Net cash provided by operating
activities 216,006 207,106 247,173
Investing activities
Proceeds from bonds sold,
matured or repaid 5,743,126 2,978,253 1,692,370
Cost of bonds acquired (293,966) (3,388,068) (1,826,241)
Dividend paid to parent (2,500,000) - -
Other 1,451 49,070 1
Net cash provided by (used in)
investing activities 2,950,611 (360,745) (133,870)
Increase (decrease) in cash and
cash equivalents 3,166,617 (153,639) 113,303
Cash and cash equivalents at
beginning of year 284,858 438,497 325,194
Cash and cash equivalents at end
of year $3,451,475 $ 284,858 $ 438,497
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements
December 31, 1997
1. Organization and Significant Accounting Policies
Organization
Through December 31, 1997, Keyport Benefit Life Insurance Company (formerly
American Benefit Life Insurance Company) was wholly owned by American
Republic Insurance Company (American Republic), a mutual life insurance
company. The Company was sold on January 2, 1998 to Keyport Life Insurance
Company including the assumption of all responsibilities related to the
Separate Account. The name of the Company was changed in conjunction with
the sale from American Benefit Life Insurance Company to Keyport Benefit
Life Insurance Company. The Company offers flexible premium annuities and
long-term care products. The Company is licensed in the State of New York.
Basis of Presentation
The accompanying financial statements of Keyport Benefit Life Insurance
Company (formerly American Benefit Life Insurance Company) have been
prepared in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of New York, which practices differ
from generally accepted accounting principles ("GAAP").
Prescribed statutory accounting practices include state laws, regulations
and general administrative rules, as well as a variety of publications of
the National Association of Insurance Commissioners (NAIC). Permitted
statutory accounting practices encompass all accounting practices that are
not prescribed. Such practices may differ from state to state, may differ
from company to company within a state and may change in the future.
The NAIC is in the process of codifying statutory accounting practices
(Codification). Codification will likely change, to some extent, prescribed
statutory accounting practices and may result in changes to the accounting
practices that the Company uses to prepare its statutory-basis financial
statements. Codification, which was approved by the NAIC in March 1998,
will require adoption by the various states before it becomes the
prescribed statutory basis of accounting for insurance companies
domesticated within those states. Accordingly, before Codification becomes
effective for the Company, the State of Iowa must adopt Codification as the
prescribed basis of accounting on which domestic insurers must report their
statutory-basis results to the Insurance Division. At this time, it is
unclear whether the State of Iowa will adopt Codification.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
The more significant differences between statutory accounting practices and
GAAP are as follows: (a) investments in bonds are reported at amortized
cost or market value based on their NAIC rating. For GAAP purposes, such
investments in debt securities are designated at purchase as held-to-
maturity, trading or available-for-sale. Held-to-maturity investments in
debt securities are reported at amortized cost. The remaining investments
in debt securities are reported at fair value with the unrealized holding
gains and losses reported in operations for those designated as trading and
as a separate component of equity for those designated as available-for-
sale; (b) the costs of acquiring and renewing business are charged to
current operations as incurred rather than deferred and amortized over the
premium-paying period or in proportion to the present value of expected
gross profit margins; (c) policy reserves on certain annuity contracts use
discounting methodologies utilizing statutory interest rates rather than
full account values; (d) deferred federal income taxes are not provided for
the difference between the financial reporting and income tax bases of
assets and liabilities for statutory purposes, whereas, they are required
for GAAP; (e) under a formula determined by the NAIC, the Company defers in
the Interest Maintenance Reserve (IMR) the portion of realized gains and
losses on sales of bonds attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity. Realized capital gains and losses are reported in operations net
of federal income taxes and transfers to the IMR rather than reported in
the statements of operations on a pretax basis in the period that the asset
giving rise to the gain or loss is sold; (f) declines in the estimated
realizable value of investments are provided for through the establishment
of a formula determined statutory asset valuation reserve (carried as a
liability) with changes charged directly to surplus, rather than through
recognition in the statements of operations for declines in value, when
such declines are judged to be other than temporary; (g) certain assets
designated as "non-admitted assets" have been charged directly to surplus
rather than being reported as assets; and (h) revenues for annuity deposits
consist of premiums received rather than policy charges for the cost of
insurance, policy initiation and administration, surrender charges and
other fees that have been assessed against policy account values.
The effects of the foregoing variances from GAAP on the accompanying
statutory-basis financial statements have not been determined, but are
presumed to be material.
Use of Estimates
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported
in the financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
Investments
Investments in bonds and short-term investments are stated at cost adjusted
for amortization of premiums or accrual of discounts. The discounts or
premiums on bonds are amortized using the scientific (interest) method,
which results in a constant yield over the investmentsO expected lives.
Other admitted assets are valued as required or permitted by the Insurance
Department of the State of New York.
Realized capital gains and losses on investments are determined on the
basis of specific identification and are recorded in the statements of
operations net of related federal income taxes and amounts transferred to
the interest maintenance reserve. The Asset Valuation Reserve (AVR) is
established by the Company to provide for anticipated losses in the event
of default by issuers of certain invested assets. These amounts are
determined using a formula prescribed by the NAIC and are reported as a
liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses, net of amounts attributed to changes in the
general level of interest rates. Under a formula prescribed by the NAIC,
the Company defers, in the IMR, the portion of realized gains and losses on
sales of fixed income investments, principally bonds, attributable to
changes in the general level of interest rates and amortizes those
deferrals over the remaining period to maturity of the security.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of one year or less when
purchased to be cash equivalents.
Policy Reserves
The annuity policy reserves are established and maintained using assumed
interest rates and valuation methods that will provide, in the aggregate,
reserves that are greater than the minimum valuation required by law or
guaranteed policy cash values.
The accident and health policy reserves represent unearned premiums on
accident and health policies and an estimate of unpaid claims. Policy and
contract claims are determined using individual claim evaluations and
statistical analyses. Policy and contract claims represent estimates of the
ultimate net costs of all losses, reported and unreported, which remain
unpaid at December 31 of each year. These estimates are necessarily subject
to the impact of future changes in claim severity, frequency and other
factors. In spite of the variability inherent in such situations,
management believes that the unpaid claim amounts are adequate. The
estimates are continuously reviewed and as adjustments to these amounts
become necessary, such adjustments are reflected in current operations.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
Recognition of Premium Revenue and Costs
Premiums are recognized as revenue over the premium-paying period and all
costs related to the acquisition of new business are charged to operations
as incurred.
Separate Account
Separate account assets and liabilities represent funds held for the
exclusive benefit of variable annuity contractholders. Fees are received
for administrative expenses and for assuming certain mortality,
distribution and expense risks. The statement of operations includes the
premiums, benefits and other items (including transfers to and from the
separate account) arising from the operations of the separate account.
2. Fair Values of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
about Fair Value of Financial Instruments, requires disclosure of fair
value information about financial instruments, whether or not recognized in
the balance sheet, for which it is practicable to estimate that value. In
cases where quoted market prices are not available, fair values are based
on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparisons to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do
not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts of $3,451,475 and
$284,858 at December 31, 1997 and 1996, respectively, for these
instruments approximate their fair values.
Bonds: Fair values for bonds are based on quoted market prices, where
available. For bonds not actively traded, fair values are estimated
using values obtained from independent pricing services. The carrying
amounts and fair values of the 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 for the years ended December 31, 1997 and 1996.
Statements of Operations for the years ended December 31,
1997,
1996 and 1995.
Statements of Changes in Capital and Surplus for the years
ended December 31, 1997, 1996 and 1995.
Statements of Cash Flows for the years ended December 31,
1997,
1996 and 1995.
Notes to Financial Statements
(b) Exhibits:
** (1) Resolution of the Board of Directors establishing Variable
Account A
(2) Not applicable
** (3a) Form of Principal Underwriter's Agreement
** (3b) Specimen Agreement between Principal Underwriter and Dealer
** (4a) Form of Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company
** (4b) Form of Group Variable Annuity Certificate of Keyport
Benefit
Life Insurance Company
** (4c) Form of Tax-Sheltered Annuity Endorsement
** (4d) Form of Individual Retirement Annuity Endorsement
** (4e) Form of Corporate/Keogh 401(a) Plan Endorsement
** (4f) Form of Unisex Endorsement
** (4g) Form of Qualified Plan Endorsement
*** (4h) Specimen Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company (M&N)
*** (4i) Specimen Variable Annuity Certificate of Keyport Benefit
Life Insurance Company (M&N)
**** (4j) Specimen Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company (KA)
**** (4k) Specimen Variable Annuity Certificate of Keyport Benefit
Life Insurance Company (KA)
(4l) Specimen Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company (KAV)
(4m) Specimen Variable Annuity Certificate of Keyport Benefit
Life Insurance Company (KAV)
** (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) Participation Agreement Among Manning & Napier Insurance
Fund, Inc., Manning & Napier Investor Services, Inc.,
Manning
& Napier Advisors, Inc., and Keyport Benefit Life Insurance
Company
*** (8c) Participation Agreement By and Among Keyport Benefit
Life Insurance Company, Keyport Financial Services Corp.,
and SteinRoe Variable Investment Trust
**** (8d) Participation Agreement Among MFS Variable Insurance Trust,
Keyport Benefit Life Insurance Company, and Massachusetts
Financial Services Corp.
**** (8e) Participation Agreement Among The Alger American Fund,
Keyport Benefit Life Insurance Company, and Fred Alger and
Company, Incorporated
**** (8f) Participation Agreement Among Alliance Variable Products
Series Fund, Inc., Alliance Fund Distributors, Inc.,
Alliance
Capital Management L.P., and Keyport Benefit Life Insurance
Company
**** (8g) Participation Agreement By and Among Keyport Benefit Life
Insurance Company, Keyport Financial Services Corp., and
Liberty Variable Investment Trust
(8h) Participation Agreement By and Among AIM Variable Insurance
Funds, Inc., Keyport Benefit Life Insurance Company, on
Behalf of Itself and its Separate Accounts, and Keyport
Financial Services Corp.
** (9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
+ (13) Schedule for Computations of Performance Quotations
* (15) Chart of Affiliations
** (16) Powers of Attorney
** (17) Specimen Tax-Sheltered Annuity Acknowledgement
** (18) Form of Administrative Services Agreement
*** (27) Financial Data Schedule
* Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement (Files No. 333-1043; 811-7543) filed on or
about
February 6, 1998.
** Incorporated by reference to Registration Statement (Files No. 333-
45727; 811-08635) filed on or about February 6, 1998.
*** Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement (Files No. 333-45727; 811-08635) filed on or
about June 15, 1998.
**** Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement (Files No. 333-45727; 811-08635) filed on or
about June 30, 1998.
+ To be Filed by Amendment.
Item 25. Officers and Directors of the Depositor.
Name and Position and Offices
Business Address* with Depositor
William P. Donohue Director
Senior Advisor
Bentley Associates LP
1155 Avenue of the Americas
New York, NY 10036
Peter M. Lehrer Director
Opus Three Ltd.
550 Mamaroneck Ave.
Harrison, NY 10528
Jeff S. Liebmann Director
Partner
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019-6092
Christopher C. York Director
Principal
C.C. York Company
200 Rector Place, 18-E
New York, NY 11280-1101
John W. Rosensteel Chairman of the Board, Director, President
and
Chief Executive Officer
Stephen B. Bonner Director and Executive Vice President
Paul H. LeFevre, Jr. Director and Executive Vice President
Bernard R. Beckerlegge Director, Senior Vice President and General
Counsel
Bernhard M. Koch Director, Senior Vice President and Chief
Financial Officer
Stewart R. Morrison Senior Vice President and Chief Investment
Officer
Francis E. Reinhart Senior Vice President and Chief Information
Officer
Mark R. Tully Senior Vice President and Chief Sales
Officer
Garth A. Bernard Vice President
Daniel C. Bryant Vice President and Assistant Secretary
James P. Greaton Vice President and Corporate Actuary
Jacob M. Herschler Vice President
Kenneth M. Hughes Vice President
James J. Klopper Vice President and Secretary
Jeffrey J. Lobo Vice President-Risk Management
Suzanne E. Lyons Vice President-Human Resources
Jeffery J. Whitehead Vice President and Treasurer
John G. Bonvouloir Assistant Vice President and Assistant
Treasurer
Alan R. Downey Assistant Vice President
Scott E. Morin Assistant Vice President and Controller
Edward M. Shea Assistant Vice President
Donald A. Truman Assistant Secretary
Daniel Yin Assistant Vice President
*125 High Street, Boston, Massachusetts 02110, unless noted otherwise
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant.
The Depositor controls the Registrant, and is a wholly-owned
subsidiary of Keyport Life Insurance Company, which controls KMA Variable
Account, Keyport 401 Variable Account, Keyport Variable Account I, and
Keyport Variable Account II.
The Depositor is under common control with Keyport Financial Services
Corp. (KFSC), a Massachusetts corporation functioning as a broker/dealer of
securities. KFSC files separate financial statements.
The Depositor is under common control with Liberty Advisory Services
Corp. (LASC), a Massachusetts corporation functioning as an investment
adviser. LASC files separate financial statements.
The Depositor is under common control with Independence Life and
Annuity Company ("Independence Life"), a Rhode Island corporation
functioning as a life insurance company. Independence Life files separate
financial statements.
Chart for the affiliations of the Depositor is incorporated by
reference to Post-Effective Amendment No. 7 to the Registration Statement
(Files No. 333-1043; 811-7543) filed on or about February 6, 1998.
Item 27. Number of Contract Owners.
None.
Item 28. Indemnification.
Directors and officers of the Depositor and the principal underwriter
are covered persons under Directors and Officers/Errors and Omissions
liability insurance policies. Insofar as indemnification for liability
arising under the Securities Act of 1933 may be permitted to directors and
officers under such insurance policies, or otherwise, the Depositor has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Depositor of
expenses incurred or paid by a director or officer in the successful
defense of any action, suit or proceeding) is asserted by such director or
officer in connection with the variable annuity contracts, the Depositor
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters.
Keyport Financial Services Corp. (KFSC) is principal underwriter of
the SteinRoe Variable Investment Trust and the Liberty Variable Investment
Trust, which offer eligible funds for variable annuity and variable life
insurance contracts. KFSC is the principal underwriter for Variable
Account A of Keyport Benefit Life Insurance Company. KFSC is also principal
underwriter for Variable Account J and Variable Account K of Liberty Life
Assurance Company of Boston and for the KMA Variable Account, Variable
Account A and Keyport Variable Account-I of Keyport Life Insurance Company
and for the Independence Variable Annuity Account and Independence Variable
Life Account of Independence Life and Annuity Company, which are affiliated
companies of Keyport Benefit.
The directors and officers are:
Name and Principal Position and Offices
Business Address* with Underwriter
John W. Rosensteel Chairman of the Board and President
James J. Klopper Director and Clerk
Francis E. Reinhart Director and Vice President-Administration
Rogelio P. Japlit Treasurer
Paul T. Holman Assistant Clerk
Donald A. Truman Assistant Clerk
*125 High Street, Boston, Massachusetts 02110.
Item 30. Location of Accounts and Records.
Keyport Benefit Life Insurance Company, 125 High St., Boston, MA 02110
Keyport Life Insurance Company, 125 High St., Boston, MA 02110
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the
audited financial statements in the Registration Statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
The Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that
an applicant can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or included in
the prospectus that the applicant can remove to send for a Statement of
Additional Information.
The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
Registrant represents that it is relying on the November 28, 1988 no-
action letter (Ref. No. IP-6-88) relating to variable annuity contracts
offered as funding vehicles for retirement plans meeting the requirements
of Section 403(b) of the Internal Revenue Code. Registrant further
represents that it has complied with the provisions of paragraphs (1) - (4)
of that letter. Specimen of acknowledgement form used to comply with
paragraph (4) is included as Exhibit 17 in this Registration Statement.
Representation
Depositor represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by
the Depositor. Further, this representation applies to each form of the
contract described in a prospectus and statement of additional information
included in this Registration Statement.
SIGNATURES
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant has caused this Registration Statement to be
signed on its behalf, in the City of Boston and Commonwealth of
Massachusetts, on this 23rd day of July, l998.
Variable Account A
(Registrant)
By: Keyport Benefit Life Insurance Company
(Depositor)
By: /s/ John W. Rosensteel*
John W. Rosensteel
President
*BY: /s/James J. Klopper July 23, 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 July 23, 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
(4l) Specimen Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company (KAV)
(4m) Specimen Variable Annuity Certificate of Keyport Benefit
Life Insurance Company (KAV)
(8h) Participation Agreement By and Among AIM Variable Insurance
Funds, Inc., Keyport Benefit Life Insurance Company, on Behalf
of Itself and its Separate Accounts, and Keyport Financial
Services Corp.
(10) Consent of Independent Auditors
EXHIBIT 4l
KEYPORT BENEFIT LIFE INSURANCE COMPANY
Read this Contract carefully. This document is a description of the
legal contract between the Group Contract Owner and Us.
A Certificate Owner may return a Certificate to Us within 10 days
after receipt by delivering or mailing it to Our Office. The return of the
Certificate by mail will be effective when the postmark is affixed to a
properly addressed and postage prepaid envelope. This returned Certificate
will be treated as if We never issued it and We will refund the Certificate
Value plus any amount deducted from the purchase payment before it was
allocated to the Variable Account. The Certificate Value will be determined
as of the date of surrender (i.e., for a mailed contract, the postmark
date).
The Group Contract, as issued to the Group Contract Owner by Us with
any riders or endorsements, alone makes up the agreement under which
benefits are paid. The Group Contract may be inspected at the office of
the Group Contract Owner. In consideration of any application for a
Certificate and the payment of purchase payments, We agree, subject to the
terms and conditions of the Group Contract, to provide the benefits
described in the Certificate to the Certificate Owner. If a Certificate is
In Force on the Income Date, We will begin making income payments to the
Annuitant. We will make such payments according to the terms of the
Certificate and Group Contract.
Signed for the Company on the Issue Date at Our Executive Office, 125
High Street, Boston, Massachusetts 02110:
_________________________ _________________________
Secretary President
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase
payment flexibility. This contract is nonparticipating with no dividends.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN
BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND
ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. VARIABLE ANNUITY PAYMENTS WILL NOT
DECREASE OVER TIME IF THE SEPARATE ACCOUNT (AFTER DEDUCTION OF THE ANNUAL
[1.55%] ASSET CHARGE) HAS AN ANNUALIZED INVESTMENT RETURN OF AT LEAST 5.0%.
SEE PAGES 12-13 AND 19 FOR FURTHER EXPLANATION. CONTRACT ASSETS ALLOCATED
TO THE SEPARATE ACCOUNT INCUR CHARGES OF [1.55%] BEFORE ANNUITY PAYMENTS
BEGIN AND [1.40%] ONCE ANNUITY PAYMENTS BEGIN. INCOME, CAPITAL GAINS,
AND/OR LOSSES WHETHER OR NOT REALIZED, FROM ASSETS ALLOCATED TO THE
SEPARATE ACCOUNT ARE CREDITED TO OR CHARGED AGAINST THE SEPARATE ACCOUNT
WITHOUT REGARD TO INCOME, CAPITAL GAINS, AND/OR LOSSES ARISING OUT OF ANY
OTHER BUSINESS THE COMPANY MAY CONDUCT.
Table of Contents
Page
Right to Examine Certificate 1
Definitions 2
Contract Schedule 3
General Provisions 5
Variable Account Provisions 10
Transfers 13
Partial Withdrawals and Total Surrender 14
Death Provisions 15
Annuity Provisions 16
Endorsements (if any) are before page 22
Definitions
Accumulation Period: The period prior to the Income Date during which
Purchase Payments may be made by a Certificate Owner.
Accumulation Unit: An accounting unit used to calculate a Certificate
Owner's interest in a Sub-account of the Variable Account during the
Accumulation Period.
Adjusted Certificate Value: The Certificate Value less any applicable
taxes relating to a Certificate and Certificate Maintenance Charge. This
amount is applied to the applicable Annuity Tables to determine Annuity
Payments.
Annuitant: The natural person on whose life Annuity Payments are based,
and to whom any Annuity Payments will be made starting on the Income Date.
Annuity Options: Options available for Annuity Payments.
Annuity Payments: The series of payments made to the Annuitant, starting
on the Income Date, under the Annuity Option selected.
Annuity Period: The period after the Income Date during which Annuity
Payments are made.
Annuity Unit: An accounting unit used to calculate Variable Annuity
Payments during the Annuity Period.
Beneficiary: The person(s) or entity(ies) who controls the Certificate if
any Certificate Owner dies before the Income Date.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
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)003
GROUP CONTRACT ISSUE DATE 10/1/97
MINIMUM INITIAL PAYMENT $25,000
MINIMUM ADDITIONAL PAYMENT $250 ($50 for EFT payment)
Charges
Distribution Charge: None.
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 costs.
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: None
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 21 Sub-accounts and the Fixed
Account. We reserve the right to increase or decrease the number of
available Sub-accounts. The minimum You may allocate to any Sub-account or
the Fixed Account is 5% of any Purchase Payment. Your initial Purchase
Payment has been invested as follows:
AIM Capital Appreciation x%
AIM Growth x%
AIM International x%
Alliance Global Bond x%
Alliance Growth and Income x%
Alliance Premier Growth x%
Alliance Real Estate x%
Colonial Growth and Income x%
Colonial High Yield Securities x%
Colonial Small Cap Value x%
Colonial Strategic Income x%
Colonial U.S. Stock x%
Liberty All-Star x%
MFS Bond x%
MFS Emerging Growth x%
MFS Research x%
Stein Roe Balanced x%
Stein Roe Global Utilities x%
Stein Roe Growth Stock x%
Stein Roe Money Market x%
Stein Roe Special Venture x%
Fixed Account - 1 Year x%
Transfer Guidelines
Number of Transfers and Transfer Charge: Currently, Certificate Owners are
permitted unlimited transfers per Certificate Year during the Accumulation
Period and unlimited transfers 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.
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. 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.
Death Benefit Amount
Certificate Anniversary Death Benefit
On the Certificate Date, the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) (a) Start with the Death Benefit from the Certificate Date;
(b) Add to (a) any additional Purchase Payments paid since the
Certificate Date and subtract from (a) any partial
withdrawals (including any associated surrender charge
incurred) made since the Certificate Date;
(2) (a) Determine the Certificate Value for each Certificate
Anniversary (the "Anniversary Value") before the 81st
birthday of the Certificate Owner or, if the Certificate
Owner is a non-natural Person, the Annuitant;
(b) Increase each "Anniversary Value" by any Purchase Payments
made after that Value's Anniversary;
(c) Decrease each "Anniversary Value" by the following amount
calculated at the time of each partial withdrawal made
after that Value's Anniversary: (i) the partial withdrawal
amount (including any associated surrender charge
incurred) divided by the Certificate Value immediately
preceding the withdrawal, (ii) multiplied by the
"Anniversary Value" immediately preceding the withdrawal;
(d) Select the highest "Anniversary Value" after the
adjustments in (b) and (c) above;
(3) Set the Death Benefit equal to the greater of (1) and (2).
If there is a change of Certificate Owner, the new Certificate Owner's age
will be used to determine the amount in (2) above.
The Variable Separate Account
Sub-accounts investing in shares of mutual funds
Variable Account A is a unit investment trust variable separate account,
organized in and governed by the laws of the State of New York, Our state
of domicile. Variable Account A is divided into Sub-accounts. Each Sub-
account listed below invests in shares of the corresponding Portfolio of
the Eligible Fund shown.
Sub-Accounts Investment Objective
AIM Variable Insurance Funds, Inc.
AIM Capital Appreciation Capital appreciation through investments in
Sub-account common stocks, with emphasis on medium-sized
and smaller emerging growth companies
AIM Growth Sub-Account Growth of capital through investments
primarily in common stocks of leading U.S.
companies considered by AIM to have strong
earnings momentum.
AIM International Equity Long-term growth of capital by investing in
Sub-account international equity securities, the issuers
of which are considered by AIM to have strong
earnings momentum.
Alliance Variable Products Series Fund, Inc.
Alliance Global Bond A high level of return from a combination of
Sub-account current income and capital appreciation by
investing in a globally diversified portfolio
of high quality debt securities denominated
in the U.S. Dollar and a range of foreign
currencies.
Alliance Growth and Income Balance the objectives of reasonable current
Sub-account income and reasonable opportunities for
appreciation through investments primarily in
dividend-paying common stocks of good
quality.
Alliance Premier Growth Growth of capital rather than current income.
Sub-account
Alliance Real Estate Total return on its assets through long-term
Sub-account growth of capital and income principally
through investing in a portfolio of equity
securities of issuers that are primarily
engaged in or related to the real estate
industry.
Liberty Variable Investment Trust
Colonial Growth and Income Primarily income and long-term
Sub-Account(formerly named capital growth and, secondarily,
Colonial-Keyport Growth and preservation of capital.
Income Fund)
Colonial High Yield High current income and total return by
Securities Sub-account investing primarily in lower rated corporate
debt securities.
Colonial Small Cap Value Long-term growth by investing in smaller
Sub-account capitalization equity securities.
Colonial Strategic Income A high level of current income, as is
Sub-Account (formerly named consistent with prudent risk and maximizing
Colonial-Keyport Strategic total return, by diversifying investments
Income Fund) primarily in U.S. and foreign government and
high yield, high risk corporate debt
securities.
Colonial U.S. Stock Long-term capital growth by investing
Sub-Account(formerly named primarily in large capitalization
Colonial-Keyport U.S. Stock equity securities.
Fund)
Liberty All-Star Equity Total investment return, comprised of long-
Sub-account term capital appreciation and current income,
through investment primarily in a diversified
portfolio of equity securities.
Stein Roe Global Utilities Current income and long-term growth
Sub-Account (formerly named of capital and income.
Colonial-Keyport Utilities
Fund)
MFS Variable Insurance Trust
MFS Bond Sub-Account High level of current income as is believed
consistent with prudent investment risk and
secondarily to protect shareholders' capital.
MFS Emerging Growth Long-term growth of capital.
Sub-account
MFS Research Sub-Account Long-term growth of capital and future
income.
SteinRoe Variable Investment Trust
Stein Roe Balanced High total investment return through
Sub-Account (formerly named investment in a changing mix
Stein Roe Managed Assets Fund)of securities.
Stein Roe Growth Stock Long-term growth of capital
Sub-Account(formerly named through investment primarily
SteinRoe Managed Growth in common stocks.
Stock Fund)
Stein Roe Money Market High current income from short-term
Sub-Account (formerly named money market instruments while
SteinRoe Cash Income Fund) emphasizing preservation of capital and
maintaining excellent liquidity.
Stein Roe Special Venture Capital growth by investing primarily
Sub-account (formerly named in common stocks, convertible securities
SteinRoe Capital Appreciation and other securities selected for
Fund) prospective capital growth.
Sub-accounts investing directly in securities - None.
The Fixed Account
The Fixed Account is part of Our General Account, which consists of all of
Our assets except the assets of the Variable Account and the assets of
other separate accounts that We maintain. Subject to applicable law, We
have sole discretion over investments of the assets of the Fixed Account.
If You allocate assets to the Fixed Account, Your accumulation values and
annuity payments will have guaranteed minimums.
Before the Income Date, Your interest in the Fixed Account is measured by
the Fixed Account Value. When annuity payments begin, the payee's interest
in the Fixed Account is measured by the amount of each periodic payment.
Benefits from the Fixed Account will not be less than the minimum values
required by any law of the jurisdiction where the Certificate is delivered.
Purchase Payments will be allocated to the Fixed Account in accordance with
Your selection at the Certificate Date. You may change such selection by
Written Request.
The Fixed Account Value at any time is equal to:
(1) all Purchase Payments allocated to the Fixed Account plus the
interest subsequently credited on those payments; plus
(2) any Variable Account value transferred to the Fixed Account
plus the interest subsequently credited on the transferred
value; less
(3) any prior partial withdrawals from the Fixed Account; less
(4) any Fixed Account Value transferred to the Variable Account.
We will credit interest to Purchase Payments allocated to the Fixed Account
at rates declared by Us for Guarantee Periods of one or more years from the
month and day of allocation. The minimum Guaranteed Interest Rate is 3%
per year.
Definitions (continued)
Certificate: The document issued to a Certificate Owner to evidence a
Certificate Owner's participation under the Group Contract. The
Certificate summarizes the benefits and provisions of the Group Contract.
Certificate Anniversary: An anniversary of the Certificate Date.
Certificate Date: The date a Certificate is issued to a Certificate Owner.
The Certificate Date is shown on the Certificate Schedule.
Certificate Owner: The person who owns a Certificate under the Group
Contract. Any Joint Certificate Owners and the Certificate Owner own the
Certificate equally with rights of survivorship. All Owners must exercise
ownership rights and privileges together, including the signing of Written
Requests.
Certificate Value: The sum of the Certificate Owner's interest in the Sub-
accounts of the Variable Account and the Fixed Account during the
Accumulation Period.
Certificate Year: The first Certificate Year is the annual period which
begins on the Certificate Date. Subsequent Certificate Years begin on each
Certificate Anniversary.
Eligible Fund: An investment entity shown on the Certificate Schedule.
Fixed Account: The account We establish to support Fixed Allocations. The
Contract Schedule shows whether the Fixed Account is available under the
Certificates.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under a Certificate prior to the Income Date.
Fixed Allocation: An amount allocated to the Fixed Account that is
credited with a Guaranteed Interest Rate for a specified Guarantee Period.
Fixed Annuity: An annuity with a series of payments made during the
Annuity Period which are guaranteed as to dollar amount by Us.
General Account: Our general investment account which contains all of Our
assets except those in the Variable Account and Our other separate
accounts.
Group Contract Owner: The person or entity to which the Group Contract is
issued.
Guaranteed Interest Rate: The effective annual interest rate which We will
credit for a specified Guarantee Period.
Guarantee Period: The period of year(s) a rate of interest is guaranteed
to be credited within the Fixed Account.
Income Date: The date on which Annuity Payments begin. The Income Date is
shown on the Certificate Schedule.
In Force: The status of a Certificate before the Income Date so long as it
has not been totally surrendered and there has not been a death of a
Certificate Owner or Joint Certificate Owner that will cause the
Certificate to end within five years of the date of death.
Office: Our service office shown on the Certificate Schedule.
Person: A human being, trust, corporation, or any other legally recognized
entity.
Portfolio: A series of an Eligible Fund which constitutes a separate and
distinct class of shares.
Purchase Payment: A payment made by or on behalf of a Certificate Owner
with respect to a Certificate.
Sub-account: Variable Account assets are divided into Sub-accounts.
Assets of each Sub-account will be invested in shares of a Portfolio of an
Eligible Fund, or directly in portfolio securities.
Valuation Date: Each day on which We and the New York Stock Exchange
("NYSE") are open for business, or any other day that the Securities and
Exchange Commission requires that mutual funds, unit investment trusts or
other investment portfolios be valued.
Valuation Period: The period of time beginning at the close of business of
the NYSE on each Valuation Date and ending at the close of business on the
next succeeding Valuation Date.
Variable Account: Our Variable Account(s) shown on the Certificate
Schedule.
Variable Annuity: An annuity with payments which vary as to dollar amount
in relation to the investment performance of specified Sub-accounts of the
Variable Account.
We, Us, Our: Keyport Benefit Life Insurance Company.
Written Request: A request in writing, in a form satisfactory to Us, and
received by Us at Our Office.
General Provisions
Purchase Payments
The initial Purchase Payment is due on the Certificate Date. It must be
paid at Our Office in United States currency. Coverage under a Certificate
does not take effect until We have accepted the initial Purchase Payment
during a Certificate Owner's lifetime. Each Purchase Payment after the
Certificate Date must be at least the amount shown on the Certificate
Schedule. Provided the Certificate Value under a Certificate does not go
to zero, a Certificate will stay in force until the Income Date even if a
Certificate Owner make no payments after the initial one. We reserve the
right to reject any subsequent Purchase Payment.
Allocation of Purchase Payments
An initial Purchase Payment is allocated to the Sub-accounts of the
Variable Account, and to the Fixed Account if available, in accordance with
the selections made by a Certificate Owner at the Certificate Date. Unless
otherwise changed by a Certificate Owner, subsequent Purchase Payments are
allocated in the same manner as the initial Purchase Payment. Allocation
of Purchase Payments is subject to the terms and conditions imposed by Us.
We reserve the right to allocate initial Purchase Payments to the Money
Market Sub-account until the expiration of the Right to Examine Certificate
period set forth on the first page of the Group Contract and the
Certificate.
The Contract
The Group Contract, including the application, if any, and any attached
rider or endorsement constitute the entire contract between the Group
Contract Owner and Us. All statements made by the Group Contract Owner,
any Certificate Owner or any Annuitant will be deemed representations and
not warranties. No such statement will be used in any contest unless it is
contained in the application signed by the Group Contract Owner or in a
written instrument signed by the Certificate Owner, a copy of which has
been furnished to the Certificate Owner, the Beneficiary or to the Group
Contract Owner.
Only Our President or Secretary may agree to change any of the terms of the
Group Contract. Any changes must be in writing. Any change to the terms
of a Certificate must be in writing and with Certificate Owner's consent,
unless provided otherwise by the Group Contract and the Certificate.
To assure that the Group Contract and the Certificate will maintain their
status as a variable annuity under the Internal Revenue Code, We reserve
the right to change the Group Contract and any Certificate issued
thereunder to comply with future changes in the Internal Revenue Code, any
regulations or rulings issued thereunder, and any requirements otherwise
imposed by the Internal Revenue Service. The Group Contract Owner and the
affected Certificate Owner will be sent a copy of any such amendment.
We reserve the right, subject to the approval of the New York
Superintendent of Insurance and compliance with U.S. Laws as currently
applicable or subsequently changed, to: (a) operate the Variable Account
in any form permitted under the Investment Company Act of 1940, as
amended, (the "1940 Act"), or in any other form permitted by law; (b) take
any action necessary to comply with or obtain and continue any exemptions
from the 1940 Act, or to comply with any other applicable law; (c) transfer
any assets in any Sub-account to another Sub-account, or to one or more
separate investment accounts, or the General Account; or to add, combine or
remove Sub-accounts in the Variable Account; and (d) change the way We
assess charges, so long as We do not increase the aggregate amount beyond
that currently charged to the Variable Account and the Eligible Funds in
connection with a Certificate. If the shares of any of the Eligible Funds
should become unavailable for investment by the Variable Account or if in
Our judgment further investment in such Portfolio shares should become
inappropriate in view of the purpose of the Certificate, We may add or
substitute shares of another mutual fund for the Portfolio shares already
purchased under the Certificate. No substitution of Portfolio shares in
any Sub-account may take place without prior approval of the Securities and
Exchange Commission and notice to the affected Certificate Owners, to the
extent required by the 1940 Act.
Certificate Owner
A Certificate Owner has all rights and may receive all benefits under a
Certificate. A Certificate Owner is the person designated as such on the
Certificate Date, unless changed. A Certificate Owner may exercise all
rights of a Certificate while it is In Force, subject to the rights of (a)
any assignee under an assignment filed with Us, and (b) any irrevocably
named Beneficiary.
Joint Certificate Owner
A Certificate can be owned by Joint Certificate Owners. Upon the death of
any Certificate Owner or Joint Certificate Owner, the surviving owner(s)
will be the primary Beneficiary(ies). Any other beneficiary designation
will be treated as a Contingent Beneficiary unless otherwise indicated in a
Written Request filed with Us.
Annuitant
The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by a Certificate Owner at the
Certificate Date, unless changed prior to the Income Date. Any change of
Annuitant is subject to Our underwriting rules then in effect. The
Annuitant may not be changed in a Certificate which is owned by a non-
natural person. A Certificate Owner may name a Contingent Annuitant. The
Contingent Annuitant becomes the Annuitant if the Annuitant dies while a
Certificate is In Force. If the Annuitant dies and no Contingent
Annuitant has been named, We will allow a Certificate Owner sixty days to
designate someone other than the Certificate Owner as Annuitant. The
Certificate Owner will be the Contingent Annuitant unless the Certificate
Owner names someone else. If the Certificate is owned by a non-natural
person, the death of the Annuitant will be treated as the death of the
Certificate Owner and a new Annuitant may not be designated.
Beneficiary
The Beneficiary is the person who controls the Certificate if any
Certificate Owner dies prior to the Income Date. If the Certificate is
owned by Joint Certificate Owners, upon the death of any Certificate Owner
or Joint Certificate Owner, the surviving owner(s) will become the primary
Beneficiary. Any other beneficiary designation will be treated as a
Contingent Beneficiary unless otherwise indicated in a Written Request
filed with Us. If a Certificate Owner names more than one Person as
Primary Beneficiary or as Contingent Beneficiary, and does not state
otherwise on an application or in a Written Request to Us, any non-
survivors will not receive a benefit. The survivors will receive equal
shares. Subject to the rights of any irrevocable Beneficiary(ies), a
Certificate Owner may change primary or contingent Beneficiary(ies). A
change must be made by Written Request and will be effective as of the date
the Written Request is signed. We will not be liable for any payment We
make or action We take before We receive the Written Request.
Group Contract Owner
The Group Contract Owner has title to the Group Contract. The Group
Contract and any amount accumulated under any Certificate are not subject
to the claims of the Group Contract Owner or any of its creditors. The
Group Contract Owner may transfer ownership of this Group Contract. Any
transfer of ownership terminates the interest of any existing Group
Contract Owner. It does not change the rights of any Certificate Owner.
Nothing in the Group Contract shall invalidate or impair any rights granted
to the Certificate Owner by the Certificate or New York law.
Change of Certificate Owner, Beneficiary or Contingent Annuitant
While a Certificate is In Force, a Certificate Owner may by Written Request
change the primary Certificate Owner, Joint Certificate Owner, primary
Beneficiary, Contingent Beneficiary, Contingent Annuitant, or in certain
instances, the Annuitant. An irrevocably named Person may be changed only
with the written consent of such Person. The change will be effective,
following Our receipt of the Written Request, as of the date the Written
Request is signed. The change will not affect any payments We make or
actions We take prior to the time We receive the Written Request.
Assignment of the Certificate
A Certificate Owner may assign a Certificate at any time while it is In
Force. The assignment must be in writing and a copy must be filed at Our
Office. A Certificate Owner's rights and those of any revocably named
Person will be subject to the assignment. An assignment will not affect
any payments We make or actions We take before We receive the assignment.
We are not responsible for the validity of any assignment.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any payee has been misstated, We will
compute the amount payable based on the correct age and sex. If Annuity
Payments have begun, any underpayment(s) that have been made plus interest
at a rate of 5% per year will be paid in full with the next Annuity
Payment. Any overpayment plus interest at a rate of 5% per year, unless
repaid to Us in one sum, will be deducted from future Annuity Payments
otherwise due until We are repaid in full.
Non-Participating
A Certificate does not participate in Our divisible surplus.
Evidence of Death, Age, Sex or Survival
If a Certificate provision relates to the death of a natural Person, We
will require proof of death before We will act under that provision. Proof
of death shall be: (a) a certified death certificate; or (b) a certified
decree of a court of competent jurisdiction as to the finding of death; or
(c) a written statement by a medical doctor who attended the deceased; or
(d) any other document constituting due proof of death under applicable
state law. If Our action under a Certificate provision is based on the
age, sex, or survival of any Person, We may require evidence of the
particular fact before We act under that provision.
Protection of Proceeds
No Beneficiary or payee may commute or assign any payments under a
Certificate before they are due. To the extent permitted by law, no
payments shall be subject to the debts of any Beneficiary or payee or to
any judicial process for payment of those debts.
Reports
We will send Certificate Owners a report that shows the Certificate Value
at least once each Certificate Year. We will send any other reports that
may be required by law.
Taxes
Any taxes paid to any governmental entity relating to a Certificate will be
deducted from the Purchase Payments or Certificate Value. We may, in Our
sole discretion, delay the deduction until a later date. By not deducting
tax payments at the time of Our payment, We do not waive any right We may
have to deduct amounts at a later date. We will, in Our sole discretion,
determine when taxes relate to a Certificate or to the operation of the
Variable Account. We reserve the right to establish a provision for
federal income taxes if We determine, in Our sole discretion, that We will
incur a tax as a result of the operation of the Variable Account. Such a
provision will be reflected in the Accumulation and Annuity Unit Values.
We will deduct for any income taxes incurred by Us as a result of the
operation of the Variable Account whether or not there was a provision for
taxes and whether or not it was sufficient. We will deduct from any
payment under a Certificate any withholding taxes required by applicable
law.
Regulatory Requirements
All values payable under a Certificate will not be less than the minimum
benefits required by the laws and regulations of the states in which the
Certificate is delivered.
Suspension or Deferral of Payments
We reserve the right to suspend or postpone payments for a withdrawal,
transfer, surrender or death benefit for any period when:
(1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); or
(2) trading on the New York Stock Exchange is restricted; or
(3) an emergency exists as a result of which valuation or disposal
of the assets and securities of the Variable Account is not
reasonably practicable; or
(4) the Securities and Exchange Commission, by order or
pronouncement, so permits for the protection of Certificate
Owners;
provided that applicable rules and regulations of the Securities and
Exchange Commission govern as to whether the conditions described in (2)
and (3) above exist.
We reserve the right to delay payment of amounts allocated to the Fixed
Account for up to six months.
Variable Account Provisions
The Variable Account
The Variable Account(s) is designated on the Certificate Schedule and
consists of assets set aside by Us, which are kept separate from Our
general assets and all other variable account assets We maintain. We own
the assets of the Variable Account. Variable Account assets equal to
reserves and other contract liabilities will not be chargeable with
liabilities arising out of any other business We may conduct. We may
transfer to Our General Account assets which exceed the reserves and other
liabilities of the Variable Account. Income and realized and unrealized
gains or losses from assets in the Variable Account are credited to or
charged against the account without regard to other income, gains or losses
in Our other investment accounts.
The Variable Account assets are divided into Sub-accounts. The Sub-
accounts which are available under the Certificate are shown on the
Certificate Schedule. The assets of the Sub-accounts of the unit
investment trust variable separate account are allocated to the Eligible
Fund(s) and the Portfolio(s), if applicable, within an Eligible Fund shown
on the Certificate Schedule. The assets of the Sub-accounts of the
investment company variable separate account, if applicable, are invested
in portfolios of securities designed to meet the objectives of the Sub-
Account shown on the Certificate Schedule. We may, from time to time, add
additional Sub-accounts, Eligible Funds or Portfolios to those shown on the
Certificate Schedule. A Certificate Owner may be permitted to transfer
Certificate Values or allocate Purchase Payments to the additional Sub-
Accounts, Eligible Funds or Portfolios. However, the right to make such
transfers or allocations will be limited by the terms and conditions
imposed by Us.
We also have the right to eliminate Sub-accounts from the Variable Account,
to combine two or more Sub-accounts or to substitute a new Portfolio for
the Portfolio in which a Sub-account invests. A substitution may become
necessary if, in Our discretion, a Portfolio or Sub-account no longer suits
the purposes of the Group Contract. This may happen: due to a change in
laws or regulations or a change in a Portfolio's investment objectives or
restrictions; because the Portfolio or Sub-account is no longer available
for investment; or for some other reason. We will obtain any prior
approvals that may be required from the insurance department of Our state
of domicile, the New York Superintendent of Insurance and from the SEC or
any other governmental entity before making such a substitution.
When permitted by law, We reserve the right to:
(1) Deregister a Variable Account under the 1940 Act;
(2) Operate a Variable Account as a management company under the 1940
Act, if it is operating as a unit investment trust;
(3) Operate a Variable Account as a unit investment trust under the 1940
Act, if it is operating as a management company;
(4) Restrict or eliminate any voting rights as to the account;
(5) Combine the Variable Account with any other variable account.
Valuation of Assets
The assets of the Variable Account are valued at their fair market value in
accordance with Our procedures.
Accumulation Units
A Certificate Owner's Variable Account value will fluctuate in accordance
with the investment results of the Sub-accounts to which the Certificate
Owner has allocated his or her Purchase Payments or Certificate Value. In
order to determine how these fluctuations affect a Certificate Owner's
Certificate Value, We use an Accumulation Unit value. Accumulation Units
are used to account for all amounts allocated to or withdrawn from the Sub-
accounts of the Variable Account as a result of Purchase Payments, partial
withdrawals, transfers, or charges deducted from the Certificate Value.
We determine the number of Accumulation Units of a Sub-account purchased or
canceled by dividing the amount allocated to, or withdrawn from, the Sub-
account by the dollar value of one Accumulation Unit of the Sub-account as
of the end of the Valuation Period during which We receive the request for
the transaction.
Accumulation Unit Value
The Accumulation Unit Value for each Sub-account was initially set at $10.
Subsequent Accumulation Unit Values for each Sub-account are determined by
multiplying the Accumulation Unit Value for the immediately preceding
Valuation Period by a net investment factor for the Sub-account for the
current period. This factor may be greater or less than 1.0; therefore,
the Accumulation Unit Value may increase or decrease from Valuation Period
to Valuation Period.
We calculate the net investment factor for each Sub-account investing in
shares of mutual funds by dividing (a) by (b) and then subtracting (c)
where:
(a) is equal to:
(i) the net asset value per share of the Portfolio in which the Sub-
account invests at the end of the Valuation Period; plus
(ii) any dividend per share declared for the Portfolio that has an ex-
dividend date within the current Valuation Period.
(b) is the net asset value per share of the Portfolio at the end of the
preceding Valuation Period.
(c) is equal to:
(i) the sum of each Valuation Period equivalent of the annual rate for
the Mortality and Expense Risk Charge, for the Administrative
Charge,
and for the Distribution Charge, if any, which are shown on the
Certificate Schedule; plus
(ii) a charge factor, if any, for any tax provision established by Us a
result of the operation of the Sub-account.
We calculate the net investment factor for each Sub-account investing
directly in securities with the same formula, except:
(a) is equal to:
(i) the value of the assets in the Sub-account at the end of the
preceding Valuation Period; plus
(ii) any investment income and capital gains, realized or
unrealized, credited to the assets during the current
Valuation Period; less
(iii) any capital losses, realized or unrealized, charged against
the assets during the current Valuation Period; less
(iv) all operating and investment expenses relating to the assets
that are incurred during the current Valuation Period.
(b) is the value of the assets in the Sub-account at the end of the
preceding Valuation Period.
Mortality and Expense Risk Charge
Each Valuation Period We deduct a Mortality and Expense Risk Charge from
each Sub-account of the Variable Account which is equal, on an annual
basis, to the amount shown on the Certificate Schedule. The Mortality and
Expense Risk Charge compensates Us for assuming the mortality and expense
risks with respect to the Certificates We issue. We guarantee the dollar
amount of each Annuity Payment after the first Annuity Payment will not be
affected by variations in mortality or expense experience.
Administrative Charge
Each Valuation Period We deduct an Administrative Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Administrative Charge compensates Us for the
costs associated with administration of the Variable Account and the
Certificates We issue.
Distribution Charge
Each Valuation Period We deduct a Distribution Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Distribution Charge compensates Us for the costs
associated with the distribution of the Certificates We issue.
Certificate Maintenance Charge
We deduct a Certificate Maintenance Charge from the Certificate Value by
canceling Accumulation Units from each applicable Sub-account to reimburse
Us for expenses relating to the maintenance of the Certificate. We will
deduct the Certificate Maintenance Charge from the Sub-accounts of the
Variable Account in the same proportion that the amount of Certificate
Value in each Sub-account bears to the Certificate Value. The Certificate
Maintenance Charge is shown on the Certificate Schedule. The Certificate
Maintenance Charge will be deducted from the Certificate Value on each
Certificate Anniversary during the Accumulation Period.
If a total surrender is made on a date other than a Certificate
Anniversary, the Certificate Maintenance Charge will be deducted at the
time of surrender.
During the Annuity Period, the Certificate Maintenance Charge will be
deducted on a pro-rata basis from each Annuity Payment.
Transfers
Transfers: Subject to any limitation We impose on the number of
transfers permitted in a Certificate Year, a Certificate Owner may transfer
all or part of Certificate Owner's Certificate Value among the Sub-accounts
and the Fixed Account, if any, by Written Request or by telephone without
the imposition of any fees or charges. Transfers among the Sub-accounts
and the Fixed Account are permitted only during the Accumulation Period.
The number of permitted transfers, and the charge for transfers in excess
of that number, are shown on the Certificate Schedule. All transfers are
subject to the following:
(1) If more than the number of free transfers, shown on the
Certificate Schedule, are made in a Certificate Year, We will deduct a
transfer charge, shown on the Certificate Schedule, for each subsequent
transfer. The transfer fee will be deducted from the Sub-account from
which the transfer is made. However, if Certificate Owner transfers his or
her entire interest in a Sub-account, the transfer fee will be deducted
from the amount transferred. If a Certificate Owner makes a transfer from
more than one Sub-account, any transfer fee will be allocated pro-rata
among such Sub-accounts in proportion to the amount transferred from each.
The deduction of any fees We impose on such transfers will not exceed the
maximum listed on page 3.
(2) During the Annuity Period, transfers of values between Sub-
accounts will be made by converting the number of Annuity Units being
transferred to the number of Annuity Units in the Sub-account to which a
transfer is made, so that the next Annuity Payment, if it were made at that
time, would be the same amount that it would have been without the
transfer. Thereafter, Annuity Payments will reflect changes in the value
of the new Annuity Units.
(3) The minimum amount which can be transferred is shown on the
Certificate Schedule. The minimum amount which must remain in a Sub-
account after a transfer is shown on the Certificate Schedule.
(4) If 100% of the value of any Sub-account is transferred and the
current allocation for Purchase Payments includes that Sub-account, the
allocation for future Purchase Payments will change to reflect a
Certificate Owner's allocation of Certificate Value following the transfer.
(5) We reserve the right, at any time and without prior notice to
any party, to terminate, suspend or modify the transfer privileges
described above.
We will not be liable for transfers made in accordance with a Certificate
Owner's instructions. All amounts and Accumulation Units will be
determined as of the end of the Valuation Period in which We receive the
request for transfer.
Partial Withdrawals and Total Surrender
Partial Withdrawals
During the Accumulation Period while the Certificate is In Force, a
Certificate Owner may, upon Written Request, make a partial withdrawal,
subject to the provisions and limitations shown on the Certificate
Schedule. For purposes of determining whether a Surrender Charge is
applicable to a partial withdrawal:
(1) A partial withdrawal will first be taken from the portion of a
Certificate Owner's Certificate Value which is in excess of
Purchase Payments, and then from Purchase Payments; and
(2) We will allocate partial withdrawals to Purchase Payments in the
order in which the Purchase Payments were made, starting with
the
first.
A withdrawal will result in the cancellation of Accumulation Units from
each applicable Sub-account in the ratio that a Certificate Owner's
interest in the Sub-account bears to his or her Certificate Value in all
the Sub-accounts. A Certificate Owner must specify by Written Request in
advance if he or she wants Accumulation Units to be canceled in a manner
other than the method described above. If there is no value or
insufficient value in the Variable Account, then the amount withdrawn, or
the insufficient portion, will be deducted from the Fixed Account. If a
Certificate Owner has multiple Guarantee Periods, We will deduct such
amount from each Guarantee Period's values in the ratio that each Period's
values bears to the total Fixed Account Value. A Certificate Owner must
specify by Written Request in advance if he or she wants multiple Guarantee
Periods to be reduced in a manner other than the method described above.
Any amount deducted from the fixed account value may be subject to a market
value adjustment, if applicable.
Each partial withdrawal must be for an amount not less than the amount
shown on the Certificate Schedule. The Certificate Value which must remain
in a Certificate is shown on the Certificate Schedule. The Certificate
Schedule also shows any charge.
Total Surrender
During the Accumulation Period while the Certificate is In Force, a
Certificate Owner may, upon Written Request, make a total surrender of the
Certificate Withdrawal Value. The Certificate Withdrawal Value is:
(1) the Certificate Value as of the end of the Valuation Period
during which We receive a Written Request for a withdrawal or
surrender; less
(2) any applicable taxes not previously deducted; less
(3) any Surrender Charge; less
(4) any Certificate Maintenance Charge.
The Fixed Account Value, which is a component of the Certificate Value, may
be subject to a market value adjustment, if applicable.
We will pay the amount of any withdrawal or surrender within seven days
unless the Suspension or Deferral of Payments Provision is in effect.
Death Provisions
Death of Certificate Owner
These provisions apply if, during the Accumulation Period while the
Certificate is In Force, the Certificate Owner or any Joint Certificate
Owner dies (whether or not the decedent is also the Annuitant) or the
Annuitant dies under a Certificate owned by a non-natural Person. The
"designated beneficiary" will control the Certificate after such a death.
This "designated beneficiary" will be the first Person among the following
who is alive on the date of death: Certificate Owner; Joint Certificate
Owner; primary Beneficiary; Contingent Beneficiary; and Certificate Owner's
estate. If the Certificate Owner and Joint Certificate Owner are both
alive, they shall be the "designated beneficiary" together.
If the decedent's surviving spouse (if any) is the sole "designated
beneficiary", the surviving spouse will automatically become the new sole
Certificate Owner as of the date of the death. And, if the Annuitant is
the decedent, the new Annuitant will be any living Contingent Annuitant,
otherwise the surviving spouse. The Certificate may stay in force until
another death occurs (i.e., until the death of the Certificate Owner or
Joint Certificate Owner). Except for this paragraph, all of "Death
Provisions" will apply to that subsequent death.
In all other cases, the Certificate may stay in force up to five years from
the date of death. During this period, the "designated beneficiary" may
exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to surrender the Certificate for its
Certificate Withdrawal Value. If this Certificate is still in force at the
end of the five-year period, We will automatically end it then by paying to
the "designated beneficiary" the Certificate Withdrawal Value without the
deduction of any applicable Surrender Charges. If the "designated
beneficiary" is not alive then, We will pay any Person(s) named by the
"designated beneficiary" in a Written Request; otherwise the "designated
beneficiary's" estate.
Death of Annuitant
These provisions apply if during the Accumulation Period while the
Certificate is In Force, (a) the Annuitant dies, (b) the Annuitant is not
an Owner, and (c) the Owner is a natural person. The Certificate will
continue In Force after the Annuitant's death. The new Annuitant will be
any living Contingent Annuitant, otherwise the Certificate Owner.
Payment of Benefits
Instead of receiving a lump sum, a Certificate Owner or any "designated
beneficiary" may by Written Request direct that We pay any benefit of
$2,000 or more under an Annuity Option that meets the following: (a) the
first payment to the "designated beneficiary" must be made no later than
one year after the date of death; (b) payments must be made over the life
of the "designated beneficiary" or over a period not extending beyond that
person's life expectancy; and (c) any Annuity Option that provides for
payments to continue after the death of the "designated beneficiary" will
not allow the successor payee to extend the period of time over which the
remaining payments are to be made.
Annuity Provisions
General
If the Certificate is In Force on the Income Date, the Adjusted Certificate
Value will be applied under the Annuity Option selected by a Certificate
Owner. Annuity Payments may be made on a fixed or variable basis or both.
Income Date
The Income Date may be selected by a Certificate Owner. It is shown on the
Certificate Schedule. The Income Date can be any time after the
Certificate Date for variable payments and any time after the first
Certificate Anniversary for fixed payments. The Income Date may not be
later than the earlier of when the Annuitant reaches attained age 90 or
that required under state law. If no Income Date is selected, it will be
the earlier of when the Annuitant reaches attained age 90 or the maximum
date permitted under state law, if any.
Prior to the Income Date, a Certificate Owner may change the Income Date by
Written Request. Any change must be requested at least 30 days prior to
the new Income Date.
Selection of an Annuity Option
An Annuity Option may be selected by a Certificate Owner. If no Annuity
Option is selected, Option B will automatically be applied. Prior to the
Income Date, a Certificate Owner can change the Annuity Option selected by
Written Request. Any change must be requested at least 30 days prior to
the Income Date.
Frequency and Amount of Annuity Payments
Annuity Payments are paid in monthly installments unless quarterly, semi-
annual or annual payments are chosen. The Adjusted Certificate Value is
applied to the Annuity Table for the Annuity Option selected. If the
Adjusted Certificate Value to be applied under an Annuity Option is less
than $2,000, We reserve the right to make a lump sum payment in lieu of
Annuity Payments. If the Annuity Payment would be or becomes less than
$100, We will reduce the frequency of payments to a longer interval which
will result in each payment being at least $100.
Annuity Options
The following Annuity Options or any other Annuity Option acceptable to Us
may be selected:
OPTION A. ANNUITY FOR A FIXED NUMBER OF YEARS: Annuity Payments for a
chosen number of years, not less than 5. If the payee dies during the
payment period and the Beneficiary does not desire payments to continue for
the remainder of the period, he/she may elect to have the present value of
the remaining payments commuted and paid in a lump sum. During the payment
period of a Variable Annuity, the payee may elect by Written Request to
receive the following amount: (a) the present value of the remaining
payments commuted; less (b) any Surrender Charge that may be due by
treating the value defined in (a) as a surrender. Instead of receiving a
lump sum, the payee may elect another Annuity Option. The amount applied
to that Option would not be reduced by the charge defined in (b).
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 10 YEARS: Annuity
Payments during the lifetime of the payee and in any event for 10 years
certain. If the payee dies during the guaranteed payment period and the
Beneficiary does not desire payments to continue for the remainder of the
guaranteed period, he/she may elect to have the present value of the
guaranteed payments remaining commuted and paid in a lump sum.
OPTION C. JOINT AND SURVIVOR ANNUITY: Annuity Payments payable during
the joint lifetime of the payee and a designated second natural person and
then during the lifetime of the survivor.
Unless the Annuity Option provides for commutation by the payee, a payee
may not withdraw or otherwise end an Annuity Option after it begins.
Payments will end upon the payee's death unless the Annuity Option provides
for payments continuing to a successor payee. No successor payee may
extend the period of time over which the remaining payments are to be made.
Annuity
If a Certificate Owner selects a Fixed Annuity, the Adjusted Certificate
Value is allocated to the General Account and the Annuity is paid as a
Fixed Annuity. If the Certificate Owner selects a Variable Annuity, the
Adjusted Certificate Value will be allocated to the Sub-accounts of the
Separate Account in accordance with the selection he or she makes, and the
Annuity will be paid as a Variable Annuity. A Certificate Owner can also
select a combination of a Fixed and Variable Annuity and the Adjusted
Certificate Value will be allocated accordingly. If a Certificate Owner
does not select between a Fixed Annuity and a Variable Annuity, any
Adjusted Certificate Value in the Variable Account will be applied to a
Variable Annuity and any Adjusted Certificate Value in the Fixed Account
will be applied to a Fixed Annuity.
The Adjusted Certificate Value will be applied to the applicable Annuity
Table contained in the Certificate based upon the Annuity Option a
Certificate Owner selects. If, as of the Income Date, the current Annuity
Option rates applicable to the class of Certificates issued under the Group
Contract provide an initial Annuity Payment greater than the initial
Annuity Payment guaranteed under the applicable Annuity Table in the
Certificate, the greater payment will be made.
Fixed Annuity
The minimum dollar amount of each Fixed Annuity Payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. After the
initial Fixed Annuity payment, the payments will not change regardless of
investment, mortality or expense experience.
Variable Annuity
Variable Annuity Payments reflect the investment performance of the
Variable Account in accordance with the allocation of the Adjusted
Certificate Value to the Sub-accounts during the Annuity Period. Variable
Annuity payments are not guaranteed as to dollar amount.
The dollar amount of the first Variable Annuity payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. The dollar
amount of Variable Annuity payments for each applicable Sub-account after
the first Variable Annuity Payment is determined as follows:
(1) the dollar amount of the first Variable Annuity payment is
divided
by the value of an Annuity Unit for each applicable Sub-account
as
of the Income Date. This sets the number of Annuity Units for
each monthly payment for the applicable Sub-account. The number
of Annuity Units for each applicable Sub-account remains fixed
during the Annuity Period;
(2) the fixed number of Annuity Units per payment in each Sub-account
is multiplied by the Annuity Unit Value for that Sub-account for
the Valuation Period for which the payment is due. This result
is
the dollar amount of the payment for each applicable Sub-account.
The total dollar amount of each Variable Annuity payment is the sum of all
Sub-account Variable Annuity payments reduced by the applicable portion of
the Certificate Maintenance Charge.
Annuity Unit
The value of any Annuity Unit for each Sub-Account of the Separate Account
was initially set at $10.
The Sub-account Annuity Unit Value at the end of any subsequent Valuation
Period is determined as follows:
(1) the net investment factor calculated as set forth on pages 11-12
(but without the Distribution Charge, if any) for the current
Valuation Period is multiplied by the value of the Annuity Unit
for the Sub-account for the immediately preceding Valuation
Period.
(2) the result in (1) is then divided by the Assumed Investment Rate
Factor which equals 1.00 plus the Valuation Period equivalent of
the Assumed Investment Rate for the number of days in the current
Valuation Period. The Assumed Investment Rate is equal to 6% per
year.
The value of an Annuity Unit may increase or decrease from Valuation Period
to Valuation Period.
Using the Tables
Tables 2, 3, 5, and 6 are age-dependent. The amount of the first annuity
payment will be based on an age a specified number of years younger than
the person's then-attained age (i.e., age last birthday). This age setback
is as follows:
Date of First Payment Age Setback
1996-1999 1 year
2000-2009 2 years
2010-2019 4 years
2020-2029 5 years
2030 or later 6 years
We will calculate the amount for a payment frequency other than monthly and
for any ages not shown in Tables 2, 3, 5, and 6 in accordance with the next
section. Upon request, We will tell a Certificate Owner any such amount.
Basis of Calculation
Tables 1 and 4 are based on interest at 5% and 3%, respectively. Tables 2,
3, 5, and 6 are based on the 1983 Individual Annuity Valuation Tables (sex
distinct), with interest at 5% (Tables 2 and 3) and 3% (Tables 5 and 6),
projected dynamically with Projection Scale G.
TABLE 1: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 1 FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years
Payment
5 $18.74 12 $9.16 19 $6.71 25 $5.76
6 15.99 13 8.64 20 6.51 26 5.65
7 14.02 14 8.20 21 6.33 27 5.54
8 12.56 15 7.82 22 6.17 28 5.45
9 11.42 16 7.49 23 6.02 29 5.36
10 10.51 17 7.20 24 5.88 30 5.28
11 9.77 18 6.94
TABLE 2: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION B FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $4.45 $4.34 47 $5.05 $4.78 64 $6.54 $5.98 80 $9.14 $8.67
31 4.47 4.35 48 5.11 4.82 65 6.68 6.10 81 9.29 8.86
32 4.50 4.37 49 5.17 4.87 66 6.82 6.22 82 9.44 9.05
33 4.52 4.39 50 5.23 4.92 67 6.97 6.35 83 9.57 9.23
34 4.55 4.41 51 5.29 4.97 68 7.12 6.49 84 9.69 9.40
35 4.57 4.43 52 5.36 5.02 69 7.28 6.63 85 9.81 9.55
36 4.60 4.45 53 5.43 5.08 70 7.44 6.79 86 9.91 9.69
37 4.63 4.47 54 5.50 5.13 71 7.61 6.95 87 10.01 9.82
38 4.67 4.49 55 5.58 5.20 72 7.78 7.12 88 10.10 9.94
39 4.70 4.52 56 5.67 5.27 73 7.95 7.30 89 10.17 10.04
40 4.74 4.55 57 5.76 5.34 74 8.12 7.48 90 10.24 10.13
41 4.78 4.57 58 5.85 5.41 75 8.30 7.67 91 10.30 10.21
42 4.82 4.60 59 5.95 5.49 76 8.47 7.87 92 10.35 10.27
43 4.86 4.64 60 6.06 5.58 77 8.65 8.07 93 10.39 10.33
44 4.91 4.67 61 6.17 5.67 78 8.82 8.27 94 10.43 10.37
45 4.95 4.70 62 6.29 5.77 79 8.98 8.47 96 10.45 10.41
46 5.00 4.74 63 6.41 5.87
TABLE 3: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 3 FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30$4.24$4.28$4.31$4.34$4.36$4.38$4.40$4.42$4.43$4.44$4.45 $4.45 $4.45 $4.46
35 4.26 4.30 4.35 4.39 4.43 4.47 4.50 4.52 4.54 4.56 4.57 4.57 4.58 4.58
40 4.28 4.33 4.39 4.45 4.51 4.56 4.61 4.65 4.68 4.71 4.73 4.74 4.75 4.75
M45 4.29 4.35 4.42 4.50 4.58 4.66 4.74 4.80 4.86 4.90 4.93 4.96 4.97 4.98
A50 4.30 4.37 4.46 4.55 4.66 4.77 4.88 4.98 5.07 5.14 5.20 5.23 5.25 5.27
L55 4.31 4.39 4.48 4.59 4.73 4.87 5.03 5.18 5.32 5.44 5.53 5.59 5.63 5.65
E60 4.32 4.40 4.50 4.63 4.78 4.97 5.18 5.40 5.61 5.80 5.96 6.07 6.13 6.17
65 4.33 4.41 4.52 4.65 4.83 5.05 5.31 5.61 5.92 6.23 6.50 6.70 6.83 6.90
A70 4.33 4.42 4.53 4.68 4.87 5.11 5.42 5.80 6.23 6.70 7.14 7.50 7.75 7.90
G75 4.34 4.42 4.54 4.69 4.89 5.16 5.50 5.95 6.50 7.15 7.83 8.45 8.92 9.23
E80 4.34 4.43 4.54 4.70 4.91 5.19 5.56 6.06 6.71 7.55 8.52 9.50 10.34 10.93
85 4.34 4.43 4.55 4.71 4.92 5.21 5.60 6.13 6.86 7.85 9.10 10.52 11.87 12.93
90 4.34 4.43 4.55 4.71 4.93 5.22 5.62 6.18 6.96 8.06 9.55 11.39 13.34 15.05
95 4.34 4.43 4.55 4.71 4.93 5.23 5.64 6.21 7.02 8.20 9.86 12.09 14.69 17.20
TABLE 4: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION A FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $17.91 12 $8.24 19 $5.73 25 $4.71
6 15.14 13 7.71 20 5.51 26 4.59
7 13.16 14 7.26 21 5.32 27 4.47
8 11.68 15 6.87 22 5.15 28 4.37
9 10.53 16 6.53 23 4.99 29 4.27
10 9.61 17 6.23 24 4.84 30 4.18
11 8.86 18 5.96
TABLE 5: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION B FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $3.12 $2.99 47 $3.82 $3.53 64 $5.40 $4.83 80 $8.15 $7.66
31 3.15 3.01 48 3.88 3.58 65 5.55 4.96 81 8.32 7.86
32 3.18 3.03 49 3.94 3.63 66 5.69 5.08 82 8.47 8.06
33 3.21 3.06 50 4.01 3.68 67 5.85 5.22 83 8.61 8.25
34 3.24 3.08 51 4.08 3.74 68 6.01 5.37 84 8.75 8.43
35 3.27 3.11 52 4.15 3.80 69 6.18 5.52 85 8.87 8.60
36 3.31 3.13 53 4.23 3.86 70 6.35 5.68 86 8.98 8.75
37 3.34 3.16 54 4.31 3.93 71 6.52 5.85 87 9.08 8.88
38 3.38 3.19 55 4.39 4.00 72 6.70 6.03 88 9.18 9.01
39 3.42 3.22 56 4.48 4.07 73 6.89 6.21 89 9.26 9.12
40 3.46 3.25 57 4.58 4.15 74 7.07 6.41 90 9.33 9.21
41 3.51 3.29 58 4.68 4.23 75 7.26 6.61 91 9.40 9.30
42 3.55 3.32 59 4.78 4.32 76 7.44 6.81 92 9.45 9.37
43 3.60 3.36 60 4.89 4.41 77 7.63 7.02 93 9.49 9.43
44 3.65 3.40 61 5.01 4.50 78 7.81 7.23 94 9.53 9.47
45 3.71 3.44 62 5.14 4.61 79 7.98 7.45 95 9.55 9.51
46 3.76 3.49 63 5.27 4.72
TABLE 6: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION C FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30$2.88$2.93$2.97$3.01$3.04$3.07$3.08$3.10$3.11$3.12$3.12 $3.12 $3.13 $3.13
35 2.91 2.97 3.03 3.09 3.14 3.18 3.21 3.23 3.25 3.26 3.27 3.27 3.28 3.28
40 2.93 3.01 3.09 3.17 3.24 3.30 3.35 3.39 3.42 3.44 3.46 3.46 3.47 3.47
45 2.95 3.04 3.14 3.24 3.34 3.43 3.51 3.58 3.63 3.66 3.69 3.71 3.72 3.72
M50 2.96 3.06 3.17 3.30 3.43 3.56 3.68 3.79 3.87 3.94 3.98 4.01 4.03 4.03
A55 2.97 3.07 3.20 3.34 3.50 3.68 3.85 4.02 4.16 4.27 4.34 4.39 4.42 4.44
L60 2.98 3.09 3.22 3.38 3.56 3.78 4.01 4.25 4.47 4.66 4.80 4.89 4.95 4.98
E65 2.98 3.09 3.23 3.40 3.61 3.86 4.15 4.48 4.81 5.12 5.37 5.55 5.66 5.72
70 2.99 3.10 3.24 3.42 3.64 3.92 4.26 4.67 5.13 5.60 6.04 6.38 6.60 6.73
A75 2.99 3.10 3.25 3.43 3.66 3.96 4.34 4.81 5.39 6.06 6.75 7.35 7.79 8.07
G80 2.99 3.11 3.25 3.44 3.68 3.99 4.39 4.92 5.60 6.45 7.44 8.42 9.23 9.79
E85 2.99 3.11 3.26 3.44 3.69 4.00 4.42 4.98 5.73 6.74 8.01 9.44 10.77 11.81
90 2.99 3.11 3.26 3.45 3.69 4.01 4.44 5.02 5.82 6.93 8.43 10.29 12.25 13.95
95 2.99 3.11 3.26 3.45 3.70 4.02 4.45 5.04 5.87 7.05 8.73 10.97 13.58 16.11
Endorsements
To be inserted only by Us
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase payment
flexibility. This Contract is non participating with no dividends.
EXHIBIT 4m
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 DVA001
CERTIFICATE NUMBER 123455
CERTIFICATE OWNER John Q. Public, male, 1/1/40
JOINT CERTIFICATE OWNER Jane Q. Public, female, 2/29/40
ANNUITANT Thomas Doe, male, 11/22/40
COVERED PERSONS John Q. Public, Jane Q. Public, Thomas
Doe
ISSUE STATE New York
IRS PLAN TYPE Non-Qualified
CERTIFICATE DATE November 1, 1995
INCOME DATE November 1, 2010
INITIAL PURCHASE PAYMENT $25,000
MINIMUM INITIAL PAYMENT $25,000
MINIMUM ADDITIONAL PAYMENT $250 ($50 for EFT payment)
Charges
Distribution Charge: None.
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 costs.
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: None
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 21 Sub-accounts and the Fixed
Account. We reserve the right to increase or decrease the number of
available Sub-accounts. The minimum You may allocate to any Sub-account or
the Fixed Account is 5% of any Purchase Payment. Your initial Purchase
Payment has been invested as follows:
AIM Capital Appreciation x%
AIM Growth x%
AIM International x%
Alliance Global Bond x%
Alliance Growth and Income x%
Alliance Premier Growth x%
Alliance Real Estate x%
Colonial Growth and Income x%
Colonial High Yield Securities x%
Colonial Small Cap Value x%
Colonial Strategic Income x%
Colonial U.S. Stock x%
Liberty All-Star x%
MFS Bond x%
MFS Emerging Growth x%
MFS Research x%
Stein Roe Balanced x%
Stein Roe Global Utilities x%
Stein Roe Growth Stock x%
Stein Roe Money Market x%
Stein Roe Special Venture x%
Fixed Account - 1 Year x%
Transfer Guidelines
Number of Transfers and Transfer Charge: Currently, Certificate Owners are
permitted unlimited transfers per Certificate Year during the Accumulation
Period and unlimited transfers 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.
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. 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.
Death Benefit Amount
Certificate Anniversary Death Benefit
On the Certificate Date, the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) (a) Start with the Death Benefit from the Certificate Date;
(b) Add to (a) any additional Purchase Payments paid since the
Certificate Date and subtract from (a) any partial
withdrawals (including any associated surrender charge
incurred) made since the Certificate Date;
(2) (a) Determine the Certificate Value for each Certificate
Anniversary (the "Anniversary Value") before the 81st
birthday of the Certificate Owner or, if the Certificate
Owner is a non-natural Person, the Annuitant;
(b) Increase each "Anniversary Value" by any Purchase Payments
made after that Value's Anniversary;
(c) Decrease each "Anniversary Value" by the following amount
calculated at the time of each partial withdrawal made
after that Value's Anniversary: (i) the partial withdrawal
amount (including any associated surrender charge
incurred) divided by the Certificate Value immediately
preceding the withdrawal, (ii) multiplied by the
"Anniversary Value" immediately preceding the withdrawal;
(d) Select the highest "Anniversary Value" after the
adjustments in (b) and (c) above;
(3) Set the Death Benefit equal to the greater of (1) and (2).
If there is a change of Certificate Owner, the new Certificate Owner's age
will be used to determine the amount in (2) above.
The Variable Separate Account
Sub-accounts investing in shares of mutual funds
Variable Account A is a unit investment trust variable separate account,
organized in and governed by the laws of the State of Rhode Island, Our
state of domicile. Variable Account A is divided into Sub-accounts. Each
Sub-account listed below invests in shares of the corresponding Portfolio
of the Eligible Fund shown.
Sub-Accounts Investment Objective
AIM Variable Insurance Funds, Inc.
AIM Capital Appreciation Capital appreciation through investments in
Sub-account common stocks, with emphasis on medium-sized
and smaller emerging growth companies
AIM Growth Sub-Account Growth of capital through investments
primarily in common stocks of leading U.S.
companies considered by AIM to have strong
earnings momentum.
AIM International Equity Long-term growth of capital by investing in
Sub-account international equity securities, the issuers
of which are considered by AIM to have strong
earnings momentum.
Alliance Variable Products Series Fund, Inc.
Alliance Global Bond A high level of return from a combination of
Sub-account current income and capital appreciation by
investing in a globally diversified portfolio
of high quality debt securities denominated
in the U.S. Dollar and a range of foreign
currencies.
Alliance Growth and Income Balance the objectives of reasonable current
Sub-account income and reasonable opportunities for
appreciation through investments primarily in
dividend-paying common stocks of good
quality.
Alliance Premier Growth Growth of capital rather than current income.
Sub-account
Alliance Real Estate Total return on its assets through long-term
Sub-account growth of capital and income principally
through investing in a portfolio of equity
securities of issuers that are primarily
engaged in or related to the real estate
industry.
Liberty Variable Investment Trust
Colonial Growth and Income Primarily income and long-term
Sub-Account(formerly named capital growth and, secondarily,
Colonial-Keyport Growth and preservation of capital.
Income Fund)
Colonial High Yield High current income and total return by
Securities Sub-account investing primarily in lower rated corporate
debt securities.
Colonial Small Cap Value Long-term growth by investing in smaller
Sub-account capitalization equity securities.
Colonial Strategic Income A high level of current income, as is
Sub-Account (formerly named consistent with prudent risk and maximizing
Colonial-Keyport Strategic total return, by diversifying investments
Income Fund) primarily in U.S. and foreign government and
high yield, high risk corporate debt
securities.
Colonial U.S. Stock Long-term capital growth by investing
Sub-Account(formerly named primarily in large capitalization
Colonial-Keyport U.S. Stock equity securities.
Fund)
Liberty All-Star Equity Total investment return, comprised of long-
Sub-account term capital appreciation and current income,
through investment primarily in a diversified
portfolio of equity securities.
Stein Roe Global Utilities Current income and long-term growth
Sub-Account (formerly named of capital and income.
Colonial-Keyport Utilities
Fund)
MFS Variable Insurance Trust
MFS Bond Sub-Account High level of current income as is believed
consistent with prudent investment risk and
secondarily to protect shareholders' capital.
MFS Emerging Growth Long-term growth of capital.
Sub-account
MFS Research Sub-Account Long-term growth of capital and future
income.
SteinRoe Variable Investment Trust
Stein Roe Balanced High total investment return through
Sub-Account (formerly named investment in a changing mix
SteinRoeManaged Assets Fund) of securities.
Stein Roe Growth Stock Long-term growth of capital
Sub-Account(formerly named through investment primarily
SteinRoe Managed Growth in common stocks.
Stock Fund)
Stein Roe Money Market High current income from short-term
Sub-Account (formerly named money market instruments while
SteinRoe Cash Income Fund) emphasizing preservation of capital and
maintaining excellent liquidity.
Stein Roe Special Venture Capital growth by investing primarily
Sub-account (formerly named in common stocks, convertible securities
SteinRoe Capital Appreciation and other securities selected for
Fund) prospective capital growth.
Sub-accounts investing directly in securities - None.
The Fixed Account
The Fixed Account is part of Our General Account, which consists of all of
Our assets except the assets of the Variable Account and the assets of
other separate accounts that We maintain. Subject to applicable law, We
have sole discretion over investments of the assets of the Fixed Account.
If You allocate assets to the Fixed Account, Your accumulation values and
annuity payments will have guaranteed minimums.
Before the Income Date, Your interest in the Fixed Account is measured by
the Fixed Account Value. When annuity payments begin, the payee's interest
in the Fixed Account is measured by the amount of each periodic payment.
Benefits from the Fixed Account will not be less than the minimum values
required by any law of the jurisdiction where the Certificate is delivered.
Purchase Payments will be allocated to the Fixed Account in accordance with
Your selection at the Certificate Date. You may change such selection by
Written Request.
The Fixed Account Value at any time is equal to:
(1) all Purchase Payments allocated to the Fixed Account plus the
interest subsequently credited on those payments; plus
(2) any Variable Account value transferred to the Fixed Account
plus the interest subsequently credited on the transferred
value; less
(3) any prior partial withdrawals from the Fixed Account; less
(4) any Fixed Account Value transferred to the Variable Account.
We will credit interest to Purchase Payments allocated to the Fixed Account
at rates declared by Us for Guarantee Periods of one or more years from the
month and day of allocation. The minimum Guaranteed Interest Rate is 3%
per year.
Table of Contents
Page
Right to Examine Certificate.............................................1
Certificate Schedule.....................................................2
Definitions..............................................................3
General Provisions.......................................................5
Variable Account Provisions..............................................9
Transfers...............................................................12
Partial Withdrawals and Total Surrender.................................13
Death Provisions........................................................14
Annuity Provisions......................................................15
Endorsements (if any) are before page...................................21
Definitions
Accumulation Period: The period prior to the Income Date during which
Purchase Payments may be made by a Certificate Owner.
Accumulation Unit: An accounting unit used to calculate a Certificate
Owner's interest in a Sub-account of the Variable Account during the
Accumulation Period.
Adjusted Certificate Value: The Certificate Value less any applicable
taxes relating to a Certificate and Certificate Maintenance Charge. This
amount is applied to the applicable Annuity Tables to determine Annuity
Payments.
Annuitant: The natural person on whose life Annuity Payments are based,
and to whom any Annuity Payments will be made starting on the Income Date.
Annuity Options: Options available for Annuity Payments.
Annuity Payments: The series of payments made to the Annuitant, starting
on the Income Date, under the Annuity Option selected.
Annuity Period: The period after the Income Date during which Annuity
Payments are made.
Annuity Unit: An accounting unit used to calculate Variable Annuity
Payments during the Annuity Period.
Beneficiary: The person(s) or entity(ies) who controls the Certificate if
any Certificate Owner dies before the Income Date.
Definitions (continued)
Certificate: The document issued to a Certificate Owner to evidence a
Certificate Owner's participation under the Group Contract. The
Certificate summarizes the benefits and provisions of the Group Contract.
Certificate Anniversary: An anniversary of the Certificate Date.
Certificate Date: The date a Certificate is issued to a Certificate Owner.
The Certificate Date is shown on the Certificate Schedule.
Certificate Owner: The person who owns a Certificate under the Group
Contract. Any Joint Certificate Owners and the Certificate Owner own the
Certificate equally with rights of survivorship.
Certificate Value: The sum of the Certificate Owner's interest in the Sub-
accounts of the Variable Account and the Fixed Account during the
Accumulation Period.
Certificate Year: The first Certificate Year is the annual period which
begins on the Certificate Date. Subsequent Certificate Years begin on each
Certificate Anniversary.
Eligible Fund: An investment entity shown on the Certificate Schedule.
Fixed Account: The account We establish to support Fixed Allocations. The
Certificate Schedule shows whether the Fixed Account is available under the
Certificate.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under this Certificate prior to the Income Date.
Fixed Allocation: An amount allocated to the Fixed Account that is
credited with a Guaranteed Interest Rate for a specified Guarantee Period.
Fixed Annuity: An annuity with a series of payments made during the
Annuity Period which are guaranteed as to dollar amount by Us.
General Account: Our general investment account which contains all of Our
assets except those in the Variable Account and Our other separate
accounts.
Group Contract Owner: The person or entity to which the Group Contract is
issued.
Guaranteed Interest Rate: The effective annual interest rate which We will
credit for a specified Guarantee Period.
Guarantee Period: The period of year(s) a rate of interest is guaranteed
to be credited within the Fixed Account.
Income Date: The date on which Annuity Payments begin. The Income Date is
shown on the Certificate Schedule.
In Force: The status of a Certificate before the Income Date so long as it
has not been totally surrendered and there has not been a death of a
Certificate Owner or Joint Certificate Owner that will cause the
Certificate to end within five years of the date of death.
Office: Our service office shown on the Certificate Schedule.
Person: A human being, trust, corporation, or any other legally recognized
entity.
Portfolio: A series of an Eligible Fund which constitutes a separate and
distinct class of shares.
Purchase Payment: A payment made by or on behalf of a Certificate Owner
with respect to a Certificate.
Sub-account: Variable Account assets are divided into Sub-accounts.
Assets of each Sub-account will be invested in shares of a Portfolio of an
Eligible Fund, or directly in portfolio securities.
Valuation Date: Each day on which We and the New York Stock Exchange
("NYSE") are open for business, or any other day that the Securities and
Exchange Commission requires that mutual funds, unit investment trusts or
other investment portfolios be valued.
Valuation Period: The period of time beginning at the close of business of
the NYSE on each Valuation Date and ending at the close of business on the
next succeeding Valuation Date.
Variable Account: Our Variable Account(s) shown on the Certificate
Schedule.
Variable Annuity: An annuity with payments which vary as to dollar amount
in relation to the investment performance of specified Sub-accounts of the
Variable Account.
We, Us, Our: Keyport Benefit Life Insurance Company of Boston.
Written Request: A request in writing, in a form satisfactory to Us, and
received by Us at Our Office.
You, Your: The Certificate Owner and any Joint Certificate Owners.
General Provisions
Purchase Payments
The initial Purchase Payment is due on the Certificate Date. It must be
paid at Our Office in United States currency. Coverage under a Certificate
does not take effect until We have accepted the initial Purchase Payment
during Your lifetime. Each Purchase Payment after the Certificate Date
must be at least the amount shown on the Certificate Schedule. Provided
the Certificate Value under a Certificate does not go to zero, a
Certificate will stay in force until the Income Date even if You make no
payments after the initial one. We reserve the right to reject any
subsequent Purchase Payment.
Allocation of Purchase Payments
Your initial Purchase Payment is allocated to the Sub-accounts of the
Variable Account, and to the Fixed Account if available, in accordance with
the selections made by You at the Certificate Date. Unless otherwise
changed by You, subsequent Purchase Payments are allocated in the same
manner as the initial Purchase Payment. Allocation of Purchase Payments is
subject to the terms and conditions imposed by Us. We reserve the right to
allocate initial Purchase Payments to the Money Market Sub-account until
the expiration of the Right to Examine Certificate period set forth on the
first page of the Certificate.
The Contract
The Group Contract, including the application, if any, and any attached
rider or endorsement constitute the entire contract between the Group
Contract Owner and Us. All statements made by the Group Contract Owner,
any Certificate Owner or any Annuitant will be deemed representations and
not warranties. No such statement will be used in any contest unless it is
contained in the application signed by the Group Contract Owner or in a
written instrument signed by the Certificate Owner, a copy of which has
been furnished to the Certificate Owner, the Beneficiary or to the Group
Contract Owner.
Only Our President or Secretary may agree to change any of the terms of the
Group Contract. Any changes must be in writing. Any change to the terms
of a Certificate must be in writing and with Your consent, unless provided
otherwise by the Group Contract and the Certificate.
To assure that the Group Contract and the Certificate will maintain their
status as a variable annuity under the Internal Revenue Code, We reserve
the right to change the Group Contract and any Certificate issued
thereunder to comply with future changes in the Internal Revenue Code, any
regulations or rulings issued thereunder, and any requirements otherwise
imposed by the Internal Revenue Service. The Group Contract Owner and the
affected Certificate Owner will be sent a copy of any such amendment.
We reserve the right, subject to the approval of the New York
Superintendent of Insurance and compliance with U.S. laws as currently
applicable or subsequently changed, to: (a) operate the Variable Account
in any form permitted under the Investment Company Act of 1940, as
amended, (the "1940 Act"), or in any other form permitted by law; (b) take
any action necessary to comply with or obtain and continue any exemptions
from the 1940 Act, or to comply with any other applicable law; (c) transfer
any assets in any Sub-account to another Sub-account, or to one or more
separate investment accounts, or the General Account; or to add, combine or
remove Sub-accounts in the Variable Account; and (d) change the way We
assess charges, so long as We do not increase the aggregate amount beyond
that currently charged to the Variable Account and the Eligible Funds in
connection with this Certificate. If the shares of any of the Eligible
Funds should become unavailable for investment by the Variable Account or
if in Our judgment further investment in such Portfolio shares should
become inappropriate in view of the purpose of the Certificate, We may add
or substitute shares of another mutual fund for the Portfolio shares
already purchased under the Certificate. No substitution of Portfolio
shares in any Sub-account may take place without prior approval of the
Securities and Exchange Commission and notice to the affected Certificate
Owners, to the extent required by the 1940 Act.
Certificate Owner
You are the Certificate Owner of this Certificate. You have all rights and
may receive all benefits under a Certificate. A Certificate Owner is the
person designated as such on the Certificate Date, unless changed. You may
exercise all rights of this Certificate while it is In Force, subject to
the rights of (a) any assignee under an assignment filed with Us, and (b)
any irrevocably named Beneficiary.
Joint Certificate Owner
A Certificate can be owned by Joint Certificate Owners. Upon the death of
any Certificate Owner or Joint Certificate Owner, the surviving owner(s)
will be the primary Beneficiary(ies). Any other beneficiary designation
will be treated as a Contingent Beneficiary unless otherwise indicated in a
Written Request filed with Us.
Annuitant
The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by You at the Certificate Date, unless
changed prior to the Income Date. Any change of Annuitant is subject to
Our underwriting rules then in effect. The Annuitant may not be changed in
a Certificate which is owned by a non-natural person. You may name a
Contingent Annuitant. The Contingent Annuitant becomes the Annuitant if
the Annuitant dies while this Certificate is In Force. If the Annuitant
dies and no Contingent Annuitant has been named, We will allow You sixty
days to designate someone other than Yourself as Annuitant. You will be
the Contingent Annuitant unless You name someone else. If the Certificate
is owned by a non-natural person, the death of the Annuitant will be
treated as the death of the Certificate Owner and a new Annuitant may not
be designated.
Beneficiary
The Beneficiary is the person who controls the Certificate if any
Certificate Owner dies prior to the Income Date. If the Certificate is
owned by Joint Certificate Owners, upon the death of any Certificate Owner
or Joint Certificate Owner, the surviving owner(s) will become the primary
Beneficiary. Any other beneficiary designation will be treated as a
Contingent Beneficiary unless otherwise indicated in a Written Request
filed with Us. If You name more than one Person as Primary Beneficiary or
as Contingent Beneficiary, and do not state otherwise on an application or
in a Written Request to Us, any non-survivors will not receive a benefit.
The survivors will receive equal shares. Subject to the rights of any
irrevocable Beneficiary(ies), You may change primary or contingent
Beneficiary(ies). A change must be made by Written Request and will be
effective as of the date the Written Request is signed. We will not be
liable for any payment We make or action We take before We receive the
Written Request.
Group Contract Owner
The Group Contract Owner has title to the Group Contract. The Group
Contract and any amount accumulated under any Certificate are not subject
to the claims of the Group Contract Owner or any of its creditors. The
Group Contract Owner may transfer ownership of this Group Contract. Any
transfer of ownership terminates the interest of any existing Group
Contract Owner. It does not change the rights of any Certificate Owner.
Nothing in the Group Contract shall invalidate or impair any right granted
to the Certificate Owner by the Certificate or New York law.
Change of Certificate Owner, Beneficiary or Contingent Annuitant
While this Certificate is In Force, You may by Written Request change the
primary Certificate Owner, Joint Certificate Owner, primary Beneficiary,
Contingent Beneficiary, Contingent Annuitant, or in certain instances, the
Annuitant. An irrevocably named Person may be changed only with the
written consent of such Person. The change will be effective, following
Our receipt of the Written Request, as of the date the Written Request is
signed. The change will not affect any payments We make or actions We take
prior to the time We receive the Written Request.
Assignment of the Certificate
You may assign this Certificate at any time while it is In Force. The
assignment must be in writing and a copy must be filed at Our Office. Your
rights and those of any revocably named Person will be subject to the
assignment. An assignment will not affect any payments We make or actions
We take before We receive the assignment. We are not responsible for the
validity of any assignment.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any payee has been misstated, We will
compute the amount payable based on the correct age and sex. If Annuity
Payments have begun, any underpayment(s) that have been made plus interest
thereon at a rate of 5% per year will be paid in full with the next
Annuity Payment. Any overpayment plus interest thereon at a rate of 5% per
year, unless repaid to Us in one sum, will be deducted from future Annuity
Payments otherwise due until We are repaid in full.
Non-Participating
This Certificate does not participate in Our divisible surplus.
Evidence of Death, Age, Sex or Survival
If a Certificate provision relates to the death of a natural Person, We
will require proof of death before We will act under that provision. Proof
of death shall be: (a) a certified death certificate; or (b) a certified
decree of a court of competent jurisdiction as to the finding of death; or
(c) a written statement by a medical doctor who attended the deceased; or
(d) any other document constituting due proof of death under applicable
state law. If Our action under a Certificate provision is based on the
age, sex, or survival of any Person, We may require evidence of the
particular fact before We act under that provision.
Protection of Proceeds
No Beneficiary or payee may commute or assign any payments under a
Certificate before they are due. To the extent permitted by law, no
payments shall be subject to the debts of any Beneficiary or payee or to
any judicial process for payment of those debts.
Reports
We will send Certificate Owners a report that shows the Certificate Value,
the Certificate Withdrawal Value and the Death Benefit at least once each
Certificate Year. We will send any other reports that may be required by
law.
Taxes
Any taxes paid to any governmental entity relating to a Certificate will be
deducted from the Purchase Payments or Certificate Value. We may, in Our
sole discretion, delay the deduction until a later date. By not deducting
tax payments at the time of Our payment, We do not waive any right We may
have to deduct amounts at a later date. We will, in Our sole discretion,
determine when taxes relate to a Certificate or to the operation of the
Variable Account. We reserve the right to establish a provision for
federal income taxes if We determine, in Our sole discretion, that We will
incur a tax as a result of the operation of the Variable Account. Such a
provision will be reflected in the Accumulation and Annuity Unit Values.
We will deduct for any income taxes incurred by Us as a result of the
operation of the Variable Account whether or not there was a provision for
taxes and whether or not it was sufficient. We will deduct from any
payment under this Certificate any withholding taxes required by applicable
law.
Regulatory Requirements
All values payable under a Certificate will not be less than the minimum
benefits required by the laws and regulations of the state in which the
Certificate is delivered.
Suspension or Deferral of Payments
We reserve the right to suspend or postpone payments for a withdrawal,
transfer or surrender for any period when:
(1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); or
(2) trading on the New York Stock Exchange is restricted; or
(3) an emergency exists as a result of which valuation or disposal
of the assets and securities of the Variable Account is not
reasonably practicable; or
(4) the Securities and Exchange Commission, by order or
pronouncement, so permits for the protection of Certificate
Owners;
provided that applicable rules and regulations of the Securities and
Exchange Commission govern as to whether the conditions described in (2)
and (3) above exist.
We reserve the right to delay payment of amounts allocated to the Fixed
Account for up to six months.
Variable Account Provisions
The Variable Account
The Variable Account(s) is designated on the Certificate Schedule and
consists of assets set aside by Us, which are kept separate from Our
general assets and all other variable account assets We maintain. We own
the assets of the Variable Account. Variable Account assets equal to
reserves and other contract liabilities will not be chargeable with
liabilities arising out of any other business We may conduct. Income and
realized and unrealized gains or losses from assets in the Variable Account
are credited to or charged against the account without regard to other
income, gains or losses in Our other investment accounts.
The Variable Account assets are divided into Sub-accounts. The Sub-
accounts which are available under the Certificate are shown on the
Certificate Schedule. The assets of the Sub-accounts of the unit
investment trust variable separate account are allocated to the Eligible
Fund(s) and the Portfolio(s), if applicable, within an Eligible Fund shown
on the Certificate Schedule. The assets of the Sub-accounts of the
investment company variable separate account, if applicable, are invested
in portfolios of securities designed to meet the objectives of the Sub-
Account shown on the Certificate Schedule. We may, from time to time, add
additional Sub-accounts, Eligible Funds or Portfolios to those shown on the
Certificate Schedule. You may be permitted to transfer Certificate Values
or allocate Purchase Payments to the additional Sub-Accounts, Eligible
Funds or Portfolios. However, the right to make such transfers or
allocations will be limited by the terms and conditions imposed by Us.
We also have the right to eliminate Sub-accounts from the Variable Account,
to combine two or more Sub-accounts or to substitute a new Portfolio for
the Portfolio in which a Sub-account invests. A substitution may become
necessary if, in Our discretion, a Portfolio or Sub-account no longer suits
the purposes of the Group Contract. This may happen: due to a change in
laws or regulations or a change in a Portfolio's investment objectives or
restrictions; because the Portfolio or Sub-account is no longer available
for investment; or for some other reason. We will obtain any prior
approvals that may be required from the insurance department of Our state
of domicile, the New York Superintendent of Insurance and from the SEC or
any other governmental entity before making such a substitution.
When permitted by law, We reserve the right to:
(1) Deregister a Variable Account under the 1940 Act;
(2) Operate a Variable Account as a management company under the
1940 Act, if it is operating as a unit investment trust;
(3) Operate a Variable Account as a unit investment trust under the
1940 Act, if it is operating as a management company;
(4) Restrict or eliminate any voting rights as to the account;
(5) Combine the Variable Account with any other variable account.
Valuation of Assets
The assets of the Variable Account are valued at their fair market value in
accordance with Our procedures.
Accumulation Units
Your Variable Account value will fluctuate in accordance with the
investment results of the Sub-accounts to which You have allocated Your
Purchase Payments or Certificate Value. In order to determine how these
fluctuations affect Your Certificate Value, We use an Accumulation Unit
value. Accumulation Units are used to account for all amounts allocated to
or withdrawn from the Sub-accounts of the Variable Account as a result of
Purchase Payments, partial withdrawals, transfers, or charges deducted
from the Certificate Value. We determine the number of Accumulation Units
of a Sub-account purchased or canceled by dividing the amount allocated to,
or withdrawn from, the Sub-account by the dollar value of one Accumulation
Unit of the Sub-account as of the end of the Valuation Period during which
We receive the request for the transaction.
Accumulation Unit Value
The Accumulation Unit Value for each Sub-account was initially set at $10.
Subsequent Accumulation Unit Values for each Sub-account are determined by
multiplying the Accumulation Unit Value for the immediately preceding
Valuation Period by a net investment factor for the Sub-account for the
current period. This factor may be greater or less than 1.0; therefore,
the Accumulation Unit Value may increase or decrease from Valuation Period
to Valuation Period.
We calculate the net investment factor for each Sub-account investing in
shares of mutual funds by dividing (a) by (b) and then subtracting (c)
where:
(a) is equal to:
(i) the net asset value per share of the Portfolio in which the
Sub-account invests at the end of the Valuation Period;
plus
(ii) any dividend per share declared for the Portfolio that has
an ex-dividend date within the current Valuation Period.
(b) is the net asset value per share of the Portfolio at the end of
the preceding Valuation Period.
(c) is equal to:
(i) the sum of each Valuation Period equivalent of the annual
rate for the Mortality and Expense Risk Charge, for the
Administrative Charge, and for the Distribution Charge, if
any, which are shown on the Certificate Schedule; plus
(ii) a charge factor, if any, for any tax provision established
by Us a result of the operation of the Sub-account.
We calculate the net investment factor for each Sub-account investing
directly in securities with the same formula, except:
(a) is equal to:
(i) the value of the assets in the Sub-account at the end of
the preceding Valuation Period; plus
(ii) any investment income and capital gains, realized or
unrealized, credited to the assets during the current
Valuation Period; less
(iii) any capital losses, realized or unrealized, charged against
the assets during the current Valuation Period; less
(iv) all operating and investment expenses relating to the
assets that are incurred during the current Valuation
Period.
(b) is the value of the assets in the Sub-account at the end of the
preceding Valuation Period.
Mortality and Expense Risk Charge
Each Valuation Period We deduct a Mortality and Expense Risk Charge from
each Sub-account of the Variable Account which is equal, on an annual
basis, to the amount shown on the Certificate Schedule. The Mortality and
Expense Risk Charge compensates Us for assuming the mortality and expense
risks with respect to the Certificates We issue. We guarantee the dollar
amount of each Annuity Payment after the first Annuity Payment will not be
affected by variations in mortality or expense experience.
Administrative Charge
Each Valuation Period We deduct an Administrative Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Administrative Charge compensates Us for the
costs associated with administration of the Variable Account and the
Certificates We issue.
Distribution Charge
Each Valuation Period We deduct a Distribution Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Distribution Charge compensates Us for the costs
associated with the distribution of the Certificates We issue.
Certificate Maintenance Charge
We deduct a Certificate Maintenance Charge from the Certificate Value by
canceling Accumulation Units from each applicable Sub-account to reimburse
Us for expenses relating to the maintenance of the Certificate. We will
deduct the Certificate Maintenance Charge from the Sub-accounts of the
Variable Account in the same proportion that the amount of Certificate
Value in each Sub-account bears to the Certificate Value. The Certificate
Maintenance Charge is shown on the Certificate Schedule. The Certificate
Maintenance Charge will be deducted from the Certificate Value on each
Certificate Anniversary during the Accumulation Period.
If a total surrender is made on a date other than a Certificate
Anniversary, the Certificate Maintenance Charge will be deducted at the
time of surrender.
Transfers
Subject to any limitation We impose on the number of transfers permitted in
a Certificate Year, You may transfer all or part of Your Certificate Value
among the Sub-accounts and the Fixed Account, if any, by Written Request or
by telephone without the imposition of any fees or charges. Transfers
among the Sub-accounts and the Fixed Account are permitted only during the
Accumulation Period. The number of permitted transfers, and the charge for
transfers in excess of that number, are shown on the Certificate Schedule.
All transfers are subject to the following:
(1) If more than the number of free transfers, shown on the
Certificate Schedule, are made in a Certificate Year, We will deduct a
transfer charge, shown on the Certificate Schedule, for each subsequent
transfer. The transfer fee will be deducted from the Sub-account from
which the transfer is made. However, if You transfer Your entire interest
in a Sub-account, the transfer fee will be deducted from the amount
transferred. If You make a transfer from more than one Sub-account, any
transfer fee will be allocated pro-rata among such Sub-accounts in
proportion to the amount transferred from each. The deduction of any fees
We impose on such transfers will not exceed the maximum listed on page 3.
(2) During the Annuity Period, transfers of values between Sub-
accounts will be made by converting the number of Annuity Units being
transferred to the number of Annuity Units in the Sub-account to which a
transfer is made, so that the next Annuity Payment, if it were made at that
time, would be the same amount that it would have been without the
transfer. Thereafter, Annuity Payments will reflect changes in the value
of the new Annuity Units.
(3) The minimum amount which can be transferred is shown on the
Certificate Schedule. The minimum amount which must remain in a Sub-
account after a transfer is shown on the Certificate Schedule.
(4) If 100% of the value of any Sub-account is transferred and the
current allocation for Purchase Payments includes that Sub-account, the
allocation for future Purchase Payments will change to reflect Your
allocation of Certificate Value following the transfer.
(5) We reserve the right, at any time and without prior notice to any
party, to terminate, suspend or modify the transfer privileges described
above.
We will not be liable for transfers made in accordance with Your
instructions. All amounts and Accumulation Units will be determined as of
the end of the Valuation Period in which We receive the request for
transfer.
Partial Withdrawals and Total Surrender
Partial Withdrawals
During the Accumulation Period while the Certificate is In Force, You may,
upon Written Request, make a partial withdrawal, subject to the provisions
and limitations shown on the Certificate Schedule. For purposes of
determining whether a surrender charge is applicable to Your partial
withdrawal:
(1) Your partial withdrawal will first be taken from the portion of
Your Certificate Value which is in excess of Your Purchase
Payments, and then from Your Purchase Payments; and
(2) We will allocate partial withdrawals to Purchase Payments in the
order in which the Purchase Payments were made, starting with the
first.
A withdrawal will result in the cancellation of Accumulation Units from
each applicable Sub-account in the ratio that Your interest in the Sub-
account bears to Your Certificate Value in all the Sub-accounts. You must
specify by Written Request in advance if You want Accumulation Units to be
canceled in a manner other than the method described above. If there is no
value or insufficient value in the Variable Account, then the amount
withdrawn, or the insufficient portion, will be deducted from the Fixed
Account. If You have multiple Guarantee Periods, We will deduct such
amount from each Guarantee Period's values in the ratio that each Period's
values bears to the total Fixed Account Value. You must specify by Written
Request in advance if You want multiple Guarantee Periods to be reduced in
a manner other than the method described above. [Any amount deducted from
the Fixed Account Value may be subject to a market value adjustment, if
applicable.]
Each partial withdrawal must be for an amount not less than the amount
shown on the Certificate Schedule. The Certificate Value which must remain
in a Certificate is shown on the Certificate Schedule. The Certificate
Schedule also shows any charge.
Total Surrender
During the Accumulation Period while the Certificate is In Force, You may,
upon Written Request, make a total surrender of the Certificate Withdrawal
Value. The Certificate Withdrawal Value is:
(1) the Certificate Value as of the end of the Valuation Period during
which We receive a Written Request for a withdrawal or surrender;
less
(2) any applicable taxes not previously deducted; less
(3) any Surrender Charge; less
(4) any Certificate Maintenance Charge.
[The Fixed Account Value, which is a component of the Certificate Value,
may be subject to a market value adjustment, if applicable.]
We will pay the amount of any withdrawal or surrender within seven days
unless the Suspension or Deferral of Payments Provision is in effect.
Death Provisions
Death of Certificate Owner
These provisions apply if, during the Accumulation Period while the
Certificate is In Force, the Certificate Owner or any Joint Certificate
Owner dies (whether or not the decedent is also the Annuitant) or the
Annuitant dies under a Certificate owned by a non-natural Person. The
"designated beneficiary" will control the Certificate after such a death.
This "designated beneficiary" will be the first Person among the following
who is alive on the date of death: Certificate Owner; Joint Certificate
Owner; primary Beneficiary; Contingent Beneficiary; and Certificate Owner's
estate. If the Certificate Owner and Joint Certificate Owner are both
alive, they shall be the "designated beneficiary" together.
If the decedent's surviving spouse (if any) is the sole "designated
beneficiary", the surviving spouse will automatically become the new sole
Certificate Owner as of the date of the death. And, if the Annuitant is
the decedent, the new Annuitant will be any living Contingent Annuitant,
otherwise the surviving spouse. The Certificate may stay in force until
another death occurs (i.e., until the death of the Certificate Owner or
Joint Certificate Owner). Except for this paragraph, all of "Death
Provisions" will apply to that subsequent death.
In all other cases, the Certificate may stay in force up to five years from
the date of death. During this period, the "designated beneficiary" may
exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to surrender the Certificate for its
Certificate Withdrawal Value. If this Certificate is still in force at the
end of the five-year period, We will automatically end it then by paying to
the "designated beneficiary" the Certificate Withdrawal Value without the
deduction of any applicable surrender charges. If the "designated
beneficiary" is not alive then, We will pay any Person(s) named by the
"designated beneficiary" in a Written Request; otherwise the "designated
beneficiary's" estate.
Death of Annuitant
These provisions apply if during the Accumulation Period while the
Certificate is In Force, (a) the Annuitant dies, (b) the Annuitant is not
an Owner, and (c) the Owner is a natural person. The Certificate will
continue In Force after the Annuitant's death. The new Annuitant will be
any living Contingent Annuitant, otherwise the Certificate Owner.
Payment of Benefits
Instead of receiving a lump sum, You or any "designated beneficiary" may by
Written Request direct that We pay any benefit of $2,000 or more under an
Annuity Option that meets the following: (a) the first payment to the
"designated beneficiary" must be made no later than one year after the date
of death; (b) payments must be made over the life of the "designated
beneficiary" or over a period not extending beyond that person's life
expectancy; and (c) any Annuity Option that provides for payments to
continue after the death of the "designated beneficiary" will not allow the
successor payee to extend the period of time over which the remaining
payments are to be made.
Annuity Provisions
General
If the Certificate is In Force on the Income Date, the Adjusted Certificate
Value will be applied under the Annuity Option selected by You. Annuity
Payments may be made on a fixed or variable basis or both.
Income Date
The Income Date may be selected by You. It is shown on the Certificate
Schedule. The Income Date can be any time after the Certificate Date for
variable payments and any time after the first Certificate Anniversary for
fixed payments. The Income Date may not be later than the earlier of when
the Annuitant reaches attained age 90 or that required under state law. If
no Income Date is selected, it will be the earlier of when the Annuitant
reaches attained age 90 or the maximum date permitted under state law, if
any.
Prior to the Income Date, You may change the Income Date by Written
Request. Any change must be requested at least 30 days prior to the new
Income Date.
Selection of an Annuity Option
An Annuity Option may be selected by You. If no Annuity Option is
selected, Option B will automatically be applied. Prior to the Income
Date, You may change the Annuity Option selected by Written Request. Any
change must be requested at least 30 days prior to the Income Date.
Frequency and Amount of Annuity Payments
Annuity Payments are paid in monthly installments unless quarterly, semi-
annual or annual payments are chosen. The Adjusted Certificate Value is
applied to the Annuity Table for the Annuity Option selected. If the
Adjusted Certificate Value to be applied under an Annuity Option is less
than $2,000, We reserve the right to make a lump sum payment in lieu of
Annuity Payments. If the Annuity Payment would be or becomes less than
$100, We will reduce the frequency of payments to a longer interval which
will result in each payment being at least $100.
Annuity Options
The following Annuity Options or any other Annuity Option acceptable to Us
may be selected:
OPTION A. ANNUITY FOR A FIXED NUMBER OF YEARS: Annuity Payments for a
chosen number of years, not less than 5. If the payee dies during the
payment period and the Beneficiary does not desire payments to continue for
the remainder of the period, he/she may elect to have the present value of
the remaining payments commuted and paid in a lump sum. During the payment
period of a Variable Annuity, the payee may elect by Written Request to
receive the following amount: (a) the present value of the remaining
payments commuted using a 3% interest rate for fixed payments and a 5%
interest rate for variable payments; less (b) any surrender charge that may
be due by treating the value defined in (a) as a surrender. Instead of
receiving a lump sum, the payee may elect another Annuity Option. The
amount applied to that Option would not be reduced by the charge defined in
(b).
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 10 YEARS: Annuity Payments
during the lifetime of the payee and in any event for 10 years certain. If
the payee dies during the guaranteed payment period and the Beneficiary
does not desire payments to continue for the remainder of the guaranteed
period, he/she may elect to have the present value of the guaranteed
payments remaining commuted using a 3% interest rate for fixed payments and
a 5% interest rate for variable payments and paid in a lump sum.
OPTION C. JOINT AND SURVIVOR ANNUITY: Annuity Payments payable during
the joint lifetime of the payee and a designated second natural person and
then during the lifetime of the survivor.
Unless the Annuity Option provides for commutation by the payee, a payee
may not withdraw or otherwise end an Annuity Option after it begins.
Payments will end upon the payee's death unless the Annuity Option provides
for payments continuing to a successor payee. No successor payee may
extend the period of time over which the remaining payments are to be made.
Annuity
If You select a Fixed Annuity, the Adjusted Certificate Value is allocated
to the General Account and the Annuity is paid as a Fixed Annuity. If You
select a Variable Annuity, the Adjusted Certificate Value will be allocated
to the Sub-accounts of the Separate Account in accordance with the
selection You make, and the Annuity will be paid as a Variable Annuity.
You can also select a combination of a Fixed and Variable Annuity and the
Adjusted Certificate Value will be allocated accordingly. If You don't
select between a Fixed Annuity and a Variable Annuity, any Adjusted
Certificate Value in the Variable Account will be applied to a Variable
Annuity and any Adjusted Certificate Value in the Fixed Account will be
applied to a Fixed Annuity.
The Adjusted Certificate Value will be applied to the applicable Annuity
Table contained in the Certificate based upon the Annuity Option You
select. If, as of the Income Date, the current Annuity Option rates or the
rates for a single premium consideration for any immediate annuity
applicable to the class of Certificates issued under the Group Contract
provide an initial Annuity Payment greater than the initial Annuity Payment
guaranteed under the applicable Annuity Table in the Certificate, the
greater payment will be made.
Fixed Annuity
The minimum dollar amount of each Fixed Annuity Payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. After the
initial Fixed Annuity payment, the payments will not change regardless of
investment, mortality or expense experience.
Variable Annuity
Variable Annuity Payments reflect the investment performance of the
Variable Account in accordance with the allocation of the Adjusted
Certificate Value to the Sub-accounts during the Annuity Period. Variable
Annuity payments are not guaranteed as to dollar amount.
The dollar amount of the first Variable Annuity payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. The dollar
amount of Variable Annuity payments for each applicable Sub-account after
the first Variable Annuity Payment is determined as follows:
(1) the dollar amount of the first Variable Annuity payment is
divided by the value of an Annuity Unit for each applicable Sub-
account as of the Income Date. This sets the number of Annuity
Units for each monthly payment for the applicable Sub-account.
The number of Annuity Units for each applicable Sub-account
remains fixed during the Annuity Period;
(2) the fixed number of Annuity Units per payment in each Sub-
account is multiplied by the Annuity Unit Value for that Sub-
account for the Valuation Period for which the payment is due.
This result is the dollar amount of the payment for each
applicable Sub-account.
The total dollar amount of each Variable Annuity payment is the sum of all
Sub-account Variable Annuity payments.
Annuity Unit
The value of any Annuity Unit for each Sub-Account of the Separate Account
was initially set at $10.
The Sub-account Annuity Unit Value at the end of any subsequent Valuation
Period is determined as follows:
(1) the net investment factor calculated as set forth on pages 11-12
(but without the Distribution Charge, if any) for the current
Valuation Period is multiplied by the value of the Annuity Unit
for the Sub-account for the immediately preceding Valuation
Period.
(2) the result in (1) is then divided by the Assumed Investment Rate
Factor which equals 1.00 plus the Valuation Period equivalent of
the Assumed Investment Rate for the number of days in the
current Valuation Period. The Assumed Investment Rate is equal
to 5% per year.
The value of an Annuity Unit may increase or decrease from Valuation Period
to Valuation Period.
Using the Tables
Tables 2, 3, 5, and 6 are age-dependent. The amount of the first annuity
payment will be based on an age a specified number of years younger than
the person's then-attained age (i.e., age last birthday). This age setback
is as follows:
Date of First Payment Age Setback
1996-1999 1 year
2000-2009 2 years
2010-2019 4 years
2020-2029 5 years
2030 or later 6 years
We will calculate the amount for a payment frequency other than monthly and
for any ages not shown in Tables 2, 3, 5, and 6 in accordance with the next
section. Upon request, We will tell You any such amount.
Basis of Calculation
Tables 1 and 4 are based on interest at 5% and 3%, respectively. Tables 2,
3, 5, and 6 are based on the 1983 Individual Annuity Valuation Tables (sex
distinct) with interest at 5% (Tables 2 and 3) and 3% (Tables 5 and 6),
projected dynamically with Projection Scale G.
TABLE 1: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 1 FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years
Payment
5 $18.74 12 $9.16 19 $6.71 25 $5.76
6 15.99 13 8.64 20 6.51 26 5.65
7 14.02 14 8.20 21 6.33 27 5.54
8 12.56 15 7.82 22 6.17 28 5.45
9 11.42 16 7.49 23 6.02 29 5.36
10 10.51 17 7.20 24 5.88 30 5.28
11 9.77 18 6.94
TABLE 2: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION B FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $4.45 $4.34 47 $5.05 $4.78 64 $6.54 $5.98 80 $9.14 $8.67
31 4.47 4.35 48 5.11 4.82 65 6.68 6.10 81 9.29 8.86
32 4.50 4.37 49 5.17 4.87 66 6.82 6.22 82 9.44 9.05
33 4.52 4.39 50 5.23 4.92 67 6.97 6.35 83 9.57 9.23
34 4.55 4.41 51 5.29 4.97 68 7.12 6.49 84 9.69 9.40
35 4.57 4.43 52 5.36 5.02 69 7.28 6.63 85 9.81 9.55
36 4.60 4.45 53 5.43 5.08 70 7.44 6.79 86 9.91 9.69
37 4.63 4.47 54 5.50 5.13 71 7.61 6.95 87 10.01 9.82
38 4.67 4.49 55 5.58 5.20 72 7.78 7.12 88 10.10 9.94
39 4.70 4.52 56 5.67 5.27 73 7.95 7.30 89 10.17 10.04
40 4.74 4.55 57 5.76 5.34 74 8.12 7.48 90 10.24 10.13
41 4.78 4.57 58 5.85 5.41 75 8.30 7.67 91 10.30 10.21
42 4.82 4.60 59 5.95 5.49 76 8.47 7.87 92 10.35 10.27
43 4.86 4.64 60 6.06 5.58 77 8.65 8.07 93 10.39 10.33
44 4.91 4.67 61 6.17 5.67 78 8.82 8.27 94 10.43 10.37
45 4.95 4.70 62 6.29 5.77 79 8.98 8.47 96 10.45 10.41
46 5.00 4.74 63 6.41 5.87
TABLE 3: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 3 FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30$4.24$4.28$4.31$4.34$4.36$4.38$4.40$4.42$4.43$4.44$4.45 $4.45 $4.45 $4.46
35 4.26 4.30 4.35 4.39 4.43 4.47 4.50 4.52 4.54 4.56 4.57 4.57 4.58 4.58
40 4.28 4.33 4.39 4.45 4.51 4.56 4.61 4.65 4.68 4.71 4.73 4.74 4.75 4.75
M45 4.29 4.35 4.42 4.50 4.58 4.66 4.74 4.80 4.86 4.90 4.93 4.96 4.97 4.98
A50 4.30 4.37 4.46 4.55 4.66 4.77 4.88 4.98 5.07 5.14 5.20 5.23 5.25 5.27
L55 4.31 4.39 4.48 4.59 4.73 4.87 5.03 5.18 5.32 5.44 5.53 5.59 5.63 5.65
E60 4.32 4.40 4.50 4.63 4.78 4.97 5.18 5.40 5.61 5.80 5.96 6.07 6.13 6.17
65 4.33 4.41 4.52 4.65 4.83 5.05 5.31 5.61 5.92 6.23 6.50 6.70 6.83 6.90
A70 4.33 4.42 4.53 4.68 4.87 5.11 5.42 5.80 6.23 6.70 7.14 7.50 7.75 7.90
G75 4.34 4.42 4.54 4.69 4.89 5.16 5.50 5.95 6.50 7.15 7.83 8.45 8.92 9.23
E80 4.34 4.43 4.54 4.70 4.91 5.19 5.56 6.06 6.71 7.55 8.52 9.50 10.34 10.93
85 4.34 4.43 4.55 4.71 4.92 5.21 5.60 6.13 6.86 7.85 9.10 10.52 11.87 12.93
90 4.34 4.43 4.55 4.71 4.93 5.22 5.62 6.18 6.96 8.06 9.55 11.39 13.34 15.05
95 4.34 4.43 4.55 4.71 4.93 5.23 5.64 6.21 7.02 8.20 9.86 12.09 14.69 17.20
TABLE 4: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION A FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $17.91 12 $8.24 19 $5.73 25 $4.71
6 15.14 13 7.71 20 5.51 26 4.59
7 13.16 14 7.26 21 5.32 27 4.47
8 11.68 15 6.87 22 5.15 28 4.37
9 10.53 16 6.53 23 4.99 29 4.27
10 9.61 17 6.23 24 4.84 30 4.18
11 8.86 18 5.96
TABLE 5: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION B FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $3.12 $2.99 47 $3.82 $3.53 64 $5.40 $4.83 80 $8.15 $7.66
31 3.15 3.01 48 3.88 3.58 65 5.55 4.96 81 8.32 7.86
32 3.18 3.03 49 3.94 3.63 66 5.69 5.08 82 8.47 8.06
33 3.21 3.06 50 4.01 3.68 67 5.85 5.22 83 8.61 8.25
34 3.24 3.08 51 4.08 3.74 68 6.01 5.37 84 8.75 8.43
35 3.27 3.11 52 4.15 3.80 69 6.18 5.52 85 8.87 8.60
36 3.31 3.13 53 4.23 3.86 70 6.35 5.68 86 8.98 8.75
37 3.34 3.16 54 4.31 3.93 71 6.52 5.85 87 9.08 8.88
38 3.38 3.19 55 4.39 4.00 72 6.70 6.03 88 9.18 9.01
39 3.42 3.22 56 4.48 4.07 73 6.89 6.21 89 9.26 9.12
40 3.46 3.25 57 4.58 4.15 74 7.07 6.41 90 9.33 9.21
41 3.51 3.29 58 4.68 4.23 75 7.26 6.61 91 9.40 9.30
42 3.55 3.32 59 4.78 4.32 76 7.44 6.81 92 9.45 9.37
43 3.60 3.36 60 4.89 4.41 77 7.63 7.02 93 9.49 9.43
44 3.65 3.40 61 5.01 4.50 78 7.81 7.23 94 9.53 9.47
45 3.71 3.44 62 5.14 4.61 79 7.98 7.45 95 9.55 9.51
46 3.76 3.49 63 5.27 4.72
TABLE 6: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION C FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30$2.88$2.93$2.97$3.01$3.04$3.07$3.08$3.10$3.12$3.12$3.12 $3.12 $3.13$3.13
35 2.91 2.97 3.03 3.09 3.14 3.18 3.21 3.23 3.25 3.26 3.27 3.27 3.28 3.28
40 2.93 3.01 3.09 3.17 3.24 3.30 3.35 3.39 3.42 3.44 3.46 3.46 3.47 3.47
M45 2.95 3.04 3.14 3.24 3.34 3.43 3.51 3.58 3.63 3.66 3.69 3.71 3.72 3.72
A50 2.96 3.06 3.17 3.30 3.43 3.56 3.68 3.79 3.87 3.94 3.98 4.01 4.03 4.03
L55 2.97 3.07 3.20 3.34 3.50 3.68 3.85 4.02 4.16 4.27 4.34 4.39 4.42 4.44
E60 2.98 3.09 3.22 3.38 3.56 3.78 4.01 4.25 4.47 4.66 4.80 4.89 4.95 4.98
65 2.98 3.09 3.23 3.40 3.61 3.86 4.15 4.48 4.81 5.12 5.37 5.55 5.66 5.72
A70 2.99 3.10 3.24 3.42 3.64 3.92 4.26 4.67 5.13 5.60 6.04 6.38 6.60 6.73
G75 2.99 3.10 3.25 3.43 3.66 3.96 4.34 4.81 5.39 6.06 6.75 7.35 7.79 8.07
E80 2.99 3.11 3.25 3.44 3.68 3.99 4.39 4.92 5.60 6.45 7.44 8.42 9.23 9.79
85 2.99 3.11 3.26 3.44 3.69 4.00 4.42 4.98 5.73 6.74 8.01 9.44 10.77 1.81
90 2.99 3.11 3.26 3.45 3.69 4.01 4.44 5.02 5.82 6.93 8.43 10.29 12.25 3.95
95 2.99 3.11 3.26 3.45 3.70 4.02 4.45 5.04 5.87 7.05 8.73 10.97 13.58 6.11
Endorsements
To be inserted only by Us
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CERTIFICATE with limited purchase payment
flexibility. This certificate is nonparticipating with no dividends.
EXHIBIT 8h
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
KEYPORT BENEFIT LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
KEYPORT FINANCIAL SERVICES CORP.
TABLE OF CONTENTS
Description Page
Section 1. Available Funds.....................................2
1.1 Availability..........................................2
1.2 Addition, Deletion or Modification of Funds...........2
1.3 No Sales to the General Public........................2
Section 2. Processing Transactions.............................2
2.1 Timely Pricing and Orders.............................2
2.2 Timely Payments.......................................3
2.3 Applicable Price......................................3
2.4 Dividends and Distributions...........................4
2.5 Book Entry............................................4
Section 3. Costs and Expenses..................................4
3.1 General...............................................4
3.2 Registration..........................................4
3.3 Other (Non-Sales-Related).............................5
3.4 Other (Sales-Related).................................5
3.5 Parties To Cooperate..................................5
Section 4. Legal Compliance....................................5
4.1 Tax Laws..............................................5
4.2 Insurance and Certain Other Laws......................8
4.3 Securities Laws.......................................8
4.4 Notice of Certain Proceedings and Other Circumstances.9
4.5 LIFE COMPANY To Provide Documents; Information
AVIF 10
4.6 AVIF To Provide Documents; Information About
LIFE COMPANY........................................11
Section 5. Mixed and Shared Funding...........................12
5.1 General..............................................12
5.2 Disinterested Directors..............................13
5.3 Monitoring for Material Irreconcilable Conflicts.....13
5.4 Conflict Remedies....................................14
5.5 Notice to LIFE COMPANY...............................15
5.6 Information Requested by Board of Directors..........15
5.7 Compliance with SEC Rules............................15
5.8 Other Requirements...................................16
Section 6. Termination........................................16
6.1 Events of Termination................................16
6.2 Notice Requirement for Termination...................17
6.3 Funds To Remain Available............................17
6.4 Survival of Warranties and Indemnifications..........18
6.5 Continuance of Agreement for Certain Purposes........18
Section 7. Parties To Cooperate Respecting Termination........18
Section 8. Assignment.........................................18
Section 9. Notices............................................18
Section 10. Voting Procedures.................................19
Section 11. Foreign Tax Credits...............................20
Section 12. Indemnification...................................20
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER..............20
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF..............22
12.3 Effect of Notice.....................................25
12.4 Successors...........................................25
Section 13. Applicable Law....................................25
Section 14. Execution in Counterparts.........................25
Section 15. Severability......................................25
Section 16. Rights Cumulative.................................25
Section 17. Headings..........................................25
Section 18. Confidentiality...................................26
Section 19. Trademarks and Fund Names.........................26
Section 20. Parties to Cooperate..............................28
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 13th day of July, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); Keyport Benefit Life Insurance Company, a New York
life insurance company ("LIFE COMPANY"), on behalf of itself and each of
its segregated asset accounts listed in Schedule A hereto, as the parties
hereto may amend from time to time (each, an "Account," and collectively,
the "Accounts"); and Keyport Financial Services Corp., an affiliate of LIFE
COMPANY and the principal underwriter of the Contracts ("UNDERWRITER")
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act
of 1933, as amended (the "1933 Act") and are currently sold to one or more
separate accounts of life insurance companies to fund benefits under
variable annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent
the context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth
on Schedule A hereto, as the Parties hereto may amend from time to time,
which Contracts (hereinafter collectively, the "Contracts"), if required by
applicable law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount
thereof to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts,
each of which is registered as a unit investment trust investment company
under the 1940 Act (or exempt therefrom), and the security interests deemed
to be issued by the Accounts under the Contracts will be registered as
securities under the 1933 Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the
Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under
the Securities Exchange Act of 1934 ("1934 Act") and a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
AVIF will make Shares of each Fund available to LIFE COMPANY for
purchase and redemption at net asset value and with no sales charges,
subject to the terms and conditions of this Agreement. The Board of
Directors of AVIF may refuse to sell Shares of any Fund to any person, or
suspend or terminate the offering of Shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Directors acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, such
action is deemed in the best interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine,
or modify existing Funds, by amending Schedule A hereto. Upon such
amendment to Schedule A, any applicable reference to a Fund, AVIF, or its
Shares herein shall include a reference to any such additional Fund.
Schedule A, as amended from time to time, is incorporated herein by
reference and is a part hereof.
1.3 No Sales to the General Public
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders
(a) AVIF or its designated agent will use its best efforts to provide
LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall
mean any day on which (i) the New York Stock Exchange is open for regular
trading, (ii) AVIF calculates the Fund's net asset value, and (iii) LIFE
COMPANY is open for business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit
values and to process transactions that receive that same Business Day's
Account unit values. LIFE COMPANY will perform such Account processing
the same Business Day, and will place corresponding orders to purchase or
redeem Shares with AVIF by 9:00 a.m. Central Time the following Business
Day; provided, however, that AVIF shall provide additional time to LIFE
COMPANY in the event that AVIF is unable to meet the 6:00 p.m. time stated
in paragraph (a) immediately above. Such additional time shall be equal to
the additional time that AVIF takes to make the net asset values available
to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and
of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase
and redemption orders with respect to each Fund and shall transmit one net
payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be
entitled to an adjustment to the number of Shares purchased or redeemed to
reflect the correct net asset value per Share. Any material error in the
calculation or reporting of net asset value per Share, dividend or capital
gain information shall be reported promptly upon discovery to LIFE COMPANY.
2.2 Timely Payments
LIFE COMPANY will wire payment for net purchases to a custodial
account designated by AVIF by 1:00 p.m. Central Time on the same day as the
order for Shares is placed, to the extent practicable. AVIF will wire
payment for net redemptions to an account designated by LIFE COMPANY by
1:00 p.m. Central Time on the same day as the Order is placed, to the
extent practicable, but in any event within five (5) calendar days after
the date the order is placed in order to enable LIFE COMPANY to pay
redemption proceeds within the time specified in Section 22(e) of the 1940
Act or such shorter period of time as may be required by law.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions
under Contracts (collectively, "Contract transactions") and that LIFE
COMPANY receives prior to the close of regular trading on the New York
Stock Exchange on a Business Day will be executed at the net asset values
of the appropriate Funds next computed after receipt by AVIF or its
designated agent of the orders. For purposes of this Section 2.3(a), LIFE
COMPANY shall be the designated agent of AVIF for receipt of orders
relating to Contract transactions on each Business Day and receipt by such
designated agent shall constitute receipt by AVIF; provided that AVIF
receives notice of such orders by 9:00 a.m. Central Time on the next
following Business Day or such later time as computed in accordance with
Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed
after receipt by AVIF or its designated agent of the order therefor, and
such orders will be irrevocable.
2.4 Dividends and Distributions
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund.
LIFE COMPANY hereby elects to reinvest all dividends and capital gains
distributions in additional Shares of the corresponding Fund at the ex-
dividend date net asset values until LIFE COMPANY otherwise notifies AVIF
in writing, it being agreed by the Parties that the ex-dividend date and
the payment date with respect to any dividend or distribution will be the
same Business Day. LIFE COMPANY reserves the right to revoke this election
and to receive all such income dividends and capital gain distributions in
cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry only.
Stock certificates will not be issued to LIFE COMPANY. Shares ordered from
AVIF will be recorded in an appropriate title for LIFE COMPANY, on behalf
of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided in Schedule C, attached
hereto and made a part hereof, each Party will bear, or arrange for others
to bear, all expenses incident to its performance under this Agreement.
3.2 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
Section 4. Legal Compliance
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently
qualified as a regulated investment company ("RIC") under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), and represents
that it will use its best efforts to qualify and to maintain qualification
of each Fund as a RIC. AVIF will notify LIFE COMPANY immediately upon
having a reasonable basis for believing that a Fund has ceased to so
qualify or that it might not so qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and
to maintain each Fund's compliance with the diversification requirements
set forth in Section 817(h) of the Code and Section 1.817-5(b) of the
regulations under the Code. AVIF will notify LIFE COMPANY immediately
upon having a reasonable basis for believing that a Fund has ceased to so
comply or that a Fund might not so comply in the future. In the event of a
breach of this Section 4.1(b) by AVIF, it will take all reasonable steps to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Section 1.817-5 of the regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service
("IRS") asserts in writing in connection with any governmental audit or
review of LIFE COMPANY or, to LIFE COMPANY's knowledge, of any Participant,
that any Fund has failed to comply with the diversification requirements of
Section 817(h) of the Code or LIFE COMPANY otherwise becomes aware of any
facts that could give rise to any claim against AVIF or its affiliates as a
result of such a failure or alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions
of Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize
any liability that may arise as a result of such failure or
alleged failure;
(iii)LIFE COMPANY shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating,
pursuant to Treasury Regulations Section 1.817-5(a)(2), to
the Commissioner of the IRS that such failure was
inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their
legal and accounting advisors to participate in any
conferences, settlement discussions or other administrative
or judicial proceeding or contests (including judicial
appeals thereof) with the IRS, any Participant or any other
claimant regarding any claims that could give rise to
liability to AVIF or its affiliates as a result of such a
failure or alleged failure; provided, however, that LIFE
COMPANY will retain control of the conduct of such
conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by LIFE COMPANY to the
IRS, any Participant or any other claimant in connection
with any of the foregoing proceedings or contests
(including, without limitation, any such materials to be
submitted to the IRS pursuant to Treasury Regulations
Section 1.817-5(a)(2)), (a) shall be provided by LIFE
COMPANY to AVIF (together with any supporting information or
analysis); subject to the confidentiality provisions of
Section 18, at least ten (10) business days or such shorter
period to which the Parties hereto agree prior to the day on
which such proposed materials are to be submitted, and (b)
shall not be submitted by LIFE COMPANY to any such person
without the express written consent of AVIF which shall not
be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of LIFE COMPANY) in
order to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the preceding
clause or its assessment of the validity or amount of any
claim against its arising from such a failure or alleged
failure;
(vii) LIFE COMPANY shall not with respect to any claim of the
IRS or any Participant that would give rise to a claim
against AVIF or its affiliates (a) compromise or settle any
claim, (b) accept any adjustment on audit, or (c) forego any
allowable administrative or judicial appeals, without the
express written consent of AVIF or its affiliates, which
shall not be unreasonably withheld, provided that LIFE
COMPANY shall not be required, after exhausting all
administrative penalties, to appeal any adverse judicial
decision unless AVIF or its affiliates shall have provided
an opinion of independent counsel to the effect that a
reasonable basis exists for taking such appeal; and provided
further that the costs of any such appeal shall be borne
equally by the Parties hereto; and
(viii)AVIF and its affiliates shall have no liability as a result
of such failure or alleged failure if LIFE COMPANY fails to
comply with any of the foregoing clauses (i) through (vii),
and such failure could be shown to have materially
contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written
consent to any compromise or settlement of any claim or liability
hereunder, LIFE COMPANY may, in its discretion, authorize AVIF or its
affiliates to act in the name of LIFE COMPANY in, and to control the
conduct of, such conferences, discussions, proceedings, contests or appeals
and all administrative or judicial appeals thereof, and in that event AVIF
or its affiliates shall bear the fees and expenses associated with the
conduct of the proceedings that it is so authorized to control; provided,
that in no event shall LIFE COMPANY have any liability resulting from
AVIF's refusal to accept the proposed settlement or compromise with respect
to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined
in Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it will use its
best efforts to maintain such treatment; LIFE COMPANY will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated
in the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue
to meet such definitional requirements, and it will notify AVIF immediately
upon having a reasonable basis for believing that such requirements have
ceased to be met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws
(a) AVIF will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested
in writing by LIFE COMPANY, including, the furnishing of information not
otherwise available to LIFE COMPANY which is required by state insurance
law to enable LIFE COMPANY to obtain the authority needed to issue the
Contracts in any applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an
insurance company duly organized, validly existing and in good standing
under the laws of the State of New York and has full corporate power,
authority and legal right to execute, deliver and perform its duties and
comply with its obligations under this Agreement, (ii) it has legally and
validly established and maintains each Account as a segregated asset
account under Section 4240 of the New York Insurance Law and the
regulations thereunder, and (iii) the Contracts comply in all material
respects with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Maryland and has full power, authority, and legal right to
execute, deliver, and perform its duties and comply with its obligations
under this Agreement.
4.3 Securities Laws
(a) LIFE COMPANY represents and warrants that (i) interests in
each Account pursuant to the Contracts will be registered under the 1933
Act to the extent required by the 1933 Act, (ii) the Contracts will be duly
authorized for issuance and sold in compliance with all applicable federal
and state laws, including, without limitation, the 1933 Act, the 1934 Act,
the 1940 Act and New York law, (iii) each Account is and will remain
registered under the 1940 Act, to the extent required by the 1940 Act, (iv)
each Account does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, to the extent
required, (v) each Account's 1933 Act registration statement relating to
the Contracts, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and
the rules thereunder, (vi) LIFE COMPANY will amend the registration
statement for its Contracts under the 1933 Act and for its Accounts under
the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply
in all material respects with the requirements of the 1933 Act and the
rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant
to this Agreement will be registered under the 1933 Act to the extent
required by the 1933 Act and duly authorized for issuance and sold in
compliance with Maryland law, (ii) AVIF is and will remain registered under
the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend
the registration statement for its Shares under the 1933 Act and itself
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares, (iv) AVIF does and will comply in all
material respects with the requirements of the 1940 Act and the rules
thereunder, (v) AVIF's 1933 Act registration statement, together with any
amendments thereto, will at all times comply in all material respects with
the requirements of the 1933 Act and rules thereunder, and (vi) AVIF's
Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for
sale in accordance with the laws of any state or other jurisdiction if and
to the extent reasonably deemed advisable by AVIF.
(d) AVIF 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 reserves the right to make such payments in the
future. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a
majority of whom are not "interested" persons of the Fund, formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
having access to the funds and/or securities of the Fund are and continue
to be at all times covered by a blanket fidelity bond or similar coverage
for the benefit of the Fund 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 includes
coverage for larceny and embezzlement and is issued by a reputable bonding
company.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF will immediately notify LIFE COMPANY of (i) the
issuance by any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to AVIF's registration
statement under the 1933 Act or AVIF Prospectus, (ii) any request by the
SEC for any amendment to such registration statement or AVIF Prospectus
that may affect the offering of Shares of AVIF, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating to the
registration or offering of AVIF's Shares, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of Shares of any
Fund in any state or jurisdiction, including, without limitation, any
circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an
underlying investment medium of the Contracts issued or to be issued by
LIFE COMPANY. AVIF will make every reasonable effort to prevent the
issuance, with respect to any Fund, of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to each Account's
registration statement under the 1933 Act relating to the Contracts or each
Account Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or Account Prospectus that may affect the offering
of Shares of AVIF, (iii) the initiation of any proceedings for that purpose
or for any other purpose relating to the registration or offering of each
Account's interests pursuant to the Contracts, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of said interests
in any state or jurisdiction, including, without limitation, any
circumstances in which said interests are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order
and, if any such order is issued, to obtain the lifting thereof at the
earliest possible time.
4.5 LIFE COMPANY To Provide Documents; Information About AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction
solicitation material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to each
Account or the Contracts, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which AVIF or any of its affiliates is named, at
least five (5) Business Days prior to its use or such shorter period as the
Parties hereto may, from time to time, agree upon. No such material shall
be used if AVIF or its designated agent objects to such use within five (5)
Business Days after receipt of such material or such shorter period as the
Parties hereto may, from time to time, agree upon. AVIF hereby designates
AIM as the entity to receive such sales literature, until such time as AVIF
appoints another designated agent by giving notice to LIFE COMPANY in the
manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give
any information or make any representations or statements on behalf of or
concerning AVIF or its affiliates in connection with the sale of the
Contracts other than (i) the information or representations contained in
the registration statement, including the AVIF Prospectus contained
therein, relating to Shares, as such registration statement and AVIF
Prospectus may be amended from time to time; or (ii) in reports or proxy
materials for AVIF; or (iii) in published reports for AVIF that are in the
public domain and approved by AVIF for distribution; or (iv) in sales
literature or other promotional material approved by AVIF, except with the
express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that
is intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker
only materials") is so used, and neither AVIF nor any of its affiliates
shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
(e) For the purposes of this Section 4.5, 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, (e.g., on-line networks such as the Internet or other
electronic messages), 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, registration statements, prospectuses, statements
of additional information, shareholder reports, and proxy materials and any
other material constituting sales literature or advertising under the NASD
rules, the 1933 Act or the 1940 Act.
4.6 AVIF To Provide Documents; Information About LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete
copy of all SEC registration statements, AVIF Prospectuses, reports, any
preliminary and final proxy material, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that relate
to AVIF or the Shares of a Fund, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready or computer
diskette copies of all AVIF prospectuses and printed copies, in an amount
specified by LIFE COMPANY, of AVIF statements of additional information,
proxy materials, periodic reports to shareholders and other materials
required by law to be sent to Participants who have allocated any Contract
value to a Fund. AVIF will provide such copies to LIFE COMPANY in a timely
manner so as to enable LIFE COMPANY, as the case may be, to print and
distribute such materials within the time required by law to be furnished
to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which LIFE COMPANY, or any of its respective
affiliates is named, or that refers to the Contracts, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto
may, from time to time, agree upon. No such material shall be used if LIFE
COMPANY or its designated agent objects to such use within five (5)
Business Days after receipt of such material or such shorter period as the
Parties hereto may, from time to time, agree upon. LIFE COMPANY shall
receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section
9 hereof.
(d) Neither AVIF nor any of its affiliates will give any
information or make any representations or statements on behalf of or
concerning LIFE COMPANY, each Account, or the Contracts other than (i) the
information or representations contained in the registration statement,
including each Account Prospectus contained therein, relating to the
Contracts, as such registration statement and Account Prospectus may be
amended from time to time; or (ii) in published reports for the Account or
the Contracts that are in the public domain and approved by LIFE COMPANY
for distribution; or (iii) in sales literature or other promotional
material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and
implement procedures reasonably designed to ensure that information
concerning LIFE COMPANY, and its respective affiliates that is intended for
use only by brokers or agents selling the Contracts (i.e., information that
is not intended for distribution to Participants) ("broker only materials")
is so used, and neither LIFE COMPANY, nor any of its respective affiliates
shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
(f) For purposes of this Section 4.6, 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, (e.g., on-line networks such as the Internet or other
electronic messages), 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, registration statements, prospectuses, statements
of additional information, shareholder reports, and proxy materials and any
other material constituting sales literature or advertising under the NASD
rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be
available for investment by certain other entities, including, without
limitation, separate accounts funding variable annuity contracts or
variable life insurance contracts, separate accounts of insurance companies
unaffiliated with LIFE COMPANY, and trustees of qualified pension and
retirement plans (collectively, "Mixed and Shared Funding"). The Parties
recognize that the SEC has imposed terms and conditions for such orders
that are substantially identical to many of the provisions of this Section
5. Sections 5.2 through 5.8 below shall apply pursuant to such an
exemptive order granted to AVIF. AVIF hereby notifies LIFE COMPANY that,
in the event that AVIF implements Mixed and Shared Funding, it may be
appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared
Funding.
5.2 Disinterested Directors
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not
interested persons of AVIF within the meaning of Section 2(a)(19) of the
1940 Act and the rules thereunder and as modified by any applicable orders
of the SEC, except that if this condition is not met by reason of the
death, disqualification, or bona fide resignation of any director, then the
operation of this condition shall be suspended (a) for a period of forty-
five (45) days if the vacancy or vacancies may be filled by the Board; (b)
for a period of sixty (60) days if a vote of shareholders is required to
fill the vacancy or vacancies; or (c) for such longer period as the SEC may
prescribe by order upon application.
5.3 Monitoring for Material Irreconcilable Conflicts
AVIF agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing
AVIF ("Participating Insurance Companies"), including each Account, and
participants in all qualified retirement and pension plans investing in
AVIF ("Participating Plans"). LIFE COMPANY agrees to inform the Board of
Directors of AVIF of the existence of or any potential for any such
material irreconcilable conflict of which it is aware. The concept of a
"material irreconcilable conflict" is not defined by the 1940 Act or the
rules thereunder, but the Parties recognize that such a conflict may arise
for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other 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 Fund are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by
Participants of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will
assist the Board of Directors in carrying out its responsibilities by
providing the Board of Directors with all information reasonably necessary
for the Board of Directors to consider any issue raised, including
information as to a decision by LIFE COMPANY to disregard voting
instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the
members of the Board of Directors or a majority of the Disinterested
Directors that a material irreconcilable conflict exists, LIFE COMPANY
will, if it is a Participating Insurance Company for which a material
irreconcilable conflict is relevant, at its own 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, which steps may include, but are not
limited to:
(i) withdrawing the assets allocable to some or all of the
Accounts from AVIF or any Fund and reinvesting such assets in
a different investment medium, including another Fund of
AVIF, or submitting the question whether such segregation
should be implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any particular
group (e.g., annuity Participants, life insurance
Participants or all Participants) that votes in favor of such
segregation, or offering to the affected Participants the
option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940
Act or a new separate account that is operated as a
management company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote,
LIFE COMPANY may be required, at AVIF's election, to withdraw each
Account's investment in AVIF or any Fund. No charge or penalty will be
imposed as a result of such withdrawal. Any such withdrawal must take
place within six (6) months after AVIF gives notice to LIFE COMPANY that
this provision is being implemented, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase
and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to LIFE COMPANY
conflicts with the majority of other state regulators, then LIFE COMPANY
will withdraw each Account's investment in AVIF within six (6) months after
AVIF's Board of Directors informs LIFE COMPANY that it has determined that
such decision has created a material irreconcilable conflict, and until
such withdrawal AVIF shall continue to accept and implement orders by LIFE
COMPANY for the purchase and redemption of Shares of AVIF. No charge or
penalty will be imposed as a result of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors
will determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event, however, will AVIF or any
of its affiliates be required to establish a new funding medium for any
Contracts. LIFE COMPANY will not be required by the terms hereof to
establish a new funding medium for any Contracts if an offer to do so has
been declined by vote of a majority of Participants materially adversely
affected by the material irreconcilable conflict.
5.5 Notice to LIFE COMPANY
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable
conflict, a description of the facts that give rise to such conflict and
the implications of such conflict.
5.6 Information Requested by Board of Directors
LIFE COMPANY and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials
or data as the Board of Directors may reasonably request so that the Board
of Directors may fully carry out the obligations imposed upon it by the
provisions hereof or any exemptive order granted by the SEC to permit
Mixed and Shared Funding, and said reports, materials and data will be
submitted at any reasonable time deemed appropriate by the Board of
Directors. All reports received by the Board of Directors of potential or
existing conflicts, and all Board of Directors actions with regard to
determining the existence of a conflict, notifying Participating Insurance
Companies and Participating Plans of a conflict, and determining whether
any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate
records, and such minutes or other records will be made available to the
SEC upon request.
5.7 Compliance with SEC Rules
If, at any time during which AVIF is serving as an investment medium
for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if
applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive
relief with respect to Mixed and Shared Funding, AVIF agrees that it will
comply with the terms and conditions thereof and that the terms of this
Section 5 shall be deemed modified if and only to the extent required in
order also to comply with the terms and conditions of such exemptive relief
that is afforded by any of said rules that are applicable.
5.8 Other Requirements
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in
substance the same provisions as are set forth in Sections 4.1(b), 4.1(d),
4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
Section 6. Termination
6.1 Events of Termination
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any party, with or without cause with respect
to the Fund, upon six (6) months advance written notice to the other
parties, or, if later, upon receipt of any required exemptive relief from
the SEC, unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding LIFE COMPANY's
obligations under this Agreement or related to the sale of the Contracts,
the operation of each Account, or the purchase of Shares, if, in each case,
AVIF reasonably determines that such proceedings, or the facts on which
such proceedings would be based, have a material likelihood of imposing
material adverse consequences on the Fund with respect to which the
Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment
adviser by the NASD, the SEC, or any state insurance regulator or any other
regulatory body regarding AVIF's obligations under this Agreement or
related to the operation or management of AVIF or the purchase of AVIF
Shares, if, in each case, LIFE COMPANY reasonably determines that such
proceedings, or the facts on which such proceedings would be based, have a
material likelihood of imposing material adverse consequences on LIFE
COMPANY, or the Subaccount corresponding to the Fund with respect to which
the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's
Shares are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (ii) such law
precludes the use of such Shares as an underlying investment medium of the
Contracts issued or to be issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment
in the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as
a RIC under Subchapter M of the Code or under successor or similar
provisions, or if LIFE COMPANY reasonably believes that the Fund may fail
to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY
cease to qualify as annuity contracts or life insurance contracts under the
Code (other than by reason of the Fund's noncompliance with Section 817(h)
or Subchapter M of the Code) or if interests in an Account under the
Contracts are not registered, where required, and, in all material
respects, are not issued or sold in accordance with any applicable federal
or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 Notice Requirement for Termination
No termination of this Agreement will be effective unless and until
the Party terminating this Agreement gives prior written notice to the
other Party to this Agreement of its intent to terminate, and such notice
shall set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions
of Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be
given at least six (6) months in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions
of Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be
given at least ninety (90) days in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions
of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior
written notice shall be given as soon as possible within twenty-four (24)
hours after the terminating Party learns of the event causing termination
to be required.
6.3 Funds To Remain Available
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all
Contracts 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 will be permitted to
reallocate investments in the Fund (as in effect on such date), 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 6.3 will not apply to any terminations under
Section 5 and the effect of such terminations will be governed by Section 5
of this Agreement.
6.4 Survival of Warranties and Indemnifications
All warranties and indemnifications will survive the termination of
this Agreement.
6.5 Continuance of Agreement for Certain Purposes
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i) hereof, this Agreement shall nevertheless continue in effect as to
any Shares of that Fund that are outstanding as of the date of such
termination (the "Initial Termination Date"). This continuation shall
extend to the earlier of the date as of which an Account owns no Shares of
the affected Fund or a date (the "Final Termination Date") six (6) months
following the Initial Termination Date, except that LIFE COMPANY may, by
written notice shorten said six (6) month period in the case of a
termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance
to one another in taking all necessary and appropriate steps for the
purpose of ensuring that an Account owns no Shares of a Fund after the
Final Termination Date with respect thereto, or, in the case of a
termination pursuant to Section 6.1(a), the termination date specified in
the notice of termination. Such steps may include combining the affected
Account with another Account, substituting other mutual fund shares for
those of the affected Fund, or otherwise terminating participation by the
Contracts in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each
other notice or communication required or permitted by this Agreement will
be given to the following persons at the following addresses and facsimile
numbers, or such other persons, addresses or facsimile numbers as the Party
receiving such notices or communications may subsequently direct in
writing:
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
Keyport Benefit Life Insurance Company
Keyport Financial Corp.
125 High Street
Boston, MA 02110
Facsimile: (617) 526-1618
Attn: Bernard R. Beckerlegge, General Counsel
James J. Klopper, Clerk
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3
hereof, LIFE COMPANY will distribute all proxy material furnished by AVIF
to Participants to whom pass-through voting privileges are required to be
extended and will solicit voting instructions from Participants. LIFE
COMPANY will vote Shares in accordance with timely instructions received
from Participants. LIFE COMPANY will vote Shares that are (a) not
attributable to Participants to whom pass-through voting privileges are
extended, or (b) attributable to Participants, but for which no timely
instructions have been received, in the same proportion as Shares for which
said instructions have been received from Participants, so long as and to
the extent that the SEC continues to interpret the 1940 Act to require pass
through voting privileges for Participants. Neither LIFE COMPANY nor any
of its affiliates will in any way recommend action in connection with or
oppose or interfere with the solicitation of proxies for the Shares held
for such Participants. LIFE COMPANY reserves the right to vote shares held
in any Account in its own right, to the extent permitted by law. LIFE
COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of
other Participating Insurance Companies or in the manner required by the
Mixed and Shared Funding exemptive order obtained by AVIF. AVIF will
notify LIFE COMPANY of any changes of interpretations or amendments to
Mixed and Shared Funding exemptive order it has obtained. AVIF will comply
with all provisions of the 1940 Act requiring voting by shareholders, and
in particular, AVIF either will provide for annual meetings (except insofar
as the SEC may interpret Section 16 of the 1940 Act not to require such
meetings) or will comply with Section 16(c) of the 1940 Act (although AVIF
is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF 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 SEC may promulgate with respect thereto.
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to
pass through the benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless
AVIF, its affiliates, and each person, if any, who controls AVIF or its
affiliates within the meaning of Section 15 of the 1933 Act and each of
their respective directors and officers, (collectively, the "Indemnified
Parties" for purposes of this Section 12.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of LIFE COMPANY and UNDERWRITER) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise; provided, the Account owns shares
of the Fund and insofar as such losses, claims, damages, liabilities or
actions:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or advertising
for the Contracts (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 to LIFE COMPANY or UNDERWRITER by or on
behalf of AVIF for use in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or sales
literature or advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any amendment or
supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied
for use therein by or on behalf of LIFE COMPANY, UNDERWRITER
or their respective affiliates and on which such persons
have reasonably relied) or the negligent, illegal or
fraudulent conduct of LIFE COMPANY, UNDERWRITER or their
respective affiliates or persons under their control
(including, without limitation, their employees and
"Associated Persons," as that term is defined in paragraph
(m) of Article I of the NASD's By-Laws), in connection with
the sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
AVIF's 1933 Act registration statement, AVIF Prospectus,
sales literature or advertising of AVIF, or any amendment or
supplement to any of the foregoing, 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
AVIF or its affiliates by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates for use in AVIF's
1933 Act registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or
UNDERWRITER to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement, or any material breach of any representation
and/or warranty made by LIFE COMPANY or UNDERWRITER in this
Agreement or arise out of or result from any other material
breach of this Agreement by LIFE COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued by LIFE
COMPANY to qualify as annuity contracts or life insurance
contracts under the Code, otherwise than by reason of any
Fund's failure to comply with Subchapter M or Section 817(h)
of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under
this Section 12.1 with respect to any losses, claims, damages, liabilities
or actions to which an Indemnified Party would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of that
Indemnified Party's reckless disregard of obligations or duties (i) under
this Agreement, or (ii) to AVIF.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under
this Section 12.1 with respect to any action against an Indemnified Party
unless AVIF shall have notified LIFE COMPANY and UNDERWRITER in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the action 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 LIFE
COMPANY and UNDERWRITER of any such action shall not relieve LIFE COMPANY
and UNDERWRITER from any liability which they may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
Section 12.1. Except as otherwise provided herein, in case any such action
is brought against an Indemnified Party, LIFE COMPANY and UNDERWRITER shall
be entitled to participate, at their own expense, in the defense of such
action and also shall be entitled to assume the defense thereof, with
counsel approved by the Indemnified Party named in the action, which
approval shall not be unreasonably withheld. After notice from LIFE
COMPANY or UNDERWRITER to such Indemnified Party of LIFE COMPANY's or
UNDERWRITER's election to assume the defense thereof, the Indemnified Party
will cooperate fully with LIFE COMPANY and UNDERWRITER and shall bear the
fees and expenses of any additional counsel retained by it, and neither
LIFE COMPANY nor UNDERWRITER will be liable to such Indemnified Party under
this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense
thereof, other than reasonable costs of investigation.
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF agrees to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who
controls LIFE COMPANY, UNDERWRITER or their respective affiliates within
the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent
of AVIF) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law, or otherwise;
provided, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
AVIF's 1933 Act registration statement, AVIF Prospectus or
sales literature or advertising of AVIF (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 to AVIF or its
affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or
their respective affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, or in sales
literature or advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any amendment or
supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or advertising for
the Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
AVIF or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF or its affiliates or persons under its
control (including, without limitation, their employees and
"Associated Persons" as that term is defined in Section (n)
of Article I of the NASD By-Laws), in connection with the
sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon and in
conformity with information furnished to LIFE COMPANY,
UNDERWRITER or their respective affiliates by or on behalf of
AVIF for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
AVIF in this Agreement or arise out of or result from any
other material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF agrees to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of
AVIF) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may become
subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund
to operate as a regulated investment company in compliance with (i)
Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h)
of the Code and regulations thereunder, including, without limitation, any
income taxes and related penalties, rescission charges, liability under
state law to Participants asserting liability against LIFE COMPANY pursuant
to the Contracts, the costs of any ruling and closing agreement or other
settlement with the IRS, and the cost of any substitution by LIFE COMPANY
of Shares of another investment company or portfolio for those of any
adversely affected Fund as a funding medium for each Account that LIFE
COMPANY reasonably deems necessary or appropriate as a result of the
noncompliance.
(c) AVIF shall not be liable under this Section 12.2 with respect
to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (i) under this Agreement,
or (ii) to LIFE COMPANY, UNDERWRITER, each Account or Participants.
(d) AVIF shall not be liable under this Section 12.2 with respect
to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF in writing within a reasonable time after the
summons or other first legal process giving information of the nature of
the action 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 AVIF of any such action shall not
relieve AVIF from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
Section 12.2. Except as otherwise provided herein, in case any such action
is brought against an Indemnified Party, AVIF will be entitled to
participate, at its own expense, in the defense of such action and also
shall be entitled to assume the defense thereof (which shall include,
without limitation, the conduct of any ruling request and closing agreement
or other settlement proceeding with the IRS), with counsel approved by the
Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AVIF to such Indemnified Party of
AVIF's election to assume the defense thereof, the Indemnified Party will
cooperate fully with AVIF and shall bear the fees and expenses of any
additional counsel retained by it, and AVIF will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection
with the defense thereof, other than reasonable costs of investigation.
(e) In no event shall AVIF be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including, without limitation, LIFE COMPANY, UNDERWRITER or any other
Participating Insurance Company or any Participant, with respect to any
losses, claims, damages, liabilities or expenses that arise out of or
result from (i) a breach of any representation, warranty, and/or covenant
made by LIFE COMPANY or UNDERWRITER hereunder or by any Participating
Insurance Company under an agreement containing substantially similar
representations, warranties and covenants; (ii) the failure by LIFE COMPANY
or any Participating Insurance Company to maintain its segregated asset
account (which invests in any Fund) as a legally and validly established
segregated asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the 1940 Act
(unless exempt therefrom); or (iii) the failure by LIFE COMPANY or any
Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or
control of any action by the indemnifying Party will in no event be deemed
to be an admission by the indemnifying Party of liability, culpability or
responsibility, and the indemnifying Party will remain free to contest
liability with respect to the claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby.
Section 16. Rights Cumulative
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, that the Parties are entitled to under
federal and state laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of LIFE COMPANY
or any of its affiliates (collectively, the "LIFE COMPANY Protected
Parties" for purposes of this Section 18), information maintained regarding
those customers, and all computer programs and procedures or other
information developed by the LIFE COMPANY Protected Parties or any of their
employees or agents in connection with LIFE COMPANY's performance of its
duties under this Agreement are the valuable property of the LIFE COMPANY
Protected Parties. AVIF agrees that if it comes into possession of any
list or compilation of the identities of or other information about the
LIFE COMPANY Protected Parties' customers, or any other information or
property of the LIFE COMPANY Protected Parties, other than such information
as may be independently developed or compiled by AVIF from information
supplied to it by the LIFE COMPANY Protected Parties' customers who also
maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing
any of such information or other property except: (a) with LIFE COMPANY's
prior written consent; or (b) as required by law or judicial process. LIFE
COMPANY acknowledges that the identities of the customers of AVIF or any of
its affiliates (collectively, the "AVIF Protected Parties" for purposes of
this Section 18), information maintained regarding those customers, and all
computer programs and procedures or other information developed by the AVIF
Protected Parties or any of their employees or agents in connection with
AVIF's performance of its duties under this Agreement are the valuable
property of the AVIF Protected Parties. LIFE COMPANY agrees that if it
comes into possession of any list or compilation of the identities of or
other information about the AVIF Protected Parties' customers or any other
information or property of the AVIF Protected Parties, other than such
information as may be independently developed or compiled by LIFE COMPANY
from information supplied to it by the AVIF Protected Parties' customers
who also maintain accounts directly with LIFE COMPANY, LIFE COMPANY will
hold such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property
except: (a) with AVIF's prior written consent; or (b) as required by law or
judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable
harm to the other parties for which there would be no adequate remedy at
law and agree that in the event of such a breach, the other parties will be
entitled to equitable relief by way of temporary and permanent injunctions,
as well as such other relief as any court of competent jurisdiction deems
appropriate.
Section 19. Trademarks and Fund Names
(a) A I M Management Group Inc. ("AIM" or "licensor"), an
affiliate of AVIF, owns all right, title and interest in and to the name,
trademark and service mark "AIM" and such other tradenames, trademarks and
service marks as may be set forth on Schedule B, as amended from time to
time by written notice from AIM to LIFE COMPANY (the "AIM licensed marks"
or the "licensor's licensed marks") and is authorized to use and to license
other persons to use such marks. LIFE COMPANY and its affiliates are
hereby granted a non-exclusive license to use the AIM licensed marks in
connection with LIFE COMPANY's performance of the services contemplated
under this Agreement, subject to the terms and conditions set forth in this
Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates ( the
"licensee") shall terminate automatically upon termination of this
Agreement. Upon automatic termination, the licensee shall cease to use the
licensor's licensed marks, except that LIFE COMPANY shall have the right to
continue to service any outstanding Contracts bearing any of the AIM
licensed marks. Upon AIM's elective termination of this license, LIFE
COMPANY and its affiliates shall immediately cease to issue any new annuity
or life insurance contracts bearing any of the AIM licensed marks and shall
likewise cease any activity which suggests that it has any right under any
of the AIM licensed marks or that it has any association with AIM, except
that LIFE COMPANY shall have the right to continue to service outstanding
Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials bearing
the licensor's licensed marks. The licensor's approvals shall not be
unreasonably withheld.
(d) During the term of this grant of license, a licensor may
request that a licensee submit samples of any materials bearing any of the
licensor's licensed marks which were previously approved by the licensor
but, due to changed circumstances, the licensor may wish to reconsider.
If, on reconsideration, or on initial review, respectively, any such
samples fail to meet with the written approval of the licensor, then the
licensee shall immediately cease distributing such disapproved materials.
The licensor's approval shall not be unreasonably withheld, and the
licensor, when requesting reconsideration of a prior approval, shall assume
the reasonable expenses of withdrawing and replacing such disapproved
materials. The licensee shall obtain the prior written approval of the
licensor for the use of any new materials developed to replace the
disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that,
to the best of the knowledge of the licensee, the licensor's licensed marks
are valid and enforceable trademarks and/or service marks and that such
licensee does not own the licensor's licensed marks and claims no rights
therein other than as a licensee under this Agreement; (ii) agrees never to
contend otherwise in legal proceedings or in other circumstances; and (iii)
acknowledges and agrees that the use of the licensor's licensed marks
pursuant to this grant of license shall inure to the benefit of the
licensor.
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation,
the SEC, the NASD and state insurance regulators) and will permit each
other and such authorities reasonable access to its books and records
(including copies thereof) in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/Nancy L. Martin By: /s/Robert H. Graham
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
KEYPORT BENEFIT LIFE INSURANCE
COMPANY, on behalf of itself and
its separate accounts
Attest: /s/James J. Klopper By: /s/Jacob M. Herschler
Name: James J. Klopper Name: Jacob M. Herschler
Title: Secretary Title: Vice President
KEYPORT FINANCIAL SERVICES CORP.
Attest: /s/Donald A. Truman By: /s/James J. Klopper
Name: Donald A. Truman Name: James J. Klopper
Title: Assistant Clerk Title: Clerk
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. International Equity Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Variable Account A
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
DVA
SCHEDULE B
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM and Design
LOGO
SCHEDULE C
EXPENSE ALLOCATIONS
Life Company AVIF
preparing and filing the preparing and filing the
Account's registration statement Fund's registration statement
text composition for Account text composition for Fund
prospectuses and supplements prospectuses and supplements
text alterations of prospectuses text alterations of prospectuses
(Account) and supplements (Account) (Fund) and supplements (Fund)
printing Account and Fund a camera ready Fund prospectus
prospectuses and supplements
text composition and printing text composition and printing
Account SAIs Fund SAIs
mailing and distributing Account mailing and distributing Fund
SAIs to policy owners upon SAIs to policy owners upon
request by policy owners request by policy owners
mailing and distributing
prospectuses (Account and Fund) and
supplements (Account and Fund) to
policy owners of record as required
Federal Securities Laws and to
prospective purchasers
text composition (Account), text composition of annual and
printing, mailing, and distributing, semi-annual reports (Fund)
annual and semi-annual reports for
Account (Fund and Account as,
applicable)
text composition, printing, mailing, text composition, printing,
distributing, and tabulation of mailing, distributing and
proxy statements and voting tabulation of proxy statements
instruction solicitation materials and voting instruction
to policy owners with respect to solicitation materials to
proxies related to the Account policy owners with respect to
proxies related to the Fund
preparation, printing and
distributing sales material and
advertising relating to the Funds,
insofar as such materials relate
to the Contracts and filing such
materials with and obtaining
approval from, the SEC, the NASD,
any state insurance regulatory
authority, and any other
appropriate regulatory authority,
to the extent required
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Statement of Additional Information and to the use of our report dated
March 13, 1998, with respect to the financial statements of Keyport Benefit
Life Insurance Company (formerly American Benefit Life Insurance Company),
included in this Post-Effective Amendment No. 2 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
July 15, 1998
