As Filed with the Securities and Exchange Commission on October 13, 1995
Registration No. 33-41122
811-6329
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 7 [X]
-
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 8 [X]
-
Variable Account - K
--------------------
(exact name of Registrant)
Liberty Life Assurance Company of Boston
----------------------------------------
(Name of Depositor)
175 Berkeley Street, Boston, Massachusetts 02117
------------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: 617-357-9500
Lee W. Rabkin
Liberty Life Assurance Company of Boston
175 Berkeley Street
Boston, MA 02117
----------------
(Name and Address of Agent for Service)
Copies to: James J. Klopper
Keyport Life Insurance Company
125 High Street, 13th Floor
Boston, MA 02110
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:
(X) 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) of Rule 485
( ) on [date] pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2 (17 CFR
270.24f-2) and the Rule 24f-2 Notice for Registrant's fiscal year 1994 was
filed on February 27, 1995.
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<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
Powers of Attorney
Exhibits
<PAGE>
VARIABLE ACCOUNT - K
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-4
N-4 Item Caption in Prospectus
- -------- ---------------------
1. Cover Page
2. Glossary of Special Terms
3. Synopsis
4. Condensed Financial Information
5. Liberty Life and the Variable Account
Eligible Funds
6. Deductions
7. Allocations of Purchase Payments
Transfer of Variable Account Value
Substitution of Securities
Modification of the Contract
Death Provisions for Non-Qualified Contracts
Death Provisions for Qualified Contracts
Ownership
Assignment
Surrenders
Annuity Benefits
Suspension of Payments
Inquiries by Contract Owners
8. Annuity Provisions
9. Death Provisions for Non-Qualified Contracts
Death Provisions for Qualified Contracts
Settlement Options
10. Purchase Payments
Variable Account Value
Valuation Periods
Net Investment Factor
Distribution of the Contract
11. Surrenders
Option 1: Income For a Fixed Number of Years
Right to Revoke
12. Tax Status
13. Legal Proceedings
14. Table of Contents - Statement of Additional Information
Caption in Statement of Additional Information
----------------------------------------------
15. Cover Page
16. Table of Contents
17. Liberty Life Assurance Company of Boston
18. Custodian, Experts
19. Not applicable
20. Principal Underwriter
21. Investment Performance
22. Variable Annuity Benefits
23. Financial Statements
<PAGE>
PART A
<PAGE>
SUPPLEMENT DATED OCTOBER 13, 1995 TO
PROSPECTUS DATED MAY 1, 1995 FOR
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT - K
AND
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
The May 1, 1995 date on page 1 of the prospectus is changed to October 13,
1995.
- -------------------------------------------------------------------------------
On September 27, 1995, the Securities and Exchange Commission issued an order
approving the substitution of shares of the Colonial-Keyport Strategic Income
Fund for shares of the Managed Income Fund ("MIF"); the substitution of shares
of the Mortgage Securities Income Fund for shares of the Colonial-Keyport U.S.
Government Fund ("CKUSGF") and the substitution of shares of the Managed Assets
Fund for shares of the Strategic Managed Assets Fund ("SMAF"). MIF, CKUSGF and
SMAF Sub-Accounts are no longer available under the Contract for any purpose.
The following three new funds of Keyport Variable Investment Trust are now
available: Colonial-Keyport Strategic Income Fund ("CKSIF"), Colonial-Keyport
U.S. Fund for Growth ("CKUSFG") and Newport-Keyport Tiger Fund ("NKTF"). The
Guaranteed Minimum Death Value amount will change for certain Contracts issued
on or after January 15, 1993 once the New York State Insurance Department grants
its approval of contract endorsements.
The above changes affect the prospectus as follows.
On pages 4-5, the fourth, fifth and sixth table in "Summary of Expenses" are
changed to:
- -------------------------------------------------------------------------------
SteinRoe Trust and Keyport Trust Annual Expenses 3, 4
(as a percentage of average net assets)
Management Other Total Fund
Fund Fees Expenses Operating Expenses
---- ---- -------- ------------------
CIF .50% .12% .62%
MSIF .55 .15 .70 ( .71%)5
CKGIF .65 .22 .87
CKSIF .65 .15 .80 (1.60%)4
MAF .60 .08 .68
CKUF .65 .21 .86
MGSF .65 .12 .77
CKUSFG .80 .20 1.00 (1.64%)4
CAF .65 .15 .80
CKIFG .90 .84 1.74
NKTF .90 .45 1.35
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Example #1-Assuming surrender of the Contract at the end of the periods shown.6
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
----------- ------ ------- ------- --------
CIF $ 91 $117 $153 $298
MSIF 92 120 157 308
CKGIF 94 125 167 330
CKSIF 93 123 ---- ----
MAF 92 119 156 306
CKUF 93 125 166 329
MGSF 93 122 161 317
CKUSFG 95 129 ---- ----
CAF 93 123 163 321
CKIFG 102 151 214 436
NKTF 98 139 ---- ----
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Example #2 - Assuming annuitization of the Contract
at the end of the periods shown.6
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
----------- ------ ------- ------- --------
CIF $21 $ 68 $123 $298
MSIF 22 71 127 308
CKGIF 24 76 137 330
CKSIF 23 74 ---- ----
MAF 22 70 126 306
CKUF 23 76 136 328
MGSF 23 73 131 317
CKUSFG 25 80 ---- ----
CAF 23 74 133 321
CKIFG 32 103 184 436
NKTF 28 91 ---- ----
- -------------------------------------------------------------------------------
On page 5, footnote 4 is changed to read:
Keyport Trust's manager has agreed until 4/30/96 to reimburse all expenses,
including management fees, in excess of the following percentage of the average
annual net assets of each Fund so long as such reimbursement would not result in
the Fund's inability to qualify as a regulated investment company under the
Internal Revenue Code: 1.75% for CKIFG and NKTF; 1.00% for CKGIF, CKUF and
CKUSFG: and .80% for CKSIF. The total percentage shown is after expense
reimbursement. The 1.60% and 1.64% shown in the parentheses is an estimate of
what the total expenses would be in the absence of expense reimbursement. The
Keyport Trust expenses are for 1994 with the exception of those for NKTF which
are estimated for the first year of the Fund's operation since the Fund
commenced operations in May 1995.
<PAGE>
On page 10, the boxed area shall include:
---------------------------------------------------------------------------
Eligible Funds of Keyport Variable Investment Trust Sub-Accounts
--------------------------------------------------- ------------
Colonial-Keyport Strategic Income Fund ("CKSIF") CKSIF Sub-Account
Colonial-Keyport U.S. Fund for Growth ("CKUSFG") CKUSFG Sub-Account
Newport-Keyport Tiger Fund ("NKTF") NKTF Sub-Account
---------------------------------------------------------------------------
On page 10, the following is added at the end of the second to last paragraph:
The portfolio of the Colonial-Keyport U.S. Fund for Growth is managed by State
Street Global Advisors, a division of State Street Bank and Trust Company.
On page 11, the boxed area shall include:
---------------------------------------------------------------------------
Eligible Funds of Keyport
Variable Investment Trust and
Variable Account Sub-Accounts Investment Objective
----------------------------- --------------------
Colonial-Keyport Strategic A high level of current income, as is
Income Fund (CKSIF Sub-Account) consistent with prudent risk, and
maximizing total return, by diversifying
investments primarily in U.S. and
foreign government and high yield, high
risk corporate debt securities. The Fund
may invest a substantial portion of its
assets in high yield, high risk bonds
(commonly referred to as "junk bonds").
Colonial-Keyport U.S. Fund for Growth exceeding over time the S&P 500
Growth (CKUSFG Sub-Account) Index's (Standard & Poor's Corporation
Composite Stock Price Index)
performance.
Newport-Keyport Tiger Fund Long-term capital growth by investing
(NKTF Sub-Account) primarily in equity securitites of
companies located in the four Tigers of
Asia (Hong Kong, Singapore, South Korea
and Taiwan) and other mini-Tigers of
East Asia (Malaysia, Thailand,
Indonesia, China and the Philippines).
---------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SERVICE HOTLINE 800-367-3653 (press 3)
Issued by Liberty Life Assurance Company of Boston
Distributed by Keyport Financial Services Corp.
SteinRoe Variable Investment Trust managed by Stein Roe and Farnham Incorporated
One South Wacker Drive, Chicago, Illinois 60606
Keyport Variable Investment Trust managed by Keyport Advisory Services Corp. and
sub-advised by Colonial Management Associates, Inc.
One Financial Center, Boston, Massachusetts 02111
Liberty Life Service Office and Keyport Companies located at:
125 High Street, Boston, Massachusetts 02110-2712
<PAGE>
NEW YORK PREFERRED ADVISOR PROSPECTUS
May 1, 1995
<PAGE>
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT-K
AND
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
The variable annuity contract (form number FLEX(4V)NY, referred to as the
"Contract") described in this prospectus provides for accumulation of
Contract Values on a variable basis and the payment of periodic annuity
payments on a fixed and/or a variable basis. The Contract is designed for use
by individuals for retirement planning purposes.
Purchase payments will be allocated to a segregated investment account of
Liberty Life Assurance Company of Boston ("Liberty Life"), designated the
Variable Account-K ("Variable Account"). The Variable Account currently
invests in shares of the following Eligible Funds of SteinRoe Variable
Investment Trust ("SteinRoe Trust") at their respective net asset values:
Cash Income Fund ("CIF"); Mortgage Securities Income Fund ("MSIF"); Managed
Income Fund ("MIF"); Managed Assets Fund ("MAF"); Strategic Managed Assets
Fund ("SMAF"); Managed Growth Stock Fund ("MGSF"); and Capital Appreciation
Fund ("CAF"). The Variable Account also invests in shares of the following
Eligible Funds of Keyport Variable Investment Trust ("Keyport Trust") at
their net asset value: Colonial-Keyport U.S. Government Fund ( "CKUSGF");
Colonial-Keyport Growth and Income Fund ("CKGIF"); Colonial-Keyport Utilities
Fund ("CKUF"); and Colonial-Keyport International Fund for Growth ("CKIFG").
The MIF, SMAF and CKUSGF Sub-Accounts are not available to receive either
allocations of new purchase payments or transfers of Contract Value since a
filing is pending with the Securities and Exchange Commission seeking its
approval of the substitution of shares of Colonial-Keyport Strategic Income
Fund, MAF and MSIF for the shares of MIF, SMAF and CKUSGF, respectively.
Liberty Life may also offer group variable annuity contracts issued with
respect to the Variable Account. Any such group contract would be offered by
a separate prospectus.
A Statement of Additional Information dated the same as this prospectus has
been filed with the Securities and Exchange Commission and is herein
incorporated by reference. It is available, at no charge, by writing the
Distributor, Keyport Financial Services Corp. at 125 High Street, Boston, MA
02110, by calling Liberty Life's Service Office at (800) 437-4466, or by
returning the postcard on the back cover of this prospectus. A table of
contents for the Statement of Additional Information is on Page 24.
The Contract may be sold by or through banks or other depository
institutions. The Contract: (bullet) is not insured by the FDIC; (bullet) is
not a deposit or other obligation of, or guaranteed by, the depository
institution; and (bullet) is subject to investment risks, including the
possible loss of principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS SETS FORTH THE INFORMATION A PROSPECTIVE INVESTOR SHOULD KNOW
BEFORE INVESTING. THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE OR JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED BY
LIBERTY LIFE TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THIS OFFERING,
AND IF GIVEN OR MADE, SUCH UNAUTHORIZED INFORMATION OR REPRESENTATIONS SHOULD
NOT BE RELIED UPON.
The date of this prospectus is May 1, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-------
<S> <C>
Glossary of Special Terms 3
Summary of Expenses 4
Synopsis 6
Condensed Financial Information 7
Liberty Life and the Variable Account 8
Purchase Payments and Applications 9
Investments of the Variable Account 9
Allocations of Purchase Payments 9
Eligible Funds 10
Dollar Cost Averaging 11
Transfer of Contract Value 12
Substitution of Eligible Funds and Other Variable
Account Changes 13
Deductions 13
Deductions for Contract Maintenance Charge 13
Deductions for Mortality and Expense Risk Charge 13
Deductions for Daily Sales Charge 13
Deductions for Contingent Deferred Sales Charge 14
Deductions for Transfers of Contract Value 15
Deductions for Premium Taxes 15
Deductions for Income Taxes 15
Total Expenses 15
The Contracts 15
Contract Value 15
Valuation Periods 15
Net Investment Factor 15
Modification of the Contract 16
Right to Revoke 16
Death Provisions for Non-Qualified Contracts 16
Death Provisions for Qualified Contracts 17
Ownership 18
Assignment 18
Surrenders 18
Annuity Provisions 18
Annuity Benefits 18
Income Date and Settlement Option 19
Change in Income Date and Settlement Option 19
Settlement Options 19
Variable Annuity Payment Values 20
Fixed Annuity Payment Values 20
Proof of Age, Sex, and Survival of Annuitant 20
Suspension of Payments 20
Tax Status 20
Introduction 20
Taxation of Annuities in General 21
Qualified Plans 22
Tax-Sheltered Annuities 22
Individual Retirement Annuities 22
Corporate Pension and Profit-Sharing Plans 23
Deferred Compensation Plans with Respect to
Service for State and Local Governments 23
Variable Account Voting Rights 23
Distribution of the Contract 23
Legal Proceedings 23
Inquiries by Contract Owners 23
Table of Contents--Statement of Additional
Information 24
Appendix A--Telephone Instructions 25
Appendix B--Dollar Cost Averaging 26
</TABLE>
2
<PAGE>
GLOSSARY OF SPECIAL TERMS
Accumulation Unit: An accounting unit of measure used to calculate Contract
Value.
Annuitant: The Annuitant is the natural person to whom any annuity payments
will be made starting on the Income Date. The Annuitant may not be over age
80 on the Issue Date (age 75 for Qualified Contracts).
Contract Anniversary: The same month and day as the Issue Date in each
subsequent year of the Contract.
Contract Owner: The person (or persons in the case of joint ownership) who
possesses all the ownership rights under the Contract. An owner may not be
over age 80 on the Issue Date (age 75 for Qualified Contracts).
Contract Value: The sum of all amounts under the Contract, prior to the
Income Date, less any surrenders.
Contract Year: Any period of 12 months commencing with the Issue Date and
each Contract Anniversary thereafter shall be a Contract Year.
Designated Beneficiary: The person who may be entitled to receive benefits
following the death of the Annuitant or Contract Owner. The Designated
Beneficiary will be the first person among the following who is alive on the
date of death: primary owner; joint owner; primary beneficiary; contingent
beneficiary; and if no one is alive, the primary owner's estate. If the
primary owner and joint owner are both alive, they will be the Designated
Beneficiary together.
Eligible Funds: The mutual funds that are eligible investments for the
Variable Account.
In Force: The status of the Contract before the Income Date so long as it is
not totally surrendered and there has not been a death of the Annuitant or
any Contract Owner that will cause the Contract to end within at most five
years of the date of death.
Income Date: The date on which annuity payments are to begin.
Issue Date: The effective date of the Contract; it is shown on Page 3 of the
Contract.
Non-Qualified Contract: Any Contract that is not issued under a Qualified
Plan.
Qualified Contract: Contracts issued under Qualified Plans.
Qualified Plan: A retirement plan established pursuant to the provisions of
Sections 401, 403 or 408 of the Internal Revenue Code. Liberty Life treats
Section 457 plans as Qualified Plans.
Service Office: Liberty Life's Service Office, which is 125 High Street,
Boston, Massachusetts 02110.
Surrender Value: The Contract Value less deductions made upon a total
surrender of the Contract. See "Surrenders" on Page 18.
Variable Account: A separate investment account of Liberty Life, designated
Variable Account-K, into which purchase payments may be allocated. The
Variable Account is divided into Sub- Accounts ("Sub-Account" or "Investment
Account") that correspond to the Eligible Funds in which they invest.
Written Request: A request written on a form satisfactory to Liberty Life,
signed by the Contract Owner and a disinterested witness, and filed at its
Service Office.
3
<PAGE>
SUMMARY OF EXPENSES
The expense summary format below, including the examples, was adopted by the
Securities and Exchange Commission to assist the owner of a variable annuity
contract in understanding the transaction and operating expenses the owner
will directly or indirectly bear under a contract. The values reflect
expenses of the Variable Account as well as the Eligible Funds. The expenses
shown for the Eligible Funds and the examples should not be considered a
representation of future expenses.
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Contingent Deferred Sales Charge
(as a percentage of purchase payments): 7%(1)
Years from Date of Payment Sales Charge
- ----------------------------- ---------------
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or later 0%
Maximum Total Contract Owner Transaction Expenses(2)
(as a percentage of purchase payments): 7%
Annual Contract $30
Fee
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: 1.25%
Asset-based Sales Charge: .15%
----
Total Variable Account Annual
Expenses 1.40%
SteinRoe Trust and Keyport Trust Annual Expenses(3, 4)
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Total Fund
Management Other Operating
Fund Fees Expenses Expenses
- ------- -------- ------- -----------------
<S> <C> <C> <C>
CIF .50% .12% .62%()
CKUSGF .60 .26 .86
MSIF .55 .15 .70(.71%)(5)
MIF .55 .23 .78
CKGIF .65 .22 .87
MAF .60 .08 .68
CKUF .65 .21 .86
SMAF .70 .15 .85(.88%)(5)
MGSF .65 .12 .77
CAF .65 .15 .80
CKIFG .90 .84 1.74
</TABLE>
4
<PAGE>
Example #1--Assuming surrender of the Contract at the end of the periods
shown.(6)
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
<TABLE>
<CAPTION>
1 3 5
Sub-Account Year Years Years 10 Years
- ------------ ----- ------ ------ --------
<S> <C> <C> <C> <C>
CIF $ 91 $117 $153 $298
CKUSGF 93 125 166 329
MSIF 92 120 157 308
MIF 93 122 162 319
CKGIF 94 125 167 330
MAF 92 119 156 306
CKUF 93 125 166 329
SMAF 93 124 166 328
MGSF 93 122 161 317
CAF 93 123 163 321
CKIFG 102 151 214 436
</TABLE>
Example #2--Assuming annuitization of the Contract at the end of the periods
shown.(6)
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
<TABLE>
<CAPTION>
1 3 5
Sub-Account Year Years Years 10 Years
- ------------ ----- ----- ----- --------
<S> <C> <C> <C> <C>
CIF $21 $ 68 $123 $298
CKUSGF 23 76 136 329
MSIF 22 71 127 308
MIF 23 73 132 319
CKGIF 24 76 137 330
MAF 22 70 126 306
CKUF 23 76 136 329
SMAF 23 75 136 328
MGSF 23 73 131 317
CAF 23 74 133 321
CKIFG 32 103 184 436
</TABLE>
Example #3--Assuming the Contract stays in force through the periods shown.
A $1,000 investment in each Sub-Account listed would be subject to the same
expenses shown in Example #2, assuming 5% annual return on assets.
(1)Contingent Deferred Sales Charges are deducted only if the Contract is
fully or partially surrendered. A surrender will not incur the charge
percentage shown to the extent the amount of that surrender does not exceed
the Contract's increase in value at the time of surrender or, after the first
Contract Year, 10% of the Contract Value on the prior Contract Anniversary if
this 10% amount is greater. The full amount of the Contingent Deferred Sales
Charge will not be deducted if (a) such amount plus any prior Contingent
Deferred Sales Charges plus the cumulative .15% asset-based sales charge
exceeds (b) the Contract's maximum cumulative sales charge of 8.5% of the
total purchase payments made to the Contract. If the (a) amount exceeds the
(b) amount, the full amount of the Charge will be reduced by the excess
amount.
(2)Liberty Life reserves the right to impose a transfer fee after prior notice
to Contract Owners, but currently does not impose any charge. Premium taxes are
not shown. Liberty Life deducts the amount of premium taxes, if any, when paid
unless Liberty Life elects to defer such deduction.
(3)The SteinRoe Trust expenses are for 1994. The expenses for MIF have been
restated for inclusion in the table to reflect a new expense reimbursement
level beginning May 1, 1995 (see footnote 5). The Keyport Trust expenses are
for 1994.
(4)Keyport Trust's manager has agreed until 4/30/96 to reimburse all
expenses, including management fees, in excess of the following percentage of
the average annual net assets of each Fund, so long as such reimbursement
would not result in the Fund's inability to qualify as a regulated investment
company under the Internal Revenue Code: 1.75% for CKIFG and 1.00% for
CKUSGF, CKGIF and CKUF. The total percentages shown in the table do not
5
<PAGE>
reflect expense reimbursement since the Funds were eligible for expense
reimbursement in 1994 but did not receive any.
(5)SteinRoe Trust's adviser has voluntarily agreed until 4/30/96 to reimburse
all expenses, including management fees, in excess of the following
percentage of the average annual net assets of each listed Fund so long as
such reimbursement would not result in the Fund's ability to qualify as a
regulated investment company under the Internal Revenue Code: .65% for CIF;
.70% for MSIF; .75% for MAF; .80% for MIF, MGSF and CAF; and .85% for SMAF.
The total percentages shown in the table for MSIF and SMAF are after expense
reimbursement (the other Funds were eligible for expense reimbursement in
1994 but did not receive any). Each percentage shown in the parentheses is
what the total for 1994 would have been in the absence of expense
reimbursement: for MSIF, .71%; and for SMAF, .88%.
(6)The annuity is designed for retirement planning purposes. Surrenders prior
to the Income Date are not consistent with the long-term purposes of the
Contract and the applicable tax laws.
The examples should not be considered a representation of past or future
expenses and charges of the Sub-Accounts. Actual expenses may be greater or
less than those shown. Similarly, the assumed 5% annual rate of return is not
an estimate or a guarantee of future investment performance. See "Deductions"
in this prospectus, "How the Funds are Managed" in the prospectus for
SteinRoe Variable Investment Trust, and "Trust Management Organizations" and
"Expenses of the Funds" in the prospectus for Keyport Variable Investment
Trust.
SYNOPSIS
The Contract allows Contract Owners to allocate purchase payments to the
Variable Account only. The Variable Account is a separate investment account
maintained by Liberty Life. Contract Owners may receive annuity payments from
the Variable Account and/or Fixed Account. The Fixed Account is part of
Liberty Life's "general account", which consists of all Liberty Life's assets
except the Variable Account and the assets of other separate accounts
maintained by Liberty Life. The Contract Value and annuity payments made from
the Variable Account will fluctuate according to the investment performance
of the Eligible Funds chosen. If the Contract Owner selects a fixed annuity
payment option from the Fixed Account, annuity payments will be of a fixed
amount.
The Contract permits purchase payments to be made on a flexible purchase
payment basis. The minimum initial payment is $5,000. The minimum amount for
each subsequent payment is $1,000 or such lesser amounts as Liberty Life may
permit from time to time for certain types of contracts (currently $250).
(See "Purchase Payments and Applications" on Page 9.)
There are no deductions made from purchase payments for sales charges at the
time of purchase. A Contingent Deferred Sales Charge may be deducted in the
event of a total or partial surrender (see "Surrenders" on Page 18). The
Contingent Deferred Sales Charge is based on a graded table of charges. The
charge will not exceed 7% of that portion of the amount surrendered that
represents purchase payments made during the seven years immediately
preceding the request for surrender. (See "Deductions for Contingent Deferred
Sales Charge" on Page 14.) Liberty Life deducts a sales charge which is equal
on an annual basis to .15% of the average daily net asset values in the
Variable Account attributable to the Contracts. (See "Deductions for Daily
Sales Charge" on Page 13.)
Liberty Life deducts a Mortality and Expense Risk Charge, which is equal on
an annual basis to 1.25% of the average daily net asset values in the
Variable Account attributable to the Contracts. (See "Deductions for
Mortality and Expense Risk Charge" on Page 13.)
Liberty Life deducts an annual Contract Maintenance Charge (currently $30.00)
from the Contract Value for administrative expenses. Prior to the Income
Date, Liberty Life reserves the right to change this charge for future years.
(See "Deductions for Contract Maintenance Charge" on Page 13.)
Premium taxes will be charged against Contract Value. Currently such premium
taxes range from 0% to 5.0%. (See "Deductions for Premium Taxes" on Page 15.)
There are no federal income taxes on increases in the value of a Contract
until a distribution occurs, in the form of a lump sum payment, annuity
payments, or the making of a gift or assignment of the Contract. A federal
penalty tax (currently 10%) may also apply. (See "Tax Status" on Page 20.)
The Contract allows the Contract Owner to revoke the Contract within 10 days
of delivery (see "Right to Revoke" on Page 16). Since Liberty Life will
refund the Contract Value, the Contract Owner bears the investment risk
during the revocation period.
6
<PAGE>
CONDENSED FINANCIAL INFORMATION
<TABLE>
Accumulation Unit Values*
<CAPTION>
Accumulation
Unit Accumulation Number of
Value Unit Accumulation
Beginning of Value Units
Sub-Account Year** End of Year End of Year Year
- -------------------------------------- ---------------- ------------- -------------- ----
<S> <C> <C> <C> <C>
Cash Income Fund ("CIF") $12.036 $12.322 110,638 1994
11.883 12.036 19,344 1993
Colonial-Keyport U.S. Government Fund
("CKUSGF") 10.085 9.805 138,711 1994
10.000 10.085 118,390 1993
Mortgage Securities Income Fund
("MSIF") 14.529 14.104 141,459 1994
13.930 14.529 161,996 1993
Managed Income Fund ("MIF") 10.695 10.083 38,637 1994
10.000 10.695 33,145 1993
Colonial-Keyport Growth and Income
Fund ("CKGIF") 10.426 10.205 87,234 1994
10.000 10.426 34,520 1993
Managed Assets Fund ("MAF") 15.785 15.071 202,386 1994
14.644 15.785 106,655 1993
Colonial-Keyport Utilities Fund
("CKUF") 9.747 8.625 207,084 1994
10.000 9.747 218,876 1993
Strategic Managed Assets Fund ("SMAF") 16.578 16.345 105,595 1994
16.542 16.578 62,481 1993
Managed Growth Stock Fund ("MGSF") 18.158 16.770 60,134 1994
17.451 18.158 39,837 1993
Capital Appreciation Fund ("CAF") 21.236 21.192 149,229 1994
15.765 21.236 65,816 1993
Colonial-Keyport International Fund
for Growth ("CKIFG") 10.000 9.314 20,356 1994
</TABLE>
*Accumulation Unit values are rounded to the nearest tenth of a cent and
numbers of accumulation units are rounded to the nearest whole number.
**Except for MIF and the four Keyport Trust Funds, each initial unit value is
as of January 1, 1993, which precedes the February 15, 1993 date beginning of
operations of the Sub-Accounts. The $10.00 value for CKUSGF, CKGIF and CKUF
is as of the date the Fund Sub-Account first became available: July 13, 1993;
July 23, 1993; and July 13, 1993, respectively. The unit values for the MIF
and CKIFG Sub-Accounts were valued at $10.00 on February 1, 1993 and May 2,
1994, respectively.
The full financial statements for the Variable Account and Liberty Life are
in the Statement of Additional Information.
The Variable Account may from time to time advertise certain performance
information concerning its various Sub-Accounts.
This performance information is not intended to indicate either past
performance under an actual Contract or future performance.
The Sub-Accounts, other than CIF Sub-Account, may advertise total return
information for various periods of time. Total return
7
<PAGE>
performance information is based on the overall percentage change in value of
a hypothetical investment in the specific Sub-Account over a given period of
time.
Average annual total return information shows the average percentage change
in the value of an investment in the Sub-Account from the beginning date of
the measuring period to the end of that period. This standardized version of
average annual total return reflects all historical investment results, less
all charges and deductions applied against the Sub-Account and a Contract
(including any Contingent Deferred Sales Charge that would apply if a
Contract Owner surrendered the Contract at the end of each period indicated).
Average total return does not take into account any premium taxes and would
be lower if these taxes were included.
In order to calculate average annual total return, Liberty Life divides the
change in value of a Sub-Account under a Contract surrendered on a particular
date by a hypothetical $1,000 investment in the Sub-Account made by the
Contract Owner at the beginning of the period illustrated. The resulting
total rate for the period is then annualized to obtain the average annual
percentage change during the period. Annualization assumes that the
application of a single rate of return each year during the period will
produce the ending value, taking into account the effect of compounding.
The Sub-Accounts may present additional total return information computed on
a different basis.
First, the Sub-Accounts may present total return information computed on the
same basis as described above, except deductions will not include the
Contingent Deferred Sales Charge. This presentation assumes that the
investment in the Contract continues beyond the period when the Contingent
Deferred Sales Charge applies, consistent with the long-term investment and
retirement objectives of the Contract. The total return percentage will thus
be higher under this method than the standard method described above.
Second, the Sub-Accounts may present total return information calculated by
dividing the change in a Sub-Account's Accumulation Unit value over a
specified time period by the Accumulation Unit value of that Sub-Account at
the beginning of the period. This computation results in a 12-month change
rate or, for longer periods, a total rate for the period which Liberty Life
annualizes in order to obtain the average annual percentage change in the
Accumulation Unit value for that period. The change percentages do not take
into account the Contingent Deferred Sales Charge, the Contract Maintenance
Charge and premium taxes. The percentages would be lower if these charges
were included.
Third, the Sub-Accounts may present total return information for the SteinRoe
Trust's Funds for periods prior to the date the Variable Account began
operations. For such periods, any total return information for the
Sub-Accounts will be calculated based on the actual performance of the Funds
and on the assumption that the Sub-Accounts and the Contract were in
existence since the inception date of the Funds.
The CIF Sub-Account is a money market Sub-Account that may advertise yield
and effective yield information. The yield of the Sub-Account refers to the
income generated by an investment in the Sub-Account over a specifically
identified 7-day period. This income is annualized by assuming that the
amount of income generated by the investment during that week is generated
each week over a 52-week period and is shown as a percentage. The yield
reflects the deduction of all charges assessed against the Sub-Account and a
Contract but does not take into account Contingent Deferred Sales Charges and
premium taxes. The yield would be lower if these charges were included.
The effective yield of the Sub-Account is calculated in a similar manner but,
when annualizing such yield, income earned by the Sub-Account is assumed to
be reinvested. This compounding effect causes effective yield to be higher
than yield.
LIBERTY LIFE AND THE VARIABLE ACCOUNT
Liberty Life Assurance Company of Boston was incorporated on September 17,
1963 as a stock life insurance company. Its executive and administrative
offices are at 175 Berkeley Street, Boston, Massachusetts 02117.
Liberty Life writes individual life insurance on both a participating and a
non-participating basis and group life and health insurance and individual
and group annuity contracts on a non-participating basis. The variable
annuity contracts described in this prospectus are issued on a
non-participating basis. Liberty Life is licensed to do business in all
states and in the District of Columbia. However, the contracts described in
this prospectus are currently offered only in New York. Liberty Life has been
rated "A" by A.M. Best and Company, independent analysts of the insurance
industry. The Best's A rating is in the second highest rating category, which
also includes a lower rating of A-. Best's Ratings merely reflect Best's
opinion as to the relative financial strength of Liberty Life and Liberty
Life's ability to meet its contractual obligations to its policyholders. Even
though assets in the Variable Account are held separately from Liberty Life's
other assets, ratings of Liberty Life may still be relevant to Contract
Owners since not all of Liberty Life's contractual obligations relate to
payments based on those segregated assets (e.g., see "Death Provisions" on
pages 16-17 for Liberty Life's obligation after certain deaths to increase
the Contract Value if it is less than the guaranteed minimum death value
amount).
Liberty Life is a wholly-owned subsidiary of Liberty Mutual Insurance Company
and Liberty Mutual Fire Insurance Company. Liberty Mutual Insurance Company
is a multi-line insurance and financial services institution.
The Variable Account was established by Liberty Life pursuant to the
provisions of Massachusetts Law on September 13, 1989. The Variable Account
meets the definitions of "separate
8
<PAGE>
account" under the federal securities laws. The Variable Account was
registered with the Securities and Exchange Commission as a unit investment
trust under the Investment Company Act of 1940 on June 12, 1991. Such
registration does not involve supervision of the management of the Variable
Account or Liberty Life by the Securities and Exchange Commission, and the
Variable Account is subject to regulation as an investment company.
Obligations under the Contracts are the obligations of Liberty Life. Although
the assets of the Variable Account are the property of Liberty Life, these
assets are held separately from the other assets of Liberty Life and are not
chargeable with liabilities arising out of any other business Liberty Life
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 Liberty Life
may conduct. The Contract Value and the amount of variable annuity payments
will vary with the investment performance of the investments in the Variable
Account. Liberty Life does not guarantee the investment performance of the
Variable Account.
PURCHASE PAYMENTS AND APPLICATIONS
The initial purchase payment is due on the Issue Date. The minimum initial
purchase payment is $5,000. Additional purchase payments can be made at the
Contract Owner's option. Each subsequent purchase payment must be at least
$1,000 or such lesser amount as Liberty Life may permit from time to time for
certain types of contracts (currently $250). Liberty Life may reject any
purchase payment.
If the application for a Contract is in good order, Liberty Life will apply
the initial purchase payment to the Variable Account as instructed by the
Contract Owner and credit the Contract with Accumulation Units within two
business days of receipt. If the application for a Contract is not in good
order, Liberty Life will attempt to get it in good order within five business
days. If it is not complete at the end of this period, Liberty Life will
inform the applicant of the reason for the delay and that the purchase
payment will be returned immediately unless the applicant specifically
consents to Liberty Life keeping the purchase payment until the application
is complete. Once it is complete, the purchase payment will be applied within
two business days of its completion. Liberty Life has reserved the right to
reject any application.
Liberty Life confirms, in writing, to the Contract Owner the allocation of
all purchase payments and the re-allocation of values after any requested
transfer. Liberty Life must be notified immediately by the Contract Owner of
any processing error.
Liberty Life will permit others to act on behalf of an applicant in two
instances. First, Liberty Life will accept an application for a Contract that
contains a signature signed under a power of attorney if a copy of that power
of attorney is submitted with the application. Second, Liberty Life will
issue a Contract that is not replacing an existing life insurance or annuity
policy without having previously received a signed application from the
applicant. Certain dealers will inform Liberty Life of an applicant's answers
to the questions in the application by telephone or by order ticket and cause
the initial purchase payment to be paid to Liberty Life. If the information
is in good order, Liberty Life will issue the Contract with a copy of an
application completed with that information. The Contract will be delivered
to the Contract Owner with a letter from Liberty Life that will give the
Contract Owner an opportunity to respond to Liberty Life if any of the
application information is incorrect. Alternatively, Liberty Life's letter
may request the Contract Owner to confirm the correctness of the information
by signing either a copy of the application or a Contract delivery receipt
that ratifies the application in all respects (in either case, a copy of the
signed document would be returned to Liberty Life for its permanent records).
All purchases are confirmed, in writing, to the applicant. Liberty Life's
liability under a Contract extends only to amounts so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
Purchase payments will be invested in one or more of the Eligible Fund
Sub-Accounts designated as permissible investments in accordance with the
selection made by the Contract Owner in the application. Any selection must
specify the percentage of the purchase payment that is allocated to each Sub-
Account. The percentage for each Sub-Account, if not zero, must be at least
10% and must be a whole number. A Contract Owner may change the allocation
percentages without fee, penalty or other charge. Allocation changes must be
made by Written Request unless the Contract Owner has by Written Request
authorized Liberty Life to accept telephone allocation instructions from the
Contract Owner or from a person acting for the Contract Owner as an
attorney-in-fact under a power of attorney. By authorizing Liberty Life to
accept telephone changes, a Contract Owner agrees to accept and be bound by
the conditions and procedures established by Liberty Life from time to time.
The current conditions and procedures are described in Appendix A and
Contract Owners authorizing telephone allocation instructions will be
notified, in advance, of any changes.
The Variable Account is segmented into Sub-Accounts. Each Sub-Account invests
in the shares of one of the Eligible Funds and such shares are purchased at
net asset value. Eligible Funds and Sub-Accounts may be added or withdrawn as
permitted by applicable law. The Sub-Accounts of the Variable Account and the
corresponding Eligible Funds currently are as follows:
9
<PAGE>
<TABLE>
<CAPTION>
Eligible Funds of SteinRoe Variable Investment Trust Sub-Accounts
- ---------------------------------------------------------- ---------------------
<S> <C>
Cash Income Fund ("CIF") CIF Sub-Account
Mortgage Securities Income Fund ("MSIF") MSIF Sub-Account
Managed Income Fund ("MIF") MIF Sub-Account*
Managed Assets Fund ("MAF") MAF Sub-Account
Strategic Managed Assets Fund ("SMAF") SMAF Sub-Account*
Managed Growth Stock Fund ("MGSF") MGSF Sub-Account
Capital Appreciation Fund ("CAF") CAF Sub-Account
Eligible Funds of Keyport Variable Investment Trust Sub-Accounts
- ---------------------------------------------------------- -------------------
Colonial-Keyport U.S. Government Fund ("CKUSGF") CKUSGF Sub-Account*
Colonial-Keyport Growth and Income Fund ("CKGIF") CKGIF Sub-Account
Colonial-Keyport Utilities Fund ("CKUF") CKUF Sub-Account
Colonial-Keyport International Fund for Growth ("CKIFG") CKIFG Sub-Account
</TABLE>
*The MIF, SMAF and CKUSGF Sub-Accounts are not available to receive either
allocations of new purchase payments or transfers of Contract Value.
Eligible Funds
The Eligible Funds which are the permissible investments of the Variable
Account are the separate funds of SteinRoe Variable Investment Trust, the
separate funds of Keyport Variable Investment Trust, and any other mutual
funds with which Liberty Life and the Variable Account may enter into a
participation agreement for the purpose of making such mutual funds available
as Eligible Funds under certain Contracts.
Stein Roe & Farnham Incorporated ("Stein Roe") is the investment adviser for
each Eligible Fund of SteinRoe Trust. In 1986, Stein Roe was organized and
succeeded to the business of Stein Roe & Farnham, a partnership. Stein Roe is
an affiliate of Liberty Life. Stein Roe and its predecessor have provided
investment advisory and administrative services since 1932.
Keyport Advisory Services Corp. ("KASC"), an affiliate of Liberty Life, is
the manager for Keyport Trust and its Eligible Funds. Colonial Management
Associates, Inc. ("Colonial"), an affiliate of Liberty Life, serves as
sub-adviser for the Eligible Funds. Colonial has provided investment advisory
services since 1931. The portfolio of the Colonial-Keyport International Fund
for Growth is managed by Gartmore Capital Management Ltd.
The investment objectives of the Eligible Funds are briefly described below.
More detailed information, including investor considerations related to the
risks of investing in a particular Eligible Fund, may be found in the current
prospectus for that Fund. An investor should read that prospectus carefully
before selecting a fund for investing. The prospectus is available, at no
charge, from a salesperson or by writing the Distributor, Keyport Financial
Services Corp. at 125 High Street, Boston, MA 02110 or by calling (800)
437-4466.
10
<PAGE>
<TABLE>
<CAPTION>
Eligible Funds of SteinRoe
Variable Investment Trust and
Variable Account Sub-Accounts Investment Objective
- ---------------------------------- --------------------------------------------------------------------------------
<S> <C>
Cash Income Fund High current income from short-term money market instruments while emphasizing
(CIF Sub-Account) preservation of capital and maintaining excellent liquidity.
Mortgage Securities Income Fund Highest possible level of current income consistent with safety of principal and
(MSIF Sub-Account) maintenance of liquidity through investment primarily in mortgage-backed securities.
Managed Income Fund
(MIF Sub-Account)* High current income with capital preservation and appreciation as secondary objectives.
Managed Assets Fund
(MAF Sub-Account) High total investment return through investment in a changing mix of securities.
Strategic Managed Assets Fund Maximum total investment return through aggressive investment in a changing mix
(SMAF Sub-Account)* of securities.
Managed Growth Stock Fund
(MGSF Sub-Account) Long-term growth of capital through investment primarily in common stocks.
Capital Appreciation Fund Capital growth by investing primarily in common stocks, convertible securities and
(CAF Sub-Account) other securities selected for prospective capital growth.
* MIF and SMAF Sub-Accounts are not available to receive either allocations of new purchase payments or transfers of Contract
Value.
Eligible Funds of Keyport
Variable Investment Trust and
Variable Account Sub-Accounts Investment Objective
- ---------------------------------- ------------------------------------------------------------------------------
Colonial-Keyport U.S. Government Fund A high level of current income, consistent with the preservation of capital, by
(CKUSGF Sub-Account)* investing primarily in U.S. Government securities.
Colonial-Keyport Growth and Income Primarily income and long-term capital growth and, secondarily, preservation of
Fund (CKGIF Sub-Account) capital.
Colonial-Keyport Utilities Fund (CKUF
Sub-Account) Current income and, secondarily, long-term capital growth.
Colonial-Keyport International Fund Long-term capital growth, by investing primarily in non-U.S. equity securities.
for Growth (CKIFG Sub- Account) The Fund is non-diversified and may invest more than 5% of its total assets in the
securities of a single issuer, thereby increasing the risk of loss compared to a
diversified fund.
* CKUSGF Sub-Account is not available to receive either allocations of new purchase payments or transfers of Contract Value.
</TABLE>
*
There is no assurance that the Eligible Funds will achieve their stated
objectives.
SteinRoe Variable Investment Trust is a funding vehicle for variable annuity
contracts offered by the separate accounts of Liberty Life and of insurance
companies affiliated and unaffiliated with Liberty Life. Keyport Variable
Investment Trust is a funding vehicle for variable annuity contracts offered
by the separate accounts of Liberty Life and of insurance companies
affiliated with Liberty Life. Both Trusts also are funding vehicles for
variable life insurance policies offered by the separate accounts of
insurance companies affiliated with Liberty Life. The risks involved in this
"mixed and shared funding" are disclosed in the Trusts' prospectuses under
the caption "The Trust".
Dollar Cost Averaging
Liberty Life offers a dollar cost averaging program that Contract Owners may
participate in by Written Request. The program periodically transfers
Accumulation Units from the CIF Sub-Account to other Sub-Accounts selected
by the Contract Owner. The program allows a Contract Owner to invest in
non-"money market" Sub-Accounts over time rather than having to invest in
those Sub-Accounts all at once. The program is available for initial and
subsequent purchase payments and for Contract Value transferred into the CIF
Sub-Account. Under the program, Liberty Life makes automatic transfers on a
periodic basis out of the Sub-Account into one or more of the other Sub-
Accounts (Liberty Life reserves the right to limit the number of Sub-
Accounts the Contract Owner can choose but there are currently no limits). A
transfer under the program will not be counted as a transfer for the purposes
of the limitations in "Transfer of Contract Value" below. The automatic
transfer program does not guarantee a profit nor does it protect against loss
in declining markets. The program is described in detail in Appendix B on
Page 26. Appendix B also describes the prior availability of the CKUSGF
Sub-Account for transfers out of it.
11
<PAGE>
Transfer of Contract Value
Contract Owners may transfer Contract Value from one Sub-Account to another
Sub-Account.
The Contract allows Liberty Life to charge a transfer fee and to limit the
number of transfers that can be made in a specified time period. Contract
Owners should be aware that transfer limitations may prevent an Owner from
making a transfer on the date he or she wants to, with the result that the
Owner's future Contract Value may be lower than it would have been had the
transfer been made on the desired date.
Currently, Liberty Life is not charging a transfer fee but it is limiting
transfers to 12 per calendar year except as follows. For transfers under
different Contracts that are being requested under powers of attorney with a
common attorney-in-fact or that are, in Liberty Life's determination, based
on the recommendation of a common investment adviser or broker/dealer, the
transfer limitation is instead one transfer every 30 days.
Regardless of which transfer limitation is applicable, Liberty Life is also
limiting each transfer to a maximum of $500,000. All transfers requested for
a Contract on the same day will be treated as a single transfer and the total
combined transfer amount will be subject to the $500,000 limitation. If the
$500,000 limitation is exceeded, no amount of the transfer will be executed
by Liberty Life.
In applying the limitation of 12 transfers in a year of up to $500,000
apiece, Liberty Life may treat as one transfer all transfers requested by a
Contract Owner for multiple Contracts he or she owns. If the $500,000
limitation is exceeded for multiple transfers requested on the same day that
are treated as a single transfer, no amount of the transfer will be executed
by Liberty Life.
In applying the limitation of one $500,000 transfer every 30 days, Liberty
Life will treat as one transfer all transfers requested under different
Contracts that are being requested under powers of attorney with a common
attorney-in-fact or that are, in Liberty Life's determination, based on the
recommendation of a common investment adviser or broker/dealer. If the
$500,000 limitation is exceeded for multiple transfers requested on the same
day that are treated as a single transfer, no amount of the transfer will be
executed by Liberty Life. If a transfer is executed under one Contract and,
within the next 30 days, a transfer request for another Contract is
determined by Liberty Life to be related to the executed transfer under this
paragraph's rules, the transfer request will not be executed by Liberty Life
(in order for it to be executed, it would need to be requested again after
the 30 day period and it, along with any other transfer requests that are
collectively treated as a single transfer, would need to total less than
$500,000).
Liberty Life's interest in applying these limitations is to protect the
interests of both Contract Owners who are not engaging in significant
transfer activity and Contract Owners who are engaging in such activity.
Liberty Life has determined that the actions of Contract Owners engaging in
significant transfer activity among Sub-Accounts may cause an adverse affect
on the performance of the underlying Fund for the Sub-Account involved. The
movement of Sub-Account values from one Sub-Account to another may prevent
the appropriate underlying Fund from taking advantage of investment
opportunities because it must maintain a liquid position in order to handle
redemptions. Such movement may also cause a substantial increase in Fund
transaction costs which must be indirectly borne by Contract Owners.
Contract Owners will be notified, in advance, of the imposition of any
transfer fee or of a change in the limitation on the number of transfers. Any
fee will not exceed $25 per transfer and the fee will not exceed the cost of
effecting a transfer.
Transfers must be made by Written Request unless the Contract Owner has by
Written Request authorized Liberty Life to accept telephone transfer requests
from the Contract Owner or from a person acting for the Contract Owner as an
attorney-in-fact under a power of attorney. By authorizing Liberty Life to
accept telephone transfer instructions, a Contract Owner agrees to accept and
be bound by the conditions and procedures established by Liberty Life from
time to time. The current conditions and procedures are in Appendix A and
Contract Owners authorizing telephone transfers will be notified, in advance,
of any changes. Written transfer requests may be made by a person acting for
the Contract Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Liberty Life's Service Office before the close
of regular trading on the New York Stock Exchange (currently 4:00 PM Eastern
Time) will be initiated at the close of business that day. Any requests
received later will be initiated at the close of the next business day. Each
request from a Contract Owner to transfer value will be executed by both
redeeming and acquiring Accumulation Units on the day Liberty Life's Service
Office initiates the transfer.
If 100% of any Sub-Account's value is transferred and the allocation formula
for purchase payments includes that Sub-Account, then the allocation formula
for future purchase payments will automatically change unless the Contract
Owner instructs otherwise. For example, if the allocation formula is 50% to
Sub-Account A and 50% to Sub-Account B and all of Sub-Account A's value is
transferred to Sub-Account B, the allocation formula will change to 100% to
Sub-Account B unless the Contract Owner instructs otherwise.
12
<PAGE>
Substitution of Eligible Funds and Other Variable Account Changes
If the shares of any of the Eligible Funds should no longer be available for
investment by the Variable Account or if in the judgment of Liberty Life's
management further investment in such fund shares should become inappropriate
in view of the purpose of the Contract, Liberty Life may add or substitute
shares of another Eligible Fund or of another mutual fund for Eligible Fund
shares already purchased under the Contract. No substitution of Fund shares
in any Sub-Account may take place without prior approval of the Securities
and Exchange Commission and notice to Contract Owners, to the extent required
by the Investment Company Act of 1940.
Liberty Life has also reserved the right, subject to compliance with the law
as currently applicable or subsequently changed: (a) to operate the Variable
Account in any form permitted under the Investment Company Act of 1940 or in
any other form permitted by law; (b) to take any action necessary to comply
with or obtain and continue any exemptions from the Investment Company Act of
1940 or to comply with any other applicable law; (c) to transfer any assets
in any Sub-Account to another Sub-Account, or to one or more separate
investment accounts, or to Liberty Life's general account; or to add, combine
or remove Sub-Accounts in the Variable Account; and (d) to change the way
Liberty Life assesses charges, so long as the aggregate amount is not
increased beyond that which may be charged to the Variable Account and the
Eligible Funds in connection with the Contracts.
DEDUCTIONS
Deductions for Contract Maintenance Charge
Liberty Life has responsibility for providing all administration of the
Contracts and the Variable Account. Liberty Life has sub-contracted to an
affiliate the actual day to day administration of the Contract, owner
accounting and administration for a fee. This administration includes, but is
not limited to, preparation of the Contracts, maintenance of Contract Owners'
records, and all accounting, valuation, regulatory and reporting
requirements. Liberty Life has contracted with Keyport Life Insurance
Company, an affiliate, to provide all administration for the Contracts, as
its agent. Liberty Life makes a Contract Maintenance Charge for such
services. At the present time the Contract Maintenance Charge is $30.00 per
Contract Year. PRIOR TO THE INCOME DATE THE CONTRACT MAINTENANCE CHARGE IS
NOT GUARANTEED AND MAY BE CHANGED BY LIBERTY LIFE. The amount of the charge
will not exceed $100 per year and it will not exceed the costs of
administering the Contract.
Prior to the Income Date, the full amount of the charge will be deducted
from the Contract Value on each Contract Anniversary and on the date of any
total surrender not falling on the Contract Anniversary. On the Income Date,
a pro-rata portion of the charge due on the next Contract Anniversary will be
deducted from the Contract Value. This pro-rata charge covers the period from
the prior Contract Anniversary to the Income Date. For example, if the Income
Date occurs 73 days after that prior anniversary, then one-fifth (i.e., 73
days/365 days) of the annual charge would be deducted on the Income Date. The
charge will be deducted from each Sub-Account in the proportion that the
value of each bears to the Contract Value.
Once annuity payments begin on the Income Date or once they begin after
surrender benefits are applied under a settlement option, the yearly cost of
the Contract Maintenance Charge for a payee's annuity will be the same as the
yearly amount in effect immediately before the annuity payments begin.
Liberty Life may not later change the amount of the Contract Maintenance
Charge deducted from the annuity payments. The charge will be deducted on a
pro-rata basis from each annuity payment.
For example, if annuity payments are monthly, then one-twelfth of the
annual charge will be deducted from each payment.
Deductions for Mortality and Expense Risk Charge
Although variable annuity payments made to Annuitants will vary in
accordance with the investment performance of the investments of the Variable
Account, they will not be affected by the mortality experience (death rate)
of persons receiving such payments or of the general population. Liberty Life
guarantees certain total surrenders after the death of the Annuitant or
Contract Owner will not result in payments that are reduced by a Contingent
Deferred Sales Charge or in payments that are lower than the amount of
purchase payments less any prior partial surrenders. Liberty Life assumes an
expense risk since the
Contract Maintenance Charge after the Income Date will stay the same and not
be affected by variations in expenses.
To compensate it for assuming these mortality and expense risks, Liberty
Life deducts from each Sub-Account (other than the CIF-DCA Sub-Account from
which no deduction is made) for each Valuation Period, a Mortality and
Expense Risk Charge equal on an annual basis to 1.25% of the average daily
net asset value of the Sub-Account. The charge is deducted during both the
accumulation and annuity periods (i.e., both before and after the Income
Date).
Deductions for Daily Sales Charge
Liberty Life also deducts from each Sub-Account each Valuation Period a
sales charge equal on an annual basis to 0.15% of the average daily net asset
value of the Sub-Account. This charge compensates Liberty Life for certain
sales distribution expenses
13
<PAGE>
relating to the Contract. This charge will not be deducted from Sub-Account
values attributable to Contracts that have reached the maximum cumulative
sales charge limit defined in the next section. The charge is also not
deducted from Sub-Account values attributable to Annuity Units.
Deductions for Contingent Deferred Sales Charge
A sales charge is not deducted from the Contract's purchase payments when
initially received. However, a Contingent Deferred Sales Charge may be
deducted upon a surrender.
In order to determine whether a Contingent Deferred Sales Charge will be due
upon a partial or total surrender, Liberty Life maintains a separate set of
records. These records identify the date and amount of each purchase payment
made to the Contract and the Contract Value over time.
A surrender in any Contract Year will be free of Contingent Deferred Sales
Charge to the extent the surrender amount does not exceed the Contract's
increase in value at that time. The increase in value is equal to: the
Contract Value at the time of surrender; less that portion of purchase
payments that are still remaining at the time of surrender.
After the first Contract Year, Liberty Life guarantees that a minimum amount
of Contract Value will be free of Contingent Deferred Sales Charge each year.
This amount is equal to 10% of the Contract Value at the beginning of each
Contract Year (i.e., on the Contract Anniversary). This 10% amount will be
reduced by the amount of each surrender in a year that represents the
Contract's increase in value. The portion of any surrender in excess of this
increase in value but not in excess of the remaining 10% amount will be free
of Contingent Deferred Sales Charge. This portion will be deducted from the
purchase payments in chronological order from the oldest to the most recent
until the amount is fully deducted. Any amount so deducted will not be
subject to a charge.
The following additional amounts will be deducted from the purchase payments
in the same chronological order: the amount of any surrender in the first
Contract Year in excess of the Contract's increase in value at the time of
surrender; and the amount of any surrender in any later Contract Year in
excess of the Contract's increase in value at the time of surrender (or in
excess of the 10% limit if it applies). The Contingent Deferred Sales Charge
for each purchase payment from which a deduction is made will be equal to (a)
multiplied by (b), where:
(a) is the amount so deducted; and
(b) is the applicable percentage for the number of years that have elapsed from
the date of that payment to the date of surrender. Years are measured from
the month and day of payment to the same month and day in each subsequent
calendar year. The percentages applicable to each purchase payment during
the seven years after the date of its payment are: 7% during Year 1; 6%
during Year 2; 5% during Year 3; 4% during Year 4; 3% during Year 5; 2%
during Year 6; 1% during Year 7; and 0% thereafter.
The applicable Contingent Deferred Sales Charges for each purchase payment
are then totalled. The lesser of this total amount and the Contract's maximum
cumulative sales charge will be deducted from the Contract Value in the same
manner as the surrender amount. The maximum cumulative sales charge is equal
to (a) less (b), where (a) is 8.5% of the total purchase payments made to the
Contract and (b) is the sum of all prior Contingent Deferred Sales Charge
deductions from the Contract Value and all prior Variable Account sales
charges applicable to the Contract from the 0.15% sales charge factor. After
each surrender, Liberty Life records will be adjusted to reflect any
deductions made from the applicable purchase payments.
Example: Two purchase payments were made one year apart for $5,000 and
$7,000. The Contract Value has grown to an assumed $13,200 when the Owner
decides to withdraw $8,000. The Contract Value at the beginning of the
Contract Year of surrender was $13,000. The Contingent Deferred Sales Charge
percentages at the time of surrender are an assumed 5% for the $5,000 payment
and 6% for the $7,000 payment. The portion of the surrender representing the
Contract's increase in value ($13,200 less $12,000, or $1,200) would not be
subject to charges. Since $1,200 is less than the amount guaranteed not to
have charges (10% of $13,000, or $1,300) an additional $100 would not be
subject to charges. This $100 would be deducted from the oldest purchase
payment, reducing it from $5,000 to $4,900. The $1,200 increase in value plus
the additional $100 leaves $6,700 ($8,000 - 1,200 - 100) to be deducted. This
$6,700 would be deducted from the $4,900 of the first payment still left and
$1,800 of the second payment. The total Contingent Deferred Sales Charge
would be $4,900 multiplied by the applicable 5% and $1,800 times the
applicable 6%, or a total of $353. The sales charge records would now reflect
$0 for the 1st payment and $5,200 for the 2nd payment. The $8,000 requested
plus the $353 charge would be deducted from Contract Values under the rules
specified in the "Surrenders" section on Page 18.
The Contingent Deferred Sales Charge, when it is applicable, will be used to
cover the expenses of selling the Contract, including compensation paid to
selling dealers and the cost of sales literature. Any expenses not covered by
the Charge will be paid from Liberty Life's general account, which may
include monies deducted from the Variable Account for the Mortality and
Expense Risk Charge. A dealer selling the Contract can receive up to 6% of
purchase payments.
Liberty Life may establish a program to allow a Contract Owner to request
systematic partial surrenders in the first Contract Year up to a total of 10%
of the initial purchase payment to the Contract. Under such a program,
Liberty Life may waive the Contingent Deferred Sales Charge on the amount of
any partial surrender that is in excess of the Contract's increase in value
(defined in the third paragraph of this section) at the time the surrender
occurs. Any such excess surrender amount will not be deducted from the
initial purchase payment under the procedure described in the fourth
paragraph of this section. This means that the waiver of Contingent Deferred
Sales Charge is not a permanent waiver and the Charge can potentially be
collected by Liberty Life in the event the Contract Owner later makes a
non-systematic partial or total surrender.
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Deductions for Transfers of Contract Value
The Contract allows Liberty Life to charge a transfer fee. Currently no fee
is being charged. Contract Owners will be notified, in advance, of the
imposition of any fee. Any fee will not exceed $25 per transfer and the fee
will not exceed the cost of effecting a transfer.
Deductions for Premium Taxes
Liberty Life deducts the amount of any premium taxes levied by any state or
governmental entity when paid unless Liberty Life elects to defer such
deduction. Such premium taxes may depend, among other things, on the type of
Contract (Qualified or Non-Qualified), on the state of residence of the
Contract Owner, the state of residence of the Annuitant, the status of
Liberty Life within such states, and the insurance tax laws of such states.
For New York Contracts, the current premium tax rate is 0%.
Deductions for Income Taxes
Liberty Life will deduct from any amount payable under the Contract any
income taxes that a governmental authority requires Liberty Life to withhold
with respect to that amount. See "Income Tax Withholding" on Page 21 and
"Tax-Sheltered Annuities" on Page 22.
Total Expenses
The Variable Account's total expenses in relation to the Contract will be
the Contract Maintenance Charge, the Mortality and Expense Risk Charge, and
the Daily Sales Charge.
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and therefore the deductions from and expenses paid out of
the assets of the Eligible Funds. These deductions and expenses are described in
the Eligible Fund prospectus.
THE CONTRACTS
Contract Value
The Contract Value for a Contract is the sum of the value of each Sub-
Account to which values are allocated under a Contract. The value of each
Sub-Account is determined at any time by multiplying the number of
Accumulation Units attributable to that Sub-Account by the Accumulation Unit
value for that Sub-Account at the time of determination. The Accumulation
Unit value is an accounting unit of measure used to determine the change in
an Accumulation Unit's value from Valuation Period to Valuation Period.
Each purchase payment that is made results in additional Accumulation Units
being credited to the Contract and the appropriate Sub-Account thereunder.
The number of additional units for any Sub-Account will equal the amount
allocated to that Sub-Account divided by the Accumulation Unit value for that
Sub-Account at the time of investment.
Valuation Periods
The Variable Account is valued each Valuation Period using the net asset
value of the Eligible Fund shares. A Valuation Period is the period
commencing at the close of regular trading on the New York Stock Exchange on
each Valuation Date and ending at the close of regular trading for the next
succeeding Valuation Date. A Valuation Date is each day that the New York
Stock Exchange is open for business. The New York Stock Exchange is currently
closed on weekends, New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net Investment Factor
Contract Value will fluctuate in accordance with the investment results of
the underlying Eligible Funds. In order to determine how these fluctuations
affect value, Liberty Life utilizes an Accumulation Unit value. Each
Sub-Account has its own Accumulation Units and value per Unit. The Unit value
applicable during any Valuation Period is determined at the end of that
period.
On January 1, 1993, Liberty Life valued each Accumulation Unit as follows:
CIF--$11.882756; CIF-DCA--$10.715433; MSIF-- $13.930256; MAF--$14.643832;
SMAF--$16.542333; MGSF-- $17.450604 and CAF--$15.765195. The Accumulation
Units for MIF, CKUSGF, CKUF and CKGIF were valued at $10.000000 when Liberty
Life first purchased these Eligible Fund shares on behalf of the Variable
Account. 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. Liberty Life calculates a net investment factor
for each Sub-Account by dividing (a) by (b) and then subtracting (c) (i.e.,
(a/b) - c), where:
(a) is equal to:
(i) the net asset value per share of the Eligible Fund at the end of the
Valuation Period; plus
(ii) the per share amount of any distribution made by the Eligible Fund if
the "ex-dividend" date occurs during that same Valuation Period.
(b) is the net asset value per share of the Eligible Fund at the end of the
prior Valuation Period.
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(c) is equal to:
(i) the Valuation Period equivalent of the 1.25% per year Mortality and
Expense Risk Charge; plus
(ii) the Valuation Period equivalent of the .15% per year Daily Sales
Charge; plus
(iii) a charge factor, if any, for any tax provision established by
Liberty Life as a result of the operations of that Sub-Account.
If a Contract ever reaches the maximum cumulative sales charge limit defined
in "Deductions for Contingent Deferred Sales Charge", Unit values without
(c)(ii) above will be used thereafter.
Modification of the Contract
Only Liberty Life's President or Secretary may agree to alter the Contract
or waive any of its terms. Any changes must be made in writing and with the
Contract Owner's consent, except as may be required by applicable law.
Right to Revoke
The Contract Owner may return the Contract within 10 days after he or she
receives it by delivering or mailing it to Liberty Life's Service Office. The
return of the Contract by mail will be effective when the postmark is affixed
to a properly addressed and postage-prepaid envelope. The returned Contract
will be treated as if Liberty Life never issued it and Liberty Life will
refund the Contract Value.
DEATH PROVISIONS FOR NON-QUALIFIED CONTRACTS
Death of Primary Owner, Joint Owner or Annuitant
These provisions apply if, before the Income Date while the Contract is In
Force, the primary Owner, any joint Owner, or the Annuitant dies. The
Designated Beneficiary will control the Contract after such death.
The Contract Value will be increased, as provided below, if it is less than
the guaranteed minimum death value amount ("GMDV"). The GMDV is the greater
of (a) the sum of all purchase payments made through the date of death, less
all partial surrenders made through the date of death and (b) the Contract
Value on the seventh Contract Anniversary, plus any purchase payments made
from that Anniversary until the date of death, less any partial surrenders
made from that Anniversary until the date of death.
Beginning the date the New York Insurance Department has approved Liberty
Life's change to the death provisions (you or your agent should call
800-437-4466 to see if the change has been approved), the GMDV will change
for any Contract issued before such date but on or after January 15, 1993.
The GMDV for such a Contract is the greatest of (a) above, (b) above, and a
new (c):
(c) Liberty Life will compute an "Anniversary Value" for each Contract
Anniversary (if any) before the 81st birthday of the covered person and
Liberty Life will use the greatest of such "Anniversary Values." The covered
person is the Primary Owner or, if there is a non-natural Owner such as a
trust, the Annuitant is the covered person. The "Anniversary Value" for each
applicable Contract Anniversary initially equals the Contract Value on that
Anniversary. It is then increased by any purchase payments made from that
Anniversary until the date of death, and decreased by the following amount at
the time of each partial surrender made from that Anniversary until the date
of death: the partial surrender amount divided by the Contract Value right
before the surrender, multiplied by the "Anniversary Value" right before the
surrender.
For any Contract issued on or after the date the New York Insurance
Department has approved Liberty Life's change to the death provisions (you or
your agent should call 800-437-4466 to see if the change has been approved),
the GMDV is the greater of (a) above and (c) above.
When Liberty Life receives due proof of death, Liberty Life will compare, as
of the date of death, the Contract Value to the GMDV. If the Contract Value
was less than the GMDV, Liberty Life will increase the current Contract Value
by the amount of the difference. Note that while the amount of the difference
is determined as of the date of death, that amount is not added to the
Contract Value until Liberty Life receives due proof of death. The amount to
be credited will be allocated to the Variable Account based on the purchase
payment allocation selection that is in effect when Liberty Life receives due
proof of death. Whether or not the Contract Value is increased because of
this minimum death provision, the Designated Beneficiary may surrender the
Contract within 90 days of the date of death for the Contract Value (i.e.,
any applicable Contingent Deferred Sales Charge will be waived). For a
surrender after 90 days, the Surrender Value is payable instead. If the
Contract is not surrendered, it will stay in force for the time period
specified below.
If the decedent's surviving spouse (if any) is the sole Designated
Beneficiary, the surviving spouse will automatically become the new sole
primary owner as of the Annuitant's date of the death. And, if the Annuitant
is the decedent, the new Annuitant will be any living contingent Annuitant,
otherwise the surviving spouse. The Contract can stay in force until another
death occurs (i.e., until the death of the Annuitant, primary Owner or
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joint Owner). Except for this paragraph, all of "Death Provisions" will apply
to that subsequent death.
In all other cases, the Contract can stay in force up to five years from the
date of death. During this period, the Designated Beneficiary may exercise
all ownership rights, including the right to make transfers or partial
surrenders or the right to totally surrender the Contract for its Surrender
Value. If the Contract is still in force at the end of the five-year period,
Liberty Life will automatically end it then by paying the Contract Value to
the Designated Beneficiary. If the Designated Beneficiary is not alive then,
Liberty Life will pay any person(s) named by the Designated Beneficiary in
a Written Request; otherwise the Designated Beneficiary's estate.
Payment of Benefits
Instead of receiving a lump sum, the Owner or any Designated Beneficiary may
direct by Written Request that Liberty Life pay any benefit of $2,000 or more
under an annuity payment option that meets the following: (a) the first
payment to the Designated Beneficiary must be made no later than one year
after the date of death; (b) payments must be made over the life of the
Designated Beneficiary or over a period not extending beyond that person's
life expectancy; and (c) any payment option that provides for payments to
continue after the death of the Designated Beneficiary will not allow the
successor payee to extend the period of time over which the remaining
payments are to be made.
DEATH PROVISIONS FOR QUALIFIED CONTRACTS
Death of Annuitant
If the Annuitant dies before the Income Date while the Contract is In Force,
the Designated Beneficiary will control the Contract after such a death. The
Contract Value will be increased, as provided below, if it is less than the
guaranteed minimum death value amount ("GMDV"). The GMDV is the greater of
(a) the sum of all purchase payments made through the date of death, less all
partial surrenders made through the date of death and (b) the Contract Value
on the seventh Contract Anniversary, plus any purchase payments made from
that Anniversary until the date of death, less any partial surrenders made
from that Anniversary until the date of death.
Beginning the date the New York Insurance Department has approved Liberty
Life's change to the death provisions (you or your agent should call
800-437-4466 to see if the change has been approved), the GMDV will change
for any Contract issued before such date but on or after January 15, 1993.
The GMDV for such a Contract is the greatest of (a) above, (b) above, and a
new (c):
(c) Liberty Life will compute an "Anniversary Value" for each Contract
Anniversary (if any) before the 81st birthday of the Annuitant and Liberty
Life will use the greatest of such "Anniversary Values." The "Anniversary
Value" for each applicable Contract Anniversary initially equals the
Contract Value on that Anniversary. It is then increased by any purchase
payments made from that Anniversary until the date of death, and decreased
by the following amount at the time of each partial surrender made from that
Anniversary until the date of death: the partial surrender amount divided by
the Contract Value right before the surrender, multiplied by the
"Anniversary Value" right before the surrender.
For any Contract issued on or after the date the New York Insurance
Department has approved Liberty Life's change to the death provisions (you or
your agent should call 800-437-4466 to see if the change has been approved),
the GMDV is the greater of (a) above and (c) above as stated above.
When Liberty Life receives due proof of the Annuitant's death, Liberty Life
will compare, as of the date of death, the Contract Value to the GMDV. If the
Contract Value was less than the GMDV, Liberty Life will increase the current
Contract Value by the amount of the difference. Note that while the amount of
the difference is determined as of the date of death, that amount is not
added to the Contract Value until Liberty Life receives due proof of death.
The amount to be credited will be allocated to the Variable Account based on
the purchase payment allocation selection that is in effect when Liberty Life
receives due proof of death. Whether or not the Contract Value is increased
because of this minimum death provision, the Designated Beneficiary may
surrender the Contract within 90 days of the date of the Annuitant's death
for the Contract Value (i.e., any applicable Contingent Deferred Sales Charge
will be waived). For a surrender after 90 days, the Surrender Value is
payable instead.
If the Contract is not surrendered, it can stay in force for the time period
permitted by the Internal Revenue Code provisions applicable to the
particular Qualified Plan. During this period, the Designated Beneficiary may
exercise all ownership rights, including the right to make transfers or
partial surrenders or the right to totally surrender the Contract for its
Surrender Value. If the Contract is still in force at the end of the period,
Liberty Life will automatically end it then by paying the Contract Value to
the Designated Beneficiary. If the Designated Beneficiary is not alive then,
Liberty Life will pay any person(s) named by the Designated Beneficiary in a
Written Request; otherwise the Designated Beneficiary's estate.
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Payment of Benefits
Instead of receiving a lump sum, the Owner or any Designated Beneficiary may
direct by Written Request that Liberty Life pay any benefit of $2,000 or more
under an annuity payment option that meets the following: (a) the first
payment to the Designated Beneficiary must be made no later than one year
after the date of death; (b) payments must be made over the life of the
Designated Beneficiary or over a period not extending beyond that person's
life expectancy; and (c) any payment option that provides for payments to
continue after the death of the Designated Beneficiary will not allow the
successor payee to extend the period of time over which the remaining
payments are to be made.
OWNERSHIP
The Contract Owner shall be the person designated in the application. The
Contract Owner may exercise all the rights of the Contract.
Joint Owners are permitted but not contingent Owners.
The Contract Owner may by Written Request change the Owner, primary
beneficiary, contingent beneficiary or contingent annuitant. An
irrevocably-named person may be changed only with the written consent of such
person.
Because a change of Owner by means of a gift (i.e., a transfer without full
and adequate consideration) may be a taxable event, a Contract Owner should
consult a competent tax adviser as to the tax consequences resulting from
such a transfer.
Any Qualified Contract may have limitations on transfer of ownership. A
Contract Owner should consult a competent tax adviser as to the tax
consequences resulting from such a transfer.
ASSIGNMENT
The Contract Owner may assign the Contract at any time. A copy of any
assignment must be filed with Liberty Life's Service Office. The Contract
Owner's rights and those of any revocably-named person will be subject to
the assignment. Any Qualified Contract may have limitations on assignability.
Because an assignment may be a taxable event, a Contract Owner should consult
a competent tax adviser as to the tax consequences resulting from any such
assignment.
SURRENDERS
The Contract Owner may partially surrender the Contract. Liberty Life's
Service Office must receive a Written Request and the minimum amount to be
surrendered must be at least $300 or such lesser amount as Liberty Life may
permit in conjunction with a program of systematic partial surrenders. If the
Contract Value after a partial surrender would be below $2,500, Liberty Life
will treat the request as a surrender of only the excess amount over $2,500.
The amount surrendered will include any applicable Contingent Deferred Sales
Charge and therefore the amount actually surrendered may be greater than the
amount of the surrender check requested. Unless the request specifies
otherwise, the total amount surrendered will be deducted from all
Sub-Accounts of the Variable Account in the proportion that the value in each
Sub-Account bears to the total Contract Value.
The Contract Owner may totally surrender the Contract by making a Written
Request. Surrendering the Contract will end it. The Surrender Value is equal to
the Contract Value for the Valuation Period during which Liberty Life's Service
Office has received the request less: the Contract Maintenance Charge; any
applicable Contingent Deferred Sales Charge; and any applicable premium taxes
not previously deducted.
Liberty Life will pay the amount of any surrender within seven days of
receipt of such request. Alternatively, the Contract Owner may purchase for
himself or herself an annuity payment option with any surrender benefit of at
least $2,000. Liberty Life's consent is needed to choose an option if the
Contract Owner is not a natural person.
Settlement Options based on life contingencies cannot be surrendered after
annuity payments have begun. Settlement Option 1, which is not based on life
contingencies, may be surrendered as described on Page 19.
Because of the potential tax consequences of a full or partial surrender, a
Contract Owner should consult a competent tax adviser regarding a surrender.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Income Date and the Contract is In Force,
payments will begin under the payment option or options the Contract Owner
has chosen. The amount of the payments will be determined by applying the
Contract Value (less any premium taxes not previously deducted and less any
applicable Contract Maintenance Charge) on the Income Date in accordance with
the option selected.
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Income Date and Settlement Option
The Contract Owner may select an Income Date and Settlement Option at the
time of application. If the Contract Owner does not select a Settlement
Option, Option 2 will automatically be designated. If the Contract Owner does
not select an Income Date for the Annuitant, the Income Date will
automatically be the first day of the calendar month following the later of
the Annuitant's 75th birthday or the 10th Contract Anniversary.
Change in Income Date and Settlement Option
The Contract Owner may choose or change a Settlement Option or the Income
Date by making a Written Request to Liberty Life's Service Office at least 30
days prior to the Income Date. However, any Income Date must be: (a) for
variable annuity payment options, not earlier than the second calendar month
after the Issue Date (e.g., if the Issue Date is in January, the earliest
Income Date is March 1); (b) for fixed annuity options, not earlier than the
first calendar month after the end of the first Contract Year; (c) not later
than the calendar month after the Annuitant's 85th birthday; and (d) the
first day of a calendar month.
Settlement Options
The payment options are:
Option 1: Income for a Fixed Number of Years;
Option 2: Life Income with 10 Years of Payments Guaranteed; and
Option 3: Joint and Last Survivor Income.
Other options may be arranged by mutual consent. Each option is available in
two forms--as a variable annuity for use with the Variable Account and as a
fixed annuity for use with the Fixed Account. Variable annuity payments will
fluctuate while fixed annuity payments will not. Unless the Owner chooses
otherwise, Contract Value will be applied to a variable annuity option.
Whether variable or fixed, the same Contract Value amount applied to each
option will produce a different initial annuity payment as well as different
subsequent payments.
The payee is the person who will receive the sum payable under 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 to apply under any variable or fixed option is less
than $2,000, Liberty Life has reserved the right to pay such amount in one
sum to the payee in lieu of the payment otherwise provided for.
Annuity payments will be made monthly unless quarterly, semi-annual or
annual payments are chosen by written request. However, if any payment
provided for would be or becomes less than $100, Liberty Life has the right
to reduce the frequency of payments to such an interval as will result in
each payment being at least $100.
Option 1: Income For a Fixed Number of Years. Liberty Life will pay an
annuity for a chosen number of years, not less than 5 nor over 50 (a period
of years over 30 may be chosen only if it does not exceed the difference
between age 100 and the Annuitant's age on the date of the first payment). At
any time while variable annuity payments are being made, the payee may elect
to receive the following amount: (a) the present value of the remaining
payments, commuted at the interest rate used to create the annuity factor for
this option (this interest rate is 5% per year unless 3% per year is chosen
by Written Request); less (b) any Contingent Deferred Sales Charge due by
treating the value defined in (a) as a total surrender. (See "Deductions for
Contingent Deferred Sales Charge" on Page 14). Instead of receiving a lump
sum, the payee can elect another payment option and the amount applied to the
option will not be reduced by the charge defined in (b) above. If, at the
death of the payee, Option 1 payments have been made for less than the chosen
number of years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present value
of the remaining payments, commuted at the interest rate used to create
the annuity factor for this option. For the variable annuity, this
interest rate is 5% per year unless 3% per year is chosen by Written
Request.
For variable annuity payments under Option 1, the Mortality and Expense Risk
Charge is deducted during the payment period but Liberty Life has no
mortality risk during this period.
If annual variable annuity payments are chosen for Option 1, Liberty Life has
available a "stabilizing" payment option that can be chosen. Each annual
payment will be determined as described in "Variable Annuity Payment Values"
below. Each annual payment will then be placed in Liberty Life's general
account, from which it will be paid out in twelve equal monthly payments. The
sum of the twelve monthly payments will exceed the annual payment amount
because of an interest rate factor used by Liberty Life that will vary from
year to year. The commutation method described above for calculating the
present value of remaining payments applies to the annual payments. Any
monthly payments remaining before the next annual payment will be commuted at
the interest rate used to determine that year's monthly payments.
See "Annuity Payments" on page 21 for the manner in which Option 1 may be
taxed.
Option 2: Life Income with 10 Years of Payments Guaranteed. Liberty Life will
pay an annuity during the lifetime of the payee. If, at the death of the
payee, payments have been made for less than 10 years:
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(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present value
of the remaining payments, commuted at the interest rate used to create
the annuity factor for this option. For the variable annuity, this
interest rate is 5% per year unless 3% per year is chosen by Written
Request.
The amount of the annuity payments will depend on the age of the payee at the
time annuity payments are to begin and it may also depend on the payee's sex.
Option 3: Joint and Last Survivor Income. Liberty Life 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 at the time annuity payments are to begin 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 THE PAYEES BOTH DIE AFTER RECEIPT OF
THE SECOND PAYMENT AND SO ON.
Variable Annuity Payment Values
The amount of the first variable annuity payment is determined by Liberty
Life using an annuity purchase rate that is currently based on an assumed
annual investment return of 5%, unless 3% is chosen by Written Request.
Subsequent variable annuity payments will fluctuate in amount and reflect
whether the actual investment return of the selected Sub-Account(s) (after
deducting the Mortality and Expense Risk Charge) is better or worse than the
assumed investment return. The total dollar amount of each variable annuity
payment will be equal to: (a) the sum of all Sub-Account payments; less (b)
the pro-rata amount of the annual Contract Maintenance Charge. A payee can
instruct Liberty Life's Service Office to change the Sub-Account(s) used to
determine the amount of the variable annuity payments. Any change requested
must be at least six months after a prior selection.
Fixed Annuity Payment Values
The dollar amount of each fixed annuity payment will be determined by
deducting from the value being applied to the Fixed Account any premium taxes
not previously deducted and then dividing the remaining value by $1,000 and
multiplying the result by the greater of: (a) the applicable factor shown in
the appropriate table in the Contract; or (b) the factor currently offered by
Liberty Life 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.
Proof of Age, Sex, and Survival of Annuitant
Liberty Life 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, Liberty Life will compute the amount payable based on the correct
age and sex. If income payments have begun, any underpayments Liberty Life
may have made will be paid in full with the next annuity payment. Any
overpayments, unless repaid in one sum, will be deducted from future annuity
payments until Liberty Life is repaid in full.
SUSPENSION OF PAYMENTS
Liberty Life reserves the right to suspend or postpone any type of payment
from the Variable Account for any period when: (a) the New York Stock
Exchange is closed other than customary weekend or holiday closings; (b)
trading on the Exchange is restricted; or (c) an emergency exists as a result
of which it is not reasonably practicable to dispose of securities held in
the Variable Account; or determine their value. The applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions described in (b) and (c) exist.
TAX STATUS
Introduction
The Contract is designed for use by individuals in retirement plans which
may or may not be Qualified Plans under the provisions of the Internal
Revenue Code (the "Code"). The ultimate effect of federal income taxes on the
Contract Value, on annuity payments, and on the economic benefit to the
Contract Owner, Annuitant or Designated Beneficiary depends on the type of
retirement plan for which the Contract is purchased and upon the tax and
employment status of the individual concerned. The discussion contained
herein is general in nature and is not intended as tax advice. Each person
concerned should consult a competent tax adviser. No attempt is made to
consider any applicable state or other tax laws. Moreover, the discussion
herein is based upon Liberty Life's understanding of current federal income
tax laws as they are currently interpreted. No representation is made
regarding the likelihood of continuation of those current federal income tax
laws or of the current interpretations by the Internal Revenue Service.
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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 Contract until a distribution
occurs, in the form of a full surrender, a partial surrender, an assignment
or gift of the Contract, or annuity payments.
Surrenders, Assignments and Gifts. A Contract Owner who fully surrenders his
or her Contract is taxed on the portion of the payment that exceeds his or
her cost basis in the Contract. For Non-Qualified Contracts, the cost basis
is generally the amount of the purchase payments made for the Contract and
the taxable portion of the surrender payment is taxed as ordinary income. For
Qualified Contracts, the cost basis is generally zero and the taxable portion
of the surrender payment is generally taxed as ordinary income subject to
special 5-year income averaging. A Designated Beneficiary receiving a lump
sum surrender benefit after the death of the Annuitant or Owner is taxed on
the portion of the amount that exceeds the Contract Owner's cost basis in the
Contract. If the Designated Beneficiary elects to receive annuity payments
within 60 days of the decedent's death, different tax rules apply. See
"Annuity Payments" on page 21. For Non-Qualified Contracts, 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 date-of-death value in excess of their basis.
Partial surrenders received under Non-Qualified Contracts prior to
annuitization are first included in gross income to the extent Contract Value
exceeds purchase payments. Then, to the extent the Contract Value does not
exceed purchase payments, such surrenders are treated as a non-taxable return
of principal to the Contract Owner. For partial surrenders under a Qualified
Contract, 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 Contracts is generally zero, partial surrender amounts will
generally be fully taxed as ordinary income.
A Contract Owner who assigns or pledges a Non-Qualified Contract is treated
as if he or she had received the amount assigned or pledged and thus is
subject to taxation under the rules applicable to surrenders. A Contract
Owner who gives away the Contract (i.e., transfers it without full and
adequate consideration) to anyone other than his or her spouse is treated for
income tax purposes as if he or she had fully surrendered the Contract.
A special computational rule applies if Liberty Life issues to the Contract
Owner, during any calendar year, (a) two or more Contracts or (b) one or more
Contracts and one or more of Liberty Life's other annuity contracts. Under
this rule, the amount of any distribution includable in the Contract Owner's
gross income is to be determined under Section 72(e) of the Code by treating
all the Liberty Life contracts as one contract. Liberty Life believes that
this means the amount of any distribution under one contract will be
includable in gross income to the extent that at the time of distribution the
sum of the values for all the contracts exceeds the sum of the cost bases for
all the contracts.
Annuity Payments. The non-taxable portion of each variable annuity payment
is determined by dividing the cost basis of the Contract by the total number
of expected payments while the non-taxable portion of each fixed annuity
payment is determined by an "exclusion ratio" formula which establishes the
ratio that the cost basis of the Contract 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 Contracts, 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.
Penalty Tax. Payments received by Owners, Annuitants, and Designated
Beneficiaries under Contracts may be subject to both ordinary income taxes
and a penalty tax equal to 10% of the amount received that is includable in
income. The penalty tax is not imposed on amounts received: (a) after the
taxpayer attains age 59-1/2; (b) in a series of substantially equal payments
made for life or life expectancy; (c) after the death of the Contract Owner
(or, where the Owner is not a human being, after the death of the Annuitant);
(d) if the taxpayer becomes totally and permanently disabled; or (e) under a
Non-Qualified Contract's annuity payment option that provides for a series of
substantially equal payments, provided only one purchase payment is made to
the Contract, the Contract is not issued as a result of a Section 1035
exchange, and the first annuity payment begins in the first Contract Year.
Income Tax Withholding. Liberty Life is required to withhold federal income
taxes on taxable amounts paid under the Contract unless the recipient elects
not to have withholding apply. Liberty Life will notify recipients of their
right to elect not to have withholding apply.
Section 1035 Exchanges. A Non-Qualified Contract may be purchased with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is Liberty Life's understanding that in such an event: (a) the
new Contract will be subject to the distribution-at-death rules described in
the "Death Provisions for Non-Qualified Contracts" section on Page 16; (b)
purchase payments made between 8/14/82 and 1/18/85 and the income allocable
to them will, following an exchange, no
21
<PAGE>
longer be covered by a "grandfathered" exception to the penalty tax for a
distribution of income that is allocable to an investment made over ten years
prior to the distribution; and (c) purchase payments made before 8/14/82 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 surrenders 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. Liberty Life's understanding of the above is principally based on
legislative reports prepared by the Staff of the Congressional Joint
Committee on Taxation.
Diversification Standards. The U.S. Secretary of the Treasury has issued
regulations that set standards for diversification of the investments
underlying variable annuity contracts (other than pension plan contracts).
The Eligible Funds are designed to be managed to meet the diversification
requirements for the Contract as those requirements may change from time to
time. If the diversification requirements are not satisfied, the Contract
would not be treated as an annuity contract. As a consequence to the Contract
Owner, income earned on a Contract would be taxable to the Contract Owner in
the year in which diversification requirements were not satisfied, including
previously non-taxable income earned in prior years. As a further
consequence, Liberty Life would be subjected to federal income taxes on
assets in the Variable Account.
The Secretary of the Treasury announced in September 1986 that he expects to
issue regulations which will prescribe the circumstances in which a Contract
Owner's control of the investments of a segregated asset account may cause
the Contract Owner, rather than the insurance company, to be treated as the
owner of the assets of the account. The regulations could impose requirements
that are not reflected in the Contract. Liberty Life, however, has reserved
certain rights to alter the Contract and investment alternatives so as to
comply with such regulations. Since the regulations have not been issued,
there can be no assurance as to the content of such regulations or even
whether application of the regulations will be prospective. For these
reasons, Contract Owners are urged to consult with their own tax advisers.
Qualified Plans
The Contract is designed for use with several types of Qualified Plans. The
tax rules applicable to participants in such Qualified Plans vary according
to the type of plan and the terms and conditions of the plan itself.
Therefore, no attempt is made herein to provide more than general information
about the use of the Contract with the various types of Qualified Plans.
Participants under such Qualified Plans as well as Contract 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 Contract issued in connection therewith. Following are brief
descriptions of the various types of Qualified Plans and of the use of the
Contract in connection therewith. Purchasers of the Contract should seek
competent advice concerning the terms and conditions of the particular
Qualified Plan and use of the Contract 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 Contract 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 amount 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.
Liberty Life will notify a Contract Owner who has requested a distribution
from a Contract if all or part of such distribution is eligible for rollover
to another TSA or to an individual retirement annuity or account (IRA). Any
amount eligible for rollover treatment will be subject to mandatory federal
income tax withholding at a 20% rate if the Contract Owner receives the
amount rather than directing Liberty Life by Written Request to transfer the
amount as a direct rollover to another TSA or IRA.
Individual Retirement Annuities
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity".
These Individual Retirement Annuities are subject to limitations on the
amount which may be contributed, the persons who may be eligible, and on the
time when distributions may commence. In addition, distributions from certain
types of Qualified Plans may be placed on a tax-deferred basis into an
Individual Retirement Annuity.
22
<PAGE>
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 Contract 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 Contract can be used with such
plans. Under such plans, a participant may specify the form of investment in
which his or her participation will be made. However, all such investments
are owned by and subject to the claims of general creditors of the sponsoring
employer.
VARIABLE ACCOUNT VOTING RIGHTS
In accordance with its view of present applicable law, Liberty Life 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. Liberty Life will vote shares for which it has not received
instructions in the same proportion as it votes shares for which it has
received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation thereof should change, and
as a result Liberty Life determines that it is permitted to vote the shares
of the Eligible Funds in its own right, it may elect to do so.
The person having the voting interest under a Contract shall be the Contract
Owner. The number of shares held in each Sub-Account which are attributable
to each Contract Owner is determined by dividing the Contract Owner's
interest in each Sub-Account by the net asset value of the applicable share
of the Eligible Fund. The person having the voting interest under an annuity
payment option shall be the payee. The number of shares held in the Variable
Account which are attributable to each payee is determined by dividing the
reserve for the annuity payments by the net asset value of one share. During
the annuity payment period, the votes attributable to a payee decrease as the
reserves underlying the payments decrease.
The number of shares which a person has a right to vote will be determined as
of the date coincident with the date established by the respective Eligible
Fund for determining shareholders eligible to vote at the meeting of the Fund
and voting instructions will be solicited by written communication prior to
such meeting in accordance with the procedures established by the Eligible
Fund.
Each person having the voting interest in the Variable Account will receive
periodic reports relating to the Eligible Fund(s) in which he or she has an
interest, proxy material and a form with which to give such voting
instructions with respect to the proportion of the Eligible Fund shares held
in the Variable Account corresponding to his or her interest in the Variable
Account.
DISTRIBUTION OF THE CONTRACT
Keyport Financial Services Corp. ("KFSC") serves as the Principal Underwriter
for the Contract described in this prospectus. The Contract will be sold by
salespersons who represent Liberty Life as variable annuity agents and who are
registered representatives of broker/dealers who have entered into distribution
agreements with KFSC. KFSC is registered under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc. It
is located at 125 High Street, Boston, Massachusetts 02110.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the Principal
Underwriter are a party. Liberty Life is engaged in various kinds of routine
litigation which in its judgment is not of material importance in relation to
the total capital and surplus of Liberty Life.
INQUIRIES BY CONTRACT OWNERS
Contract Owners with questions about their Contracts can write Liberty Life
Service Office, 125 High Street, Boston, MA 02110, or call (800) 367-3653.
23
<PAGE>
<TABLE>
TABLE OF CONTENTS--STATEMENT OF ADDITIONAL INFORMATION
<CAPTION>
Page
-------
<S> <C>
Liberty Life Assurance Company of Boston 2
Variable Annuity Benefits 2
Variable Annuity Payment Values 2
Re-Allocating Sub-Account Payments 3
Principal Underwriter 4
Custodian 4
Experts 4
Investment Performance 4
Average Annual Total Return for a Contract that is Surrendered and for
a Contract that Continues 5
Change in Accumulation Unit Value 7
Yields for CIF Sub-Account 8
Financial Statements 9
Liberty Life Assurance Company of Boston 9
Variable Account-K 31
</TABLE>
24
<PAGE>
APPENDIX A
TELEPHONE INSTRUCTIONS
Telephone Transfers of Contract Values
1. If there are joint Contract Owners, both must authorize Liberty Life to
accept telephone instructions but either Owner can give Liberty Life
telephone instructions.
2. All callers will be required to identify themselves. Liberty Life reserves
the right to refuse to act upon any telephone instructions in cases where
the caller has not sufficiently identified himself/herself to Liberty Life's
satisfaction.
3. Neither Liberty Life nor any person acting on its behalf shall be subject to
any claim, loss, liability, cost or expense if it or such person acted in
good faith upon a telephone instruction, including one that is unauthorized
or fraudulent; however, Liberty Life will employ reasonable procedures to
confirm that a telephone instruction is genuine and, if Liberty Life does
not, Liberty Life may be liable for losses due to an unauthorized or
fraudulent instruction. The Contract Owner thus bears the risk that an
unauthorized or fraudulent instruction that is executed may cause the
Contract Value to be lower than it would be had no instruction been
executed.
4. All conversations will be recorded with disclosure at the time of the call.
5. The application for the Contract may allow a Contract Owner to create a
power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, such power will be treated as
durable in nature and shall not be affected by the subsequent incapacity,
disability or incompetency of the Contract Owner. Either Liberty Life or the
authorized person may cease to honor the power by sending written notice to
the Contract Owner at the Contract Owner's last known address. Neither
Liberty Life nor any person acting on its behalf shall be subject to
liability for any act executed in good faith reliance upon a power of
attorney.
6. Telephone authorization shall continue in force until (a) Liberty Life
receives the Contract Owner's written revocation, (b) Liberty Life
discontinues the privilege, or (c) Liberty Life receives written evidence
that the Contract Owner has entered into a market timing or asset allocation
agreement with an investment adviser or with a broker-dealer.
7. Telephone transfer instructions received by Liberty Life's Service Office at
800-367-3653 before the close of regular trading on the New York Stock
Exchange (currently 4:00 P.M. Eastern Time) will be initiated that day based
on the unit value prices calculated at the close of that day. Instructions
received after the close of trading on the NYSE will be initiated the
following business day.
8. Once instructions are accepted by Liberty Life, they may not be canceled.
9. All transfers must be made in accordance with the terms of the Contract and
current prospectus. If the transfer instructions are not in good order,
Liberty Life will not execute the transfer and will notify the caller within
48 hours.
10. If 100% of any Sub-Account's value is transferred and the allocation formula
for purchase payments includes that Sub-Account, then the allocation formula
for future purchase payments will change accordingly unless Liberty Life
receives telephone instructions to the contrary. For example, if the
allocation formula is 50% to Sub-Account A and 50% to Sub-Account B and all
of Sub-Account A's value is transferred to Sub-Account B, the allocation
formula will change to 100% to Sub-Account B unless Liberty Life is
instructed otherwise.
Telephone Changes to Purchase Payment Allocation Percentages
Numbers 1 - 6 above are applicable.
25
<PAGE>
APPENDIX B
DOLLAR COST AVERAGING
Liberty Life offers a dollar cost averaging program that Contract Owners may
participate in by Written Request. The program periodically transfers
Accumulation Units from the CIF Sub-Account to other Sub-Accounts selected
by the Contract Owner. The program allows a Contract Owner to invest in
non-"money market" Sub-Accounts over a period of one year or longer rather
than having to invest in those Sub-Accounts all at once.
The program is available for initial and subsequent purchase payments and for
Contract Value transferred into the CIF Sub-Account. Under the program,
Liberty Life makes automatic transfers on a periodic basis out of the CIF
Sub-Account into one or more of the other Sub-Accounts (Liberty Life reserves
the right to limit the number of Sub-Accounts the Contract Owner can choose
but there are currently no limits). The automatic transfer program does not
guarantee a profit nor does it protect against loss in declining markets.
The Contract Owner by Written Request must specify the monthly amount to be
transferred (minimum $150) and the Sub-Account(s) to which transfers are to
be made from the CIF Sub-Account. The first transfer will occur at the close
of the Valuation Period that includes the 30th day after receipt of the
Contract Owner's Written Request. Each succeeding transfer will occur one
month later (e.g., if the 30th day after the Issue Date is April 8, the
second transfer will occur at the close of the Valuation Period that includes
May 8). When the remaining Sub-Account value is less than the monthly
transfer amount, that remaining value will be transferred and the program
will end. Before this final transfer, the Contract Owner may extend the
program by allocating additional purchase payments to the CIF Sub-Account or
by transferring Contract Value to the CIF Sub-Account. The Contract Owner may
by Written Request or by telephone change the monthly amount to be
transferred, change the Sub-Account(s) to which the transfers are to be made,
or end the program. The program will automatically end if the Income Date
occurs. Liberty Life reserves the right to end the program at any time by
sending the Contract Owner a notice one month in advance.
Before March 6, 1995, Contract Owners could also specify that transfers under
the program were to be made from the CKUSGF Sub-Account. For those Contract
Owners still participating in the program with the CKUSGF Sub-Account,
substituting "CKUSGF" for "CIF" above describes their program.
Written or telephone instructions must be received by Liberty Life by the end
(currently 5:00 P.M. Eastern Time) of the business day preceding the next
scheduled transfer in order to be in effect for that transfer. Telephone
instructions are subject to the conditions and procedures established by
Liberty Life from time to time. The current conditions and procedures appear
below and Contract Owners in a dollar cost averaging program will be
notified, in advance, of any changes.
1. If there are joint Contract Owners, either Owner can give Liberty Life
telephone transfer instructions.
2. All callers will be required to identify themselves. Liberty Life reserves
the right to refuse to act upon any telephone instructions in cases where the
caller has not sufficiently identified himself/herself to Liberty Life's
satisfaction.
3. Neither Liberty Life nor any person acting on its behalf shall be subject to
any claim, loss, liability, cost or expense if it or such person acted in
good faith upon a telephone instruction, including one that is unauthorized
or fraudulent; however, Liberty Life will employ reasonable procedures to
confirm that a telephone instruction is genuine and, if Liberty Life does
not, Liberty Life may be liable for losses due to an unauthorized or
fraudulent instruction. The Contract Owner thus bears the risk that an
unauthorized or fraudulent instruction that is executed may cause the
Contract Value to be lower than it would be had no instruction been executed.
4. All conversations will be recorded with disclosure at the time of the call.
5. Telephone authorization shall continue in force until (a) Liberty Life
receives the Contract Owner's written revocation, (b) Liberty Life
discontinues the privilege, or (c) Liberty Life receives written evidence
that the Contract Owner has entered into a market timing or asset allocation
agreement with an investment adviser or with a broker-dealer.
6. Telephone instructions must be received by Liberty Life's Service Office at
800-367-3653 before the end (currently 5:00 P.M. Eastern Time) of the
business day preceding the next scheduled transfer in order to be in effect
for that transfer.
7. Once instructions are accepted by Liberty Life, they may not be canceled. New
telephone instructions may be given on the following business day.
8. All instructions must be made in accordance with the terms of the Contract
and current prospectus. If the instructions are not in good order, Liberty
Life will not execute them and will notify the caller within 48 hours.
26
<PAGE>
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 6719 BOSTON, MA
POSTAGE WILL BE PAID BY ADDRESSEE
LIBERTY LIFE SERVICE OFFICE
125 HIGH STREET
BOSTON MA 02110-9773
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
<PAGE>
Distributed by:
Keyport Financial Services Corp.
125 High Street, Boston, MA 02110-2712
[Liberty Mutual logo]
Issued by:
Liberty Life
Assurance Company of Boston
175 Berkeley Street
Boston, Massachusetts 02117
Liberty Life Service Office
125 High Street
Boston, MA 02110-2712
Service Hotline 800-367-3653 (Press 3)
Preferred Advisor used by permission
PAP/NY 5/95
[box] Yes. I would like to receive the Liberty Life Variable Annuity
Statement of Additional Information.
[box] Yes. I would like to receive the SteinRoe Variable Investment Trust
Statement of Additional Information.
[box] Yes. I would like to receive the Keyport Variable Investment Trust
Statement of Additional Information.
Name
Address
City State Zip
<PAGE>
PART B
<PAGE>
SUPPLEMENT DATED OCTOBER 13, 1995 TO
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1995 FOR
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT - K
AND
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
- -------------------------------------------------------------------------------
The May 1, 1995 date on page 1 of the statement of additional information is
changed to October 13, 1995.
- -------------------------------------------------------------------------------
On page 4, the "EXPERTS" section is changed to read:
The statutory financial statements of Liberty Life as of and for the years
ended December 31, 1994 and 1993, included herein and the financial statements
of Variable Account - K as of and for the year ended December 31, 1994 and for
the period February 15, 1993 to December 31, 1993, included herein, have been
included herein in reliance on the reports of KPMG Peat Marwick LLP,
independent certified public accountants, and upon authority of said firm as
experts in accounting and auditing.
SERVICE HOTLINE 800-367-3653 (press 3)
Issued by Liberty Life Assurance Company of Boston
Distributed by Keyport Financial Services Corp.
SteinRoe Variable Investment Trust managed by Stein Roe and Farnham Incorporated
One South Wacker Drive, Chicago, Illinois 60606
Keyport Variable Investment Trust managed by Keyport Advisory Services Corp. and
sub-advised by Colonial Management Associates, Inc.
One Financial Center, Boston, Massachusetts 02111
Liberty Life Service Office and Keyport Companies located at:
125 High Street, Boston, Massachusetts 02110-2712
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT - K
AND
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON ("Liberty Life")
This Statement of Additional Information is not a prospectus but it relates to,
and should be read in conjunction with, the variable annuity prospectus dated
May 1, 1995. The prospectus is available, at no charge, by writing Keyport
Financial Services Corp. at 125 High Street, Boston, MA 02110 or by calling
(800)-437-4466.
TABLE OF CONTENTS
Page
Liberty Life Assurance Company of Boston 2
Variable Annuity Benefits 2
Variable Annuity Payment Values 2
Re-Allocating Sub-Account Payments 3
Principal Underwriter 4
Custodian 4
Experts 4
Investment Performance 4
Average Annual Total Return for a Contract that is Surrendered
and for a Contract that Continues 5
Change in Accumulation Unit Value 7
Yield for CIF Sub-Account 8
Financial Statements 9
Liberty Life Assurance Company of Boston 9
Variable Account - K 31
The date of this statement of additional information is May 1, 1995.
LLIFE.SAI
1
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Liberty Life Assurance Company of Boston is a wholly-owned subsidiary
of Liberty Mutual Insurance Company and Liberty Mutual Fire Insurance Company.
Liberty Mutual Insurance Company is a multi-line insurance and financial
services institution. For additional information about Liberty Life, 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 Contract Maintenance Charge.
The first payment for each Sub-Account will be determined by deducting
any applicable Contract 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
Contract's annuity table for the particular payment option; or (b) the factor
currently offered by Liberty Life 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, Liberty Life uses an Annuity Unit
value. Each Sub-Account has its own Annuity Units and value per Unit. The Unit
value applicable using any Valuation Period is determined at the end of such
period.
Liberty Life initially valued each Annuity Unit as follows: January 1,
1993: CIF - 11.883555; MSIF - 13.864802; MAF - 14.646064; SMAF - 16.492406; MGSF
- - 17.540544 and CAF - 15.871076; February 1, 1993: MIF - $10.00; which precede
the February 15, 1993 date beginning of operations of the Sub-Accounts, and July
13, 1993: CKUF and CKUSGF -$10.00; July 23, 1993: CKGIF - $10.00; May 3, 1994:
CKIFG - $10.00. The Unit value for each Sub-Account in any Valuation Period
after the initial period 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), Liberty Life
calculates a net investment factor for each SubAccount by dividing (a) by (b),
where:
2
<PAGE>
(a) is equal to the net investment factor defined on page 15 of the prospectus
without any deduction for the sales charge defined in (c)(ii) on that
page; 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 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 7%,
5%, 3%, or 1% between the time of the first and second payments. With an actual
7% 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 1%, 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 amount 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 1 (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. Any change requested must be at
least six months after a prior selection. The payee's request must specify the
percentage of the annuity payment that is to be based on the investment
performance of each Sub-Account. The percentage for each Sub-Account, if not
zero, must be at least 10% and must be a whole number. At the end of the
Valuation Period during which Liberty Life receives the request, Liberty Life
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.
3
<PAGE>
PRINCIPAL UNDERWRITER
The Contract, which is offered continuously, is distributed by Keyport
Financial Services Corp. ("KFSC"), which is an affiliate of Liberty Life. During
the fiscal year ended December 31, 1994, Liberty Life paid KFSC underwriting
commissions for the Contract of $0.00.
CUSTODIAN
The custodian of the assets of the Variable Account - K is Liberty
Life.
Liberty Life has responsibility for providing all administration of the
Contracts and the Variable Account. This administration includes, but is not
limited to, preparation of the Contracts, maintenance of Contract Owners'
records, and all accounting, valuation, regulatory and reporting requirements.
Liberty Life has contracted with Keyport Life Insurance Company, an affiliate,
to provide all administration for the Contracts, as its agent. Keyport Life
Insurance Company's compensation is based on the number of Contracts and on the
Contract Value of these Contracts.
EXPERTS
The statutory financial statements of Liberty Life as of and for the
years ended December 31, 1994 and 1993, included herein and the financial
statements of Variable Account - K as of December 31, 1994 and for the period
February 15, 1993 to December 31, 1993, included herein, have been included
herein in reliance on the reports of KPMG Peat Marwick LLP, independent
certified public accountants, and upon authority of said 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) or by Morningstar, Inc. of Chicago, IL (Morningstar's
Variable Annuity Performance Report), which are independent services that
compare the performance of variable annuity subaccounts. 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 Index (an unmanaged weighted
index of 90 stocks prior to March 1957 and 500 stocks thereafter
4
<PAGE>
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 HighGrade 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 securities
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.
The tables below provide performance results for each Sub-Account
through December 31, 1994. The results shown in this section are not an estimate
or guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Contract Owner.
The Sub-Accounts, other than Cash Income Fund Sub-Account, may
advertise total return information for various periods of time. Total return
performance information is based on the overall percentage change in value of a
hypothetical investment in the specific Sub-Account over a given period of time.
Average Annual Total Return for a Contract that is Surrendered and for a
Contract that Continues
An average annual total return assuming the Contract is surrendered is
calculated using the method prescribed by the Securities and Exchange
Commission. This method illustrates each Sub-Account's average annual total
return, assuming a single $1,000 initial purchase payment and the surrender of
the contract at the end of the period being calculated. The Sub-Account's
average annual total return is the annual rate that would be necessary to
achieve the ending value of an investment kept in the SubAccount for the period.
5
<PAGE>
Each calculation assumes that the $1,000 initial purchase payment was allocated
to only one Sub-Account and no transfers or additional purchase payments were
made. The rate of return reflects all charges assessed against a Contract and
the Sub-Account except for any premium taxes that may be payable. The charges
reflected are: a Contingent Deferred Sales Charge that applies when the
hypothetical Contract is surrendered; the annual l.25% Mortality and Expense
Risk Charge and the annual 0.15% Sales Charge; and, on an allocated basis, the
Contract's $30 Contract Maintenance Charge that is deducted at the end of each
year and upon surrender. The Contingent Deferred Sales Charge used in the
calculations for a particular Sub-Account is equal to the percentage charge in
effect at the end of the period multiplied by: the assumed $1,000 payment less
any amount of that payment that is free of Contingent Deferred Sales Charge
under the Contract's surrender provisions. The percentage charge declines from
7% to 1% over 7 years by 1% per year. The Contract Maintenance Charge used in
the calculations for a particular Sub-Account is equal to $30 multiplied by a
fraction equal to the average number of Contracts with Contract Value in that
Sub-Account during the period shown divided by the average total number of
Contracts during the period shown. A particular Sub-Account's pro-rated portion
is then equated to a $1,000 basis by multiplying it by a fraction equal to
$1,000 divided by the average Contract Value in that Sub-Account during the
period shown.
A second type of average annual return is calculated in the same manner
as the first except no Contingent Deferred Sales Charge is deducted since it is
assumed the Contract continues through the end of the period.
<TABLE>
<CAPTION>
Total Return for a Contract Total Return for a Contract
Surrendered on 12/31/94 Still in force on 12/31/94
Hypothetical $1,000 PurchasePayment* Hypothetical $1,000 Purchase Payment*
------------------------------------ --------------------------------------------
Length of Investment Period Length of Investment Period
--------------------------- ----------------------------
Since Contract Since Contract
Sub-Account One Year Inception Shown One Year Inception Shown
- ----------- --------- ----------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
MSIF -8.19 % -1.90% (1/1/93) -2.95% 0.85% (1/1/93)
MAF -9.73 1.35 (1/1/93) -4.58 1.42 (1/1/93)
SMAF*** -6.77 -3.19 (1/1/93) -1.45 -0.47 (1/1/93)
MGSF -12.66 -4.90 (1/1/93) -7.68 -2.24 (1/1/93)
CAF -5.64 12.93 (1/1/93) -0.25 15.56 (1/1/93)
MIF*** -10.83 -2.43 (2/1/93) -5.74 0.42 (2/1/93)
CKUF -16.33 -13.00 (7/13/93) -11.55 -9.63 (7/13/93)
CKGIF -7.44 -2.44 (7/23/93) -2.15 1.40 (7/23/93)
CKUSGF*** -8.04 -5.02 (7/13/93) -2.79 1.35 (7/13/93)
CKIFG N/A -13.38** (5/3/94) N/A -6.86** (5/3/94)
</TABLE>
* See footnote 5 on page 6 of the prospectus for the new expense reimbursement
percentages applicable to all the SteinRoe Trust Funds beginning May 1, 1993;
Before
6
<PAGE>
then, expense reimbursement was applicable to MSIF, MIF, SMAF and MGSF to the
extent expenses, including management fees, exceeded the following percentage of
the average annual net assets of each listed Fund: .80% for MIF; 1.00% for MSIF;
and 1.50% for SMAF and MGSF. For expense reimbursement applicable to the Keyport
Trust Funds beginning July 1, 1993, see footnote 4 on page 5 of the prospectus.
The return percentages would be lower without this expense reimbursement.
** Non-annualized total returns are shown since this Sub-Account has been in
existence for less than one year.
*** The SMAF, MIF and CKUSGF Sub-Accounts are not available for the allocation
of new purchase payments or for transfers of Contract Value.
Change in Accumulation Unit Value
The change in Accumulation Unit values for each Sub-Account is computed
differently than the standardized average annual total return information.
A Sub-Account's change in Accumulation Unit values is the rate at which
the value of a Unit changes over the time period illustrated. For time periods
prior to the date the Variable Account commenced operations, Accumulation Unit
values are calculated based on the performance of the SteinRoe Trust Funds and
the assumption that the SubAccounts and the Contract were in existence since the
inception date of the Funds. Rates of change in Accumulation Unit values reflect
the Contract's annual 1.25% Mortality and Expense Risk Charge and the annual
.15% Sales Charge. They do not reflect deductions for any Contingent Deferred
Sales Charges, Contract Maintenance Charges, and premium taxes. The rates of
change would be lower if these charges were included.
<TABLE>
<CAPTION>
Average Annual Change 12-Month Period Change
In Accumulation Unit in Accumulation Unit Value*
Value Since 1/1/89*
Sub-Account 1989 1990 1991 1992 1993 1994
- ----------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MSIF 6.25% 11.40% 7.59% 12.90% 4.49% 4.79% -2.93%
MAF 8.51 21.10 -2.11 26.17 6.04 7.78 -4.52
SMAF*** 9.06 20.10** -9.81 36.59 11.47 0.52 -1.40
MGSF 10.75 29.64 -3.04 45.98 5.16 3.52 -7.64
CAF 15.46 29.39 -10.29 35.36 12.90 33.80 -0.21
MIF*** 0.43 6.95** -5.72
CKUF -9.58 -2.53** -11.51
CKGIF 1.42 4.26** -2.12
CKUSGF*** -1.33 0.85** -2.77
CKIFG N/A -6.86**
</TABLE>
* See footnote 5 on page 6 of the prospectus for the new expense reimbursement
percentages applicable to all the SteinRoe Trust Funds beginning May 1, 1993.
Before then, expense reimbursement was applicable to MISF, MIF, SMAF and MGSF to
the extent expenses, including management fees, exceeded the following
percentage of the average annual net assets of each listed Fund: .80% for MIF;
1.00% for MSIF; and 1.50% for SMAF
7
<PAGE>
and MGSF. For expense reimbursement applicable to the Keyport Trust Funds
beginning July 1, 1993, see footnote 4 on page 5 of the prospectus. The return
percentages would be lower without this expense reimbursement.
** Percentage of change is for less than 12 months; it is for the period from
the inception date to the end of that year (SMAF - 5/1/89; MIF - 2/1/93; CKUF -
7/13/93; CKGIF - 7/23/93; CKUSGF - 7/13/93; and CKIFG - 5/3/94).
*** The SMAF, MIF and CKUSGF Sub-Accounts are not available for the allocation
of new purchase payments or for transfers of Contract Value.
Yield for CIF Sub-Account
Yield and effective yield percentages for the CIF Sub-Account are
calculated using the method prescribed by the Securities and Exchange
Commission. The yield reflects the deduction of the annual l.40% asset-based
Contract charges. The yield also reflects, on an allocated basis, the Contract's
annual $30 Contract Maintenance Charge. The yield does not reflect Contingent
Deferred Sales Charges and premium taxes. The yield would be lower if these
charges were included. The following are the standardized formulas:
Yield equals: (A - B - 1) X 365
C 7
Effective Yield Equals: ( A - B) 365/7
C - 1
<TABLE>
<S> <C>
Where: A = the Accumulation Unit value at the end of the 7-day period.
B = hypothetical Contract Maintenance Charge for the 7-day period. The
assumed annual CIF charge is equal to the $30 Contract charge
multiplied by a fraction equal to the average number of Contracts
with CIF Sub-Account value during the 7-day period divided by the
average total number of Contracts 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 CIF
Accumulation Unit during the 7-day period divided by the average
Contract Value in CIF Sub-Account during the 7-day period.
C = the Accumulation Unit value at the beginning of the 7-day
period.
</TABLE>
The yield formula assumes that the weekly net income generated by an
investment in the CIF Sub-Account will continue over an entire year. The
effective yield formula also annualizes seven days of net income but it assumes
that the net income is reinvested over the year. This compounding effect causes
effective yield to be higher than the yield.
For the 7-day period ended 12/31/94, the yield for the CIF Sub-Account
was 4.34% and the effective yield was 4.43%.
8
<PAGE>
[KPMG LOGO] Peat Marwick LLP
99 High Street Telephone 617 988-1000 Telefax 617 988-0800
Boston, MA 02210
Independent Auditor's Report
The Board of Directors
Liberty Life Assurance Company of Boston
We have audited the accompanying statutory statements of admitted assets,
liabilities and capital and surplus of Liberty Life Assurance Company of Boston
as of December 31, 1994 and 1993, and the related statutory statements of
income, 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 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the Division of Insurance
of the Commonwealth of Massachusetts, which is a comprehensive basis of
accounting other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and capital and surplus
of Liberty Life Assurance Company of Boston as of December 31, 1994 and 1993,
and the results of its operations and its cash flows for the years then ended,
on the basis of accounting described in note 1.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
the accompanying Schedule 1 is presented for purposes of additional analysis and
is not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
This report is intended solely for the information and use of the board of
directors and management of Liberty Life Assurance Company of Boston and for the
filing with regulatory authorities and should not be used for any other purpose.
[SIGNATURE]
March 10, 1995
9
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Statutory Statements of Admitted Assets, Liabilities
and Capital and Surplus
December 31, 1994 and 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Admitted Assets
---------------
Investments:
Bonds $1,209,150 $1,067,897
Common stocks 882 56
Short-term investments 39,558 61,562
Other invested assets 20,270 15,037
------- ---------
Total investments 1,269,860 1,144,552
Cash 5,055 5,107
Premiums deferred and uncollected 14,860 13,183
Policy loans 36,586 32,759
Interest and dividends accrued 15,866 14,530
Other assets 10,566 8,816
Separate Accounts assets 694,564 599,266
------- ---------
Total admitted assets 2,047,357 1,818,213
======= =========
Liability and Capital and Surplus
Liabilities:
Policy and contract reserves 1,031,063 937,354
Policy and contract claims 10,799 20,604
Experience rating refund reserve 1,700 1,150
Policyholder dividend reserve 11,788 11,198
Liability for Premium and other deposit
funds 161,895 104,892
Federal income taxes 5,830 1,187
Interest maintenance reserve 5,292 4,605
Asset valuation reserve 6,969 5,120
Due to Liberty Mutual 133 16,753
Other liabilities 40,890 46,088
Separate Accounts liabilities 694,564 599,266
------- ---------
Total liabilities 1,970,923 1,748,217
------- ---------
Capital and Surplus:
Common stock, $312.50 par value; 8,000
shares authorized, issued and outstanding 2,500 2,500
Surplus:
Additional paid-in capital 2,500 2,500
Contingency reserve for separate accounts 750 750
Unassigned surplus 70,684 64,246
------- ---------
Total capital and surplus 76,434 69,996
Total liabilities and capital and surplus $2,047,357 $1,818,213
======= =========
</TABLE>
See accompanying notes to statutory financial statements.
10
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Statutory Statements of Income
Years ended December 31, 1994 and 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1993
------- ---------
<S> <C> <C>
Revenues:
Premiums and annuity considerations $193,762 $244,847
Deposit type funds 229,575 79,707
Net investment income 98,533 93,842
Other considerations 4,346 3,016
----- -------
Total revenues 526,216 421,412
----- -------
Deductions:
Benefits:
Death 29,165 27,257
Disability and accident and health 27,035 98,339
Other 81,327 80,147
----- -------
Total benefits 137,527 205,743
----- -------
Reserve increases (decreases):
Policy and contract 96,729 64,529
Liability for premium and other deposit funds 57,145 17,281
Experience rating refund 550 (2,050)
----- -------
Total net reserve increase 154,424 79,760
----- -------
Insurance expenses and taxes 42,865 63,464
Transfers to Separate Accounts 167,972 54,445
----- -------
Total deductions 502,788 403,412
----- -------
Income before dividends to policyholders, Federal income taxes and
net realized capital gains on investments 23,428 18,000
Dividends to policyholders 11,671 11,033
----- -------
Income before Federal income taxes and net realized capital gains
on investments 11,757 6,967
Federal income taxes 7,721 5,003
----- -------
Income before net realized capital gains on investments 4,036 1,964
Net realized capital gains on investments 253 484
----- -------
Net income $ 4,289 $ 2,448
===== =======
</TABLE>
See accompanying notes to statutory financial statements.
11
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Statutory Statements of Capital and Surplus
Years ended December 31, 1994 and 1993
(Dollars in thousands)
1994 1993
------ --------
Total capital and surplus, beginning of year $69,996 $68,344
Add (deduct):
Net income 4,289 2,448
Change in net unrealized capital gains on investments 1,609 919
Change in asset valuation reserve (1,849) (1,863)
Change in reserve on account of change in valuation
basis 3,019 --
Change in non-admitted assets (630) 148
---- ------
Total capital and surplus, end of year $76,434 $69,996
==== ======
See accompanying notes to statutory financial statements.
12
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Statutory Statements of Cash Flow
Years ended December 31, 1994 and 1993
(Dollars in thousands)
1994 1993
---- ----
Cash provided:
From Operations:
Premiums, annuity considerations and other fund
deposits $420,323 $327,527
Net investment income 81,810 82,131
Other considerations 4,141 3,239
----- -------
Cash provided by operations 506,274 412,897
----- -------
Life and accident and health benefits 65,657 126,806
Other benefits 84,225 83,436
Insurance expenses and taxes 43,437 59,483
Transfers to Separate Accounts 168,002 54,415
Dividends to policyholders 11,081 10,931
Federal income taxes, including tax on capital gains 4,897 13,849
Increase in policy loans 3,827 3,032
----- -------
Cash used by operations 381,126 351,952
----- -------
Net cash provided by operations 125,148 60,945
----- -------
From investments sold or matured:
Bonds 191,182 187,439
Common stocks 45,631 451
Other invested assets 2,687 2,230
----- -------
Cash provided by investments 239,500 190,120
----- -------
Total cash provided 364,648 251,065
----- -------
Cash applied:
Cost of investments acquired:
Bonds 315,120 283,205
Common stocks 45,898 41
Other invested assets 5,771 4,310
----- -------
Cash used to acquire investments 366,789 287,556
----- -------
Other, net 19,915 (6,741)
----- -------
Total cash applied 386,704 280,815
----- -------
Decrease in cash and short-term investments (22,056) (29,750)
Cash and short-term investments, beginning of year 66,669 96,419
----- -------
Cash and short-term investments, end of year $ 44,613 $ 66,669
===== =======
See accompanying notes to statutory financial statements.
13
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
December 31, 1994 and 1993
(Dollars in thousands)
(1) Summary of Significant Accounting Policies
(a) Organization
Liberty Life Assurance Company of Boston (the "Company") is directly owned
90% by Liberty Mutual Insurance Company and 10% by Liberty Mutual Fire
Insurance Company ("Liberty Mutual"). The Company insures life, annuity and
accident and health risks for groups and individuals. The Company also issues
structured settlement contracts and administers separate account contracts.
(b) Basis of Presentation
The accompanying financial statements have been prepared in accordance with
accounting practices prescribed or permitted by the Division of Insurance of the
Commonwealth of Massachusetts. Pursuant to statutory requirements: (1) premiums
are taken into earnings over the premium paying period of the policies, whereas
related acquisition costs are charged to income when incurred; (2) policy
reserves are computed using net level and commissioners' reserve valuation
methods and are based on statutory mortality (primarily 1958 and 1980 CSO for
life insurance and 1971 and 1983 IAM and GAM for annuities) and interest
requirements (primarily 2-1/2%, 4%, 4-1/2% and 4-3/4% for life insurance and
range from 5% to 11-1/4% for annuities) without consideration of withdrawals,
which are generally higher than reserves based on reasonably conservative
estimates of mortality, interest and withdrawals; (3) deferred Federal income
tax effects of tax return timing differences are not provided; (4) a liability
for undistributed earnings allocable to participating policyholders has not been
recorded; (5) the asset valuation reserve is reported as a liability; (6)
realized capital gains on sales of bonds that are due to changes in interest
rates are deferred and amortized to income to the original maturity date of the
bonds; (7) certain assets designated as "non-admitted assets," principally
certain receivables, have been charged to surplus; and (8) bonds are carried at
amortized cost irrespective of the Company's investment portfolio activity.
(c) Investments
Bonds and stocks are valued in accordance with requirements prescribed by the
National Association of Insurance Commissioners (NAIC). Bonds eligible for
amortization are carried at cost, adjusted for amortization of premium or
accretion of discount. Bonds not eligible for amortization are stated at
values prescribed by the NAIC. Common stocks are carried at market value. Net
unrealized gains or losses on investments in common stocks are recorded by a
direct charge or credit to policyholder's surplus.
Short-term investments, consisting primarily of money market instruments and
other debt issues purchased with an original maturity of 1 year or less, are
carried at cost which approximates market value. Other invested assets,
specifically investments in limited partnerships, are accounted for using the
equity method. Policy loans are stated at unpaid loan balances.
The asset valuation reserve (AVR) is a formula reserve for possible losses on
bonds, stocks, mortgage loans, real estate, and other invested assets. Changes
in the AVR are recorded by a direct charge or credit to policyholders' surplus.
(d) Reclassifications Certain reclassifications were made to the 1993 financial
statements to conform to the 1994 presentation.
(Continued)
14
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
(e) Fair Values of Financial Instruments
The Company has used the following methods and assumptions in estimating its
fair value disclosures of financial instruments:
Investment securities: Fair values for bonds are based on independently
quoted market prices for the same or similar issued bonds or on the current
rates estimated to be available to the company for bonds of similar terms and
remaining maturities. The fair values for common stocks are based on quoted
market prices.
Cash and short-term investments: The carrying amounts reported for these
instruments approximate their fair values.
Policy loans: The carrying value of policy loans approximates fair value.
(2) Investments
(a) Bonds
The amortized cost, gross unrealized gains and losses, and estimated market
value of investments in bonds at December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994
-----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 386,941 $57,271 $ (6,741) $ 437,471
Debt securities issued by foreign governments 17,772 378 (581) 17,569
Corporate securities 258,413 2,145 (11,825) 248,733
U.S. government guaranteed mortgage-backed
securities 546,024 7,216 (30,786) 522,454
------- ------ ------ --------
Total bonds $1,209,150 $67,010 $(49,933) $1,226,227
======= ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
1993
-----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 395,559 $118,131 $ (474) $ 513,216
Debt securities issued by foreign governments 14,632 1,294 (83) 15,843
Corporate securities 181,561 13,878 (385) 195,054
U.S. government guaranteed mortgage-backed
securities 476,145 32,163 (383) 507,925
------- ------ ------ --------
Total bonds $1,067,897 $165,466 $(1,325) $1,232,038
======= ====== ====== ========
</TABLE>
(Continued)
15
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
The amortized cost and estimated market value of bonds at December 31, 1994,
by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
--------- ----------
Due in one year or less $ 16,968 $ 17,206
Due after one year through five years 194,246 190,500
Due after five years through ten years 154,379 164,076
Due after ten years 297,533 331,991
U.S. government guaranteed mortgage-backed
securities 546,024 522,454
------- --------
Total bonds $1,209,150 $1,226,227
======= ========
At December 31, 1994 and 1993, bonds with an amortized cost of $8,156 and
$5,222, respectively, were on deposit with regulatory authorities.
(b) Common Stocks and Other Invested Assets
The cost of common stocks and other invested assets at December 31, 1994 and
1993 were as follows:
1994 1993
------ -------
Common stocks $ 704 $ 3
Other invested
assets 18,405 14,257
---- -----
Total $19,109 $14,260
==== =====
Gross unrealized gains and losses on common stock and other invested assets
included in unassigned surplus at December 31, 1994 and 1993 were as follows:
1994 1993
----- -------
Gross unrealized gains $2,487 $1,327
Gross unrealized losses (444) (494)
--- -----
Net unrealized gains on
investments $2,043 $ 833
=== =====
(Continued)
16
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
(c) Net Investment Income
Net investment income for the years ended December 31, 1994 and 1993 was as
follows:
1994 1993
------ --------
Investment income:
Bonds $ 95,837 $89,984
Common stocks 22 --
Cash and short-term investments 1,711 2,458
Policy loans 2,111 1,900
Amortization of interest maintenance
reserve 452 257
Other invested assets 342 397
---- ------
Total investment income 100,475 94,996
Less: Investment expenses 1,942 1,154
---- ------
Net investment income $ 98,533 $93,842
==== ======
(d) Realized Gains on Investments
Realized gains (losses) on investments for the years ended December 31, 1994
and 1993 were derived from the following sources:
1994 1993
----- -------
Bonds $1,752 $3,744
Common stocks 434 389
Short-term investments (4) --
Other invested assets 1,029 800
Foreign exchange -- (27)
--- -----
3,211 4,906
Less: Federal income taxes 1,819 2,217
--- -----
1,392 2,689
Less: Transfer to interest maintenance
reserve 1,139 2,205
--- -----
Net realized capital gains on investments $ 253 $ 484
=== =====
Proceeds from sales and maturities of investments in bonds during 1994 and
1993 were $191,182 and $187,439, respectively. Gross gains of $2,353 and
$3,860 and gross losses of $601 and $116 were realized on those sales during
1994 and 1993, respectively.
(Continued)
17
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
(e) Concentration of Investments
Investments in a single entity's corporate bonds in excess of ten percent of
capital and surplus at December 31 are as follows:
1994
---------------------
% of Total
Capital and
Amount Surplus
------ -----------
Walmart Stores $18,430 24.1%
Ford Motor Company 12,798 16.7
General Motors 12,588 16.5
Goldman Sachs Group 11,961 15.6
Pennsylvania Power &
Light 10,705 14.0
J C Penny Company 8,974 11.7
E.I. Dupont deNemours 8,141 10.7
1993
---------------------
% of Total
Capital and
Amount Surplus
------ -----------
E.I. Dupont deNemours $11,283 16.1%
Walmart Stores 9,454 13.5
J C Penny Company 8,968 12.8
Pennsylvania Power &
Light 7,710 11.0
Weyerhaeuser 7,434 10.6
Dayton Hudson 7,271 10.4
(f) Asset Valuation Reserve/Interest Maintenance Reserve
The Company provides for an asset valuation reserve (AVR) and interest
maintenance reserve (IMR) in accordance with its annual statement
instructions. AVR for December 31, 1994 and 1993 was $6,969 and $5,120
respectively. The change in AVR for the years ended December 31, 1994 and
1993 of $1,849 and $1,863 respectively, is presented as a change in surplus
in the accompanying statutory financial statements. IMR for December 31, 1994
and 1993 was $5,292 and $4,605 respectively. The IMR for 1994 and 1993 is net
of amortization of $452 and $257 respectively.
(Continued)
18
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
(3) Reinsurance
The Company reinsures with other companies portions of its risks underwritten
and assumes portions of risks on policies underwritten by other companies.
The Company generally reinsures risks on life insurance policies over two
hundred fifty thousand dollars as well as selected risks of lesser amounts.
Life insurance in force and premium information for the years ended December
31, 1994 and 1993 were as follows:
1994
--------------------------------------------------
Assumed
Ceded to From
Gross Other Other
Amount Companies Companies Net Amount
---------- -------- -------- ------------
Life insurance in force $14,824,724 $793,839 $46,532 $14,077,417
======== ====== ====== ==========
Premiums:
Group life and health 148,814 77,682 262 71,394
Individual life and
annuity 121,777 2,581 135 119,331
Group pension 3,037 -- -- 3,037
-------- ------ ------ ----------
Total premiums $ 273,628 $ 80,263 $ 397 $ 193,762
======== ====== ====== ==========
1993
--------------------------------------------------
Assumed
Ceded to From
Gross Other Other
Amount Companies Companies Net Amount
---------- -------- -------- ------------
Life insurance in force $13,264,605 $545,849 $19,470 $12,738,226
======== ====== ====== ==========
Premiums:
Group life and health 135,686 3,890 15,852 147,648
Individual life and
annuity 99,462 3,588 102 95,976
Group pension 1,223 -- -- 1,223
-------- ------ ------ ----------
Total premiums $ 236,371 $ 7,478 $15,954 $ 244,847
======== ====== ====== ==========
The Company assumes certain Disability premiums and claims from Liberty
Mutual under a reinsurance agreement effective January 1, 1986. Disability
premiums assumed relating to this agreement amounted to $262 and $15,852 in
1994 and 1993, respectively.
Amounts deducted from policy and contract reserves with respect to
reinsurance ceded at December 31, 1994 and 1993 were as follows:
1994 1993
------ --------
Group life and health $15,202 $10,215
Individual life and
annuity 17,360 13,968
---- ------
Total $32,562 $24,183
==== ======
19
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
Contingent liabilities exist with respect to reinsurance ceded which would
become liabilities of the Company in the event the assuming reinsurers are
unable to meet their obligations under reinsurance agreements.
(4) Withdrawal Characteristics of Annuity Reserves and Deposit Liabilities
Included in policy and contract reserves, separate accounts, and premium and
other deposit funds are annuity reserves and deposits that are subject to
withdrawal by the policyholder. The following tables illustrate the
composition of annuity reserve balances at December 31:
<TABLE>
<CAPTION>
1994
------------------------------------------------
Annuity Reserves
and Deposit Funds
----------------------
Not
Subject Subject
to to
Withdrawal Withdrawal Other Total
--------- --------- ------- -----------
<S> <C> <C> <C> <C>
Policy and contract reserves $ 6,967 $679,868 $344,228 $1,031,063
Separate Accounts liabilities 693,401 -- 1,163 694,564
Liability for premium and other deposit
funds 96,456 65,439 -- 161,895
------- ------- ----- ---------
Total $796,824 $745,307 $345,391 $1,887,522
======= ======= ===== =========
<CAPTION>
1993
-----------------------------------------------
Annuity Reserves
and Deposit Funds
----------------------
Not
Subject Subject
to to
Withdrawal Withdrawal Other Total
--------- --------- ------- ----------
<S> <C> <C> <C> <C>
Policy and contract reserves $ 6,419 $622,439 $308,496 $ 937,354
Separate Accounts liabilities 597,487 -- 1,779 599,266
Liability for premium and other deposit
funds 104,892 -- -- 104,892
------- ------- ----- --------
Total $708,798 $622,439 $310,275 $1,641,512
======= ======= ===== ========
</TABLE>
(Continued)
20
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
At December 31, 1994, the withdrawal characteristics of annuity reserves and
deposit liabilities are as follows:
Amount % of Total
------ ----------
Subject to discretionary withdrawal with adjustment:
--with market value adjustment $ 28,027 2%
--at book value less surrender charge 68,429 4
------- ----
96,456 6
Subject to discretionary withdrawal without adjustment:
--at book value (minimal or no charge or adjustment) 700,367 45
Not subject to discretionary withdrawal (net of
reinsurance of $12,688) 745,307 49
------- ---
Total $1,542,130 100%
======= ===
(5) Federal Income Taxes
The Company is included in a consolidated Federal income tax return with
Liberty Mutual and its other subsidiaries. Under the terms of an intercompany
taxation treaty, income taxes are determined as if the Company filed its own
tax return. Tax settlements are paid to or received from Liberty Mutual.
Actual Federal income taxes for the years ended December 31, 1994 and 1993
differ from expected tax expense computed by applying the Federal income tax
rate of 35% to statutory income before Federal income taxes and net realized
capital gains on investments as follows:
1994 1993
----- -------
Computed expected tax expense $4,115 $2,438
Policy and contract reserves 3,122 2,236
Policyholder dividend
reserve 157 37
Policy acquisition costs 1,637 1,243
Deferred premiums (631) (343)
Accrual of bond discount (620) (392)
Experience rating refund (196) (102)
Other 137 (114)
--- -----
Actual tax expense $7,721 $5,003
=== =====
As a result of the provisions of the Deficit Reduction Act of 1984, the
Company has deferred income approximating $4 million, included in its
unassigned surplus, which may become taxable in the future upon the
occurrence of certain conditions that management considers to be remote;
therefore, Federal income taxes relating to this deferred income have not
been provided for in the accompanying statutory financial statements.
(Continued)
21
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
(6) Related Party Transactions
Under a Service Agreement between the Company and Liberty Mutual, the latter
provides personnel, office space, equipment, computer processing and other
services. The Company reimburses Liberty Mutual for these services at cost,
and for any other special services supplied at the Company's request.
Substantially all of the Company's insurance expenses incurred in 1994 and
1993 related to this agreement.
The Company insures the group term life and disability risks for Liberty
Mutual employees. In addition, the Company also insures health risks for the
Liberty Mutual board of directors. Premiums associated with these policies
amounted to $13,456 and $9,793 in 1994 and 1993, respectively.
Liberty Mutual purchases structured settlement annuity contracts, with and
without life contingencies, from the Company. Premiums under these contracts
amounted to $55,683 and $45,489 in 1994 and 1993, respectively. The related
policy and contract reserves with respect to all structured settlement annuity
contracts purchased by Liberty Mutual amounted to $333,610 and $281,023 at
December 31, 1994 and 1993, respectively.
Liberty Mutual deposited $52,546 and $10,714 with the Company in 1994 and 1993,
respectively, to fund certain Liberty Mutual environmental claim transactions.
Such amounts have been included in deposit type fund revenues for the year ended
December 31, 1994 and 1993, as well as in the liability for premium and other
deposit funds.
In 1994, Liberty Mutual initiated an Optional Life Insurance Plan for key
officers of Liberty Mutual Group. The total premium paid in 1994 to the Company
was $3,986.
(7) Separate Accounts Business
Separate Accounts assets and liabilities represent designated funds held and
invested by the Company for the benefit of contractholders. Separate Accounts
assets are carried at market value. Investment income and changes in asset
values do not affect the operating results of the Company. Separate Accounts
business is maintained independently from the general account of the Company.
The Company provides administrative services for these contracts. Fees earned by
the Company related to these contracts included in other considerations were
$880 and $812 for the years ended December 31, 1994 and 1993, respectively.
(8) Pension Plan
The Company shares personnel with Liberty Mutual which has a noncontributory
defined benefit pension plan covering employees who have attained age twenty-one
and have completed one year of service. Benefits are based on years of service
and the employee's "final average compensation" which is the employee's average
compensation for the highest five consecutive calendar years during the ten
years immediately preceding retirement. Liberty Mutual's funding and accounting
policies are to contribute annually the maximum amount that can be deducted for
Federal income tax purposes and to charge such contributions to expense in the
year deductible for income tax purposes. Liberty Mutual's pension cost charged
to operations for the entire plan in 1994 and 1993 was $594 and $16,008
respectively. The Company's allocated pension cost in 1994 and 1993 was $70 and
$444, respectively. (Continued)
22
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
As of January 1, 1994 and 1993, the actuarial present value of accumulated
vested and nonvested benefits for the entire plan, based on a valuation
interest rate of 8%, approximated $563,073 and $556,977, respectively, and
the net assets, at fair market value, available for plan benefits
approximated $814,167 and $773,601 in 1994 and 1993, respectively. Assets of
the plan consist primarily of investments in life insurance company separate
accounts and a collective investment trust fund. At January 1, 1994 and 1993,
separate account investments of the Company, included in plan assets,
amounted to approximately $451,947 and $446,465, respectively.
(9) Postretirement Benefits
Liberty Mutual provides certain health care and life insurance benefits
("postretirement") for retired employees. Substantially all employees may
become eligible for these benefits if they reach retirement age while working
for the Liberty Companies. Alternatively, retirees may elect certain prepaid
health care benefit plans. Life insurance benefits are based upon a
participant's final compensation subject to the plan maximum.
In 1993, Liberty Mutual changed its method of accounting for the costs of its
postretirement benefits to the accrual method and elected to amortize its
transition obligation for retirees and fully eligible or vested employees
over 20 years. The unamortized transition obligation was $175,320 and
$185,060 at December 31, 1994 and December 31, 1993 respectively.
Net postretirement benefit costs for Liberty Mutual were approximately $29,419
in 1994 and $30,000 in 1993 and includes the expected cost of such benefits for
newly eligible or vested employees, interest cost, gains and losses arising from
differences between actuarial assumptions and actual experience, and
amortization of the transition obligation. Liberty Mutual made payments of
$13,000 in 1994 and $14,000 in 1993, as claims were incurred.
At December 31, 1994 and December 31, 1993, the accrued unfunded postretirement
benefit obligation for Liberty Mutual's retirees and other fully eligible plan
participants were $28,866 and $14,433, respectively. The accumulated benefit
obligation for non-vested employees was $96,900 and $120,507 at December 31,
1994 and 1993, respectively. The discount rates used in determining the
accumulated postretirement benefit obligation were 8% and 7.5% in 1994 and 1993,
respectively, and the health care cost trend rates were 12.75% and 13.25%,
graded to 6% over 10 years, in 1994 and 1993, respectively.
The Company's share of postretirement benefit costs were approximately $362 and
$693 for 1994 and 1993, respectively.
The health care cost trend rate assumption has a significant effect on the
amount reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the postretirement
benefit obligation of the entire plan as of December 31, 1994 by approximately
$15,600, and the estimated eligibility cost and interest cost components of net
periodic postretirement benefit cost for 1994 by approximately $2,081.
(Continued)
23
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
(10) Dividend Restrictions
According to a resolution voted by the Board of Directors of the Company, not
more than the larger of 10% of statutory profits on participating business or
fifty cents per thousand dollars of participating business in force in a
given year may accrue to the benefit of stockholders. The amount of statutory
unassigned surplus held for the benefit of participating policyholders of
$2,481 and for the stockholders is $68,203 at December 31, 1994. Dividends
paid to policyholders were $11,081, and there were no dividends paid to
stockholders in 1994. The payment of dividends to stockholders is restricted
by insurance laws of the Commonwealth of Massachusetts.
(11) Risk Based Capital
Life and health insurance companies are required to calculate Risk Based
Capital (RBC) in accordance with instructions set forth by the National
Association of Insurance Commissioners. 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 and policyholder dividend
reserve. The Company's total adjusted capital significantly exceeds RBC
requirements at December 31, 1994.
(12) Unpaid Claims Liability for Group Accident and Health Business
The activity in the liability for unpaid claims is summarized as follows:
1994 1993
------ --------
Balance at January 1 $87,557 $ 87,425
Less: reinsurance
recoverables 703 793
---- ------
Net balance at January 1 86,854 86,632
Incurred related to:
Current year 33,837 103,925
Prior years 476 (3,013)
---- ------
Total incurred 34,313 100,912
Paid related to:
Current year 10,499 74,756
Prior years 26,997 25,934
---- ------
Total paid 37,496 100,690
Net balance December 31 83,671 86,854
Plus: reinsurance
recoverables 444 703
---- ------
Net balance at December 31 $84,115 $ 87,557
==== ======
(Continued)
24
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Notes to Statutory Financial Statements
(Dollars in thousands)
As a result of changes in estimates of insured events in prior years, the
provision of claims increased by $476 in 1994 and decreased by ($3,013) in
1993.
(13) Contingencies
In the normal course of its business operations, the Company is involved in
litigation from time to time with claimants, beneficiaries and others, and
several lawsuits were pending on December 31, 1994. In the opinion of
management, the ultimate liability, if any, would not have a material adverse
financial effect upon the Company.
25
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Schedule 1--Selected Financial Data
Annual Statement for the Year ended December 31, 1994
(Dollars in thousands)
Investment income earned:
Government bonds $ 64,768
Other bonds (unaffiliated) 31,069
Bonds of affiliates --
Preferred stocks (unaffiliated) --
Preferred stocks of affiliates --
Common stocks (unaffiliated) 22
Common stocks of affiliates --
Mortgage loans --
Real estate --
Premium notes, policy loans and liens 2,111
Collateral loans --
Cash on hand and on deposit 32
Short-term investments 1,679
Other invested assets 342
Derivative instruments --
Aggregate write-ins for investment income --
--------
Gross investment income 100,023
========
Real estate owned--book value less encumbrances --
========
Mortgage loans--book value:
Farm mortgages --
Residential mortgages --
Commercial mortgages --
--------
Total mortgages --
========
Mortgage loans by standing--book value:
Good standing --
========
Good standing with restructured terms --
========
Interest overdue more than three months, not in foreclosure --
========
Foreclosure in process --
========
Other long term assets--statement value 20,270
========
Collateral loans $ --
========
(Continued)
26
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Schedule 1--Selected Financial Data
Annual Statement for the Year ended December 31, 1994
(Dollars in thousands)
Bonds and stocks of Parents, Subsidiaries and affiliates--book value
Bonds $ --
========
Preferred stocks --
========
Common stocks --
========
Bonds and Short-term investments by class and maturity:
Bonds by Maturity--statement value:
Due within one year or less 58,196
Over 1 year through 5 years 174,856
Over 5 years through 10 years 252,649
Over 10 years through 20 years 408,168
Over 20 years 354,839
--------
Total by maturity 1,248,708
========
Bonds by class--statement value:
Class 1 1,182,555
Class 2 63,321
Class 3 2,797
Class 4 --
Class 5 35
Class 6 --
--------
Total by class 1,248,708
========
Total bonds publicly traded 1,194,979
========
Total bonds privately placed 53,729
========
Preferred stocks--statement value --
========
Common stocks--market value 882,122
========
Short-term investments--book value 39,558
========
Financial options owned--statement value --
========
Financial options written and in force--statement value --
========
Financial futures contracts open--current price --
========
Cash on deposit $ 5,055
========
(Continued)
27
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Schedule 1--Selected Financial Data
Annual Statement for the Year ended December 31, 1994
(Dollars in thousands)
Life insurance in force:
Industrial $ --
========
Ordinary 6,804,244
========
Credit life --
========
Group life 8,067,011
========
Amount of accidental death insurance in force under ordinary
policies 254,617
========
Life insurance policies with disability provisions in force:
Industrial --
========
Ordinary 2,334,897
========
Credit life --
========
Group life 169,360
========
Supplemental contracts in force:
Ordinary--not involving life contingencies
Amount on deposit 1,138
========
Income payable 326
========
Ordinary--involving life contingencies
Income payable 127
========
Group--not involving life contingencies
Amount on deposit 148
========
Income payable 141
========
Group--involving life contingencies
Income payable $ 9
========
(Continued)
28
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Schedule 1--Selected Financial Data
Annual Statement for the Year Ended December 31, 1994
(Dollars in thousands)
Annuities:
Ordinary
Immediate--amount of income payable $ 32,176
======
Deferred--fully paid account balance 137,591
======
Deferred--not fully paid--account balance 89
======
Group
Amount of income payable 32,580
======
Fully paid account balance 26,624
======
Not fully paid--account balance --
======
Accidental and health insurance--premiums in force:
Ordinary 59
======
Group 134,563
======
Credit --
======
Deposit funds and dividend accumulations:
Deposit funds--account balance 161,895
======
Dividend accumulations--account balance 6,997
======
Claims payments 1994:
Group accident and health year-ended December 31, 1994:
1994 10,499
======
1994-1 26,997
======
1994-2 --
======
Other accident and health
1994 34
======
1994-1 45
======
1994-2 --
======
Other coverages that use developmental methods to calculate claims reserves
1994 --
======
1994-1 --
======
1994-2 $ --
======
29
<PAGE>
This page is intentionally left blank
30
<PAGE>
Independent Auditors' Report
The Contract Owners of
Liberty Life Assurance Company's
Variable Account K:
We have audited the accompanying statement of assets and liabilities of the
sub-accounts comprising Liberty Life Assurance Company's Variable Account K
as of December 31, 1994, and the related statements of operations and changes
in net assets for each of the years, or other periods as applicable, in the
two-year period ended December 31, 1994. 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the sub-accounts comprising
Liberty Life Assurance Company's Variable Account K at December 31, 1994, and
the results of their operations and changes in their net assets for each of
the years, or other periods as applicable, in the two-year period ended
December 31, 1994 in conformity with generally accepted accounting
principles.
[SIGNATURE]
Boston, Massachusetts
April 14, 1995
31
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY
VARIABLE ACCOUNT-K
Statement of Assets and Liabilities
December 31, 1994
<TABLE>
<S> <C>
Assets
Investments at market value:
SteinRoe Variable Investment Trust
Cash Income Fund--1,370,563 shares (cost $1,370,563) $ 1,370,563
Capital Appreciation Fund--216,136 shares (cost $3,565,981) 3,185,848
Managed Assets Fund--252,389 shares (cost $3,296,565) 3,074,096
Mortgage Securities Income Fund--214,987 shares (cost $2,288,198) 1,995,083
Managed Growth Stock Fund--55,684 shares (cost $1,087,416) 1,008,434
Strategic Managed Assets Fund--296,049 shares (cost $1,827,033) 1,725,968
Managed Income Fund--43,145 shares (cost $444,321) 389,595
Keyport Variable Investment Trust
Colonial-Keyport Growth and Income Fund--91,096 shares (cost $945,058) 913,689
Colonial-Keyport Utilities Fund--220,235 shares (cost $2,200,025) 1,786,106
Colonial-Keyport U.S. Government Fund--148,312 shares (cost $1,478,314) 1,360,017
Colonial-Keyport International Fund for Growth 100,851 shares (cost
$197,641) 189,599
----------
Total assets $16,998,998
==========
Net assets
Variable annuity contracts (note 6) $16,921,018
Annuity reserves (note 2) 70,737
Retained by Liberty Life Assurance Company (note 5) 7,243
----------
Total net assets $16,998,998
==========
</TABLE>
See accompanying notes to financial statements
32
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY
VARIABLE ACCOUNT-K
Statements of Operations and Changes in Net Assets
For the year ended December 31, 1994 and for the period
from February 15, 1993 to December 31, 1993
<TABLE>
<CAPTION>
Capital Appreciation
Cash Income Fund Fund Managed Assets Fund
1994 1993 1994 1993 1994 1993
--------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income
Dividends $ 52,096 $ 4,591 $ 361,047 $ 250,731 $ 123,668 $ 68,740
Expenses (note 3)
Mortality and expense risk and
administrative charges 18,367 1,512 37,586 4,668 38,800 8,333
------- ------ ------- ------- ------- --------
Net investment income 33,729 3,079 323,461 246,063 84,868 60,407
Realized gain (loss) -- -- (2,962) -- (895) 5
Unrealized appreciation
(depreciation) during the year -- -- (271,933) (108,200) (201,413) (21,056)
------- ------ ------- ------- ------- --------
Net increase (decrease) in net
assets from operations 33,729 3,079 48,566 137,863 (117,440) 39,356
------- ------ ------- ------- ------- --------
Purchase payments from contract
owners 2,138,062 516,107 1,517,610 1,201,979 1,287,415 1,647,462
Transfers between accounts (981,613) (216,721) 391,663 57,842 512,617 44,350
Contract terminations and annuity
payouts (129,033) -- (169,676) -- (292,067) (47,597)
Other transfers (to) from Liberty
Life Assurance Company 2,145 4,808 -- -- -- --
------- ------ ------- ------- ------- --------
Net increase (decrease) in net
assets from contract
transactions 1,029,561 304,194 1,739,597 1,259,821 1,507,965 1,644,215
------- ------ ------- ------- ------- --------
Net assets at beginning of period 307,273 -- 1,397,685 -- 1,683,571 --
------- ------ ------- ------- ------- --------
Net assets at end of period $1,370,563 $ 307,273 $3,185,848 $1,397,684 $3,074,096 $1,683,571
======= ====== ======= ======= ======= ========
</TABLE>
See accompanying notes to financial statements
33
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY
VARIABLE ACCOUNT-K
Statements of Operations and Changes in Net Assets, continued
For the year ended December 31, 1994 and for the period
from February 15, 1993 to December 31, 1993
<TABLE>
<CAPTION>
Mortgage Securities Strategic Managed
Income Managed Growth Stock Assets
Fund Fund Fund
1994 1993 1994 1993 1994 1993
--------- --------- --------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income
Dividends $ 145,663 $ 157,447 $ 63,362 $ 14,644 $ 92,161 $ 38,969
Expenses (note 3)
Mortality and expense risk
and administrative charges 31,894 14,676 13,305 3,911 20,821 5,927
------- ------- ------- ----- ------- --------
Net investment income 113,769 142,771 50,057 10,733 71,340 33,042
Realized gain (loss) (14,032) (5) (1,106) 40 398 48
Unrealized appreciation
(depreciation) during the year (167,283) (125,833) (113,632) 34,650 (85,515) (15,550)
------- ------- ------- ----- ------- --------
Net increase (decrease) in net
assets from operations (67,546) 16,933 (64,681) 45,423 (13,777) 17,540
------- ------- ------- ----- ------- --------
Purchase payments from
contract owners 129,543 2,391,052 388,698 673,900 371,567 969,525
Transfers between accounts (170,193) (40,264) 75,036 7,601 407,203 50,359
Contract terminations and
annuity payouts (250,397) (14,045) (113,970) (3,573) (74,849) (1,600)
Other transfers (to) from Liberty
Life Assurance Company -- -- -- -- -- --
------- ------- ------- ----- ------- --------
Net increase (decrease) in net
assets from contract
transactions (291,047) 2,336,743 349,764 677,928 703,921 1,018,284
------- ------- ------- ----- ------- --------
Net assets at beginning of period 2,353,676 -- 723,351 -- 1,035,824 --
------- ------- ------- ----- ------- --------
Net assets at end of period $1,995,083 $2,353,676 $1,008,434 $723,351 $1,725,968 $1,035,824
======= ======= ======= ===== ======= ========
</TABLE>
See accompanying notes to financial statements
34
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY
VARIABLE ACCOUNT-K
Statements of Operations and Changes in Net Assets, continued
For the year ended December 31, 1994 and for the period
from February 15, 1993 to December 31, 1993
<TABLE>
<CAPTION>
Colonial-Keyport
Growth and Income Colonial-Keyport
Managed Income Fund Fund* Utilities Fund*
1994 1993 1994 1993 1994 1993
-------- ------- ------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income
Dividends $ 30,440 $ 16,496 $ 22,242 $ 4,426 $ 113,585 $ 37,642
Expenses (note 3)
Mortality and expense risk
and administrative charges 5,526 1,711 11,421 1,123 29,156 7,628
------ ----- ----- ----- ------- --------
Net investment income 24,914 14,785 10,821 3,303 84,429 30,014
Realized gain (loss) (978) (10) (1,193) 127 (22,989) 4
Unrealized appreciation (depreciation)
during the year (44,812) (9,914) (29,485) (1,884) (317,393) (96,526)
------ ----- ----- ----- ------- --------
Net increase (decrease) in net assets
from operations (20,876) 4,861 (19,857) 1,546 (255,953) (66,508)
------ ----- ----- ----- ------- --------
Purchase payments from contract owners 170,578 347,689 531,570 376,348 383,054 2,159,596
Transfers between accounts 3,606 5,570 78,899 (3,793) (307,195) 70,728
Contract terminations and annuity
payouts (118,183) (3,650) (36,843) (14,181) (167,156) (30,460)
Other transfers (to) from Liberty Life
Assurance Company -- -- -- -- -- --
------ ----- ----- ----- ------- --------
Net increase (decrease) in net assets
from contract transactions 56,001 349,609 573,626 358,374 (91,297) 2,199,864
------ ----- ----- ----- ------- --------
Net assets at beginning of period 354,470 -- 359,920 -- 2,133,356 --
------ ----- ----- ----- ------- --------
Net assets at end of period $ 389,595 $354,470 $913,689 $359,920 $1,786,106 $2,133,356
====== ===== ===== ===== ======= ========
</TABLE>
*Commencement of operations--July 1, 1993
See accompanying notes to financial statements
35
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY
VARIABLE ACCOUNT-K
Statements of Operations and Changes in Net Assets, continued
For the year ended December 31, 1994 and for the period
from February 15, 1993 to December 31, 1993
<TABLE>
<CAPTION>
Colonial-Keyport
International
Colonial-Keyport Fund
U.S. Government Fund* For Growth** Total Total
1994 1993 1994 1994 1993
--------- --------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Income $
Dividends $ 79,702 $ 32,270 -- $ 1,083,967 $ 625,956
Expenses (note 3)
Mortality and expense risk
and administrative charges 19,105 4,707 1,034 227,015 54,196
------- ------- ------------ -------- ---------
Net investment income 60,597 27,563 (1,034) 856,952 571,760
Realized gain (loss) (267) 75 (105) (44,129) 284
Unrealized appreciation (depreciation)
during the year (94,143) (24,154) (8,041) (1,333,650) (368,467)
------- ------- ------------ -------- ---------
Net increase (decrease) in net assets
from operations (33,813) 3,484 (9,180) (520,827) 203,577
------- ------- ------------ -------- ---------
Purchase payments from contract owners 439,864 1,257,171 112,409 7,470,370 11,540,829
Transfers between accounts (102,489) 35,060 90,444 (2,022) 10,732
Contract terminations and annuity
payouts (137,449) (101,811) (4,074) (1,493,697) (216,917)
Other transfers (to) from Liberty Life
Assurance Company -- -- -- 2,145 4,808
------- ------- ------------ -------- ---------
Net increase (decrease) in net assets
from contract transactions 199,926 1,190,420 198,779 5,976,796 11,339,452
------- ------- ------------ -------- ---------
Net assets at beginning of period 1,193,904 -- -- 11,543,029 --
------- ------- ------------ -------- ---------
Net assets at end of period $1,360,017 $1,193,904 $189,599 $16,998,998 $11,543,029
======= ======= ============ ======== =========
</TABLE>
*Commencement of operations - July 1, 1993
**Commencement of operations - May 2, 1994
See accompanying notes to financial statements
36
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY
VARIABLE ACCOUNT-K
Notes to Financial Statements
1. Organization
Variable Account-K (the "Variable Account") is a separate investment account
established by Liberty Life Assurance Company (the "Company") to receive and
invest premium payments under flexible purchase payment deferred and immediate
variable annuity contracts issued by the Company. The Variable Account operates
as a Unit Investment Trust under the Investment Company Act of 1940 and invests
in eligible mutual funds. The Variable Account was established on February 15,
1993.
There are currently two funding vehicles available to the Variable Account, the
SteinRoe Variable Investment Trust ("SRVIT") and the Keyport Variable Investment
Trust ("KVIT"). There are currently thirteen available sub-accounts within the
Variable Account to which contract funds may be allocated. The KVIT was
established on July 1, 1993, offering the following funds to contractholders:
Colonial-Keyport Growth and Income Fund, Colonial-Keyport Utilities Fund, and
Colonial-Keyport U.S. Government Fund. The Colonial-Keyport International Fund
for Growth became available to contractholders on May 2, 1994. The Colonial
Keyport Strategic Income Fund and the Colonial Keyport U.S. Fund for Growth
became available to contractholders on July 5, 1994. No contractholders were
invested in the preceding two subaccounts at December 31, 1994.
2. Significant Accounting Policies
Shares of the Trusts 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 payout stage according to the
1983 Individual Annuity Valuation Table A. The annuitant may elect an assumed
investment rate of either 3.0% or 6.0%. The mortality risk is fully borne by the
Company and may result in additional amounts being transferred into the Account
by the Company.
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.
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 $30 to cover the cost of contract administration
is deducted from each contract owner's account on the contract anniversary date.
Daily deductions are made from each sub-account for assumption of mortality and
expense risk fees at an effective annual rate of 1.25% of the contract value. A
daily sales charge is also deducted at an effective annual rate of 0.15%.
4. Affiliated Company Transactions
Administrative services necessary for the operation of the Account are provided
by Keyport Life Insurance Company (Keyport Life), an affiliate of 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. SteinRoe & Farnham, Inc., an affiliate of the
Company, is the investment advisor to the SRVIT. Keyport Advisory Services
Corporation, a wholly owned subsidiary of Keyport Life, is the investment
advisor to KVIT. Colonial Management Associates, Inc., an affiliate of the
Company, is the sub-investment advisor for KVIT. Keyport Financial Services
Corporation, a wholly owned subsidiary of Keyport Life, is the principal
underwriter for SRVIT and KVIT. The investment advisors' and principal
underwriter's compensation is derived from the mutual funds.
5. Amounts Retained by Liberty Life Assurance Company
If a contractholder's financial transaction is not executed on the appropriate
investment date, a correcting buy or sell of shares is required by the Company
in order to make the contractholder whole. The resulting risk of a gain or loss
has no effect on the contractholder's account and is fully assumed by the
Company. Amounts retained by the Company are invested in the Variable Account
for this purpose.
37
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY
VARIABLE ACCOUNT-K
Notes to Financial Statements, continued
6. Unit Values
A summary of the accumulation unit values at December 31, 1994 and 1993 and
the accumulation units and dollar value outstanding at December 31, 1994 are
as follows:
<TABLE>
<CAPTION>
1993 1994
--------- ---------------------------------------
Unit Unit
Value Value Units Dollars
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Cash Income Fund $12.036276 $12.322293 110,638.4042 $ 1,363,319
Cash Income Fund-Dollar Cost Averaging 11.004179 11.422977 0.0000 0
Capital Appreciation Fund 21.236178 21.192232 149,229.0090 3,162,496
Managed Assets Fund 15.785199 15.070997 202,385.7864 3,050,156
Mortgage Securities Income Fund 14.529191 14.103610 141,459.0100 1,995,083
Managed Growth Stock Fund 18.157605 16.769681 60,134.3433 1,008,434
Strategic Managed Assets Fund 16.578111 16.345229 105,594.6287 1,725,968
Managed Income Fund 10.694650 10.083378 38,637.3689 389,595
Colonial-Keyport Growth and Income Fund 10.426480 10.205214 87,234.3955 890,246
Colonial-Keyport Utilities Fund 9.746863 8.625030 207,084.0869 1,786,106
Colonial-Keyport U.S. Government Fund 10.084517 9.804679 138,711.0300 1,360,017
Colonial-Keyport International Fund for
Growth _ 9.314037 20,356.2103 189,598
--------- ---------
1,261,464.2732 $16,921,018
========= =========
</TABLE>
38
<PAGE>
This page is intentionally left blank
<PAGE>
PART C
<PAGE>
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part B:
Variable Account-K:
Statement of Assets and Liabilities as of December 31, 1994.
Statements of Operations and Changes in Net Assets as of
December 31, 1994 and for the period February 15, 1993 to
December 31, 1993.
Notes to Financial Statements
Liberty Life Assurance Company of Boston:
Statutory Statements of Admitted Assets, Liabilities and Capital and
Surplus as of December 31, 1994 and 1993.
Statutory Statements of Income for the years ended December 31, 1994
and 1993.
Statutory Statements of Capital and Surplus for the years ended
December 31, 1994 and 1993.
Statutory Statements of Cash Flow for the years ended December 31,
1994 and 1993. Notes to Statutory Financial Statements
(b) Exhibits:
(1) Resolution of Board of Directors is incorporated by reference to
Form N-4 File No. 33-41122 filed on June 12, 1991.
(2) Not applicable.
(3) Underwriting Agreement and Specimen Underwriter and Dealer Agreement
are incorporated by reference to Pre-Effective Amendment No. 1 to
Form N-4 (File No. 33-41122).
(4) Variable Annuity Contract FLEX(4V)NY is incorporated by reference to
Post-Effective Amendment No. 1 to Form N-4 (File No. 33-41122).
Contract Endorsements are incorporated by reference to Post-Effective
Amendment No. 1 to Form N-4 (File No. 33-41122). Endorsement
END.A(106) for Contracts issued January 15, 1993 to the date the New
York State Insurance Department approves the endorsement and
Endorsement END.A(107) for Contracts issued on or after the date the
New York State Insurance Department approves the endorsement are
Exhibit 24(b)(4).
(5) Variable Annuity Contract Application is incorporated by reference to
Post-Effective Amendment No. 4 to Form N-4 (File No. 33-41122).
(6) Articles of Incorporation and By-laws are incorporated by reference
to Form N-4 File No. 33-41122 filed on June 12, 1991.
(7) Not applicable.
(8) Participation Agreement and Service Agreement are incorporated by
reference to Pre-Effective Amendment No. 1 to Form N-4 (File No.
33-41122).
(9) Opinion and Consent of Counsel is incorporated by reference to
Pre-Effective Amendment No. 1 to Form N-4 (File No. 33-41122).
(10) Consent of Independent Certified Public Accountants is Exhibit
24(b)(10).
(11) Not applicable.
(12) Not applicable.
(13) Schedule for Computation of Performance Quotations is incorporated by
reference to Post-Effective Amendment No. 4 to Form N-4 (File No.
33-41122).
(14) Powers of Attorney are Exhibit 24(b)(14).
<PAGE>
(15) Exemptive Relief is incorporated by reference to Post-Effective
Amendment No. 5 to Form N-4 (File No. 33-41122).
Item 25. Officers and Directors of the Depositor.
Name and Address Position
- ---------------- --------
Gary L. Countryman Chairman of the Board & Chief Exec. Officer
Edmund F. Kelly President and CAO
Morton E. Spitzer Exec. VP
Maryann P. Sullivan Exec. VP
Paul A. Cronin Vice President
A. Alexander Fontanes Vice President
Andrew M. Girdwood, Jr. Vice President
Richard W. Hadley Vice President
Richard B. Lassow Vice President
Merrill J. Mack Vice President
Douglas T. Maines Vice President
John S. O'Donnell Vice President
Gerard A. Paolino Vice President
Steven M. Sentler Vice President
Richard A. Torrey Vice President
John A. Tymochko Vice President
Robert H. Gruhl Treasurer
Barry S. Gilvar Secretary
James W. Jakobek Assistant Treasurer
Paul R. Anthony Assistant Secretary
Peter S. Aten Assistant Secretary
David W. Hoffman Assistant Secretary
Christine T. O'Neill Assistant Secretary
<PAGE>
Directors
- ---------
John B. Conners Robert H. Gruhl Morton E. Spitzer
Gary L. Countryman Edmund F. Kelly Maryann P. Sullivan
A. Alexander Fontanes Christopher C. Mansfield
*175 Berkeley Street, Boston, MA 02117, unless noted otherwise
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
The Depositor controls the Registrant, and is an affiliate of Keyport
Financial Services Corp. (KFSC) a Massachusetts corporation functioning
as a broker/dealer of securities. KFSC files separate financial
statements. Both are ultimately controlled by Liberty Mutual Insurance
Company.
The Depositor is an affiliate of Keyport Advisory Services Corp. (KASC),
a Massachusetts corporation functioning as an investment advisor. KASC
files separate financial statements and is ultimately controlled by
Liberty Mutual Insurance Company.
Chart for the affiliations of the Depositor is incorporated by reference
to Form N-4 File No. 33-41122.
Item 27. Number of Contract Owners.
At September 30, 1995, there were 316 Qualified Contract Owners and
281 Non-Qualified Contract Owners.
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 Keyport Variable Investment Trust,
which offer eligible funds for variable annuity and variable life insurance
contracts. KFSC is also principal underwriter for the KMA Variable Account and
Keyport Variable Account - I of Keyport Life Insurance Company and for the
Keyport America Variable Annuity Account and Keyport America Variable Life
Account of Keyport America Life Insurance Company, both are affiliated companies
of Liberty Life.
<PAGE>
The directors and officers are:
Name and Principal Position and Offices
Business Address* with Underwriter
- ----------------- ----------------
John W. Rosensteel Chairman of the Board and President
Lee R. Roberts Director
John E. Arant III Vice President and Sales Officer
William L. Dixon Vice President-Compliance Officer
Francis E. Reinhart Director and Vice President-Administration
Rogelio P. Japlit Treasurer
James J. Klopper Clerk
*125 High Street, Boston, Massachusetts 02110.
Item 30. Location of Accounts and Records.
Liberty Life Assurance Company of Boston, 175 Berkeley St., Boston, MA
02117
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
incorporated by reference to Form N-4 File No. 33-41122 filed on June 12, 1991.
<PAGE>
SIGNATURES
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets the requirements of Securities
Act Rule 485(b) for effectiveness for this Registration Statement and has caused
this Registration Statement to be signed on its behalf, in the City of Boston
and Commonwealth of Massachusetts, on this 12th day of October, l995.
Variable Account - K
--------------------
(Registrant)
BY: Liberty Life Assurance Company of Boston
----------------------------------------
(Depositor)
BY: /S/ Robert H. Gruhl
----------------------------------------
Robert H. Gruhl, Treasurer
<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.
GARY L. COUNTRYMAN* EDMUND F. KELLY*
- ------------------- ----------------
GARY L. COUNTRYMAN EDMUND F. KELLY
Chairman of the Board President
JOHN B. CONNERS* /S/ Robert H. Gruhl 10/12/95
- ---------------- ------------------- --------
JOHN B. CONNERS ROBERT H. GRUHL DATE
Director Treasurer
A. ALEXANDER FONTANES*
- ----------------------
A. ALEXANDER FONTANES
Director
/S/ Robert H. Gruhl
- -------------------
ROBERT H. GRUHL
Director
EDMUND F. KELLY*
- ----------------
EDMUND F. KELLY
Director
CHRISTOPHER C. MANSFIELD*
- -------------------------
CHRISTOPHER C. MANSFIELD
Director
*BY: /S/ Robert H. Gruhl 10/12/95
------------------- --------
MORTON E. SPITZER* ROBERT H. GRUHL Date
- ------------------ Attorney-in-Fact
MORTON E. SPITZER
Director
MARYANN P. SULLIVAN*
- --------------------
MARYANN P. SULLIVAN
Director
* Robert H. Gruhl 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.
<PAGE>
EXHIBIT INDEX
Exhibit
24(b)(4) Contract Endorsements
24(b)(10) Consent of Independent Certified Public Accountants
24(b)(14) Powers of Attorney
<PAGE>
Exhibit 24(b)(4)
CONTRACT ENDORSEMENTS
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY DEATH PROVISIONS
OF BOSTON ENDORSEMENT
- ------------------------------------------------------------------------------
We have issued this endorsement as part of the contract to which it is attached
to be effective as of the Issue Date.
The "Death of Primary Owner, Joint Owner, or Annuitant" section on page 9
provides for a guaranteed minimum death value amount that is the greater of two
defined amounts [(a) and (b)]. This endorsement enhances this guaranteed minimum
by adding a third amount. The guaranteed minimum is now the greatest of the
current (a) and (b) and a new (c):
(c) we will compute an "Anniversary Value" for each Contract Anniversary (if
any) before the 81st birthday of the covered person and we will use the
greatest of such "Anniversary Values". The covered person is the Primary
Owner or, if there is a non-natural Owner such as a trust, the Annuitant
is the covered person. The "Anniversary Value" for each applicable
Contract Anniversary initially equals the Contract Value on that
Anniversary. It is then increased by any purchase payments made from
that Anniversary until the date of death, and decreased by the following
amount at the time of each partial surrender made from that Anniversary
until the date of death: the partial surrender amount divided by the
Contract Value right before the surrender, multiplied by the
"Anniversary Value" right before the surrender.
Signed by the Company:____________________________________
President
END.A(106)
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY DEATH PROVISIONS
OF BOSTON ENDORSEMENT
- -------------------------------------------------------------------------------
We have issued this endorsement as part of the contract to which it is attached
as of the Issue Date.
The first two sentences of the second paragraph of the "Death of Primary Owner,
Joint Owner, or Annuitant" section on page 9 are replaced by the following:
The Contract Value will be increased, as provided below, if it is less
than the guaranteed minimum death value amount. This minimum value is
the greater of the following two amounts: (a) we will add up all
purchase payments made through the date of death and then subtract all
partial surrenders made through the date of death, and (b) we will
compute an "Anniversary Value" for each Contract Anniversary (if any)
before the 81st birthday of the covered person and we will use the
greatest of such "Anniversary Values". The covered person is the
Primary Owner of, if there is a non-natural Owner such as a trust, the
Annuitant is the covered person. The "Anniversary Value" for each
applicable Contract Anniversary initially equals the Contract Value on
that Anniversary. It is then increased by any purchase payments made
from that Anniversary until the date of death, and decreased by the
following amount at the time of each partial surrender made from that
Anniversary until the date of death: the partial surrender amount
divided by the Contract Value right before the surrender, multiplied by
the "Anniversary Value" right before the surrender.
Signed by the Company:___________________________________
President
END.A(107)
<PAGE>
Exhibit 24(b)(10)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Liberty Life Assurance Company of Boston:
We consent to the use of our reports included herein and to the
reference to our firm under the heading "Experts" in the Statement of Additional
Information.
Boston, Massachusetts /S/ KPMG Peat Marwick LLP
October 13, 1995
<PAGE>
Exhibit 24(b)(14)
POWERS OF ATTORNEY
<PAGE>
LIMITED POWER OF ATTORNEY
I, John B. Conners, a Director of Liberty Life Assurance Company of
Boston, a corporation duly organized under the laws of the Commonwealth of
Massachusetts, do hereby appoint Edmund F. Kelly and Robert H. Gruhl, and each
of them singly, my true and lawful attorneys, with full power to them and each
of them to sign for me and in my name as a director of this Company all
documents required for registration of a security under the Securities Act of
1933, as amended, all documents required for registration of an investment
company under the Investment Company Act of 1940, as amended, and all other
documents required to be filed with the Securities and Exchange Commission under
those two Acts and the Act regulations.
Date: October 9, 1995
/S/ /S/ John B. Conners
- ------------------------ ------------------------
Signature of Witness Signature of Mr. Conners
<PAGE>
LIMITED POWER OF ATTORNEY
I, Gary L. Countryman, Chairman of the Board and Chief Executive
Officer of Liberty Life Assurance Company of Boston, a corporation duly
organized under the laws of the Commonwealth of Massachusetts, do hereby appoint
Edmund F. Kelly and Robert H. Gruhl, and each of them singly, my true and lawful
attorneys, with full power to them and each of them to sign for me and in my
name as Chairman of the Board and Chief Executive Officer of this Company all
documents required for registration of a security under the Securities Act of
1933, as amended, all documents required for registration of an investment
company under the Investment Company Act of 1940, as amended, and all other
documents required to be filed with the Securities and Exchange Commission under
those two Acts and the Act regulations.
Date: October 9, 1995
/S/ /S/ Gary L. Countryman
- ------------------------ ---------------------------
Signature of Witness Signature of Mr. Countryman
<PAGE>
LIMITED POWER OF ATTORNEY
I, Edmund F. Kelly, Director, President and Chief Administrative
Officer of Liberty Life Assurance Company of Boston, a corporation duly
organized under the laws of the Commonwealth of Massachusetts, do hereby appoint
Robert H. Gruhl my true and lawful attorney, with full power to sign for me and
in my name as director, President and Chief Administrative Officer of this
Company all documents required for registration of a security under the
Securities Act of 1933, as amended, all documents required for registration of
an investment company under the Investment Company Act of 1940, as amended, and
all other documents required to be filed with the Securities and Exchange
Commission under those two Acts and the Act regulations.
Date: October 9, 1995
/S/ /S/ Edmund F. Kelly
- ------------------------ ------------------------
Signature of Witness Signature of Mr. Kelly
<PAGE>
LIMITED POWER OF ATTORNEY
I, A. Alexander Fontanes, Director and Vice President of Liberty Life
Assurance Company of Boston, a corporation duly organized under the laws of the
Commonwealth of Massachusetts, do hereby appoint Edmund F. Kelly and Robert H.
Gruhl, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name as director and Vice
President of this Company all documents required for registration of a security
under the Securities Act of 1933, as amended, all documents required for
registration of an investment company under the Investment Company Act of 1940,
as amended, and all other documents required to be filed with the Securities and
Exchange Commission under those two Acts and the Act regulations.
Date: October 9, 1995
/S/ /S/ A. Alexander Fontanes
- ------------------------ --------------------------
Signature of Witness Signature of Mr. Fontanes
<PAGE>
LIMITED POWER OF ATTORNEY
I, Robert H. Gruhl, Director and Treasurer of Liberty Life Assurance
Company of Boston, a corporation duly organized under the laws of the
Commonwealth of Massachusetts, do hereby appoint Edmund F. Kelly, my true and
lawful attorney, with full power to sign for me and in my name as a director and
Treasurer of this Company all documents required for registration of a security
under the Securities Act of 1933, as amended, all documents required for
registration of an investment company under the Investment Company Act of 1940,
as amended, and all other documents required to be filed with the Securities and
Exchange Commission under those two Acts and the Act regulations.
Date: October 9, 1995
/S/ /S/ Robert H. Gruhl
- ------------------------ ------------------------
Signature of Witness Signature of Mr. Gruhl
<PAGE>
LIMITED POWER OF ATTORNEY
I, Christopher C. Mansfield, a Director of Liberty Life Assurance
Company of Boston, a corporation duly organized under the laws of the
Commonwealth of Massachusetts, do hereby appoint Edmund F. Kelly and Robert H.
Gruhl, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name as a director of this
Company all documents required for registration of a security under the
Securities Act of 1933, as amended, all documents required for registration of
an investment company under the Investment Company Act of 1940, as amended, and
all other documents required to be filed with the Securities and Exchange
Commission under those two Acts and the Act regulations.
Date: October 9, 1995
/S/ /S/ Christopher C. Mansfield
- ------------------------ -----------------------------
Signature of Witness Signature of Mr. Mansfield
<PAGE>
LIMITED POWER OF ATTORNEY
I, Morton E. Spitzer, Director and Executive Vice President of Liberty
Life Assurance Company of Boston, a corporation duly organized under the laws of
the Commonwealth of Massachusetts, do hereby appoint Edmund F. Kelly and Robert
H. Gruhl, and each of them singly, my true and lawful attorneys, with full power
to them and each of them to sign for me and in my name as a director and an
Executive Vice President of this Company all documents required for registration
of a security under the Securities Act of 1933, as amended, all documents
required for registration of an investment company under the Investment Company
Act of 1940, as amended, and all other documents required to be filed with the
Securities and Exchange Commission under those two Acts and the Act regulations.
Date: October 9, 1995
/S/ /S/ Morton E. Spitzer
- ------------------------ ------------------------
Signature of Witness Signature of Mr. Spitzer
<PAGE>
LIMITED POWER OF ATTORNEY
I, Maryann P. Sullivan, Director and Executive Vice President of
Liberty Life Assurance Company of Boston, a corporation duly organized under the
laws of the Commonwealth of Massachusetts, do hereby appoint Edmund F. Kelly and
Robert H. Gruhl, and each of them singly, my true and lawful attorneys, with
full power to them and each of them to sign for me and in my name as a director
and an Executive Vice President of this Company all documents required for
registration of a security under the Securities Act of 1933, as amended, all
documents required for registration of an investment company under the
Investment Company Act of 1940, as amended, and all other documents required to
be filed with the Securities and Exchange Commission under those two Acts and
the Act regulations.
Date: October 9, 1995
/S/ /S/ Maryann P. Sullivan
- ------------------------ ------------------------
Signature of Witness Signature of Ms. Sullivan
