As Filed with the Securities and Exchange Commission on June 16, 1999
Registration No. 333-75157
811-08635
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12 [X]
Variable Account A
(Exact Name of Registrant)
Keyport Benefit Life Insurance Company
(Name of Depositor)
125 High Street, Boston, Massachusetts 02110
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: 617-526-1400
Bernard R. Beckerlegge, Esq.
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110
(Name and Address of Agent for Service)
Copies to:
Joan E. Boros, Esq.
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( ) on [date] pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a)(1) of Rule 485
( ) on [date] pursuant to paragraph (a)(1) of Rule 485
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Title of Securities Being Registered: Variable Portion of the Contracts
Funded Through the Separate Account.
No filing fee is due because an indefinite amount of securities is deemed
to have been registered in reliance on Section 24(f) of the Investment
Company Act of 1940.
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=
Exhibit List on Page ____
<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
<PAGE>
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
<PAGE>
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
<PAGE>
PART A
<PAGE>
July 1, 1999 Prospectus for
New York
Keyport Advisor Charter Variable Annuity
Including Eligible Fund Prospectuses for
AIM VARIABLE INSURANCE FUNDS, INC.
THE ALGER AMERICAN FUND
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
LIBERTY VARIABLE INVESTMENT TRUST
STEINROE VARIABLE INVESTMENT TRUST
TEMPLETON VARIABLE PRODUCTS SERIES FUND
<PAGE>
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.
<PAGE>
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Prospectus for
The Keyport Advisor Charter Variable Annuity
Group Flexible Purchase Payment
Deferred Variable Annuity Contracts
issued by
Variable Account A
of
Keyport Benefit Life Insurance Company
- ---------------------------------------------------------------------------
This prospectus describes the Keyport Advisor Charter variable annuity
group Contracts and Certificates offered by Keyport Benefit Life Insurance
Company. All discussion of Certificates applies to the Contracts unless
specified otherwise.
Under the Certificate, you may elect to have value accumulate on a variable
or fixed basis. You may also elect to receive periodic annuity payments on
either a variable or a fixed basis. This prospectus generally describes
only the variable features of the Certificate. For a summary of the Fixed
Account and its features, see Appendix A. The Certificates are designed to
help you in your retirement planning. You may purchase them on a tax
qualified or non-tax qualified basis. Because they are offered on a
flexible payment basis, you are permitted to make multiple payments.
We will allocate your purchase payments to the investment options and the
Fixed Account in the proportions you choose. The Certificate currently
offers twenty-three investment options, each of which is a Sub-account of
Variable Account A. Currently, you may choose among the following Eligible
Funds:
AIM VARIABLE INSURANCE FUNDS, INC.: AIM V.I. Capital Appreciation Fund and
AIM V.I. Value Fund
THE ALGER AMERICAN FUND: Alger American Growth Portfolio and Alger American
Small Capitalization Portfolio
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.: Global Bond Portfolio;
Premier Growth Portfolio and Technology Portfolio
LIBERTY VARIABLE INVESTMENT TRUST: Colonial Global Equity Fund, Variable
Series; Colonial High Yield Securities Fund, Variable Series; Colonial
International Horizons Fund, Variable Series; Colonial Small Cap Value,
Variable Series; Colonial Strategic Income Fund, Variable Series; Colonial
U.S. Growth and Income Fund, Variable Series; Crabbe Huson Real Estate
Investment Fund, Variable Series; Liberty All-Star Equity Fund, Variable
Series; Newport Tiger Fund, Variable Series; and Stein Roe Global Utilities
Fund, Variable Series
STEINROE VARIABLE INVESTMENT TRUST: Stein Roe Balanced Fund, Variable
Series; Stein Roe Growth Stock Fund, Variable Series; Stein Roe Money
Market Fund, Variable Series; and Stein Roe Mortgage Securities Fund,
Variable Series
TEMPLETON VARIABLE PRODUCTS SERIES FUND: Templeton Developing Markets Fund
You may not purchase a Certificate if either you or the Annuitant are over
90 years old before we receive your application. You may not purchase a tax-
qualified Certificate if you or the Annuitant are over 75 years old before
we receive your application (age 90 applies to Roth IRAs).
The purchase of a Contract or Certificate involves certain risks.
Investment performance of the Eligible Funds to which you may allocate
purchase payments may vary. We do not guarantee any minimum Certificate
Value for amounts allocated to the Eligible Funds. Benefits provided by
this Certificate, when based on the Fixed Account, may be subject to a
market value adjustment, which may result in an upward or downward
adjustment in withdrawal benefits, death benefits, settlement values,
transfers to Eligible Funds, or periodic income payments.
The Variable Account may offer other certificates with different features,
fees and charges, and other Sub-accounts which may invest in different or
additional mutual funds. Separate prospectuses and statements of additional
information will describe other certificates. The agent selling the
Certificates has information concerning the eligibility for and the
availability of the other certificates.
This prospectus contains important information about the Contracts and
Certificates you should know before investing. You should read it before
investing and keep it for future reference. We have filed a Statement of
Additional Information ("SAI") with the Securities and Exchange Commission.
The current SAI has the same date as this prospectus and is incorporated by
reference in this prospectus. You may obtain a free copy by writing us at
125 High Street, Boston, MA 02110, by calling (800) 437-4466, or by
returning the postcard on the back cover of this prospectus. A table of
contents for the SAI appears on page 42 of this prospectus.
The date of this prospectus is July 1, 1999.
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
Definitions 3
Summary of Certificate Features 4
Fee Table 6
Examples 9
Explanation of Fee Table and Examples 10
Performance Information 10
Keyport Benefit and the Variable Account 12
Purchase Payments and Applications 12
Investments of the Variable Account 13
Allocations of Purchase Payments 13
Eligible Funds 13
Transfer of Variable Account Value 17
Limits on Transfers 17
Substitution of Eligible Funds and Other Variable Account Changes 18
Deductions 18
Deductions for Certificate Maintenance Charge 18
Deductions for Mortality and Expense Risk Charge 19
Deductions for Daily Distribution Charge 19
Deductions for Surrender Charge 19
Deductions for Transfers of Variable Account Value 20
Deductions for Premium Taxes 20
Deductions for Income Taxes 20
Total Variable Account Expenses 20
Certificate Value Deductions 20
Other Services 21
The Certificates 24
Variable Account Value 24
Valuation Periods 24
Net Investment Factor 24
Modification of the Certificate 25
Right to Revoke 25
Death Provisions for Non-Qualified Certificates 25
Death of Primary Owner, Joint Owner or Annuitant 25
Death Benefit 26
Payment of Death Benefit 28
Death Provisions for Qualified Certificates 29
Certificate Ownership 29
Assignment 30
Partial Withdrawals and Surrender 30
Annuity Provisions 31
Annuity Benefits 31
Annuity Option and Income Date 31
Annuity Options 31
Variable Annuity Payment Values 33
Proof of Age, Sex, and Survival of Annuitant 34
Suspension of Payments 34
Year 2000 Matters 35
Tax Status 35
Introduction 35
Taxation of Annuities in General 35
Qualified Plans 38
Tax-Sheltered Annuities 38
Individual Retirement Annuities 39
Corporate Pension and Profit-Sharing Plans 39
Deferred Compensation Plans with Respect to
Service for State and Local Governments 39
Annuity Purchases by Nonresident Aliens 39
Variable Account Voting Privileges 39
Sales of the Certificates 40
Legal Proceedings 41
Inquiries by Certificate Owners 41
Table of Contents--Statement of Additional Information 42
Appendix A--The Fixed Account (also known as the Modified
Guaranteed Annuity Account) 43
Appendix B--Telephone Instructions 47
Appendix C--Systematic Withdrawal Program 48
<PAGE>
DEFINITIONS
Accumulation Unit: A unit of measurement which we use to calculate Variable
Account Value.
Annuitant: The natural person on whose life annuity benefits are based and
who will receive annuity payments starting on the Income Date.
Certificate Anniversary: Each anniversary of the Certificate Date.
Certificate Date: The date when the Certificate becomes effective that is
the date when we receive your completed application and initial purchase
payment.
Certificate Owner ("you"): The person(s) having the privileges of ownership
defined in the Certificate.
Certificate Value: The sum of the Variable Account Value and the Fixed
Account Value.
Certificate Withdrawal Value: The Certificate Value increased or decreased
by a market value adjustment that applies to any Fixed Account Value less
any premium taxes, certificate maintenance charge and surrender charge.
Certificate Year: Each 12-month period beginning on the Certificate Date
and each Certificate Anniversary thereafter.
Company ("we", "us", "our", "Keyport Benefit"): Keyport Benefit Life
Insurance Company.
Covered Person: The person(s) identified in the Certificate whose death may
result in an adjustment of Certificate Value, a waiver of any surrender
charges and a waiver of any market value adjustment or whose medical stay
in a hospital or nursing facility may allow the Certificate Owner to be
eligible for either a total or partial waiver of the surrender charge.
Designated Beneficiary: The person designated to receive any death benefits
under the Certificate.
Eligible Funds: The underlying mutual funds in which the Variable Account
invests.
Fixed Account: Part of our general account to which purchase payments or
Certificate Values may be allocated or transferred.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under the Certificate prior to the Income Date.
Guarantee Period Anniversary: An anniversary of a Guarantee Period's Start
Date.
Guarantee Period Month: The first Guarantee Period Month is the monthly
period which begins on the Start Date. Later Guarantee Period Months begin
on the same day in the following months.
Guarantee Period Year: The 12-month period which begins on the Start Date.
Guarantee Period Years thereafter begin on each Guaranteed Period
Anniversary.
In Force: The status of the Certificate before the Income Date so long as
it is not totally surrendered, the Certificate Value under a Certificate
does not go to zero, and there has not been a death of the Annuitant or any
Certificate Owner that will cause the Certificate to end within at most
five years of the date of death.
Income Date: The date on which annuity payments are to begin.
Non-Qualified Certificate: Any Certificate that is not issued under a
Qualified Plan.
Qualified Certificate: Certificates issued under Qualified Plans.
Qualified Plan: A retirement plan which receives special tax treatment
under Sections 401, 403(b), 408(b) or 408A of the Internal Revenue Code
("Code") or a deferred compensation plan for a state and local government
or another tax exempt organization under Section 457 of the Code.
Start Date: The date money is first allocated to a Guarantee Period of the
Fixed Account.
Variable Account: Variable Account A which is a separate investment account
of the Company into which purchase payments under the Certificates may be
allocated. The Variable Account is divided into Sub-accounts which invest
in shares of an Eligible Fund.
Variable Account Value: The value of all Variable Account amounts
accumulated under the Certificate prior to the Income Date.
Written Request: A request written on a form satisfactory to us, signed by
you and a disinterested witness, and filed at our office.
SUMMARY OF CERTIFICATE FEATURES
Because this is a summary, it does not contain all of the information that
may be important to you. You should read the entire prospectus and
Statement of Additional Information before deciding to invest. Further,
individual state requirements, which are different from the information in
this prospectus, are described in supplements to this prospectus or in
endorsements to the Certificate.
Purchase of the Certificate
You may (except in Oregon) make multiple purchase payments. The minimum
initial payment is $5,000. For individual retirement annuities the minimum
payment is $2,000. (See "Purchase Payments and Applications".)
Investment Choices
You can allocate and reallocate your investment among the Sub-accounts of
the Variable Account which in turn invest in the following Eligible Funds:
AIM Variable Insurance Funds, Inc. ("AIM Insurance Funds")
AIM V.I. Capital Appreciation Fund ("AIM Capital Appreciation")
AIM V.I. Value Fund ("AIM Value")
The Alger American Fund ("Alger American Fund")
Alger American Growth Portfolio ("Alger Growth")
Alger American Small Capitalization Portfolio ("Alger Small Cap")
Alliance Variable Products Series Fund, Inc. ("Alliance Series Fund")
Global Bond Portfolio ("Alliance Global Bond")
Premier Growth Portfolio ("Alliance Premier Growth")
Technology Portfolio ("Alliance Technology")
Liberty Variable Investment Trust ("Liberty Trust")
Colonial Global Equity Fund, Variable Series ("Colonial Global Equity")
Colonial High Yield Securities Fund, Variable Series ("Colonial High
Yield Securities")
Colonial International Horizons Fund, Variable Series ("Colonial Int'l
Horizons")
Colonial Small Cap Value Fund, Variable Series ("Colonial Small Cap
Value")
Colonial Strategic Income Fund, Variable Series ("Colonial Strategic
Income")
Colonial U.S. Growth and Income Fund, Variable Series ("Colonial U.S.
Growth and Income")
Crabbe Huson Real Estate Investment Fund, Variable Series ("Crabbe
Huson Real Estate")
Liberty All-Star Equity Fund, Variable Series ("Liberty All-Star Equity")
Newport Tiger Fund, Variable Series ("Newport Tiger")
Stein Roe Global Utilities Fund, Variable Series ("Stein Roe Global
Utilities")
SteinRoe Variable Investment Trust ("SteinRoe Trust")
Stein Roe Balanced Fund, Variable Series ("Stein Roe Balanced")
Stein Roe Growth Stock Fund, Variable Series ("Stein Roe Growth Stock")
Stein Roe Money Market Fund, Variable Series ("Stein Roe Money Market")
Stein Roe Mortgage Securities Fund, Variable Series ("Stein Roe Mortgage
Securities")
Templeton Variable Products Series Fund ("Templeton Series Fund")
Templeton Developing Markets Fund ("Templeton Developing Markets")
Fees and Charges
Please see "Fee Table", "Explanation of Fee Table and Examples" and
"Deductions".
Federal Income Taxes
You will not pay federal income taxes on the increases in the value of your
Certificate. However, if you make a withdrawal in the form of a lump sum
payment, annuity payment, or make a gift or assignment you will be subject
to federal income taxes on the increases in value of your Certificate and
may also be subject to a 10% federal penalty tax. (See "Tax Status".)
Right to Revoke
Generally, you may revoke the Certificate by returning it to us within 10
days after you receive it. We will refund your Certificate Value as of the
date we receive the returned Certificate. You will bear the investment risk
during the revocation period. (See "Right to Revoke".)
FEE TABLE
Certificate Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Surrender Charge
(as a percentage of purchase payments): 7%
Years from Date of Payment Sales Charge
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or later 0%
Maximum Total Certificate Owner Transaction Expenses
(as a percentage of purchase payments): 7%
Annual Certificate Maintenance Charge: $36
Transfer Charge (Maximum of $25): $ 0
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: 1.25%
Distribution Charge: .15%
Total Variable Account Annual Expenses: 1.40%
AIM Insurance Funds, Alger American Fund, Alliance Series Fund,
Liberty Trust, SteinRoe Trust and Templeton Series Fund Annual Expenses1
(After any Fee Waivers and/or Expense Reimbursements)2
(as a percentage of average net assets)
Total Fund
Management Rule 12b-1 Other Operating
Fund Fees ___Fees___ Expenses Expenses
AIM Capital Appreciation .62% .05% .67%
AIM Value .61% .05% .66%
Alger Growth .75% .04% .79%
Alger Small Cap .85% .04% .89%
Alliance Global Bond3 .64%(.65%) .25% .29%(.53%) 1.18%(1.43%)
Alliance Premier Growth3 .97%(1.00%) .25% .09% 1.31%(1.34%)
Alliance Technology3 .81%(1.00%) .25% .14%(.20%) 1.20%(1.45%)
Colonial Global Equity3 .95 .25% .20%(.44%) 1.40%(1.64%)
Colonial High Yield Securities .60% .20%(1.24%) .80%(1.84%)
Colonial Int'l Horizons3 .95 .25% .20%(.27%) 1.40%(1.47%)
Colonial Small Cap Value .80% .20%(3.32%) 1.00%(4.32%)
Colonial Strategic Income .65% .13% .78%
Colonial U.S. Growth and Income .80% .10% .90%
Crabbe Huson Real Estate3 1.00% .25% .20%(.56%) 1.45%(1.81%)
Liberty All-Star Equity .80% .20%(.24%) 1.00%(1.04%)
Newport Tiger .90% .40% 1.30%
Stein Roe Global Utilities .65% .17% .82%
Stein Roe Balanced .45% .20% .65%
Stein Roe Growth Stock .50% .20% .70%
Stein Roe Money Market .35% .27% .62%
Stein Roe Mortgage Securities .40% .30% .70%
Templeton Developing Markets3 1.25% .25% .41% 1.91%
The above expenses for the Eligible Funds were provided by the Funds. We
have not independently verified the accuracy of the information.
1All Trust and Fund expenses are for 1998 with the exception for those of
Colonial Global Equity, Colonial International Horizons and Crabbe Huson
Real Estate, which are estimated since Colonial Global Equity, Colonial
International Horizons and Crabbe Huson Real Estate commenced operations in
June 1999. Data for Class B shares of the Alliance Series Fund, which will
include 12b-1 fees, is not available. Therefore, we have included estimates
for 1999 for Alliance Global Bond, Alliance Premier Growth and Alliance
Technology based on the historical expenses of the Fund's Class A shares
for the fiscal year ended December 31, 1998. The AIM Insurance Funds, Alger
American Funds, Alliance Series Fund, Liberty Trust and SteinRoe Trust
expenses reflect such Fund's or Trust's manager's agreement to reimburse
expenses above certain limits (see footnote 2).
2The 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 AIM
Insurance 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 Alger American Fund has agreed to reimburse Alger Growth and
Alger Small Cap, to the extent that annual operating expenses, excluding
interest, taxes, fees for brokerage services and extraordinary expenses,
exceed 1.50% of a fund's average daily net assets for any fiscal year. The
Alger American Fund's manager was not required to reimburse expenses as of
the date of this prospectus.
The manager of Alliance Series Fund has agreed to continue voluntary
expense reimbursements for Alliance Global Bond, Alliance Premier Growth
and Alliance Technology for the foreseeable future. Because the Alliance
Series Funds did not have Class B shares until June 1, 1999, fees (other
than 12b-1 Fees) are estimates for 1999 based on the historical expenses of
the Fund's Class A shares. Each percentage shown in the parentheses is an
estimate of what the expenses would be in the absence of expense
reimbursement: for Alliance Global Bond - .65% for management fees, .53%
for other expenses and 1.43% for total expenses; for Alliance Premier
Growth - 1.00% for management fees and 1.34% for total expenses; and for
Alliance Technology - 1.00% for management fees, .20% for other expenses,
and 1.45% for total expenses.
The manager of Liberty Trust has agreed until April 30, 2000 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 assets of each Eligible Fund: 1.00%
for Colonial Small Cap Value, Colonial U.S. Growth and Income, Liberty All-
Star Equity, and Stein Roe Global Utilities; 1.45% for Crabbe Huson Real
Estate; 1.40% for Colonial Global Equity and Colonial Int'l Horizons; 1.75%
for Newport Tiger Fund and .80% for Colonial High Yield Securities. The
following percentages are what the expenses would be without any expense
reimbursement: for Colonial Global Equity--.44% for other expenses and
1.64% for total expenses; for Colonial High Yield Securities--1.24% for
other expenses and 1.84% for total expenses; for Colonial Int'l Horizons--
.27% for other expenses and 1.47% for total expenses; for Colonial Small
Cap Value--3.32% for other expenses and 4.32% for total expenses; for
Crabbe Huson Real Estate--.56% for other expenses and 1.81% for total
expenses; and for Liberty All-Star Equity--.24% for other expenses and
1.04% for total expenses. The Liberty Trust manager reimbursed expenses at
these levels as of the date of the prospectus.
The manager of SteinRoe Trust has agreed until April 30, 2000 to reimburse
all expenses, including management fees, in excess of the following
percentage of the average net assets of the following Eligible Funds: for
Stein Roe Balanced--.75%; for Stein Roe Growth Stock--.80%; for Stein Roe
Mortgage Securities--.70%; and for Stein Roe Money Market--.65%. The
SteinRoe Trust's manager was not required to reimburse expenses as of the
date of this prospectus.
3The Eligible Fund has a distribution plan or "Rule 12b-1 Plan" which is
described in the Fund's prospectus.
EXAMPLES
Example #1 - If you surrender your Certificate at the end of the periods
shown you would pay the following expenses on a $1,000 investment, assuming
5% annual return on assets.
Sub-account 1 year 3 years 5 years 10 years
AIM Capital Appreciation $ 91 $118 $154 $303
AIM Value 91 118 154 302
Alger Growth 92 122 161 318
Alger Small Cap 93 125 167 331
Alliance Global Bond 96 133 183 367
Alliance Premier Growth 97 137 190 383
Alliance Technology 96 134 184 370
Colonial Global Equity 98 140 195 394
Colonial High Yield Securities 92 122 162 320
Colonial Int'l Horizons 98 140 195 394
Colonial Small Cap Value 94 128 173 345
Colonial Strategic Income 92 121 161 317
Colonial U.S. Growth and Income 93 125 167 332
Crabbe Huson Real Estate 98 141 197 400
Liberty All-Star Equity 94 128 173 345
Newport Tiger 97 137 189 382
Stein Roe Global Utilities 92 122 163 322
Stein Roe Balanced 91 117 153 300
Stein Roe Growth Stock 91 119 156 307
Stein Roe Money Market 90 116 152 297
Stein Roe Mortgage Securities 91 119 156 307
Templeton Developing Markets 103 155 221 454
Example #2 - If you annuitize or if you do not surrender your Certificate
at the end of the periods shown, you would pay the following expenses on a
$1,000 investment, assuming 5% annual return on assets.
Sub-account 1 year 3 years 5 years 10 years
AIM Capital Appreciation $21 $ 69 $124 $303
AIM Value 21 68 124 302
Alger Growth 22 73 131 318
Alger Small Cap 23 76 137 331
Alliance Global Bond 26 85 153 367
Alliance Premier Growth 27 89 160 383
Alliance Technology 26 85 154 370
Colonial Global Equity 28 92 165 394
Colonial High Yield Securities 22 73 132 320
Colonial Int'l Horizons 28 92 165 394
Colonial Small Cap Value 24 79 143 345
Colonial Strategic Income 22 72 131 317
Colonial U.S. Growth and Income 23 76 137 332
Crabbe Huson Real Estate 28 93 167 400
Liberty All-Star Equity 24 79 143 345
Newport Tiger 27 89 159 382
Stein Roe Global Utilities 22 73 133 322
Stein Roe Balanced 21 68 123 300
Stein Roe Growth Stock 21 70 126 307
Stein Roe Money Market 20 67 122 297
Stein Roe Mortgage Securities 21 70 126 307
Templeton Developing Markets 33 108 192 454
EXPLANATION OF FEE TABLE AND EXAMPLES
The purpose of the fee table is to illustrate the expenses you may directly
or indirectly bear under a Certificate. The table reflects expenses of the
Variable Account as well as the Eligible Funds. You should read
"Deductions" in this prospectus and the sections relating to expenses of
the Eligible Funds in their prospectuses. The fee table and examples do not
include any taxes or tax penalties you may be required to pay if you
surrender your Certificate.
We deduct surrender charges only if you totally or partially surrender the
Certificate. You will not incur a surrender charge in the following
instances:
o In the first Certificate Year, you may withdraw an aggregate amount
up to the Certificate's earnings. Earnings equal the Certificate
Value at the time of withdrawal less purchase payments not
previously withdrawn.
o In the second and later Certificate Years you may withdraw:
(a) earnings, and
(b) an amount up to (i) 10% of the Certificate Value as of the
preceding Certificate Anniversary, (ii) less earnings.
The examples assume you did not make any transfers. We reserve the right to
impose a transfer fee after we notify you. Currently, we do not impose any
transfer fee. Premium taxes are not shown. We deduct the amount of any
premium taxes (which range from 0% to 5%) from Certificate Value upon full
surrender or annuitization.
We waive the certificate maintenance charge on the first Certificate
Anniversary and in certain other instances.
The fee table and examples should not be considered a representation of
past or future expenses and charges of the Sub-accounts. Your actual
expenses may be greater or less than those shown. Similarly, the 5% annual
rate of return assumed in the example is not an estimate or a guarantee of
future investment performance. See "Deductions" in this prospectus,
"Management" in the prospectus for AIM Insurance Funds, "Management of the
Fund" in the prospectuses for the Alger American Fund and the Alliance
Series Fund, "Trust Management Organizations" and "Expenses of the Funds"
in the prospectus for Liberty Trust, "How the Funds are Managed" in the
prospectus for SteinRoe Trust, and "Portfolio Management" in the prospectus
for Templeton Series Fund.
The Certificates described in this prospectus have not previously been made
available for sale, and may include fees and charges that are different
from our other variable annuity contracts. These differences will produce
differing Accumulation Unit values. Therefore, no condensed financial
information is provided. Our full financial statements and those for the
Variable Account are in the Statement of Additional Information.
PERFORMANCE INFORMATION
The Variable Account may from time to time advertise certain performance
information concerning its various Sub-accounts.
Performance information is not an indicator of either past or future
performance of a Certificate.
The Sub-accounts may advertise total return information for various periods
of time. Total return performance information is based on the overall
percentage change in value of a hypothetical investment in the Sub-account
over a given period of time.
Average annual total return information shows the average annual
compounding percentage change applied to the value of an investment in the
Sub-account from the beginning of the measuring period to the end of that
period. This average annual total return reflects all historical investment
results, less all Sub-account and Certificate charges and deductions as
required by certain regulatory rules. This would include any surrender
charge that would apply if you surrendered the Certificate at the end of
each period indicated. Average total return is not reduced by any premium
taxes. Average total return would be less if these taxes were deducted.
In order to calculate average annual total return, we divide the change in
value of a Sub-account under a Certificate surrendered on a particular date
by a hypothetical $1,000 investment in the Sub-account. We then annualize
the resulting total rate for the period to obtain the average annual
compounding percentage change during the period.
The Sub-accounts may present, along with any current required performance
information, additional non-standardized total return information that is
computed on a different basis:
o First, the Sub-accounts may present total return information as
described above, except for the deduction of the surrender charge.
This presentation assumes that the investment in the Certificate
continues beyond the period when the surrender charge applies. This
is consistent with the long-term investment and retirement
objectives of the Certificate. The total return percentage will be
higher using this method than the standard method described above.
o Second, the Sub-accounts may present total return information as
described above, except that there are no Certificate deductions
for the surrender charge, the certificate maintenance charge and
premium taxes. Because these charges are not deducted, the
calculation is simplified. We divide the change in a Sub-account's
Accumulation Unit value over a specified time period by the
Accumulation Unit value of that Sub-account at the beginning of the
period. This computation results in a 12-month change rate. For
longer periods it is a total rate for the period. We annualize the
total rate in order to obtain the average annual percentage change
in the Accumulation Unit value for that period. The percentages
would be less if these charges were included.
o Third, certain of the Eligible Funds have been available for other
variable annuity contracts prior to the beginning 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 and applying the fees and charges to
the Certificate for the specified time periods.
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 seven-day period. We annualize this
income by assuming that the amount of income generated by the investment
during that week is generated each week over a 52-week period. It is shown
as a percentage. The yield reflects the deduction of all charges assessed
against the Sub-account and a Certificate but does not include surrender
charges and premium tax charges. The yield would be lower if these charges
were included.
We calculate the effective yield of the Stein Roe Money Market Sub-account
in a similar manner but, when annualizing the yield, we assume income
earned by the Sub-account is reinvested. This compounding effect causes
effective yield to be higher than yield.
We may provide to you and prospective Contract Owners advertising and other
information on a variety of topics. Such topics may include the
relationship between certain economic sectors and the economy as a whole
and its effect on various securities markets, investment strategies and
techniques (such as value investing, dollar cost averaging and asset
allocation). Such topics may also include, the advantages and
disadvantages of investing in tax-advantaged and taxable instruments,
customer profiles and hypothetical purchase scenarios, financial management
and tax and retirement planning, and other investment alternatives,
including comparisons between the Certificates and the characteristics of
and market for such alternatives.
KEYPORT BENEFIT AND THE VARIABLE ACCOUNT
We were organized under the laws of the State of New York in 1987 as a
stock life insurance company. We are a wholly-owned subsidiary of Keyport
Life Insurance Company. Our executive and administrative offices are at
125 High Street, Boston, Massachusetts 02110. Our home office is at 100
Manhattanville Road, Purchase, New York 10577. We are admitted to conduct
life insurance business in New York.
We are a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and membership in IMSA in
advertisements. Being a member means that we have chosen to participate in
IMSA's Life Insurance Ethical Market Conduct Program.
We are indirectly owned by Liberty Financial Companies, Inc. and are
ultimately controlled by Liberty Mutual Insurance Company of Boston,
Massachusetts, a multi-line insurance and financial services institution.
We established the Variable Account 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 mean the Securities and Exchange Commission
supervises us or the management of the Variable Account.
Obligations under the Certificates are our obligations. Although the assets
of the Variable Account are our property, these assets are held separately
from our other assets and are not chargeable with liabilities arising out
of any other business we may conduct. Income, capital gains and/or capital
losses, whether or not realized, from assets allocated to the Variable
Account are credited to or charged against the Variable Account without
regard to the income, capital gains, and/or capital losses arising out of
any other business we may conduct.
PURCHASE PAYMENTS AND APPLICATIONS
The initial purchase payment is due on the Certificate Date. The minimum
initial purchase payment is $5,000 and $2,000 for individual retirement
annuities. You may make additional purchase payments. Each subsequent
purchase payment must be at least $1,000 or any lesser amount we may
permit, which is currently $250. For payments made under the systematic
investment program, the minimum is $50. We may reject any purchase payment
or any application. Purchase payments are allocated to a Certificate based
on the applicable Sub-account accumulation unit value(s) next determined
after we receive it.
If your application for a Certificate is complete and amounts are to be
allocated to the Variable Account, we will apply your initial purchase
payment to the Variable Account within two business days of receipt. If the
application is incomplete, we will notify you and try to complete it within
five business days. If it is not complete at the end of this period, we
will inform you of the reason for the delay. The purchase payment will be
returned immediately unless you specifically consent to our keeping the
purchase payment until the application is complete. Once the application is
complete, the purchase payment will be applied within two business days of
its completion.
We will send you a written notification showing the allocation of all
purchase payments and the re-allocation of values after any transfer you
have requested. You must notify us immediately of any error.
We will permit others to act on your behalf in certain instances,
including:
o we will accept an application for a Certificate signed by an
attorney-in-fact if we receive a copy of the power of attorney with
the application.
o we will issue a Certificate to replace an existing life insurance
or annuity policy that we or an affiliated company issued even
though we did not previously receive a signed application from you.
Certain dealers or other authorized persons such as employers and Qualified
Plan fiduciaries may inform us of your responses to application questions
by telephone or by order ticket and cause the initial purchase payment to
be paid to us. If the information is complete, we will issue the
Certificate. We will send you the Certificate and a letter so you may
review the information and notify us of any errors. We may request you to
confirm that the information is correct by signing a copy of the letter or
a Certificate delivery receipt. We will send you a written notice
confirming all purchases. Our liability under any Certificate relates only
to amounts so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
We will invest the purchase payments you applied to the Variable Account in
the Eligible Fund Sub-accounts you have chosen. Your selection must specify
the percentage of the purchase payment that is allocated to each Sub-
account or must specify the asset allocation model you select. (See "Other
Services, The Programs".) The percentage for each Sub-account, if not zero,
must be at least 5% and a whole number. You may change the allocation
percentages without fee, penalty or other charge. You must notify us in
writing of your allocation changes unless you, your attorney-in-fact, or
another authorized person have given us written authorization to accept
telephone allocation instructions. By allowing us to accept telephone
changes, you agree to accept our current conditions and procedures. The
current conditions and procedures are in Appendix B. We will notify you of
any changes in advance.
The Variable Account is segmented into Sub-accounts. Each Sub-account
contains the shares of one of the Eligible Funds and such shares are
purchased at net asset value. We may add or withdraw Eligible Funds and Sub-
accounts as permitted by applicable law.
Eligible Funds
The Eligible Funds are the separate funds listed within the AIM Insurance
Funds, Alger American Fund, Alliance Series Fund, Liberty Trust, SteinRoe
Trust and Templeton Series Fund. Keyport Benefit and the Variable Account
may enter into agreements with other mutual funds for the purpose of making
such mutual funds available as Eligible Funds under certain Certificates.
We do not promise that the Eligible Funds will meet their investment
objectives. Amounts you have allocated to Sub-accounts may grow, decline,
or grow less in value than you expect, depending on the investment
performance of the Eligible Funds in which the Sub-accounts invest. You
bear the investment risk that those Eligible Funds possibly will not meet
their investment objectives. You should carefully review their prospectuses
before allocating amounts to the Sub-accounts of the Variable Account.
Some of the Eligible Funds are funding vehicles for other variable annuity
contracts and variable life insurance policies offered by our separate
accounts. The Eligible Funds are also available for the separate accounts
of insurance companies affiliated and unaffiliated with us. The risks
involved in this "mixed and shared funding" are disclosed in the Eligible
Funds' prospectuses under the following captions: AIM Insurance
Funds-"Purchase and Redemption of Shares"; Alger American Fund--
"Participating Insurance Companies and Plans"; Alliance Series
Fund-"Introduction to the Fund"; Liberty Trust-"The Trust"; SteinRoe
Trust-"The Trust" and Templeton Series Fund-"Purchase of Shares".
AIM Advisors Inc. ("AIM") serves as the investment adviser to each of the
Eligible Funds of AIM Insurance Funds.
Fred Alger Management, Inc. ("Alger Management") is the investment manager
for the Eligible Funds of Alger American Fund.
Alliance Capital Management L.P. is the investment adviser for the Eligible
Funds of Alliance Series Fund. AIGAM International Limited is sub-adviser
for Alliance Global.
Liberty Advisory Services Corp. ("LASC"), an affiliate, is the manager for
Liberty Trust and its Eligible Funds. Colonial Management Associates, Inc.
("Colonial"), an affiliate, is the sub-adviser for the Eligible Funds
except for Crabbe Huson Real Estate, Newport Tiger, Stein Roe Global
Utilities and Liberty All-Star Equity. Crabbe Huson Group, Inc., an
affiliate, is sub-adviser for Crabbe Huson Real Estate. Newport Fund
Management, Inc., an affiliate, is sub-adviser for Newport Tiger. Liberty
Asset Management Company, an affiliate, is 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.
Stein Roe & Farnham Incorporated ("Stein Roe"), an affiliate, is the
investment adviser for each Eligible Fund of SteinRoe Trust and sub-adviser
for Stein Roe Global Utilities.
Templeton Asset Management LTD. is the investment adviser for Templeton
Developing Markets Fund.
We have briefly described the Eligible Funds below. You should read the
current prospectuses for the Eligible Funds for more details and complete
information. The prospectus is available, at no charge, from a salesperson
or by writing to us or by calling (800) 437-4466.
Eligible Funds of AIM Insurance
Funds and Variable Account
Sub-accounts Investment Objective
AIM Capital Appreciation (AIM Capital appreciation through
Capital Appreciation investments in common stocks,
Sub-account) with emphasis on medium-sized
and smaller emerging growth
companies.
AIM Value (AIM Value Sub-account) Long-term growth of capital by
investing primarily in equity
securities judged by AIM to be
undervalued relative to the
current or projected earnings of
the companies issuing the
securities, or relative current
market value of assets owned by the
companies issuing the securities
or relative to the equity markets
in general. Income is a secondary
objective.
Eligible Funds of Alger
American Fund and Variable Account
Sub-accounts Investment Objective
Alger Growth Long-term capital appreciation
(Alger Growth Sub-account)
Alger Small Cap Long-term capital appreciation.
(Alger Small Cap Sub-account)
Eligible Funds of Alliance Series
Fund and Variable Account
Sub-accounts Investment Objective
Alliance Global Bond A high level of return from a
(Alliance Global Bond combination of current income and
Sub-account) capital appreciation by investing
in a globally diversified portfolio
of high quality debt securities
denominated in the U.S. Dollar and
a range of foreign currencies.
Alliance Premier Growth Growth of capital rather than
(Alliance Premier Growth current income.
Sub-account)
Alliance Technology (Alliance Growth of capital through
Technology Sub-account) investment in companies expected
to benefit from advances in
technology.
Eligible Funds of Liberty Trust
and Variable Account
Sub-accounts Investment Objective
Colonial Global Equity (Colonial Long-term growth by investing
Global Equity Sub-account) primarily in global securities.
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 Int'l Horizons Preservation of capital purchasing
(Colonial Int'l Horizons power and long-term growth.
Sub-account)
Colonial Small Cap Value Long-term growth by investing in
(Colonial Small Cap Value smaller capitalization equity
Sub-account) 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. Growth and Income Long-term capital growth and income
(Colonial U.S. Growth and Income by investing primarily in large
Sub-account) capitalization equity securities.
Crabbe Huson Real Estate Growth of capital and current
(Crabbe Huson Real Estate income by investing in a
Sub-account) diversified portfolio consisting
primarily of equity securities
of real estate investment trusts
(REITs) and other real estate
industry companies, in mortgage
backed securities and, to a lesser
extent, in debt securities of
such companies.
Liberty All-Star Equity Total investment return, comprised
(Liberty All-Star Equity Sub-account) of long-term capital appreciation
and current income, through
investment primarily in a
diversified portfolio of equity
securities.
Newport Tiger Long-term capital growth by
(Newport Tiger Sub-account) investing primarily in equity
securities of companies located in
the nine Tigers of Asia (Hong Kong,
Singapore, South Korea, Taiwan,
Malaysia, Thailand, Indonesia,
China and the Philippines).
Stein Roe Global Utilities
(Stein Roe Global Utilities Current income and long-term growth
Sub-account) of capital and income.
Eligible Funds of SteinRoe Trust
and Variable Account
Sub-accounts Investment Objective
Stein Roe Balanced High total investment return
(Stein Roe Balanced through investment in a changing
Sub-account) mix of securities.
Stein Roe Growth Stock Long-term growth of capital through
(Stein Roe Growth Stock investment primarily in common
Sub-account) stocks.
Stein Roe Money Market High current income from short-term
(Stein Roe Money Market money market instruments while
Sub-account) emphasizing preservation of capital
and maintaining excellent
liquidity.
Stein Roe Mortgage Securities Highest possible level of current
(Stein Roe Mortgage Securities income consistent with safety of
Sub-account) principal and maintenance of
liquidity through investment
primarily in mortgage-backed
securities.
Eligible funds of Templeton Series
Fund & Variable Account Sub-accounts Investment Objective
Templeton Developing Markets Long-term capital appreciation by
(Templeton Developing Markets investing primarily in equity
Sub-account) securities of issuers in countries
having developing markets.
Transfer of Variable Account Value
You may transfer Variable Account Value from one Sub-account to another Sub-
account and/or to the Fixed Account.
We may charge a transfer fee and limit the number of transfers that you can
make in a time period. Transfer limitations may prevent you from making a
transfer on the date you select. This may result in your Certificate Value
being lower than it would have been if you had been able to make the
transfer.
Limits on Transfers
Currently, we do not limit the number or frequency of transfers. We do not
charge a transfer fee for each transfer in excess of 12 in each Certificate
Year, except as follows:
o We impose a transfer limit of one transfer every 30 days, or
such other period as we may permit, for transfers on behalf of
multiple Certificates by a common attorney-in-fact, or transfers
that are, in our determination, based on the recommendation of a
common investment adviser or broker/dealer, and
o We limit each transfer to a maximum of $500,000, or such greater
amount as we may permit. We treat all transfer requests for a
Certificate made on the same day as a single transfer. We may
treat as a single transfer all transfers you request on the same
day for every Certificate you own. The total combined transfer
amount is subject to the $500,000 limitation. If the total amount
of the requested transfers exceeds $500,000, we will not execute
any of the transfers, and
o We treat as a single transfer all transfers made on the same day on
behalf of multiple Certificates by a common attorney-in-fact, or
transfers that are, in our determination, based on the
recommendation of a common investment adviser or broker/dealer. The
$500,000 limitation applies to such transfers. If the total amount
of the requested transfers exceeds $500,000, we will not execute
any of the transfers.
If we have executed a transfer with respect to your Certificate as part of
a multiple transfer request, we will not execute another transfer request
for your Certificate for 30 days.
By applying these limitations we intend to protect the interests of
individuals who do and those who do not engage in significant transfer
activity among Sub-accounts. We have determined that the actions of
individuals engaging in significant transfer activity may cause an adverse
affect on the performance of the Eligible Fund for the Sub-account
involved. The movement of values from one Sub-account to another may
prevent the appropriate Eligible Fund from taking advantage of investment
opportunities because the Eligible Fund must maintain a liquid position in
order to handle redemptions. Such movement may also cause a substantial
increase in fund transaction costs which all Certificate Owners must
indirectly bear.
We will notify you prior to charging any transfer fee or a change in the
limitation on the number of transfers. The fee will not exceed $25.
You must notify us in writing of your transfer requests unless you have
given us written authorization to accept telephone transfer requests from
you or your attorney-in-fact. By authorizing us to accept telephone
transfer instructions, you agree to accept our current conditions and
procedures. The current conditions and procedures are in Appendix B. You
will be given prior notification of any changes. A person acting on your
behalf as an attorney-in-fact may make written transfer requests.
If we receive your transfer requests before 4:00 P.M. Eastern Time, we will
initiate them at the close of business that day. We will initiate any
requests received after that time at the close of the next business day.
We will execute your request to transfer value by both redeeming and
acquiring Accumulation Units on the day we initiate the transfer.
If you transfer 100% of any Sub-account's value, and the allocation formula
for purchase payments on your application includes that Sub-account, the
allocation formula for future purchase payments will automatically change
unless you tell us otherwise.
Substitution of Eligible Funds and Other Variable Account Changes
If shares of any of the Eligible Funds are no longer available for
investment by the Variable Account, or further investment in the shares of
an Eligible Fund is no longer appropriate under the Certificate, we may add
or substitute shares of another Eligible Fund or of another mutual fund for
Eligible Fund shares already purchased or to be purchased in the future.
Any substitution of securities will comply with the requirements of the
Investment Company Act of 1940.
We also reserve the right to make the following changes in relation to the
Variable Account and Eligible Funds:
o to operate the Variable Account in any form permitted by law;
o to take any action necessary to comply with applicable law or
obtain and continue any exemption from applicable law;
o to transfer any assets in any Sub-account to another or to one or
more separate investment accounts, or to our general account;
o to add, combine or remove Sub-accounts in the Variable Account; and
o to change how we assess charges, so long as we do not increase them
above the current total amount charged to the Variable Account and
the Eligible Funds in connection with your Certificate.
DEDUCTIONS
Deductions for Certificate Maintenance Charge
We charge an annual certificate maintenance charge of $36 per Certificate
Year. Before the Income Date we do not guarantee the amount of the
certificate maintenance charge and may change it. This charge reimburses us
for our expenses incurred in maintaining your Certificate.
Before the Income Date, we will deduct the certificate maintenance charge
from the Variable Account Value on each Certificate Anniversary and on the
date of any total surrender not falling on the Certificate Anniversary. We
will waive this charge before the Income Date if:
o it is the first Certificate Anniversary;
o the Certificate Value is at least $40,000 on the date we impose
this charge, or
o in the prior Certificate Year, purchase payments of at least $2,000
have been made and you have not made any partial withdrawals.
On the Income Date, we will subtract a pro-rata portion of the charge due
on the next Certificate Anniversary from the Variable Account Value. This
pro-rata charge covers the period from the prior Certificate Anniversary to
the Income Date.
We will deduct the certificate maintenance charge proportionally from each
Sub-account based upon the value each Sub-account bears to the Variable
Account Value.
Once annuity payments begin, the certificate maintenance charge is deducted
only from variable annuity payments and the charge amount is guaranteed not
to increase. We will subtract this charge in equal parts from each annuity
payment. For example, if annuity payments are monthly, then we will deduct
one-twelfth of the annual charge from each payment.
We will waive the charge on and after the Income Date for the current year
if:
o you have selected variable annuity Option A; and
o the present value of all of the remaining payments is at least
$40,000 at the time of the first payment of the year.
Deductions for Mortality and Expense Risk Charge
Variable annuity payments fluctuate depending on the investment performance
of the Sub-accounts. The payments will not be affected by the mortality
experience (death rate) of persons receiving such payments or of the
general population. We guarantee the death benefit described in "Death
Provisions". We also assume an expense risk since the certificate
maintenance charge after the Income Date remains the same and does not
change to reflect variations in expenses.
We deduct a mortality and expense risk charge from each Sub-account. The
mortality and expense risk charge is equal, on an annual basis, to 1.25% of
the average daily net asset value of each Sub-account. We deduct the charge
both before and after the Income Date. We may deduct less than the full
charge from Sub-account values attributable to Certificates issued to our
employees and to other persons specified in "Sales of the Certificates".
Deductions for Daily Distribution Charge
We deduct from each Sub-account for each valuation period a daily
distribution charge equal on an annual basis to 0.15% of the average daily
net asset value of each Sub-account. This charge compensates us for certain
sales distribution expenses relating to the Certificates. We do not deduct
the distribution charge during the annuity payment period.
We do not deduct this charge from the values of Certificates issued to our
employees and other persons specified in "Sales of the Certificates". We
may decide not to deduct the charge from Sub-account values attributable to
a Certificate issued in an internal exchange or transfer of an annuity
contract from our general account.
Deductions for Surrender Charge
We do not deduct a sales charge from the Certificate when you purchase it.
We may deduct such a charge if you make a withdrawal from your Certificate.
To determine whether we will deduct a surrender charge on a withdrawal, we
maintain a separate set of records. These records identify the date and
amount of each purchase payment you have made and the Certificate Value
over time. This allows us to determine if a charge is due with respect to a
withdrawal from a particular purchase payment.
You may make partial withdrawals during the Accumulation Period without
incurring a surrender charge. During the first Certificate Year, you may
withdraw an amount up to the Certificate's earnings. Earnings equal the
Certificate Value at the time of withdrawal, less purchase payments not
previously withdrawn. Beginning with the second Certificate Year, you may
withdraw earnings, and up to an amount equal to 10% of the Certificate
Value on the prior Certificate Anniversary, less earnings. In each Year, we
will deduct a surrender charge with respect to any portion of your
withdrawals in excess of these "free withdrawal amounts".
We will deduct the excess withdrawal amount in any Certificate Year from
the purchase payments beginning with the oldest payment until we have
deducted the full amount.
The amount of the surrender charge for each purchase payment from which an
excess withdrawal is deducted will equal the amount so deducted multiplied
by the applicable percentage for the number of years that have elapsed from
the date of the purchase payment to the date of surrender. We measure years
from the date of each purchase payment you make. The applicable percentages
for each year are 7% during the first year, and decreasing by 1% each
following year until the percentage is 0%. We will deduct the surrender
charges from the Sub-accounts and the Fixed Account in the same manner as
we deduct the amount you withdraw.
The surrender charge is used to cover the expenses of selling the
Certificate, including the cost of sales literature and compensation paid
to selling dealers . Selling dealers may receive up to 6.00% or 7.00% of
purchase payments. (See "Sales of the Certificates".) We pay any expenses
not covered by the charge from our general account, which may include
monies deducted from the Variable Account for the mortality and expense
risk charge.
We will waive the surrender charge in the event a Covered Person is
confined in a medical facility in accordance with the provisions and
conditions of an endorsement to the Certificate relating to such
confinement.
The surrender charge is not applicable to Certificates issued to our
employees and other persons specified in "Sales of the Certificates".
We may reduce or change any surrender charge percentage to 0% under a
Certificate issued in an internal exchange or transfer of an annuity
contract from our general account.
Under the "Systematic Withdrawal Program" on page 23 and under other
permitted circumstances, we may allow the 10% "free withdrawal amount" to
be available in the first Certificate Year.
Deductions for Transfers of Variable Account Value
Currently, we do not charge a transfer fee. However, the Certificate allows
us to charge up to $25 for each transfer in excess of 12 per year that
occur outside of the optional investment related programs. We will notify
you prior to the imposition of any fee.
Deductions for Premium Taxes
We deduct the amount of any premium taxes required by any state or
governmental entity. Currently, we deduct premium taxes from Certificate
Value upon full surrender (including a surrender for the Death Benefit) or
annuitization. The actual amount of any such premium taxes will depend,
among other things, on the type of Certificate you purchase (Qualified or
Non-Qualified), on your state of residence, the state of residence of the
Annuitant, and the insurance tax laws of such states. For New York
Certificates, the current premium tax rate is 0%.
Deductions for Income Taxes
We will deduct income taxes from any amount payable under the Certificate
that a governmental authority requires us to withhold. See "Income Tax
Withholding" and "Tax-Sheltered Annuities".
Total Variable Account Expenses
Total Variable Account expenses you will incur will be the certificate
maintenance charge, the mortality and expense risk charge, the daily
distribution charge, and, if applicable a tax charge factor. (See "Net
Investment Factor".)
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and the deductions and expenses paid out of the assets
of the Eligible Funds. The prospectus for the Eligible Fund describes these
deductions and expenses.
Certificate Value Deductions
The certificate maintenance charge, surrender charge, transfer fee and
premium taxes are each calculated independent of the other charges for
purposes of determining the applicable charge amount and/or whether a
charge waiver applies. Next, each charge amount is then deducted from the
appropriate value under the Certificate.
The above approach can be contrasted with a processing order that
calculates a particular charge first and then deducts it from the
appropriate value, then calculates another charge on the new net value and
deducts that charge, and so on until all charges are calculated and
deducted. As a result, the amount of a particular charge could vary
depending on whether it was determined first, second, third, etc. We do not
use this approach.
OTHER SERVICES
The Programs. We offer the following optional investment-related programs
under your Certificate which are only available prior to the Income Date:
o dollar cost averaging;
o asset allocation;
o systematic investment; and
o systematic withdrawal.
A rebalancing program is available before and after the Income Date.
Under each program that uses transfers, there will never by a charge for
the transfers between and among Sub-accounts and the Fixed Account. Each of
the programs has its own requirements, as discussed below. We reserve the
right to terminate any program.
If you have submitted a telephone authorization form, you may make certain
changes by telephone. For those programs involving transfers, you may
change instructions by telephone with regard to which Sub-account value or
Fixed Account Value may be transferred. We describe the current conditions
and procedures in Appendix B.
Dollar Cost Averaging Program. Under the program, we make automatic
transfers of Accumulation Units on a periodic basis 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 you select. The program allows you to
invest in the Sub-accounts over time rather than all at once. The program
is available for purchase payments and amounts transferred into the Stein
Roe Money Market Sub-account or the One-Year Guarantee Period. We reserve
the right to limit the number of Sub-accounts you may choose; currently,
there are no limits.
If you wish to participate in the program you must specify in writing the
Stein Roe Money Market Sub-account or the One-Year Guarantee Period from
which you want the transfers made. You must also tell us the monthly
amount you want transferred (minimum $100) and the Sub-account(s) to which
you want the transfers made. The first transfer will occur at the close of
the valuation period designated by us that is within 30 days after we
receive your request. Each subsequent periodic transfer will occur at the
close of the same valuation period one month later. For example, if you
select monthly transfers and the first transfer occurs on April 8, the
second transfer will occur at the close of the valuation period that
includes May 8. When the remaining value is less than the monthly transfer
amount, we will transfer that remaining value and the program will end.
Before this final transfer, you may extend the program by allocating
additional purchase payments, or by transferring Certificate Value, to the
Stein Roe Money Market Sub-account or the One-Year Guarantee Period.
You may change the monthly amount you want transferred, the Sub-account(s)
to which you want transfers made, or end the program. The program will
automatically end on the Income Date. We reserve the right to end the
program at any time by sending you a notice one month in advance.
We must receive your written or telephone instructions by 4:00 PM Eastern
Time of the business day before the next scheduled transfer in order for
the new instructions to be in effect for that transfer. We establish
conditions and procedures for telephone instructions for dollar cost
averaging from time to time. The current conditions and procedures appear
in Appendix B, and you will be notified prior to any changes.
We may from time to time offer a variation of the program described above
that applies only to your initial purchase payment and that makes transfers
to the Sub-account(s) you select from a One-Year Guarantee Period that is
only available with dollar cost averaging. This One-Year Guarantee Period
will have a higher interest rate than the regular One-Year Guarantee
Period. We set the transfer time period(s) that you may select which is
generally 6 or 12 months.
We calculate the monthly transfer amount by dividing the purchase payment
amount allocated to the One-Year Guarantee Period by the number of months
in the transfer time period. The last monthly transfer amount also includes
all the interest credited to the One-Year Guarantee Period over the
transfer time period. You may not change the transfer time period and/or
the monthly transfer amount.
Asset Allocation Program. You may create your own asset allocation
portfolio model using the variable Sub-accounts and the Guarantee Periods
of the Fixed Account. Your allocation percentages must total 100% and each
allocation percentage, if not zero, must be at least 5% and a whole number.
Alternatively you may choose one of the following five asset allocation
model portfolios for the Certificate that have been separately developed by
Ibbotson Associates and Standard & Poor's:
o Model A -- Capital Preservation,
o Model B -- Income and Growth,
o Model C -- Moderate Growth,
o Model D -- Growth, and
o Model E -- Aggressive Growth.
If you create your own model or choose one of the models A through E, we
will allocate your initial and subsequent purchase payments among the
specific Sub-accounts used in the applicable model based on the model's Sub-
account percentages.
Before requesting us to apply any model to your Certificate, you should
review its Sub-account allocations to determine that they correspond to
your risk tolerance and time horizons. An optional questionnaire and
scoring system is available for models A through E to help you determine
the model you may wish to select.
For any particular model A through E, the percentage allocations of its Sub-
accounts and the type of broad asset class (e.g., stocks, bonds) of each
Sub-account determines the model's percentage allocations among the broad
asset classes. These percentage allocations among Sub-accounts and broad
asset classes under your Certificate may differ from those used in the same
five models A through E offered under another certificate of ours that are
described in other prospectuses.
Periodically Ibbotson Associates and Standard & Poor's will review models A
through E and may determine that a reconfiguration of the Sub-accounts and
percentage allocations among those Sub-accounts is appropriate. You will
receive notification prior to any reconfiguration.
The Fixed Account is not available in models A through E. You may, however,
allocate initial or subsequent purchase payments, or Certificate Value,
between models A through E and the Fixed Account.
Rebalancing Program. Rebalancing allows you to maintain the percentage of
your Certificate Value allocated to each Sub-account at a pre-set level.
Over time, the variations in each Sub-account's investment results will
shift the balance of your Certificate Value allocations. Under the
rebalancing program, each period, if the allocations change from your
desired percentages, we will automatically transfer your Certificate Value,
including new purchase payments (unless you tell us otherwise), back to the
percentages you specify. Rebalancing maintains your percentage allocations
among Sub-accounts, although it is accomplished by reducing your
Certificate Value allocated to the better performing Sub-accounts.
You may choose to have rebalancing done on a quarterly basis. We will
automatically rebalance the Certificate Value of each Sub-account on the
last day of the calendar quarter to match your current percentage
allocations. We will not charge a transfer fee for rebalancing.
Generally, you may change your allocation percentages, choice of Sub-
accounts, or terminate the program at any time by notifying us in writing.
We must receive your changes 10 days before the end of the calendar
quarter.
Certificate Value allocated to the Fixed Account is not included in the
rebalancing program. After the Income Date, the rebalancing program applies
only to variable annuity payments, and we will rebalance the number of
Annuity Units in each Sub-account. Annuity Units are used to calculate the
amount of each annuity payment.
If your total Certificate Value subject to rebalancing falls below any
minimum value that we may establish, we may prohibit or limit your use of
rebalancing. We may change, terminate, limit or suspend rebalancing at any
time.
Systematic Investment Program. You may make purchase payments for Non-
Qualified Certificates through monthly deductions from your bank account or
payroll. You may elect this program by completing and returning a
systematic investment program application and authorization form to us. You
may obtain an application and authorization form from us or your sales
representative. There is a current minimum of $50 per payment for the
program.
Systematic Withdrawal Program. To the extent permitted by law, if you
enroll in the systematic withdrawal program, we will make monthly,
quarterly, semi-annual or annual distributions directly to you. We will
treat such distributions for federal tax purposes as any other withdrawal
or distribution of Certificate Value. We will also treat such distributions
as partial withdrawals for all purposes under the Certificate, including
the calculation of the amount you would receive if you revoke the
Certificate under the "Right to Revoke" provision. You may make systematic
withdrawals from any Sub-accounts or any Guarantee Period of the Fixed
Account. However, any withdrawal from a Guarantee Period with an original
length of three or more years may be subject to a market value adjustment
(see Appendix A).
In each Certificate Year, your systematic withdrawals and any additional
partial withdrawals you make outside the program will not incur a surrender
charge if the withdrawals do not exceed the "free withdrawal amounts" (see
"Deductions for Surrender Charge"). If any portion of those withdrawals
exceeds the "free withdrawal amounts", the excess amount, if any, is:
(a) In the first Certificate Year, the amount of each partial
withdrawal either under or outside the program which is greater
than any earnings of the Certificate at the time of the
withdrawal, and
(b) In the second or later Certificate Year, any portion of the
current withdrawal amount which is greater than any earnings at
the time of the withdrawal and which, when added to any similar
excess portion of each prior withdrawal made in the same year
either under or outside the program, is greater that the 10%
"free withdrawal amount".
For the first systematic withdrawal payment type (Percentage Method)
described in Appendix C, the prior paragraph will be modified in three ways
only for withdrawals occurring in the first Certificate Year. First, the
"free withdrawal amounts" shall include the Certificate's standard first-
year amount of earnings plus a special additional amount equal to 10% of
the Certificate Value on the date of the first systematic withdrawal, less
earnings. Second, (b) in the prior paragraph, instead of (a), shall apply
in the first Certificate Year. Third, if you revoke the program in the
first Certificate Year, then any subsequent partial withdrawals will
immediately become subject to the standard first-year rule in (a) above
that the "free withdrawal amount" is only earnings.
Unless you specify the Sub-account(s) or the Fixed Account from which you
want withdrawals of Certificate Value made, or if the amount in a specified
Sub-account is less than the predetermined amount, we will make withdrawals
under the program in the manner specified for partial withdrawals in
"Partial Withdrawals and Surrender". We will process all Sub-account
withdrawals under the program by canceling Accumulation Units equal in
value to the amount to be distributed to you and to the amount of any
applicable surrender charge.
You may combine the program with all other programs except the systematic
investment program.
It may not be advisable to participate in the systematic withdrawal program
and incur a surrender charge and income taxes when making additional
purchase payments under the Certificate.
Appendix C describes the systematic withdrawal program in greater detail,
including the five payment types currently available.
THE CERTIFICATES
Variable Account Value
The Variable Account Value for a Certificate is the sum of the value of
each Sub-account to which you have allocated values. We determine the value
of each Sub-account at any time by multiplying the number of Accumulation
Units attributable to that Sub-account by its Accumulation Unit value.
Each purchase payment you make results in the credit of additional
Accumulation Units to your Certificate and the appropriate Sub-account. The
number of additional units for any Sub-account will equal the amount
allocated to that Sub-account divided by the Accumulation Unit value for
that Sub-account at the time of investment.
Valuation Periods
We determine the value of the Variable Account each valuation period using
the net asset value of the Eligible Fund shares. A valuation period is the
period generally beginning at 4:00 P.M. (EST), or any other time for the
close of trading on the New York Stock Exchange, and ending at the close of
trading for the next business day. The New York Stock Exchange is currently
closed on weekends, New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Net Investment Factor
Your Variable Account Value will fluctuate with the investment results of
the underlying Eligible Funds you have selected. In order to determine how
these fluctuations affect value, we use an Accumulation Unit value. Each
Sub-account has its own Accumulation Units and value per unit. We determine
the unit value applicable during any valuation period at the end of that
period.
When we first purchased Eligible Fund shares on behalf of the Variable
Account, we valued each Accumulation Unit at a specified dollar amount. The
Unit value for each Sub-account in any valuation period thereafter is
determined by multiplying the value for the prior period by a net
investment factor. This factor may be greater or less than 1.0; therefore,
the Accumulation Unit may increase or decrease from valuation period to
valuation period. We calculate a net investment factor for each Sub-account
according to the following formula (a b) - c, where:
(a) is equal to:
(i) the net asset value per share of the Eligible Fund at the end of
the valuation period; plus
(ii) the per share amount of any distribution the Eligible Fund made
if the "ex-dividend" date occurs during that same valuation
period.
(b) is the net asset value per share of the Eligible Fund at the end of
the prior valuation period.
(c) is equal to:
(i) the valuation period equivalent of the mortality and expense
risk charge; plus
(ii) the valuation period equivalent of the daily distribution
charge; plus
(iii) a charge factor established by us for any taxes resulting
from the operations of that Sub-account (currently zero).
For Certificates issued to our employees and other persons specified in
"Sales of the Certificates", the mortality and expense risk charge in
(c)(i) above is .35% and the daily distribution charge in (c)(ii) above is
eliminated. We may eliminate the daily distribution charge in (c)(ii) above
for certain Certificates we issue in an internal exchange or transfer.
Modification of the Certificate
Only our President or Secretary may agree to alter the Certificate or waive
any of its terms. A change may be made to the Certificate if there have
been changes in applicable law or interpretation of law. Any changes will
be made in writing and with your consent, except as may be required by
applicable law.
Right to Revoke
You may return the Certificate within 10 days after you receive it by
delivering or mailing it to us. The postmark on a properly addressed and
postage-prepaid envelope determines if a Certificate is returned within the
period. We will treat the returned Certificate as if we never issued it and
we will refund the Certificate Value. You bear the investment risk during
the period prior to our receiving your request for cancellation.
DEATH PROVISIONS FOR NON-QUALIFIED CERTIFICATES
Death of Primary Owner, Joint Owner or Annuitant
If, the Certificate is In Force, you, any joint Certificate Owner or the
Annuitant dies, we will treat the Designated Beneficiary as the Certificate
Owner after such a death. The Designated Beneficiary will be the first
person among the following who is alive on the date of death: you; the
joint Certificate Owner; the primary beneficiary; the contingent
beneficiary; and if none of the prior persons are alive, your estate. If
you and the joint Certificate Owner are both alive, both of you will be the
Designated Beneficiary.
If the Annuitant was the decedent and he or she was not a Certificate
Owner, and you and any Joint Certificate Owner are all natural persons, the
Designated Beneficiary may surrender the Certificate after the Annuitant's
death for the Death Benefit. If the Designated Beneficiary elects instead
to continue the Certificate until another death occurs, the Designated
Beneficiary may surrender the Certificate for the Death Benefit after that
death. All of "Death Provisions", including this paragraph which gives the
Designated Beneficiary the option of surrendering or continuing the
Certificate after the death of a non-Owner Annuitant, will apply to that
subsequent death. If the Certificate is continued after the death of a non-
Owner Annuitant, (a) the new Annuitant will be any living contingent
Annuitant, or the person you designate in writing within 60 days of death,
or you and (b) you will continue to be the Certificate Owner and treated as
the Designated Beneficiary.
The following two paragraphs apply if the decedent is the Certificate Owner
or any joint Certificate Owner and the second paragraph applies if there is
a non-natural Certificate Owner such as a trust and the decedent is the
Annuitant.
If the decedent's surviving spouse is the sole Designated Beneficiary, he
or she will automatically become the new sole primary Certificate Owner as
of the decedent's date of death. If the decedent was the Annuitant, the new
Annuitant will be any living contingent annuitant, otherwise the surviving
spouse. If the surviving spouse does not surrender the Certificate for the
Death Benefit, it will continue until he or she or the Annuitant, if a
different person, dies. Except for this paragraph, all of "Death Provisions
for Non-Qualified Certificates" will apply to that subsequent death.
In all other cases (i.e., either when a sole Designated Beneficiary is
other than the decedent's surviving spouse or when there is more than one
Designated Beneficiary), the Death Benefit will apply whether the
Designated Beneficiary chooses to surrender the Certificate or continue it
for a period not to exceed five years from the date of death. During this
continuation period, the Designated Beneficiary may exercise all ownership
rights, including the right to make transfers or partial withdrawals and/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
five-year continuation period, we will automatically end it then by paying
the Certificate Value less any premium taxes to the Designated Beneficiary.
If the Designated Beneficiary is not alive then, we will pay any person(s)
named by the Designated Beneficiary in writing; otherwise we will pay the
Designated Beneficiary's estate.
Death Benefit
The Covered Persons shall be you, any joint Certificate Owner, and the
Annuitant. If there is a non-natural Certificate Owner such as a trust, the
Annuitant shall be the sole Covered Person.
We will calculate the Death Benefit when the first Covered Person dies
while the Certificate is In Force and we have received due proof of death
and a written request from the Designated Beneficiary to surrender or
continue the Certificate. In the following two instances, if the Designated
Beneficiary elects to continue the Certificate rather than surrender it,
the Death Benefit calculation will not occur and will automatically be
deferred to a subsequent death:
o when the decedent's surviving spouse is the sole Designated
Beneficiary; if he or she chooses to continue the Certificate
rather than surrender it for the Death Benefit, the Death Benefit
may be calculated following the death of that surviving spouse or
the Annuitant, if different; and
o when the decedent is a non-Owner Annuitant and you and any joint
Certificate Owner(s) are all natural persons; if you choose to
continue the Certificate rather than surrender it for the Death
Benefit, the Death Benefit may be calculated following your
death, the death of any joint Certificate Owner, or the new
Annuitant.
We will calculate the Death Benefit only once during the life of your
Certificate. The Death Benefit is the greatest of the following three
amounts at the time we receive due proof of death and the Designated
Beneficiary's election request in writing:
o the current "net purchase payment death benefit",
o the current "greatest Anniversary value", or
o the current Certificate Value.
The Death Benefit amount does not change your Certificate Value at any time
prior to the death of a Covered Person and does so after such a death only
under the conditions described below.
If the Designated Beneficiary is surrendering the Certificate for the Death
Benefit, we will pay the greatest of the three amounts defined above less
any premium taxes. If (a) the Designated Beneficiary is continuing the
Certificate and the Death Benefit calculation is applicable to that
continuation and (b) on the date we receive due proof of death and the
written election to continue the Certificate, the current "net purchase
payment death benefit" and/or the current "greatest Anniversary value" is
greater than the current Certificate Value, then we will add the higher
difference in amounts to the current Certificate Value. We allocate this
additional amount to the Variable Account and/or the Fixed Account based on
the current purchase payment allocation selection then in effect.
Net Purchase Payment Death Benefit. The "net purchase payment death
benefit" is:
o the initial purchase payment, plus
o any additional purchase payments made prior to the Death Benefit
calculation date, less
o any partial withdrawals (including any applicable surrender
charges) made prior to the Death Benefit calculation date.
We calculate the "net purchase payment death benefit" daily for each
Covered Person so that it will be available if the Death Benefit
calculation is applicable to that person's death.
Greatest Anniversary Value. On the Certificate Date, we will determine if
any Covered Person is age 80 or older. If so, the "greatest Anniversary
value" will not apply upon his or her death. Thus, for purposes of the
calculation of the Death Benefit, described in "Standard Death Benefit"
above, the "greatest Anniversary value" shall be zero. This zero treatment
effectively changes the Death Benefit applicable to the particular Covered
Person from the greatest of three defined amounts to the greater of just
two of those amounts.
If any Covered Person is under age 80 on the Certificate Date, we calculate
the "greatest Anniversary value" on Certificate Anniversaries with
adjustments between Certificate Anniversaries if you make a purchase
payment or partial withdrawal. We do this calculation for each Covered
Person under the age of 80 on the Certificate Date so that the "greatest
Anniversary value" will be available if the Death Benefit calculation is
applicable to that person's death. The "greatest Anniversary value" for
each applicable Covered Person initially equals the Certificate Value on
the first Certificate Anniversary. Then, each following day in the second
Certificate Year, we will adjust the "greatest Anniversary value" by adding
any additional purchase payments made that day, and subtracting the
following amount for each partial withdrawal made that day:
o the amount of the partial withdrawal (including any applicable
surrender charge),
o divided by the Certificate Value immediately before the withdrawal,
and
o multiplied by the "greatest Anniversary value" immediately before
the withdrawal.
On the second and each subsequent Certificate Anniversary, we compare the
current Certificate Value to the "greatest Anniversary value", adjusted as
described above if you made any purchase payments and/or partial
withdrawals during the Certificate Year ending on that Certificate
Anniversary. If the current Certificate Value exceeds the adjusted
"greatest Anniversary value", the current Certificate Value will become the
new "greatest Anniversary value". Except for the two instances relating to
adding or changing a Covered Person that are described in the last two
paragraphs of this section, our last Certificate Anniversary calculation
for each applicable Covered Person will occur:
o If the Covered Person dies prior to his or her 81st birthday, on
the Certificate Anniversary before that person's death, or
o If the Covered Person dies on or after his or her 81st birthday, on
the Certificate Anniversary before his or her 81st birthday.
On the last Certificate Anniversary specified in the prior two sentences
that is applicable to a Covered Person, we will set that Covered Person's
last "greatest Anniversary value" equal to the greater of his or her
current Certificate Value and the adjusted "greatest Anniversary value".
Between the last Certificate Anniversary and the date of death, the last
"greatest Anniversary value" for each applicable Covered Person will not
change unless you make purchase payments and/or partial withdrawals, in
which case the person's last value will be adjusted as described above.
Between the date of death and the calculation of the Death Benefit upon
receipt of the Designated Beneficiary's request to surrender or continue
the Certificate for the Death Benefit, the "greatest Anniversary value" for
each applicable Covered Person last determined before death under the prior
sentence will not change unless you make purchase payments and/or partial
withdrawals, in which case the person's value will be further adjusted on a
dollar-for-dollar basis as described above for the "net purchase payment
death benefit".
If (a) at least one current Covered Person has not yet reached the
Certificate Anniversary before his or her 81st birthday and (b) you either
add or replace any Covered Person with a person who is age 80 or older as
of the Certificate Date, the "greatest Anniversary value" will not apply
upon the new Covered Person's death. Thus, for purposes of the calculation
of the Death Benefit described in "Death Benefit" above, the "greatest
Anniversary value" shall be zero. This zero treatment effectively changes
the Death Benefit applicable to the new Covered Person from the greatest of
three defined amounts to the greater of only two of those amounts.
If each Covered Person lives until the Certificate Anniversary before his
or her 81st birthday and then you add or replace a Covered Person, the
current "greatest Anniversary value" for the youngest of the other Covered
Persons will become the "greatest Anniversary value" for the new Covered
Person. If this value is zero, it will never change from zero; this zero
treatment effectively changes the Death Benefit applicable to the new
Covered Person from the greatest of three defined amounts to the greater of
only two of those amounts. If the "greatest Anniversary value" for the new
Covered Person is greater than zero, it will not change unless you make
purchase payments and/or partial withdrawals, in which case we will adjust
the value in the same manner as is described in the two paragraphs above
that begin with "Between".
Systematic Withdrawal and Systematic Investment Programs. After we receive
due proof of death or receive information about a death that we reasonably
believe to be true, we will end any systematic withdrawal program and/or
systematic investment program except as follows:
o for systematic withdrawals, the Designated Beneficiary is a
Certificate Owner who requested us to begin the program and/or has
been the sole or joint recipient of the payments
o for systematic investments, the decedent is a non-owner Annuitant.
If we end your systematic withdrawal program based on the above but have
paid any systematic withdrawal(s) after death to a person other than the
Designated Beneficiary, we will use reasonable efforts to get the recipient
to return the systematic withdrawal amount(s) so that it may be paid to the
Designated Beneficiary or added to the Certificate Value if the Designated
Beneficiary elects to continue the Certificate. If the recipient does not
return the payment(s), we are not responsible to pay the Designated
Beneficiary for those payments.
Payment of Death Benefit
Instead of receiving a lump sum, you or any Designated Beneficiary may
direct us in writing to pay any surrender Death Benefit of $5,000 or more
under an annuity payment option that meets the following:
o the first payment to the Designated Beneficiary must be made no
later than one year after the date of death;
o payments must be made over the life of the Designated Beneficiary
or over a period not extending beyond that person's life
expectancy; and
o any payment option that provides for payments to continue after the
death of the Designated Beneficiary will not allow the successor
payee to extend the period of time during which the remaining
payments are to be made.
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
If the Annuitant dies while the Certificate is In Force, the Designated
Beneficiary will control the Certificate. If the Designated Beneficiary
chooses in writing to surrender the Certificate for the Death Benefit, we
will pay the greatest of the three amounts determined in "Death Benefit"
above, less any premium taxes. This surrendered Death Benefit may be
applied to an annuity payment option in accordance with "Payment of Death
Benefit" above.
If the Annuitant's surviving spouse is the sole Designated Beneficiary and
he or she chooses to continue the Certificate instead of surrendering it
for the Death Benefit, the Death Benefit will be calculated following his
or her death in the same manner as the non-qualified Certificate Death
Benefit.
If any other Designated Beneficiary chooses to continue the Certificate
instead of surrendering it for the Death Benefit, both the Death Benefit
calculation and any addition to the current Certificate Value will be
handled in the same manner as the non-qualified Certificate Death Benefit.
The Certificate may continue for the time period permitted by the Internal
Revenue Code provisions applicable to the particular Qualified Plan.
During this continuation 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 continuation period, we will automatically end it then by paying
the Certificate Value less any premium taxes to the Designated Beneficiary.
If the Designated Beneficiary is not alive then, we will pay any person(s)
named by the Designated Beneficiary in writing; otherwise we will pay the
Designated Beneficiary's estate.
CERTIFICATE OWNERSHIP
The Certificate Owner shall be the person designated in the application and
you may exercise all the rights of the Certificate. Joint Certificate
Owners are permitted. Contingent Certificate Owners are not permitted.
You may direct us in writing to change the Certificate Owner, primary
beneficiary, contingent beneficiary or contingent annuitant. An irrevocably-
named person may be changed only with the written consent of that person.
Because a change of Certificate Owner by means of a gift may be a taxable
event, you should consult a competent tax adviser as to the tax
consequences resulting from such a transfer.
Any Qualified Certificate may have limitations on transfer of ownership.
You should consult the plan administrator and a competent tax adviser as to
the tax consequences resulting from such a transfer.
ASSIGNMENT
You may assign the Certificate at any time. You must file a copy of any
assignment with us. Your rights and those of any revocably-named person
will be subject to the assignment. A Qualified Certificate may have
limitations on your ability to assign the Certificate.
Because an assignment may be a taxable event, you should consult a
competent tax adviser as to the tax consequences resulting from any such
assignment.
PARTIAL WITHDRAWALS AND SURRENDER
You may make partial withdrawals from the Certificate by notifying us in
writing. The minimum withdrawal amount is $300. We may permit a lesser
amount with the systematic withdrawal program. If the Certificate Value
after a partial withdrawal would be below $2,500, we will treat the request
as a withdrawal of only the amount over $2,500. The amount withdrawn will
include any applicable surrender charge and may be greater than the amount
of the surrender check requested. Unless you specify otherwise, we will
deduct the total amount withdrawn from all Sub-accounts of the Variable
Account in the ratio that the value in each Sub-account bears to the total
Variable Account Value. If there is no or insufficient value in the
Variable Account, the amount surrendered, or the insufficient portion, will
be deducted from the Fixed Account in the ratio that each Guarantee
Period's value bears to the total Fixed Account Value.
You may totally surrender the Certificate by notifying us in writing.
Surrendering the Certificate will end it. Upon surrender, you will receive
the Certificate Withdrawal Value.
We will pay the amount of any surrender within seven days of receipt of
your request. Alternatively, you may purchase for yourself an annuity
payment option with any surrender benefit of at least $5,000. If the
Certificate Owner is not a natural person, we must consent to the selection
of an annuity payment option.
You may not surrender annuity options based on life contingencies after
annuity payments have begun. You may surrender Option A, described in
"Annuity Options" below, which is not based on life contingencies, if you
have selected a variable payout.
Because of the potential tax consequences of a full or partial surrender,
you should consult a competent tax adviser regarding a surrender.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Income Date and the Certificate is In
Force, we will begin payments to the Annuitant under the Annuity Option or
Options you have chosen. We determine the amount of the initial payment(s)
on the Income Date by using the following formula:
o your Certificate Value,
o plus any positive or negative market value adjustment
applicable to any Fixed Account Value (see Appendix A),
o less any premium taxes not previously deducted, and
o less any applicable certificate maintenance charge on the Income
Date.
Annuity Option and Income Date
You may select an Annuity Option and Income Date at the time of application
or later. Any Income Date must be:
o for variable annuity options, not earlier than the first day after
the Certificate Date,
o for fixed annuity options, not earlier than the first Certificate
Anniversary, and
o not later than the earlier of
(i) the later of the Annuitant's 90th birthday and the 10th
Certificate Anniversary and
(ii) any maximum date permitted under state law.
If you do not select an Annuity Option, we automatically choose Option B.
If you do not select an Income Date for the Annuitant, the Income Date will
automatically be the latest date specified above.
You may choose or change an Annuity Option or the Income Date by writing to
us at least 30 days before the Income Date.
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.
You may arrange other options if we agree. Each option is available in two
forms - as a variable annuity for use with the Variable Account and as a
fixed annuity for use with our general account Fixed Account. Variable
annuity payments will fluctuate. Fixed annuity payments will not fluctuate.
We determine the dollar amount of each fixed annuity payment by:
(a) deducting from the Fixed Account Value, increased or decreased by
a market value adjustment described in Appendix A, any
premium taxes not previously deducted and any applicable
certificate maintenance charge;
(b) dividing the remainder by $1,000; and
(c) multiplying the result by the greater of:
(i) the applicable factor shown in the appropriate table in
the Certificate; and
(ii) the factor we currently offer at the time annuity
payments begin. We may base this current factor on the sex
of the payee unless we are prohibited by law from doing so.
If you do not select an Annuity Option, we will automatically apply Option
B. Unless you choose otherwise, we will apply:
(a) Variable Account Value, less any premium taxes not previously
deducted and less any applicable certificate maintenance charge,
in its entirety to a variable annuity option, and
(b) Fixed Account Value, increased or decreased by a market
value adjustment described in Appendix A less any premium taxes
not previously deducted, to a fixed annuity option.
The same amount applied to a variable option and a fixed option will
produce a different initial annuity payment and different subsequent
payments.
The payee is the person who will receive the sum payable under a payment
option. Any payment option that provides for payments to continue after the
death of the payee will not allow the successor payee to extend the period
of time over which the remaining payments are to be made.
If the amount available under any variable or fixed option is less than
$5,000, we reserve the right to pay such amount in one sum to the payee in
lieu of the payment otherwise provided for.
We will make annuity payments monthly unless you have requested in writing
quarterly, semi-annual or annual payments. However, if any payment would be
less than $100, we have the right to reduce the frequency of payments to a
period that will result in each payment being at least $100.
Option A: Income For a Fixed Number of Years. We will pay an annuity for a
chosen number of years, not less than 5 nor more than 50. You may choose a
period of years over 30 only if it does not exceed the difference between
age 100 and the Annuitant's age on the date of the first payment. We refer
to Option A as Preferred Income Plan (PIP) when we are making variable
annuity payments. At any time while we are making variable annuity
payments, the payee may elect to receive the following amount:
(a) the present value of the remaining variable annuity payments,
commuted at the interest rate used to create the annuity factor
for this option (this interest rate for variable annuity payments
is also referred to as the assumed investment rate (AIR) or
benchmark rate and it is 5% per year, unless you chose 3% per
year when you selected the option; less
(b) any surrender charge due by treating the value defined in (a) as
a total surrender.
Instead of receiving a lump sum, the payee may elect another payment option
and we will not reduce the amount applied to the new option by the
surrender charge above.
If, at the death of the payee, Option A payments, whether variable or
fixed, have been made for fewer than the chosen number of years:
o we will continue payments during the remainder of the period to
the successor payee; or
o the successor payee may elect to receive in a lump sum the
present value of the remaining payments, commuted at the interest
rate used to create the annuity factor for this option.
The mortality and expense risk charge is deducted during the Option A
payment period if a variable payout has been selected, but we have no
mortality risk during this period.
You may choose a "level monthly" payment option for variable payments under
Option A. Under this option, we convert your annual payment into 12 equal
monthly payments. Thus the monthly payment amount changes annually instead
of monthly. We will determine each annual payment as described below in
"Variable Annuity Payment Values", place each annual payment in our general
account, and distribute it in 12 equal monthly payments. The sum of the 12
monthly payments will exceed the annual payment amount because of an
interest rate factor we use, which may vary from year to year but will not
be less than 2.0% per year. If the payments are commuted, we will use the
commutation method described above for calculating the present value of
remaining annual payments and use the interest rate that determined the
current 12 monthly payments to commute any unpaid monthly payments.
Currently, we permit the original payee to make a number of changes to
variable payments under Option A. No new change is permitted if a change
has occurred with the prior year (i.e., the prior 365 days). For regular
PIPs, the permissible changes, which can be made at any time followed by
the yearly waiting period, include:
o shortening or lengthening the period certain provided the payments
already made and those to be made meet the 5 - 50 year and age 100
limits described above;
o changing to a life option - note that this option does not allow
the payee to end the payments for a commuted value;
o changing to the "level monthly" option;
o changing the AIR or benchmark rate;
o changing the payment frequency; and
o changing the day of the month on which payment occurs.
For "level monthly" PIPs, the permissible changes, which can only be made
on the anniversary date we convert your annual payment into 12 equal
monthly payments, include:
o shortening or lengthening the period certain provided the payments
already made and those to be made meet the 5 - 50 year and age 100
limits described above;
o changing to a life option - note that this option does not allow
the payee to end the payments for a commuted value;
o changing to the regular PIP option;
o changing the AIR or benchmark rate; and
o changing the day of the month on which payment occurs.
See "Annuity Payments" for the manner in which Option A may be taxed.
Option B: Life Income with 10 Years of Payments Guaranteed. We will pay an
annuity during the lifetime of the payee. If, at the death of the payee,
payments have been made for fewer than 10 years:
o we will continue payments during the remainder of the period to
the successor payee; or
o the successor payee may elect to receive in a lump sum the
present value of the remaining payments, commuted at the interest
rate used to create the annuity factor for this option. For the
variable annuity, this interest rate is 5% per year, unless you
chose 3% per year when you selected the option.
The amount of the annuity payments will depend on the age of the payee on
the Income Date and it may also depend on the payee's sex.
Option C: Joint and Last Survivor Income. We will pay an annuity for as
long as either the payee or a designated second natural person is alive.
The amount of the annuity payments will depend on the age of both persons
on the Income Date and it may also depend on each person's sex. It is
possible under this option to receive only one annuity payment if both
payees die after the receipt of the first payment, or to receive only two
annuity payments if both payees die after receipt of the second payment,
and so on.
Variable Annuity Payment Values
We determine the amount of the first variable annuity payment by using an
annuity purchase rate based on an assumed annual investment rate (AIR or
benchmark rate) of 5% per year, unless you choose 3% in writing. (See below
and "Variable Annuity Payment Values" in the Statement of Additional
Information for more information on AIRs.) 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 rate.
The total dollar amount of each variable annuity payment will be equal to:
(a) the sum of all Sub-account payments, less
(b) the pro-rata amount of the annual certificate maintenance charge.
(See "Deductions for Certificate Maintenance Charge" for the
circumstances under which this charge will be waived under
variable payments Option A.)
Currently, there is no limit on the number of times or the frequency with
which a payee may instruct us to change the Sub-account(s) used to
determine the amount of the variable annuity payments. Currently, there is
also no charge for such transfers.
If you apply an amount of Sub-account value to a particular payment option,
your initial payment will be smaller if you select a 3% AIR instead of a 5%
AIR but, all other things being equal, your subsequent 3% AIR payments have
the potential for increasing in amount by a larger percentage and for
decreasing in amount by a smaller percentage. Note that these changes in
payment amounts are on a percentage basis and do not illustrate when, if
ever, the 3% AIR payment amount might become larger than the 5% AIR payment
amount. Note though that if you select Option A (Income for a Fixed Number
of Years) 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.
Proof of Age, Sex, and Survival of Annuitant
We may require proof of age, sex or survival of any payee upon whose age,
sex or survival payments depend. If the age or sex has been misstated, we
will compute the amount payable based on the correct age and sex. If income
payments have begun, we will pay in full any underpayments with the next
annuity payment and deduct any overpayments, unless repaid in one sum,
from future annuity payments until we are repaid in full.
SUSPENSION OF PAYMENTS
We reserve the right to postpone surrender payments from the Fixed Account
for up to six months. We also reserve the right to suspend or postpone any
type of payment from the Variable Account for any period when:
o the New York Stock Exchange is closed other than customary weekend
or holiday closings;
o trading on the Exchange is restricted;
o 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
o 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 prior two conditions described above exist.
YEAR 2000 MATTERS
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous
results by or at the year 2000. This potential problem has become known as
the "Year 2000 issue". The Year 2000 issue affects virtually all companies
and organizations.
Computer applications that are affected by the Year 2000 issue could impact
our business functions in various ways, ranging from a complete inability
to perform critical business functions to a loss of productivity in varying
degrees. Likewise, the failure of some computer applications could have no
impact on critical business functions.
We are assessing and addressing the Year 2000 issue by implementing a four-
step plan. The first two steps involve conducting an inventory of all
computer applications which support our business functions and prioritizing
computer applications which are affected by the Year 2000 issue, based upon
the degree of impact each application has on the functioning of our
business units. The first two steps of the plan are substantially complete.
The final two steps of the four-step plan involve repairing and replacing
affected computer programs and testing them for Year 2000 readiness. For
computer applications which are "mission critical" (i.e., their failure
would result in our complete inability to perform critical business
functions), we expect to complete the final two steps of the plan by June
30, 1999. We expect to complete the repair and replacement of non-critical
computer applications by December 31, 1999.
We believe the Year 2000 issue could have a material impact on our
operations if we do not implement the four-step plan in a timely manner.
However, based upon our progress, we believe we will meet our timetable,
and the Year 2000 issue will not pose significant operational problems for
our computer systems.
We do not expect the cost of addressing the Year 2000 issue to be material
to our financial condition or results of operations.
TAX STATUS
Introduction
This discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax adviser. We make no
attempt to consider any applicable state or other tax laws. Moreover, this
discussion is based upon our understanding of current federal income tax
laws as they are currently interpreted. We make no representation regarding
the likelihood of continuation of those current federal income tax laws or
of the current interpretations by the Internal Revenue Service.
The Certificate is for use by individuals in retirement plans which may or
may not be Qualified Plans under the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"). The ultimate effect of federal
income taxes on the Certificate Value, on annuity payments, and on the
economic benefit to the Certificate Owner, Annuitant or Designated
Beneficiary depends on the type of retirement plan for which you purchase
the Certificate and upon the tax and employment status of the individual
concerned.
Taxation of Annuities in General
Section 72 of the Code governs taxation of annuities in general. There are
no income taxes on increases in the value of a Certificate until a
distribution occurs, in the form of a full surrender, a partial surrender,
an assignment or gift of the Certificate, or annuity payments. A trust or
other entity owning a Non-Qualified Certificate, other than as an agent for
an individual, is taxed differently; increases in the value of a
Certificate are taxed yearly whether or not a distribution occurs.
Surrenders, Assignments and Gifts. If you fully surrender your Certificate,
the portion of the payment that exceeds your cost basis in the Certificate
is subject to tax as ordinary income. For Non-Qualified Certificates, the
cost basis is generally the amount of the purchase payments made for the
Certificate. For Qualified Certificates, the cost basis is generally zero
and the taxable portion of the surrender payment is generally taxed as
ordinary income subject to special 5-year income averaging for lump-sum
distributions received before January 1, 2000. A Designated Beneficiary
receiving a lump sum surrender benefit after your death or the death of the
Annuitant is taxed on the portion of the amount that exceeds your cost
basis in the Certificate. If the Designated Beneficiary elects that the
lump sum not be paid in order to receive annuity payments that begin within
one year of the decedent's death, different tax rules apply. See "Annuity
Payments" below. For Non-Qualified Certificates, the tax treatment
applicable to Designated Beneficiaries may be contrasted with the income-
tax-free treatment applicable to persons inheriting and then selling mutual
fund shares with a date-of-death value in excess of their basis.
Partial withdrawals received under Non-Qualified Certificates prior to
annuitization are first included in gross income to the extent Certificate
Value exceeds purchase payments. Then, to the extent the Certificate Value
does not exceed purchase payments, such withdrawals are treated as a non-
taxable return of principal to you. For partial withdrawals under a
Qualified Certificate, payments are treated first as a non-taxable return
of principal up to the cost basis and then a taxable return of income.
Since the cost basis of Qualified Certificates is generally zero, partial
surrender amounts will generally be fully taxed as ordinary income.
If you assign or pledge a Non-Qualified Certificate, you will be treated as
if you had received the amount assigned or pledged. You will be subject to
taxation under the rules applicable to partial withdrawals or surrenders.
If you give away your Certificate to anyone other than your spouse, you are
treated for income tax purposes as if you had fully surrendered the
Certificate.
A special computational rule applies if we issue to you, during any
calendar year, two or more Certificates, or one or more Certificates and
one or more of our other annuity contracts. Under this rule, the amount of
any distribution includable in your gross income is determined under
Section 72(e) of the Code. All of the contracts will be treated as one
contract. We believe this means the amount of any distribution under any
one Certificate will be includable in gross income to the extent that at
the time of distribution the sum of the values for all the Certificates or
contracts exceeds the sum of each contract's cost basis.
Annuity Payments. We determine the non-taxable portion of each variable
annuity payment by dividing the cost basis of your values allocated to
Variable Account Value by the total number of expected payments. We
determine the non-taxable portion of each fixed annuity payment with an
"exclusion ratio" formula which establishes the ratio that the cost basis
of your values allocated to Fixed Account Value bears to the total expected
value of annuity payments for the term of the annuity. The remaining
portion of each payment is taxable. Such taxable portion is taxed at
ordinary income rates. For Qualified Certificates, the cost basis is
generally zero. With annuity payments based on life contingencies, the
payments will become fully taxable once the payee lives longer than the
life expectancy used to calculate the non-taxable portion of the prior
payments. Because variable annuity payments can increase over time and
because certain payment options provide for a lump sum right of
commutation, it is possible that the IRS could determine that variable
annuity payments should not be taxed as described above but instead should
be taxed as if they were received under an agreement to pay interest. This
determination would result in a higher amount (up to 100%) of certain
payments being taxable.
With respect to the "level monthly" payment option available under Annuity
Option A, pursuant to which each annual payment is placed in our general
account and paid out with interest in 12 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.
Following any change by the payee to variable annuity payments under Option
A, other than a change of the payment day of the month or a change from
regular PIP to "level monthly" PIP (or vice versa) where the remaining
payment length stays the same, the non-taxable portion of each payment will
be recalculated in accordance with IRS standards.
Penalty Tax. Payments received by you, Annuitants, and Designated
Beneficiaries under Certificates may be subject to both ordinary income
taxes and a penalty tax equal to 10% of the amount received that is
includable in income. The penalty tax is not imposed on the following
amounts received:
o after the taxpayer attains age 59-1/2;
o in a series of substantially equal payments made for life or life
expectancy;
o after the death of the Certificate Owner (or, where the Certificate
Owner is not a human being, after the death of the Annuitant);
o if the taxpayer becomes totally and permanently disabled; or
o under a Non-Qualified Certificate's annuity payment option that
provides for a series of substantially equal payments; provided
only that one purchase payment is made to the Certificate, that the
Certificate is not issued as a result of a Section 1035 exchange,
and that the first annuity payment begins in the first Certificate
Year.
Income Tax Withholding. We are required to withhold federal income taxes on
taxable amounts paid under Certificates unless the recipient elects not to
have withholding apply. We will notify recipients of their right to elect
not to have withholding apply. See "Tax-Sheltered Annuities" (TSAs) for an
alternative type of withholding that may apply to distributions from TSAs
that are eligible for rollover to another TSA or an individual retirement
annuity or account (IRA).
Section 1035 Exchanges. You may purchase a Non-Qualified Certificate with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is our understanding that in such an event:
o the new Certificate will be subject to the distribution-at-death
rules described in "Death Provisions for Non-Qualified
Certificates";
o 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 10 years prior to the distribution; and
o purchase payments made before August 14, 1982 and the income
allocable to them will, following an exchange, continue to receive
the following "grandfathered" tax treatment under prior law:
(i) the penalty tax does not apply to any distribution;
(ii) partial withdrawals are treated first as a non-taxable
return of principal and then a taxable return of income;
and
(iii) assignments are not treated as surrenders subject to
taxation. We base our understanding of the above
principally on legislative reports prepared by the Staff
of the Congressional Joint Committee on Taxation.
Diversification Standards. The U.S. Secretary of the Treasury has issued
regulations that set standards for diversification of the investments
underlying variable annuity contracts (other than pension plan contracts).
The Eligible Funds intend to meet the diversification requirements for the
Certificate, as those requirements may change from time to time. If the
diversification requirements are not satisfied, the Certificate will not be
treated as an annuity contract. As a consequence, income earned on a
Certificate would be taxable to you in the year in which diversification
requirements were not satisfied, including previously non-taxable income
earned in prior years. As a further consequence, we could be subjected to
federal income taxes on assets in the Variable Account.
The Secretary of the Treasury announced in September 1986 that he expects
to issue regulations which will prescribe the circumstances in which your
control of the investments of a segregated asset account may cause you,
rather than us, to be treated as the owner of the assets of the account.
The regulations could impose requirements that are not reflected in the
Certificate. We, however, have reserved certain rights to alter the
Certificate and investment alternatives so as to comply with such
regulations. Since no regulations have been issued, there can be no
assurance as to the content of such regulations or even whether application
of the regulations will be prospective. For these reasons, you are urged to
consult with your tax adviser.
Qualified Plans
The Certificate is for use with several types of Qualified Plans. The tax
rules applicable to participants in such Qualified Plans vary according to
the type of plan and the terms and conditions of the plan itself.
Therefore, we do not attempt to provide more than general information about
the use of the Certificate with the various types of Qualified Plans.
Participants under such Qualified Plans as well as Certificate Owners,
Annuitants, and Designated Beneficiaries are cautioned that the rights of
any person to any benefits under such Qualified Plans may be subject to the
terms and conditions of the plans themselves regardless of the terms and
conditions of the Certificate issued in connection therewith. Following are
brief descriptions of the various types of Qualified Plans and of the use
of the Certificate in connection with them. Purchasers of the Certificate
should seek competent advice concerning the terms and conditions of the
particular Qualified Plan and use of the Certificate with that Plan.
Tax-Sheltered Annuities
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts
and, subject to certain contribution limitations, exclude the amount of
purchase payments from gross income for tax purposes. However, such
purchase payments may be subject to Social Security (FICA) taxes. This type
of annuity contract is commonly referred to as a "Tax-Sheltered Annuity"
(TSA).
Section 403(b)(11) of the Code contains distribution restrictions.
Specifically, benefits may be paid, through surrender of the Certificate or
otherwise, only:
(a) when the employee attains age 59-1/2, separates from service, dies
or becomes totally and permanently disabled (within the meaning of
Section 72(m)(7) of the Code) or
(b) in the case of hardship. A hardship distribution must be of
employee contributions only and not of any income attributable to
such contributions.
Section 403(b)(11) does not apply to distributions attributable to assets
held as of December 31, 1988. Thus, it appears that the law's restrictions
would apply only to distributions attributable to contributions made after
1988, to earnings on those contributions, and to earnings on amounts held
as of December 31, 1988. The Internal Revenue Service has indicated that
the distribution restrictions of Section 403(b)(11) are not applicable when
TSA funds are being transferred tax-free directly to another TSA issuer,
provided the transferred funds continue to be subject to the Section
403(b)(11) distribution restrictions.
If you have requested a distribution from a Certificate, we will notify you
if all or part of such distribution is eligible for rollover to another TSA
or to an individual retirement annuity or account (IRA). Any amount
eligible for rollover treatment will be subject to mandatory federal income
tax withholding at a 20% rate unless you direct us in writing to transfer
the amount as a direct rollover to another TSA or IRA.
Individual Retirement Annuities
Sections 408(b) and 408A of the Code permit eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" and "Roth IRA", respectively. These individual
retirement annuities are subject to limitations on the amount which may be
contributed, the persons who may be eligible to contribute, and on the time
when distributions may commence. In addition, distributions from certain
types of Qualified Plans may be placed on a tax-deferred basis into a
Section 408(b) Individual Retirement Annuity.
Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such retirement
plans may permit the purchase of the Certificate to provide benefits under
the plans.
Deferred Compensation Plans With Respect to Service for State and Local
Governments
Section 457 of the Code, while not actually providing for a Qualified Plan
as that term is normally used, provides for certain deferred compensation
plans that enjoy special income tax treatment with respect to service for
tax-exempt organizations, state governments, local governments, and
agencies and instrumentalities of such governments. The Certificate can be
used with such plans. Under such plans, a participant may specify the form
of investment in which his or her participation will be made. However, all
such investments are owned by and subject to the claims of general
creditors of the sponsoring employer.
Annuity Purchases by Nonresident Aliens
The discussion above provides general information regarding federal income
tax consequences to annuity purchasers who are U.S. citizens or resident
aliens. Purchasers who are not U.S. citizens or resident aliens will
generally be subject to U.S. federal income tax and withholding on annuity
distributions at a 30% rate, unless a lower rate applies in a U.S. treaty
with the purchaser's country. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may
be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state, and foreign taxation with respect to an annuity
purchase.
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with our view of present applicable law, we will vote the
shares of the Eligible Funds held in the Variable Account at regular and
special meetings of the shareholders of the Eligible Funds in accordance
with instructions received from persons having the voting interest in the
Variable Account. We will vote shares for which we have not received
instructions in the same proportion as we vote shares for which we have
received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation should change, and as a
result we determine that we are permitted to vote the shares of the
Eligible Funds in our own right, we may elect to do so.
You have the voting interest under a Certificate prior to the Income Date.
The number of shares held in each Sub-account which are attributable to you
is determined by dividing your Variable Account Value in each Sub-account
by the net asset value of the applicable share of the Eligible Fund. The
payee has the voting interest after the Income Date under an annuity
payment option. The number of shares held in the Variable Account which are
attributable to each payee is determined by dividing the reserve for the
annuity payments by the net asset value of one share. During the annuity
payment period, the votes attributable to a payee decrease as the reserves
underlying the payments decrease.
We will determine the number of shares in which a person has a voting
interest as of the date established by the respective Eligible Fund for
determining shareholders eligible to vote at the meeting of the Fund. We
will solicit voting instructions in writing prior to such meeting in
accordance with the procedures established by the Eligible Fund.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to the Eligible Fund(s) in which he or she has an
interest, proxy material and a form with which to give such voting
instructions.
SALES OF THE CERTIFICATES
Keyport Financial Services Corp. ("KFSC"), an affiliate, serves as the
principal underwriter for the Certificate described in this prospectus.
Salespersons who represent us as variable annuity agents will sell the
Certificates. Such salespersons are also registered representatives of
broker/dealers who have entered into distribution agreements with KFSC.
KFSC is registered under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. It is
located at 125 High Street, Boston, Massachusetts 02110.
A dealer selling the Certificate may receive up to 6.00% of purchase
payments, and additional compensation later based on the Certificate Value
attributable to those payments. The percentage may increase to 7.00% during
certain time periods Keyport Benefit and KFSC select. In addition, under
certain circumstances, we or certain of our affiliates, under a marketing
support agreement with KFSC, may pay certain sellers for other services not
directly related to the sale of the Certificates, such as special marketing
support allowances.
We may sell Certificates with lower or no dealer compensation to a person
who is an officer, director, or employee of ours or an affiliate of ours or
to any Qualified Plan established for such a person. Such Certificates may
be different from the Certificates sold to others in that they are not
subject to the deduction for the certificate maintenance charge, the asset-
based distribution charge or the surrender charge and they have a mortality
and expense risk charge of 0.35% per year.
We may sell Certificates with lower or no dealer compensation as part of an
exchange program for other fixed ("Old FA") and variable ("Old VA") annuity
contracts we previously issued. A Certificate issued in exchange for an Old
VA will be issued with an exchange endorsement and we will not assess a
surrender charge under the Old VA at the time of the exchange. The exchange
endorsement provides that we will calculate any surrender charge assessed
under the Certificate in relation to the initial purchase payment (i.e.,
the amount exchanged) based on the actual time of each purchase payment
under the Old VA. The endorsement also provides that we will not refund the
amount described in "Right to Revoke" if the Certificate is returned.
Instead, we will return the Old VA to the owner and treat it as if no
exchange had occurred.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the
Principal Underwriter are a party. We are engaged in various kinds of
routine litigation which, in our judgment, is not of material importance in
relation to our total capital and surplus.
INQUIRIES BY CERTIFICATE OWNERS
You may write us with questions about your Certificate to Keyport Benefit
Life Insurance Company, 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
Yield for Stein Roe Money Market Sub-Account 5
Financial Statements 6
Variable Account A 7
Keyport Benefit Life Insurance Company 33
<PAGE>
APPENDIX A
THE FIXED ACCOUNT (ALSO KNOWN AS THE MODIFIED GUARANTEED ANNUITY ACCOUNT)
Introduction
This appendix describes the Fixed Account option available under the
Certificate.
Fixed Account Values are subject to a limited market value adjustment. The
adjustment may result in an increase or decrease in amounts transferred and
amounts paid to you or other payees (including withdrawals, surrenders,
death benefits, and amounts applied to purchase annuity payments). However,
a market value adjustment will not reduce the interest rate applied to
amounts you allocate to a Guarantee Period to less than 3% per year.
Payments made from Fixed Account Values at the end of a Guarantee Period
are not subject to the limited market value adjustment.
Any purchase payments you allocate to the Fixed Account option become part
of our general account. Because of provisions in the securities laws, our
general account including the Fixed Account, are not subject to regulation
under the Securities Act of 1933 or the Investment Company Act of 1940. The
Securities and Exchange Commission has not reviewed the disclosure in the
prospectus relating to the general account and the Fixed Account option.
Allocations to the Fixed Account
We will allocate purchase payments to the Fixed Account according to your
selection in the application. Your selection must specify the percentage of
the purchase payment you want to allocate to each Guarantee Period. The
percentage, if not zero, must be at least 5%. You may change the allocation
percentages without any charges. You must make allocation changes in
writing unless you have, in writing, authorized us to accept telephone
allocation instructions. By authorizing us to accept telephone changes, you
agree to the conditions and procedures we establish from time to time. The
current conditions and procedures are in Appendix B. We will notify you in
advance of any changes.
Each Guarantee Period currently offered is available for initial and
subsequent purchase payments and for transfers of Certificate Value. We
currently offer Guarantee Periods of 1, 3, 5, and 7 years. We may change at
any time the number and/or length of Guarantee Periods we offer. If we no
longer offer a particular Guarantee Period, the existing Fixed Account
Value in that Guarantee Period will remain until the end of the period. At
that time, you must select a different Guarantee Period.
Capital Protection Plus
We offer a capital protection plus program. Under this program, we allocate
part of your purchase payment to the Guarantee Period you select.
Currently, you may only select the 7-year Guarantee Period.
Based on the length of the period and the period's interest rate, we
determine how much of your purchase payment must be allocated to the
Guarantee Period so that, at the end of the Guarantee Period, the allocated
amount plus interest will be equal to your total purchase payment. We will
allocate the rest of your purchase payment to the Sub-account(s) of the
Variable Account based on your allocation instructions.
For example, assume you choose the 7-year Guarantee Period and we receive
your purchase payment of $10,000 when the interest rate for the Guarantee
Period is 6.75% per year. We will allocate $6,331 to that Guarantee Period,
because $6,331 will increase, at the interest rate of 6.75%, to $10,000
after seven years. The remaining $3,669 of the payment will be allocated to
the Sub-account(s) you select.
If you surrender or transfer any part of the Fixed Account Value before the
end of the Guarantee Period, the value at the end of that period will not
equal your original purchase payment amount.
Fixed Account Value
Fixed Account Value is equal to:
o all purchase payments allocated or amounts transferred to the Fixed
Account plus the interest credited on those payments or amounts
transferred; less
o any prior partial withdrawals or transfers from the Fixed Account,
including any applicable charges.
Interest Credits
We credit interest daily. The interest we credit is based on an annual
compound interest rate. It is credited to purchase payments allocated to
the Fixed Account at rates we declare for Guarantee Periods of one or more
years from the month and day of allocation. Any rate we set will be at
least 3% per year.
Our interest crediting method may result in each of your Guarantee Periods
being subject to different rates. For purposes of this section, we treat
Variable Account Value transferred to the Fixed Account and Fixed Account
Value that is renewed or transferred to another Guarantee Period as a
purchase payment allocation.
Application of Market Value Adjustment
No market value adjustment applies to Guarantee Periods of less than three
years.
A market value adjustment applies to any Fixed Account Value surrendered,
withdrawn, transferred, or applied to an Annuity Option from a Guarantee
Period of three years or more, unless:
o the transaction occurs at the end of the Guarantee Period, or
o the Certificate is surrendered for the Death Benefit after the
death of a Covered Person.
We apply the market value adjustment before we deduct any applicable
surrender charges or taxes.
If a market value adjustment applies to a surrender or the application to
an Annuity Option, we will add or deduct any positive or negative market
value adjustment amount, respectively, to your Certificate Value.
If a market value adjustment applies to either a partial withdrawal or a
transfer, we will add or deduct any positive or negative market value
adjustment, respectively, to, the partial withdrawal or transfer amount
after we have deducted the requested withdrawal or transfer amount from the
Fixed Account Value. This means that the net amount may be more or less
than the amount requested.
Effect of Market Value Adjustment
A market value adjustment reflects the change in prevailing current
interest rates since the beginning of a Guarantee Period. The market value
adjustment may be positive or negative. Any negative adjustment may be
limited in amount (see "Market Value Adjustment Factor" below).
Generally, if the treasury rate (see "Treasury Rates" below) for your
Guarantee Period is lower than the treasury rate for a new Guarantee Period
with a length equal to the time remaining in your Guarantee Period, the
market value adjustment will be negative and it will result in a reduction
of the amount surrendered, withdrawn, transferred, or applied to an Annuity
Option.
On the other hand, if the treasury rate for your Guarantee Period is higher
than the treasury rate for a new Guarantee Period with a length equal to
the time remaining in your Guarantee Period, then the market value
adjustment will be positive and it will result in an increase in the amount
surrendered, withdrawn, transferred, or applied to an Annuity Option.
Market Value Adjustment Factor
We compute the market value adjustment for each of your Guarantee Periods
by multiplying the applicable amount surrendered, withdrawn, transferred,
or applied to an Annuity Option, by the market value adjustment factor. The
market value adjustment factor is calculated as the larger of formulas (a)
and (b):
(a) (1+a)/(1+b)(n/12)-1
where:
"a" is the treasury rate for the initial number of years in your Guarantee
Period;
"b" is the treasury rate for a period equal to the time remaining (rounded
up to the next whole number of 12-month periods) to the expiration of your
Guarantee Period; and
"n" is the number of complete Guarantee Period Months remaining before the
expiration of your Guarantee Period.
(b) (1.03)/(1+i)(y+d/#)-1
where:
"i" is the guaranteed interest rate for your Guarantee Period;
"y" is the number of complete 12-month periods that have elapsed in your
Guarantee Period;
"d" is the number of calendar days since the end of the last complete 12-
month period in your Guarantee Period or, if "y" is zero, the number of
calendar days since the start of your Guarantee Period; and
"#" is the number of calendar days in the current 12-month period of your
Guarantee Period, which is generally 365 days.
As stated above, the formula (b) amount will apply only if it is greater
than the formula (a) amount. This will occur only when the formula (a)
amount is negative and the formula (b) amount is a smaller negative number.
Under these conditions, formula a's full (normal) negative market value
adjustment will be limited to the extent that adjustment would decrease
your Guarantee Period's Fixed Account Value below the following amount:
(i) the amount allocated to your Guarantee Period; less
(ii) any prior systematic or partial withdrawal amounts and amounts
transferred; less
(iii) interest on the above items (i) and (ii) credited annually
at a rate of 3% per year.
Treasury Rates
The treasury rate for a Guarantee Period is the interest rate in the
Treasury Constant Maturity Series, as published by the Federal Reserve
Board, for a maturity equal to the number of years specified in "a" and "b"
in formula (a) above. Weekly series are published at the beginning of the
following week. The Determination Dates are the last business day before
the 1st and 15th of each calendar month.
To determine the "a" treasury rate, we use the weekly series first
published on or after the most recent Determination Date that occurs on or
before the Start Date for the Guarantee Period. If the Start Date is the
same as the Determination Date or the date of publication, or any date in
between, we instead use the weekly series first published after the prior
Determination Date. To determine the "b" treasury rate, we use the weekly
series first published on or after the most recent Determination Date which
occurs on or before the date on which the market value adjustment factor is
calculated. If the calculation date is the same as the Determination Date
or the date of publication, or any date in between, we will instead use the
weekly series first published after the prior Determination Date.
If the number of years and or 12-month periods specified in "a" or "b" is
not equal to a maturity in the Treasury Constant Maturity Series, we
determine the treasury rate by straight line interpolation between the
interest rates of the next highest and next lowest maturities.
If the Treasury Constant Maturity Series becomes unavailable, we will adopt
a comparable constant maturity index. If such a comparable index is not
available, we will replicate calculation of the Treasury Constant Maturity
Series Index based on U.S. Treasury Security coupon rates.
End of A Guarantee Period
We will notify you in writing at least 30 days prior to the end of each of
your Guarantee Periods. At the end of your Guarantee Period, we will
automatically transfer your Guarantee Period's Fixed Account Value to the
Stein Roe Money Market Sub-account unless we have received:
o your election of a new Guarantee Period from among those we offer
at that time; or
o your instructions to transfer the ending Fixed Account Value to one
or more Sub-accounts of the Variable Account.
You may not elect a new Guarantee Period that is longer than the number of
years remaining until the Income Date.
Transfers of Fixed Account Value
You may transfer Fixed Account Value from one of your Guarantee Periods to
another or to one or more Sub-accounts of the Variable Account subject to
any applicable market value adjustment. If the Fixed Account Value
represents multiple Guarantee Periods, your transfer request must specify
from which values you want the transfer made.
The Certificate allows us to limit the number of transfers you may make in
a specified time period. Currently, we generally limit Variable Account and
Fixed Account transfers to unlimited transfers per calendar year with a
$500,000 per transfer dollar limit. See "Transfer of Variable Account
Value" and "Limits on Transfers". These limitations will not apply to any
transfer made at the end of a Guarantee Period. We will notify you prior to
changing the current limitations.
You must request transfers in writing unless you have authorized us in
writing to accept telephone transfer instructions from you or from a person
acting on your behalf as an attorney-in-fact under a power of attorney. By
authorizing us to accept telephone transfer instructions, you agree to the
conditions and procedures we establish from time to time. The current
conditions and procedures are in Appendix B. If you have authorized
telephone transfers, you will be notified in advance of any changes. A
person acting on your behalf as an attorney-in-fact under a power of
attorney may request transfers in writing.
If we receive your transfer requests before 4:00 PM Eastern Time, or any
other time for the close of trading on the New York Stock Exchange, we will
execute them at the close of business that day. Any requests we receive
later, we will execute at the close of the next business day.
If you transfer 100% of a Guarantee Period's value and your current
allocation for purchase payments includes that Guarantee Period, we will
automatically change the allocation formula for future purchase payments
unless you instruct otherwise. For example, if the allocation formula is
50% to the One-Year Guarantee Period and 50% to Sub-account A and you
transfer all Fixed Account Value to Sub-account A, we will change the
allocation formula to 100% to Sub-account A.
<PAGE>
APPENDIX B
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are joint Certificate Owners, both must authorize us to accept
telephone instructions but either Certificate Owner may give us telephone
instructions.
2. All callers must identify themselves. We reserve the right to refuse to
act upon any telephone instructions in cases where the caller has not
sufficiently identified himself/herself to our satisfaction.
3. Neither we nor any person acting on our behalf shall be subject to any
claim, loss, liability, cost or expense if we or such person acted in good
faith upon a telephone instruction, including one that is unauthorized or
fraudulent. However, we will employ reasonable procedures to confirm that a
telephone instruction is genuine and, if we do not, we may be liable for
losses due to an unauthorized or fraudulent instruction. You thus bear the
risk that an unauthorized or fraudulent instruction we execute may cause
your Certificate Value to be lower than it would be had we not executed the
instruction.
4. We record all conversations with disclosure at the time of the call.
5. The application for the Certificate may allow you to create a power of
attorney by authorizing another person to give telephone instructions.
Unless prohibited by state law, we will treat such power as durable in
nature and it shall not be affected by your subsequent incapacity,
disability or incompetency. Either we or the authorized person may cease to
honor the power by sending written notice to you at your last known
address. Neither we nor any person acting on our behalf shall be subject to
liability for any act executed in good faith reliance upon a power of
attorney.
6. Telephone authorization shall continue in force until:
o we receive your written revocation,
o we discontinue the privilege, or
o we receive written evidence that you have entered into a market
timing or asset allocation agreement with an investment adviser or
with a broker/dealer.
7. If we receive telephone transfer instructions at 800-367-3653 before
4:00 P.M. Eastern Time or other close of trading on the New York Stock
Exchange, they will be initiated that day based on the unit value prices
calculated at the close of that day. We will initiate instructions we
receive after the close of trading on the NYSE on the following business
day.
8. Once we accept instructions, they may not be canceled.
9. You must make all transfers in accordance with the terms of the
Certificate and current prospectus. If your transfer instructions do not
conform to these terms, we will not execute the transfer and will notify
the caller within 48 hours.
10. If you transfer 100% of any Sub-account's value and the allocation
formula for purchase payments includes that Sub-account, then we will
change the allocation formula for future purchase payments accordingly
unless we receive telephone instructions to the contrary. For example, if
the allocation formula is 50% to Sub-account A and 50% to Sub-account B and
you transfer all of Sub-account A's value to Sub-account B, we will change
the allocation formula to 100% to Sub-account B unless you instruct us
otherwise.
Telephone Changes to Purchase Payment Allocation Percentages
Numbers 1-6 above are applicable.
<PAGE>
APPENDIX C
SYSTEMATIC WITHDRAWAL PROGRAM
Payment Type
There are three payment types available under all certificates (#1-3) and
two that are available only under individual retirement annuities if the
owner is under age 58-1/2 at time of the first payment (#4&5). We will not
set up any payment type you select if we determine that the first payment
amount will be less than $100.
1. Percentage Method. We will apply a percentage specified by you,
not to exceed 10%, to the Certificate Value at the time of the
first payment, and pay you the total in equal payments based on the
payment frequency you select. It is possible that the full
percentage amount chosen will not be received in the initial
Certificate Year under the program. A proportionate amount of the
Percentage will be received based on the number of payments that
will be made in the remainder of the Certificate Year in relation
to the number of payments made annually under the selected payment
frequency. For example, if the percentage chosen is 10% and the
Certificate Year begins on January 2 and monthly payments begin on
April 6 when the Certificate Value is $120,000, the monthly amount
payable will be $1,000 (10% of $120,000, divided by 12). Nine
payments (representing 9/12 of the 10% amount) will be made before
the next January 2 anniversary. On the first payment date after the
anniversary, (January 6 in this example), the dollar amount of the
percentage will be recalculated and divided by 12 to determine the
new monthly amount.
2. Earnings Method. The payment amount is calculated at the time of
each withdrawal by subtracting from the current Certificate Value (a)
for the first withdrawal, the Certificate Value from one payment
period prior (e.g., if the frequency is quarterly, the Certificate
Value would be from three months prior) and (b) for each subsequent
withdrawal, the Certificate Value at the time of the prior withdrawal.
No payment will be made if the calculation amount is zero or less and
payments will resume only when the calculation amount is greater than
zero.
3. Net Amount Method. You specify a set dollar amount for each
withdrawal of at least $100. In the event a surrender charge is
applicable to all or part of a withdrawal because your specified
amount exceeds the "free withdrawal amounts", we will increase the
withdrawal amount in order to create a net withdrawal amount equal to
your specified amount.
4. IRA Amortization Method. The systematic withdrawal amount will
remain the same during the entire life expectancy period. We will
calculate the payment amount based on the amortization method
described in IRS Notice 89-25 (Q&A-12), using your Certificate Value
on the date of the first payment, your life expectancy based on your
attained age on the date of the first payment and IRS Table V, and an
interest rate set by us on the date of the first payment that is not
in excess of a reasonable rate.
5. IRA Minimum Distribution Method. The systematic withdrawal amount
will change each year during the life expectancy period. We will
calculate the annual payment amount based on the minimum distribution
method described in IRS Notice 89-25 (Q&A-12), by dividing your
current Certificate Value at the time of each year's calculation by
your then current life expectancy factor (the life expectancy factor
is initially determined by your attained age on the date of the first
payment and IRS Table V and it is then reduced by 1.0 when each
succeeding year's calculation is made). The initial calculation of
the annual payment amount will occur on the date of the first payment
and each succeeding year's calculation will occur one year later. The
annual payment calculated each year will be paid out in equal payments
according to the frequency option chosen.
Payment Frequency and First Payment Date
You may request that withdrawals be made monthly, quarterly, semi-annually
or annually. If, however, your selected payment frequency will create a
withdrawal amount of less than $100, we will reduce the frequency of
payments to an interval that will result in the withdrawal being at least
$100.
Unless you select a later date by written request, the date of the first
withdrawal will be (a) one payment period after the Certificate Date if you
request systematic withdrawals at the time of your initial purchase payment
or (b) one payment period after we receive your written request to begin
systematic withdrawals. If, however, your written request is for an IRA
Method (#4 or #5) and you made a partial withdrawal in the same Certificate
Year, then the first withdrawal shall instead be on the next Certificate
Anniversary.
Federal Income Tax Withholding
The taxable portion of withdrawals you receive from your Certificate is
subject to 10% federal income tax withholding unless you elect not to have
withholding apply. Any withholding will be deducted from the payment amount
calculated under the payment type in effect.
You may elect not to have withholding apply to withdrawal payments by
signing and dating an election of no withholding. You are liable for
payment of federal income tax on the taxable portion of your withdrawal.
You also may be subject to tax penalties if your withholding and estimated
tax payments are not sufficient.
If you want federal income tax withholding to apply, please sign and date
an election of withholding. Your election to withhold or to not withhold
will remain in effect until you revoke it. You may revoke it at any time.
Direct Deposit of Payments
If you request direct deposit of systematic withdrawals to your checking or
savings account, we will use our best effort to ensure that the correct
amount is credited to your account within three business days of the
payment date. If we transfer less than the correct amount, any shortfall
will be corrected in full with the next transfer. If we transfer more than
the correct amount or duplicate a transfer in error, any excess or
duplicate amount, unless repaid to us in one sum, will be deducted from
future transfers until we are repaid in full.
Important Income Tax Information
Payment Types 1-3. Systematic withdrawals will be taxed under the regular
rules applicable to surrenders and not under the special exclusion
ratio/amount rules applicable to annuity payments. All or part of each
withdrawal may thus be taxable. In addition, anyone under the age of 59-1/2
at the time of a withdrawal may also be subject to a 10% federal income tax
penalty on the taxable portion of the withdrawal. Our reporting to the
Internal Revenue Service will be based on our opinion of the taxable amount
and whether the penalty tax applies.
IRA Payment Types 4 and 5. Based on Internal Revenue Service requirements,
we will report systematic withdrawals to them as 100% taxable. It is our
opinion under current federal income tax laws that the withdrawals will not
be subject to an additional 10% federal income penalty tax because they
will be part of a series of substantially equal periodic payments made for
your life expectancy. We will thus report to the Internal Revenue Service
that no penalty tax applies. If, however, you end systematic withdrawals
before the later of your attaining age 59-1/2 or five years after the first
payment, you will then be subject to both retroactive 10% federal penalty
taxes on all systematic withdrawals made before 59-1/2 and federal interest
penalties on those taxes. Unlike you, we may not end your systematic
withdrawals before your retroactive penalty tax period has expired.
Other Systematic Withdrawal Conditions
Under payment types #1-3, if any withdrawal would cause your Certificate
Value to be reduced below the minimum value specified in your Certificate,
that withdrawal will not be made and will contact you about modifying the
withdrawal amount and/or the payment frequency so that withdrawals may
resume. Your systematic withdrawals will continue until we receive your
written revocation, we discontinue the program, or the annuitant or an
owner dies. Once authorization terminates, systematic withdrawals cannot be
resumed again until after the next Certificate Anniversary. At that time a
new systematic withdrawal request form will be required. All additional
withdrawals after termination will be treated as regular withdrawals and
surrender charges may apply.
Under IRA payment types #4 and 5, you may not make a withdrawal outside the
program or surrender the Certificate during the period of systematic
withdrawals. Also, you may not make any additional purchase payments to
the Certificate. Your systematic withdrawals will continue in force until
we receive your written revocation, you die, or we discontinue the program
after the later of your attaining age 59-1/2 or five years after your first
payment. Once your authorization terminates, systematic withdrawals may
not be resumed. All additional withdrawals after termination will be
treated as regular withdrawals and surrender charges may apply.
For other information of a general nature, including circumstances under
which the surrender charge and/or the Fixed Account market value adjustment
may apply to any withdrawals, see "Systematic Withdrawal Program" under
"OTHER SERVICES".
<PAGE>
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
KAC.PROS/KBLIC 2237.6/99
Yes. I would like to receive the New York Keyport Advisor Charter 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.
The Alger American Fund
Alliance Variable Products Series Fund, Inc.
Liberty Variable Investment Trust
SteinRoe Variable Investment Trust
Templeton Variable Products Series Fund
Name
Address
City
State
Zip
<PAGE>
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
<PAGE>
PART B
<PAGE>
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 New York Keyport
Advisor Charter variable annuity prospectus dated July 1, 1999. 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
Yield for Stein Roe Money Market Sub-Account........................5
Financial Statements..................................................6
Variable Account A..................................................7
Keyport Benefit Life Insurance Company..............................33
The date of this statement of additional information is July 1, 1999.
<PAGE>
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, 1998, owned, indirectly, approximately 72% of the
combined voting power of the outstanding stock of LFC (with the balance
being publicly held). For additional information about Keyport Benefit, see
page 8 of the prospectus.
VARIABLE ANNUITY BENEFITS
Variable Annuity Payment Values
For each variable payment option, the total dollar amount of each periodic
payment will be equal to: (a) the sum of all Sub-Account payments; less (b)
the pro-rata amount of the annual Certificate Maintenance Charge.
The first payment for each Sub-Account will be determined by deducting any
applicable Certificate Maintenance Charge and any applicable state premium
taxes and then dividing the remaining value of that Sub-Account by $1,000
and multiplying the result by the greater of: (a) the applicable factor
from the Certificate's annuity table for the particular payment option; or
(b) the factor currently offered by Keyport Benefit at the time annuity
payments begin. This current factor may be based on the sex of the payee
unless to do so would be prohibited by law.
The number of Annuity Units for each Sub-Account will be determined by
dividing such first payment by the Sub-Account Annuity Unit value for the
Valuation Period that includes the date of the first payment. The number
of Annuity Units remains fixed for the annuity payment period. Each Sub-
Account payment after the first one will be determined by multiplying (a)
by (b), where: (a) is the number of Sub-Account Annuity Units; and (b) is
the Sub-Account Annuity Unit value for the Valuation Period that includes
the date of the particular payment.
Variable annuity payments will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect annuity payments, Keyport Benefit uses an Annuity Unit
value. Each Sub-Account has its own Annuity Units and value per Unit. The
Annuity Unit value applicable during any Valuation Period is determined at
the end of such period.
When Keyport Benefit first purchased Eligible Fund shares on behalf of the
Variable Account, Keyport Benefit valued each Annuity Unit for each Sub-
Account at a specified dollar amount. The Unit value for each Sub-Account
in any Valuation Period thereafter is determined by multiplying the value
for the prior period by a net investment factor. This factor may be
greater or less than 1.0; therefore, the Annuity Unit may increase or
decrease from Valuation Period to Valuation Period. For each assumed
annual investment rate (AIR), Keyport Benefit calculates a net investment
factor for each Sub-Account by dividing (a) by (b), where:
(a) is equal to the net investment factor as defined in the prospectus
without any deduction for the sales charge defined in (c)(ii) of
the
net investment factor formula; and
(b) is the assumed investment factor for the current Valuation Period.
The assumed investment factor adjusts for the interest assumed in
determining the first variable annuity payment. Such factor for any
Valuation Period shall be the accumulated value, at the end of such
period, of $1.00 deposited at the beginning of such period at the
assumed annual investment rate (AIR). The AIR for Annuity Units
based on the Contract's annuity tables is 5% per year. An AIR of
3% per year is also currently available upon Written Request.
With a particular AIR, payments after the first one will increase or
decrease from month to month based on whether the actual annualized
investment return of the selected Sub-Account(s) (after deducting the
Mortality and Expense Risk Charge) is better or worse than the assumed AIR
percentage. If a given amount of Sub-Account value is applied to a
particular payment option, the initial payment will be smaller if a 3% AIR
is selected instead of a 5% AIR but, all other things being equal, the
subsequent 3% AIR payments have the potential for increasing in amount by a
larger percentage and for decreasing in amount by a smaller percentage.
For example, consider what would happen if the actual annualized investment
return (see the first sentence of this paragraph) is 9%, 5%, 3%, or 0%
between the time of the first and second payments. With an actual 9%
return, the 3% AIR and 5% AIR payments would both increase in amount but
the 3% AIR payment would increase by a larger percentage. With an actual
5% return, the 3% AIR payment would increase in amount while the 5% AIR
payment would stay the same. With an actual return of 3%, the 3% AIR
payment would stay the same while the 5% AIR payment would decrease in
amount. Finally, with an actual return of 0%, the 3% AIR and 5% AIR
payments would both decrease in amount but the 3% AIR payment would
decrease by a smaller percentage. Note that the changes in payment amounts
described above are on a percentage basis and thus do not illustrate when,
if ever, the 3% AIR payment amount might become larger than the 5% AIR
payment amount. Note though that if Option A (Income for a Fixed Number of
Years) is selected and payments continue for the entire period, the 3% AIR
payment amount will start out being smaller than the 5% AIR payment amount
but eventually the 3% AIR payment amount will become larger than the 5% AIR
payment amount.
Re-Allocating Sub-Account Payments
The number of Annuity Units for each Sub-Account under any variable annuity
option will remain fixed during the entire annuity payment period unless
the payee makes a written request for a change. Currently, a payee can
instruct Keyport Benefit to change the Sub-Account(s) used to determine the
amount of the variable annuity payments 1 time every 12 months. The
payee's request must specify the percentage of the annuity payment that is
to be based on the investment performance of each Sub-Account. The
percentage for each Sub-Account, if not zero, must be at least 5% and must
be a whole number. At the end of the Valuation Period during which Keyport
Benefit receives the request, Keyport Benefit will: (a) value the Annuity
Units for each Sub-Account to create a total annuity value; (b) apply the
new percentages the payee has selected to this total value; and (c)
recompute the number of Annuity Units for each Sub-Account. This new
number of units will remain fixed for the remainder of the payment period
unless the payee requests another change.
SAFEKEEPING OF ASSETS
Keyport Benefit is responsible for the safekeeping of the assets of the
Variable Account.
Keyport Benefit has responsibility for providing all administration of the
Certificates and the Variable Account. This administration includes, but is
not limited to, preparation of the Contracts and Certificates, maintenance
of Certificate Owners' records, and all accounting, valuation, regulatory
and reporting requirements. Keyport Benefit has contracted with Keyport
Life Insurance Company, its corporate parent, to provide all administration
for the Contracts and Certificates, as its agent. Keyport Benefit pays
Keyport Life Insurance Company for the costs it incurs for providing those
administrative services.
PRINCIPAL UNDERWRITER
The Contract and Certificates, which are offered continuously, are
distributed by Keyport Financial Services Corp. ("KFSC"), which is an
affiliate of Keyport Benefit.
EXPERTS
The statutory-basis financial statements of Keyport Benefit Life Insurance
Company (formerly American Benefit Life Insurance Company) as of December
31, 1998 and 1997, and for the years then ended, and the financial
statements of Keyport Benefit Life Insurance Company-Variable Account A at
December 31, 1998 and for the period from February 6, 1998 (commencement of
operations) to December 31, 1998, appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
INVESTMENT PERFORMANCE
The Variable Account may from time to time quote performance information
concerning its various Sub-Accounts. A Sub-Account's performance may also
be compared to the performance of sub-accounts used with variable annuities
offered by other insurance companies. This comparative information may be
expressed as a ranking prepared by Financial Planning Resources, Inc. of
Miami, FL (The VARDS Report), Lipper Analytical Services, Inc., or by
Morningstar, Inc. of Chicago, IL (Morningstar's Variable Annuity
Performance Report), which are independent services that compare the
performance of variable annuity sub-accounts. The rankings are done on the
basis of changes in accumulation unit values over time and do not take into
account any charges (such as sales charges or administrative charges) that
are deducted directly from contract values.
Ibbotson Associates of Chicago, IL provides historical returns from 1926 on
capital markets in the United States. The Variable Account may quote the
performance of its Sub-Accounts in conjunction with the long-term
performance of capital markets in order to illustrate general long-term
risk versus reward investment scenarios. Capital markets tracked by
Ibbotson Associates include common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, U.S. Treasury Bills, and the
U.S. inflation rate. Historical total returns are determined by Ibbotson
Associates for: Common Stocks, represented by the Standard and Poor's
Composite Stock Price Index (an unmanaged weighted index of 90 stocks prior
to March 1957 and 500 stocks thereafter of industrial, transportation,
utility and financial companies widely regarded by investors as
representative of the stock market); Small Company Stocks, represented by
the fifth capitalization quintile (i.e., the ninth and tenth deciles) of
stocks on the New York Stock Exchange for 1926-1981 and by the performance
of the Dimensional Fund Advisors Small Company 9/10 (for ninth and tenth
deciles) Fund thereafter; Long Term Corporate Bonds, represented beginning
in 1969 by the Salomon Brothers Long-Term High-Grade Corporate Bond Index,
which is an unmanaged index of nearly all Aaa and Aa rated bonds,
represented for 1946-1968 by backdating the Salomon Brothers Index using
Salomon Brothers' monthly yield data with a methodology similar to that
used by Salomon Brothers in computing its Index, and represented for 1925-
1945 through the use of the Standard and Poor's monthly High-Grade
Corporate Composite yield data, assuming a 4% coupon and a 20-year
maturity; Long-Term Government Bonds, measured each year using a portfolio
containing one U.S. government bond with a term of approximately twenty
years and a reasonably current coupon; U.S. Treasury Bills, measured by
rolling over each month a one-bill portfolio containing, at the beginning
of each month, the shortest-term bill having not less than one month to
maturity; Inflation, measured by the Consumer Price Index for all Urban
Consumers, not seasonably adjusted, since January, 1978 and by the Consumer
Price Index before then. The stock capital markets may be contrasted with
the corporate bond and U.S. government securities capital markets. Unlike
an investment in stock, an investment in a bond that is held to maturity
provides a fixed rate of return. Bonds have a senior priority to common
stocks in the event the issuer is liquidated and interest on bonds is
generally paid by the issuer before it makes any distributions to common
stock owners. Bonds rated in the two highest rating categories are
considered high quality and present minimal risk of default. An additional
advantage of investing in U.S. government bonds and Treasury bills is that
they are backed by the full faith and credit of the U.S. government and
thus have virtually no risk of default. Although government securities
fluctuate in price, they are highly liquid.
Yield for Stein Roe Money Market Sub-Account
Yield for the Stein Roe Money Market Sub-Account is calculated using the
method prescribed by the Securities and Exchange Commission. Yield
reflects the deduction of the annual 1.40% asset-based Certificate charge
and, on an allocated basis, the Certificate's annual $36 Certificate
Maintenance Charge. The yield does not reflect Contingent Deferred Sales
Charges and premium tax charges. The yield would be lower if these charges
were included. The following is the standardized formula:
Yield equals: (A - B - 1) X 365
C 7
Where:
A = the Accumulation Unit value at the end of the 7-day period.
B = hypothetical Certificate Maintenance Charge for the 7-day
period. The assumed annual Stein Roe Money Market Sub-Account
charge is equal to the $36 Certificate charge multiplied by a
fraction equal to the average number of Certificates with Stein
Roe Money Market Sub-Account value during the 7-day period
divided by the average total number of Certificates during the
7-day period. This annual amount is converted to a 7-day charge
by multiplying it by 7/365. It is then equated to an
Accumulation Unit size basis by multiplying it by a fraction
equal to the average value of one Stein Roe Money Market Sub-
Account Accumulation Unit during the 7-day period divided by the
average Certificate Value in Stein Roe Money Market Sub-Account
during the 7-day period.
C = the Accumulation Unit value at the beginning of the 7-day
period.
The yield formula assumes that the weekly net income generated by an
investment in the Stein Roe Money Market Sub-Account will continue over an
entire year.
FINANCIAL STATEMENTS
The financial statements of the Variable Account and Keyport Benefit Life
Insurance Company are included in the statement of additional information.
The financial statements of Keyport Benefit Life Insurance Company are
provided as relevant to its ability to meet its financial obligations under
the Certificates and should not be considered as bearing on the investment
performance of the assets held in the Variable Account.
<PAGE>
Report of Independent Auditors
To the Board of Directors of Keyport Benefit Life Insurance Company
and Contract Owners of Variable Account A
We have audited the accompanying statement of assets and liabilities of
Keyport Benefit Life Insurance Company - Variable Account A as of December
31, 1998, and the related statement of operations and changes in net assets
for the period from February 6, 1998 (commencement of operations) to
December 31, 1998. These financial statements are the responsibility of
Keyport Benefit Life Insurance Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Keyport Benefit Life
Insurance Company - Variable Account A at December 31, 1998 and the results
of its operations and changes in net assets for the period from February 6,
1998 (commencement of operations) to December 31, 1998, in conformity with
generally accepted accounting principles.
Boston, Massachusetts /s/Ernst & Young LLP
March 12, 1999
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Assets and Liabilities
December 31, 1998
Assets
Investments at market value:
AIM
AIM Capital Appreciation Fund - 82 shares (cost $1,915) $ 2,074
AIM Growth Fund - 75 shares (cost $1,516) 1,853
AIM International Equity Fund - 428 shares (cost $7,553) 8,395
Alger American Fund
Alger American Growth Portfolio - 13,408 shares
(cost $607,309) 713,559
Alger American Small Capitalization Portfolio -
4,485 shares (cost $171,201) 197,187
Alliance Variable Products Series Fund, Inc.
Alliance Global Bond Portfolio - 35,273 shares
(cost $435,293) 438,090
Alliance Premier Growth Portfolio - 47,599 shares
(cost $1,265,854) 1,476,990
Alliance Growth and Income Portfolio - 362 shares
(cost $6,737) 7,901
Alliance Real Estate Portfolio - 811 shares (cost $7,913) 7,936
MFS Variable Insurance Trust
MFS Bond Series - 20,398 shares (cost $229,492) 232,130
MFS Emerging Growth Series - 17,263 shares
(cost $298,807) 370,627
MFS Research Series - 31,630 shares (cost $538,284) 602,548
SteinRoe Variable Investment Trust
SteinRoe Money Market Fund - 2,003,931 shares
(cost $2,003,931) 2,003,931
SteinRoe Special Venture Fund - 4,823 shares
(cost $59,586) 65,689
SteinRoe Balanced Fund - 67,022 shares
(cost $1,083,481) 1,148,761
SteinRoe Mortgage Securities Fund - 99,585 shares
(cost $1,066,290) 1,074,528
SteinRoe Growth Stock Fund - 14,449 shares
(cost $561,924) 628,951
Liberty Variable Investment Trust
Colonial Growth and Income Fund - 92,525 shares
(cost $1,447,575) 1,516,483
SteinRoe Global Utilities Fund - 31,029 shares
(cost $401,244) 426,962
Colonial International Fund for Growth - 136,709
shares (cost $253,230) 273,417
Colonial Strategic Income Fund - 199,726 shares
(cost $2,304,666) 2,212,965
Colonial U.S. Stock Fund - 65,909 shares
(cost $1,158,834) 1,238,429
Newport Tiger Fund - 35,644 shares (cost $54,825) 55,961
Colonial High Yield Securities Fund - 5,913 shares
(cost $56,905) 55,052
Colonial Small Cap Value Fund - 183 shares
(cost $1,287) 1,575
Liberty All-Star Equity Fund - 44,833 shares
(cost $488,585) 533,514
Total assets 15,295,508
Liabilities
Due to Keyport Benefit Life Insurance Company (Note 2) (51,747)
Net assets $15,243,761
Net Assets
Variable annuity contracts (Note 5) $14,405,259
Annuity reserves (Note 2) 838,502
Net assets $15,243,761
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
AIM Capital AIM
Appreciation Fund Growth Fund
1998 1998
Income
Dividends $ 55 $ 108
Expenses (Note 3)
Mortality and expense risk
and administrative charges 2 5
Net investment income (expense) 53 103
Realized gain (loss) - -
Unrealized appreciation (depreciation)
during the period 160 233
Net increase (decrease) in net assets
from operations 213 336
Purchase payments from contract owners 1,895 1,250
Transfers between accounts (34) 267
Contract terminations and annuity payouts - -
Other transfers to Keyport Benefit
Life Insurance Company - -
Net increase in net assets
from contract transactions 1,861 1,517
Net assets at beginning of period - -
Net assets at end of period $ 2,074 $ 1,853
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
AIM International Alger American
Equity Fund Growth Portfolio
1998 1998
Income
Dividends $ 66 $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 23 1,303
Net investment income (expense) 43 (1,303)
Realized gain (loss) - 227
Unrealized appreciation (depreciation)
during the period 946 106,250
Net increase (decrease) in net assets
from operations 989 105,174
Purchase payments from contract owners 7,500 548,549
Transfers between accounts (94) 65,745
Contract terminations and annuity payouts - (5,909)
Other transfers to Keyport Benefit
Life Insurance Company - -
Net increase in net assets
from contract transactions 7,406 608,385
Net assets at beginning of period - -
Net assets at end of period $ 8,395 $ 713,559
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
Alger American Small Alliance Global
Capitalization Portfolio Bond Portfolio
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 287 821
Net investment income (expense) (287) (821)
Realized gain (loss) 30 (107)
Unrealized appreciation (depreciation)
during the period 25,986 2,797
Net increase (decrease) in net assets
from operations 25,729 1,869
Purchase payments from contract owners 139,884 465,440
Transfers between accounts 34,175 (5,389)
Contract terminations and annuity payouts (2,601) (23,830)
Other transfers to Keyport Benefit
Life Insurance Company - -
Net increase in net assets
from contract transactions 171,458 436,221
Net assets at beginning of period - -
Net assets at end of period $ 197,187 $ 438,090
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
Alliance Premier Alliance Growth and
Growth Portfolio Income Portfolio
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 2,625 17
Net investment income (expense) (2,625) (17)
Realized gain (loss) 10 1
Unrealized appreciation (depreciation)
during the period 211,136 1,164
Net increase (decrease) in net assets
from operations 208,521 1,148
Purchase payments from contract owners 1,176,221 6,250
Transfers between accounts 119,457 503
Contract terminations and annuity payouts (27,209) -
Other transfers to Keyport Benefit
Life Insurance Company - -
Net increase in net assets
from contract transactions 1,268,469 6,753
Net assets at beginning of period - -
Net assets at end of period $ 1,476,990 $ 7,901
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
Alliance Real MFS
Estate Portfolio Bond Series
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 9 370
Net investment income (expense) (9) (370)
Realized gain (loss) 4 127
Unrealized appreciation (depreciation)
during the period 22 2,638
Net increase (decrease) in net assets
from operations 17 2,395
Purchase payments from contract owners 7,539 191,934
Transfers between accounts 380 38,419
Contract terminations and annuity payouts - (618)
Other transfers to Keyport Benefit
Life Insurance Company - -
Net increase in net assets
from contract transactions 7,919 229,735
Net assets at beginning of period - -
Net assets at end of period $ 7,936 $ 232,130
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
MFS Emerging MFS
Growth Series Research Series
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 806 1,071
Net investment income (expense) (806) (1,071)
Realized gain (loss) 96 300
Unrealized appreciation (depreciation)
during the period 71,819 64,264
Net increase (decrease) in net assets
from operations 71,109 63,493
Purchase payments from contract owners 293,402 515,692
Transfers between accounts 10,924 53,653
Contract terminations and annuity payouts (4,808) (30,290)
Other transfers to Keyport Benefit
Life Insurance Company - -
Net increase in net assets
from contract transactions 299,518 539,055
Net assets at beginning of period - -
Net assets at end of period $ 370,627 $ 602,548
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
SteinRoe Money SteinRoe Special
Market Fund Venture Fund
1998 1998
Income
Dividends $ 264,105 $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 3,248 151
Net investment income (expense) 260,857 (151)
Realized gain (loss) 133 24
Unrealized appreciation (depreciation)
during the period 603 6,104
Net increase (decrease) in net assets
from operations 261,593 5,977
Purchase payments from contract owners 2,491,179 60,143
Transfers between accounts (360,032) 1,896
Contract terminations and annuity payouts (388,809) (2,327)
Other transfers to Keyport Benefit
Life Insurance Company (51,009) -
Net increase in net assets
from contract transactions 1,691,329 59,712
Net assets at beginning of period - -
Net assets at end of period $ 1,952,922 $ 65,689
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
SteinRoe SteinRoe Mortgage
Balanced Fund Securities Fund
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 2,004 2,244
Net investment income (expense) (2,004) (2,244)
Realized gain (loss) 10 77
Unrealized appreciation (depreciation)
during the period 65,281 8,238
Net increase (decrease) in net assets
from operations 63,287 6,071
Purchase payments from contract owners 1,006,990 955,196
Transfers between accounts 82,673 116,105
Contract terminations and annuity payouts (4,189) (2,844)
Other transfers to Keyport Benefit
Life Insurance Company - -
Net increase in net assets
from contract transactions 1,085,474 1,068,457
Net assets at beginning of period - -
Net assets at end of period $ 1,148,761 $ 1,074,528
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
SteinRoe Growth Colonial Growth
Stock Fund and Income Fund
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 1,055 2,575
Net investment income (expense) (1,055) (2,575)
Realized gain (loss) (156) 237
Unrealized appreciation (depreciation)
during the period 67,027 68,352
Net increase (decrease) in net assets
from operations 65,816 66,014
Purchase payments from contract owners 479,178 1,275,389
Transfers between accounts 87,855 202,347
Contract terminations and annuity payouts (3,898) (27,267)
Other transfers to Keyport Benefit
Life Insurance Company - (556)
Net increase in net assets
from contract transactions 563,135 1,449,913
Net assets at beginning of period - -
Net assets at end of period $ 628,951 $ 1,515,927
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
SteinRoe Global Colonial International
Utilities Fund Fund for Growth
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 669 569
Net investment income (expense) (669) (569)
Realized gain (loss) 173 116
Unrealized appreciation (depreciation)
during the period 25,661 20,183
Net increase (decrease) in net assets
from operations 25,165 19,730
Purchase payments from contract owners 388,031 237,494
Transfers between accounts 26,794 23,797
Contract terminations and annuity payouts (13,028) (7,604)
Other transfers to Keyport Benefit
Life Insurance Company (56) (5)
Net increase in net assets
from contract transactions 401,741 253,682
Net assets at beginning of period - -
Net assets at end of period $ 426,906 $ 273,412
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
Colonial Strategic Colonial U.S.
Income Fund Stock Fund
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 4,337 2,492
Net investment income (expense) (4,337) (2,492)
Realized gain (loss) (48) 360
Unrealized appreciation (depreciation)
during the period (90,986) 79,488
Net increase (decrease) in net assets
from operations (95,371) 77,356
Purchase payments from contract owners 2,223,375 1,108,592
Transfers between accounts 257,850 106,120
Contract terminations and annuity payouts (172,889) (53,639)
Other transfers to Keyport Benefit
Life Insurance Company - (105)
Net increase in net assets
from contract transactions 2,308,336 1,160,968
Net assets at beginning of period - -
Net assets at end of period $ 2,212,965 $ 1,238,324
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
Colonial High Yield
Newport Tiger Fund Securities Fund
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 71 64
Net investment income (expense) (71) (64)
Realized gain (loss) (4) (18)
Unrealized appreciation (depreciation)
during the period 1,138 (1,854)
Net increase (decrease) in net assets
from operations 1,063 (1,936)
Purchase payments from contract owners 45,170 53,003
Transfers between accounts 10,261 3,985
Contract terminations and annuity payouts (533) -
Other transfers to Keyport Benefit
Life Insurance Company - (2)
Net increase in net assets
from contract transactions 54,898 56,986
Net assets at beginning of period - -
Net assets at end of period $ 55,961 $ 55,050
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
Colonial Small Liberty All-Star
Cap Value Fund Equity Fund
1998 1998
Income
Dividends $ - $ -
Expenses (Note 3)
Mortality and expense risk
and administrative charges 4 996
Net investment income (expense) (4) (996)
Realized gain (loss) - 189
Unrealized appreciation (depreciation)
during the period 288 44,914
Net increase (decrease) in net assets
from operations 284 44,107
Purchase payments from contract owners 1,250 471,010
Transfers between accounts 41 42,221
Contract terminations and annuity payouts - (23,824)
Other transfers to Keyport Benefit
Life Insurance Company - (14)
Net increase in net assets
from contract transactions 1,291 489,393
Net assets at beginning of period - -
Net assets at end of period $ 1,575 $ 533,500
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Statement of Operations and Changes in Net Assets
For the Period February 6, 1998 (commencement of operations) to
December 31, 1998
Total
1998
Income
Dividends $ 264,334
Expenses (Note 3)
Mortality and expense risk
and administrative charges 27,818
Net investment income (expense) 236,516
Realized gain (loss) 1,781
Unrealized appreciation (depreciation)
during the period 781,852
Net increase (decrease) in net assets
from operations 1,020,149
Purchase payments from contract owners 14,151,556
Transfers between accounts 919,919
Contract terminations and annuity payouts (796,116)
Other transfers to Keyport Benefit
Life Insurance Company (51,747)
Net increase in net assets
from contract transactions 14,223,612
Net assets at beginning of period -
Net assets at end of period $ 15,243,761
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements
December 31, 1998
1. Organization
The Variable Account A (the "Variable Account") was established on January
2, 1998 as a segregated investment account of Keyport Benefit Life
Insurance Company (the "Company"). The Variable Account is registered with
the Securities and Exchange Commission as a Unit Investment Trust under the
Investment Company Act of 1940 and invests in shares of eligible funds.
The Variable Account is a funding vehicle for group and individual variable
annuity contracts. The Variable Account currently offers two contracts,
distinguished principally by the level of expenses, surrender charges, and
eligible fund options. The two contracts and their respective eligible
fund options are as follows:
Keyport Advisor Variable Annuity Keyport Advisor Vista Variable Annuity
Alger American Fund: AIM:
Alger American Growth Portfolio AIM Capital Appreciation Fund
Alger American Small AIM Growth Fund
Capitalization Portfolio AIM International Equity
MFS Variable Insurance Trust: MFS Variable Insurance Trust:
MFS Emerging Growth Series MFS Emerging Growth Series
MFS Research Series MFS Research Series
MFS Bond Series
SteinRoe Variable Investment SteinRoe Variable Investment
Trust (SRVIT): Trust (SRVIT):
SteinRoe Money Market Fund SteinRoe Money Market Fund
SteinRoe Special Venture Fund SteinRoe Special Venture Fund
SteinRoe Balanced Fund SteinRoe Balanced Fund
SteinRoe Mortgaged Securities SteinRoe Growth Stock Fund
Fund
SteinRoe Growth Stock Fund
Liberty Variable Investment Liberty Variable Investment
Trust (LVIT): Trust (LVIT):
Colonial Growth and Income Fund Colonial Growth and Income Fund
SteinRoe Global Utilities Fund SteinRoe Global Utilities Fund
Colonial International Fund Colonial Strategic Income Fund
for Growth
Colonial Strategic Income Fund Colonial U.S. Stock Fund
Colonial U.S. Stock Fund Liberty All-Star Equity Fund
Newport Tiger Fund Colonial Small Cap Value Fund
Liberty All-Star Equity Fund Colonial High Yield Securities Fund
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements (continued)
1. Organization (continued)
Alliance Variable Products Alliance Variable Products
Series Fund, Inc: Series Fund, Inc:
Alliance Global Bond Portfolio Alliance Global Bond Portfolio
Alliance Premier Growth Portfolio Alliance Premier Growth Portfolio
Alliance Growth and Income Portfolio
Alliance Real Estate Portfolio
2. Significant Accounting Policies
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP"). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect amounts reported therein. Although
actual results could differ from these estimates, any such differences are
expected to be immaterial to the Variable Account. Certain prior year
amounts have been reclassified to conform to the current year's
presentation.
Shares of the eligible funds are sold to the Variable Account at the
reported net asset values. Transactions are recorded on the trade date.
Income from dividends is recorded on the ex-dividend date. Realized gains
and losses on sales of investments are computed on the basis of identified
cost of the investments sold.
Annuity reserves are computed for contracts in the income stage according
to the 1983a Individual Annuity Mortality Table. The assumed investment
rate is either 3.0%, 4.0%, 5.0% or 6.0% unless the annuitant elects
otherwise, in which case the rate may vary from 3.0% to 6.0%, as regulated
by the laws of the state of New York. The mortality risk is fully borne by
the Company and may result in additional amounts being transferred into the
Variable Account by the Company.
Amounts due to Keyport Benefit Life Insurance Company represent mortality
and expense risk and administrative charges earned by the Company in 1998
but not transferred to the Company until January 1999.
The operations of the Variable Account are included in the federal income
tax return of the Company, which is taxed as a Life Insurance Company under
the provisions of the Internal Revenue Code. The Company anticipates no
tax liability resulting from the operations of the Variable Account.
Therefore, no provision for income taxes has been charged against the
Variable Account.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements (continued)
3. Expenses
There are no deductions made from purchase payments for sales charges at
the time of purchase. In the event of a contract termination, a contingent
deferred sales charge, based on a graded table of charges, is deducted. An
annual contract maintenance charge of $36 to cover the cost of contract
administration is deducted from each contractholder's account on the
contract anniversary date. Daily deductions are made from each sub-account
for assumption of mortality and expense risk at an effective annual rate of
1.25% of contract value. A daily deduction is also made for distribution
costs incurred by the Company at an effective annual rate of 0.15% of
contract value.
4. Affiliated Company Transactions
Administrative services necessary for the operation of the Variable Account
are provided by the Company. The Company has absorbed all organizational
expenses including the fees of registering the Variable Account and its
contracts for distribution under federal and state securities laws. Stein
Roe & Farnham, Inc., an affiliate of the Company, is the investment advisor
to the SRVIT. Liberty Advisory Services Corporation, a wholly-owned
subsidiary of the Company, is the investment advisor to the LVIT. Colonial
Management Associates, Inc., an affiliate of the Company, is the investment
sub-advisor to the LVIT. Keyport Financial Services Corp., a wholly-owned
subsidiary of the Company, is the principal underwriter for SRVIT and LVIT.
The investment advisors' compensation is derived from the mutual funds.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements (continued)
5. Unit Values
A summary of the accumulation unit values at December 31, 1998 and the
accumulation units and dollar value outstanding at December 31, 1998 are as
follows:
UNIT
VALUE UNITS DOLLARS
AIM Capital Appreciation Fund
Keyport Advisor Vista $11.091130 187.0050 $ 2,074
AIM Growth Fund
Keyport Advisor Vista 11.815758 156.8355 1,853
AIM International Equity Fund
Keyport Advisor Vista 9.997160 839.7241 8,395
Alger American Growth Portfolio
Keyport Advisor 17.928398 39,233.0573 703,386
Alger American Small Capitalization Portfolio
Keyport Advisor 12.685024 13,187.4168 167,283
Alliance Global Bond Portfolio
Keyport Advisor 11.041874 37,827.9406 417,691
Alliance Premier Growth Portfolio
Keyport Advisor 19.645990 72,221.4541 1,418,862
Alliance Growth and Income Portfolio
Keyport Advisor Vista 10.894009 725.2682 7,901
Alliance Real Estate Portfolio
Keyport Advisor Vista 9.019247 879.8745 7,936
MFS Bond Series
Keyport Advisor Vista 10.239799 22,669.3616 232,130
MFS Emerging Growth Series
Keyport Advisor 15.454973 23,981.0630 370,627
MFS Research Series
Keyport Advisor 14.399988 38,021.4961 547,509
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements (continued)
5. Unit Values (continued)
UNIT
VALUE UNITS DOLLARS
SteinRoe Money Market Fund
Keyport Advisor $14.283805 98,844.1188 $1,411,870
Dollar Cost Averaging 10.203180 19,658.6719 200,581
SteinRoe Special Venture Fund
Keyport Advisor 25.351276 2,591.1558 65,689
SteinRoe Balanced Fund
Keyport Advisor 27.188237 42,018.6170 1,142,412
SteinRoe Mortgage Securities Fund
Keyport Advisor 18.825527 56,959.9473 1,072,301
SteinRoe Growth Stock Fund
Keyport Advisor 44.828835 13,510.3866 605,655
Colonial Growth and Income Fund
Keyport Advisor 21.211314 68,719.8638 1,457,639
SteinRoe Global Utilities Fund
Keyport Advisor 17.923199 23,195.9962 415,746
Colonial International Fund for Growth
Keyport Advisor 10.761067 25,407.5636 273,412
Colonial Strategic Income Fund
Keyport Advisor 14.237231 144,486.3679 2,057,086
Colonial U.S. Stock Fund
Keyport Advisor 24.622292 48,450.6467 1,192,966
Newport Tiger Fund
Keyport Advisor 7.866774 7,113.6011 55,961
Colonial High Yield Securities Fund
Keyport Advisor Vista 9.631230 5,715.8216 55,050
Colonial Small Cap Value Fund
Keyport Advisor Vista 8.575210 183.6356 1,575
Liberty All-Star Equity Fund
Keyport Advisor Vista 11.777423 43,444.9041 511,669
850,231.7948 $14,405,259
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements (continued)
6. Purchases and Sales of Securities
The cost of shares purchased and proceeds from shares sold by the Variable
Account during 1998 are shown below:
Purchases Sales
AIM Capital Appreciation Fund $ 1,917 $ 2
AIM Growth Fund 1,518 3
AIM International Equity Fund 7,566 14
Alger American Growth Portfolio 615,569 8,487
Alger American Small Capitalization Portfolio 172,070 899
Alliance Global Bond Portfolio 520,667 85,267
Alliance Premier Growth Portfolio 1,285,780 19,935
Alliance Growth and Income Portfolio 6,744 8
Alliance Real Estate Portfolio 9,408 1,499
MFS Bond Series 281,730 52,364
MFS Emerging Growth Series 304,450 5,739
MFS Research Series 596,745 58,762
SteinRoe Money Market Fund 2,569,116 565,185
SteinRoe Special Venture Fund 61,701 2,139
SteinRoe Balanced Fund 1,085,018 1,546
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements (continued)
6. Purchases and Sales of Securities (continued)
The cost of shares purchased and proceeds from shares sold by the Variable
Account during 1998 are shown below:
Purchases Sales
SteinRoe Mortgage Securities Fund $ 1,111,003 $ 44,790
SteinRoe Growth Stock Fund 573,851 11,772
Colonial Growth and Income Fund 1,478,534 31,196
SteinRoe Global Utilities Fund 419,235 18,162
Colonial International Fund for Growth 261,538 8,424
Colonial Strategic Income Fund 2,454,870 150,870
Colonial U.S. Stock Fund 1,206,934 48,457
Newport Tiger Fund 55,427 599
Colonial High Yield Securities Fund 61,352 4,429
Colonial Small Cap Value Fund 1,289 2
Liberty All-Star Equity Fund 527,697 39,301
$ 15,671,729 $1,159,851
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements (continued)
7. Diversification Requirements
Under the provisions of Section 817(h) of the Internal Revenue Code, a
variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period for which the investments
of the segregated asset account on which the contract is based are not
adequately diversified. The Code provides that the "adequately
diversified" requirement may be met if the underlying investments satisfy
either a statutory safe harbor test or diversification requirements set
forth in regulations issued by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. The Company believes that the Variable Account satisfies the
current requirements of the regulations, and it intends that the Variable
Account will continue to meet such requirements.
8. Year 2000 (Unaudited)
The Company relies significantly on computer systems and applications in
its operations. Many of these systems are not presently Year 2000
compliant. These systems use programs that were designed and developed
without considering the impact of the upcoming change in the century. Any
of the Company's computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. The
Company's business, financial condition and results of operations could be
materially and adversely affected by the failure of the Company's systems
and applications (and those operated by third parties interfacing with the
Company's systems and applications) to properly operate or manage these
dates.
In addressing the Year 2000 issue, the Company has completed an inventory
of its computer programs and assessed its Year 2000 readiness. The
Company's computer programs include internally developed programs, third-
party purchased programs and third-party custom developed programs. For
programs which were identified as not being Year 2000 ready, the Company
has implemented a remedial plan which includes repairing or replacing the
programs and appropriate testing for Year 2000. The remediation plan is
substantially complete and is currently in the final testing phase. The
Company also identified its non-information technology systems with respect
to Year 2000 issues. The Company initiated remediation efforts in this
area and expects to complete this phase during 1999.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A
Notes to Financial Statements (continued)
8. Year 2000 (Unaudited) (continued)
In addition, the Company has initiated communication with significant
financial institutions, distributors, suppliers and others with which it
does business to determine the extent to which the Company's systems are
vulnerable by the failure of others to remediate their own Year 2000
issues. The Company has received feedback from such parties and is in the
process of independently confirming information received from other parties
with respect to their year 2000 issues. The Company is developing, and will
continue to develop, contingency plans for dealing with any adverse effects
that become likely in the event the Company's remediation plans are not
successful or third parties fail to remediate their own Year 2000 issues.
The Company expects contingency planning to be substantially complete by
June 1999. If necessary modifications and conversions are not made, or are
not timely completed, or if the systems of the companies on which the
Company's interface system relies are not timely converted, the Year 2000
issues could have a material impact on the financial condition and results
of operations of the Company. However, the Company believes that with
modifications to existing software and conversions to new software, the
Year 2000 issue will not pose significant operational problems for its
computer systems.
<PAGE>
Report of Independent Auditors
The Board of Directors
Keyport Benefit Life Insurance Company
We have audited the accompanying statutory-basis balance sheet of Keyport
Benefit Life Insurance Company (formerly American Benefit Life Insurance
Company) as of December 31, 1998 and 1997, and the related statutory-basis
statements of operations, capital and surplus, and cash flow for the years
then ended. 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 2 to the financial statements, the Company presents
its financial statements in conformity with accounting practices prescribed
or permitted by the State of New York Insurance Department, which practices
differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles are
described in Note 2. 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, 1998 and 1997, or the results of its operations or
its cash flow for the years then ended.
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, 1998 and 1997, and the results of
its operations and its cash flow for the years then ended in conformity
with accounting practives prescribed or permitted by the State of New York
Insurance Department.
Boston, Massachusetts /s/Ernst & Young LLP
January 28, 1999
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
BALANCE SHEET-STATUTORY-BASIS
(in thousands)
December 31
1998 1997
ADMITTED ASSETS
Cash and invested assets:
Bonds $ 12,546 $ 2,996
Cash and short-term investments 39,386 3,451
Total cash and invested assets 51,932 6,447
Accrued investment income 350 87
Other assets 604 3
Separate account assets 17,448 2,778
Total admitted assets $ 70,334 $ 9,315
LIABILITIES AND CAPITAL AND (DEFICIT) SURPLUS
Liabilities:
Reserves for future policy benefits $ 40,996 $ 169
Policy and contract claims 62 47
Interest maintenance reserve 33 39
Total policy and contract liabilities 41,091 255
Accounts payable and accrued expenses 64 106
Federal income taxes payable - 87
Separate account liabilities 17,448 2,778
Total liabilities 58,603 3,226
Capital and (deficit) surplus:
Common stock, $2.00 par value; authorized
1,000 shares; issued and outstanding
1,000 shares 2,000 2,000
Paid-in surplus 10,000 2,500
Unassigned (deficit) surplus (269) 1,589
Total capital and surplus 11,731 6,089
Total liabilities and capital and
(deficit) surplus $ 70,334 $ 9,315
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
STATEMENT OF OPERATIONS-STATUTORY-BASIS
(in thousands)
Year Ended December 31
1998 1997
Revenues:
Premiums and annuity considerations $ 42,046 $ 37
Deposit-type funds 13,000 -
Considerations for supplementary contracts 723 -
Separate account fee income 28 46
Net investment income 921 571
Other revenues 5 -
Total revenues 56,723 654
Benefits and expenses:
Increase in reserves for future policy benefits 40,721 1
Surrender benefits 1,296 1,312
Annuity benefits 770 28
Other benefits 24 28
42,811 1,369
Other operating expenses:
Commissions 3,153 3
General insurance expenses 864 389
Taxes, licenses, and fees 14 27
Net transfers to (from) separate accounts 12,588 (1,310)
Total benefits and expenses 59,430 478
(Loss) income before federal income tax
(benefit) expense (2,707) 176
Federal income tax (benefit) expense (949) 66
Net (loss) income $ (1,758) $ 110
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
STATEMENT OF CAPITAL AND (DEFICIT) SURPLUS-STATUTORY-BASIS
(in thousands)
Separate
Account Unassigned Total
Common Paid-in Contingency (Deficit) Captial and
Stock Surplus Reserve Surplus Surplus
Balances at
January 1, 1997 $ 2,000 $ 5,000 $ 92 $ 1,328 $ 8,420
Net income 110 110
Change in asset
valuation reserve 59 59
Transfer of
Contingency reserve (92) 92 -
Dividends paid (2,500) (2,500)
Balances at
December 31, 1997 2,000 2,500 - 1,589 6,089
Net loss (1,758) (1,758)
Change in non-admitted
Assets (100) (100)
Capital contribution 7,500 7,500
Balances at
December 31, 1998 $ 2,000 $ 10,000 $ - $ (269) $ 11,731
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
STATEMENT OF CASH FLOW-STATUTORY-BASIS
(in thousands)
Year Ended December 31
1998 1997
Operations:
Premiums and annuity considerations $ 55,769 $ 38
Net investment income received 671 648
Benefits paid (2,076) (1,365)
Commissions and other expenses (4,067) (341)
Net transfers (to) from separate account (13,453) 1,317
Separate account fee income 28 46
Other revenues received less other expenses 4 (1)
Federal income taxes paid (172) (126)
Net cash provided by operations 36,704 216
Investment activities:
Proceeds from sales, maturities, or
repayments of bonds 1,000 5,743
Cost of bonds acquired (10,575) (294)
Net cash (used in) provided by
investment activities (9,575) 5,449
Financing and other activities:
Capital contribution received 7,500 -
Dividend paid - (2,500)
Other applications, net 1,306 1
Net cash provided by (used in)
financing and other activities 8,806 (2,499)
Net increase in cash and short-term
Investments 35,935 3,166
Cash and short-term investments:
Beginning of year 3,451 285
End of year $ 39,386 $ 3,451
See accompanying notes.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. Organization
On January 2, 1998, Keyport Life Insurance Company acquired the common
stock of American Benefit Life Insurance Company, renamed Keyport Benefit
Life Insurance Company (the "Company") on March 31, 1998. Keyport Benefit
Life Insurance Company is licensed in the State of New York and Rhode
Island and offers fixed and variable annuities and accident and health
policies.
The Company is a wholly-owned subsidiary of Keyport Life Insurance Company
("Keyport Life"). Keyport Life is a wholly-owned subsidiary of SteinRoe
Services Incorporated ("SteinRoe"). SteinRoe is a wholly-owned subsidiary
of Liberty Financial Companies, Incorporated ("Liberty Financial"), which
is a majority owned, indirect subsidiary of Liberty Mutual Insurance
Company ("Liberty Mutual").
2. Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements have been prepared in accordance with
insurance accounting practices prescribed or permitted by the New York
State Insurance Department. These practices differ from generally accepted
accounting principles ("GAAP"). The more significant variances between
statutory and GAAP are as follows: (a) the costs related to 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 profits; (b) policy reserves are based
on statutory mortality and interest requirements rather than full account
value; (c) deferred federal income taxes are not provided for the
difference between the financial reporting and tax bases of assets and
liabilities for statutory purposes, whereas, they are required for GAAP;
(d) certain assets designated as "non-admitted assets" (principally
furniture and equipment, leasehold improvements, and certain agents' debit
balances) have been excluded from the balance sheet through a charge to
surplus; (e) bonds are generally carried at amortized cost irrespective of
the Company's investment portfolio activity; (f) the asset valuation
reserve (AVR), which is in the nature of a contingency reserve for possible
losses on investments, is recorded as a liability through a charge to
surplus, and (g) the interest maintenance reserve (IMR), which is designed
to include deferred realized gains and losses (net of applicable federal
income taxes) due to interest rate changes on fixed income investments, is
also recorded as a liability. These deferred net realized investment gains
or losses are amortized into future income generally over the original
period to maturity of the assets sold.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (continued)
2. Summary of Significant Accounting Policies (continued)
Other significant accounting practices are as follows:
(b) Permitted Statutory Accounting Practices
The Company's statutory-basis financial statements are prepared in
accordance with accounting practices prescribed or permitted by the New
York State Insurance Department. "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.
In 1998, the NAIC adopted codified statutory accounting principles
("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 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 New York must
adopt Codification as the prescribed basis of accounting on which domestic
insurers must report their statutory-basis results to the Insurance
Department. At this time it is unclear whether the state of New York will
adopt Codification. Management has not yet determined the impact of
Codification to the Company's statutory-basis financial statements.
(c) Investments
All investments are valued in accordance with guidelines provided by the
NAIC. Bonds are carried at amortized cost, except for those bonds in or
near default, which are recorded at lower of amortized cost or fair value.
Realized investment gains and losses are calculated on a first-in, first-
out basis.
Net realized investment gains or losses include gains on sales of equity
securities and credit related gains and losses on fixed maturities, net of
applicable federal income taxes. Interest related realized investment gains
or losses are deferred in the IMR and amortized under the grouped method.
The grouped method classifies realized investment gains and losses, net of
applicable taxes, according to the number of calendar years to expected
maturity. The groupings are in bands of five calendar years with
amortization factors for each band provided by the NAIC's Securities
Valuation Office.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (continued)
2. Summary of Significant Accounting Policies (continued)
(d) Cash and Short-Term Investments
Cash and short term investments represent cash balances and investments
with original maturities of one year or less.
(e) Separate Accounts
Separate account assets, which are valued at fair value, consist
principally of investments in mutual funds and are included as a separate
caption in the balance sheet. The contractholders bear the investment risk.
Investment income and changes in asset values related to policyholders are
fully allocated to variable annuity and variable life policyholders and,
therefore, do not affect the operating results of the Company. The Company
provides administrative services and bears the mortality risk related to
these contracts. 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.
(f) Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in
determining estimated fair values of financial instruments:
Fixed maturities: Fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed maturities not
actively traded, the estimated fair values are determined using values
from independent pricing services, or, in the case of private
placements, are determined by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality,
and maturity of the securities.
Cash and short-term investments: The carrying value of cash and short-
term investments approximates fair value.
Reserves for future policy benefits: Deferred annuity contracts are
assigned fair value equal to current net surrender value. Annuitized
contracts are valued based on the present value of the future cash
flows at current pricing rates.
(g) Use of Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
(h) Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (continued)
3. Investments
(a) Fixed Maturities
The carrying value and fair value of investments in fixed maturities as of
December 31, 1998 and 1997 are as follows (in thousands):
December 31, 1998
Gross Gross
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
U.S. Treasury securities $ 12,546 $ 79 $ (105) $ 12,520
December 31, 1997
Gross Gross
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
U.S. Treasury securities $ 2,996 $ 64 $ - $ 3,060
(b) Contractual Maturities
The carrying value and fair value of fixed maturities by contractual
maturity as of December 31, 1998 are as follows (in thousands):
December 31, 1998
Carrying Fair
Value Value
Due in one year or less $ 999 $ 1,030
Due after one year through five years 11,547 11,490
Total fixed maturities $ 12,546 $ 12,520
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (continued)
3. Investments (continued)
At December 31, 1998 and 1997, bonds with an amortized cost of $499,532 and
$500,000, respectively, were on deposit with state insurance departments to
satisfy regulatory authorities.
(c) Net Investment Income
Net investment income is summarized as follows (in thousands):
Year Ended December 31
1998 1997
Bonds $ 243 $ 502
Cash and short-term investments 673 76
Gross investment income 916 578
Investment expenses - (15)
916 563
Amortization of interest maintenance reserve 5 8
Net investment income $ 921 $ 571
There were no non-income producing bonds as of December 31, 1998 and 1997.
4. Federal Income Taxes
Income taxes are calculated as if the Company filed its own income tax
return. For 1998, the Company will file a consolidated return with Keyport
Life and Independence Life and Annuity Company. The Company will be
eligible to file a consolidated return with Liberty Financial beginning in
2003. The method of allocation is subject to a written agreement and is
based upon separate return calculations with current credit for net losses
incurred to the extent those losses are used in the consolidated return.
This written agreement is pending approval from the state of Rhode Island.
For 1997, the Company filed a consolidated return with its former parent,
American Republic Insurance Company.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate of 35% for the following reasons (in
thousands):
Year ended December 31
1998 1997
Computed expected tax (benefit) expense $ (947) $ 62
Other, net (2) 4
Federal income tax (benefit) expense $ (949) $ 66
Taxes recoverable of $1,034,000 are included in other assets.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (continued)
5. Transactions with Affiliated Companies
The Company reimbursed Keyport Life for corporate general and
administrative expenses and corporate overhead, such as executive and legal
support. The total amount reimbursed in 1998 was $318,590. In 1997, the
Company reimbursed American Republic Life Insurance Company (former parent)
$69,415 for the cost of services that it provided to the Company.
6. Dividend Restrictions
The maximum amount of dividends which can be paid by the Company without
prior approval of the Insurance Commissioner of the State of New York is
subject to restrictions related to statutory surplus and statutory adjusted
net investment income. The Company has not paid dividends since the
acquisition by Keyport Life.
7. Commitments and Contingencies
(a) Leases
The Company leases its home office, data processing equipment, furniture
and certain office facilities from others, under operating leases expiring
in various years through 2006. Rental expense amounted to $9,450 and
$16,316 for the years ended December 31, 1998 and 1997, respectively. The
following are the minimum future rental payments under noncancelable
operating leases having remaining terms in excess of one year at December
31, 1998:
1999 $ 13,200
2000 13,200
2001 13,200
2002 15,000
2003 15,000
Thereafter 45,000
Total minimum future rental payments $ 114,600
(b) Other Matters
The Company is involved, from time to time, in litigation incidental to its
business. In the opinion of management, the resolution of such litigation
is not expected to have a material adverse effect on the Company's
financial position.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (continued)
8. Annuity Reserves
At December 31, 1998, the Company's annuity reserves and deposit fund
liabilities that are subject to discretionary withdrawal (with adjustment),
subject to discretionary withdrawal (without adjustment), and not subject
to discretionary withdrawal provisions are summarized as follows (in
thousands):
Amount Percent
Subject to discretionary withdrawal (with adjustment)
At book value less current surrender charge of 5%
or more $ 39,873 69.3%
At market value 16,702 29.1%
Total with adjustment or at market value 56,575 98.4%
Subject to discretionary withdrawal (without
adjustment) at book value with minimal or no
charge or adjustment 943 1.6%
Not subject to discretionary withdrawal - -
Total annuity reserves and deposit fund liabilities $ 57,518 100.0%
The carrying value and fair value of the Company's reserves for future
policy benefits at December 31, 1998 was $40.9 million and $40.8 million,
respectively.
9. Separate Accounts
At December 31, 1998, the Company had reserves for nonguaranteed separate
accounts subject to discretionary withdrawal at market value of $17.4
million. A reconciliation of the amounts transferred to and from the
separate accounts is presented below (in thousands):
Year ended December 31, 1998
Transfers as reported in the Summary of
Operations of the Separate Accounts
Statement:
Transfers from separate accounts $ (1,529)
Transfers to separate accounts 14,153
Net transfers from separate accounts 12,624
Reconciling adjustments:
Other transfers 36
Transfers as reported in the Summary of Operations
of the Life, Accident & Health Annual Statement $ 12,588
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (continued)
10. Risk-Based Capital
Life and health insurance companies are required to calculate Risk-Based
Capital ("RBC") in accordance with instructions set forth by the NAIC. RBC
is a means of setting the capital standards for insurance companies to
support their operations and encompasses various risks associated with the
business including asset quality, premium volume, policy reserves, and
interest rates. The RBC is then compared to the Company's total adjusted
capital, which is comprised of reported capital and surplus adjusted for
the asset valuation reserve. The Company's capital and surplus exceeds the
RBC requirements at December 31, 1998.
11. Year 2000 (Unaudited)
The Company relies significantly on computer systems and applications in
its operations. Many of these systems are not presently Year 2000
compliant. These systems use programs that were designed and developed
without considering the impact of the upcoming change in the century. Any
of the Company's computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. The
Company's business, financial condition and results of operations could be
materially and adversely affected by the failure of the Company's systems
and applications (and those operated by third parties interfacing with the
Company's systems and applications) to properly operate or manage these
dates.
In addressing the Year 2000 issue, the Company has completed an inventory
of its computer programs and assessed its Year 2000 readiness. The
Company's computer programs include internally developed programs, third-
party purchased programs and third-party custom developed programs. For
programs which were identified as not being Year 2000 ready, the Company
has implemented a remedial plan which includes repairing or replacing the
programs and appropriate testing for Year 2000. The remediation plan is
substantially complete and is currently in the final testing phase. The
Company also identified its non-information technology systems with respect
to Year 2000 issues. The Company initiated remediation efforts in this area
and expects to complete this phase during 1999.
<PAGE>
KEYPORT BENEFIT LIFE INSURANCE COMPANY
(formerly American Benefit Life Insurance Company)
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (continued)
11. Year 2000 (Unaudited)(continued)
In addition, the Company has initiated communication with significant
financial institutions, distributors, suppliers and others with which it
does business to determine the extent to which the Company's systems are
vulnerable by the failure of others to remediate their own Year 2000
issues. The Company has received feedback from such parties and is in the
process of independently confirming information received from other parties
with respect to their year 2000 issues. The Company is developing, and will
continue to develop, contingency plans for dealing with any adverse effects
that become likely in the event the Company's remediation plans are not
successful or third parties fail to remediate their own Year 2000 issues.
The Company expects contingency planning to be substantially complete by
June 1999. If necessary modifications and conversions are not made, or are
not timely completed, or if the systems of the companies on which the
Company's interface system relies are not timely converted, the Year 2000
issues could have a material impact on the financial condition and results
of operations of the Company. However, the Company believes that with
modifications to existing software and conversions to new software, the
Year 2000 issue will not pose significant operational problems for its
computer systems.
<PAGE>
PART C
<PAGE>
Item 24. Financial Statements and Exhibits
(a) Statutory-Basis Financial Statements:
Included in Part B:
Variable Account A:
Statement of Assets and Liabilities - December 31, 1998
Statement of Operations and Changes in Net Assets for the year
ended December 31, 1998
Notes to Financial Statements
Keyport Benefit Life Insurance Company:
Balance Sheets for the years ended December 31, 1998 and 1997.
Statements of Operations for the years ended December 31,
1998,
1997 and 1996.
Statements of Changes in Capital and Surplus for the years
ended December 31, 1998, 1997 and 1996.
Statements of Cash Flows for the years ended December 31,
1998,
1997 and 1996.
Notes to Financial Statements
(b) Exhibits:
** (1) Resolution of the Board of Directors establishing Variable
Account 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
**** (4i) Specimen Variable Annuity Certificate of Keyport Benefit
Life Insurance Company
** (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 By and Among Keyport Benefit
Life Insurance Company, Keyport Financial Services Corp.,
and SteinRoe Variable Investment Trust
**** (8c) Participation Agreement Among The Alger American Fund,
Keyport Benefit Life Insurance Company, and Fred Alger and
Company, Incorporated
(8d) Participation Agreement Among Alliance Variable Products
Series Fund, Inc., Alliance Fund Distributors, Inc.,
Alliance
Capital Management L.P., and Keyport Benefit Life Insurance
Company
**** (8e) Participation Agreement By and Among Keyport Benefit Life
Insurance Company, Keyport Financial Services Corp., and
Liberty Variable Investment Trust
# (8f) 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.
(8g) Participation Agreement Among Templeton Variable Products
Series Fund, Franklin Templeton Distributors, Inc. and
Keyport Benefit Life Insurance Company
(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.
# Incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement (Files No. 333-45727; 811-08635) filed on or
about July 23, 1998.
## Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement (Files No. 333-45727; 811-08635) filed on or
about April 30, 1999.
+ 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
J. Andrew Hilbert Director
Liberty Financial Companies, Inc.
Federal Reserve Plaza
600 Atlantic Avenue, 24th Floor
Boston, MA 02110
Peter M. Lehrer Director
Opus Three Ltd.
550 Mamaroneck Ave.
Harrison, NY 10528
<PAGE>
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
Philip K. Polkinghorn Director and President
Paul H. LeFevre, Jr. Director and Executive Vice President
Bernard R. Beckerlegge Director, Senior Vice President and
General Counsel
Stewart R. Morrison Director, Senior Vice President and
Chief Investment Oficer
Bernhard M. Koch Senior Vice President and Chief
Financial 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
Daniel Yin Vice President
John G. Bonvouloir Assistant Vice President and Assistant
Treasurer
Stephen Cross Assistant Vice President and Assistant
Controller
Alan R. Downey Assistant Vice President
Scott E. Morin Assistant Vice President and Controller
Sean P. O'Brien Assistant Vice President
Donald A. Truman Assistant Secretary
*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
Jacob M. Herschler Director
Paul T. Holman Director and Assistant Clerk
James J. Klopper Director, President and Clerk
Daniel C. Bryant Vice President
Rogelio P. Japlit Treasurer
Donald A. Truman Assistant Clerk
*125 High Street, Boston, Massachusetts 02110.
Item 30. Location of Accounts and Records.
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.
<PAGE>
SIGNATURES
<PAGE>
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 16th day of June, l999.
Variable Account A
(Registrant)
By: Keyport Benefit Life Insurance Company
(Depositor)
By: /s/ Philip K. Polkinghorn *
Philip K. Polkinghorn
President
By: /s/James J. Klopper June 16, 1999
James J. Klopper Date
Attorney-in-Fact
* James J. Klopper has signed this document on the indicated date on
behalf of each of Mr. Polkinghorn pursuant to powers of attorney duly
executed by him and included herewith as Exhibit 16.
<PAGE>
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/PHILIP K. POLKINGHORN* /s/PHILIP K. POLKINGHORN*
PHILIP K. POLKINGHORN PHILIP K. POLKINGHORN
Chairman of the Board President
/s/BERNARD R. BECKERLEGGE* /s/BERNHARD M. KOCH*
BERNARD R. BECKERLEGGE BERNHARD M. KOCH
Director Chief Financial Officer
/s/WILLIAM P. DONOHUE*
WILLIAM P. DONOHUE
Director
/s/J. ANDREW HILBERT*
J. ANDREW HILBERT
Director
/s/PAUL H. LEFEVRE, JR.*
PAUL H. LEFEVRE, JR.
Director
*BY: /s/James J. Klopper June 16, 1999
/s/PETER M. LEHRER* James J. Klopper Date
PETER M. LEHRER Attorney-in-Fact
Director
/s/JEFF S. LIEBMANN*
JEFF S. LIEBMANN
Director
/s/STEWART R. MORRISON*
STEWART R. MORRISON
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
herewith as Exhibit 16.
<PAGE>
EXHIBIT INDEX
Item Page
(8d) 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 Among Templeton Variable Products
Series Fund, Franklin Templeton Distributors, Inc. and
Keyport Benefit Life Insurance Company
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(16) Powers of Attorney
EXHIBIT 8(d)
PARTICIPATION AGREEMENT
AMONG ALLIANCE FUND DISTRIBUTORS, INC. ON BEHALF OF ITSELF
and
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.,
and
KEYPORT BENEFIT LIFE INSURANCE COMPANY
THIS AGREEMENT made as of May 10, 1999, among Alliance Variable
Products Series Fund, Inc. (the "Trust"), a corporation organized under
Maryland law, Alliance Fund Distributors, Inc., a Delaware corporation, the
Trust's principal underwriter ("Underwriter"), and Keyport Benefit Life
Insurance Company, a life insurance company organized as a corporation
under New York law (the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company set forth in Schedule A, as may be
amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the
various series of its shares under the Securities Act of 1933, as amended
(the "1933 Act");
WHEREAS, the Trust and the Underwriter desire that Trust shares be
used as an investment vehicle for separate accounts established for
variable life insurance policies and variable annuity contracts to be
offered by life insurance companies which have entered into fund
participation agreements with the Trust (the "Participating Insurance
Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular
managed portfolio of securities and other assets, and certain of those
series, named in Schedule B, (the "Portfolios") are to be made available
for purchase by the Company for the Accounts; and
WHEREAS, the Trust has been granted or currently intends to apply for
an order from the SEC granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a) and 15(b) of the 1940 Act, and Rules 6e-2 (b) (15) and 6e-3 (T) (b)
(15) thereunder, to the extent necessary to permit shares of the Trust to
be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance
companies and certain qualified pension and retirement plans (the "Shared
Funding Exemptive Order");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from
registration under the 1940 Act is available and the Trust has been so
advised; and has registered or will register certain variable annuity
contracts and variable life insurance policies under which the portfolios
are to be made available as investment vehicles (the "Contracts") under the
1933 Act unless such interests under the Contracts in the Accounts are
exempt from registration under the 1933 Act and the Trust has been so
advised;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such account on Schedule A hereto, to set
aside and invest assets attributable to one or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an
"Adviser") is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended ("Advisers Act") and any applicable state
securities laws;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Contracts and the
Underwriter is authorized to sell such shares to unit investment trusts
such as each Account at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's
designee for receipt of purchase orders and requests for redemption
relating to each Portfolio from each Account, provided that the Company
notifies the Trust of such purchase orders and requests for redemption by
9:00 a.m. Eastern time on the next following Business Day, as defined in
Section 1.3.
1.2. The Trust agrees to make shares of the Portfolios available to
the Accounts for purchase at the net asset value per share next computed
after receipt of a purchase order by the Trust (or its designee), as
established in accordance with the provisions of the then current
prospectus of the Trust describing Portfolio purchase procedures on those
days on which the Trust calculates its net asset value pursuant to rules of
the SEC, and the Trust shall use its best efforts to calculate such net
asset value on each day on which the New York Stock Exchange ("NYSE") is
open for trading. The Company will transmit orders from time to time to the
Trust for the purchase of shares of the Portfolios. The Trustees of the
Trust (the "Trustees") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any
applicable state laws, such action is deemed in the best interests of the
shareholders of such Portfolio.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than the close of business on
the next Business Day after the Trust receives the purchase order. Payment
shall be made in federal funds transmitted by wire to the Trust or its
designated custodian. Upon receipt by the Trust of the federal funds so
wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Trust for this purpose. "Business
Day" shall mean any day on which the NYSE is open for trading and on which
the Trust calculates its net asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares of
any Portfolio, when requested by the Company on behalf of an Account, at
the net asset value next computed after receipt by the Trust (or its
designee) of the request for redemption, as established in accordance with
the provisions of the then current prospectus of the Trust describing
Portfolio redemption procedures. The Trust shall make payment for such
shares in the manner established from time to time by the Trust.
Redemption with respect to a Portfolio will normally be paid to the Company
for an Account in federal funds transmitted by wire to the Company before
the close of business on the next Business Day after the receipt of the
request for redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market conditions
exist, but in no event shall payment be delayed for a greater period than
is permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios by
the Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 may be netted against one another
on any Business Day for the purpose of determining the amount of any wire
transfer on that Business Day.
1.6 Issuance and transfer of the Trust's Portfolio shares will be by
book entry only. Stock certificates will not be issued to the Company or
the Account. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7 The Trust shall furnish, on or before the ex-dividend date, notice
to the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company hereby
elects to receive all such income dividends and capital gain distributions
as are payable on a Portfolio's shares in additional shares of the
Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or its
designated agent on a daily basis as soon as reasonably practical after the
net asset value per share is calculated and shall use reasonable efforts to
make such net asset value per share available by 7:00 p.m. Eastern time
each Business Day.
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to
certain qualified pension and retirement plans to the extent permitted by
the Shared Funding Exemptive Order. No shares of any Portfolio will be sold
directly to the general public. The Company agrees that it will use Trust
shares only for the purposes of funding the Contracts through the Accounts
listed in Schedule A, as amended from time to time.
1.10 The Company agrees that all net amounts available under the
Contracts shall be invested in the Trust, in such other Funds advised by an
Adviser or its affiliates as may be mutually agreed to in writing by the
parties hereto, or in the Company's general account, provided that such
amounts may also be invested in an investment company other than the Trust
if: (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of the Portfolios; or (b) the Company gives the
Trust and the Underwriter 45 days written notice of its intention to make
such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company is available as a funding
vehicle for the Contracts at the date of this Agreement and the Company so
informs the Trust and the Underwriter prior to their signing this
Agreement; or (d) the Trust or Underwriter consents to the use of such
other investment company.
1.11 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.10 and
Article IV of this Agreement.
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any
affiliate of any other party), and shall not be liable in the event that an
error results from any incorrect information or confirmations supplied by
any other party. If an error is made in reliance upon incorrect information
or confirmations, any amount required to make a Contract owner's account
whole shall be borne by the party who provided the incorrect information or
confirmation.
ARTICLE II.
Obligations of the Parties; Fees and Expenses
2.1 The Trust shall prepare and be responsible for filing with the SEC
and any state regulators requiring such filing all shareholder reports,
notices, proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional
information of the Trust. The Trust shall bear the costs of registration
and qualification of its shares of the Portfolios, preparation and filing
of the documents listed in this Section 2.1 and all taxes to which an
issuer is subject on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust or the Underwriter shall
either (a) provide the Company with as many copies of portions of the
Trust's current prospectus, annual report, semi-annual report and other
shareholder communications, including any amendments or supplements to any
of the foregoing, pertaining specifically to the Portfolios as the Company
shall reasonably request; or (b) provide the Company with a camera ready
copy of such documents in a form suitable for printing and from which
information relating to series of the Trust other than the Portfolios has
been deleted to the extent practicable. The Trust or the Underwriter shall
provide the Company with a copy of its current statement of additional
information, including any amendments or supplements, in a form suitable
for duplication by the Company. Expenses of furnishing such documents for
marketing purposes shall be borne by the Company and expenses of furnishing
such documents for current contract owners invested in the Trust shall be
borne by the Trust or the Underwriter.
2.3 The Trust (at its expense) shall provide the Company with copies
of any Trust-sponsored proxy materials in such quantity as the Company
shall reasonably require for distribution to Contract owners. The Company
shall bear the costs of distributing proxy materials (or similar materials
such as voting solicitation instructions), prospectuses and statements of
additional information to Contract owners. The Company assumes sole
responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 If and to the extent required by law, the Company shall: (i)
solicit voting instructions from Contract owners; (ii) vote the Trust
shares in accordance with the instructions received from Contract owners;
and (iii) vote Trust shares for which no instructions have been received in
the same proportion as Trust shares of such Portfolio for which
instructions have been received; so long as and to the extent that the SEC
continues to interpret the 1940 Act to require pass-through voting
privileges for variable contract owners. The Company reserves the right to
vote Trust shares held in any segregated asset account in its own right, to
the extent permitted by law.
2.5 The Company shall furnish, or cause to be furnished to the Trust
or its designee, at least one complete copy of each registration statement,
prospectus, statement of additional information, retirement plan disclosure
information or other disclosure documents or similar information, as
applicable (collectively "disclosure documents"), as well as any report,
solicitation for voting instructions, sales literature and other
promotional materials, and all amendments to any of the above that relate
to the Contracts or the Accounts prior to its first use. The Company shall
furnish, or shall cause to be furnished, to the Trust or its designee each
piece of sales literature or other promotional material in which the Trust
or an Adviser is named, at least 15 Business Days prior to its use. No such
material shall be used if the Trust or its designee reasonably objects to
such use within five Business Days after receipt of such material. For
purposes of this paragraph, "sales literature or other promotional
material" includes, but is not limited to, portions of the following that
use any Trademark related to the Trust or Underwriter or refer to the Trust
or affiliates of the Trust: 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 electronic communication or other public
media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts or any other advertisement, sales literature or
published article or electronic communication), educational or training
materials or other communications distributed or made generally available
to some or all agents or employees, and disclosure documents, shareholder
reports and proxy materials.
2.6 The Company and its agents shall not give any information or make
any representations or statements on behalf of the Trust or concerning the
Trust, the Underwriter or an Adviser in connection with the sale of the
Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the
Trust shares (as such registration statement and prospectus may be amended
or supplemented from time to time), annual and semi-annual reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
2.7 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
each Adviser, in such form as the Company may reasonably require, as the
Company shall reasonably request in connection with the preparation of
disclosure documents and annual and semi-annual reports pertaining to the
Contracts.
2.8 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from disclosure
documents for the Contracts (as such disclosure documents may be amended or
supplemented from time to time), or in materials approved by the Company
for distribution including sales literature or other promotional materials,
except as required by legal process or regulatory authorities or with the
written permission of the Company.
2.9 So long as, and to the extent that, the SEC interprets the 1940
Act to require pass-through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners
whose Contract values are invested, through the registered Accounts, in
shares of one or more Portfolios of the Trust. The Trust shall require all
Participating Insurance Companies to calculate voting privileges in the
same manner and the Company shall be responsible for assuring that the
Accounts calculate voting privileges in the manner established by the
Trust. With respect to each registered Account, the Company will vote
shares of each Portfolio of the Trust held by a registered Account and for
which no timely voting instructions from Contract owners are received in
the same proportion as those shares held by that registered Account for
which voting instructions are received. The Company and its agents will in
no way recommend or oppose or interfere with the solicitation of proxies
for Portfolio shares held to fund the Contracts without the prior written
consent of the Trust, which consent may be withheld in the Trust's sole
discretion.
2.10 The Trust and Underwriter shall pay no fee or other compensation
to the Company under this Agreement except as provided on Schedule C.
Nevertheless, the Trust or the Underwriter or an affiliate may make
payments (other than pursuant to a Rule 12b-1 Plan) to the Company or its
affiliates or to the Contracts' underwriter in amounts agreed to by the
Underwriter in writing and such payments may be made out of fees otherwise
payable to the Underwriter or its affiliates, profits of the Underwriter or
its affiliates, or other resources available to the Underwriter or its
affiliates.
ARTICLE III.
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of its state of
incorporation and that it has legally and validly established each Account
as a segregated asset account under such law as of the date set forth in
Schedule A.
3.2 The Company represents and warrants that, with respect to each
Account, (1) the Company has registered or, prior to any issuance or sale
of the Contracts, will register the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
asset account for the Contracts, or (2) if the Account is exempt from
registration as an investment company under Section 3(c) of the 1940 Act,
the Company will make every effort to maintain such exemption and will
notify the Trust and the Adviser immediately upon having a reasonable basis
for believing that such exemption no longer applies or might not apply in
the future.
3.3 The Company represents and warrants that, with respect to each
Contract, (1) the Contract will be registered under the 1933 Act, or (2) if
the Contract is exempt from registration under Section 3(a)(2) of the 1933
Act or under Section 4(2) and Regulation D of the 1933 Act, the Company
will make every effort to maintain such exemption and will notify the Trust
and the Adviser immediately upon having a reasonable basis for believing
that such exemption no longer applies or might not apply in the future. The
Company further represents and warrants that the Contracts will be sold by
broker-dealers, or their registered representatives, who are registered
with the SEC under the 1934 Act and who are members in good standing of the
NASD; the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws; and the sale of the
Contracts shall comply in all material respects with state insurance
suitability requirements.
For any unregistered Accounts which are exempt from registration under
the 1940 Act in reliance upon Sections 3(c)(1) or 3(c)(7) thereof, the
Company represents and warrants that:
(a) each Account and sub-account thereof has a principal underwriter
which is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended;
(b) Trust shares are and will continue to be the only investment
securities held by the corresponding Account sub-accounts; and
(c) with regard to each Portfolio, the Company, on behalf of the
corresponding sub-account, will:
(1) seek instructions from all Contract owners with regard to
the voting of all proxies with respect to Trust shares and
vote such proxies only in accordance with such instructions
or vote such shares held by it in the same proportion as the
vote of all other holders of such shares; and
(2) refrain from substituting shares of another security for
such shares unless the SEC has approved such substitution in
the manner provided in Section 26 of the 1940 Act.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Maryland and that it does
and will comply in all material respects with the 1940 Act and the rules
and regulations thereunder.
3.5 The Trust represents and warrants that the Portfolio shares
offered and sold pursuant to this Agreement will be registered under the
1933 Act and the Trust shall be registered under the 1940 Act prior to and
at the time of any issuance or sale of such shares. The Trust shall amend
its registration statement under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of its shares.
The Trust shall register and qualify its shares for sale in accordance with
the laws of the various states only if and to the extent deemed advisable
by the Trust or the Underwriter.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h)
of the Internal Revenue Code of 1986, as amended (the"Code"), and the rules
and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify the Company immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might
not so comply and will in that event immediately take all reasonable steps
to adequately diversify the Portfolio to achieve compliance within the
grace period afforded by Regulation 1.817-5.
3.7 The Trust represents and warrants that it is currently qualified
as a "regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify the
Company immediately upon having a reasonable basis for believing it has
ceased to so qualify or might not so qualify in the future.
3.8 The Trust represents and warrants that should it ever desire to
make any payments to finance distribution expenses pursuant to Rule 12b-1
under the 1940 Act, the Trustees, including a majority who are not
"interested persons" of the Trust under the 1940 Act ("disinterested
Trustees"), will formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
3.9 The Trust represents and warrants that it, its directors,
officers, employees and others dealing with the money or securities, or
both, of a Portfolio shall at all times be covered by a blanket fidelity
bond or similar coverage for the benefit of the Trust in an amount not less
that the minimum coverage required by Rule 17g-1 or other regulations under
the 1940 Act. Such bond shall include coverage for larceny and embezzlement
and be issued by a reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at
all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust, in an amount not less than $5 million. The aforesaid
bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Trust and the
Underwriter in the event that such coverage no longer applies.
3.11 The Underwriter represents that each Adviser is duly organized
and validly existing under applicable corporate law and that it is
registered and will during the term of this Agreement remain registered as
an investment adviser under the Advisers Act.
3.12 The Trust currently intends for one or more classes of shares
(each, a "Class") to make payments to finance its distribution expenses,
including service fees, pursuant to a Plan adopted under Rule 12b-1 under
the 1940 Act ("Rule 12b-1"), although it may determine to discontinue such
practice in the future. To the extent that any Class of the Trust finances
its distribution expenses pursuant to a Plan adopted under Rule 12b-1, the
Trust undertakes to comply with any then current SEC and SEC staff
interpretations concerning Rule 12b-1 or any successor provisions.
ARTICLE IV.
Potential Conflicts
4.1 The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies. In
such event, the Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by
any state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or regulations, or a
public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any Portfolio are
being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract
owners. The Trust shall promptly inform the Company of any determination by
the Trustees that an irreconcilable material conflict exists and of the
implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities by providing the Trustees
with all information reasonably necessary for the Trustees to consider any
issues raised including, but not limited to, information as to a decision
by the Company to disregard Contract owner voting instructions. All
communications from the Company to the Trustees may be made in care of the
Trust.
4.3 If it is determined by a majority of the Trustees, or a majority
of the disinterested Trustees, that a material irreconcilable conflict
exists that affects the interests of Contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract
owners are also affected, at its own expense and to the extent reasonably
practicable (as determined by the Trustees) take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict,
which steps could include: (a) withdrawing the assets allocable to some or
all of the Accounts from the Trust or any Portfolio and reinvesting such
assets in a different investment medium, including (but not limited to)
another Portfolio of the Trust, or submitting the question of whether or
not such withdrawal should be implemented to a vote of all affected
Contract owners and, as appropriate, withdrawal of the assets of any
appropriate group (i.e. , annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such withdrawal, or offering to the
affected Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed
separate account.
4.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and
that decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw the
affected Account's investment in the Trust and terminate this Agreement
with respect to such Account; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this
provision is being implemented. Until the end of such six (6) month period,
the Trust shall continue to accept and implement orders by the Company for
the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts
with a majority of other state regulators, then the Company will withdraw
the affected Account's investment in the Trust and terminate this Agreement
with respect to such Account within six (6) months after the Trustees
inform the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of
the disinterested Trustees. Until the end of such six (6) month period, the
Trust shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Trust be required to establish a new funding medium for the
Contracts. In the event that the Trustees determine that any proposed
action does not adequately remedy any irreconcilable material conflict,
then the Company will withdraw the Account's investment in the Trust and
terminate this Agreement within six (6) months after the Trustees inform
the Company in writing of the foregoing determination; provided, however,
that such withdrawal and termination shall be limited to the extent
required by any such material irreconcilable conflict as determined by a
majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that
the Trustees may fully carry out the duties imposed upon them by the Shared
Funding Exemptive Order, and said reports, materials and data shall be
submitted more frequently if reasonably deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to
comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted,
to the extent such rules are applicable.
ARTICLE V.
Indemnification
5.1 Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the
Underwriter, the Trust and each of its Trustees, officers, employees
and agents and each person, if any, who controls the Trust within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually the "Indemnified Party" for purposes of this
Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of Trust Shares or
the Contracts and
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
disclosure document for the Contracts or in the Contracts
themselves or in sales literature generated or approved by the
Company on behalf of the Contracts or Accounts (or any amendment
or supplement to any of the foregoing) (collectively, "Company
Documents" for the purposes of this Article V), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this indemnity shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived
from written information furnished to the Company by or on behalf
of the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Trust Documents as
defined in Section 5.2 (a)(i)) or wrongful conduct of the Company
or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(iii) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a)(i) or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance
upon and accurately derived from written information furnished to
the Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the Company
to provide the services or furnish the materials required under
the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
(b) The Company shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this
Agreement or to the Trust or Underwriter, whichever is applicable.
The Company shall also not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in
writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action
is brought against the Indemnified Parties, the Company shall be
entitled to participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the Company to such party of the Company's election
to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
(c) The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Trust shares or the
Contracts or the operation of the Trust.
5.2 Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the
Company, the underwriter of the Contracts and each of its directors
and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually an "Indemnified Party" for
purposes of this Section 5.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the
written consent of the Underwriter, which consent shall not be
unreasonably withheld) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability
or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses") to which the Indemnified Parties
may become subject under any statute, at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the
Trust's Shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement, prospectus or sales literature of the
Trust (or any amendment or supplement to any of the foregoing)
(collectively, the "Trust Documents") 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 of such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Trust by or on behalf
of the Company for use in the Registration Statement or
prospectus for the Trust or in sales literature (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the disclosure documents or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Trust, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a disclosure document
or sales literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein
not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Trust; or
(iv) arise as a result of any failure by the Trust to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the qualification
representation specified in Section 3.7 of this Agreement and the
diversification requirements specified in Section 3.6 of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 5.2(b) and 5.2(c)
hereof.
(b) The Underwriter shall not be liable under this
indemnification provision with respect to any Losses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement or to each Company or the Account,
whichever is applicable.
(c) The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Underwriter in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Underwriter of any
such claim shall not relieve the Underwriter from any liability which
it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties,
the Underwriter will be entitled to participate, at its own expense,
in the defense thereof. The Underwriter also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
5.3 Indemnification By The Trust
(a) The Trust agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust, which consent shall not be unreasonably withheld) or litigation
(including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Trust, and arise out of
or result from any material breach of any representation and/or
warranty made by the Trust in this Agreement or arise out of or result
from any other material breach of this Agreement by the Trust; as
limited by and in accordance with the provisions of Section 5.3(b) and
5.3(c) hereof. It is understood and expressly stipulated that neither
the holders of shares of the Trust nor any Trustee, officer, agent or
employee of the Trust shall be personally liable hereunder, nor shall
any resort be had to other private property for the satisfaction of
any claim or obligation hereunder, but the Trust only shall be liable.
(b) The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against any Indemnified Party as such
may arise from such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the
Company, the Trust, the Underwriter or each Account, whichever is
applicable.
(c) The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Trust in writing
within a reasonable time after the summons or other first legal
process giving information of the nature of the claims shall have been
served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent),
but failure to notify the Trust of any such claim shall not relieve
the Trust from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to
participate, at its own expense, in the defense thereof. The Trust
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Trust to such party of the Trust's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust will not be liable to
such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
(d) The Company and the Underwriter agree promptly to notify the
Trust of the commencement of any litigation or proceedings against it
or any of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to the
operation of either the Account, or the sale or acquisition of share
of the Trust.
ARTICLE VI.
Termination
6.1 This Agreement may be terminated by any party in its entirety or
with respect to one, some or all Portfolios or any reason by sixty (60)
days advance written notice delivered to the other parties, and shall
terminate immediately in the event of its assignment, as that term is used
in the 1940 Act.
6.2 This Agreement may be terminated immediately by either the Trust
or the Underwriter following consultation with the Trustees upon written
notice to the Company if :
(a) the Company notifies the Trust or the Underwriter that the
exemption from registration under Section 3(c) of the 1940 Act no
longer applies, or might not apply in the future, to the unregistered
Accounts, or that the exemption from registration under Section 4(2)
or Regulation D promulgated under the 1933 Act no longer applies or
might not apply in the future, to interests under the unregistered
Contracts; or
(b) either one or both of the Trust or the Underwriter
respectively, shall determine, in their sole judgment exercised in
good faith, that the Company has suffered a material adverse change in
its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(c) the Company gives the Trust and the Underwriter the written
notice specified in Section 1.10 hereof and at the same time such
notice was given there was no notice of termination outstanding under
any other provision of this Agreement; provided, however, that any
termination under this Section 6.2(c) shall be effective forty-five
(45) days after the notice specified in Section 1.10 was given; or
6.3 If this Agreement is terminated for any reason, except under
Article IV (Potential Conflicts) above, the Trust shall, at the option of
the Company, continue to make available additional shares of any Portfolio
and redeem shares of any Portfolio pursuant to all of the terms and
conditions of this Agreement for all Contracts in effect on the effective
date of termination of this Agreement. If this Agreement is terminated
pursuant to Article IV, the provisions of Article IV shall govern.
6.4 The provisions of Articles II (Representations and Warranties) and
V (Indemnification) shall survive the termination of this Agreement. All
other applicable provisions of this Agreement shall survive the termination
of this Agreement, as long as shares of the Trust are held on behalf of
Contract owners in accordance with Section 6.3, except that the Trust and
the Underwriter shall have no further obligation to sell Trust shares with
respect to Contracts issued after termination.
6.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract owner
initiated or approved transactions, (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption"),
or (iii) as permitted by an order of the SEC pursuant to Section 26(b) of
the 1940 Act. Upon request, the Company will promptly furnish to the Trust
and the Underwriter the opinion of counsel for the Company (which counsel
shall be reasonably satisfactory to the Trust and the Underwriter) to the
effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts, the Company shall not prevent Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Trust or the Underwriter 90 days notice
of its intention to do so.
ARTICLE VII.
Notices.
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust or the Underwriter:
Alliance Variable Products Series Fund, Inc. or
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Edmund Bergen
If to the Company:
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110-2712
Attention: Jim Klopper
ARTICLE VIII.
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the
same instrument.
8.3 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Rhode
Island. It shall also be subject to the provisions of the federal
securities laws and the rules and regulations thereunder and to any orders
of the SEC granting exemptive relief therefrom and the conditions of such
orders. Copies of any such orders shall be promptly forwarded by the Trust
to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this
Agreement, of any and every nature whatsoever, shall be satisfied solely
out of the assets of the Trust and that no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be personally
liable for any such liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
8.7 Each party hereto shall treat as confidential the names and
addresses of the Contract owners and all information reasonably identified
as confidential in writing by any other party hereto, and, except as
permitted by this Agreement or as required by legal process or regulatory
authorities, shall not disclose, disseminate, or utilize such names and
addresses and other confidential information until such time as they may
come into the public domain, without the express written consent of the
affected party. Without limiting the foregoing, no party hereto shall
disclose any information that such party has been advised is proprietary,
except such information that such party is required to disclose by any
appropriate governmental authority (including, without limitation, the SEC,
the NASD, and state securities and insurance regulators).
8.8 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
8.9 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided in
Section 1.10.
8.10 Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the prior written approval of the
other party.
8.11 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by
both parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year
first above written.
The Company:
Keyport Benefit Life Insurance Company
By its authorized officer
By: /s/James J. Klopper
Name: James J. Klopper
Title: Vice President & Secretary
The Underwriter:
Alliance Fund Distributors, Inc.
By its authorized officer
By: /s/Richard A. Winge
Name: Richard A. Winge
Title: Managing Director
SCHEDULE A
Separate Accounts of
Keyport Benefit Life Insurance Company
1. Variable Account A
Date Established: February 6, 1998
SEC Registration Numbers: 333-75157
333-75155
SCHEDULE B
Trust Portfolios and Classes Available
Alliance Variable Products Series Adviser
Global Bond Alliance Capital Management L.P.
Premier Growth Portfolio Alliance Capital Management L.P.
Growth & Income Portfolio Alliance Capital Management L.P.
Technology Portfolio Alliance Capital Management L.P.
SCHEDULE C
RULE 12B-1 PLANS
Compensation Schedule
Each Portfolio named below shall pay the following amounts pursuant to the
terms and conditions referenced below under its Class B Rule 12b-1
Distribution Plan, stated as a percentage per year of Class B's average
daily net assets represented by shares of Class B.
Portfolio Name Maximum Annual Payment Rate
Global Bond 0.25%
Premier Growth 0.25%
Growth & Income 0.25%
Technology 0.25%
Agreement Provisions
If the Company, on behalf of any Account, purchases Trust Portfolio
shares ("Eligible Shares") which are subject to a Rule 12b-1 Plan adopted
under the 1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees
(collectively "you") you provide administrative and other services which
assist in the promotion and distribution of Eligible Shares or Variable
Contracts offering Eligible Shares, the Underwriter, the Trust or their
affiliates (collectively, "we") may pay you a Rule 12b-1 fee.
"Administrative and other services" may include, but are not limited to,
furnishing personal services to owners of Contracts which may invest in
Eligible Shares ("Contract Owners"), answering routine inquiries regarding
a Portfolio, coordinating responses to Contract Owner inquiries regarding
the Portfolios, maintaining such accounts or providing such other enhanced
services as a Trust Portfolio or Contract may require, maintaining customer
accounts and records, or providing other services eligible for service fees
as defined under NASD rules. Your acceptance of such compensation is your
acknowledgment that eligible services have been rendered. All Rule 12b-1
fees, shall be based on the value of Eligible Shares owned by the Company
on behalf of its Accounts, and shall be calculated on the basis and at the
rates set forth in the Compensation Schedule stated above. The aggregate
annual fees paid pursuant to each Plan shall not exceed the amounts stated
as the "annual maximums" in the Portfolio's prospectus, unless an increase
is approved by shareholders as provided in the Plan. These maximums shall
be a specified percent of the value of a Portfolio's net assets
attributable to Eligible Shares owned by the Company on behalf of its
Accounts (determined in the same manner as the Portfolio uses to compute
its net assets as set forth in its effective Prospectus).
You shall furnish us with such information as shall reasonably be
requested by the Trust's Boards of Trustees ("Trustees") with respect to
the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to
the Trustees, for their review on a quarterly basis, a written report of
the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must
be approved annually by a vote of the Trustees, including the Trustees who
are not interested persons of the Trust and who have no financial interest
in the Plans or any related agreement ("Disinterested Trustees"). Each Plan
may be terminated at any time by the vote of a majority of the
Disinterested Trustees, or by a vote of a majority of the outstanding
shares as provided in the Plan, on sixty (60) days' written notice, without
payment of any penalty. The Plans may also be terminated by any act that
terminates the Underwriting Agreement between the Underwriter and the
Trust, and/or the management or administration agreement between Alliance
Capital Management L.P. or its/their affiliates and the Trust. Continuation
of the Plans is also conditioned on Disinterested Trustees being ultimately
responsible for selecting and nominating any new Disinterested Trustees.
Under Rule 12b-1, the Trustees have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to
furnish, such information as may reasonably be necessary to an informed
determination of whether the Plan or any agreement should be implemented or
continued. Under Rule 12b-1, the Trust is permitted to implement or
continue Plans or the provisions of any agreement relating to such Plans
from year-to-year only if, based on certain legal considerations, the
Trustees are able to conclude that the Plans will benefit each affected
Trust Portfolio and class. Absent such yearly determination, the Plans must
be terminated as set forth above. In the event of the termination of the
Plans for any reason, the provisions of this Schedule C relating to the
Plans will also terminate.
Any obligation assumed by the Trust pursuant to this Agreement shall be
limited in all cases to the assets of the Trust and no person shall seek
satisfaction thereof from shareholders of the Trust. You agree to waive
payment of any amounts payable to you by Underwriter under a Plan until
such time as the Underwriter has received such fee from the Fund.
The provisions of the Plans shall control over the provisions of the
Participation Agreement, including this Schedule C, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable
statutes, rules and regulations of all rule 12b-1 fees received from us in
the prospectus of the contracts.
DRAFT
EXHIBIT 8(g)
PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS, INC. and
KEYPORT BENEFIT LIFE INSURANCE COMPANY
THIS AGREEMENT made as of May 1, 1999, among Templeton Variable
Products Series Fund (the "Trust"), an open-end management investment
company organized as a business trust under Massachusetts law,
Franklin Templeton Distributors, Inc., a California corporation, the
Trust's principal underwriter ("Underwriter"), and Keyport Benefit
Life Insurance Company, a life insurance company organized as a
corporation under Rhode IslandNew York law (the "Company"), on its own
behalf and on behalf of each segregated asset account of the Company
set forth in Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"),
and has an effective registration statement relating to the offer and
sale of the various series of its shares under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, the Trust and the Underwriter desire that Trust shares
be used as an investment vehicle for separate accounts established for
variable life insurance policies and variable annuity contracts to be
offered by life insurance companies which have entered into fund
participation agreements with the Trust (the "Participating Insurance
Companies");
WHEREAS, the beneficial interest in the Trust is divided into
several series of shares, each series representing an interest in a
particular managed portfolio of securities and other assets, and
certain of those series, named in Schedule B, (the "Portfolios") are
to be made available for purchase by the Company for the Accounts; and
WHEREAS, the Trust has received an order from the SEC, dated
November 16, 1993 (File No. 812-8546), granting Participating
Insurance Companies and their separate accounts exemptions from the
provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act,
and Rules 6e-2 (b) (15) and 6e-3 (T) (b) (15) thereunder, to the
extent necessary to permit shares of the Trust to be sold to and held
by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain
qualified pension and retirement plans (the "Shared Funding Exemptive
Order");
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act unless an exemption from
registration under the 1940 Act is available and the Trust has been so
advised; and has registered or will register certain variable annuity
contracts and variable life insurance policies, listed on Schedule C
attached hereto, under which the portfolios are to be made available
as investment vehicles (the "Contracts") under the 1933 Act unless
such interests under the Contracts in the Accounts are exempt from
registration under the 1933 Act and the Trust has been so advised;
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company, on the date shown for such account on
Schedule A hereto, to set aside and invest assets attributable to one
or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an
"Adviser") is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act") and any
applicable state securities laws;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios
on behalf of each Account to fund certain of the aforesaid Contracts
and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1 For purposes of this Article I, the Company shall be the
Trust's designee for receipt of purchase orders and requests for
redemption relating to each Portfolio from each Account, provided that
the Company notifies the Trust of such purchase orders and requests
for redemption by 9:00 a.m. Eastern time on the next following
Business Day, as defined in Section 1.3.
1.2 The Trust agrees to make shares of the Portfolios available
to the Accounts for purchase at the net asset value per share next
computed after receipt of a purchase order by the Trust (or its
designee), as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio purchase
procedures on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC, and the Trust shall use its best
efforts to calculate such net asset value on each day on which the New
York Stock Exchange ("NYSE") is open for trading. The Company will
transmit orders from time to time to the Trust for the purchase of
shares of the Portfolios. The Trustees of the Trust (the "Trustees")
may refuse to sell shares of any Portfolio to any person, or suspend
or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or
if, in the sole discretion of the Trustees acting in good faith and in
light of their fiduciary duties under federal and any applicable state
laws, such action is deemed in the best interests of the shareholders
of such Portfolio.
1.3 The Company shall submit payment for the purchase of shares
of a Portfolio on behalf of an Account no later than the close of
business on the next Business Day after the Trust receives the
purchase order. Payment shall be made in federal funds transmitted by
wire to the Trust or its designated custodian. Upon receipt by the
Trust of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of
the Trust for this purpose. "Business Day" shall mean any day on which
the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares
of any Portfolio, when requested by the Company on behalf of an
Account, at the net asset value next computed after receipt by the
Trust (or its designee) of the request for redemption, as established
in accordance with the provisions of the then current prospectus of
the Trust describing Portfolio redemption procedures. The Trust shall
make payment for such shares in the manner established from time to
time by the Trust. Redemption with respect to a Portfolio will
normally be paid to the Company for an Account in federal funds
transmitted by wire to the Company before the close of business on the
next Business Day after the receipt of the request for redemption.
Such payment may be delayed if, for example, the Portfolio's cash
position so requires or if extraordinary market conditions exist, but
in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios
by the Company under Section 1.3 and payments for the redemption of
shares of the Trust's Portfolios under Section 1.4 may be netted
against one another on any Business Day for the purpose of determining
the amount of any wire transfer on that Business Day.
1.6 Issuance and transfer of the Trust's Portfolio shares will be
by book entry only. Stock certificates will not be issued to the
Company or the Account. Portfolio Shares purchased from the Trust will
be recorded in the appropriate title for each Account or the
appropriate subaccount of each Account.
1.7 The Trust shall furnish, on or before the ex-dividend date,
notice to the Company of any income dividends or capital gain
distributions payable on the shares of any Portfolio of the Trust. The
Company hereby elects to receive all such income dividends and capital
gain distributions as are payable on a Portfolio's shares in
additional shares of the Portfolio. The Trust shall notify the Company
of the number of shares so issued as payment of such dividends and
distributions.
1.8 The Trust shall calculate the net asset value of each
Portfolio on each Business Day, as defined in Section 1.3. The Trust
shall make the net asset value per share for each Portfolio available
to the Company or its designated agent on a daily basis as soon as
reasonably practical after the net asset value per share is calculated
(normally by 6:30 p.m. Eastern time) and shall use reasonable efforts
to make such net asset value per share available by 7:00 p.m. Eastern
time each Business Day.
1.9 The Trust agrees that its Portfolio shares will be sold only
to Participating Insurance Companies and their separate accounts and
to certain qualified pension and retirement plans to the extent
permitted by the Shared Funding Exemptive Order. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended
from time to time.
1.10 The Company agrees that all net amounts available under the
Contracts shall be invested in the Trust, in such other Funds advised
by an Adviser or its affiliates as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account,
provided that such amounts may also be invested in an investment
company other than the Trust if: (a) such other investment company, or
series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of
the Portfolios; or (b) the Company gives the Trust and the Underwriter
45 days written notice of its intention to make such other investment
company available as a funding vehicle for the Contracts; or (c) such
other investment company is available as a funding vehicle for the
Contracts at the date of this Agreement and the Company so informs the
Trust and the Underwriter prior to their signing this Agreement (a
list of such investment companies appearing on Schedule D to this
Agreement); or (d) the Trust or Underwriter consents to the use of
such other investment company.
1.11 The Trust agrees that all Participating Insurance Companies
shall have the obligations and responsibilities regarding pass-through
voting and conflicts of interest corresponding to those contained in
Section 2.10 and Article IV of this Agreement.
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any
affiliate of any other party), and shall not be liable in the event
that an error results from any incorrect information or confirmations
supplied by any other party. If an error is made in reliance upon
incorrect information or confirmations, any amount required to make a
Contract owner's account whole shall be borne by the party who
provided the incorrect information or confirmation.
ARTICLE II.
Obligations of the Parties; Fees and Expenses
2.1 The Trust shall prepare and be responsible for filing with
the SEC and any state regulators requiring such filing all shareholder
reports, notices, proxy materials (or similar materials such as voting
instruction solicitation materials), prospectuses and statements of
additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares of the Portfolios,
preparation and filing of the documents listed in this Section 2.1 and
all taxes to which an issuer is subject on the issuance and transfer
of its shares.
2.2 At the option of the Company, the Trust or the Underwriter
shall either (a) provide the Company with as many copies of portions
of the Trust's current prospectus, annual report, semi-annual report
and other shareholder communications, including any amendments or
supplements to any of the foregoing, pertaining specifically to the
Portfolios as the Company shall reasonably request; or (b) provide the
Company with a camera ready copy of such documents in a form suitable
for printing and from which information relating to series of the
Trust other than the Portfolios has been deleted to the extent
practicable. The Trust or the Underwriter shall provide the Company
with a copy of its current statement of additional information,
including any amendments or supplements, in a form suitable for
duplication by the Company. Expenses of furnishing such documents for
marketing purposes shall be borne by the Company and expenses of
furnishing such documents for current contract owners invested in the
Trust shall be borne by the Trust or the Underwriter.
2.3 The Trust (at its expense) shall provide the Company with
copies of any Trust-sponsored proxy materials in such quantity as the
Company shall reasonably require for distribution to Contract owners.
The Company shall bear the costs of distributing proxy materials (or
similar materials such as voting solicitation instructions),
prospectuses and statements of additional information to Contract
owners. The Company assumes sole responsibility for ensuring that such
materials are delivered to Contract owners in accordance with
applicable federal and state securities laws.
2.4 If and to the extent required by law, the Company shall: (i)
solicit voting instructions from Contract owners; (ii) vote the Trust
shares in accordance with the instructions received from Contract
owners; and (iii) vote Trust shares for which no instructions have
been received in the same proportion as Trust shares of such Portfolio
for which instructions have been received; so long as and to the
extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
2.5 Except as provided in section 2.6, the Company shall not use
any designation comprised in whole or part of the names or marks
"Franklin" or "Templeton" or any other Trademark relating to the Trust
or Underwriter without prior written consent, and upon termination of
this Agreement for any reason, the Company shall cease all use of any
such name or mark as soon as reasonably practicable.
2.6 The Company shall furnish, or cause to be furnished to the
Trust or its designee, at least one complete copy of each registration
statement, prospectus, statement of additional information, retirement
plan disclosure information or other disclosure documents or similar
information, as applicable (collectively "disclosure documents"), as
well as any report, solicitation for voting instructions, sales
literature and other promotional materials, and all amendments to any
of the above that relate to the Contracts or the Accounts prior to its
first use. The Company shall furnish, or shall cause to be furnished,
to the Trust or its designee each piece of sales literature or other
promotional material in which the Trust or an Adviser is named, at
least 15 Business Days prior to its use. No such material shall be
used if the Trust or its designee reasonably objects to such use
within five Business Days after receipt of such material. For purposes
of this paragraph, "sales literature or other promotional material"
includes, but is not limited to, portions of the following that use
any Trademark related to the Trust or Underwriter or refer to the
Trust or affiliates of the Trust: 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 electronic
communication or other public media), sales literature (i.e., any
written communication distributed or made generally available to
customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or
excerpts or any other advertisement, sales literature or published
article or electronic communication), educational or training
materials or other communications distributed or made generally
available to some or all agents or employees, and disclosure
documents, shareholder reports and proxy materials.
2.7 The Company and its agents shall not give any information or
make any representations or statements on behalf of the Trust or
concerning the Trust, the Underwriter or an Adviser in connection with
the sale of the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), annual
and semi-annual reports of the Trust, Trust-sponsored proxy
statements, or in sales literature or other promotional material
approved by the Trust or its designee, except as required by legal
process or regulatory authorities or with the written permission of
the Trust or its designee.
2.8 The Trust shall use its best efforts to provide the Company,
on a timely basis, with such information about the Trust, the
Portfolios and each Adviser, in such form as the Company may
reasonably require, as the Company shall reasonably request in
connection with the preparation of disclosure documents and annual and
semi-annual reports pertaining to the Contracts.
2.9 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from disclosure
documents for the Contracts (as such disclosure documents may be
amended or supplemented from time to time), or in materials approved
by the Company for distribution including sales literature or other
promotional materials, except as required by legal process or
regulatory authorities or with the written permission of the Company.
2.10 So long as, and to the extent that, the SEC interprets the
1940 Act to require pass-through voting privileges for Contract
owners, the Company will provide pass-through voting privileges to
Contract owners whose Contract values are invested, through the
registered Accounts, in shares of one or more Portfolios of the Trust.
The Trust shall require all Participating Insurance Companies to
calculate voting privileges in the same manner and the Company shall
be responsible for assuring that the Accounts calculate voting
privileges in the manner established by the Trust. With respect to
each registered Account, the Company will vote shares of each
Portfolio of the Trust held by a registered Account and for which no
timely voting instructions from Contract owners are received in the
same proportion as those shares held by that registered Account for
which voting instructions are received. The Company and its agents
will in no way recommend or oppose or interfere with the solicitation
of proxies for Portfolio shares held to fund the Contracts without the
prior written consent of the Trust, which consent may be withheld in
the Trust's sole discretion.
2.11 The Trust and Underwriter shall pay no fee or other
compensation to the Company under this Agreement except as provided on
Schedule E, if attached. Nevertheless, the Trust or the Underwriter
or an affiliate may make payments (other than pursuant to a Rule 12b-1
Plan) to the Company or its affiliates or to the Contracts'
underwriter in amounts agreed to by the Underwriter in writing and
such payments may be made out of fees otherwise payable to the
Underwriter or its affiliates, profits of the Underwriter or its
affiliates, or other resources available to the Underwriter or its
affiliates.
ARTICLE III.
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of its
state of incorporation and that it has legally and validly established
each Account as a segregated asset account under such law as of the
date set forth in Schedule A.
3.2 The Company represents and warrants that, with respect to
each Account, (1) the Company has registered or, prior to any issuance
or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated asset account for the Contracts, or (2) if the
Account is exempt from registration as an investment company under
Section 3(c) of the 1940 Act, the Company will make every effort to
maintain such exemption and will notify the Trust and the Adviser
immediately upon having a reasonable basis for believing that such
exemption no longer applies or might not apply in the future.
3.3 The Company represents and warrants that, with respect to
each Contract, (1) the Contract will be registered under the 1933 Act,
or (2) if the Contract is exempt from registration under Section
3(a)(2) of the 1933 Act or under Section 4(2) and Regulation D of the
1933 Act, the Company will make every effort to maintain such
exemption and will notify the Trust and the Adviser immediately upon
having a reasonable basis for believing that such exemption no longer
applies or might not apply in the future. The Company further
represents and warrants that the Contracts will be sold by broker-
dealers, or their registered representatives, who are registered with
the SEC under the 1934 Act and who are members in good standing of the
NASD; the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws; and the
sale of the Contracts shall comply in all material respects with state
insurance suitability requirements.
For any unregistered Accounts which are exempt from
registration under the `40 Act in reliance upon Sections 3(c)(1)
or 3(c)(7) thereof, the Company represents and warrants that:
(a) each Account and sub-account thereof has a principal
underwriter which is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended;
(b) Trust shares are and will continue to be the only
investment securities held by the corresponding Account
sub-accounts; and
(c) with regard to each Portfolio, the Company, on behalf
of the corresponding sub-account, will:
(1) seek instructions from all Contract owners with
regard to the voting of all proxies with respect
to Trust shares and vote such proxies only in
accordance with such instructions or vote such
shares held by it in the same proportion as the
vote of all other holders of such shares; and
(2) refrain from substituting shares of another
security for such shares unless the SEC has
approved such substitution in the manner provided
in Section 26 of the `40 Act.
3.4 The Trust represents and warrants that it is duly organized
and validly existing under the laws of the State of Massachusetts and
that it does and will comply in all material respects with the 1940
Act and the rules and regulations thereunder.
3.5 The Trust represents and warrants that the Portfolio shares
offered and sold pursuant to this Agreement will be registered under
the 1933 Act and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and
the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and
qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or the
Underwriter.
3.6 The Trust represents and warrants that the investments of
each Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code"), and the rules and regulations thereunder, including without
limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any Portfolio
has ceased to comply or might not so comply and will in that event
immediately take all reasonable steps to adequately diversify the
Portfolio to achieve compliance within the grace period afforded by
Regulation 1.817-5.
3.7 The Trust represents and warrants that it is currently
qualified as a "regulated investment company" under Subchapter M of
the Code, that it will make every effort to maintain such
qualification and will notify the Company immediately upon having a
reasonable basis for believing it has ceased to so qualify or might
not so qualify in the future.
3.8 The Trust represents and warrants that should it ever desire
to make any payments to finance distribution expenses pursuant to Rule
12b-1 under the 1940 Act, the Trustees, including a majority who are
not "interested persons" of the Trust under the 1940 Act (
"disinterested Trustees" ), will formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.
3.9 The Trust represents and warrants that it, its directors,
officers, employees and others dealing with the money or securities,
or both, of a Portfolio shall at all times be covered by a blanket
fidelity bond or similar coverage for the benefit of the Trust in an
amount not less that the minimum coverage required by Rule 17g-1 or
other regulations under the 1940 Act. Such bond shall include coverage
for larceny and embezzlement and be issued by a reputable bonding
company.
3.10 The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals or entities dealing with the money and/or securities of
the Trust are and shall be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Trust, in an amount
not less than $5 million. The aforesaid bond shall include coverage
for larceny and embezzlement and shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to
see that this bond or another bond containing these provisions is
always in effect, and agrees to notify the Trust and the Underwriter
in the event that such coverage no longer applies.
3.11 The Underwriter represents that each Adviser is duly
organized and validly existing under applicable corporate law and that
it is registered and will during the term of this Agreement remain
registered as an investment adviser under the Advisers Act.
3.12 The Trust currently intends for one or more classes of
shares (each, a "Class") to make payments to finance its distribution
expenses, including service fees, pursuant to a Plan adopted under
Rule 12b-1 under the 1940 Act ("Rule 12b-1"), although it may
determine to discontinue such practice in the future. To the extent
that any Class of the Trust finances its distribution expenses
pursuant to a Plan adopted under Rule 12b-1, the Trust undertakes to
comply with any then current SEC and SEC staff interpretations
concerning Rule 12b-1 or any successor provisions.
ARTICLE IV.
Potential Conflicts
4.1 The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies.
In such event, the Trustees will monitor the Trust for the existence
of any material irreconcilable conflict between the interests of the
contract owners of all Participating Insurance Companies. An
irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d)
the manner in which the investments of any Portfolio are being
managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of
contract owners. The Trust shall promptly inform the Company of any
determination by the Trustees that an irreconcilable material conflict
exists and of the implications thereof.
4.2 The Company agrees to promptly report any potential or
existing conflicts of which it is aware to the Trustees. The Company
will assist the Trustees in carrying out their responsibilities under
the Shared Funding Exemptive Order by providing the Trustees with all
information reasonably necessary for the Trustees to consider any
issues raised including, but not limited to, information as to a
decision by the Company to disregard Contract owner voting
instructions. All communications from the Company to the Trustees may
be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a
majority of the disinterested Trustees, that a material irreconcilable
conflict exists that affects the interests of Contract owners, the
Company shall, in cooperation with other Participating Insurance
Companies whose contract owners are also affected, at its own expense
and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a)
withdrawing the assets allocable to some or all of the Accounts from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of
the Trust, or submitting the question of whether or not such
withdrawal should be implemented to a vote of all affected Contract
owners and, as appropriate, withdrawal of the assets of any
appropriate group (i.e. , annuity contract owners, life insurance
policy owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such
withdrawal, or offering to the affected Contract owners the option of
making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting
instructions and that decision represents a minority position or would
preclude a majority vote, the Company may be required, at the Trust's
election, to withdraw the affected Account's investment in the Trust
and terminate this Agreement with respect to such Account; provided,
however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such
withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being
implemented. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the
Company conflicts with a majority of other state regulators, then the
Company will withdraw the affected Account's investment in the Trust
and terminate this Agreement with respect to such Account within six
(6) months after the Trustees inform the Company in writing that it
has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Until the end of such six (6) month period,
the Trust shall continue to accept and implement orders by the Company
for the purchase and redemption of shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any
proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Trust be required to establish a
new funding medium for the Contracts. In the event that the Trustees
determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within
six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees
such reports, materials or data as the Trustees may reasonably request
so that the Trustees may fully carry out the duties imposed upon them
by the Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Shared Funding Exemptive Order, then the Trust
and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with Rules 6e-2 and 6e-
3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules
are applicable.
ARTICLE V.
Indemnification
5.1 Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the
Underwriter, the Trust and each of its Trustees, officers,
employees and agents and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually the
"Indemnified Party" for purposes of this Article V) against any
and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company, which
consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may
become subject under any statute or regulation, or at common law
or otherwise, insofar as such Losses are related to the sale or
acquisition of Trust Shares or the Contracts and
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in a disclosure document for the Contracts or in
the Contracts themselves or in sales literature generated or
approved by the Company on behalf of the Contracts or
Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the
purposes of this Article V), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that
this indemnity shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately
derived from written information furnished to the Company by
or on behalf of the Trust for use in Company Documents or
otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Trust Documents as
defined in Section 5.2 (a)(i)) or wrongful conduct of the
Company or persons under its control, with respect to the
sale or acquisition of the Contracts or Trust shares; or
(iii) arise out of or result from any untrue statement
or alleged untrue statement of a material fact contained in
Trust Documents as defined in Section 5.2(a)(i) or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived
from written information furnished to the Trust by or on
behalf of the Company; or
(iv) arise out of or result from any failure by the
Company to provide the services or furnish the materials
required under the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company.
(b) The Company shall not be liable under this
indemnification provision with respect to any Losses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to the Trust or
Underwriter, whichever is applicable. The Company shall also not
be liable under this indemnification provision with respect to
any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which
it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action.
The Company also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Company to such party of the Company's election
to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it,
and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
(c) The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them
in connection with the issuance or sale of the Trust shares or
the Contracts or the operation of the Trust.
5.2 Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless
the Company, the underwriter of the Contracts and each of its
directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually an
"Indemnified Party" for purposes of this Section 5.2) against any
and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter,
which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith)
(collectively, "Losses") to which the Indemnified Parties may
become subject under any statute, at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of
the Trust's Shares or the Contracts and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the Registration Statement, prospectus or sales
literature of the Trust (or any amendment or supplement to
any of the foregoing) (collectively, the "Trust Documents")
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 of such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Trust by or on
behalf of the Company for use in the Registration Statement
or prospectus for the Trust or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the disclosure documents or sales literature
for the Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Trust, Adviser
or Underwriter or persons under their control, with respect
to the sale or distribution of the Contracts or Trust
shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
disclosure document or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Trust; or
(iv) arise as a result of any failure by the Trust to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the qualification representation specified in Section 3.7 of
this Agreement and the diversification requirements
specified in Section 3.6 of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Underwriter
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of Sections
5.2(b) and 5.2(c) hereof.
(b) The Underwriter shall not be liable under this
indemnification provision with respect to any Losses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to each Company or
the Account, whichever is applicable.
(c) The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against
an Indemnified Party unless such Indemnified Party shall have
notified the Underwriter in writing within a reasonable time
after the summons or other first legal process giving information
of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but
failure to notify the Underwriter of any such claim shall not
relieve the Underwriter from any liability which it may have to
the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties,
the Underwriter will be entitled to participate, at its own
expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume
the defense thereof, the Indemnified Party shall bear the
expenses of any additional counsel retained by it, and the
Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other
than reasonable costs of investigation.
(d) The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or
any of its officers or directors in connection with the issuance
or sale of the Contracts or the operation of each Account.
5.3 Indemnification By The Trust
(a) The Trust agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person,
if any, who controls the Company within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 5.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with
the written consent of the Trust, which consent shall not be
unreasonably withheld) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross negligence,
bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Trust, and arise
out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of this Agreement by
the Trust; as limited by and in accordance with the provisions of
Section 5.3(b) and 5.3(c) hereof. It is understood and expressly
stipulated that neither the holders of shares of the Trust nor
any Trustee, officer, agent or employee of the Trust shall be
personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
(b) The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against any
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Trust, the
Underwriter or each Account, whichever is applicable.
(c) The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Trust
in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the
claims shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify the Trust
of any such claim shall not relieve the Trust from any liability
which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to
participate, at its own expense, in the defense thereof. The
Trust also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After
notice from the Trust to such party of the Trust's election to
assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
the Trust will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other
than reasonable costs of investigation.
(d) The Company and the Underwriter agree promptly to notify
the Trust of the commencement of any litigation or proceedings
against it or any of its respective officers or directors in
connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of either the Account,
or the sale or acquisition of share of the Trust.
ARTICLE VI.
Termination
6.1 This Agreement may be terminated by any party in its
entirety or with respect to one, some or all Portfolios or any
reason by sixty (60) days advance written notice delivered to the
other parties, and shall terminate immediately in the event of
its assignment, as that term is used in the 1940 Act.
6.2 This Agreement may be terminated immediately by either
the Trust or the Underwriter following consultation with the
Trustees upon written notice to the Company if :
(a) the Company notifies the Trust or the Underwriter
that the exemption from registration under Section 3(c) of
the 1940 Act no longer applies, or might not apply in the
future, to the unregistered Accounts, or that the exemption
from registration under Section 4(2) or Regulation D
promulgated under the 1933 Act no longer applies or might
not apply in the future, to interests under the unregistered
Contracts; or
(b) either one or both of the Trust or the
Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity; or
(c) the Company gives the Trust and the Underwriter
the written notice specified in Section 1.10 hereof and at
the same time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however, that any termination under
this Section 6.2(c) shall be effective forty-five (45) days
after the notice specified in Section 1.10 was given; or
6.3 If this Agreement is terminated for any reason, except
under Article IV (Potential Conflicts) above, the Trust shall, at
the option of the Company, continue to make available additional
shares of any Portfolio and redeem shares of any Portfolio
pursuant to all of the terms and conditions of this Agreement for
all Contracts in effect on the effective date of termination of
this Agreement. If this Agreement is terminated pursuant to
Article IV, the provisions of Article IV shall govern.
6.4 The provisions of Articles II (Representations and
Warranties) and V (Indemnification) shall survive the termination
of this Agreement. All other applicable provisions of this
Agreement shall survive the termination of this Agreement, as
long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 6.3, except that the Trust and the
Underwriter shall have no further obligation to sell Trust shares
with respect to Contracts issued after termination.
6.5 The Company shall not redeem Trust shares attributable
to the Contracts (as opposed to Trust shares attributable to the
Company's assets held in the Account) except (i) as necessary to
implement Contract owner initiated or approved transactions, (ii)
as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or
(iii) as permitted by an order of the SEC pursuant to Section
26(b) of the 1940 Act. Upon request, the Company will promptly
furnish to the Trust and the Underwriter the opinion of counsel
for the Company (which counsel shall be reasonably satisfactory
to the Trust and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under
the terms of the Contracts, the Company shall not prevent
Contract owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the
Trust or the Underwriter 90 days notice of its intention to do
so.
ARTICLE VII.
Notices.
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Trust or the Underwriter:
Templeton Variable Products Series Fund or
Franklin Templeton Distributors, Inc.
500 E. Broward Boulevard
Fort Lauderdale, FL 33394-3091
Attention: Barbara J. Green, Trust Secretary
WITH A COPY TO
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94404
Attention: Karen L. Skidmore, Senior Corporate
Counsel
If to the Company:
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110-2712
Attention: Jim Klopper
ARTICLE VIII.
Miscellaneous
8.1 The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and
the same instrument.
8.3 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
Florida. It shall also be subject to the provisions of the federal
securities laws and the rules and regulations thereunder and to any
orders of the SEC granting exemptive relief therefrom and the
conditions of such orders. Copies of any such orders shall be promptly
forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this
Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and that no Trustee, officer,
agent or holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection
with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.7 Each party hereto shall treat as confidential the names and
addresses of the Contract owners and all information reasonably
identified as confidential in writing by any other party hereto, and,
except as permitted by this Agreement or as required by legal process
or regulatory authorities, shall not disclose, disseminate, or utilize
such names and addresses and other confidential information until such
time as they may come into the public domain, without the express
written consent of the affected party. Without limiting the foregoing,
no party hereto shall disclose any information that such party has
been advised is proprietary, except such information that such party
is required to disclose by any appropriate governmental authority
(including, without limitation, the SEC, the NASD, and state
securities and insurance regulators).
8.8 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties
hereto are entitled to under state and federal laws.
8.9 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided in
Section 1.10.
8.10 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the prior written
approval of the other party.
8.11 No provisions of this Agreement may be amended or modified
in any manner except by a written agreement properly authorized and
executed by both parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and
year first above written.
The Company:
Keyport Benefit Life Insurance Company
By its authorized officer
By: /s/Bernard R. Beckerlegge
Name: Bernard R. Beckerlegge
Title: SVP & GC
The Trust:
Templeton Variable Products Series Fund
By its authorized officer
By: /s/Karen L. Skidmore
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant
Secretary
The Underwriter:
Franklin Templeton Distributors, Inc.
By its authorized officer
By: /s/Deborah R. Gatzek
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant
Secretary
SCHEDULE A
Separate Accounts of
Keyport Benefit Life Insurance Company
1. Variable Account A
Date Established: January 30, 1996February 6, 1998
SEC Registration Number: 333-104345727
SCHEDULE B
Trust Portfolios and Classes Available
Templeton Variable Products Series Adviser
Templeton Developing Markets Fund Templeton Asset Management Ltd.
-Class 2
SCHEDULE C
Variable Annuity Contracts
Issued by Keyport Benefit Life Insurance Company
Contract 1 Contract 2
Contract 3
Contract/Product Name Keyport Advisor Optima
Keyport Advisor Charter
Registered (Y/N) Yes
SEC Registration Number 333-
Representative Form
Numbers DVA(1)/CERT (NY)
DVA(1)/IND
DVA(1)(NY)
Separate Account Name Variable Account A
SEC Registration Number 333-104345727
Templeton Variable
Products Series
Portfolios and Classes
(Adviser) Templeton Developing
Markets Fund - Class 2
(Templeton Asset
Management Ltd.)
SCHEDULE D
Other Portfolios Available under the Contracts
Col. Sm Cap Value
Col. High Yield
Col. Strategic Inc.
Col. US Stock
Col. International Horizons
Col. Global Equity
SR Growth Stock
SR MMF
SR Global Utilities
SR Balanced
Liberty All-Star
Newport Tiger
SR Mortgage Securities
Progress High Alpha Concentration
Crabbe Huson Real Estate
Alger Small Cap
Alger Growth
Alliance Premier Growth
Alliance Global Bond
Alliance Technology Fund
AIM V.I. Value
AIM V.I. Cap App. (Constellation)
SCHEDULE E
RULE 12B-1 PLANS
Compensation Schedule
Each Portfolio named below shall pay the following amounts
pursuant to the terms and conditions referenced below under its
Class 2 Rule 12b-1 Distribution Plan, stated as a percentage per
year of Class 2's average daily net assets represented by shares
of Class 2.
Portfolio Name Maximum Annual Payment Rate
TEMPLETON DEVELOPING MARKETS FUND 0.25%
Agreement Provisions
If the Company, on behalf of any Account, purchases Trust
Portfolio shares ("Eligible Shares") which are subject to a Rule
12b-1 Plan adopted under the 1940 Act (the "Plan"), the Company
may participate in the Plan.
To the extent the Company or its affiliates, agents or
designees (collectively "you") you provide administrative and
other services which assist in the promotion and distribution of
Eligible Shares or Variable Contracts offering Eligible Shares,
the Underwriter, the Trust or their affiliates (collectively,
"we") may pay you a Rule 12b-1 fee. "Administrative and other
services" may include, but are not limited to, furnishing
personal services to owners of Contracts which may invest in
Eligible Shares ("Contract Owners"), answering routine inquiries
regarding a Portfolio, coordinating responses to Contract Owner
inquiries regarding the Portfolios, maintaining such accounts or
providing such other enhanced services as a Trust Portfolio or
Contract may require, maintaining customer accounts and records,
or providing other services eligible for service fees as defined
under NASD rules. Your acceptance of such compensation is your
acknowledgment that eligible services have been rendered. All
Rule 12b-1 fees, shall be based on the value of Eligible Shares
owned by the Company on behalf of its Accounts, and shall be
calculated on the basis and at the rates set forth in the
Compensation Schedule stated above. The aggregate annual fees
paid pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in the Portfolio's prospectus, unless an
increase is approved by shareholders as provided in the Plan.
These maximums shall be a specified percent of the value of a
Portfolio's net assets attributable to Eligible Shares owned by
the Company on behalf of its Accounts (determined in the same
manner as the Portfolio uses to compute its net assets as set
forth in its effective Prospectus).
You shall furnish us with such information as shall
reasonably be requested by the Trust's Boards of Trustees
("Trustees") with respect to the Rule 12b-1 fees paid to you
pursuant to the Plans. We shall furnish to the Trustees, for
their review on a quarterly basis, a written report of the
amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such
Plans must be approved annually by a vote of the Trustees,
including the Trustees who are not interested persons of the
Trust and who have no financial interest in the Plans or any
related agreement ("Disinterested Trustees"). Each Plan may be
terminated at any time by the vote of a majority of the
Disinterested Trustees, or by a vote of a majority of the
outstanding shares as provided in the Plan, on sixty (60) days'
written notice, without payment of any penalty. The Plans may
also be terminated by any act that terminates the Underwriting
Agreement between the Underwriter and the Trust, and/or the
management or administration agreement between Franklin Advisers,
Inc. or Templeton Investment Counsel, Inc. or their affiliates
and the Trust. Continuation of the Plans is also conditioned on
Disinterested Trustees being ultimately responsible for selecting
and nominating any new Disinterested Trustees. Under Rule 12b-1,
the Trustees have a duty to request and evaluate, and persons who
are party to any agreement related to a Plan have a duty to
furnish, such information as may reasonably be necessary to an
informed determination of whether the Plan or any agreement
should be implemented or continued. Under Rule 12b-1, the Trust
is permitted to implement or continue Plans or the provisions of
any agreement relating to such Plans from year-to-year only if,
based on certain legal considerations, the Trustees are able to
conclude that the Plans will benefit each affected Trust
Portfolio and class. Absent such yearly determination, the Plans
must be terminated as set forth above. In the event of the
termination of the Plans for any reason, the provisions of this
Schedule E relating to the Plans will also terminate.
Any obligation assumed by the Trust pursuant to this Agreement
shall be limited in all cases to the assets of the Trust and no
person shall seek satisfaction thereof from shareholders of the
Trust. You agree to waive payment of any amounts payable to you
by Underwriter under a Plan until such time as the Underwriter
has received such fee from the Fund.
The provisions of the Plans shall control over the provisions of
the Participation Agreement, including this Schedule E, in the
event of any inconsistency.
You agree to provide complete disclosure as required by all
applicable statutes, rules and regulations of all rule 12b-1 fees
received from us in the prospectus of the contracts.
EXHIBIT 9
June 16, 1999
Philip K. Polkinghorn, President
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110
RE: OPINION OF COUNSEL - VARIABLE ACCOUNT A
Dear Mr. Polkinghorn:
You have requested my opinion concerning the legality of the variable
annuity contracts being registered with the Securities and Exchange
Commission by this Registration Statement.
I have made such examination of the law and have examined such records and
documents as in my judgment was necessary or appropriate to enable me to
render the opinion expressed below.
I am of the opinion that the contracts will be legally issued and will
represent binding obligations of the depositor (Keyport Benefit Life
Insurance Company).
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
Sincerely,
/s/Bernard R. Beckerlegge
Bernard R. Beckerlegge
General Counsel
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 reports dated
January 28, 1999, with respect to the statutory-basis financial statements
of Keyport Benefit Life Insurance Company, and March 12, 1999, with respect
to the financial statements of Keyport Benefit Life Insurance Company-
Variable Account A, included in this Pre-Effective Amendment No. 1 to the
Registration Statement (Form N-4, Nos. 333-75157 and 811-08635).
/s/ERNST & YOUNG LLP
Boston, Massachusetts
June 16, 1999
EXHIBIT 16
LIMITED POWER OF ATTORNEY
I, Philip K. Polkinghorn, a director, the Chairman of the
Board and President of Keyport Benefit Life Insurance Company
(the "Company"), a corporation duly organized under the laws of
the State of New York, do hereby individually appoint Bernard R.
Beckerlegge and James J. Klopper to be my true and lawful
attorney and agent, and grant each of them individually the power
to execute, deliver and file in my name as a director, the
Chairman of the Board and President of the Company, any and all
instruments that said attorney and agent may deem necessary or
advisable to enable the Company: (1) to register any security
issued by the Company or any security issued by a validly
established separate account for which the Company serves as the
depositor, under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, including without limitation
any registration statement (including pre-effective and post-
effective amendments thereto); (2) to register an investment
company or apply for an order of approval or exemption under the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder, including without limitation any
registration statement (including pre-effective and post-
effective amendments thereto) and application for an order
(including any amendments thereto) and (3) to comply with any
other filing requirement of the U.S. Securities and Exchange
Commission under the Acts and rules and regulations referenced
above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/Philip K. Polkinghorn
Philip K. Polkinghorn
Director, Chairman of the Board and President
LIMITED POWER OF ATTORNEY
I, Bernard R. Beckerlegge, a director of Keyport Benefit
Life Insurance Company (the "Company"), a corporation duly
organized under the laws of the State of New York, do hereby
individually appoint Philip K. Polkinghorn and James J. Klopper
to be my true and lawful attorney and agent, and grant each of
them individually the power to execute, deliver and file in my
name as a director of the Company, any and all instruments that
said attorney and agent may deem necessary or advisable to enable
the Company: (1) to register any security issued by the Company
or any security issued by a validly established separate account
for which the Company serves as the depositor, under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, including without limitation any registration
statement (including pre-effective and post-effective amendments
thereto); (2) to register an investment company or apply for an
order of approval or exemption under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto)
and application for an order (including any amendments thereto)
and (3) to comply with any other filing requirement of the U.S.
Securities and Exchange Commission under the Acts and rules and
regulations referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/Bernard R. Beckerlegge
Bernard R. Beckerlegge
Director
LIMITED POWER OF ATTORNEY
I, William P. Donohue, a director of Keyport Benefit Life
Insurance Company (the "Company"), a corporation duly organized
under the laws of the State of New York, do hereby individually
appoint Philip K. Polkinghorn, Bernard R. Beckerlegge and James
J. Klopper to be my true and lawful attorney and agent, and grant
each of them individually the power to execute, deliver and file
in my name as a director of the Company, any and all instruments
that said attorney and agent may deem necessary or advisable to
enable the Company: (1) to register any security issued by the
Company or any security issued by a validly established separate
account for which the Company serves as the depositor, under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, including without limitation any registration
statement (including pre-effective and post-effective amendments
thereto); (2) to register an investment company or apply for an
order of approval or exemption under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto)
and application for an order (including any amendments thereto)
and (3) to comply with any other filing requirement of the U.S.
Securities and Exchange Commission under the Acts and rules and
regulations referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/William P. Donohue
William P. Donohue
Director
LIMITED POWER OF ATTORNEY
I, Paul H. LeFevre, Jr., a director of Keyport Benefit Life
Insurance Company (the "Company"), a corporation duly organized
under the laws of the State of New York, do hereby individually
appoint Philip K. Polkinghorn, Bernard R. Beckerlegge and James
J. Klopper to be my true and lawful attorney and agent, and grant
each of them individually the power to execute, deliver and file
in my name as a director of the Company, any and all instruments
that said attorney and agent may deem necessary or advisable to
enable the Company: (1) to register any security issued by the
Company or any security issued by a validly established separate
account for which the Company serves as the depositor, under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, including without limitation any registration
statement (including pre-effective and post-effective amendments
thereto); (2) to register an investment company or apply for an
order of approval or exemption under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto)
and application for an order (including any amendments thereto)
and (3) to comply with any other filing requirement of the U.S.
Securities and Exchange Commission under the Acts and rules and
regulations referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/Paul H. LeFevre, Jr.
Paul H. LeFevre, Jr.
Director
LIMITED POWER OF ATTORNEY
I, Bernhard M. Koch, a Senior Vice President and the Chief
Financial Officer of Keyport Benefit Life Insurance Company (the
"Company"), a corporation duly organized under the laws of the
State of New York, do hereby individually appoint Philip K.
Polkinghorn, Bernard R. Beckerlegge and James J. Klopper to be my
true and lawful attorney and agent, and grant each of them
individually the power to execute, deliver and file in my name as
a Senior Vice President and the Chief Financial Officer of the
Company, any and all instruments that said attorney and agent may
deem necessary or advisable to enable the Company: (1) to
register any security issued by the Company or any security
issued by a validly established separate account for which the
Company serves as the depositor, under the Securities Act of
1933, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto);
(2) to register an investment company or apply for an order of
approval or exemption under the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder, including
without limitation any registration statement (including pre-
effective and post-effective amendments thereto) and application
for an order (including any amendments thereto) and (3) to comply
with any other filing requirement of the U.S. Securities and
Exchange Commission under the Acts and rules and regulations
referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/Bernhard M. Koch
Bernhard M. Koch
Senior Vice President and Chief Financial Officer
LIMITED POWER OF ATTORNEY
I, Peter M. Lehrer, a director of Keyport Benefit Life
Insurance Company (the "Company"), a corporation duly organized
under the laws of the State of New York, do hereby individually
appoint Philip K. Polkinghorn, Bernard R. Beckerlegge and James
J. Klopper to be my true and lawful attorney and agent, and grant
each of them individually the power to execute, deliver and file
in my name as a director of the Company, any and all instruments
that said attorney and agent may deem necessary or advisable to
enable the Company: (1) to register any security issued by the
Company or any security issued by a validly established separate
account for which the Company serves as the depositor, under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, including without limitation any registration
statement (including pre-effective and post-effective amendments
thereto); (2) to register an investment company or apply for an
order of approval or exemption under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto)
and application for an order (including any amendments thereto)
and (3) to comply with any other filing requirement of the U.S.
Securities and Exchange Commission under the Acts and rules and
regulations referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/Peter M. Lehrer
Peter M. Lehrer
Director
LIMITED POWER OF ATTORNEY
I, Jeff S. Liebmann, a director of Keyport Benefit Life
Insurance Company (the "Company"), a corporation duly organized
under the laws of the State of New York, do hereby individually
appoint Philip K. Polkinghorn, Bernard R. Beckerlegge and James
J. Klopper to be my true and lawful attorney and agent, and grant
each of them individually the power to execute, deliver and file
in my name as a director of the Company, any and all instruments
that said attorney and agent may deem necessary or advisable to
enable the Company: (1) to register any security issued by the
Company or any security issued by a validly established separate
account for which the Company serves as the depositor, under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, including without limitation any registration
statement (including pre-effective and post-effective amendments
thereto); (2) to register an investment company or apply for an
order of approval or exemption under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto)
and application for an order (including any amendments thereto)
and (3) to comply with any other filing requirement of the U.S.
Securities and Exchange Commission under the Acts and rules and
regulations referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/Jeff S. Liebmann
Jeff S. Liebmann
Director
LIMITED POWER OF ATTORNEY
I, Christopher C. York, a director of Keyport Benefit Life
Insurance Company (the "Company"), a corporation duly organized
under the laws of the State of New York, do hereby individually
appoint Philip K. Polkinghorn, Bernard R. Beckerlegge and James
J. Klopper to be my true and lawful attorney and agent, and grant
each of them individually the power to execute, deliver and file
in my name as a director of the Company, any and all instruments
that said attorney and agent may deem necessary or advisable to
enable the Company: (1) to register any security issued by the
Company or any security issued by a validly established separate
account for which the Company serves as the depositor, under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, including without limitation any registration
statement (including pre-effective and post-effective amendments
thereto); (2) to register an investment company or apply for an
order of approval or exemption under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto)
and application for an order (including any amendments thereto)
and (3) to comply with any other filing requirement of the U.S.
Securities and Exchange Commission under the Acts and rules and
regulations referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/Christopher C. York
Christopher C. York
Director
LIMITED POWER OF ATTORNEY
I, J. Andrew Hilbert, a director of Keyport Benefit Life
Insurance Company (the "Company"), a corporation duly organized
under the laws of the State of New York, do hereby individually
appoint Philip K. Polkinghorn, Bernard R. Beckerlegge and James
J. Klopper to be my true and lawful attorney and agent, and grant
each of them individually the power to execute, deliver and file
in my name as a director of the Company, any and all instruments
that said attorney and agent may deem necessary or advisable to
enable the Company: (1) to register any security issued by the
Company or any security issued by a validly established separate
account for which the Company serves as the depositor, under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, including without limitation any registration
statement (including pre-effective and post-effective amendments
thereto); (2) to register an investment company or apply for an
order of approval or exemption under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto)
and application for an order (including any amendments thereto)
and (3) to comply with any other filing requirement of the U.S.
Securities and Exchange Commission under the Acts and rules and
regulations referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/J. Andrew Hilbert
J. Andrew Hilbert
Director
LIMITED POWER OF ATTORNEY
I, Stewart R, Morrison, a director of Keyport Benefit Life
Insurance Company (the "Company"), a corporation duly organized
under the laws of the State of New York, do hereby individually
appoint Philip K. Polkinghorn, Bernard R. Beckerlegge and James
J. Klopper to be my true and lawful attorney and agent, and grant
each of them individually the power to execute, deliver and file
in my name as a director of the Company, any and all instruments
that said attorney and agent may deem necessary or advisable to
enable the Company: (1) to register any security issued by the
Company or any security issued by a validly established separate
account for which the Company serves as the depositor, under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, including without limitation any registration
statement (including pre-effective and post-effective amendments
thereto); (2) to register an investment company or apply for an
order of approval or exemption under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder,
including without limitation any registration statement
(including pre-effective and post-effective amendments thereto)
and application for an order (including any amendments thereto)
and (3) to comply with any other filing requirement of the U.S.
Securities and Exchange Commission under the Acts and rules and
regulations referenced above or under any other law as amended.
Dated this 4th day of June, 1999.
/s/Stewart R. Morrison
Stewart R. Morrison
Director