485BPOS 1 rydexannuity.htm As filed with the Securities and Exchange Commission on April 28, 1995.

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As filed with the Securities and Exchange Commission on April 25, 2002.

 

Registration Nos. 333-92947

 

811-07543

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==========================================================================

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. ___

[ ]

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Post-Effective Amendment No. 3

[X]

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and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

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Amendment No. 81

[X]

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Variable Account A

(Exact name of Registrant)

Keyport Life Insurance Company

(Name of Depositor)

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One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481

(Address of Depositor's Principal Executive Offices (Zip Code)

Depositor's Telephone Number, including Area Code: 617-526-1400

Edward M. Shea, Esq.

Assistant Vice President and Senior Counsel

Keyport Life Insurance Company

One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481

(Name and Address of Agent for Service)

copy to:

Joan E. Boros, Esq.

Christopher S. Petito, Esq.

Jorden Burt LLP

1025 Thomas Jefferson Street, N.W.

Washington, DC 20007

It is proposed that this filing will become effective:

( ) immediately upon filing pursuant to paragraph (b) of Rule 485

(X) on May 1, 2002 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

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Title of Securities Being Registered: Variable Portion of the Contracts Funded Through the Separate Account.

No filing fee is due because an indefinite amount of securities is deemed to have been registered in reliance on Section 24(f) of the Investment Company Act of 1940.

==========================================================================

Exhibit Index on Page ____

 

CONTENTS OF REGISTRATION STATEMENT

 

The Facing Sheet

The Contents Page

Cross-Reference Sheet

PART A

Prospectus

PART B

Statement of Additional Information

PART C

Items 24 - 32

The Signatures

Exhibits

 

 

 

 

PART A

 

 

Prospectus for
The Rydex Variable Annuity
Individual Flexible Purchase Payment
Deferred Variable Annuity Contract

issued by
Variable Account A
of
Keyport Life Insurance Company
125 High Street
Boston, Massachusetts 02110

Service Office:
Keyport Life Insurance Co.
P.O. Box 691
Leesburg, VA 20178
(877) 569-3789

This prospectus describes the Rydex variable annuity Contracts offered by Keyport Life Insurance Company. This Contract may be sold under different names. Most transactions involving this Contract may be performed through the Internet Service Center.

The value of your Contract will fluctuate on a variable basis. The Contract is designed to help you in your retirement planning. You may purchase it on a tax qualified or non-tax qualified basis.

To apply for the Contract, you must be of legal age, in a state where the Contracts may lawfully be sold.

You may not purchase a Contract if either you or the Annuitant are over 90 years old before we receive your application. You may not purchase a tax-qualified Contract if you or the Annuitant are over 75 years old before we receive your application (age 90 applies to Roth IRAs).

The minimum initial purchase payment for the Contract in most cases is $15,000. After the initial purchase payment, the minimum subsequent payment is $1,000. If you elect to have monthly electronic fund transfers, the minimum subsequent payment is $250. We reserve the right to limit the total purchase payments made under this Contract to $5,000,000.

If the value of your Contract is less than $5,000, we reserve the right to cancel your Contract and pay you the value of your Contract.

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We will allocate your initial purchase payment to the investment options you choose in the proportions you choose. Subsequent purchase payments will automatically be allocated to the Rydex U.S. Government Money Market Sub-account. You may then transfer funds from the Rydex U.S. Government Money Market Sub-account to any of the other available Sub-accounts. The Contract currently offers thirty-one investment options, each of which is a Sub-account of Variable Account A. Currently, you may choose among the Sub-accounts investing in the following Eligible Funds:

RYDEX VARIABLE TRUST: Rydex Nova Fund; Rydex Ursa Fund; Rydex OTC Fund; Rydex Arktos Fund; Rydex Large-Cap Europe Fund; Rydex Large-Cap Japan Fund; Rydex Banking Fund; Rydex Basic Materials Fund; Rydex Biotechnology Fund; Rydex Consumer Products Fund; Rydex Electronics Fund; Rydex Energy Fund; Rydex Energy Services Fund; Rydex Financial Services Fund; Rydex Health Care Fund; Rydex Internet Fund; Rydex Leisure Fund; Rydex Medius Fund; Rydex Mekros Fund; Rydex Precious Metals Fund; Rydex Real Estate Fund; Rydex Retailing Fund; Rydex Technology Fund; Rydex Telecommunications Fund; Rydex Titan 500 Fund; Rydex Transportation Fund; Rydex Utilities Fund; Rydex U.S. Government Bond Fund, Rydex U.S. Government Money Market Fund and Rydex Velocity 100 Fund

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Prospectuses for the Eligible Funds are attached. The purchase of a Contract involves certain risks. Investment performance of the Eligible Funds may vary. We do not guarantee any minimum Contract Value under the Contract. An investment in the Rydex U.S. Government Money Market Sub-account is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Rydex U.S. Government Money Market Fund, in which the Rydex U.S. Government Money Market Sub-account invests, seeks to preserve the value of your investment at $1.00 per share it is possible to lose money by investing in the Rydex U.S. Government Money Market Sub-account.

This prospectus contains important information about the Contract you should know before investing. You should read it before investing and keep it for future reference. You may download or print the prospectus from our website. If you require a free paper copy of this prospectus or the prospectuses for the Eligible Funds, please call or write our Service Office at the address above.

We have filed a Statement of Additional Information ("SAI") with the Securities and Exchange Commission. The current SAI has the same date as this prospectus and is incorporated by reference in this prospectus. A table of contents for the SAI appears on the last page of this prospectus. If you would like a free paper copy of this SAI, e-mail Help@mail.annuitynet.com or call the telephone number provided above. The SAI is also available through the SEC website (http://www.sec.gov). In addition, other information regarding the Company and the Separate Account is available through the SEC website or, if you prefer a paper copy, you may send an e-mail request to our Internet Service Center or by calling the telephone number above.

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The date of this prospectus is May 1, 2002.

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The SEC has not approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

TABLE OF CONTENTS

Definitions
Summary of Contract Features
Fee Table
Example
Explanation of Fee Table and Example
Condensed Financial Information
Performance Information
Keyport and the Variable Account
Purchase Payments and Applications
Investments of the Variable Account
  Allocations of Purchase Payments
  Eligible Funds
  Transfer of Variable Account Value
Substitution of Eligible Funds and Other Variable Account Changes
Deductions
  Deductions for Annuity Asset Charge
  Deductions for Premium Taxes
  Deductions for Income Taxes
  Total Variable Account Expenses
The Contracts
  Variable Account Value
  Valuation Periods
  Calculation of Contract Value
  Modification of the Contract
  Right to Revoke
Death Benefit Provisions
  Death of Annuitant
Contract Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Provisions
  Annuity Benefits
  Annuity Option and Income Date
  Annuity Options
  Variable Annuity Payment Values
  Proof of Age, Sex, and Survival of Annuitant
Suspension of Payments
Advertising
Tax Status
  Introduction
  Taxation of Annuities in General
  Qualified Plans
  Individual Retirement Annuities
  Annuity Purchases by Nonresident Aliens
Variable Account Voting Privileges
Sales of the Contracts
Legal Proceedings
Records and Reports
Inquiries by Contract Owners
Table of Contents--Statement of Additional Information

DEFINITIONS

Accumulation Unit: A unit of measurement used to calculate Variable Account Value.

Annuitant: The natural person on whose life annuity benefits are based starting on the Income Date.

Annuity Option: A form of payment of the annuity available under the Contract.

Annuity Payment: An amount paid at regular intervals after the Income Date under one of several Annuity Options. The amount paid may vary.

Annuity Unit: A unit of measure used to calculate the amount of Annuity Payments after the Income Date.

Contract: The variable annuity contract between you and us.

Contract Anniversary: Each anniversary of the Contract Date.

Contract Date: The date your Contract becomes effective. The date we receive your completed application and initial purchase payment.

Contract Owner ("you"): The person(s) having the privileges of ownership defined in the Contract.

Contract Value: The value of all Variable Account amounts under your Contract at a given time.

Contract Year: Each 12-month period beginning on the Contract Date and each Contract Anniversary thereafter.

Company ("we", "us", "our", "Keyport"): Keyport Life Insurance Company.

Designated Beneficiary: The person you designate to receive any death benefits under the Contract.

Eligible Funds: The underlying mutual funds in which the Variable Account invests.

In Force: The status of your Contract before the Income Date, as long as:

(1)  

you do not totally surrender it,

(2)  

your Contract Value is greater than zero, and

(3)  

if the Annuitant or any Contract Owner has died, fewer than five years have passed since the date of death.

Income Date: The date on which Annuity Payments are to begin.

Internet Service Center: The Internet site that provides variable annuity contract documents and information to current and prospective Contract Owners and through which various transactions may be performed. Certain of these transactions may require faxed or mailed signatures.

Net Asset Value: The difference between the value of assets and the amount of liabilities.

Non-Qualified Contract: Any Contract that is not issued under a Qualified Plan.

Qualified Contract: A Contract issued under a Qualified Plan.

Qualified Plan: A retirement plan which receives special tax treatment under Sections 401, 403(b), 408(b) or 408A of the Internal Revenue Code ("Code") or a deferred compensation plan for a state and local government or another tax exempt organization under Section 457 of the Code.

Sub-account: The portion of the Variable Account which invests in shares of a particular Eligible Fund.

Valuation Date: Each day the New York Stock Exchange (NYSE) is open for trading.

Valuation Period: The period commencing at the close of trading (currently 4:00 p.m. ET) on each day that the NYSE is open for trading (in other words, the Valuation Date) and ending at the close of such trading on the next succeeding Valuation Date.

Variable Account: Variable Account A which is a separate investment account of the Company into which purchase payments under the Contracts may be allocated. The Variable Account is divided into Sub-accounts, each of which invests in shares of an Eligible Fund.

SUMMARY OF CONTRACT FEATURES

Because this is a summary, it does not contain all of the information that may be important to you. You should read the entire prospectus before deciding to invest. Further, individual state requirements that are different from the information in this prospectus are described in supplements to this prospectus or in endorsements to the Contract.

WHAT ARE MY INVESTMENT CHOICES? You can allocate and reallocate your investment among the Sub-accounts of the Variable Account, each of which in turn invests in one of the following Eligible Funds:

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Rydex Variable Trust ("Rydex Trust"):
  Rydex Nova Fund
  Rydex Ursa Fund
  Rydex OTC Fund
  Rydex Arktos Fund
  Rydex Large-Cap Europe Fund
  Rydex Large-Cap Japan Fund
  Rydex Banking Fund
  Rydex Basic Materials Fund
  Rydex Biotechnology Fund
  Rydex Consumer Products Fund
  Rydex Electronics Fund
  Rydex Energy Fund
  Rydex Energy Services Fund
  Rydex Financial Services Fund
  Rydex Health Care Fund
  Rydex Internet Fund
  Rydex Leisure Fund
  Rydex Medius Fund
  Rydex Mekros Fund
  Rydex Precious Metals Fund
  Rydex Real Estate Fund
  Rydex Retailing Fund
  Rydex Technology Fund
  Rydex Telecommunications Fund
  Rydex Titan 500 Fund
  Rydex Transportation Fund
  Rydex Utilities Fund
  Rydex U.S. Government Bond Fund
  Rydex U.S. Government Money Market Fund
  Rydex Velocity 100 Fund

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HOW DOES THE CONTRACT WORK? During the accumulation period, you may make purchase payments to us. Prior to annuitization, you may choose to withdraw some or all of your Contract Value. When you begin Annuity Payments, your periodic Annuity Payments will be based upon your Contract Value on the Income Date. Subsequently, Annuity Payments will vary depending upon the performance of the Funds you select. (See "The Contracts".)

WHAT CAN I DO THROUGH THE INTERNET SERVICE CENTER? Most transactions associated with your Contract can be accomplished through the Internet Service Center. We will send you information concerning your Contract, and you can receive documents concerning your Contract, through the Internet Service Center. You can monitor the status of your Contract, move funds from one Sub-account to another, change your e-mail or mailing address, etc., all through the Internet Service Center. For security reasons, we may issue you a PIN or password which you will use to access the Internet Service Center. Certain transactions, however, such as a change of Beneficiary or a total withdrawal of funds from the Contract, may not be completed through the Internet Service Center, but will also require a signed request that is faxed or mailed to our Service Office.

WHAT CHARGES ARE ASSOCIATED WITH THIS CONTRACT? We apply an annual charge totaling .90% to the daily net asset value of the Variable Account. (See "Deductions".)

Each Eligible Fund also has additional operating expenses associated with its daily operation. Finally, each fund pays a management fee to its investment advisors based upon the average daily net asset value of the Fund. See the FEE TABLE. These fees and expenses are more fully described in the prospectuses for the funds.

If your state assesses a premium tax with respect to your Contract, we will deduct those amounts upon full surrender (including a surrender for the Death Benefit) or annuitization.

HOW WILL MY ANNUITY PAYMENTS BE CALCULATED? If you decide to annuitize, you elect an Annuity Option. Your periodic payment will be based upon the Annuity Option you selected, the changing values of the Sub-accounts in which you have invested, and your age at the Income Date. (See "Annuity Options".) Remember that you will benefit from any gain, and bear the risk of any drop, in the value of the securities in the Sub-accounts of the Variable Account.

WHAT HAPPENS IF I DIE BEFORE I ANNUITIZE? We will pay to your designated beneficiary the greater of your Contract Value or the sum of your purchase payments adjusted for partial withdrawals. (See "Death Provisions".)

MAY I SURRENDER THE CONTRACT OR MAKE A WITHDRAWAL? Yes. (See "Partial Withdrawals and Surrender".) You will be subject to income taxes on any earnings you withdraw and you may also be subject to a 10% income tax penalty. (See "Tax Status".)

DO I GET A FREE LOOK AT THIS CONTRACT? Yes. If within ten days (or a longer period if required by law) of the date you receive the signed Contract through the Internet Service Center, you cancel the Contract through the Internet Service Center or return it, postage prepaid, to the Service Office of Keyport, it will be canceled. If you live in a state that requires "return of Contract Value", you may invest in the Sub-Accounts during this period (the "Right to Revoke Period"). You bear the investment risk during this Right to Revoke Period. If you live in a state that requires "return of purchase payments", during this Right to Revoke Period and for ten additional days to allow for delivery of the notice from and to Us, your purchase payments will be invested in the Rydex U.S. Government Money Market Sub-account. You may change, at anytime during the Right to Revoke Period, the allocation(s) to the Sub-accounts of the Variable Account that you specified on your application. (See "Right to Revoke".)

FEE TABLE

Contract Owner Transaction Expenses

Sales Load Imposed on Purchases:

0%

Maximum Surrender Charge
 (as a percentage of purchase payments):


0%

Annual Contract Maintenance Charge:

$0  

Transfer Charge:

$0  

Variable Account Annual Expenses
(as a percentage of average net assets)

Annuity Asset Charge:
  (This charge is for administrative, mortality and    expense risk fees. See "Deductions".)

.90%

Total Variable Account Annual Expenses:

.90%

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Rydex Variable Trust Annual Expenses1
(Numbers in Parentheses Represent Expenses After any Fee Waiver or Expense Reimbursement)2
(as a percentage of average net assets)


Fund

Management Fees

Other Expenses

Total Fund Operating Expenses

Rydex Nova Fund

.75%

 .70%

     1.45%

Rydex Ursa Fund

.90%

 .99%

     1.89%

Rydex OTC Fund

.75%

 .70%

     1.45%

Rydex Arktos Fund

.90%

1.33%

     2.23%

Rydex Large-Cap Europe Fund

.90%

1.27%

     2.17%

Rydex Large-Cap Japan Fund

.90%

1.33%

     2.23%

Rydex Banking Fund

.85%

1.14%

     1.99%

Rydex Basic Materials Fund

.85%

1.10%

     1.95%

Rydex Biotechnology Fund

.85%

1.42%

     2.27%

Rydex Consumer Products Fund

.85%

1.22%

     2.07%

Rydex Electronics Fund

.85%

1.51%

     2.36%

Rydex Energy Fund

.85%

1.20%

     2.05%

Rydex Energy Services Fund

.85%

1.21%

     2.06%

Rydex Financial Services Fund

.85%

1.34%

     2.19%

Rydex Health Care Fund

.85%

1.38%

     2.23%

Rydex Internet Fund

.85%

1.48%

     2.33%

Rydex Leisure Fund

.85%

1.13%

     1.98%

Rydex Medius Fund

.90%

1.37%

     2.27%

Rydex Mekros Fund

.90%

1.36%

     2.26%

Rydex Precious Metals Fund

.75%

1.43%

     2.18%

Rydex Real Estate Fund

.85%

1.46%

     2.31%

Rydex Retailing Fund

.85%

1.39%

     2.24%

Rydex Technology Fund

.85%

1.49%

     2.34%

Rydex Telecommunications Fund

.85%

1.40%

     2.25%

Rydex Titan 500 Fund

.90%

1.32%

     2.22%

Rydex Transportation Fund

.85%

1.31%

     2.16%

Rydex Utilities Fund

.85%

1.27%

     2.08%

Rydex U.S. Government Bond Fund

.50%

1.87%

     2.37%(2.01%)

Rydex U.S. Government Money Market Fund

.50%

 .69%

     1.19%

Rydex Velocity 100 Fund

.90%

1.44%

     2.34%

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The above expenses for the Eligible Funds were provided by the Funds. We have not independently verified the accuracy of the information.

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1All Trust and Fund expenses are for 2001 The Rydex Trust expenses reflect such Trust's manager's agreement to reimburse expenses above certain limits.

2Rydex Global Advisors, investment adviser to the Rydex Variable Trust, may from time to time volunteer to waive fees and/or reimburse expenses if they exceed a certain level. Including this reimbursement, total fund expenses for Rydex U.S. Government Bond Fund were 2.01%. This arrangement may be discontinued at any time. .

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EXAMPLE

Example 1. If your Contract stays in force through the periods shown or is surrendered or annuitized at the end of the periods shown, you would pay the following expenses on a $1,000 investment, assuming 5% annual return on assets.

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Sub-account

1 Year

3 Years

5 Years

10 Years

Rydex Nova

$24

$ 76

$137

$330

Rydex Ursa

 28

  90

 161

 385

Rydex OTC

 24

  76

 137

 330

Rydex Arktos Fund

 31

 100

 179

 425

Rydex Large-Cap Europe Fund

 31

  99

 176

 418

Rydex Large-Cap Japan Fund

 31

 100

 179

 425

Rydex Banking Fund

 29

  93

 166

 397

Rydex Basic Materials Fund

 28

  92

 164

 392

Rydex Biotechnology Fund

 32

 102

 181

 430

Rydex Consumer Products Fund

 30

  95

 171

 406

Rydex Electronics Fund

 33

 105

 186

 441

Rydex Energy Fund

 30

  95

 169

 404

Rydex Energy Services Fund

 30

  95

 170

 405

Rydex Financial Services Fund

 30

  96

 172

 409

Rydex Health Care Fund

 31

 100

 179

 425

Rydex Internet Fund

 32

 104

 185

 437

Rydex Leisure Fund

 29

  93

 166

 395

Rydex Medius Fund

 32

 102

 181

 430

Rydex Mekros Fund

 32

 101

 181

 429

Rydex Precious Metals

 31

 99

 177

 419

Rydex Real Estate Fund

 32

 103

 184

 435

Rydex Retailing Fund

 31

 101

 180

 427

Rydex Technology Fund

 32

 104

 185

 438

Rydex Telecommunications Fund

 32

 101

 180

 428

Rydex Titan 500 Fund

 31

 100

 179

 424

Rydex Transportation Fund

 31

  98

 175

 417

Rydex Utilities Fund

 30

  96

 171

 408

Rydex U.S. Government Bond

 29

 94

 167

 399

Rydex U.S. Government Money Market

 21

 68

 122

 297

Rydex Velocity 100 Fund

 32

 104

 185

 438

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EXPLANATION OF FEE TABLE AND EXAMPLE

The purpose of the fee table is to illustrate the expenses you may directly or indirectly bear under a Contract. The table reflects expenses of the Variable Account as well as the Eligible Funds. You should read "Deductions" in this prospectus and the sections relating to expenses of the Eligible Funds in their prospectuses. The fee table and example does not include any taxes or tax penalties you may be required to pay if you surrender your Contract. We deduct the amount of any premium taxes (which currently range from 0% to 3.5%) upon full surrender (including a surrender for the Death Benefit) or annuitization.

The example should not be considered a representation of past or future expenses and charges of the Sub-accounts. Your actual expenses may be greater or less than those shown. Similarly, the 5% annual rate of return assumed in the example is not an estimate or a guarantee of future investment performance. See "Deductions" in this prospectus, and "Management" in the prospectus for Rydex Trust.

CONDENSED FINANCIAL INFORMATION

Accumulation Unit Values*

 

Accumulation

Accumulation

Number of

 

 

Unit Value

Unit Value

Accumulation

 

 

Beginning of

End of

Units End

 

Sub-account

Year**

Year

of Year

Year

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Rydex Nova

$28.409

$15.456

 3,581

2001

 

 25.000

 20.409

0

2000

 

Available in 2000 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Ursa

 28.731

 32.742

21,460

2001

 

 25.000

 28.731

0

2000

 

Available in 2000 but no Accumulation Units were purchased

 

 

 

 

 

Rydex OTC

 15.493

  9.953

 5,559

2001

 

 25.000

 15.493

0

2000

 

Available in 2000 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Arktos Fund

 25.000

 29.480

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Large-Cap Europe Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Large-Cap Japan Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Banking Fund

 25.000

 25.210

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Basic Materials Fund

 25.000

 24.210

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Biotechnology Fund

 25.000

 24.670

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Consumer Products Fund

 25.000

 25.320

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Electronics Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Energy Fund

 25.000

 21.210

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Energy Services Fund

 25.000

 17.740

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Financial Services Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Health Care Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Internet Fund

 25.000

 15.760

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Leisure Fund

 25.000

 18.090

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Medius Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Mekros Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Precious Metals

 24.068

 26.951

   420

2001

 

 25.000

 24.068

0

2000

 

Available in 2000 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Real Estate Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Retailing Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Technology Fund

 25.000

 18.610

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Telecommunications Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Titan 500 Fund

Not available until May 1, 2002

 

 

 

 

 

Rydex Transportation Fund

 25.000

 24.400

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex Utilities Fund

 25.000

 18.230

0

2001

 

Available in 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex U.S. Government Bond

 27.733

 27.488

0

2001

 

 25.000

 27.733

0

2000

 

Available in 2000 and 2001 but no Accumulation Units were purchased

 

 

 

 

 

Rydex U.S. Government Money Market

 25.758

 26.240

65,783

2001

 

 25.000

 25.758

 5,346

2000

 

 

 

 

 

Rydex Velocity 100 Fund

Not available until May 1, 2002

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*Accumulation Unit Values are rounded to the nearest tenth of a cent and numbers of accumulation units are rounded to the nearest whole number. The year-end accumulation unit value reflects the actual performance of the corresponding Eligible Fund reduced by Variable Account expenses at the rate shown in the Fee Table.

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**Each value is as of the date the Fund Sub-accounts first became available.

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The full financial statements for the Variable Account and Keyport are in the Statement of Additional Information.

PERFORMANCE INFORMATION

We may from time to time advertise certain performance information concerning the Sub-accounts.

Performance information is not an estimate or guarantee of future investment performance, and does not represent the actual experience of amounts invested by a particular Contract Owner.

We may advertise total return information for the Sub-accounts for various periods of time. Total return performance information is based on the overall percentage change in value of a hypothetical investment in the Sub-account over a given period of time.

We may present, along with any current required performance information, additional total return information that is computed on a different basis. Certain of the Eligible Funds have been available for other variable annuity contracts prior to the beginning of the offering of the Contracts described in this prospectus. Any performance information for such periods will be based on the historical results of the Eligible Funds and applying the fees and charges of the Contract for the specified time periods.

The Rydex U.S. Government Money Market Sub-account is a money market Sub-account that also may advertise yield and effective yield information. The yield of the Sub-account refers to the income generated by an investment in the Sub-account over a specifically identified seven-day period. We annualize this income by assuming that the amount of income generated by the investment during that week is generated each week over a 52-week period. It is shown as a percentage. The yield reflects the deduction of all charges assessed against the Sub-account but does not include premium tax charges. The yield would be lower if those charges were included.

We calculate the effective yield of the Rydex U.S. Government Money Market Sub-account in a similar manner but, when annualizing the yield, we assume income earned by the Sub-account is reinvested. This compounding effect causes effective yield to be higher than yield.

KEYPORT AND THE VARIABLE ACCOUNT

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We were incorporated in Rhode Island in 1957 as a stock life insurance company. Our executive is at One Sun Life Executive Park, Wellesley Hills, Masschusetts and our administrative office is at 125 High Street, Boston, Massachusetts 02110. Our home office is at 695 George Washington Highway, Lincoln, Rhode Island 02865. The mailing address of our Service Office is Post Office Box 691, Leesburg, Virginia 20178. Our Internet Service Center is http://www.AnnuityNet.com.

We write individual life insurance and individual and group annuity contracts that are "non-participating". That is, we do not pay dividends or benefits based on our financial performance. We are licensed to do business in all states except New York and are also licensed in the District of Columbia and the Virgin Islands. We are rated A+ (Superior) by A.M. Best and Company, independent analysts of the insurance industry. Standard & Poor's ("S&P") rates us AA+ (with negative outlook) for very strong financial security, Moody's rates us Aa2 (with positive outlook) for excellent financial strength and Fitch rates us AA (with positive outlook) for strong financial strength. The Best's A+ rating is the second highest rating level out of 16 rating levels. The S&P AA+ rating is the second highest rating level out of 21 rating levels. The Moody's Aa2 rating is the third highest rating level out of 21 rating levels. The Fitch AA rating is the third highest rating level out of 24 rating levels. These ratings reflect the opinion of the rating company as to our relative financial strength and ability to meet contractual obligations to our policyholders. Even though we hold the assets in the Variable Account separately from our other assets, our ratings may still be relevant to you since not all of our contractual obligations relate to payments based on those segregated assets. Our ratings do not affect or influence the performance of the Eligible Funds or the Separate Account.

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We are a member of the Insurance Marketplace Standards Association ("IMSA"), and as such may use the IMSA logo and membership in IMSA in advertisements. Being a member means that we have chosen to participate in IMSA's Life Insurance Ethical Market Conduct Program.

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We are an indirect wholly-owned subsidiary of Sun Life Assurance Company of Canada, ("Sun Life Assurance"), a multi-line insurance and financial services institution. We were acquired by Sun Life Assurance in November 2001 from Liberty Financial Companies, Inc., a subsidiary of Liberty Mutual Insurance Company of Boston, Massachusetts. We are ultimately controlled by Sun Life Financial Services of Canada, Inc. ("Sun Life Financial"), a corporation organized in Canada, that is a reporting company under the Securities Exchange Act of 1934 with common shares listed on the Toronto, New York, London and Philippines stock exchanges.

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We established the Variable Account pursuant to the provisions of Rhode Island Law on January 30, 1996. The Variable Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. Such registration does not mean the Securities and Exchange Commission supervises us or the management of the Variable Account.

Obligations under the Contracts are our obligations. Although the assets of the Variable Account are our property, these assets are held separately from our other assets and are not chargeable with liabilities arising out of any other business we may conduct. Income, capital gains and/or capital losses, whether or not realized, from assets allocated to the Variable Account are credited to or charged against the Variable Account without regard to the income, capital gains, and/or capital losses arising out of any other business we may conduct.

PURCHASE PAYMENTS AND APPLICATIONS

The initial purchase payment is due on the Contract Date. The minimum initial purchase payment is $15,000. You may make additional purchase payments. Each subsequent purchase payment must be at least $1,000 or any lesser amount we may permit. We will reduce the subsequent purchase payment to $250 in cases where you arrange for subsequent purchase payments by electronic funds transfer. Subsequent purchase payments will automatically be allocated to the Rydex U.S. Government Money Market Sub-account. You may then transfer funds from the Rydex U.S. Government Money Market Sub-account to any of the other available Sub-accounts. We reserve the right to cancel this Contract and return the Contract Value to you if the value of your Contract is less than $5,000. We may reject any purchase payment or any application. Purchase payments are allocated to a Contract based on the applicable Sub-account accumulation unit value(s) next determined after we receive it.

We have attempted to make the application process for the Contract as simple as possible. You may apply for the Contract on this Internet Service Center website (http://www.AnnuityNet.com) by completing our online application. During the application process, information is transferred between your computer and the Internet Service Center through a secure internet connection. In order to complete the online application, you will need to supply the following information:

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the full name, address, telephone number, date of birth, and Social Security or Taxpayer Identification Number for the Primary Owner, Annuitant, and any Joint Owner; and

o

the full name, address, and relationship to the Owner of any Beneficiary(ies) that you wish to designate. If you do not designate any Beneficiary(ies), your estate will be the beneficiary.

Once you have completed the online application, you will be asked to print a copy of the application. You must sign this application and fax or mail it to our Service Office before we can process your application.

You may make your initial purchase payment by personal check, by enclosing your check with your signed application. During the online application process, you may also choose to make purchase payments by Electronic Funds Transfer (EFT). If you choose the EFT option, it will still be necessary for you to enclose either a deposit slip or a voided check with your signed application when you mail the application to our Service Office.

If your application for a Contract is complete, we will apply your initial purchase payment to the Variable Account within two business days of receipt. If you live in a state that requires "return of purchase payments", during the Right to Revoke Period and for ten additional days to allow for delivery of the notice from and to Us, your purchase payments will be invested in the Rydex U.S. Government Money Market Sub-account. Once this period has ended, your purchase payments will then be allocated to the Sub-accounts you have selected. You may change, at anytime during the Right to Revoke Period, the allocation(s) to the Sub-accounts of the Variable Account that you specified on your application.

If the application is incomplete, we will notify you and try to complete it within five business days. If it is not complete at the end of this period, we will inform you of the reason for the delay. The purchase payment will be returned immediately unless you specifically consent to our keeping the purchase payment until the application is complete. Once the application is complete, the purchase payment will be applied within two business days of its completion.

We will send you a written notification by e-mail, to your last known e-mail address, showing the allocation of all purchase payments and the re-allocation of values after any transfer you have requested. You must notify us immediately of any error.

We may request you to confirm that the information is correct by signing a copy of the letter or a Contract delivery receipt. We will send you a written notice confirming all purchases. Our liability under any Contract relates only to amounts so confirmed.

INVESTMENTS OF THE VARIABLE ACCOUNT

Allocations of Purchase Payments

The Variable Account is segmented into Sub-accounts. Each Sub-account invests in shares of one of the Eligible Funds. We may add or withdraw Eligible Funds and Sub-accounts as permitted by applicable law.

We will invest your initial purchase payment to the Variable Account in the Sub-accounts you choose, after the expiration of the Right to Revoke Period. Your selection must specify the percentage of the initial purchase payment that is allocated to each Sub-account. The percentage for each Sub-account, if not zero, must be a whole number. The total of your specified allocations for the initial purchase payment must equal 100%. Subsequent purchase payments will automatically be allocated to the Rydex U.S. Government Money Market Sub-account. From there, you may transfer purchase payments to the Sub-account investing in other Eligible Funds as you may select.

Eligible Funds

The Eligible Funds are the separate funds listed within the Rydex Trust. Keyport and the Variable Account may enter into agreements with other mutual funds for the purpose of making such mutual funds available as Eligible Funds under certain Contracts.

We do not promise that the Eligible Funds will meet their investment objectives. Amounts you have allocated to Sub-accounts may grow, decline, or grow less in value than you expect, depending on the investment performance of the Eligible Funds in which the Sub-accounts invest. You bear the investment risk that those Eligible Funds possibly will not meet their investment objectives. You should carefully review their attached prospectuses before allocating amounts to the Sub-accounts of the Variable Account. The Eligible Funds are available for the separate accounts of insurance companies unaffiliated with us. The risks involved in this "mixed and shared funding" are disclosed in the Eligible Funds' prospectuses under the following caption: "Purchasing and Redeeming Shares".

Rydex Global Advisors serves as the investment adviser and manager of the Eligible Funds of the Rydex Trust.

Please see the Fund Prospectus for a complete description of the investment techniques utilized by the Funds, including the risks and volatility of these investments. Moreover, the strategic or tactical asset allocation program that can be utilized in a Contract of this type may be characterized as aggressive investing. There can be no assurance that you or any financial advisor will predict market moves successfully. If you utilized a financial advisor, you should carefully consider his or her education, experience, and reputation.

We briefly describe the Eligible Funds and the objectives they seek to achieve below:

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Eligible Funds of Rydex Trust
and Variable Account Sub-accounts


Investment Objective

Rydex Nova Fund ("Rydex Nova Sub-account")

Investment returns that match the performance of a specific benchmark or a daily basis. The current benchmark is 150% of the performance of the S&P 500 Index.

Rydex Ursa Fund ("Rydex Ursa Sub-account")

Investment returns that will inversely correlate to the performance of the S&P 500 Index.

Rydex OTC Fund ("Rydex OTC Sub-account")

Investment results that correspond to a benchmark for over-the-counter securities. The current benchmark is the NASDAQ 100 Index.

Rydex Arktos Fund ("Rydex Arktos Sub-account")

Investment returns that match the performance of a specific benchmark. The current benchmark is the inverse performance of the NASDAQ 100 Index.

Rydex Large-Cap Europe Fund ("Rydex Large-Cap Europe Sub-account")

Investment returns that correlate to the performance of a specific benchmark. The current benchmark is the Dow Jones Stoxx 50 Index.

Rydex Large-Cap Japan Fund ("Rydex Large-Cap Japan Sub-account")

Investment returns that correlate to the performance of a specific benchmark. The current benchmark is the Topix 100 Index.

Rydex Banking Fund ("Rydex Banking Sub-account")

Seeks to provide capital appreciation by investing in companies that are involved in the banking sector, including commercial banks (and their holding companies) and savings and loan institutions.

Rydex Basic Materials Fund ("Rydex Basic Materials Sub-account")

Seeks capital appreciation by investing in companies engaged in the mining, manufacture, or sale of basic materials, such as lumber, steel, iron, aluminum, concrete, chemicals and other basic building and manufacturing materials.

Rydex Biotechnology Fund ("Rydex Biotechnology Sub-account")

Seeks capital appreciation by investing in companies that are involved in the biotechnology industry, including companies involved in research and development, genetic or other biological engineering, and in the design, manufacture, or sale of related biotechnology products or services.

Rydex Consumer Products Fund (Rydex Consumer Products Sub-account")

Seeks capital appreciation by investing in companies engaged in manufacturing finished goods and services both domestically and internationally.

Rydex Electronics Fund ("Rydex Electronics Sub-account")

Seeks capital appreciation by investing in companies that are involved in the electronics sector, including semiconductor manufacturers and distributors, and makers and vendors of other electronic components and devices.

Rydex Energy Fund ("Rydex Energy Sub-account")

Seeks capital appreciation by investing in companies involved in the energy field, including the exploration, production, and development of oil, gas, coal and alternative energy sources.

Rydex Energy Services Fund ("Rydex Energy Services Sub-account")

Seeks capital appreciation by investing in companies that are involved in the energy services field, including those that provide services and equipment in the areas of oil, coal, and gas exploration and production.

Rydex Financial Services Fund ("Rydex Financial Services Sub-account")

Seeks capital appreciation by investing in companies involved in the financial services sector.

Rydex Health Care Fund ("Rydex Health Care Sub-account")

Seeks capital appreciation by investing in companies that are involved in the health care industry.

Rydex Internet Fund ("Rydex Internet Sub-account")

Seeks capital appreciation by investing in companies that provide products or services designed for or related to the Internet.

Rydex Leisure Fund ("Rydex Leisure Sub-account")

Seeks capital appreciation by investing in companies engaged in leisure and entertainment businesses.

Rydex Medius Fund ("Rydex Medius Sub-account")

Seeks to provide investment returns that correlate to the performance of a specific benchmark for mid-cap securities. The current benchmark is the S&P MidCap 400 Index.

Rydex Mekros Fund ("Rydex Mekros Sub-account")

Seeks to provide investment returns that correlate to the performance of a specific benchmark for small-cap securities. The current benchmark is the Russell 2000 Index.

Rydex Precious Metals Fund ("Rydex Precious Metals Sub-account")

Seeks to provide capital appreciation by investing in U.S. and foreign companies that are involved in the precious metals sector, including exploration, mining, production and development, and other precious metals related services.

Rydex Real Estate Fund ("Rydex Real Estate Sub-account")

Seeks capital appreciation by investing in companies that are involved in the real estate industry including real estate investment trusts (REITS).

Rydex Retailing Fund ("Rydex Retailing Sub-account")

Seeks capital appreciation by investing in companies engaged in merchandising furnished goods and services, including department stores, restaurant franchises, mail order operations, and other companies involved in selling products to consumers.

Rydex Technology Fund ('Rydex Technology Sub-account")

Seeks capital appreciation by investing in companies that are involved in the technology sector, including computer software and service companies, semiconductor manufacturers, networking and telecommunications equipment manufacturers, PC hardware and peripherals companies.

Rydex Telecommunications Fund ("Rydex Telecommunications Sub-account")

Seeks capital appreciation by investing in companies engaged in the development, manufacture, or sale of communications services or communications equipment.

Rydex Titan 500 Fund ("Rydex Titan 500 Sub-account")

Seeks to provide investment returns that will match the performance of a specific benchmark on a daily basis. The current benchmark is 200% of the performance of the S&P Index.

Rydex Transportation Fund ("Rydex Transportation Sub-account")

Seeks capital appreciation by investing in companies engaged in providing transportation services or companies engaged in the design, manufacture, distribution, or sale of transportation equipment.

Rydex Utilities Fund ("Rydex Utilities Sub-account")

Seeks capital appreciation by investing in companies that operate public utilities.

Rydex U.S. Government Bond Fund ("Rydex U.S. Government Bond Sub-account")

Investment results that correspond to a benchmark for U.S. Government Securities. The current benchmark is120% of the daily price movement of the Long Treasury Bond.

Rydex U.S. Government Money Market Fund ("Rydex U.S. Government Money Market Sub-account")

Security of principal, high current income and liquidity.

Rydex Velocity 100 Fund ("Rydex Velocity 100 Sub- account")

Seeks to provide investment returns that will match the performance of a specific benchmark on a daily basis. The current benchmark is 200% of the performance of the NASDAQ 100 Index.

Transfer of Variable Account Value

You may transfer Variable Account Value from one Sub-account to another after expiration of the Right to Revoke Period. We do not limit the number or frequency of transfers.

You may submit your transfer requests through the Internet Service Center. If we receive your request before 4:00 P.M. Eastern Time, we will initiate it at the close of business that day. We will initiate any requests received after that time at the close of the next business day. We will execute your request to transfer value by both redeeming and acquiring Accumulation Units on the day we initiate the transfer.

You may at any time view a list of transfer requests you have submitted that are awaiting execution by accessing your personal account information through the Internet Service Center. You may also retract a transfer request by removing it from the list at any time prior to 4:00 P.M. Eastern Time.

We are filing an amendment to the prospectus to change the deadlines for transfer requests for all Sub-accounts available under this Contract, except the Rydex U.S. Government Money Market Sub-Account, to 3:30 P.M., Eastern Time. Upon effectiveness of the change, if we receive your transfer requests before 3:30 P.M., Eastern Time on a Valuation Date, we will initiate them at the close of business that Valuation Date. We will initiate any requests received after that time at the close of the next Valuation Date. This change will apply to all Contracts, including Contracts issued before the effective date of the change.

We will notify you before we change the transfer deadline. We reserve the right to make other changes to the transfer provisions, consistent with applicable law.

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Substitution of Eligible Funds and Other Variable Account Changes

If shares of any of the Eligible Funds are no longer available for investment by the Variable Account, or further investment in the shares of an Eligible Fund is no longer appropriate under the Contract, we may add or substitute shares of another Eligible Fund or of another mutual fund for Eligible Fund shares already purchased or to be purchased in the future. Any substitution of securities will comply with the requirements of the Investment Company Act of 1940.

We also reserve the right to make the following changes in relation to the Variable Account and Eligible Funds:

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to operate the Variable Account in any form permitted by law;

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to take any action necessary to comply with applicable law or obtain and continue any exemption from applicable law;

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to transfer any assets in any Sub-account to another or to one or more separate investment accounts;

o

to add, combine or remove Sub-accounts in the Variable Account; and

o

to change how we assess charges, so long as we do not increase them above the maximum total amount shown in the Fee Table in connection with your Contract.

DEDUCTIONS

Deductions for Annuity Asset Charge

We deduct an annuity asset charge on a daily basis in computing the Accumulation Unit values from each Sub-account. The annuity asset charge is equal, on an annual basis, to .90% of the average daily net asset value of each Sub-account. We deduct the charge both before and after the Income Date.

The charge compensates us for administrative expenses we incur and for mortality and expense risks we assume. Our administrative expenses include, but are not limited to, bookkeeping costs, the cost of maintaining our Service Office and our Internet Service Center, and the costs associated with sales of the Contract. We assume the risk that annuitants as a class may live longer than expected (mortality risk), and that expenses may be higher than the deductions for those expenses (expense risk). In either case, the loss will fall on us. Conversely, if such deductions exceed our actual expenses, the excess will be profit to us.

Deductions for Premium Taxes

We deduct the amount of any premium taxes required by any state or governmental entity. We deduct premium taxes from Contract Value when they are paid. The actual amount of any such premium taxes will depend, among other things, on the type of Contract you purchase (Qualified or Non-Qualified), on your state of residence, the state of residence of the Annuitant, and the insurance tax laws of those states. Currently such premium taxes range from 0% to 3.5% of total purchase payments.

Deductions for Income Taxes

We will deduct income taxes from any amount payable under the Contract that a governmental authority requires us to withhold. See "Income Tax Withholding".

Total Variable Account Expenses

Total Variable Account expenses you will incur will be the annuity asset charge and, if applicable, a tax charge factor. (See "Calculation of Contract Value".)

The value of the assets in the Variable Account will reflect the value of Eligible Fund shares and the deductions and expenses paid out of the assets of the Eligible Funds. Each Eligible Fund pays a management fee to its investment adviser(s) based upon the average daily net asset value of the Fund. Each Eligible Fund also has additional operating expenses associated with the daily operation of the funds. The prospectuses for the Eligible Funds describe these deductions and expenses.

THE CONTRACTS

Variable Account Value

The Variable Account Value for your Contract is based on the sum of your proportionate interest in the value of each Sub-account to which you have allocated values. We determine the value of each Sub-account at any time by multiplying the number of Accumulation Units attributable to that Sub-account by its Accumulation Unit value.

Each purchase payment you make results in the credit of additional Accumulation Units to your Contract and the appropriate Sub-account. Purchase payments are credited to your Contract using the Accumulation Unit value that is next calculated after we receive your purchase payment. The number of additional units for any Sub-account will equal the amount allocated to that Sub-account divided by the Accumulation Unit value for that Sub-account at the time of investment.

Valuation Periods

We determine the value of the Variable Account each valuation period using the net asset value per share of the Eligible Fund shares. A valuation period is the period generally beginning at 4:00 P.M. (ET), or any other time for the close of trading on the New York Stock Exchange, and ending at the close of trading for the next business day. The New York Stock Exchange is currently closed on weekends; New Year's Day; Martin Luther King, Jr. Day; Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day and Christmas Day.

Calculation of Contract Value

Contract Value at any time prior to the Income Date equals the sum of the values of the Accumulation Units credited in the Sub-accounts under the Contract. Your Contract Value will fluctuate with the investment results of the Eligible Funds underlying the Sub-accounts you have selected.

The value of a Sub-account on any Valuation Date is the number of Accumulation Units in the Sub-account multiplied by the value of an Accumulation Unit in the Sub-account at the end of the Valuation Period.

Accumulation Units for each Sub-account are valued separately. Initially, the value of an Accumulation Unit was arbitrarily established at the inception of the Sub-account. It may increase or decrease from Valuation Period to Valuation Period. The Accumulation Unit value for a Sub-account for any later Valuation Period is determined as follows:

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the total value of Fund shares held in the Sub-account is calculated by multiplying the number of Fund shares owned by the Sub-account at the beginning of the Valuation Period by the net asset value per share of the Fund at the end of the Valuation Period (without giving effect to any transactions occurring during the Valuation Period), and adding any dividend or other distribution of the Fund if the record date for such distribution occurs during the Valuation Period; minus

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the liabilities of the Sub-account at the end of the Valuation Period (such liabilities include the daily charge (see below) imposed on the Sub-account, and may include a tax charge factor (see below); and the result is divided by

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the outstanding number of Accumulation Units in the Sub-account at the beginning of the Valuation Period.

The daily charge imposed on a Sub-account for any Valuation Period represent the annuity asset charge adjusted for the number of calendar days in the Valuation Period.

No tax charge factor is currently necessary since there are no federal income taxes attributable to the Separate Account. If we determine that there are federal income taxes attributable to the Separate Account, we may create a factor for such taxes to be included in the calculation.

Modification of the Contract

Only our President or Secretary may agree to alter the Contract or waive any of its terms. A change may be made to the Contract if there have been changes in applicable law or interpretation of law. Any changes must be made in writing and with your consent, except as may be required by applicable law.

Right to Revoke

Generally, you may return the Contract within 10 days after you receive it by delivering or mailing it to us. You may also cancel the Contract within 10 days through the Internet Service Center. If you return the Contract to us through the mail, the postmark on a properly addressed and postage-prepaid envelope determines if a Contract is returned within the 10-day period. We will treat the returned Contract as if we never issued it. We will promptly refund the Contract Value or purchase payments, whichever is required by state law, as of the date we receive the returned Contract or the date it is cancelled through the Internet Service Center. You may ask us which standard applies to your state. If you live in a state that requires "return of Contract Value", you may invest in the Sub-Accounts during this Right to Revoke Period. You bear the investment risk during this period. If you live in a state that requires "return of purchase payments", during the Right to Revoke Period and for ten additional days to allow for delivery of the notice from and to Us, your initial purchase payment will be held in the Rydex U.S. Government Money Market Sub-account. Your initial purchase payment will not be transferred to the Sub-account(s) you select until the Right to Revoke Period has ended.

You may change, at anytime during the Right to Revoke Period, the allocation(s) to the Sub-accounts of the Variable Account that you specified on your application.

In some states, under applicable law or regulation, your Right to Revoke Period may be longer than 10 days. Please refer to your Contract.

DEATH BENEFIT PROVISIONS

You may designate a Beneficiary during your lifetime and, unless prohibited by a previous designation, change the Beneficiary by mailing a request to our Service Office. A change of Beneficiary may be requested through the Internet Service Center but requires a signed request to be mailed to our Service Office. Each change of Beneficiary revokes any previous designation.

If there is a single Contract Owner and the Contract Owner dies before the Income Date, the Death Benefit paid to the designated Beneficiary will be the Contract Value as of the date on which we approve the payment of the claim.

The Death Benefit is the greater of premium payments less any partial withdrawals or the current Contract Value, less any applicable state premium taxes.

The premium payment death benefit is:

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the initial premium payment, plus

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any additional premium payments, minus

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any partial withdrawals.

We will determine the value of the Death Benefit as of the date on which the death claim is approved for payment. We will approve a claim for a Death Benefit upon receipt of:

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proof, satisfactory to us, of the death of the Contract Owner;

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a request for payment of the Death Benefit mailed to our Service Office; and

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our receipt of all required claim forms, fully completed.

We will make payment of an approved Death Benefit in accordance with applicable laws and regulations governing payment of Death Benefits. We will not allow any payment that does not satisfy the requirements of Internal Revenue Code section 72(s) or 401(a)(9) as applicable, as amended from time to time.

Unless otherwise provided in the Beneficiary designation, one of the following procedures will occur on the death of a Beneficiary:

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if any Beneficiary dies before the Contract Owner, that Beneficiary's interest will go to any other Beneficiaries named, according to their respective interests; and/or

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if no Beneficiary survives the Contract Owner, the proceeds of the Death Benefit will be paid to the Contract Owner's estate.

The Death Benefit payable to the Beneficiary must be distributed within five years of the Contract Owner's date of death unless the Beneficiary begins receiving within one year of the Contract Owner's death substantially equal installments over a period not extending beyond the Beneficiary's life expectancy.

If the Beneficiary is the spouse of the Contract Owner, then he or she may elect to continue the Contract as Contract Owner. If the Contract Owner is a corporation or other non-natural person, the death of the Annuitant will be treated as the death of the Contract Owner and the above distribution rules will apply.

If there are joint Contract Owners, upon the death of the first joint Contract Owner, the surviving joint Contract Owner will receive the Death Benefit. The surviving joint Contract Owner will be treated as the primary, Designated Beneficiary. Any other designation on record at the time of death will be treated as a contingent Beneficiary.

If the surviving joint Contract Owner, as spouse of the deceased joint Contract Owner, continues the Contract as the sole owner in lieu of receiving the Death Benefit, then the designated Beneficiary(s) will receive the Death Benefit upon the death of the surviving spouse.

Death of Annuitant

If the Annuitant is also the Contract Owner or joint Contract Owner, then the Death Benefit will be subject to the provisions of the Contract regarding death of the Contract Owner. If a surviving spouse assumes the contract upon death of a joint Contract Owner Annuitant, then the contingent Annuitant becomes the Annuitant. If no contingent Annuitant is named, then the surviving spouse becomes the Annuitant.

If an Annuitant who is not the Contract Owner or joint Contract Owner dies, then the contingent Annuitant, if any, becomes the Annuitant. If no contingent Annuitant is named, the Contract Owner (or joint Contract Owner if younger) becomes the Annuitant.

CONTRACT OWNERSHIP

The Contract Owner shall be the person designated in the application and you may exercise all the rights of the Contract. Joint Contract Owners are permitted. Contingent Contract Owners are not permitted.

You may direct us in writing to change the Contract Owner, primary beneficiary, contingent beneficiary or contingent annuitant. An irrevocably-named person may be changed only with the written consent of that person.

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Because a change of Contract Owner by means of a gift may be a taxable event, you should consult a qualified tax professional as to the tax consequences resulting from such a transfer.

Any Qualified Contract may have limitations on transfer of ownership. You should consult the plan administrator and a qualified tax professional as to the tax consequences resulting from such a transfer.

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ASSIGNMENT

You may assign the Contract at any time. You must file a copy of any assignment with us. Your rights and those of any revocably-named person will be subject to the assignment. A Qualified Contract may have limitations on your ability to assign the Contract.

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Because an assignment may be a taxable event, you should consult a qualified tax professional as to the tax consequences resulting from any such assignment.

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PARTIAL WITHDRAWALS AND SURRENDER

You may make partial withdrawals from the Contract through the Internet Service Center or by submitting to us by mail your request for a partial withdrawal. You may not make a partial withdrawal during the Right to Revoke Period. The minimum withdrawal amount is $300, or such lesser amount as we may permit. If the Contract Value after a partial withdrawal would be below $5,000, we will treat the request as a withdrawal of only the amount over $5,000. Unless you specify otherwise, we will deduct the total amount withdrawn from all Sub-accounts of the Variable Account in the ratio that the value in each Sub-account bears to the total Variable Account Value.

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The minimum withdrawal amount is waived if you enter into an agreement with an investment adviser that allows the adviser to make partial withdrawals from your annuity to pay the service fees of the adviser. Such distributions may have adverse tax consequences. Please consult a qualified tax professional.

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You may totally surrender the Contract by notifying us by mail. Surrendering the Contract will end it. Upon surrender, you will receive the Contract Value less any applicable premium taxes.

We will pay the amount of any surrender within seven days of receipt of your request. Alternatively, you may purchase for yourself an annuity payment option with any surrender benefit of at least $5,000 for yourself. If the Contract Owner is not a natural person, we must consent to the selection of an annuity payment option.

You may not make partial withdrawals or surrender annuity options based on life contingencies after annuity payments have begun. Once annuity payments have begun, partial withdrawals and surrenders are available only under Option A. Any partial withdrawal will reduce your future annuity payments.

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Because of the potential tax consequences of a partial withdrawal or surrender, you should consult a qualified tax professional.

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Participants under Qualified Plans as well as Contract Owners, Annuitants, and Designated Beneficiaries are cautioned that you may not be able to take a partial withdrawal or surrender the Contract under a Qualified Plan. You should seek competent advice concerning the terms and conditions of the particular Qualified Plan and use of the Contract with that Plan.

ANNUITY PROVISIONS

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Each of the Rydex Variable Trust Funds invests in the securities of a relatively few number of issuers. Since the assets of each Fund are invested in a limited number of issuers, the net asset value of the Fund may be more susceptible to a single adverse economic, political or regulatory occurrence. You should consider this in making your decision to annuitize.

Annuity Benefits

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If the Annuitant is alive on the Income Date and the Contract is In Force, we will begin variable income payments to the Annuitant under the Annuity Option or Options you have chosen. We determine the amount of the initial payment(s) on the Income Date by applying the Contract Value less any premium taxes not previously deducted to the option selected. See "Variable Annuity Payment Values" for additional information on how we calculate annuity payment amounts.

Subsequent payments will fluctuate in amount.

Annuity Option and Income Date

You may select an Annuity Option and Income Date at the time of application or later. Any Income Date must be:

o

not earlier than the first day after the Contract Date, and

o

not later than the earlier of

 

(i)

the later of the Annuitant's 90th birthday and the 10th Contract Anniversary or
 

(ii)

any maximum date permitted under state law.

If you do not select an Income Date for the Annuitant, the Income Date will automatically be the latest date specified above.

You may choose or change an Annuity Option or the Income Date through the Internet Service Center or by writing to us at least 30 days before the Income Date. You may continue to make purchase payments until you reach your Income Date.

Annuity Options

The Annuity Options are:

Option A: Income for a Fixed Number of Years;

Option B: Life Income with 10 Years of Payments Guaranteed; and

Option C: Joint and Last Survivor Income.

You may arrange other variable income options if we agree. Fixed income payments are not available. If you do not select an Annuity Option, we automatically choose Option B.

The payee is the person who will receive the sum payable under a payment option. Any payment option that provides for payments to continue after the death of the payee will not allow the successor payee to extend the period of time over which the remaining payments are to be made.

If the amount available under any annuity option is less than $5,000, we reserve the right to pay such amount in one sum to the payee in lieu of the payment otherwise provided for.

We will make annuity payments monthly unless you have requested quarterly, semi-annual or annual payments. However, if any payment would be less than $100, we have the right to reduce the frequency of payments to a period that will result in each payment being at least $100.

Option A: Income For a Fixed Number of Years. We will pay an annuity for a chosen number of years, not less than 5 nor more than 50. You may choose a period of years over 30 only if it does not exceed the difference between age 100 and the Annuitant's age on the date of the first payment. We refer to Option A as Preferred Income Plan (PIP). At any time, the payee may elect to receive the following amount:

o

the present value of the remaining variable annuity payments, commuted at the 5% interest rate (3% per year for Florida Contracts) used to create the annuity factor for this option (this interest rate for variable annuity payments is also referred to as the assumed investment rate (AIR) or benchmark rate).

Instead of receiving a lump sum, the payee may elect another payment option.

If, at the death of the payee, Option A payments have been made for fewer than the chosen number of years:

o

we will continue payments during the remainder of the period to the successor payee; or

o

the successor payee may elect to receive in a lump sum the present value of the remaining payments, commuted at the 5% interest rate (3% per year for Florida Contracts) used to create the annuity factor for this option.

The annuity asset charge is deducted during the Option A payment period, but we have no mortality risk during this period.

Currently, we permit the original payee to make a number of changes to variable payments under Option A. For regular PIPs, a change may be made generally only on the anniversary of the date of your initial PIP payment. The permissible changes include:

o

shortening or lengthening the period certain provided the payments already made and those to be made meet the 5 - 50 year and age 100 limits described above;

o

changing to a life option - note that under this option the payee no longer may end the payments for a commuted value;

o

changing the payment frequency; and

o

changing the day of the month on which payment occurs.

See "Annuity Payments" for the manner in which Option A may be taxed.

Option B: Life Income with 10 Years of Payments Guaranteed. We will pay an annuity during the lifetime of the payee. If, at the death of the payee, payments have been made for fewer than 10 years:

o

we will continue payments during the remainder of the period to the successor payee; or

o

the successor payee may elect to receive in a lump sum the present value of the remaining payments, commuted at the 5% interest rate (3% per year for Florida Contracts) used to create the annuity factor for this option.

The amount of the annuity payments will depend on the age of the payee on the Income Date and it may also depend on the payee's sex.

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In the case of Options A and B, the present value of remaining payments referred to above will be based on interest compounded annually at the current AIR or benchmark rate and on the assumption that each future payment is equal in amount to a payment determined using the applicable Sub-account annuity unit values for the Valuation Period which ends on the date of determination.

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Option C: Joint and Last Survivor Income. We will pay an annuity for as long as either the payee or a designated second natural person is alive. The amount of the annuity payments will depend on the age of both persons on the Income Date and it may also depend on each person's sex. It is possible under this option to receive only one annuity payment if both payees die after the receipt of the first payment, or to receive only two annuity payments if both payees die after receipt of the second payment, and so on.

Variable Annuity Payment Values

We determine the amount of the first payment by using an annuity purchase rate based on an assumed annual investment rate (AIR or benchmark rate) of 5% per year (3% per year for Florida Contracts). (See "Variable Annuity Payment Values" in the Statement of Additional Information for more information on AIRs.) Subsequent payments will fluctuate in amount and reflect whether the actual investment return of the selected Sub-account(s) (after deducting the annuity asset charge) is better or worse than the assumed investment rate. The total dollar amount of each payment will be equal to the sum of all Sub-account payments.

We limit the number of times or the frequency with which a payee may instruct us to change the Sub-account(s) used to determine the amount of the annuity payments to three times per contract year. We reserve the right to change the number of transfers that we allow.

Proof of Age, Sex, and Survival of Annuitant

We may require proof of age, sex or survival of any payee upon whose age, sex or survival payments depend. If the age or sex has been misstated, we will compute the amount payable based on the correct age and sex. If income payments have begun, we will pay in full any underpayments with the next annuity payment and deduct any overpayments, unless repaid in one sum, from future annuity payments until we are repaid in full.

SUSPENSION OF PAYMENTS

We reserve the right to suspend or postpone any type of payment from the Variable Account for any period when:

o

the New York Stock Exchange (NYSE) is closed other than customary weekend or holiday closings;

o

trading on the Exchange is restricted;

o

an emergency exists as a result of which it is not reasonably practicable to dispose of securities held in the Variable Account or determine their value; or

o

the Securities and Exchange Commission permits delay for the protection of security holders.

The applicable rules and regulations of the Securities and Exchange Commission shall govern as to whether the prior two conditions described above exist.

ADVERTISING

We may provide to you and prospective Contract Owners advertising and other information on a variety of topics. Such topics may include the relationship between certain economic sectors and the economy as a whole and its effect on various securities markets, investment strategies and techniques (such as value investing, dollar cost averaging and asset allocation). Such topics may also include, the advantages and disadvantages of investing in tax-advantaged and taxable instruments, customer profiles and hypothetical purchase scenarios, financial management and tax and retirement planning, and other investment alternatives, including comparisons between the Contracts and the characteristics of and market for such alternatives.

In marketing the variable annuity Contracts, we may refer to certain ratings assigned to us under the rating systems of the A.M. Best and Company, Standard & Poor's, Moody's and Duff & Phelps. The objective of these rating systems is to evaluate the various factors affecting the overall performance of an insurance company in order to provide an opinion about that company's relative financial strength and ability to meet its contractual obligations. The procedure includes both a quantitative and qualitative review of the insurance company. In marketing the Contracts and the underlying funds, we may at times use data published by other nationally-known independent statistical services. These service organizations provide relative measures of such factors as an insurer's claims paying ability, the features of particular Contracts, and the comparative investment performance of the Eligible Funds with other portfolios having similar objectives. A few such services are: Duff & Phelps, the Lipper Group, Moody's, Morningstar, Standard and Poor's and VARDS. Marketing materials may employ illustrations of compound interest, discuss automatic withdrawal services, and describe our customer base, assets, and our relative size in the industry. They may also discuss other features of Keyport, the Variable Account, the Eligible Funds and their investment management.

TAX STATUS

Introduction

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This section provides general information on the federal income tax consequences of ownership of a Contract based upon our understanding of current federal tax laws and is not intended as tax advice. Actual federal tax consequences will vary depending on, among other things, the type of retirement plan under which your Contract is issued. Also, legislation altering the current tax treatment of annuity contracts could be enacted in the future and could apply retroactively to Contracts that were purchased before the date of enactment. We make no attempt to consider any applicable federal estate, federal gift, state, or other tax laws. We also make no guarantee regarding the federal, state, or local tax status of any Contract or any transaction involving any Contract. You should consult a qualified tax professional for advice before purchasing a Contract or executing any other transaction (such as a rollover, distribution, withdrawal or payment) involving a Contract.

You may purchase a Certificate that is not issued under a Qualified Plan ("Non-Qualified Certificate") or a Certificate that is used under a Plan that is Qualified under the provisions of the Internal Revenue Code of 1986, as amended (the "Code") (a "Qualified Certificate"). 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 you purchase the Contract and upon the tax and employment status of the individual concerned.

Taxation of Annuities in General

For federal income tax purposes, purchase payments made under Non-Qualified Contracts are not deductible. Under certain circumstances, purchase payments made under Qualified Contracts may be excludible or deductible from taxable income. Any such amounts will also be excluded from the cost basis for purposes of determining the taxable portion of any distributions from a Qualified Contract.

You should note that a qualified retirement plan generally provides tax deferral regardless of whether the plan invests in an annuity contract. For that reason, no decision to purchase a Qualified Contract should be based on the assumption that the purchase of a Qualified Contract is necessary to obtain tax deferral under a qualified plan.

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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 withdrawal, an assignment or gift of the Contract, or annuity payments. A trust or other entity owning a Non-Qualified Contract, other than as an agent for an individual, is taxed differently; increases in the value of a Contract are taxed yearly whether or not a distribution occurs.

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Surrenders, Death Benefit Payments, Assignments and Gifts. If you fully surrender your Contract, the portion of the payment that exceeds your cost basis in the Contract is subject to tax as ordinary income. For Non-Qualified Contracts, the cost basis is generally the amount of the purchase payments made for the Contract. For Qualified Contracts, the cost basis is generally zero and the entire surrender payment is generally taxed as ordinary income. A Designated Beneficiary receiving a lump sum death benefit payment after your death or the death of the Annuitant is similarly taxed on the portion of the amount that exceeds your cost basis in the Contract. If the Designated Beneficiary elects that the lump sum not be paid in order to receive annuity payments that begin within one year of the decedent's death, different tax rules apply. See "Annuity Payments" below. For Non-Qualified 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 a date-of-death value in excess of the decedent's basis.

Partial withdrawals 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 withdrawals are treated as a non-taxable return of principal to you. For partial withdrawals under a Qualified Contract, a portion of each payment is treated as a non-taxable return of principal and the remaining amount is treated as taxable income. Since the cost basis of Qualified Contracts is generally zero, partial withdrawal amounts will generally be fully taxed as ordinary income.

If you assign or pledge a Non-Qualified Contract, you will be treated as if you had received the amount assigned or pledged. You will be subject to taxation under the rules applicable to partial withdrawals or surrenders. If you give away your Contract to anyone other than your spouse, you are treated for income tax purposes as if you had fully surrendered the Contract.

A special computational rule applies if we issue to you, during any calendar year, two or more Contracts, or one or more Contracts and one or more of our other annuity contracts. Under this rule, the amount of any distribution includable in your gross income is determined under Section 72(e) of the Code. All of the contracts will be treated as one contract. This means that the amount of any distribution under any 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 or contracts exceeds the sum of each contract's cost basis.

Annuity Payments. We determine the non-taxable portion of each variable annuity payment by dividing the cost basis of your values allocated to Variable Account Value by the total number of expected payments. 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 Internal Revenue Service (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.

Following any change by the payee to variable annuity payments under Option A, other than a change of the payment day of the month where the remaining payment length stays the same, the non-taxable portion of each payment will be recalculated in accordance with IRS standards.

The Code does not specifically address partial withdrawals from annuity payments. Based on a private letter ruling issued by the IRS in 2000, it is our intention to report as taxable income the portion of any partial withdrawal from variable annuity Option A that does not exceed immediately before the partial withdrawal the present value of remaining payments less the Contract's remaining cost basis. Under this approach, a partial withdrawal of $10,000 when the present value is $150,000 and the remaining cost basis is $145,000 would result in taxable income of $5,000 being reported. Since private letter rulings do not bind the IRS, the IRS could take the position that the Code requires the full amount of the partial withdrawal ($10,000 in the example) to be treated as taxable income. Under either approach to determining the taxable income associated with a partial withdrawal, some taxpayers, such as those under age 59 1/2, could be subject to additional tax penalties. Because of the potential for adverse tax results as described above, you should carefully consider, prior to making a partial withdrawal, your need for funds from the Contract and the tax implications. You should also consult a qualified tax professional prior to making a partial withdrawal.

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Penalty Tax. Payments received by you, 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 the following amounts received:

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o

after the taxpayer attains age 59-1/2;

o

in a series of substantially equal payments (not less frequently than annually) made for life or life expectancy;

o

after the death of the Contract Owner (or, where the Contract Owner is not a human being, after the death of the Annuitant);

o

if the taxpayer becomes totally and permanently disabled; or

o

under a Non-Qualified Contract's annuity payment option that provides for a series of substantially equal payments (not less frequently than annually); provided that only one purchase payment is made to the Contract, that the Contract is not issued as a result of a Section 1035 exchange, and that the first annuity payment begins in the first Contract Year.

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Income Tax Withholding. We are required to withhold federal income taxes on taxable amounts paid under Contracts unless the recipient elects not to have withholding apply. We will notify recipients of their right to elect not to have withholding apply.

Section 1035 Exchanges. You may purchase a Non-Qualified Contract with proceeds from the surrender of an existing annuity contract. Such a transaction may qualify as a tax-free exchange pursuant to Section 1035 of the Code. It is our understanding that in such an event:

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o

the new Contract will be subject to the distribution-at-death rules described in "Death Benefit Provisions";

o

purchase payments made between August 14, 1982 and January 18, 1985 and the income allocable to them will, following an exchange, no longer be covered by a "grandfathered" exception to the penalty tax for a distribution of income that is allocable to an investment made over 10 years prior to the distribution; and

o

purchase payments made before August 14, 1982 and the income allocable to them will, following an exchange, continue to receive the following "grandfathered" tax treatment under prior law:

 

(i)

the penalty tax does not apply to any distribution;

 

(ii)

partial withdrawals are treated first as a non-taxable return of principal and then a taxable return of income; and
 

(iii)

assignments are not treated as surrenders subject to taxation.

Diversification Standards. The U.S. Secretary of the Treasury has issued regulations that set standards for diversification of the investments underlying variable annuity contracts (other than pension plan contracts). The Eligible Funds intend to meet the diversification requirements for the Contract, as those requirements may change from time to time. If the diversification requirements are not satisfied, the Contract will not be treated as an annuity contract. As a consequence, income earned on a Contract would be taxable to you in the year in which diversification requirements were not satisfied, including previously non-taxable income earned in prior years.

The preamble to the 1986 investment diversification regulations stated that the Internal Revenue Service may promulgate guidelines under which an owner's excessive control over investments underlying a variable annuity contract will preclude the contract from qualifying as an annuity for federal tax purposes. The guidelines could impose requirements that are not reflected in the Contract. We, however, have reserved certain rights to alter the Contract and investment alternatives so as to comply with such guidelines. Since no guidelines have been issued, there can be no assurance as to the content of such guidelines or even whether application of the guidelines will be prospective. For these reasons, you are urged to consult with a qualified tax professional.

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Qualified Plans

The variable annuity Contract may be used with certain Qualified Plans. The Contract includes features such as tax deferral on accumulated earnings. Qualified Plans provide their own tax deferral benefit. Please consult a tax advisor for information specific to your circumstances in order to determine whether the Contract is an appropriate investment for you.

The tax rules applicable to participants in such Qualified Plans vary according to the type of plan and the terms and conditions of the plan itself. Therefore, we do not attempt to provide more than general information about the use of the Contract with 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. Following is a brief description of the Qualified Plans and of the use of the Contract in connection with them. 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.

Individual Retirement Annuities

Sections 408(b) and 408A of the Code permit eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" and "Roth IRA", respectively. These individual retirement annuities are subject to limitations on the amount which may be contributed, the persons who may be eligible to contribute, and on the time when distributions may commence. In addition, distributions from certain types of Qualified Plans may be placed on a tax-deferred basis into a Section 408(b) Individual Retirement Annuity.

Annuity Purchases by Nonresident Aliens

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The discussion above provides general information regarding federal income tax consequences to annuity purchasers who are U.S. citizens or resident aliens. Purchasers who are not U.S. citizens or are resident aliens will generally be subject to U.S. federal income tax and withholding on annuity distributions at a 30% rate, unless a lower rate applies in a U.S. treaty with the purchaser's country. In addition, purchasers may be subject to state premium tax, other state and/or municipal taxes, and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax professional regarding U.S., state, and foreign taxation with respect to an annuity purchase.

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VARIABLE ACCOUNT VOTING PRIVILEGES

In accordance with our view of present applicable law, we will vote the shares of the Eligible Funds held in the Variable Account at regular and special meetings of the shareholders of the Eligible Funds in accordance with instructions received from persons having the voting interest in the Variable Account. We will vote shares for which we have not received instructions in the same proportion as we vote shares for which we have received instructions.

However, if the Investment Company Act of 1940 or any regulation thereunder should be amended or if the present interpretation should change, and as a result we determine that we are permitted to vote the shares of the Eligible Funds in our own right, we may elect to do so.

You have the voting interest under a Contract prior to the Income Date. The number of shares held in each Sub-account which are attributable to you is determined by dividing your Variable Account Value in each Sub-account by the net asset value of the applicable share of the Eligible Fund. The payee has the voting interest after the Income Date under an annuity payment option. The number of shares held in the Variable Account which are attributable to each payee is determined by dividing the reserve for the annuity payments by the net asset value of one share. During the annuity payment period, the votes attributable to a payee decrease as the reserves underlying the payments decrease.

We will determine the number of shares in which a person has a voting interest as of the date established by the respective Eligible Fund for determining shareholders eligible to vote at the meeting of the Fund. We will solicit voting instructions in writing prior to such meeting in accordance with the procedures established by the Eligible Fund.

Each person having a voting interest in the Variable Account will receive periodic reports relating to the Eligible Fund(s) in which he or she has an interest, proxy material and a form with which to give such voting instructions.

SALES OF THE CONTRACTS

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The Contracts will be sold through the Internet Service Center we maintain for this purpose. Keyport Financial Services Corp. ("KFSC"), our subsidiary, serves as the principal underwriter for the Contract described in this prospectus. 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 One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481. We may also from time to time enter into selling agreements with other broker/dealers who will also distribute the Contracts. Such broker/dealers will be appropriately licensed to sell the Contracts.

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LEGAL PROCEEDINGS

There are no legal proceedings to which the Variable Account or the Principal Underwriter are a party. We are engaged in various kinds of routine litigation which, in our judgment, is not of material importance in relation to our total capital and surplus.

RECORDS AND REPORTS

As presently required by the Investment Company Act of 1940 ("1940 Act") and applicable regulations, we are responsible for maintaining all records and accounts relating to the Variable Account. We will electronically mail to you, at your last know e-mail address, at least semiannually after the first Contract Year, reports containing information required by the 1940 Act or any other applicable law or regulation.

INQUIRIES BY CONTRACT OWNERS

If you have questions about your Contract, you may send an e-mail to our Internet Service Center (Help@Mail.AnnuityNet.com) or visit the Internet Service Center on the world wide web at http://www.AnnuityNet.com or write to us at Keyport Life Insurance Co., P.O. Box 691, Leesburg, VA 20178. You may also call our Service Office at (877) 569-3789.

TABLE OF CONTENTS--STATEMENT OF ADDITIONAL INFORMATION

 

Page

Keyport Life Insurance Company

2

Variable Annuity Benefits

2

  Variable Annuity Payment Values

2

  Re-Allocating Sub-account Payments

3

Safekeeping of Assets

3

Principal Underwriter

3

Experts

3

Investment Performance

3

  Average Annual Total Return for a Contract that is Surrendered

4

  Change in Accumulation Unit Value

6

  Yield for Rydex U.S. Government Money Market Sub-account

6

Financial Statements

7

  Variable Account A

8

  Keyport Life Insurance Company

66

 

 

 

 

 

PART B

 

STATEMENT OF ADDITIONAL INFORMATION

INDIVIDUAL FLEXIBLE PURCHASE PAYMENT

DEFERRED VARIABLE ANNUITY CONTRACT

ISSUED BY

VARIABLE ACCOUNT A

OF

KEYPORT LIFE INSURANCE COMPANY ("Keyport")

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This Statement of Additional Information (SAI) is not a prospectus but it relates to, and should be read in conjunction with, the Rydex variable annuity prospectus dated May 1, 2002. The SAI is incorporated by reference into the prospectus. A free copy of the prospectus is available by writing Keyport at its Service Office P.O. Box 691, Leesburg, VA 20178 or upon e-mail request through our Internet Service Center website (http://www.AnnuityNet.com) or by calling (877) 569-3789. The prospectus is also available through the SEC website (http://www.sec.gov). In addition, other information regarding the Company and the Separate Account is available at the SEC website and through our Internet Service Center.

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TABLE OF CONTENTS

 

Page

 

 

Keyport Life Insurance Company

2

Variable Annuity Benefits

2

  Variable Annuity Payment Values

2

  Re-Allocating Sub-Account Payments

3

Safekeeping of Assets

3

Principal Underwriter

3

Experts

3

Investment Performance

3

  Average Annual Total Return for a Contract that is Surrendered

4

  Change in Accumulation Unit Value

6

  Yield for Rydex U.S. Government Money Market Sub-Account

6

Financial Statements

7

  Variable Account A

8

  Keyport Life Insurance Company

66

 

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The date of this statement of additional information is May 1, 2002.

 

 

RA2002.SAI

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KEYPORT LIFE INSURANCE COMPANY

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Sun Life Financial Services of Canada, Inc. ("Sun Life Financial"), a reporting company under the Securities Exchange Act of 1934 with common shares listed on the Toronto, New York, London and Philippines stock exchanges, is the ultimate corporate parent of Keyport. For additional information about Keyport, see "Keyport and the Variable Account" in the prospectus.

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VARIABLE ANNUITY BENEFITS

Variable Annuity Payment Values

For each variable payment option, the total dollar amount of each periodic payment will be equal to the sum of all Sub-Account payments.

The first payment for each Sub-Account will be determined by deducting any applicable state premium taxes and then dividing the remaining value of that Sub-Account by $1,000 and multiplying the result by the greater of: (a) the applicable factor from the Contract's annuity table for the particular payment option; or (b) the factor currently offered by Keyport at the time annuity payments begin. This current factor may be based on the sex of the payee unless to do so would be prohibited by law.

The number of Annuity Units for each Sub-Account will be determined by dividing such first payment by the Sub-Account Annuity Unit value for the Valuation Period that includes the date of the first payment. The number of Annuity Units remains fixed for the annuity payment period. Each Sub-Account payment after the first one will be determined by multiplying (a) by (b), where: (a) is the number of Sub-Account Annuity Units; and (b) is the Sub-Account Annuity Unit value for the Valuation Period that includes the date of the particular payment.

Variable annuity payments will fluctuate in accordance with the investment results of the underlying Eligible Funds. In order to determine how these fluctuations affect annuity payments, Keyport uses an Annuity Unit value. Each Sub-Account has its own Annuity Units and value per Unit. The Annuity Unit value applicable during any Valuation Period is determined at the end of such period.

When Keyport first purchased Eligible Fund shares on behalf of the Variable Account, Keyport valued each Annuity Unit for each Sub-Account at a specified dollar amount. The Unit value for each Sub-Account in any Valuation Period thereafter may increase or decrease and is determined as follows:

o

The total value of Fund shares held in the Sub-account is calculated by multiplying the number of Fund shares owned by the Sub-account at the beginning of the Valuation Period by the net asset value per share of the Fund at the end of the Valuation Period (without giving effect to any transactions occurring during the Valuation Period), and adding any dividend or other distribution of the Fund if the record date for such distribution occurs during the Valuation Period; minus

 

 

o

The liabilities of the Sub-account at the end of the Valuation Period (such liabilities include daily charges imposed on the Sub-account, and may include a tax charge factor); and the result is divided by

 

 

o

The outstanding number of Annuity Units in the Sub-account at the beginning of the Valuation Period. The result is adjusted by a factor to reflect the assumed annual investment rate (AIR). The AIR for Annuity Units based on the Contract's annuity tables is 5% per year.

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 Annuity Asset Charge) is better or worse than the assumed AIR percentage. For example, consider what would happen if the actual annualized investment return is 9%, 5%, 3%, or 0% between the time of the first and second payments. With an actual 9% return, the 5% AIR payments would increase in amount. With an actual 5% return, the 5% AIR payment would stay the same. With an actual return of 3%, the 5% AIR payment would decrease in amount. Finally, with an actual return of 0%, the 5% AIR payments would decrease in amount.

Re-Allocating Sub-Account Payments

The number of Annuity Units for each Sub-Account under any variable annuity option will remain fixed during the entire annuity payment period unless the payee makes a written request for a change. Currently, a payee can instruct Keyport to change the Sub-Account(s) used to determine the amount of the variable annuity payments unlimited times every 12 months. The payee's request must specify the percentage of the annuity payment that is to be based on the investment performance of each Sub-Account. The percentage for each Sub-Account, if not zero, must be at least 5% and must be a whole number. At the end of the Valuation Period during which Keyport receives the request, Keyport will: (a) value the Annuity Units for each Sub-Account to create a total annuity value; (b) apply the new percentages the payee has selected to this total value; and (c) recompute the number of Annuity Units for each Sub-Account. This new number of units will remain fixed for the remainder of the payment period unless the payee requests another change.

SAFEKEEPING OF ASSETS

Keyport acts as custodian for, and is responsible for the safekeeping of, the assets of the Variable Account. Keyport has responsibility for providing all administration of the Certificates and the Variable Account. This administration includes, but is not limited to, preparation of the Contracts and Certificates, maintenance of Certificate Owners' records, and all accounting, valuation, regulatory and reporting requirements.

PRINCIPAL UNDERWRITER

The Contract and Contracts, which are offered continuously, are distributed by Keyport Financial Services Corp. ("KFSC"), a wholly-owned subsidiary of Keyport.

EXPERTS

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Ernst & Young LLP, independent auditors, have audited our consolidated financial statements at December 31, 2001 and 2000, and for the ten-month period ended October 31, 2001 and the two-month period ended December 31, 2001 and for the years ended December 31, 2000 and 1999, and the financial statements of the Variable Account at December 31, 2001 and for each of the two years in the period ended December 31, 2001, as set forth in their reports. We've included our financial statements in the statement of additional information in reliance on Ernst & Young LLP's reports, given on their authority as experts in accounting and auditing. Their principal office is located at 200 Clarendon Street, Boston, Massachusetts.

</R>

INVESTMENT PERFORMANCE

The Variable Account may from time to time quote performance information concerning its various Sub-Accounts. A Sub-Account's performance may also be compared to the performance of sub-accounts used with variable annuities offered by other insurance companies. This comparative information may be expressed as a ranking prepared by Financial Planning Resources, Inc. of Miami, FL (The VARDS Report), Lipper Analytical Services, Inc., or by Morningstar, Inc. of Chicago, IL (Morningstar's Variable Annuity Performance Report), which are independent services that compare the performance of variable annuity sub-accounts. The rankings are done on the basis of changes in accumulation unit values over time and do not take into account any charges (such as distribution charges or administrative charges) that are deducted directly from Contract values.

Ibbotson Associates of Chicago, IL provides historical returns from 1926 on capital markets in the United States. The Variable Account may quote the performance of its Sub-Accounts in conjunction with the long-term performance of capital markets in order to illustrate general long-term risk versus reward investment scenarios. Capital markets tracked by Ibbotson Associates include common stocks, small company stocks, long-term corporate bonds, long-term government bonds, U.S. Treasury Bills, and the U.S. inflation rate. Historical total returns are determined by Ibbotson Associates for: Common Stocks, represented by the Standard and Poor's Composite Stock Price Index (an unmanaged weighted index of 90 stocks prior to March 1957 and 500 stocks thereafter of industrial, transportation, utility and financial companies widely regarded by investors as representative of the stock market); Small Company Stocks, represented by the fifth capitalization quintile (i.e., the ninth and tenth deciles) of stocks on the New York Stock Exchange for 1926-1981 and by the performance of the Dimensional Fund Advisors Small Company 9/10 (for ninth and tenth deciles) Fund thereafter; Long Term Corporate Bonds, represented beginning in 1969 by the Salomon Brothers Long-Term High-Grade Corporate Bond Index, which is an unmanaged index of nearly all Aaa and Aa rated bonds, represented for 1946-1968 by backdating the Salomon Brothers Index using Salomon Brothers' monthly yield data with a methodology similar to that used by Salomon Brothers in computing its Index, and represented for 1925-1945 through the use of the Standard and Poor's monthly High-Grade Corporate Composite yield data, assuming a 4% coupon and a 20-year maturity; Long-Term Government Bonds, measured each year using a portfolio containing one U.S. government bond with a term of approximately twenty years and a reasonably current coupon; U.S. Treasury Bills, measured by rolling over each month a one-bill portfolio containing, at the beginning of each month, the shortest-term bill having not less than one month to maturity; Inflation, measured by the Consumer Price Index for all Urban Consumers, not seasonably adjusted, since January, 1978 and by the Consumer Price Index before then. The stock capital markets may be contrasted with the corporate bond and U.S. government securities capital markets. Unlike an investment in stock, an investment in a bond that is held to maturity provides a fixed rate of return. Bonds have a senior priority to common stocks in the event the issuer is liquidated and interest on bonds is generally paid by the issuer before it makes any distributions to common stock owners. Bonds rated in the two highest rating categories are considered high quality and present minimal risk of default. An additional advantage of investing in U.S. government bonds and Treasury bills is that they are backed by the full faith and credit of the U.S. government and thus have virtually no risk of default. Although government securities fluctuate in price, they are highly liquid.

Average annual total return information shows the average annual compounding percentage change applied to the value of an investment in the Sub-account from the beginning of the measuring period to the end of that period. This average annual total return reflects all historical investment results, less all Sub-account and Contract charges and deductions as required by certain regulatory rules. Average total return is not reduced by any premium taxes. Average total return would be less if these taxes were deducted.

In order to calculate average annual total return, we divide the change in value of a Sub-account under a Contract surrendered on a particular date by a hypothetical $1,000 investment in the Sub-account. We then annualize the resulting total rate for the period to obtain the average annual compounding percentage change during the period.

Average Annual Total Return for a Contract that is Surrendered

<R>

The tables below provide performance results for each Sub-Account through December 31, 2001. 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.

</R>

The following tables were calculated using the method prescribed by the Securities and Exchange Commission. They illustrate each Sub-Account's average annual total return over the periods shown assuming a single $1,000 initial purchase payment and the surrender of the Contract at the end of each period. 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 Sub-Account for the period specified. The first table uses the inception date of the Contract's Sub-Accounts while the second table assumes the Contract was available prior to that date on the Funds' inception date.

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 charge reflected is the 90% annual annuity asset charge.

<R>

 

Average Annual Total Return for a

 

Contract Surrendered on 12/31/01

 

Hypothetical $1,000 Purchase Payment*

 

 

 

Length of Investment Period

 

 

 

One

Three

Five

Ten

Since Sub-Account

Sub-Account

Year

Years

Years

Years

Inception Shown

Rydex Nova Fund

-24.27%

N/A

N/A

N/A

-20.74%(03/15/00)

Rydex Ursa Fund

13.96%

N/A

N/A

N/A

12.56%(03/15/00)

Rydex OTC Fund

-35.76%

N/A

N/A

N/A

-43.72%(03/15/00)

Rydex Precious Metals Fund

11.98%

N/A

N/A

N/A

1.52%(03/15/00)

Rydex U.S. Government Bond Fund

-0.88%

N/A

N/A

N/A

6.20%(03/15/00)

* Fund expenses in excess of defined amounts were reimbursed during one or more calendar years. Without this expense reimbursement any return percentages shown that include these calendar years would be lower. See footnote 1 on page 6 of the prospectus for any expense reimbursement percentages currently applicable to the Funds.

 

Average Annual Total Return for a

 

Contract Surrendered on 12/31/01

 

Hypothetical $1,000 Purchase Payment*

 

 

 

Length of Investment Period

 

 

 

One

Three

Five

Ten

Since Fund

Sub-Account

Year

Years

Years

Years

Inception Shown

Rydex Nova Fund

-24.27%

-9.93%

N/A

N/A

3.38%(05/07/97)

Rydex Ursa Fund

13.96%

3.33%

N/A

N/A

-5.70%(06/10/97)

Rydex OTC Fund

-35.76%

-8.34%

N/A

N/A

9.35%(05/07/97)

Rydex Precious Metals Fund

11.98%

-5.70%

N/A

N/A

-14.39%(05/27/97)

Rydex U.S. Government Bond Fund

-0.88%

-2.39%

N/A

N/A

3.54%(08/18/97)

* Fund expenses in excess of defined amounts were reimbursed during one or more calendar years. Without this expense reimbursement any return percentages shown that include these calendar years would be lower. See footnote 2 on page 6 of the prospectus any expense reimbursement percentages currently applicable to the Funds.

</R>

Change in Accumulation Unit Value

The following performance information illustrates the average annual change and the actual annual change in Accumulation Unit values for each Sub-Account and is computed differently than the standardized average annual total return information. Performance information for periods prior to the inception date of the Contract's Sub-Accounts assumes the Contracts were available prior to that date on the Funds' inception date.

A Sub-Account's average annual change in Accumulation Unit values is the annualized rate at which the value of a Unit changes over the time period illustrated. A Sub-Account's actual annual change in Accumulation Unit values is the rate at which the value of a Unit changes over each 12-month period illustrated. These rates of change in Accumulation Unit values reflect the Contracts annual .90% annuity asset charge. They do not reflect deductions for any premium taxes. The rates of change would be lower if these charges were included.

<R>

 

Average Annual Change

Average Annual Change

 

In Accumulation Unit

in Accumulation Unit Value

 

Value From Fund

over the period shown

 

Inception Shown

through 12/31/01

Sub-Account

through 12/31/01**

Three Years

Five Years

Ten Years

Rydex Nova Fund

3.38%(05/07/97)

-9.93%

N/A

N/A

Rydex Ursa Fund

-5.70%(06/10/97)

3.33%

N/A

N/A

Rydex OTC Fund

9.35%(05/07/97)

-8.34%

N/A

N/A

Rydex Precious Metals Fund

-14.39%(05/27/97)

-5.70%

N/A

N/A

Rydex U.S. Government Bond Fund

3.54%(08/18/97)

-2.39%

N/A

N/A

 

12-Month Period Change in Accumulation

 

Unit Value**

Sub-Account

1997

1998

1999

2000

2001

Rydex Nova Fund

22.50%*

30.40%

22.16%

-21.01%

-24.27%

Rydex Ursa Fund

-11.41%*

-21.71%

-15.83%

15.02%

13.96%

Rydex OTC Fund

6.88%*

84.15%

95.11%

-38.56%

-35.76%

Rydex Precious Metals Fund

-29.64%*

-17.02%

-7.31%

-19.21%

11.98%

Rydex U.S. Government Bond Fund

10.60%*

13.18%

-21.22%

19.09%

-0.88%

</R>

* Percentage of change is for less than 12 months; it is for the period from the inception date shown to the end of the year.

** Fund expenses in excess of defined amounts were reimbursed during one or more calendar years. Without this expense reimbursement any return percentages shown that include these calendar years would be lower. See footnote 1 on page 6 of the prospectus for any expense reimbursement percentages currently applicable to the Funds.

Yield for Rydex U.S. Government Money Market Sub-Account

Yield percentages for the Rydex U.S. Government Money Market Sub-Account are calculated using the method prescribed by the Securities and Exchange Commission. Yields reflect the deduction of the annual .90% asset-based Contract charges. Yields do not reflect premium tax charges. The yield would be lower if these charges were included. The following is the standardized formula:

Yield equals:   (A - B - 1) x  365

                            C                 7

Where:

A

=

the Accumulation Unit value at the end of the 7-day period.

 

 

 

B

=

$0.00.

 

 

 

C

=

the Accumulation Unit value at the beginning of the 7-day period.

The yield formula assumes that the weekly net income generated by an investment in the Rydex U.S. Government Money Market Sub-Account will continue over an entire year.

<R>

For the 7-day period ended 12/31/01, the yield for Rydex U.S. Government Money Market Sub-Account was
-0.12%.

</R>

FINANCIAL STATEMENTS

The financial statements of the Variable Account and Keyport Life Insurance Company are included in the statement of additional information. The consolidated financial statements of Keyport Life Insurance Company are provided as relevant to its ability to meet its financial obligations under the Contracts and should not be considered as bearing on the investment performance of the assets held in the Variable Account.

 

<R>

Report of Independent Auditors

To the Board of Directors of Keyport Life Insurance Company

and Contract Owners of Variable Account A

We have audited the accompanying statement of assets and liabilities of Keyport Life Insurance Company - Variable Account A (comprising, respectively, AIM VI Capital Appreciation Series I, AIM VI Growth Series I, AIM VI International Equity Series I, AIM VI Value Series I, Alger American Growth Portfolio, Alger American Small Capitalization Portfolio, Alliance Global Bond Portfolio (A), Alliance Global Bond Portfolio (B), Alliance Growth & Income Portfolio (A), Alliance Growth & Income Portfolio (B), Alliance Growth Portfolio (B), Alliance International Portfolio (B), Alliance Premier Growth Portfolio (A), Alliance Premier Growth Portfolio (B), Alliance Real Estate Investment Portfolio (A), Alliance Technology Portfolio (B), Alliance Total Return Portfolio (B), Alliance Worldwide Privatization Portfolio (B), Brinson Tactical Allocation Portfolio (I), Exeter Growth Fund, Exeter Moderate Growth Fund, Fidelity VIP Equity Income Fund - SC2, Fidelity VIP III Dynamic Capital Appreciation Fund, Fidelity VIP III Growth Opportunities Fund - SC2, Templeton Developing Markets Securities Fund 2, Colonial Global Equity Fund, VS (B), Colonial High Yield Securities Fund, VS (A), Colonial High Yield Securities Fund, VS (B), Colonial International Fund for Growth, VS (A), Colonial International Horizons Fund, VS (B), Colonial Small Cap Value Fund, VS (A), Colonial Small Cap Value Fund, VS (B), Colonial Strategic Income Fund, VS (A), Colonial Strategic Income Fund, VS (B), Colonial US Growth & Income Fund, VS (A), Colonial US Growth & Income Fund, VS (B), Crabbe Huson Real Estate Investment Fund, VS (B), Liberty All-Star Equity Fund, VS (A), Liberty All-Star Equity Fund, VS (B), Liberty Newport Japan Opp Fund, VS (A), Liberty Newport Japan Opp Fund, VS (B), Liberty S&P 500 Index Fund, VS (A), Liberty S&P 500 Index Fund, VS (B), Liberty Select Value Fund, VS (A), Liberty Select Value Fund, VS (B), Liberty Value Fund, VS (A), Liberty Value Fund, VS (B), Newport Tiger Fund, VS (A), Newport Tiger Fund, VS (B), Rydex Financial Services Fund, VS (A), Rydex Financial Services Fund, VS (B), Rydex Health Care Fund, VS (A), Rydex Health Care Fund, VS (B), SteinRoe Global Utilities Fund, Wanger Foreign Forty Fund, Wanger International Small Cap Fund, Wanger Twenty Fund, Wanger US Small Cap Fund, MFS Bond Series IC, MFS Emerging Growth Series IC, MFS Emerging Growth Series SC, MFS Investors Growth Stock Series SC, MFS Investors Trust Series SC, MFS New Discovery Series SC, MFS Research Series IC, Rydex Nova Fund, Rydex OTC Fund, Rydex Precious Metals Fund, Rydex US Government Money Market Fund, Rydex Ursa Fund, SteinRoe Balanced Fund VS (A), SteinRoe Balanced Fund VS (B), SteinRoe Growth Stock Fund VS (A), SteinRoe Growth Stock Fund VS (B), SteinRoe Money Market Fund VS (A), Liberty Federal Securities Fund VS (A), Liberty Federal Securities Fund VS (B), SteinRoe Small Company Growth Fund VS (A)) as of December 31, 2001, and the related statements of operations and changes in net assets for each of the two years in the period then ended. These financial statements are the responsibility of Keyport Life Insurance 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 auditing standards generally accepted in the United States. 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 Keyport Life Insurance Company - Variable Account A at December 31, 2001 and the results of its operations and changes in its net assets for the years ended December 31, 2001 and 2000, in conformity with accounting principles generally accepted in the United States.

 

ERNST & YOUNG LLP

Boston, Massachusetts

April 19, 2002

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statement of Assets and Liabilities

December 31, 2001

 

Assets

Investments at market value:

 

 

 

 

 

AIM Variable Insurance Funds, Inc.

 

 

AIM VI Capital Appreciation Series I - 1,147,453 shares (cost $38,775,361)

$

24,922,688

AIM VI Growth Series I - 269,180 shares (cost $7,618,725)

 

4,406,474

AIM VI International Equity Series I - 1,396,049 shares (cost $26,979,040)

 

20,815,086

AIM VI Value Series I - 1,596,163 shares (cost $49,242,820)

 

37,270,403

 

 

 

Alger American Fund

 

 

Alger American Growth Portfolio - 2,069,150 shares (cost $113,520,183)

 

76,082,646

Alger American Small Capitalization Portfolio - 991,635 shares (cost $37,954,832)

 

16,411,558

 

 

 

Alliance Variable Products Series Fund, Inc.

 

 

Alliance Global Bond Portfolio (A) - 2,039,872 shares (cost $23,916,482)

 

22,295,805

Alliance Global Bond Portfolio (B) - 500,413 shares (cost $5,506,619)

 

5,434,480

Alliance Growth & Income Portfolio (A) - 324,471 shares (cost $7,018,576)

 

7,190,280

Alliance Growth & Income Portfolio (B) - 1,762,448 shares (cost $40,074,795)

 

38,826,725

Alliance Growth Portfolio (B) - 74,276 shares (cost $1,133,630)

 

1,211,446

Alliance International Portfolio (B) - 36,252 shares (cost $407,843)

 

423,429

Alliance Premier Growth Portfolio (A) - 4,105,550 shares (cost $124,100,460)

 

103,295,637

Alliance Premier Growth Portfolio (B) - 2,050,645 shares (cost $75,156,473)

 

51,266,126

Alliance Real Estate Investment Portfolio (A) - 79,250 shares (cost $772,791)

 

911,371

Alliance Technology Portfolio (B)- 1,495,282 shares (cost $49,018,694)

 

25,644,080

Alliance Total Return Portfolio (B) - 92,295 shares (cost $1,612,611)

 

1,628,999

Alliance Worldwide Privatization Portfolio (B)- 56,127 shares (cost $652,413)

 

683,066

 

 

 

Brinson Series Trust

 

 

Brinson Tactical Allocation Portfolio(I) - 1,941,700 shares (cost $31,455,705)

 		 

24,640,174

 

 

 

Exeter Insurance Fund, Inc.

 

 

Exeter Growth Fund - 25,244 shares (cost $320,205)

 

355,181

Exeter Moderate Growth Fund - 15,731 shares (cost $169,168)

 

174,614

 

 

 

Fidelity VIP Funds

 

 

Fidelity VIP Equity Income Fund - SC2 -728,815 shares (cost $17,059,009)

 

16,463,928

Fidelity VIP III Dynamic Capital Appreciation Fund - 42,868 shares (cost $256,108)

 

261,064

Fidelity VIP III Growth Opportunities Fund - SC2 - 601,983 shares (cost $10,285,389)

 

9,053,824

 

 

 

Franklin Templeton Funds

 

 

Templeton Developing Markets Sec Fund 2 - 371,521 shares (cost $2,440,026)

 

1,768,442

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statement of Assets and Liabilities

December 31, 2001

 

Assets (continued)

Liberty Variable Investment Trust

 

 

Colonial Global Equity Fund, VS (B) - 895,690 shares (cost $9,116,219)

$

6,377,316

Colonial High Yield Securities Fund, VS (A) - 1,641,248 shares (cost $14,662,441)

 

10,750,173

Colonial High Yield Securities Fund, VS (B) - 1,052,380 shares (cost $7,781,836)

 

6,850,992

Colonial International Fund for Growth, VS (A) - 21,549,476 shares (cost $42,632,030)

 

31,462,234

Colonial International Horizons Fund, VS (B) - 1,026,454 (cost $11,044,145)

 

7,749,736

Colonial Small Cap Value Fund, VS (A) - 479,191 shares (cost $4,372,726)

 

5,539,446

Colonial Small Cap Value Fund, VS (B) - 654,573 shares (cost $6,882,389)

 

7,560,320

Colonial Strategic Income Fund, VS (A) - 9,195,197 shares (cost $102,049,289)

 

82,021,153

Colonial Strategic Income Fund, VS (B) - 1,856,628 shares (cost $17,953,368)

 

16,542,553

Colonial U.S. Growth & Income Fund, VS (A)- 7,051,692 (cost $127,860,969)

 

109,653,805

Colonial U.S. Growth & Income Fund, VS (B) - 1,414,109 shares (cost $24,525,429)

 

21,961,119

Crabbe Huson Real Estate Investment Fund, VS (B) - 436,609 shares (cost $4,156,079)

 

4,357,363

Liberty All-Star Equity Fund, VS (A) - 4,393,521 shares (cost $51,874,780)

 

46,307,710

Liberty All-Star Equity Fund, VS (B) - 367,140 shares (cost $4,552,184)

 

3,865,989

Liberty Newport Japan Opp Fund,VS (A) - 8,333 shares (cost $100,000)

 

47,750

Liberty Newport Japan Opp Fund, VS (B) - 206,501 shares (cost $2,474,979)

 

1,183,253

Liberty S&P 500 Index Fund, VS (A) - 8,420 shares (cost $100,918)

 

83,357

Liberty S&P 500 Index Fund, VS (B) - 2,559,589 shares (cost $28,089,217)

 

25,314,334

Liberty Select Value Fund, VS (A) - 8,443 shares (cost $101,462)

 

115,416

Liberty Select Value Fund, VS (B) - 1,123,718 shares (cost $14,967,825)

 

15,338,753

Liberty Value Fund, VS (A) - 6,375,915 shares (cost $102,104,408)

 

88,115,159

Liberty Value Fund, VS (B) - 503,635 shares (cost $7,345,813)

 

6,945,124

Newport Tiger Fund, VS (A) - 5,551,870 shares (cost $10,686,215)

 

9,826,810

Newport Tiger Fund, VS (B) - 566,412 shares (cost $1,231,577)

 

1,025,205

Rydex Financial Services Fund, VS(A) - 8,433 shares (cost $101,378)

 

107,178

Rydex Financial Services Fund, VS (B) - 296,077 shares (cost $3,852,884)

 

3,757,226

Rydex Health Care Fund, VS (A) - 8,333 shares (cost $100,000)

 

104,417

Rydex Health Care Fund, VS (B) - 468,232 shares (cost $5,933,398)

 

5,862,264

SteinRoe Global Utilities Fund - 3,066,363 shares (cost $42,197,807)

 

33,270,043

Wanger Foreign Forty Fund - 152,791 shares (cost $2,057,626)

 

1,778,487

Wanger International Small Cap Fund - 450,625 shares (cost $7,738,804)

 

6,939,631

Wanger Twenty Fund -350,963 shares (cost $4,919,176)

 

5,390,784

Wanger US Small Cap Fund - 781,017 shares (cost $16,613,913)

 

17,377,623

 

 

 

MFS Variable Insurance Trust

 

 

MFS Bond Series IC - 512,511 shares (cost $5,723,862)

 

5,904,126

MFS Emerging Growth Series IC - 1,481,910 shares (cost $30,100,617)

 

26,644,750

MFS Emerging Growth Series SC - 459,027 shares (cost $11,734,649)

 

8,230,355

MFS Investors Growth Stock Series SC - 1,160,585 shares (cost $14,057,246)

 

11,222,861

MFS Investors Trust Series SC - 586,227 shares (cost $11,129,820)

 

10,012,762

MFS New Discovery Series SC - 357,347 shares (cost $5,705,517)

 

5,438,829

MFS Research Series IC - 2,638,548 shares (cost $47,253,008)

 

37,784,006

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statement of Assets and Liabilities

December 31, 2001

 

Assets (continued)

Rydex Variable Trust

 

 

Rydex OTC Fund - 237,324 shares (cost $5,092,613)

 

3,512,391

Rydex Nova Fund - 6,385 shares (cost $56,089)

 

55,357

Rydex Ursa Fund -111,707 shares (cost $702,636)

 

702,635

Rydex US Government Money Market Fund -1,726,183 shares (cost $1,726,182)

 

1,726,183

Rydex Precious Metals Fund - 2,323 shares (cost $10,964)

 

11,313

 

 

 

SteinRoe Variable Investment Trust

 

 

SteinRoe Balanced Fund VS (A) - 8,180,588shares (cost $133,665,251)

 

113,382,956

SteinRoe Balanced Fund VS (B) - 3,077,616 shares (cost $46,617,733)

 

42,501,877

SteinRoe Growth Stock Fund VS (A) - 2,982,252 shares (cost $143,761,219)

 

83,324,121

SteinRoe Growth Stock Fund VS (B) - 963,387 shares (cost $39,238,895)

 

26,801,435

SteinRoe Money Market Fund VS (A) -173,332,847 shares (cost $173,332,847)

 

173,332,847

Liberty Federal Securities Fund VS (A) - 5,070,681 shares (cost $53,223,753)

 

55,016,893

Liberty Federal Securities Fund VS (B) - 3,932,948 shares (cost $41,722,233)

 

42,397,178

SteinRoe Small Company Growth Fund VS (A) - 975,750 shares (cost $12,959,954)

 

8,879,329

 

 

 

Total assets

$

1,731,902,453

Liabilities

 

 

Variable annuity contracts

$

1,396,357,820

Annuity reserves

 

316,836,921

Invested by Keyport Life Insurance Company

 

18,707,712

 

 

 

Total liabilities

$

1,731,902,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

AIM VI Capital
Appreciation Series I

 

AIM VI
Growth Series I

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

791,334

 

 

$

10,715

 

 

$

270,330

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

383,484

 

 

 

280,910

 

 

 

76,025

 

 

 

116,553

 

Net investment income (expense)

 

(383,484

)

 

 

510,424

 

 

 

(65,310

)

 

 

153,777

 

Realized gain (loss)

 

(1,594,415

)

 

 

(31,627

)

 

 

(958,242

)

 

 

(8,957

)

Realized gain distributions

 

2,022,740

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(9,019,108

)

 

 

(5,886,232

)

 

 

(1,683,431

)

 

 

(2,404,819

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(8,974,267

)

 

 

(5,407,435

)

 

 

(2,706,983

)

 

 

(2,259,999

)

Purchase payments from contract owners

 

5,394,518

 

 

 

28,617,427

 

 

 

535,141

 

 

 

5,770,717

 

Transfers between accounts

 

3,864,296

 

 

 

8,942,016

 

 

 

(152,963

)

 

 

1,529,690

 

Contract terminations and annuity payouts

 

(4,043,355

)

 

 

(9,188,856

)

 

 

(1,250,830

)

 

 

(3,404,093

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

5,215,459

 

 

 

28,370,587

 

 

 

(868,652

)

 

 

3,896,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

28,681,496

 

 

 

5,718,344

 

 

 

7,982,109

 

 

 

6,345,794

 

Net assets at end of period

$

24,922,688

 

 

$

28,681,496

 

 

$

4,406,474

 

 

$

7,982,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

AIM International
VI Equity Series I

 

AIM VI Value Series I

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

71,658

 

 

$

1,291,986

 

 

$

49,583

 

 

$

1,592,466

 

Expenses

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

343,528

 

 

 

148,967

 

 

 

553,333

 

 

 

382,928

 

Net investment income (expense)

 

(271,870

)

 

 

1,143,019

 

 

 

(503,750

)

 

 

1,209,538

 

Realized gain (loss)

 

4,670,196

 

 

 

4,078,130

 

 

 

(340,706

)

 

 

55,430

 

Realized gain distributions

 

560,358

 

 

 

-

 

 

 

752,677

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(4,590,324

)

 

 

(3,024,696

)

 

 

(5,743,075

)

 

 

(7,297,083

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

368,360

 

 

 

2,196,453

 

 

 

(5,834,854

)

 

 

(6,032,115

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

13,526,228

 

 

 

10,381,538

 

 

 

9,174,778

 

 

 

31,540,085

 

Transfers between accounts

 

8,302,507

 

 

 

(4,517,330

)

 

 

3,582,464

 

 

 

9,797,800

 

Contract terminations and annuity payouts

 

(12,934,772

)

 

 

(2,731,372

)

 

 

(5,438,815

)

 

 

(11,486,338

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

8,893,963

 

 

 

3,132,836

 

 

 

7,318,427

 

 

 

29,851,547

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

11,552,763

 

 

 

6,223,474

 

 

 

35,786,830

 

 

 

11,967,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

20,815,086

 

 

$

11,552,763

 

 

$

37,270,403

 

 

$

35,786,830

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Alger American
Growth Portfolio

 

Alger American Small
Capitalization Portfolio

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

215,321

 

 

$

15,624,947

 

 

$

9,434

 

 

$

11,019,831

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

1,282,988

 

 

 

1,620,516

 

 

 

269,781

 

 

 

402,960

 

Net investment income (expense)

 

(1,067,667

)

 

 

14,004,431

)

 

 

(260,347

)

 

 

10,616,871

 

Realized gain (loss)

 

(4,115,849

)

 

 

(578,236

)

 

 

(1,197,283

)

 

 

(162,807

)

Realized gain distributions

 

11,675,896

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(20,163,063

)

 

 

(34,859,747

)

 

 

(6,295,731

)

 

 

(20,711,733

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(13,670,683

)

 

 

(21,433,552

)

 

 

(7,753,361

)

 

 

(10,257,669

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

2,092,433

 

 

 

30,579,088

 

 

 

611,872

 

 

 

11,142,378

 

Transfers between accounts

 

(8,692,907

)

 

 

19,671,555

 

 

 

462,192

 

 

 

6,211,099

 

Contract terminations and annuity payouts

 

(11,199,776

)

 

 

(17,832,190

)

 

 

(2,381,949

)

 

 

(5,057,039

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(17,800,250

)

 

 

32,418,453

 

 

 

(1,307,885

)

 

 

12,296,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

107,553,579

 

 

 

96,568,678

 

 

 

25,472,804

 

 

 

23,434,035

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

76,082,646

 

 

$

107,553,579

 

 

$

16,411,558

 

 

$

25,472,804

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Alliance Global
Bond Portfolio (A)

 

Alliance Global
Bond Portfolio (B)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

Dividends

$

-

 

 

$

1,298,382

 

 

$

-

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

356,450

 

 

 

402,009

 

 

 

78,753

 

 

 

57,672

 

Net investment income (expense)

 

(356,450

)

 

 

896,373

 

 

 

(78,753

)

 

 

(57,672

)

Realized gain (loss)

 

(202,148

)

 

 

(169,198

)

 

 

18,736

 

 

 

(1,362

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

84,897

 

 

 

(732,891

)

 

 

(63,631

)

 

 

42

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(473,701

)

 

 

(5,716

)

 

 

(123,648

)

 

 

(58,992

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

430,646

 

 

 

6,408,759

 

 

 

-

 

 

 

-

 

Transfers between accounts

 

(2,317,592

)

 

 

(57,737

)

 

 

(140,367

)

 

 

4,043,605

 

Contract terminations and annuity payouts

 

(3,958,144

)

 

 

(5,736,032

)

 

 

-

 

 

 

(10,512

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(5,845,090

)

 

 

614,990

 

 

 

(140,367

)

 

 

4,033,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

28,614,596

 

 

 

28,005,322

 

 

 

5,698,495

 

 

 

1,724,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

22,295,805

 

 

$

28,614,596

 

 

$

5,434,480

 

 

$

5,698,495

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Alliance Growth &
Income Portfolio (A)

 

Alliance Growth &
Income Portfolio (B)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

49,147

 

 

$

843,189

 

 

$

149,608

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

114,370

 

 

 

113,006

 

 

 

374,001

 

 

 

73,540

 

Net investment income (expense)

 

(65,223

)

 

 

730,183

 

 

 

(224,393

)

 

 

(73,540

)

Realized gain (loss)

 

(55,911

)

 

 

68,409

 

 

 

(52,929

)

 

 

(48,029

)

Realized gain distributions

 

361,251

 

 

 

-

 

 

 

1,158,885

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(363,286

)

 

 

486,806

 

 

 

(1,887,438

)

 

 

574,238

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(123,169

)

 

 

1,285,398

 

 

 

(1,005,875

)

 

 

452,669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

25,098,944

 

 

 

15,879,323

 

 

 

225,172

 

 

 

-

 

Transfers between accounts

 

(17,419,315

)

 

 

(8,136,578

)

 

 

27,011,096

 

 

 

10,281,255

 

Contract terminations and annuity payouts

 

(9,211,375

)

 

 

(6,898,482

)

 

 

10

 

 

 

-

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(1,531,746

)

 

 

844,263

 

 

 

27,236,278

 

 

 

10,281,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

8,845,195

 

 

 

6,715,534

 

 

 

12,596,322

 

 

 

1,862,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

7,190,280

 

 

$

8,845,195

 

 

$

38,826,725

 

 

$

12,596,322

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Alliance Growth
Portfolio (B)1

 

Alliance International
Portfolio (B)1

Alliance Premier
Growth Portfolio (A)

 

 

2001

 

2000

 

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

$

-

 

 

$

-

 

 

$

11,946,785

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

3,827

 

 

1,465

 

 

 

1,726,709

 

 

 

2,538,389

 

Net investment income (expense)

 

(3,827

)

 

(1,465

)

 

 

(1,726,709

)

 

 

9,408,396

 

Realized gain (loss)

 

1,013

 

 

2,647

 

 

 

(8,093,792

)

 

 

(945,508

)

Realized gain distributions

 

-

 

 

-

 

 

 

6,755,850

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

77,815

 

 

15,584

 

 

 

(24,543,962

)

 

 

(40,469,657

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

75,001

 

 

16,766

 

 

 

(27,608,613

)

 

 

(32,006,769

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

-

 

 

-

 

 

 

14,449,836

 

 

 

64,893,553

 

Transfers between accounts

 

1,146,525

 

 

408,049

 

 

 

(14,531,374

)

 

 

(25,171,260

)

Contract terminations and annuity payouts

 

(10,080

)

 

(1,386

)

 

 

(24,139,741

)

 

 

(35,825,180

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

1,136,445

 

 

406,663

 

 

 

(24,221,279

)

 

 

3,897,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

-

 

 

-

 

 

 

155,125,529

 

 

 

183,235,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

1,211,446

 

$

423,429

 

 

$

103,295,637

 

 

$

155,125,529

 

1 Commenced operations October 26, 2001

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Alliance Premier
Growth Portfolio (B)

 

Alliance Real Estate
Investment Portfolio (A)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

-

 

 

$

33,807

 

 

$

43,480

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

766,593

 

 

 

562,676

 

 

 

13,277

 

 

 

14,280

 

Net investment income (expense)

 

(766,593

)

 

 

(562,676

)

 

 

20,530

 

 

 

29,200

 

Realized gain (loss)

 

(564,716

)

 

 

6,736

 

 

 

12,044

 

 

 

25,175

 

Realized gain distributions

 

2,968,530

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(13,213,209

)

 

 

(12,273,525

)

 

 

47,293

 

 

 

168,747

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(11,575,988

)

 

 

(12,829,465

)

 

 

79,867

 

 

 

223,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

35,841

 

 

 

-

 

 

 

3,844

 

 

 

370,360

 

Transfers between accounts

 

9,207,870

 

 

 

50,711,704

 

 

 

2,088

 

 

 

(295,122

)

Contract terminations and annuity payouts

 

(21,242

)

 

 

-

 

 

 

(176,122

)

 

 

(323,356

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

9,222,469

 

 

 

50,711,704

 

 

 

(170,190

)

 

 

(248,118

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

53,619,645

 

 

 

15,737,406

 

 

 

1,001,694

 

 

 

1,026,690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

51,266,126

 

 

$

53,619,645

 

 

$

911,371

 

 

$

1,001,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Alliance
Technology Portfolio (B)

 

Alliance Total
Return Portfolio (B)1

 

2001

 

 

2000

 

2001

 

Income

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

$

1,837,236

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

and administrative charges

 

437,630

 

 

436,655

 

 

3,816

 

Net investment income (expense)

 

(437,630

)

 

1,400,581

 

 

(3,816

)

Realized gain (loss)

 

(1,780,734

)

 

(447,583

)

 

(214

)

Realized gain distributions

 

2,413,192

 

 

-

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

during the period

 

(10,202,532

)

 

(14,965,181

)

 

16,388

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

from operations

 

(10,007,704

)

 

(14,012,183

)

 

12,358

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

4,409,247

 

 

34,961,612

 

 

-

 

Transfers between accounts

 

(167,405

)

 

14,450,924

 

 

1,645,468

 

Contract terminations and annuity payouts

 

(3,279,190

)

 

(9,967,862

)

 

(28,827

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

contract transactions

 

962,652

 

 

39,444,674

 

 

1,616,641

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

$

34,689,132

 

 

9,256,641

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

25,644,080

 

$

34,689,132

 

$

1,628,999

 

 

1 Commenced operations October 26, 2001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Alliance Worldwide
Privatization Portfolio (B)2

 

Mitchell Hutchins
Balanced Portfolio (I)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

909

 

 

$

-

 

 

$

76,699

 

 

$

116,647

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

8,286

 

 

 

775

 

 

 

18,657

 

 

 

13,311

 

Net investment income (expense)

 

(7,377

)

 

 

(775

)

 

 

58,042

 

 

 

103,336

 

Realized gain (loss)

 

(74,933

)

 

 

(1,010

)

 

 

(413,932

)

 

 

3,557

 

Realized gain distributions

 

28,155

 

 

 

-

 

 

 

317,948

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

50,679

 

 

 

(20,027

)

 

 

85,648

 

 

 

(104,936

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(3,476

)

 

 

(21,812

)

 

 

47,706

 

 

 

1,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

301,848

 

 

 

136,906

 

 

 

77,405

 

 

 

1,812,084

 

Transfers between accounts

 

204,152

 

 

 

112,555

 

 

 

(1,634,855

)

 

 

82,082

 

Contract terminations and annuity payouts

 

(42,123

)

 

 

(4,984

)

 

 

(210,028

)

 

 

(792,051

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

463,877

 

 

 

244,477

 

 

 

(1,767,478

)

 

 

1,102,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

222,665

 

 

 

-

 

 

 

1,719,772

 

 

 

615,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

683,066

 

 

$

222,665

 

 

$

-

 

 

$

1,719,772

 

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Mitchell Hutchins
Global Equity Portfolio (I)

 

Mitchell Hutchins
Growth Portfolio (I)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

56,893

 

 

$

-

 

 

$

479,369

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

6,580

 

 

 

7,994

 

 

 

19,504

 

 

 

31,899

 

Net investment income (expense)

 

(6,580

)

 

 

48,899

 

 

 

(19,504

)

 

 

447,470

 

Realized gain (loss)

 

(311,352

)

 

 

2,329

 

 

 

(1,947,503

)

 

 

25,343

 

Realized gain distributions

 

81,490

 

 

 

-

 

 

 

932,534

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

89,435

 

 

 

(114,399

)

 

 

556,735

 

 

 

(946,652

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(147,007

)

 

 

(63,171

)

 

 

(477,738

)

 

 

(473,839

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

-

 

 

 

442,794

 

 

 

18,008

 

 

 

907,833

 

Transfers between accounts

 

(431,012

)

 

 

33,455

 

 

 

(1,235,270

)

 

 

(274,867

)

Contract terminations and annuity payouts

 

(24,263

)

 

 

(214,530

)

 

 

(169,490

)

 

 

(658,726

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(455,275

)

 

 

261,719

 

 

 

(1,386,752

)

 

 

(25,760

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

602,282

 

 

 

403,734

 

 

 

1,864,490

 

 

 

2,364,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

-

 

 

$

602,282

 

 

$

-

 

 

$

1,864,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Mitchell Hutchins
Growth & Income Portfolio (I)

 

Mitchell Hutchins
Strategic Income Portfolio (I)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

12,216

 

 

$

59,476

 

 

$

22,614

 

 

$

15,530

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

14,438

 

 

 

14,019

 

 

 

5,084

 

 

 

3,490

 

Net investment income (expense)

 

(2,222

)

 

 

45,457

 

 

 

17,530

 

 

 

12,040

 

Realized gain (loss)

 

(423,933

)

 

 

2,531

 

 

 

(50,873

)

 

 

391

 

Realized gain distributions

 

314,905

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

64,289

 

 

 

(113,902

)

 

 

14,813

 

 

 

(11,714

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(46,961

)

 

 

(65,914

)

 

 

(18,530

)

 

 

717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

181,861

 

 

 

1,168,073

 

 

 

4,305

 

 

 

490,564

 

Transfers between accounts

 

(1,148,708

)

 

 

(17,741

)

 

 

(324,749

)

 

 

45,566

 

Contract terminations and annuity payouts

 

(201,530

)

 

 

(655,422

)

 

 

(20,769

)

 

 

(232,997

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(1,168,377

)

 

 

494,910

 

 

 

(341,213

)

 

 

303,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

1,215,338

 

 

 

786,342

 

 

 

359,743

 

 

 

55,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

-

 

 

$

1,215,338

 

 

$

-

 

 

$

359,743

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Brinson Tactical
Allocation Portfolio (I)3

 

Exeter Growth Fund

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

592,400

 

 

$

563,257

 

 

$

8,389

 

 

$

8,336

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

409,972

 

 

 

394,094

 

 

 

1,246

 

 

 

1,111

 

Net investment income (expense)

 

182,428

 

 

 

169,163

 

 

 

7,143

 

 

 

7,225

 

Realized gain (loss)

 

(470,806

)

 

 

19,146

 

 

 

84

 

 

 

57

 

Realized gain distributions

 

1,640,795

 

 

 

-

 

 

 

15,162

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(5,773,387

)

 

 

(1,245,682

)

 

 

(5,614

)

 

 

42,242

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(4,420,970

)

 

 

(1,057,373

)

 

 

16,775

 

 

 

49,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

5,659,531

 

 

 

16,703,380

 

 

 

-

 

 

 

-

 

Transfers between accounts

 

(2,259,983

)

 

 

2,500,878

 

 

 

-

 

 

 

-

 

Contract terminations and annuity payouts

 

(4,883,665

)

 

 

(11,423,043

)

 

 

-

 

 

 

-

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(1,484,117

)

 

 

7,781,215

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

30,545,261

 

 

 

23,821,419

 

 

 

338,406

 

 

 

288,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

24,640,174

 

 

$

30,545,261

 

$

355,181

 

 

$

338,406

 

3 Changed name from Mitchell Hutchins Tactical Allocation Portfolio (I)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Exeter Moderate Growth Fund

 

Fidelity VIP Equity
Income Fund - SC22

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

3,825

 

 

$

-

 

 

$

88,340

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

637

 

 

 

116

 

 

 

148,981

 

 

 

13,126

 

Net investment income (expense)

 

3,188

 

 

 

(116

)

 

 

(60,641

)

 

 

(13,126

)

Realized gain (loss)

 

37

 

 

 

5

 

 

 

(16,004

)

 

 

849

 

Realized gain distributions

 

7,090

 

 

 

-

 

 

 

254,251

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(5,175

)

 

 

10,620

 

 

 

(786,451

)

 

 

191,370

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

5,140

 

 

 

10,509

 

 

 

(608,845

)

 

 

179,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

-

 

 

 

160,000

 

 

 

11,272,753

 

 

 

3,682,789

 

Transfers between accounts

 

-

 

 

 

(1,035

)

 

 

4,960,540

 

 

 

929,487

 

Contract terminations and annuity payouts

 

-

 

 

 

-

 

 

 

(3,498,638

)

 

 

(453,251

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

-

 

 

 

158,965

 

 

 

12,734,655

 

 

 

4,159,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

169,474

 

 

 

-

 

 

 

4,338,118

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

174,614

 

 

$

169,474

 

 

$

16,463,928

 

 

$

4,338,118

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Fidelity VIP III
Dynamic Capital
Appreciation Fund - SC25

 

Fidelity VIP III Growth
Opportunities Fund - SC22

 

 

2001

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

$

15,519

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

1,090

 

 

97,981

 

 

 

12,824

 

Net investment income (expense)

 

(1,090

)

 

(82,462

)

 

 

(12,824

)

Realized gain (loss)

 

(10,661

)

 

(35,297

)

 

 

(281

)

Realized gain distributions

 

-

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

during the period

 

4,956

 

 

(841,486

)

 

 

(390,080

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

from operations

 

(6,795

)

 

(959,245

)

 

 

(403,185

)

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

280,316

 

 

5,023,142

 

 

 

3,749,188

 

Transfers between accounts

 

61,064

 

 

2,695,216

 

 

 

1,100,537

 

Contract terminations and annuity payouts

 

(73,521

)

 

(1,557,056

)

 

 

(594,773

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

contract transactions

 

267,859

 

 

6,161,302

 

 

 

4,254,952

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

-

 

 

3,851,767

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

261,064

 

$

9,053,824

 

 

$

3,851,767

 

2 Commenced operations June 1, 2000

5 Commenced operations March 15, 2001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Templeton Developing
Market Securities Fund 2

 

Colonial Global
Equity Fund VS (B)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

13,930

 

 

$

10,213

 

 

$

-

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

28,516

 

 

 

24,888

 

 

 

46,631

 

 

 

46,686

 

Net investment income (expense)

 

(14,586

)

 

 

(14,675

)

 

 

(46,631

)

 

 

(46,686

)

Realized gain (loss)

 

(48,220

)

 

 

(5,430

)

 

 

(175,988

)

 

 

(16,840

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(131,890

)

 

 

(657,375

)

 

 

(1,897,677

)

 

 

(1,554,801

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(194,696

)

 

 

(677,480

)

 

 

(2,120,296

)

 

 

(1,618,327

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

24,973

 

 

 

1,019,856

 

 

 

24,002

 

 

 

2,828,237

 

Transfers between accounts

 

165,395

 

 

 

876,671

 

 

 

150,905

 

 

 

1,273,374

 

Contract terminations and annuity payouts

 

(95,718

)

 

 

(258,802

)

 

 

(212,025

)

 

 

(1,176,309

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

94,650

 

 

 

1,637,725

 

 

 

(37,118

)

 

 

2,925,302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

1,868,488

 

 

 

908,243

 

 

 

8,534,730

 

 

 

7,227,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

1,768,442

 

 

$

1,868,488

 

 

$

6,377,316

 

 

$

8,534,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Colonial High Yield
Securities Fund VS (A)

 

Colonial High Yield
Securities Fund VS (B)2

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

1,049,757

 

 

$

1,177,649

 

 

$

569,441

 

 

$

89,498

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

174,721

 

 

 

161,431

 

 

 

59,970

 

 

 

3,650

 

Net investment income (expense)

 

875,036

 

 

 

1,016,218

 

 

 

509,471

 

 

 

85,848

 

Realized gain (loss)

 

(37,464

)

 

 

(38,222

)

 

 

6,435

 

 

 

(1,929

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(1,333,410

)

 

 

(2,022,600

)

 

 

(809,805

)

 

 

(121,041

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(495,838

)

 

 

(1,044,604

)

 

 

(293,899

)

 

 

(37,122

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

383,491

 

 

 

7,687,284

 

 

 

7,573,878

 

 

 

1,266,468

 

Transfers between accounts

 

286,695

 

 

 

12,958

 

 

 

340,697

 

 

 

(56,493

)

Contract terminations and annuity payouts

 

(1,732,958

)

 

 

(3,313,176

)

 

 

(1,734,825

)

 

 

(207,712

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(1,062,772

)

 

 

4,387,066

 

 

 

6,179,750

 

 

 

1,002,263

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

12,308,783

 

 

 

8,966,321

 

 

 

965,141

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

10,750,173

 

 

$

12,308,783

 

 

$

6,850,992

 

 

$

965,141

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Colonial International
Fund for Growth, VS (A)

 

Colonial International
Horizons Fund, VS (B)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

6,750,426

 

 

$

41,245

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

501,970

 

 

 

698,723

 

 

 

78,845

 

 

 

75,991

 

Net investment income (expense)

 

(501,970

)

 

 

6,051,703

 

 

 

(37,600

)

 

 

(75,991

)

Realized gain (loss)

 

(622,187

)

 

 

468,922

 

 

 

(271,295

)

 

 

745

 

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(10,009,709

)

 

 

(17,563,623

)

 

 

(2,285,287

)

 

 

(2,144,743

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(11,133,866

)

 

 

(11,042,998

)

 

 

(2,594,182

)

 

 

(2,219,989

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

616,224

 

 

 

2,881,909

 

 

 

197,865

 

 

 

6,815,162

 

Transfers between accounts

 

1,855,940

 

 

 

(201,683

)

 

 

(212,141

)

 

 

1,632,835

 

Contract terminations and annuity payouts

 

(4,054,515

)

 

 

(5,424,797

)

 

 

(488,695

)

 

 

(2,844,925

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(1,582,351

)

 

 

(2,744,571

)

 

 

(502,971

)

 

 

5,603,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

44,178,451

 

 

 

57,966,020

 

 

 

10,846,889

 

 

 

7,463,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

31,462,234

 

 

$

44,178,451

 

 

$

7,749,736

 

 

$

10,846,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Colonial Small Cap
Value Fund, VS (A)

 

Colonial Small Cap
Value Fund, VS (B)2

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

15,748

 

 

$

47,483

 

 

$

20,899

 

 

$

31,086

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

72,627

 

 

 

47,250

 

 

 

79,737

 

 

 

7,567

 

Net investment income (expense)

 

(56,879

)

 

 

233

 

 

 

(58,838

)

 

 

23,519

 

Realized gain (loss)

 

(23,076

)

 

 

(936

)

 

 

(25,832

)

 

 

1,269

 

Realized gain distributions

 

65,984

 

 

 

-

 

 

 

88,188

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

373,925

 

 

 

659,239

 

 

 

534,779

 

 

 

143,151

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

359,954

 

 

 

658,536

 

 

 

538,297

 

 

 

167,939

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

107,584

 

 

 

3,120,102

 

 

 

4,640,659

 

 

 

2,603,493

 

Transfers between accounts

 

1,214,261

 

 

 

684,048

 

 

 

794,433

 

 

 

795,115

 

Contract terminations and annuity payouts

 

(735,120

)

 

 

(1,430,690

)

 

 

(1,454,633

)

 

 

(524,983

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

586,725

 

 

 

2,373,460

 

 

 

3,980,459

 

 

 

2,873,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

4,592,767

 

 

 

1,560,771

 

 

 

3,041,564

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

5,539,446

 

 

$

4,592,767

 

 

$

7,560,320

 

 

$

3,041,564

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Colonial
Strategic Income Fund, VS (A)

 

Colonial Strategic
Income Fund, VS (B)2

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

7,166,626

 

 

$

9,150,642

 

 

$

1,403,744

 

 

$

288,149

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

1,253,724

 

 

 

1,360,040

 

 

 

140,463

 

 

 

8,485

 

Net investment income (expense)

 

5,912,902

 

 

 

7,790,602

 

 

 

1,263,281

 

 

 

279,664

 

Realized gain (loss)

 

(553,428

)

 

 

(215,327

)

 

 

(22,953

)

 

 

(159

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(3,308,095

)

 

 

(8,930,078

)

 

 

(1,127,838

)

 

 

(282,978

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

2,051,379

 

 

 

(1,354,803

)

 

 

112,490

 

 

 

(3,473

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

1,214,043

 

 

 

13,029,085

 

 

 

12,323,932

 

 

 

2,876,762

 

Transfers between accounts

 

(2,417,975

)

 

 

(7,860,930

)

 

 

5,312,430

 

 

 

632,042

 

Contract terminations and annuity payouts

 

(11,793,938

)

 

 

(14,185,880

)

 

 

(4,158,183

)

 

 

(553,447

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(12,997,870

)

 

 

(9,017,725

)

 

 

13,478,179

 

 

 

2,955,357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

92,967,644

 

 

 

103,340,172

 

 

 

2,951,884

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

82,021,153

 

 

$

92,967,644

 

 

$

16,542,553

 

 

$

2,951,884

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Colonial US Growth
& Income Fund, VS (A)

 

Colonial US Growth
& Income Fund, VS (B)2

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

1,116,750

 

 

$

13,479,046

 

 

$

219,734

 

 

$

305,549

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

1,593,170

 

 

 

1,599,033

 

 

 

164,403

 

 

 

9,946

 

Net investment income (expense)

 

(476,420

)

 

 

11,880,013

 

 

 

55,331

 

 

 

295,603

 

Realized gain (loss)

 

(56,107

)

 

 

342,671

 

 

 

(2,210

)

 

 

1,178

 

Realized gain distributions

 

15,019,887

 

 

 

-

 

 

 

2,463,003

 

 

 

 

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(17,012,655

)

 

 

(9,421,100

)

 

 

(2,345,671

)

 

 

(218,640

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(2,525,295

)

 

 

2,801,584

 

 

 

170,453

 

 

 

78,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

2,021,544

 

 

 

17,174,256

 

 

 

14,206,421

 

 

 

2,919,119

 

Transfers between accounts

 

5,260,611

 

 

 

(2,127,478

)

 

 

7,374,511

 

 

 

873,659

 

Contract terminations and annuity payouts

 

(12,536,486

)

 

 

(14,865,867

)

 

 

(3,324,665

)

 

 

(336,520

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(5,254,331

)

 

 

180,911

 

 

 

18,256,267

 

 

 

3,456,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

117,433,431

 

 

 

114,450,936

 

 

 

3,534,399

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

109,653,805

 

 

$

117,433,431

 

 

$

21,961,119

 

 

$

3,534,399

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Crabbe Huson Real Estate
Investment Fund, VS (B)

 

 

2001

 

 

2000

 

 

Income

 

 

 

 

 

 

 

 

Dividends

$

210,948

 

 

$

203,791

 

 

Expenses

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

and administrative charges

 

30,684

 

 

 

14,758

 

 

Net investment income (expense)

 

180,264

 

 

 

189,033

 

 

Realized gain (loss)

 

51,167

 

 

 

(398

)

 

Realized gain distributions

 

-

 

 

 

 

 

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

during the period

 

326,582

 

 

 

215,587

 

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

from operations

 

558,013

 

 

 

404,222

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

504,970

 

 

 

1,195,761

 

 

Transfers between accounts

 

(259,623

)

 

 

716,876

 

 

Contract terminations and annuity payouts

 

(348,766

)

 

 

(539,537

)

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

contract transactions

 

(103,419

)

 

 

1,373,100

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

3,902,769

 

 

 

2,125,447

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

4,357,363

 

 

$

3,902,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Liberty All-Star
Equity Fund, VS (A)

 

Liberty All-Star
Equity Fund, VS (A)

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

133,550

 

 

$

3,905,476

 

 

$

10,970

 

 

$

133,989

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

740,237

 

 

 

800,147

 

 

 

50,888

 

 

 

7,466

 

Net investment income (expense)

 

(606,687

)

 

 

3,105,329

 

 

 

(39,918

)

 

 

126,523

 

Realized gain (loss)

 

(744,138

)

 

 

4,365,739

 

 

 

(14,946

)

 

 

(609

)

Realized gain distributions

 

1,025,385

 

 

 

-

 

 

 

81,226

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(7,930,022

)

 

 

(5,456,020

)

 

 

(540,952

)

 

 

(145,243

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(8,255,462

)

 

 

2,015,048

 

 

 

(514,590

)

 

 

(19,329

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

848,921

 

 

 

7,773,581

 

 

 

2,011,117

 

 

 

2,136,206

 

Transfers between accounts

 

(323,879

)

 

 

10,566,095

 

 

 

492,644

 

 

 

590,006

 

Contract terminations and annuity payouts

 

(7,134,642

)

 

 

(6,507,970

)

 

 

(550,356

)

 

 

(279,709

)

Other transfers to Keyport Life

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Insurance Company

 

-

 

 

 

(24,261,924)

 

 

 

-

 

 

 

-

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(6,609,600

)

 

 

(12,430,218

)

 

 

1,953,405

 

 

 

2,446,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

61,172,772

 

 

 

71,587,942

 

 

 

2,427,174

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

46,307,710

 

 

$

61,172,772

 

 

$

3,865,989

 

 

$

2,427,174

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Liberty Newport Japan
Opportunities Fund, VS (A)2

 

Liberty Newport Japan
Opportunities Fund, VS (B)2

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

-

 

 

 

-

 

 

 

877

 

 

 

466

 

Net investment income (expense)

 

-

 

 

 

-

 

 

 

(877

)

 

 

(466

)

Realized gain (loss)

 

-

 

 

 

-

 

 

 

(2,763

)

 

 

24,718

 

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(22,583

)

 

 

(29,667

)

 

 

(556,051

)

 

 

(735,676

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(22,583

)

 

 

(29,667

)

 

 

(559,691

)

 

 

(711,424

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

-

 

 

 

-

 

 

 

4,405

 

 

 

89,946

 

Transfers between accounts

 

-

 

 

 

-

 

 

 

(32,377

)

 

 

10,384

 

Contract terminations and annuity payouts

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,990

)

Other transfers to Keyport Life

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Insurance Company

 

-

 

 

 

100,000

 

 

 

-

 

 

 

2,400,000

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

-

 

 

 

100,000

 

 

 

(27,972

)

 

 

2,482,340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

70,333

 

 

 

-

 

 

 

1,770,916

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

47,750

 

 

$

70,333

 

 

$

1,183,253

 

 

$

1,770,916

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Liberty S&P 500
Index Fund, VS (A)2

 

Liberty S&P 500
Index Fund, VS (B)2

 

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

460

 

 

$

458

 

 

$

140,575

 

 

$

50,682

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

-

 

 

 

-

 

 

 

197,135

 

 

 

18,747

 

Net investment income (expense)

 

460

 

 

 

458

 

 

 

(56,560

)

 

 

31,935

 

Realized gain (loss)

 

-

 

 

 

-

 

 

 

(4,452

)

 

 

(410

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(11,976

)

 

 

(5,585

)

 

 

(2,098,564

)

 

 

(676,319

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(11,516

)

 

 

(5,127

)

 

 

(2,159,576

)

 

 

(644,794

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

-

 

 

 

-

 

 

 

16,104,669

 

 

 

6,053,817

 

Transfers between accounts

 

-

 

 

 

-

 

 

 

5,436,180

 

 

 

1,376,654

 

Contract terminations and annuity payouts

 

-

 

 

 

-

 

 

 

(4,671,590

)

 

 

(1,081,026

)

Other transfers to Keyport Life

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Insurance Company

 

-

 

 

 

100,000

 

 

 

-

 

 

 

4,900,000

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

-

 

 

 

100,000

 

 

 

16,869,259

 

 

 

11,249,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

94,873

 

 

 

-

 

 

 

10,604,651

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

83,357

 

 

$

94,873

 

 

$

25,314,334

 

 

$

10,604,651

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

Liberty Select
Value Fund, VS (A)2

Liberty Select
Value Fund, VS (B) 2

2001

 

2000

 

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

252

 

 

$

1,042

 

 

$

33,229

 

 

$

33,592

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

-

 

 

 

-

 

 

 

93,503

 

 

 

3,997

 

Net investment income (expense)

 

252

 

 

 

1,042

 

 

 

(60,274

)

 

 

29,595

 

Realized gain (loss)

 

168

 

 

 

-

 

 

 

(905

)

 

 

(2,136

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

22,152

 

 

 

 

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

3,619

 

 

 

10,335

 

 

 

148,088

 

 

 

222,840

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

4,039

 

 

 

11,377

 

 

 

109,061

 

 

 

250,299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

-

 

 

 

-

 

 

 

7,465,263

 

 

 

1,276,661

 

Transfers between accounts

 

-

 

 

 

-

 

 

 

5,888,496

 

 

 

274,412

 

Contract terminations and annuity payouts

 

-

 

 

 

-

 

 

 

(1,729,331

)

 

 

(96,108

)

Other transfers to Keyport Life

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Insurance Company

 

-

 

 

 

100,000

 

 

 

-

 

 

 

1,900,000

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

-

 

 

 

100,000

 

 

 

11,624,428

 

 

 

3,354,965

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

111,377

 

 

 

-

 

 

 

3,605,264

 

 

 

-

 

 

Net assets at end of period

$

115,416

 

 

$

111,377

 

 

$

15,338,753

 

 

$

3,605,264

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

Liberty Value Fund, VS (A)6

Liberty Value Fund, VS (B)2

2001

 

2000

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

1,196,188

 

 

$

1,627,420

 

 

$

77,065

 

 

$

12,572

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

1,343,674

 

 

 

1,383,184

 

 

 

58,904

 

 

 

1,579

 

Net investment income (expense)

 

(147,486

)

 

 

244,236

 

 

 

18,161

 

 

 

10,993

 

Realized gain (loss)

 

1,820,162

 

 

 

375,117

 

 

 

(11,895

)

 

 

(84

)

Realized gain distributions

 

6,185,165

 

 

 

-

 

 

 

487,404

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(10,022,492

)

 

 

13,446,195

 

 

 

(449,716

)

 

 

49,027

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(2,164,651

)

 

 

14,065,548

 

 

 

43,954

 

 

 

59,936

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

1,332,392

 

 

 

7,162,176

 

 

 

4,173,577

 

 

 

434,024

 

Transfers between accounts

 

(7,006,744

)

 

 

(2,761,851

)

 

 

2,381,568

 

 

 

585,014

 

Contract terminations and annuity payouts

 

(11,032,731

)

 

 

(11,899,071

)

 

 

(681,604

)

 

 

(51,345

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(16,707,083

)

 

 

(7,498,746

)

 

 

5,873,541

 

 

 

967,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

106,986,893

100,420,091

1,027,629

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

88,115,159

 

 

$

106,986,893

 

 

$

6,945,124

 

 

$

1,027,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2 Commenced operations June 1, 2000

6 Name change from Colonial Growth & Income effective June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

Newport Tiger Fund, VS (A)

Newport Tiger Fund, VS (B) 2

2001

 

2000

 

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

76,214

 

 

$

124,113

 

 

$

13,995

 

 

$

5,183

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

153,735

 

 

 

191,370

 

 

 

17,238

 

 

 

3,470

 

Net investment income (expense)

 

(77,521

)

 

 

(67,257

)

 

 

(3,243

)

 

 

1,713

 

Realized gain (loss)

 

171,172

 

 

 

365,895

 

 

 

473,411

 

 

 

103,101

 

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(1,640,911

)

 

 

(2,362,610

)

 

 

(139,529

)

 

 

(66,843

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(1,547,260

)

 

 

(2,063,972

)

 

 

330,639

 

 

 

37,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

220,858

 

 

 

2,979,946

 

 

 

335,239

 

 

 

468,609

 

Transfers between accounts

 

(391,868

)

 

 

2,139,594

 

 

 

(137,870

)

 

 

113,209

 

Contract terminations and annuity payouts

 

(1,019,874

)

 

 

(1,497,502

)

 

 

(83,691

)

 

 

(38,901

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(1,190,884

)

 

 

3,622,038

 

 

 

113,678

 

 

 

542,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

12,564,954

 

 

 

11,006,888

 

 

 

580,888

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

9,826,810

 

 

$

12,564,954

 

 

$

1,025,205

 

 

$

580,888

 

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

Rydex Financial
Services Fund, VS (A)2

Rydex Financial
Services Fund, VS (B) 2

2001

 

2000

 

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

420

 

 

$

958

 

 

$

14,731

 

 

$

17,010

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

-

 

 

 

-

 

 

 

30,021

 

 

 

3,225

 

Net investment income (expense)

 

420

 

 

 

958

 

 

 

(15,290

)

 

 

13,785

 

Realized gain (loss)

 

-

 

 

 

-

 

 

 

(20,126

)

 

 

(56

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(15,120

)

 

 

20,920

 

 

 

(349,736

)

 

 

254,078

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(14,700

)

 

 

21,878

 

 

 

(385,152

)

 

 

267,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

-

 

 

 

-

 

 

 

1,645,215

 

 

 

1,011,836

 

Transfers between accounts

 

-

 

 

 

-

 

 

 

672,334

 

 

 

213,100

 

Contract terminations and annuity payouts

 

-

 

 

 

-

 

 

 

(378,394

)

 

 

(189,520

)

Other transfers to Keyport Life

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Insurance Company

 

-

 

 

 

100,000

 

 

 

-

 

 

 

900,000

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

-

 

 

 

100,000

 

 

 

1,939,155

 

 

 

1,935,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

121,878

 

 

 

-

 

 

 

2,203,223

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

107,178

 

 

$

121,878

 

 

$

3,757,226

 

 

$

2,203,223

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

Rydex Health
Care Fund, VS (A) 2

Rydex Health
Care Fund, VS (B)2

2001

 

2000

 

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

-

 

 

 

-

 

 

 

52,689

 

 

 

4,969

 

Net investment income (expense)

 

-

 

 

 

-

 

 

 

(52,689

)

 

 

(4,969

)

Realized gain (loss)

 

-

 

 

 

-

 

 

 

(5,233

)

 

 

178

 

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(14,083

)

 

 

18,500

 

 

 

(362,767

)

 

 

291,633

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(14,083

)

 

 

18,500

 

 

 

(420,689

)

 

 

286,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

-

 

 

 

-

 

 

 

2,162,238

 

 

 

1,366,274

 

Transfers between accounts

 

-

 

 

 

-

 

 

 

1,781,947

 

 

 

446,647

 

Contract terminations and annuity payouts

 

-

 

 

 

-

 

 

 

(471,234

)

 

 

(189,761

)

Other transfers to Keyport Life

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Insurance Company

 

-

 

 

 

100,000

 

 

 

-

 

 

 

900,000

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

-

 

 

 

100,000

 

 

 

3,472,951

 

 

 

2,523,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

118,500

 

 

 

-

 

 

 

2,810,002

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

104,417

 

 

$

118,500

 

 

$

5,862,264

 

 

$

2,810,002

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

SteinRoe
Global Utilities Fund, VS (A)

Wanger Foreign
Forty Fund7

2001

 

2000

 

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

589,031

 

 

$

5,296,134

 

 

$

762

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

572,301

 

 

 

718,811

 

 

 

17,682

 

 

 

80

 

Net investment income (expense)

 

16,730

 

 

 

4,577,323

 

 

 

(16,920

)

 

 

(80

)

Realized gain (loss)

 

(2,232,044

)

 

 

(50,606

)

 

 

246,650

 

 

 

205

 

Realized gain distributions

 

1,094,594

 

 

 

-

 

 

 

48,955

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(5,596,004

)

 

 

(12,842,593

)

 

 

(286,441

)

 

 

7,302

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(6,716,724

)

 

 

(8,315,876

)

 

 

(7,756

)

 

 

7,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

572,812

 

 

 

11,035,837

 

 

 

1,271,261

 

 

 

138,403

 

Transfers between accounts

 

(4,440,549

)

 

 

7,158,827

 

 

 

683,133

 

 

 

11,395

 

Contract terminations and annuity payouts

 

(5,186,355

)

 

 

(7,506,216

)

 

 

(325,323

)

 

 

(53

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(9,054,092

)

 

 

10,688,448

 

 

 

1,629,071

 

 

 

149,745

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

49,040,859

 

 

 

46,668,287

 

 

 

157,172

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

33,270,043

 

 

$

49,040,859

 

 

$

1,778,487

 

 

$

157,172

 

7 Commenced operations October 16, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

Wanger International
Small Cap Fund7

Wanger Twenty Fund 7

2001

 

2000

 

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

55,359

 

 

 

132

 

 

 

37,364

 

 

 

221

 

Net investment income (expense)

 

(55,359

)

 

 

(132

)

 

 

(37,364

)

 

 

(221

)

Realized gain (loss)

 

632,049

 

 

 

960

 

 

 

(9,120

)

 

 

15

 

Realized gain distributions

 

242,756

 

 

 

 

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(797,236

)

 

 

(1,937

)

 

 

461,866

 

 

 

9,742

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

22,210

 

 

 

(1,109

)

 

 

415,382

 

 

 

9,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

2,875,814

 

 

 

235,795

 

 

 

2,955,821

 

 

 

192,438

 

Transfers between accounts

 

8,624,726

 

 

 

49,534

 

 

 

2,136,603

 

 

 

165,172

 

Contract terminations and annuity payouts

 

(4,848,055

)

 

 

(19,284

)

 

 

(474,250

)

 

 

(9,918

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

6,652,485

 

 

 

266,045

 

 

 

4,618,174

 

 

 

347,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

264,936

 

 

 

-

 

 

 

357,228

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

6,939,631

 

 

$

264,936

 

 

$

5,390,784

 

 

$

357,228

 

7 Commenced operations October 16, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

Wanger US
Small Cap Fund 7

MFS Bond Series IC

2001

 

2000

 

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

1,220

 

 

$

-

 

 

$

464,215

 

 

$

359,334

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

99,516

 

 

 

241

 

 

 

96,369

 

 

 

99,390

 

Net investment income (expense)

 

(98,296

)

 

 

(241

)

 

 

367,846

 

 

 

259,944

 

Realized gain (loss)

 

59,461

 

 

 

(211

)

 

 

84,270

 

 

 

20,560

 

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

754,518

 

 

 

9,193

 

 

 

31,708

 

 

 

265,073

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

715,683

 

 

 

8,741

 

 

 

483,824

 

 

 

545,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

11,245,193

 

 

 

381,170

 

 

 

245,736

 

 

 

2,245,547

 

Transfers between accounts

 

6,961,804

 

 

 

47,058

 

 

 

121,878

 

 

 

(401,708)

 

Contract terminations and annuity payouts

 

(1,966,894

)

 

 

(15,132

)

 

 

(2,488,235

)

 

 

(1,615,873

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

16,240,103

 

 

 

413,096

 

 

 

(2,120,621

)

 

 

227,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

421,837

 

 

 

-

 

 

 

7,540,923

 

 

 

6,767,380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

17,377,623

 

 

$

421,837

 

 

$

5,904,126

 

 

$

7,540,923

 

7 Commenced operations October 16, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

 

MFS Emerging
Growth Series IC

MFS Emerging
Growth Series SC2

2001

 

2000

 

 

2001

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

3,259,564

 

 

$

-

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

467,406

 

 

 

808,517

 

 

 

96,617

 

 

 

15,057

 

Net investment income (expense)

 

(467,406

)

 

 

2,451,047

 

 

 

(96,617

)

 

 

(15,057

)

Realized gain (loss)

 

(4,471,634

)

 

 

(207,887

)

 

 

(83,275

)

 

 

(8,874

)

Realized gain distributions

 

2,305,740

 

 

 

-

 

 

 

413,006

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(14,252,708

)

 

 

(15,747,140

)

 

 

(2,853,139

)

 

 

(651,155

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(16,886,008

)

 

 

(13,503,980

)

 

 

(2,620,025

)

 

 

(675,086

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

837,576

 

 

 

5,996,984

 

 

 

4,811,362

 

 

 

5,123,377

 

Transfers between accounts

 

(3,133,112

)

 

 

8,133,164

 

 

 

2,912,548

 

 

 

1,002,812

 

Contract terminations and annuity payouts

 

(4,669,044

)

 

 

(6,461,760

)

 

 

(1,634,801

)

 

 

(689,832

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(6,964,580

)

 

 

7,668,388

 

 

 

6,089,109

 

 

 

5,436,357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

50,495,338

 

 

 

56,330,930

 

 

 

4,761,271

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

26,644,750

 

 

$

50,495,338

 

 

$

8,230,355

 

 

$

4,761,271

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

MFS Investors Growth
Stock Series SC8

 

MFS Investors

Trust Series SC9

2001

 

2000

 

 

2001

 

2000

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

6,093

 

 

$

-

 

 

$

23,243

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

129,208

 

 

 

16,049

 

 

 

95,547

 

 

 

8,662

 

Net investment income (expense)

 

(123,115

)

 

 

(16,049

)

 

 

(72,304

)

 

 

(8,662

)

Realized gain (loss)

 

(20,567

)

 

 

(687

)

 

 

(21,280

)

 

 

(2,251

)

Realized gain distributions

 

73,541

 

 

 

-

 

 

 

127,603

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(2,378,358

)

 

 

(456,027

)

 

 

(1,078,025

)

 

 

(39,034

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(2,448,499

)

 

 

(472,763

)

 

 

(1,044,006

)

 

 

(49,947

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

5,879,474

 

 

 

4,932,267

 

 

 

6,259,010

 

 

 

2,516,075

 

Transfers between accounts

 

3,972,890

 

 

 

1,710,797

 

 

 

3,704,982

 

 

 

831,357

 

Contract terminations and annuity payouts

 

(1,680,117

)

 

 

(671,188

)

 

 

(1,684,117

)

 

 

(520,592

)

Net increase (decrease) in net assets from

contract transactions

 

8,172,247

 

 

 

5,971,876

 

 

 

8,279,875

 

 

 

2,826,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

5,499,113

 

 

 

-

 

 

 

2,776,893

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

11,222,861

 

 

$

5,499,113

 

 

$

10,012,762

 

 

$

2,776,893

 

8 Changed name from MFS Growth Series SC May 1, 2001

9 Changed name from MFS Growth with Income Series SC May 1, 2001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

 

MFS New
Discovery Series SC2

 

 

MFS Research Series IC

 

2001

 

2000

 

 

2001

 

2000

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

-

 

 

$

6,342

 

 

$

4,061,966

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

58,256

 

 

 

7,807

 

 

 

625,442

 

 

 

877,391

 

Net investment income (expense)

 

(58,256

)

 

 

(7,807

)

 

 

(619,100

)

 

 

3,184,575

 

Realized gain (loss)

 

13,840

 

 

 

(4,741

)

 

 

(1,179,943

)

 

 

142,010

 

Realized gain distributions

 

122,954

 

 

 

-

 

 

 

6,093,204

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(156,049

)

 

 

(110,640

)

 

 

(16,598,085

)

 

 

(7,004,412

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(77,511

)

 

 

(123,188

)

 

 

(12,303,924

)

 

 

(3,677,827

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

2,638,867

 

 

 

1,994,860

 

 

 

672,710

 

 

 

4,451,754

 

Transfers between accounts

 

1,311,342

 

 

 

797,967

 

 

 

(2,678,836

)

 

 

1,028,877

 

Contract terminations and annuity payouts

 

(815,151

)

 

 

(288,357

)

 

 

(5,064,776

)

 

 

(6,234,816

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

3,135,058

 

 

 

2,504,470

 

 

 

(7,070,902

)

 

 

(754,185

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

2,381,282

 

 

 

-

 

 

 

57,158,832

 

 

 

61,590,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

5,438,829

 

 

$

2,381,282

 

 

$

37,784,006

 

 

$

57,158,832

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

Rydex
OTC Fund 10

Rydex
Nova Fund 10

Rydex
Ursa Fund10

 

2001

 

 

2000

 

 

2001

 

2001

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

25,079

 

 

$

-

 

 

$

25,422

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

38,606

 

 

 

5,423

 

 

 

910

 

 

 

821

 

Net investment income (expense)

 

(38,606

)

 

 

19,656

 

 

 

(910

)

 

 

24,601

 

Realized gain (loss)

 

(39

)

 

 

(3,911

)

 

 

4,353

 

 

 

(12,247

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

1

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(929,703

)

 

 

(650,519

)

 

 

(733

)

 

 

(1

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(968,348

)

 

 

(634,774

)

 

 

2,711

 

 

 

12,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

1,511,286

 

 

 

1,921,600

 

 

 

-

 

 

 

-

 

Transfers between accounts

 

1,639,289

 

 

 

647,259

 

 

 

52,646

 

 

 

690,282

 

Contract terminations and annuity payouts

 

(406,985

)

 

 

(196,936

)

 

 

-

 

 

 

-

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

2,743,590

 

 

 

2,371,923

 

 

 

52,646

 

 

 

690,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

1,737,149

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

3,512,391

 

 

$

1,737,149

 

 

$

55,357

 

 

$

702,635

 

 

10 Commenced operations March 15, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

Rydex US Gov't
Bond Fund10

 

Rydex US Gov't
Money Market Fund10

 

Rydex Precious
Metals Fund10

 

2001

 

 

2001

 

 

2000

 

 

2001

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

328

 

 

$

17,520

 

 

$

240

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

98

 

 

 

8,422

 

 

 

31

 

 

 

39

 

Net investment income (expense)

 

230

 

 

 

9,098

 

 

 

209

 

 

 

(39

)

Realized gain (loss)

 

1,372

 

 

 

-

 

 

 

-

 

 

 

(619

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

-

 

 

 

-

 

 

 

-

 

 

 

348

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

1,602

 

 

 

9,098

 

 

 

209

 

 

 

(310

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

 

 

 

 

2,517,494

 

 

 

137,487

 

 

 

-

 

Transfers between accounts

 

(1,602

)

 

 

(791,685

)

 

 

-

 

 

 

11,623

 

Contract terminations and annuity payouts

 

 

 

 

 

(146,420

)

 

 

-

 

 

 

-

 

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(1,602

)

 

 

1,579,389

 

 

 

137,487

 

 

 

11,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

-  

 

 

 

137,696

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

-

 

 

$

1,726,183

 

 

$

137,696

 

 

$

11,313

 

 

 

10 Commenced operations March 15, 2000

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

SteinRoe
Balanced Fund VS (A)

SteinRoe Balanced2
Fund VS (B)

 

2001

 

 

 

2000

 

 

2001

 

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

3,989,038

 

 

$

9,924,908

 

 

$

590,470

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

1,769,901

 

 

 

1,959,829

 

 

 

413,459

 

 

 

39,503

 

Net investment income (expense)

 

2,219,137

 

 

 

7,965,079

 

 

 

177,011

 

 

 

(39,503

)

Realized gain (loss)

 

(2,169,281

)

 

 

40,456

 

 

 

(31,157

)

 

 

6,292

 

Realized gain distributions

 

4,977,094

 

 

 

-

 

 

 

736,725

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(20,115,533

)

 

 

(11,507,282

)

 

 

(3,738,458

)

 

 

(377,398

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(15,088,583

)

 

 

(3,501,747

)

 

 

(2,855,879

)

 

 

(410,609

)

Purchase payments from contract owners

 

4,226,263

 

 

 

43,045,965

 

 

 

40,713,535

 

 

 

13,852,141

 

Transfers between accounts

 

(3,029,860

)

 

 

6,827,173

 

 

 

8,135,408

 

 

 

3,031,598

 

Contract terminations and annuity payouts

 

(18,396,669

)

 

 

(33,297,192

)

 

 

(16,755,180

)

 

 

(3,209,137

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(17,200,266

)

 

 

16,575,946

 

 

 

32,093,763

 

 

 

13,674,602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

145,671,805

 

 

 

132,597,606

 

 

 

13,263,993

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

113,382,956

 

 

$

145,671,805

 

 

$

42,501,877

 

 

$

13,263,993

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

SteinRoe Growth
Stock Fund VS (A)

SteinRoe Growth Stock Fund VS (B) 2

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

-

 

 

$

16,305,245

 

 

$

-

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

1,473,683

 

 

 

1,946,123

 

 

 

329,880

 

 

 

56,191

 

Net investment income (expense)

 

(1,473,683

)

 

 

14,359,122

 

 

 

(329,880

)

 

 

(56,191

)

Realized gain (loss)

 

(2,781,036

)

 

 

(220,397

)

 

 

(92,782

)

 

 

(5,894

)

Realized gain distributions

 

19,116,511

 

 

 

-

 

 

 

3,415,167

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

(48,441,045

)

 

 

(38,563,107

)

 

 

(9,794,212

)

 

 

(2,643,248

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

(33,579,253

)

 

 

(24,424,382

)

 

 

(6,801,707

)

 

 

(2,705,333

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

3,023,347

 

 

 

51,315,908

 

 

 

15,734,790

 

 

 

17,528,730

 

Transfers between accounts

 

(6,880,248

)

 

 

32,707,765

 

 

 

7,774,346

 

 

 

3,841,040

 

Contract terminations and annuity payouts

 

(14,872,066

)

 

 

(27,637,921

)

 

 

(6,184,154

)

 

 

(2,386,277

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

(18,728,967

)

 

 

56,385,752

 

 

 

17,324,982

 

 

 

18,983,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

135,632,341

 

 

 

103,670,971

 

 

 

16,278,160

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

83,324,121

 

 

$

135,632,341

 

 

$

26,801,435

 

 

$

16,278,160

 

2 Commenced operations June 1, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

SteinRoe Money
Market Fund VS (A)

 


Liberty Federal Securities VS (A)4

2001

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

$

5,366,331

 

 

$

5,695,740

 

 

$

2,868,364

 

 

$

2,699,379

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

2,214,403

 

 

 

1,324,208

 

 

 

739,433

 

 

 

636,910

 

Net investment income (expense)

 

3,151,928

 

 

 

4,371,532

 

 

 

2,128,931

 

 

 

2,062,469

 

Realized gain (loss)

 

-

 

 

 

-

 

 

 

76,017

 

 

 

107,804

 

Realized gain distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

-

 

 

 

-

 

 

 

544,596

 

 

 

2,008,968

 

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

3,151,928

 

 

 

4,371,532

 

 

 

2,749,544

 

 

 

4,179,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

118,254,959

 

 

 

74,258,740

 

 

 

788,251

 

 

 

6,236,846

 

Transfers between accounts

 

30,964,343

 

 

 

6,056,974

 

 

 

9,967,843

 

 

 

1,237,319

 

Contract terminations and annuity payouts

 

(110,324,527

)

 

 

(37,570,692

)

 

 

(6,783,992

)

 

 

(6,954,866

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

38,894,775

 

 

 

42,745,022

 

 

 

3,972,102

 

 

 

519,299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

131,286,144

 

 

 

84,169,590

 

 

 

48,295,247

 

 

 

43,596,707

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

173,332,847

 

 

$

131,286,144

 

 

$

55,016,893

 

 

$

48,295,247

 

4 Changed name from Stein Roe Mortgage Securities Fund May 1, 2001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

Liberty Federal Securities VS (B) 2,4

SteinRoe Small
Company Growth Fund VS (A)

 

2001

 

 

2000

 

 

2001

 

 

2000

 

Income

 

 

 

 

 

 

 

 

 

 

Dividends

$

662,461

 

 

$

-

 

 

$

-

 

 

$

-

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and administrative charges

 

323,792

 

 

 

18,128

 

 

 

140,169

 

 

 

180,976

 

Net investment income (expense)

 

338,669

 

 

 

(18,128

)

 

 

(140,169

)

 

 

(180,976

)

Realized gain (loss)

 

(39,526

)

 

 

1,239

 

 

 

84,631

 

 

 

(13,964

)

Realized gain distributions

 

-

 

 

 

-

 

 

 

4,433,541

 

 

 

-

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

during the period

 

459,307

 

 

 

215,638

 

 

 

(5,504,454

)

 

 

(988,472

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from operations

 

758,450

 

 

 

198,749

 

 

 

(1,126,451

)

 

 

(1,183,412

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

29,615,883

 

 

 

6,161,156

 

 

 

100,039

 

 

 

829,752

 

Transfers between accounts

 

15,817,540

 

 

 

1,588,804

 

 

 

25,259

 

 

 

2,764,824

 

Contract terminations and annuity payouts

 

(10,645,665

)

 

 

(1,097,739

)

 

 

(1,603,382

)

 

 

(1,657,210

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

contract transactions

 

34,787,758

 

 

 

6,652,221

 

 

 

(1,478,084

)

 

 

1,937,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

6,850,970

 

 

 

-

 

 

 

11,483,864

 

 

 

10,729,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

42,397,178

 

 

$

6,850,970

 

 

$

8,879,329

 

 

$

11,483,864

 

2 Commenced operations June 1, 2000

4 Changed name from Stein Roe Mortgage Securities Fund May 1, 2001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Statements of Operations and Changes in Net Assets

For the Years Ended December 31, 2001 and 2000

 

 

 

 

Total
2001

 

Total
2000

Income

 

 

 

 

 

 

Dividends

$

29,547,495

 

 

$

132,933,090

 

Expenses

 

 

 

 

 

 

 

Mortality and expense risk

 

 

 

 

 

 

 

and administrative charges

 

24,287,531

 

 

 

22,840,568

 

Net investment income (expense)

 

5,259,964

 

 

 

110,092,522

 

Realized gain (loss)

 

(30,070,086

)

 

 

7,460,605

 

Realized gain distributions

 

100,901,495

 

 

 

 

 

Unrealized appreciation (depreciation)

 

 

 

 

 

 

 

during the period

 

(297,369,758

)

 

 

(270,229,376

)

Net increase (decrease) in net assets

 

 

 

 

 

 

 

from operations

 

(221,278,385

)

 

 

(152,676,249

)

 

 

 

 

 

 

 

 

Purchase payments from contract owners

 

435,702,632

 

 

 

620,501,854

 

Transfers between accounts

 

126,276,190

 

 

 

182,014,804

 

Contract terminations and annuity payouts

 

(376,136,809

)

 

 

(329,043,627

)

Other transfers to Keyport Life

 

 

 

 

 

 

 

   Insurance Company

 

-

 

 

 

(12,761,924

)

Net increase (decrease) in net assets from

 

 

 

 

 

 

 

contract transactions

 

185,842,013

 

 

 

460,711,106

 

 

 

 

 

 

 

 

 

Net assets at beginning of period

 

1,767,338,825

 

 

 

1,459,303,968

 

 

 

 

 

 

 

 

 

Net assets at end of period

$

1,731,902,453

 

 

$

1,767,338,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements

December 31, 2001

 

1. Organization

Variable Account A (the "Variable Account") is a segregated investment account of Keyport Life Insurance Company (the "Company"). The Variable Account is registered with the Securities and Exchange Commission as a Unit Investment Trust under the Investment Company Act of 1940 and invests in shares of eligible funds. The Variable Account is a funding vehicle for group and individual variable annuity contracts. The Variable Account currently offers eleven variable annuity contracts: Keyport Advisor, Keyport Advisor Vista, Keyport Advisor Charter, Keyport Advisor Optima, Keyport Charter, Keyport Vista, Keyport Optima, Keyport Exeter (formerly known as Manning & Napier), AnnuityNet.com, Rydex, and Keyport Latitude, distinguished principally by the level of expenses, surrender charges, and eligible fund options. The eleven contracts and their respective eligible fund options are as follows:

 

Keyport Advisor Variable Annuity

Keyport Advisor Vista Variable Annuity

 

 

 

Alger American Fund:

AIM Variable Insurance Funds, Inc:

 

   Alger American Growth Portfolio

   AIM VI Capital Appreciation Fund

 

   Alger American Small Capitalization 

   AIM VI Growth Fund

 

      Portfolio

   AIM VI International Equity Fund
 

 

 

 

MFS Variable Insurance Trust:

MFS Variable Insurance Trust:   

 

   MFS Emerging Growth Series - IC 

   MFS Emerging Growth Series - IC

 

   MFS Research Series - IC  

   MFS Research Series - IC

 

  

   MFS Bond Series - IC

 

 

 

 

SteinRoe Variable Investment Trust (SRVIT):

SteinRoe Variable Investment Trust (SRVIT):

 

   SteinRoe Money Market Fund, VS (A)

   SteinRoe Money Market Fund, VS (A)

 

   SteinRoe Small Company Growth Fund, VS (A)

   SteinRoe Small Company Growth Fund, VS (A)

 

   SteinRoe Balanced Fund, VS (A)

   SteinRoe Balanced Fund, VS (A)

 

   Liberty Federal Securities Fund, VS (A)

   SteinRoe Growth Stock Fund, VS (A)

 

   SteinRoe Growth Stock Fund, VS (A)

 

 

 

 

 

Liberty Variable Investment Trust (LVIT): 

Liberty Variable Investment Trust (LVIT):

 

   Liberty Value Fund, VS (A)

   Liberty Value Fund, VS (A)

 

   SteinRoe Global Utilities Fund, VS (A)

   SteinRoe Global Utilities Fund, VS (A)

 

   Colonial International Fund for Growth, VS (A)

   Colonial Strategic Income Fund, VS (A)

 

   Colonial Strategic Income Fund, VS (A)

   Colonial U.S. Growth & Income Fund, VS (A)

 

   Colonial U.S. Growth & Income Fund, VS (A)

   Liberty All-Star Equity Fund, VS (A)

 

   Newport Tiger Fund, VS (A)

   Colonial Small Cap Value Fund, VS (A)

 

   Liberty All-Star Equity Fund, VS (A)

   Colonial High Yield Securities Fund, VS (A)

 

 

 

 

Alliance Variable Products Series Fund, Inc:

Alliance Variable Products Series Fund, Inc:

 

   Alliance Global Bond Portfolio (A)

   Alliance Global Bond Portfolio (A)

 

   Alliance Premier Growth Portfolio (A)

   Alliance Premier Growth Portfolio (A)

 

 

   Alliance Growth and Income Portfolio (A)

 

 

   Alliance Real Estate Investment Portfolio (A)

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

1. Organization (continued)

Keyport Advisor Charter Variable Annuity

Keyport Advisor Optima Variable Annuity

 

 

 

AIM Variable Insurance Funds, Inc:

AIM Variable Insurance Funds, Inc:

 

   AIM VI Capital Appreciation Fund

   AIM VI Capital Appreciation Fund

 

   AIM VI Value Fund

   AIM VI Value Fund

 

 

   AIM VI Growth Fund

 

 

 

 

SteinRoe Variable Investment Trust (SRVIT):

SteinRoe Variable Investment Trust (SRVIT):

 

   SteinRoe Money Market Fund, VS (A)

   SteinRoe Money Market Fund, VS (A)

 

   SteinRoe Balanced Fund, VS (A)

   SteinRoe Balanced Fund, VS (A)

 

   Liberty Federal Securities Fund, VS (A)

   Liberty Federal Securities Fund, VS (A)
 

   SteinRoe Growth Stock Fund, VS (A)

   SteinRoe Growth Stock Fund, VS (A)

 

 

 

 

Liberty Variable Investment Trust (LVIT): 

Liberty Variable Investment Trust (LVIT):

 

   SteinRoe Global Utilities Fund, VS (A)

   SteinRoe Global Utilities Fund, VS (A) 

 

   Colonial International Horizons Fund, VS (B)

   Colonial International Horizons Fund, VS (B)

 

   Colonial High Yield Securities Fund, VS (A)   

   Colonial High Yield Securities Fund, VS (A)

 

   Colonial Small Cap Value Fund, VS (A)

   Colonial Small Cap Value Fund, VS (A)

 

   Colonial U.S. Growth & Income Fund, VS (A)

   Colonial U.S. Growth & Income Fund, VS (A)

 

   Liberty All-Star Equity Fund, VS (A)

   Liberty All-Star Equity Fund, VS (A)

 

   Newport Tiger Fund, VS (A)

   Crabbe Huson Real Estate

 

   Colonial Strategic Income Fund, VS (A)

       Investment Fund, VS (B)

 

   Colonial Global Equity Fund, VS (B)

 

 

   Crabbe Huson Real Estate Investment Fund, VS (B)

 

 

 

 

 

Alliance Variable Products Series Fund, Inc:

Alliance Variable Products Series Fund, Inc:

 

   Alliance Global Bond Portfolio (B)

   Alliance Global Bond Portfolio (B)

 

   Alliance Technology Portfolio (B)

   Alliance Technology Portfolio (B)

 

   Alliance Premier Growth Portfolio (B)

   Alliance Growth and Income Portfolio (B)
 

 

   Alliance Total Return Portfolio (B)

 

 

   Alliance International Portfolio (B)

 

Franklin Templeton:

   Alliance Growth Portfolio (B)

 

   Templeton Developing Markets Sec Fund 2

   Alliance Global Bond Portfolio (B)
 

 

 

 

Alger American Fund:

Franklin Templeton:

 

   Alger American Growth Portfolio

   Templeton Developing Markets Sec Fund 2

 

   Alger American Small Capitalization 

 

 

      Portfolio 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

1. Organization (continued)

Keyport Charter Variable Annuity

Keyport Vista Variable Annuity

 

 

 

AIM Variable Insurance Funds, Inc:

AIM Variable Insurance Funds, Inc:

 

  AIM VI Capital Appreciation Fund

      AIM VI Capital Appreciation Fund

 

  AIM VI International Equity 

   AIM VI International Equity

 

  AIM VI Value Fund

   AIM VI Value Fund

 

 

 

 

SteinRoe Variable Investment Trust (SRVIT):

SteinRoe Variable Investment Trust (SRVIT):

 

   SteinRoe Money Market Fund, VS (A)

   SteinRoe Money Market Fund, VS (A)

 

   SteinRoe Balanced Fund, VS (B)

   SteinRoe Balanced Fund, VS (B)

 

   Liberty Federal Securities Fund, VS (B)

      Liberty Federal Securities Fund, VS (B)
 

   SteinRoe Growth Stock Fund, VS (B)

   SteinRoe Growth Stock Fund, VS (B)

 

 

 

 

Liberty Variable Investment Trust (LVIT): 

Liberty Variable Investment Trust (LVIT):

 

   Colonial High Yield Securities Fund, VS (B)

       Colonial High Yield Securities Fund, VS (B)

 

   Colonial Small Cap Value Fund, VS (B)

   Colonial Small Cap Value Fund, VS (B)

 

   Colonial Strategic Income Fund, VS (B)

   Colonial Strategic Income Fund, VS (B)

 

   Colonial U.S. Growth & Income Fund, VS (B)

   Colonial U.S. Growth & Income Fund, VS (B)

 

   Crabbe Huson Real Estate Investment

   Crabbe Huson Real Estate Investment

 

       Fund, VS (B)

       Fund, VS (B)

 

   Liberty All-Star Equity Fund, VS (B)

   Liberty All-Star Equity Fund, VS (B)

 

   Liberty Newport Japan Opportunity Fund, VS (B)

   Liberty Newport Japan Opportunity Fund, VS (B)

 

   Liberty S&P 500 Index Fund, VS (B)

   Liberty S&P 500 Index Fund, VS (B)

 

   Liberty Select Value Fund, VS (B)    

   Liberty Select Value Fund, VS (B)

 

   Liberty Value Fund, VS (B)

   Liberty Value Fund, VS (B)

 

   Newport Tiger Fund, VS (B)

   Newport Tiger Fund, VS (B)

 

   Rydex Financial Services Fund, VS (B)

   Rydex Financial Services Fund, VS (B)

 

   Rydex Health Care Fund, VS (B)

   Rydex Health Care Fund, VS (B)

 

   Wanger Foreign Forty Fund

   Wanger Foreign Forty Fund

 

   Wanger International Small Cap Fund

   Wanger International Small Cap Fund

 

   Wanger Twenty Fund

   Wanger Twenty Fund

 

   Wanger US Small Cap Fund

   Wanger US Small Cap Fund

 

 

 

 

Alliance Variable Products Series Fund, Inc:

Alliance Variable Products Series Fund, Inc:

 

   Alliance Growth & Income Portfolio (B)

   Alliance Growth & Income Portfolio (B)

 

   Alliance Premier Growth Portfolio (B)

   Alliance Premier Growth Portfolio (B)

 

   Alliance Technology Portfolio (B)   

   Alliance Technology Portfolio (B)    

 

   Alliance Worldwide Privatization Portfolio (B)

   Alliance Worldwide Privatization Portfolio (B)    
 

 

 

 

Fidelity VIP Funds:

Fidelity VIP Funds:

 

   Fidelity VIP Equity Income Fund - SC2

   Fidelity VIP Equity Income Fund - SC2

 

   Fidelity VIP III Growth Opportunities Fund - SC2

   Fidelity VIP III Growth Opportunities Fund - SC2

 

   Fidelity VIP III Dynamic Capital Appreciation

   Fidelity VIP III Dynamic Capital Appreciation

 

      Fund - SC2

      Fund - SC2

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

1. Organization (continued)

Keyport Charter Variable Annuity (continued)

Keyport Vista Variable Annuity (continued)

 

 

 

MFS Variable Insurance Trust:

MFS Variable Insurance Trust:

 

   MFS Emerging Growth Series - SC

   MFS Emerging Growth Series - SC

 

   MFS Investors Growth Stock Series - SC

   MFS Investors Growth Stock Series - SC

 

   MFS Investors Trust Series - SC   

   MFS Investors Trust Series - SC

 

   MFS New Discovery Series - SC

   MFS New Discovery Series - SC

 

 

 

 

Rydex Variable Trust:

Rydex Variable Trust:

 

   Rydex OTC Fund

   Rydex OTC Fund

Keyport Optima Variable Annuity

 

AIM Variable Insurance Funds, Inc:

Alliance Variable Products Series Fund, Inc:

 

  AIM VI Capital Appreciation Fund   

   Alliance Growth & Income Portfolio (B) 

 

  AIM VI International Equity Fund

   Alliance Premier Growth Portfolio (B) 

 

  AIM VI Value Fund

   Alliance Total Return Portfolio (B)

 

 

   Alliance International Portfolio (B)

 

 

   Alliance Growth Portfolio (B)

 

 

   Alliance Global Bond Portfolio (B)

 

 

 

 

SteinRoe Variable Investment Trust (SRVIT):

MFS Variable Insurance Trust: 

 

   SteinRoe Money Market Fund, VS (A)

   MFS Emerging Growth Series - SC 

 

   SteinRoe Balanced Fund, VS (B)

   MFS Investors Growth Stock Series - SC    

 

   Liberty Federal Securities Fund, VS (B)

      MFS Investors Trust Series - SC    
 

   SteinRoe Growth Stock Fund, VS (B) 

 

 

 

 

 

Liberty Variable Investment Trust (LVIT): 

Brinson Series Trust 

 

   Colonial High Yield Securities Fund, VS (B)  

   Brinson Tactical Allocation Portfolio

 

   Colonial Small Cap Value Fund, VS (B) 

 

 

   Colonial Strategic Income Fund, VS (B)

 

 

   Crabbe Huson Real Estate Investment  

 

 

       Fund, VS (B)

 

 

   Liberty All-Star Equity Fund, VS (B) 

 

 

   Newport Tiger Fund, VS (B)

 

Keyport Exeter Variable Annuity

 

Exeter Insurance Fund, Inc:

SteinRoe Variable Investment Trust (SRVIT):
 

   Exeter Moderate Growth Fund  

   SteinRoe Money Market Fund, VS (A) 
 

   Exeter Growth Fund

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

1. Organization (continued)

AnnuityNet.com Variable Annuity

 

Liberty Variable Investment Trust (LVIT):

SteinRoe Variable Investment Trust (SRVIT):

 

   Colonial High Yield Securities Fund, VS (A)

   SteinRoe Balanced Fund, VS (A)

 

   Colonial Small Cap Value Fund, VS (A)

   SteinRoe Growth Stock Fund, VS (A)

 

   Colonial Strategic Income Fund, VS (A)

   SteinRoe Money Market Fund, VS (A)

 

   Colonial US Growth & Income Fund, VS (A) 

   Liberty Federal Securities Fund, VS (A)

 

   Liberty All-Star Equity Fund, VS (A) 

 

 

   Newport Tiger Fund, VS (A)

 

 

   SteinRoe Global Utilities Fund, VS (A)

 

 

   Wanger Foreign Forty Fund

 

 

   Wanger International Small Cap Fund

 

 

   Wanger Twenty Fund

 

 

   Wanger US Small Cap Fund

 

Keyport Latitude Variable Annuity (offered in 2001)

 

AIM Variable Insurance Funds, Inc:

Alliance Variable Products Series Fund, Inc:

 

   AIM VI Capital Appreciation Fund

   Alliance Growth & Income Portfolio (B)

 

   AIM VI International Equity

   Alliance Premier Growth Portfolio (B) 

 

   AIM VI Value Fund

   Alliance Technology Portfolio (B)
 

 

   Alliance Worldwide Privatization Portfolio (B)

 

 

 

 

SteinRoe Variable Investment Trust (SRVIT):

 

 

   SteinRoe Money Market Fund, VS (A)

Fidelity VIP Funds:

 

   SteinRoe Balanced Fund, VS (B)

   Fidelity VIP Equity Income Fund - SC2

 

   Liberty Federal Securities Fund, VS (B)

   Fidelity VIP III Growth Opportunities Fund - SC2
 

   SteinRoe Growth Stock Fund, VS (B)

   Fidelity VIP III Dynamic Capital Appreciation 

 

 

          Fund - SC2

 

 

 

 

Liberty Variable Investment Trust (LVIT): 

MFS Variable Insurance Trust:

 

   Colonial High Yield Securities Fund, VS (B)

   MFS Emerging Growth Series - SC

 

   Colonial Small Cap Value Fund, VS (B)

   MFS Growth Series - SC

 

   Colonial Strategic Income Fund, VS (B)

   MFS Growth with Income Series - SC

 

   Colonial U.S. Growth & Income Fund, VS (B)

   MFS New Discovery Series - SC
 

   Crabbe Huson Real Estate Investment 

 

 

       Fund, VS (B)

Rydex Variable Trust:

 

   Liberty All-Star Equity Fund, VS (B)  

   Rydex OTC Fund

 

   Liberty Newport Japan Opportunity Fund, VS (B)

 

 

   Liberty S&P 500 Index Fund, VS (B)

 

 

   Liberty Select Value Fund, VS (B) 

 

 

   Liberty Value Fund, VS (B) 

 

 

   Newport Tiger Fund, VS (B)    

 

 

   Rydex Financial Services Fund, VS (B) 

 

 

   Rydex Health Care Fund, VS (B)

 

 

   Wanger Foreign Forty Fund

 

 

   Wanger International Small Cap Fund

 

 

   Wanger Twenty Fund

 

 

   Wanger US Small Cap Fund

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

1. Organization (continued)

Rydex Variable Annuity

 

Rydex Variable Trust

 

   Rydex Nova Fund

 

   Rydex OTC Fund

 

   Rydex Precious Metals Fund

 

   Rydex Ursa Fund

 

   Rydex US Government Money Market Fund

 

On September 4, 2001, the fund name for Mitchell Hutchins Tactical Allocation was changed to Brinson Tactical Allocation. On October 26, 2001, Mitchell Hutchins Growth, Balance, Growth & Income, Global Equity and Strategic Income Portfolio were closed and funds from these mutual funds were transferred to Alliance Growth, Alliance Total Return, Alliance Growth & Income, Alliance International and Alliance Global Bond, respectively.

On May 1, 2001, the fund names for SteinRoe Mortgage Securities Fund, MFS Growth with Income, MFS Growth were changed to Liberty Federal Securities Fund, MFS Investors Trust, MFS Investors Growth Stock, respectively.

On June 1, 2000, the fund name of Colonial Growth and Income Fund was changed to Liberty Value Fund.

2. Significant Accounting Policies

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported therein. Although actual results could differ from these estimates, any such differences are expected to be immaterial to the Variable Account.

Shares of the eligible funds are sold to the Variable Account at the reported net asset values. Transactions are recorded on the trade date. Income from dividends is recorded on the ex-dividend date. Realized gains and losses

on sales of investments are computed on the basis of identified cost of the investments sold.

Annuity reserves are computed for contracts in the income stage according to the 1983a Individual Annuity Mortality Table. The assumed investment rate is either 3.0%, 4.0%, 5.0% or 6.0% unless the annuitant elects otherwise, in which case the rate may vary from 3.0% to 6.0%, as regulated by the laws of the respective states. The mortality risk is fully borne by the Company.

The net assets retained by the Company represent seed money shares invested in certain sub-accounts required to commence operations. The seed money is stated at market value (shares multiplied by net asset value per share).

The operations of the Variable Account are included in the federal income tax return of the Company, which is taxed as a Life Insurance Company under the provisions of the Internal Revenue Code. The Company does not anticipate any tax liability resulting from the operations of the Variable Account. Therefore, a provision for income taxes has not been charged against the Variable Account.

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

3. Expenses

Keyport Advisor, Keyport Advisor Charter and Optima, Keyport Charter and Optima, and Keyport Latitude Variable Annuity

There are no deductions made from purchase payments for sales charges at the time of purchase. In the event of a contract termination, a contingent deferred sales charge, based on a graded table of charges, is deducted. An annual contract maintenance charge of $36 to cover the cost of contract administration is deducted from each contractholder's account on the contract anniversary date. Daily deductions are made from each sub-account for assumption of mortality and expense risk at an effective annual rate of 1.25% of contract value. A daily deduction is also made for distribution costs incurred by the Company at an effective annual rate of 0.15% of contract value. For the Contact series Keyport Advisor Employee, the effective annual rate for daily deductions for the assumption of mortality and expense risk is 0.35%; no other charges apply.

Optional riders are available for Keyport Advisor Charter and Optima only. The deduction is a yearly charge of 0.35% for a guaranteed income benefit rider, 0.05% for an enhanced death benefit (if purchased with income rider) and 0.10% for an enhanced death benefit (if purchased without the income rider).

Keyport Advisor Vista and Keyport Vista Variable Annuity

There are no deductions made from purchase payments for sales charges at the time of purchase. There are also no contingent deferred sales charges or distribution charges. Daily deductions are made from each sub-account for administrative charges incurred by the Company at an effective annual rate of 0.15% of contract value. A daily deduction is also made from each sub-account for assumption of mortality and expense risk at an effective annual rate of 1.25% of contract value.

Keyport Exeter Variable Annuity

There are no deductions made from purchase payments for sales charges at the time of purchase. There are also no contingent deferred sales charges or distribution charges. An annual contract maintenance charge of $35 to cover the cost of contract administration is deducted from each contractholder's account on the contract anniversary date. Daily deductions are made from each sub-account for assumption of mortality and expense risk at an effective annual rate of 0.35% of contract value.

AnnuityNet.com Variable Annuity

There are no deductions made from purchase payments for sales charges at the time of purchase. There are also no contingent deferred sales charges or distribution charges. Daily deductions are made from each sub-account for assumption of mortality and expense risk at an effective annual rate of 0.65% of contract value.

Rydex Variable Annuity

There are no deductions made from purchase payments for sales charges at the time of purchase. There are also no contingent deferred sales charges or distribution charges. Daily deductions are made from each sub-account for assumption of mortality and expense risk at an effective annual rate of 0.90% of contract value.

4. Affiliated Company Transactions

The Company provides administrative services necessary for the operation of the Variable Account. The Company has absorbed all organizational expenses including the fees of registering the Variable Account and its contracts for distribution under federal and state securities laws. Stein Roe & Farnham, Inc. (Stein Roe), is the investment advisor to the SRVIT. Liberty Advisory Services Corporation (LASC) is the investment advisor to the LVIT. Colonial Management Associates, Inc. (Colonial) is the investment sub-advisor to the LVIT. Keyport Financial Services Corp. (KFSC), a wholly owned subsidiary of the Company, is the principal underwriter for SRVIT and LVIT. The investment advisors' compensation is based upon the fair value of the mutual funds.

KFSC was a wholly owned subsidiary of LASC until October 31, 2001 at which time LASC dividended its ownership of KFSC to the Company. LASC was a wholly owned subsidiary of the Company and, Stein Roe and

Colonial were affiliates of the Company through October 31, 2001. On November 1, 2001, the Company was sold to Sun Life Financial of Canada (U.S.) Holdings, Inc., an indirect subsidiary of Sun Life Assurance Company of Canada, which is a subsidiary of Sun Life Financial Services, Inc. As a result of this transaction, Massachusetts Financial Services Company (MFS) is now an affiliate of Keyport Life and provides funding vehicles for the Variable Account.

5. New Audit Guide

Effective January 1, 2001, the Variable Account adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies (the Guide), as revised, effective for fiscal years beginning after December 15, 2001. The adoption of the Guide did not impact the total net assets of the subaccounts for fiscal year 2001. Certain disclosures in the financial statements of the Variable Account have changed as a result of the adoption of the Guide. The financial statement presentation of the Variable Account for the years prior to 2001 has not been restated.

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

6. Unit Values

A summary of the accumulation unit values at December 31, 2001 and 2000, the accumulation units and dollar value, the investment income ratios,the expense ratios (excluding expenses of the underlying funds) and the total return for the year ended December 31, 2001 are as follows:

 

2000

 

2001

UNIT
VALUE

UNIT
VALUE

UNITS

DOLLARS

INVESTMENT

INCOME RATIO*

EXPENSE

RATIO**

TOTAL
RETURN***

AIM VI Capital Appreciation Series I

Keyport Advisor Vista

$

13.898187

 

$

10.514299

 

1,867,636.337

 

$

19,636,887

 

0.00

%

1.39

%

(24.35

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AIM VI Growth Series I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Vista

 

12.357180

 

 

8.056291

 

336,513.039

 

 

2,711,047

 

0.04

%

1.39

%

(34.80

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AIM VI International Equity Series I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Vista

 

11.095271

 

 

8.366252

 

2,048,181.428

 

 

17,135,602

 

0.11

%

1.39

%

(24.60

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AIM VI Value Series I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Charter

 

9.488402

 

 

8.181042

 

3,652,453.872

 

 

29,880,879

 

0.03

%

1.39

%

(13.78

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alger American Growth Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

19.875524

 

 

17.283497

 

3,564,491.558

 

 

61,606,879

 

0.06

%

1.39

%

(13.04

)%

Employee

 

20.354780

 

 

17.886683

 

6,062.411

 

 

108,436

 

0.05

%

0.35

%

(12.13

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alger American Small Capitalization Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

12.881699

 

 

8.953623

 

1,579,043.958

 

 

14,138,164

 

0.01

%

1.39

%

(30.49

)%

Employee

 

14.050886

 

 

9.869349

 

1,156.368

 

 

11,413

 

0.01

%

0.35

%

(29.76

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Global Bond Portfolio (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

10.200933

 

 

10.031748

 

1,928,325.449

 

 

19,344,475

 

0.00

%

1.39

%

(1.66

)%

Employee

 

10.547027

 

 

10.481155

 

1,213.773

 

 

12,722

 

0.00

%

0.35

%

(0.62

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Global Bond Portfolio (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Charter

 

10.096031

 

 

9.901126

 

378,102.685

 

 

3,743,642

 

0.00

%

1.39

%

(1.93

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Growth and Income Portfolio (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Vista

 

13.439056

 

 

13.299388

 

451,108.039

 

 

5,999,461

 

0.15

%

1.39

%

(1.04

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Growth and Income Portfolio (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Optima

 

10.706953

 

 

10.574122

 

2,790,524.282

 

 

29,507,344

 

0.15

%

1.39

%

(1.24

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Growth Portfolio (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Optima

 

 

 

 

10.469152

 

66,426.900

 

 

695,433

 

0.00

%

1.39

%

4.69

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance International Portfolio (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Optima

 

 

 

 

10.301209

 

29,091.508

 

 

299,678

 

0.00

%

1.39

%

3.01

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Premier Growth Portfolio (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

21.091269

 

 

17.219360

 

4,954,584.674

 

 

85,314,777

 

0.00

%

1.39

%

(18.36

)%

Employee

 

20.923231

 

 

17.262221

 

6,647.143

 

 

114,744

 

0.00

%

0.35

%

(17.50

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Premier Growth Portfolio (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Charter

 

9.432312

 

 

7.682677

 

5,495,656.772

 

 

42,221,356

 

0.00

%

1.39

%

(18.55

)%

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

6. Unit Values (continued)

 

2000

 

 

2001

UNIT
VALUE

 

 

UNIT
VALUE

 

UNITS

 

 

DOLLARS

INVESTMENT
INCOME RATIO*

 

EXPENSE
RATIO**

 

TOTAL
RETURN***

Alliance Real Estate Investment Portfolio (A)

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Vista

$

10.545168

 

$

11.521150

 

62,052.243

 

$

714,913

0.89

%

0.01

%

9.26

%

Alliance Technology Portfolio (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Charter

 

11.525363

 

 

8.471968

 

2,662,160.252

 

 

22,553,736

0.00

%

1.39

%

(26.49

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Total Return Portfolio (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Optima

 

 

 

 

10.026011

 

76,925.782

 

 

771,259

0.00

%

1.39

%

0.26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Worldwide Privatization Portfolio (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

8.273973

 

 

6.749228

 

96,628.556

 

 

652,168

0.05

%

1.39

%

(18.43

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brinson Tactical Allocation Portfolio (I)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Optima

 

10.104966

 

 

8.714335

 

1,595,572.565

 

 

13,904,354

0.56

%

1.39

%

(13.76

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exeter Growth Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exeter VA

 

16.293114

 

 

17.102546

 

20,767.731

 

 

355,181

0.60

%

0.35

%

4.97

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exeter Moderate Growth Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exeter VA

 

14.132898

 

 

14.564518

 

11,988.968

 

 

174,614

0.56

%

0.35

%

3.05

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fidelity VIP Equity Income Fund - SC2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

10.761154

 

 

10.057101

 

1,380,012.395

 

 

13,878,924

0.21

%

1.39

%

(6.54

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fidelity VIP III Dynamic Capital Appreciation Fund - SC2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

 

 

 

9.334730

 

19,895.730

 

 

185,721

0.00

%

1.39

%

(6.65

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fidelity VIP III Growth Opportunities Fund - SC2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

8.333497

 

 

7.014556

 

1,112,566.901

 

 

7,804,163

0.06

%

1.39

%

(15.83

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Templeton Developing Markets Sec Fund 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Charter

 

7.046956

 

 

6.387401

 

255,840.654

 

 

1,634,157

0.19

%

1.39

%

(9.36

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial Global Equity Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Charter

 

8.800007

 

 

6.544920

 

311,522.285

 

 

2,038,888

0.00

%

1.39

%

(25.63

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial High Yield Securities, VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Vista

 

8.865879

 

 

8.509312

 

1,013,047.864

 

 

8,620,340

2.27

%

1.39

%

(4.02

)%

AnnuityNet.com

 

9.270320

 

 

8.964192

 

166.207

 

 

1,490

0.05

%

0.65

%

(3.30

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial High Yield Securities, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

8.844888

 

 

8.476489

 

610,122.501

 

 

5,171,697

3.41

%

1.39

%

(4.17

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial International Fund for Growth, VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

11.995720

 

 

8.948201

 

3,030,980.186

 

 

27,121,820

0.00

%

1.39

%

(25.41

)%

Employee

 

13.187460

 

 

9.940761

 

2,911.176

 

 

28,939

0.00

%

0.35

%

(24.62

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial International Horizons Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Charter

 

9.266803

 

 

7.006092

 

448,765.996

 

 

3,144,096

0.11

%

1.39

%

(24.40

)%

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

6. Unit Values (continued)

 

2000

 

2001

UNIT
VALUE

 

UNIT
VALUE

 

UNITS

 

DOLLARS

 

INVESTMENT
INCOME RATIO*

 

EXPENSE
RATIO**

 

TOTAL
RETURN***

Colonial Small Cap Value Fund, VS (A)

 

 

Keyport Advisor Vista

$

10.543669

 

$

11.363832

331,927.350

 

$

3,771,967

0.00%

0.01%

 

7.78

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial Small Cap Value Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

10.543674

 

 

11.354147

546,236.707

 

 

6,202,052

0.10%

1.39%

 

7.69

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial Strategic Income Fund, VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

14.101909

 

 

14.433037

4,853,274.770

 

 

70,047,494

2.05%

1.39%

 

2.35

%

Employee

 

14.981661

 

 

15.494643

813.560

 

 

12,606

1.92%

0.35%

 

3.42

%

AnnuityNet.com

 

9.967912

 

 

10.278429

294.577

 

 

3,028

4.37%

0.65%

 

3.12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial Strategic Income Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

14.074909

 

 

14.386716

873,869.114

 

 

12,572,107

3.56%

1.39%

 

2.22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial U.S. Growth & Income Fund, VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

27.788412

 

 

27.237378

3,500,341.484

 

 

95,340,124

0.25%

1.39%

 

(1.98

)%

Employee

 

29.847600

 

 

29.563377

1,058.991

 

 

31,307

0.26%

0.35%

 

(0.95

)%

AnnuityNet.com

 

10.596156

 

 

10.463904

1,163.099

 

 

12,171

0.24%

0.65%

 

(1.25

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Colonial U.S. Growth & Income Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

27.774424

 

 

27.211343

691,545.424

 

 

18,817,880

0.43%

1.39%

 

(2.03

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crabbe Huson Real Estate Investment Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Charter

 

10.198222

 

 

11.506084

113,659.321

 

 

1,307,774

1.23%

1.39%

 

12.82

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty All-Star Equity Fund, VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

13.203161

 

 

11.361079

3,522,717.568

 

 

40,021,873

0.06%

1.39%

 

(13.95

)%

Employee

 

13.638173

 

 

11.859040

8,492.764

 

 

100,716

0.07%

0.35%

 

(13.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

)%

Liberty All-Star Equity Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

9.955955

 

 

8.559018

393,362.796

 

 

3,366,799

0.09%

1.39%

 

(14.03

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Newport Japan Opp Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

6.745619

 

 

4.515871

7,773.576

 

 

35,104

0.00%

1.39%

 

(33.05

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty S&P 500 Index Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

8.925970

 

 

7.732363

2,306,797.572

 

 

17,836,996

0.22%

1.39%

 

(13.37

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Select Value Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

10.529745

 

 

10.744173

1,056,837.512

 

 

11,354,845

0.10%

1.39%

 

2.04

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Value Fund, VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

25.352693

 

 

24.954772

3,015,897.202

 

 

75,261,027

0.31%

1.39%

 

(1.57

)%

Employee

 

27.225976

 

 

27.080425

1,470.215

 

 

39,814

0.30%

0.35%

 

(0.53

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Value Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

25.303098

 

 

24.842634

256,820.715

 

 

6,380,103

0.48%

1.39%

 

(1.82

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

6. Unit Values (continued)

 

2000

 

2001

UNIT
VALUE

 

UNIT
VALUE

 

UNITS

 

DOLLARS

 

INVESTMENT
INCOME RATIO*

 

EXPENSE
RATIO**

 

TOTAL
RETURN***

Newport Tiger Fund, VS (A)

Keyport Advisor

$

10.845661

 

$

8.718053

889,684.125

 

$

7,756,313

0.17%

 

0.01%

(19.62

)%

Employee

11.504183

9.344962

6,820.723

63,739

0.19%

0.35%

(18.77

)%

AnnuityNet.com

 

8.748285

 

 

7.085021

170,613.712

 

 

1,208,802

0.14%

 

0.65%

(19.01

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Newport Tiger Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

10.887689

 

 

8.947885

108,582.061

 

 

971,580

0.44%

 

1.39%

(17.82

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex Financial Services Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

12.120670

 

 

10.501361

231,123.678

 

 

2,427,113

0.14%

 

1.39%

(13.36

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex Health Care Fund, VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

11.080013

 

 

9.619933

476,248.364

 

 

4,581,477

0.00%

 

1.39%

(13.18

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex Nova Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex VA

 

20.408721

 

 

15.456382

3,581.463

 

 

55,356

0.00%

 

0.90%

(24.27

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex Precious Metals Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex VA

 

24.067797

 

 

26.951039

419.769

 

 

11,313

0.00%

 

0.90%

11.98

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex Ursa Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex VA

 

28.730983

 

 

32.742151

21,459.647

 

 

702,635

1.81%

 

0.90%

13.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SteinRoe Global Utilities Fund, VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

19.464675

 

 

16.504348

1,728,559.681

 

 

28,528,751

0.36%

 

1.39%

(15.21

)%

Employee

 

20.800617

 

 

17.822727

273.237

 

 

4,870

0.32%

 

0.35%

(14.32

)%

AnnuityNet.com

 

9.011893

 

 

7.698633

383.266

 

 

2,951

0.59%

 

0.65%

(14.57

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wanger Foreign Forty Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

9.697009

 

 

7.017419

205,159.442

 

 

1,439,690

0.02%

 

1.39%

(27.63

)%

AnnuityNet.com

 

10.260319

 

 

7.480939

23,020.308

 

 

172,214

0.00%

 

0.65%

(27.09

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wanger International Small Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

8.931027

 

 

6.943468

850,743.667

 

 

5,907,111

0.00%

 

1.39%

(22.25

)%

AnnuityNet.com

 

9.534756

 

 

7.468554

71,825.800

 

 

536,435

0.00%

 

0.65%

(21.67

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wanger Twenty Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

10.392612

 

 

11.179817

451,136.088

 

 

5,043,619

0.00%

 

0.01%

7.57

%

AnnuityNet.com

 

10.240569

 

 

11.098933

0.001

 

 

0

0.00%

 

0.00%

8.38

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wanger US Small Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

10.541409

 

 

11.578425

1,324,070.709

 

 

15,330,653

0.00%

 

1.39%

9.84

%

AnnuityNet.com

 

10.603292

 

 

11.733768

549.004

 

 

6,442

0.00%

 

0.65%

10.66

%

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

6. Unit Values (continued)

 

2000

 

2001

UNIT
VALUE

 

UNIT
VALUE

 

UNITS

 

DOLLARS

 

INVESTMENT
INCOME RATIO*

 

EXPENSE
RATIO**

 

TOTAL
RETURN***

MFS Bond Series IC

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor Vista

$

10.707167

 

$

11.477770

438,995.888

 

$

5,038,694

1.75%

1.39%

7.20

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MFS Emerging Growth Series IC

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

21.355215

 

 

14.006333

1,629,052.643

 

 

22,817,054

0.00%

1.39%

(34.41

)%

Employee

 

23.552359

 

 

15.610367

1,073.075

 

 

16,751

0.00%

0.35%

(33.72

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MFS Emerging Growth Series SC

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

21.340401

 

 

13.968632

483,622.180

 

 

6,755,540

0.00%

1.39%

(34.54

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MFS Investors Growth Stock Series SC

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

8.795111

 

 

6.519218

1,566,693.843

 

 

10,213,619

0.02%

1.39%

(25.88

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MFS Investors Trust Series SC

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

9.677660

 

 

8.006550

1,044,375.547

 

 

8,361,845

0.09%

1.39%

(17.27

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MFS New Discovery Series SC

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

9.108587

 

 

8.510087

560,354.488

 

 

4,768,665

0.00%

1.39%

(6.57

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MFS Research Series IC

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

16.531125

 

 

12.837187

2,517,384.583

 

 

32,316,137

0.00%

1.39%

(22.35

)%

Employee

 

16.670611

 

 

13.081938

963.473

 

 

12,604

0.00%

0.35%

(21.53

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex OTC Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex VA

 

15.492820

 

 

9.952931

5,558.854

 

 

55,327

0.00%

0.90%

(35.76

)%

Keyport Charter

 

5.825796

 

 

3.723956

876,514.337

 

 

3,264,101

0.00%

1.39%

(36.08

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex US Government Money Market Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Rydex VA

 

25.757682

 

 

26.240440

65,783.307

 

 

1,726,183

0.47%

0.90%

1.87

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SteinRoe Balanced Fund VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

29.459745

 

 

26.381189

2,794,406.316

 

 

73,719,761

0.01%

0.01%

(10.45

)%

Employee

 

20.442146

 

 

18.498595

2,907.008

 

 

53,776

0.64%

0.35%

(9.51

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SteinRoe Balanced Fund VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

29.423711

 

 

26.289675

1,065,049.026

 

 

27,999,793

0.55%

1.39%

(10.65

)%

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

6. Unit Values (continued)

 

2000

 

2001

UNIT
VALUE

 

UNIT
VALUE

 

UNITS

 

DOLLARS

 

INVESTMENT
INCOME RATIO*

 

EXPENSE

RATIO**

 

TOTAL
RETURN***

SteinRoe Growth Stock Fund VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

$

52.531714

 

$

39.051850

 

1,685,621.408

 

$

65,826,634

0.00%

1.39%

(25.66

)%

Employee

 

34.014801

 

 

25.552991

 

4,966.369

 

 

126,906

0.00%

0.35%

(24.88

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SteinRoe Growth Stock Fund VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

52.458436

 

 

38.907605

 

587,188.797

 

 

22,846,110

0.00%

1.39%

(25.83

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SteinRoe Money Market Fund VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

15.436578

 

 

15.774271

 

8,627,415.370

 

 

136,091,188

0.89%

1.39%

2.19

%

Dollar Cost Averaging

 

15.555598

 

 

16.119698

 

9,126.169

 

 

147,111

0.95%

 

3.63

%

Employee

 

13.907577

 

 

14.361230

 

6,708.311

 

 

96,340

0.90%

0.35%

3.26

%

AnnuityNet.com

 

10.552915

 

 

10.864601

 

669,737.333

 

 

7,276,429

0.16%

0.65%

2.95

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Federal Securities Fund VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

20.526080

 

 

21.664784

 

2,121,128.538

 

 

45,953,792

1.38%

1.39%

5.55

%

Employee

 

15.262915

 

 

16.278945

 

1,181.966

 

 

19,241

1.24%

0.35%

6.66

%

AnnuityNet.com

 

11.030141

 

 

11.729291

 

509.788

 

 

5,979

1.89%

0.65%

6.34

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Federal Securities Fund VS (B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Charter

 

20.470221

 

 

21.551379

 

1,580,513.643

 

 

34,062,249

0.65%

1.39%

5.28

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SteinRoe Small Company Growth Fund VS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keyport Advisor

 

34.541388

 

 

30.645605

 

269,474.852

 

 

8,258,220

0.00%

1.39%

(11.28

)%

Employee

 

21.651921

 

 

19.412383

 

1,108.707

 

 

21,523

0.00%

0.35%

(10.34

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

85,248,268

 

$1,396,357,820

 

 

 

 

* These amounts represent the dividends and other income received by the subaccount from the underlying mutual fund, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest.

** These ratios represent the annualized contract expenses of the variable account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded.

*** These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

7. Purchases and Sales of Securities

The cost of shares purchased and proceeds from shares sold by the Variable Account during 2001 are shown below:

 

 

Purchases

 

 

Sales

 

 

 

 

 

 

 

AIM VI Capital Appreciation Series I

$

21,230,818

 

$

14,376,104

 

 

 

 

 

 

 

 

AIM VI Growth Series I

 

1,481,609

 

 

2,415,570

 

 

 

 

 

 

 

 

AIM VI International Equity Series I

 

867,593,512

 

 

858,411,062

 

AIM VI Value Series I

 

13,217,222

 

 

5,649,868

 

 

 

 

 

 

 

 

Alger American Growth Portfolio

 

15,519,739

 

 

22,711,760

 

 

 

 

 

 

 

 

Alger American Small Capitalization Portfolio

 

3,088,483

 

 

4,656,716

 

 

 

 

 

 

 

 

Alliance Global Bond Portfolio (A)

 

1,626,312

 

 

7,827,852

 

 

 

 

 

 

 

 

Alliance Global Bond Portfolio (B)

 

1,347,422

 

 

1,566,543

 

 

 

 

 

 

 

 

Alliance Growth and Income Portfolio (A)

 

1,195,666

 

 

2,431,384

 

 

 

 

 

 

 

 

Alliance Growth and Income Portfolio (B)

 

33,821,982

 

 

5,651,211

 

 

 

 

 

 

 

 

Alliance Growth Portfolio (B)

 

1,151,670

 

 

19,052

 

 

 

 

 

 

 

 

Alliance International Portfolio (B)

 

458,133

 

 

52,936

 

 

 

 

 

 

 

 

Alliance Premier Growth Portfolio (A)

 

11,390,990

 

 

30,583,127

 

 

 

 

 

 

 

 

Alliance Premier Growth Portfolio (B)

 

25,666,017

 

 

14,241,610

 

 

 

 

 

 

 

 

Alliance Real Estate Investment Portfolio (A)

 

128,685

 

 

278,345

 

 

 

 

 

 

 

 

Alliance Technology Portfolio (B)

 

11,756,851

 

 

8,818,638

 

 

 

 

 

 

 

 

Alliance Total Return Portfolio (B)

 

1,664,214

 

 

51,389

 

 

 

 

 

 

 

 

Alliance Worldwide Privatization Portfolio (B)

 

18,628,616

 

 

18,143,960

 

 

 

 

 

 

 

 

Brinson Tactical Allocation Portfolio (I)

 

8,894,691

 

 

8,555,585

 

 

 

 

 

 

 

 

Exeter Growth Fund

 

23,551

 

 

1,246

 

 

 

 

 

 

 

 

Exeter Moderate Growth Fund

 

10,916

 

 

638

 

 

 

 

 

 

 

 

Fidelity VIP Equity Income Fund - SC2

 

14,809,340

 

 

1,881,075

 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

7. Purchases and Sales of Securities (continued)

 

 

Purchases

 

 

Sales

 

 

 

 

 

 

 

Fidelity VIP III Dynamic Capital Appreciation Fund

$

330,530

 

$

63,761

 

 

 

 

 

 

 

 

Fidelity VIP III Growth Opportunities Fund - SC2

 

7,197,715

 

 

1,118,876

 

 

 

 

 

 

 

 

Templeton Developing Markets Sec Fund 2

 

1,634,788

 

 

1,554,723

 

 

 

 

 

 

 

 

Colonial Global Equity Fund, VS (B)

 

1,315,568

 

 

1,399,316

 

 

 

 

 

 

 

 

Colonial High Yield Securities Fund, VS (A)

 

4,112,704

 

 

4,300,441

 

 

 

 

 

 

 

 

Colonial High Yield Securities Fund, VS (B)

 

12,902,113

 

 

6,212,893

 

 

 

 

 

 

 

 

Colonial International Fund for Growth, VS (A)

 

6,361,249

 

 

8,445,570

 

 

 

 

 

 

 

 

Colonial International Horizons Fund, VS (B)

 

1,939,890

 

 

2,480,462

 

 

 

 

 

 

 

 

Colonial Small Cap Value Fund, VS (A)

 

7,877,680

 

 

7,281,849

 

 

 

 

 

 

 

 

Colonial Small Cap Value Fund, VS (B)

 

12,640,262

 

 

8,630,454

 

 

 

 

 

 

 

 

Colonial Strategic Income Fund, VS (A)

 

10,751,164

 

 

17,836,131

 

 

 

 

 

 

 

 

Colonial Strategic Income Fund, VS (B)

 

19,002,545

 

 

4,261,086

 

 

 

 

 

 

 

 

Colonial U.S. Growth & Income Fund, VS (A)

 

26,462,330

 

 

17,173,193

 

 

 

 

 

 

 

 

Colonial U.S. Growth & Income Fund, VS (B)

 

22,142,897

 

 

1,368,297

 

 

 

 

 

 

 

 

Crabbe Huson Real Estate Investment Fund, VS (B)

 

1,158,893

 

 

1,082,047

 

 

 

 

 

 

 

 

Liberty All-Star Equity Fund, VS (A)

 

7,535,426

 

 

13,726,328

 

 

 

 

 

 

 

 

Liberty All-Star Equity Fund, VS (B)

 

3,265,600

 

 

1,270,887

 

 

 

 

 

 

 

 

Liberty Newport Japan Opportunity Fund, VS (B)

 

505,769

 

 

534,619

 

 

 

 

 

 

 

 

Liberty S&P 500 Index Fund, VS (A)

 

461

 

 

-

 

 

 

 

 

 

 

 

Liberty S&P 500 Index Fund, VS (B)

 

20,460,306

 

 

3,647,608

 

 

 

 

 

 

 

 

Liberty Select Value Fund, VS (A)

 

252

 

 

-

 

 

 

 

 

 

 

 

Liberty Select Value Fund, VS (B)

 

12,525,050

 

 

938,743

 

 

 

 

 

 

 

 

Liberty Value Fund, VS (A)

 

12,699,806

 

 

23,369,209

 

 

 

 

 

 

 

 

Liberty Value Fund, VS (B)

 

7,618,943

 

 

1,239,837

 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

7. Purchases and Sales of Securities (continued)

 

 

Purchases

 

 

Sales

 

 

 

 

 

 

 

Newport Tiger Fund, VS (A)

$

85,053,254

 

$

86,321,659

 

 

 

 

 

 

 

 

Newport Tiger Fund, VS (B)

 

52,712,682

 

 

52,602,246

 

 

 

 

 

 

 

 

Rydex Financial Services Fund, VS (A)

 

420

 

 

-

 

 

 

 

 

 

 

 

Rydex Financial Services Fund, VS (B)

 

2,475,449

 

 

551,585

 

 

 

 

 

 

 

 

Rydex Health Care Fund, VS (B)

 

3,902,813

 

 

482,551

 

 

 

 

 

 

 

 

SteinRoe Global Utilities Fund, VS (A)

 

4,040,306

 

 

11,983,074

 

 

 

 

 

 

 

 

Wanger Foreign Forty Fund

 

35,626,875

 

 

33,965,769

 

 

 

 

 

 

 

 

Wanger International Small Cap Fund

 

122,352,238

 

 

115,512,356

 

 

 

 

 

 

 

 

Wanger Twenty Fund

 

5,774,776

 

 

1,193,966

 

 

 

 

 

 

 

 

Wanger US Small Cap Fund

 

23,289,188

 

 

7,147,381

 

 

 

 

 

 

 

 

MFS Bond Series IC

 

1,199,379

 

 

2,952,154

 

 

 

 

 

 

 

 

MFS Emerging Growth Series IC

 

9,170,345

 

 

14,296,590

 

 

 

 

 

 

 

 

MFS Emerging Growth Series SC

 

12,175,338

 

 

5,769,840

 

 

 

 

 

 

 

 

MFS Investors Growth Stock Series SC

 

10,294,522

 

 

2,171,849

 

 

 

 

 

 

 

 

MFS Investors Trust Series SC

 

9,445,487

 

 

1,110,312

 

 

 

 

 

 

 

 

MFS New Discovery Series SC

 

6,014,386

 

 

2,814,631

 

 

 

 

 

 

 

 

MFS Research Series IC

 

7,267,751

 

 

8,864,548

 

 

 

 

 

 

 

 

Mitchell Hutchins Balanced Portfolio (I)

 

510,113

 

 

1,901,601

 

 

 

 

 

 

 

 

Mitchell Hutchins Global Equity Portfolio (I)

 

113,834

 

 

494,199

 

 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

7. Purchases and Sales of Securities (continued)

 

 

Purchases

 

 

Sales

 

 

 

 

 

 

 

Mitchell Hutchins Growth & Income Portfolio (I)

$

541,812

 

$

1,397,507

 

 

 

 

 

 

 

 

Mitchell Hutchins Growth Portfolio (I)

 

999,206

 

 

1,472,927

 

 

 

 

 

 

 

 

Mitchell Hutchins Strategic Income Portfolio (I)

 

182,534

 

 

506,216

 

 

 

 

 

 

 

 

Rydex Nova Fund

 

8,036,794

 

 

7,985,057

 

 

 

 

 

 

 

 

Rydex OTC Fund

 

3,507,304

 

 

802,320

 

 

 

 

 

 

 

 

Rydex Precious Metals Fund

 

33,611

 

 

22,027

 

 

 

 

 

 

 

 

Rydex US Government Bond Fund

 

50,348

 

 

51,719

 

 

 

 

 

 

 

 

Rydex US Government Money Market Fund

 

3,291,828

 

 

1,703,341

 

 

 

 

 

 

 

 

Rydex Ursa Fund

 

8,439,425

 

 

7,724,543

 

 

 

 

 

 

 

 

SteinRoe Balanced Fund VS (A)

 

18,251,031

 

 

28,255,065

 

 

 

 

 

 

 

 

SteinRoe Balanced Fund VS (B)

 

42,583,924

 

 

9,576,425

 

 

 

 

 

 

 

 

SteinRoe Growth Stock Fund VS (A)

 

26,423,877

 

 

27,510,015

 

 

 

 

 

 

 

 

SteinRoe Growth Stock Fund VS (B)

 

24,214,598

 

 

3,804,330

 

 

 

 

 

 

 

 

SteinRoe Money Market Fund VS (A)

 

1,288,905,877

 

 

1,246,859,174

 

 

 

 

 

 

 

 

Liberty Federal Securities Fund VS (A)

 

17,302,144

 

 

11,201,111

 

 

 

 

 

 

 

 

Liberty Federal Securities Fund VS (B)

 

61,130,226

 

 

26,003,799

 

 

 

 

 

 

 

 

SteinRoe Small Company Growth Fund VS (A)

 

49,532,036

 

 

46,716,750

 

 

 

 

 

 

 

 

 

$

3,199,994,280

 

$

2,907,990,638

 

 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

8. Change in Units Outstanding

The change in units outstanding for the year ended December 31, 2001 were as follow:

 

 

 

 

 

 

 

 

 

Net Increase

 

 

Units Issued

 

Units Redeemed

 

(Decrease)

 

 

 

 

 

 

 

 

AIM VI Capital Appreciation Series I

1,738,481

 

1,433,970

 

304,511

 

 

 

 

 

 

 

 

AIM VI Growth Series I

158,193

 

257,285

 

(99,092

)

 

 

 

 

 

 

 

AIM VI International Equity Series I

93,286,705

 

93,013,582

 

273,123

 

 

 

 

 

 

 

 

AIM VI Value Series I

1,428,483

 

646,089

 

782,394

 

 

 

 

 

 

 

 

Alger American Growth Portfolio

209,877

 

1,212,138

 

(1,002,261

)

 

 

 

 

 

 

 

Alger American Small Capitalization Portfolio

329,463

 

468,527

 

(139,064

)

 

 

 

 

 

 

 

Alliance Global Bond Portfolio (A)

306,955

 

914,271

 

(607,316

)

 

 

 

 

 

 

 

Alliance Growth and Income Portfolio (A)

3,088,157

 

707,408

 

2,380,749

 

 

 

 

 

 

 

 

Alliance Growth and Income Portfolio (B)

117,283

 

1,581

 

115,702

 

 

 

 

 

 

 

 

Alliance International Portfolio (B)

46,166

 

5,065

 

41,101

 

 

 

 

 

 

 

 

Alliance Premier Growth Portfolio (A)

287,875

 

1,637,029

 

(1,349,154

)

 

 

 

 

 

 

 

Alliance Premier Growth Portfolio (B)

2,752,007

 

1,743,874

 

1,008,133

 

 

 

 

 

 

 

 

Alliance Real Estate Investment Portfolio (A)

8,821

 

24,785

 

(15,964

)

 

 

 

 

 

 

 

Alliance Technology Portfolio (B)

1,004,196

 

972,364

 

31,832

 

 

 

 

 

 

 

 

Alliance Total Return Portfolio (B)

167,376

 

4,922

 

162,454

 

 

 

 

 

 

 

 

Alliance Worldwide Privatization Portfolio (B)

2,754,452

 

2,679,697

 

74,755

 

 

 

 

 

 

 

 

Brinson Tactical Allocation Portfolio (I)

707,231

 

894,920

 

(187,689

)

 

 

 

 

 

 

 

Exeter Growth Fund

-

 

2

 

(2

)

 

 

 

 

 

 

 

Exeter Moderate Growth Fund

-

 

2

 

(2

)

 

 

 

 

 

 

 

Fidelity VIP Equity Income Fund - SC2

1,421,829

 

185,289

 

1,236,540

 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

8. Change in Units Outstanding (continued)

 

 

 

 

 

 

 

Net Increase

 

Units Issued

 

Units Redeemed

 

(Decrease)

 

 

 

 

 

 

 

 

Fidelity VIP III Dynamic Capital Appreciation Fund

36,307

 

7,942

 

28,365

 

 

 

 

 

 

 

 

Fidelity VIP III Growth Opportunities Fund - SC2

990,838

 

155,305

 

835,533

 

 

 

 

 

 

 

 

Templeton Developing Markets Sec Fund 2

245,034

 

233,458

 

11,576

 

 

 

 

 

 

 

 

Colonial Global Equity Fund, VS (B)

176,420

 

178,289

 

(1,869

)

 

 

 

 

 

 

 

Colonial High Yield Securities Fund, VS (A)

349,415

 

471,510

 

(122,095

)

 

 

 

 

 

 

 

Colonial High Yield Securities Fund, VS (B)

1,408,066

 

707,602

 

700,464

 

 

 

 

 

 

 

 

Colonial International Fund for Growth, VS (A)

671,032

 

833,015

 

(161,983

)

 

 

 

 

 

 

 

Colonial International Horizons Fund, VS (B)

243,738

 

313,107

 

(69,369

)

 

 

 

 

 

 

 

Colonial Small Cap Value Fund, VS (A)

740,028

 

689,002

 

51,026

 

 

 

 

 

 

 

 

Colonial Small Cap Value Fund, VS (B)

1,187,070

 

810,266

 

376,804

 

 

 

 

 

 

 

 

Colonial Strategic Income Fund, VS (A)

264,702

 

1,181,764

 

(917,062

)

 

 

 

 

 

 

 

Colonial Strategic Income Fund, VS (B)

1,258,412

 

297,853

 

960,559

 

 

 

 

 

 

 

 

Colonial U.S. Growth & Income Fund, VS (A)

415,284

 

617,781

 

(202,497

)

 

 

 

 

 

 

 

Colonial U.S. Growth & Income Fund, VS (B)

748,354

 

51,340

 

697,014

 

 

 

 

 

 

 

 

Crabbe Huson Real Estate Investment Fund, VS (B)

93,727

 

97,788

 

(4,061

)

 

 

 

 

 

 

 

Liberty All-Star Equity Fund, VS (A)

584,503

 

1,134,344

 

(549,841

)

 

 

 

 

 

 

 

Liberty All-Star Equity Fund, VS (B)

341,244

 

140,075

 

201,169

 

 

 

 

 

 

 

 

Liberty Newport Japan Opportunity Fund, VS (B)

76,936

 

80,735

 

(3,799

)

 

 

 

 

 

 

 

Liberty S&P 500 Index Fund, VS (B)

2,533,830

 

449,445

 

2,084,385

 

 

 

 

 

 

 

 

Liberty Select Value Fund, VS (B)

1,173,097

 

91,126

 

1,081,971

 

 

 

 

 

 

 

 

Liberty Value Fund, VS (A)

226,060

 

928,201

 

(702,141

)

 

 

 

 

 

 

 

Liberty Value Fund, VS (B)

293,563

 

51,574

 

241,989

 

 

 

 

 

 

 

 

Newport Tiger Fund, VS (A)

10,348,506

 

10,455,108

 

(106,602

)

 

 

 

 

 

 

 

Newport Tiger Fund, VS (B)

5,769,616

 

5,793,762

 

(24,146

)

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

8. Change in Units Outstanding (continued)

 

 

 

Net Increase

 

 

Units Issued

 

Units Redeemed

 

(Decrease)

 

 

 

 

 

 

 

 

Rydex Financial Services Fund, VS (B)

227,753

 

50,852

 

176,901

 

 

 

 

 

 

 

 

Rydex Health Care Fund, VS (B)

405,573

 

47,669

 

357,904

 

 

 

 

 

 

 

 

SteinRoe Global Utilities Fund, VS (A)

144,139

 

647,504

 

(503,365

)

 

 

 

 

 

 

 

Wanger Foreign Forty Fund

4,932,860

 

4,696,621

 

236,239

 

 

 

 

 

 

 

 

Wanger International Small Cap Fund

17,803,118

 

16,837,350

 

965,768

 

 

 

 

 

 

 

 

Wanger Twenty Fund

568,794

 

116,436

 

452,358

 

 

 

 

 

 

 

 

Wanger US Small Cap Fund

2,134,049

 

673,368

 

1,460,681

 

 

 

 

 

 

 

 

MFS Bond Series IC

67,572

 

259,871

 

(192,299

)

 

 

 

 

 

 

 

MFS Emerging Growth Series IC

452,369

 

913,709

 

(461,340

)

 

 

 

 

 

 

 

MFS Emerging Growth Series SC

748,158

 

379,342

 

368,816

 

 

 

 

 

 

 

 

MFS Investor Growth Stock Series SC

1,414,337

 

306,169

 

1,108,168

 

 

 

 

 

 

 

 

MFS Investor Trust Series SC

1,097,488

 

133,406

 

964,082

 

 

 

 

 

 

 

 

MFS New Discovery Series SC

701,447

 

321,934

 

379,513

 

 

 

 

 

 

 

 

MFS Research Series IC

97,844

 

605,511

 

(507,667

)

 

 

 

 

 

 

 

Mitchell Hutchins Balanced Portfolio (I)

11,163

 

179,833

 

(168,670

)

 

 

 

 

 

 

 

Mitchell Hutchins Global Equity Portfolio (I)

3,823

 

63,637

 

(59,814

)

 

 

 

 

 

 

 

Mitchell Hutchins Growth Portfolio (I)

8,084

 

196,992

 

(188,908

)

 

 

 

 

 

 

 

Mitchell Hutchins Growth & Income Portfolio (I)

21,083

 

140,802

 

(119,719

)

 

 

 

 

 

 

 

Mitchell Hutchins Strategic Income Portfolio (I)

16,451

 

52,477

 

(36,026

)

 

 

 

 

 

 

 

Rydex Nova Fund

512,042

 

508,461

 

3,581

 

 

 

 

 

 

 

 

Rydex OTC Fund

804,142

 

160,474

 

643,668

 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

 

 

8. Change in Units Outstanding (continued)

 

 

 

 

 

Net Increase

 

 

Units Issued

 

Units Redeemed

 

(Decrease)

 

 

 

 

 

 

 

 

Rydex Precious Metals Fund

1,269

 

849

 

420

 

 

 

 

 

 

 

 

Rydex US Government Money Market Fund

125,163

 

64,725

 

60,438

 

 

 

 

 

 

 

 

Rydex Ursa Fund

255,895

 

234,436

 

21,459

 

 

 

 

 

 

 

 

SteinRoe Balanced Fund VS (A)

402,162

 

1,067,372

 

(665,210

)

 

 

 

 

 

 

 

SteinRoe Balanced Fund VS (B)

1,687,441

 

383,958

 

1,303,483

 

 

 

 

 

 

 

 

SteinRoe Growth Stock Fund VS (A)

187,791

 

645,081

 

(457,290

)

 

 

 

 

 

 

 

SteinRoe Growth Stock Fund VS (B)

489,715

 

95,326

 

394,389

 

 

 

 

 

 

 

 

SteinRoe Money Market Fund VS (A)

84,939,340

 

81,121,004

 

3,818,336

 

 

 

 

 

 

 

 

Liberty Federal Securities Fund VS (A)

725,117

 

575,397

 

149,720

 

 

 

 

 

 

 

 

SteinRoe Mortgage Securities Fund VS (B)

2,818,999

 

1,186,384

 

1,632,615

 

 

 

 

 

 

 

 

SteinRoe Small Company Growth Fund VS (A)

1,465,428

 

1,531,538

 

(66,110

)

 

 

 

 

 

 

 

 

265,259,941

 

246,771,680

 

18,488,261

 

 

 

KEYPORT LIFE INSURANCE COMPANY - VARIABLE ACCOUNT A

Notes to Financial Statements (continued)

9. Diversification Requirements

Under the provisions of Section 817(h) of the Internal Revenue Code, a variable annuity contract, other than a contract issued in connection with certain types of employee benefit plans, will not be treated as an annuity contract for federal tax purposes for any period for which the investments of the segregated asset account on which the contract is based are not adequately diversified. The Code provides that the "adequately diversified" requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of Treasury.

The Internal Revenue Service has issued regulations under Section 817(h) of the Code. The Company believes that the Variable Account satisfies the current requirements of the regulations, and it intends that the Variable Account will continue to meet such requirements.

 

 

 

 

Report of Independent Auditors

 

 

The Board of Directors

Keyport Life Insurance Company

 

We have audited the consolidated balance sheets of Keyport Life Insurance Company (the Company) as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholder's equity, and cash flows for the ten-month period ended October 31, 2001 and the two-month period ended December 31, 2001 and for the years ended December 31, 2000 and 1999, respectively. 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 auditing standards generally accepted in the United States. 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 the 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Keyport Life Insurance Company at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for the ten-month period ended October 31, 2001 and the two-month period ended December 31, 2001 and for the years ended December 31, 2000 and 1999, respectively, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 3 to the financial statements, in 2001 the Company changed its method of accounting for its derivatives.

 

ERNST & YOUNG LLP

 

Boston, Massachusetts

February 5, 2002

KEYPORT LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31,

ASSETS

2001

2000

Cash and investments:

          Fixed maturities available for sale (amortized cost: 2001 -$12,059,631;

                      2000 -$10,728,519)  

$11,999,671

$10,668,288

          Equity securities (cost: 2001 - $36,859; 2000 - $71,489)

39,658

76,427

          Mortgage loans

6,871

9,433

          Policy loans

635,938

620,824

          Other invested assets

521,259

783,043

          Cash and cash equivalents

2,108,093

1,728,279

          Total cash and investments

15,311,490

13,886,294

Accrued investment income

183,576

163,474

Deferred policy acquisition costs

28,299

547,901

Value of business acquired

95,155

-

Goodwill

714,755

15,570

Current income tax receivable

1,622

-

Deferred income tax asset

185,855

-

Intangible assets

12,100

-

Receivable for investments sold

21,797

90,545

Other assets

28,330

91,742

Separate account assets

2,560,831

4,212,488

          Total assets

$19,143,810

$19,008,014

LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities:

          Policy liabilities

$13,627,126

$11,968,489

          Income taxes payable

-

9,954

          Deferred income taxes

-

161,615

          Payable for investments purchased and loaned

1,165,609

1,364,531

          Other liabilities

56,837

56,403

          Separate account liabilities

2,532,557

4,166,787

          Total liabilities

17,382,129

17,727,779

Stockholder's equity:

          Common stock, $1.25 par value; authorized 2,500 shares;

                  issued and outstanding 2,412 shares

3,015

3,015

          Additional paid-in capital  

1,703,462

505,933

          Retained earnings

86,976

797,606

          Accumulated other comprehensive loss

(31,772)

(26,319)

          Total stockholder's equity

1,761,681

1,280,235

Total liabilities and stockholder's equity

$19,143,810

$19,008,014

See accompanying notes.

KEYPORT LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands)

For the 2 month period ended December 31,

For the 10 month period ended October 31,




Year Ended December 31,

2001

2001

2000

1999

Revenues:

Net investment income, including distributions from

private equity limited partnerships

$    144,918

$   735,641 

$  856,808 

$  805,216 

Interest credited to policyholders

107,315

498,668 

539,643 

526,574 

Investment spread

37,603

236,973 

317,165 

278,642 

Net realized investment gains (losses)

2,454

(22,790)

(35,796)

(41,510)

Net derivative gains

99,972

446 

Net change in unrealized and undistributed (losses)

gains in private equity limited partnerships

-

(17,088)

31,604 

-

Fee income:

Surrender charges

1,174

13,654 

24,266 

17,730 

Separate account income

8,699

44,460 

43,518 

33,485 

Management fees

1,080

5,715 

6,207 

4,241 

Total fee income

10,953

63,829 

73,991 

55,456 

Expenses:

Policy benefits

1,128

4,869 

4,997 

3,603 

Operating expenses

10,778

55,710 

64,875 

49,734 

Amortization of deferred policy acquisition costs

1,439

95,507 

116,123 

97,359 

Amortization of value of business acquired

3,828

-

-

-

Amortization of intangible assets

-

1,047  

1,256 

1,256 

Total expenses

17,173

157,133 

187,251 

151,952 

Income before income taxes and cumulative

      effect of accounting changes

133,809

104,237 

199,713 

140,636 

Income tax expense

46,833

26,635 

57,128 

45,977 

Income before cumulative effect of

     accounting changes

86,976

77,602 

142,585 

94,659 

Cumulative effect of accounting changes, net of tax

-

60,847 

-

-

           Net income

$      86,976

$     16,755 

$  142,585 

$   94,659 

 

 

 

 

See accompanying notes.

 

KEYPORT LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

(in thousands)

Accumulated

Additional

Other

Common

Paid-in

Retained

Comprehensive

Stock

Capital

Earnings

Income (Loss)

Total

Balance, December 31, 1998

$3,015 

$505,933 

$600,396 

$26,253 

$1,135,597 

Comprehensive income (loss)

   Net income

-

-

94,659 

-

94,659 

   Other comprehensive income, net of tax:

     Net unrealized investment losses

-

-

-

(186,868)

(186,868)

Comprehensive income

(92,209) 

Dividends paid

-

-

(30,000)

-

(30,000)

Balance, December 31, 1999

3,015 

505,933 

665,055 

(160,615)

1,013,388 

Comprehensive income (loss)

   Net income

-

-

142,585 

-

142,585 

   Other comprehensive loss, net of tax: 

     Net unrealized investment gains

-

-

-

134,296 

134,296 

Comprehensive income

276,881 

Dividends paid

-

-

(10,034)

-

(10,034)

Balance, December 31, 2000

3,015 

505,933 

797,606 

(26,319)

1,280,235 

Comprehensive income:

   Net income

-

-

16,755 

-

16,755 

   Other comprehensive income, net of tax:

     Net unrealized investment gains

-

-

-

85,107 

85,107 

Comprehensive income

101,862 

Dividend paid 

-

-

(99)

-

(99)

Balance, October 31, 2001

3,015 

505,933 

814,262 

58,788 

1,381,998 

Sale of stockholder's equity

(3,015)

(505,933)

(814,262)

(58,788)

(1,381,998)

Sun Life acquisition cost

3,015 

1,703,462 

-

-

1,706,477 

Comprehensive income (loss)

   Net income

-

-

86,976 

-

86,976 

   Other comprehensive loss, net of tax:

     Net unrealized investment losses

-

-

-

(31,772)

(31,772)

Comprehensive income

55,204 

Balance, December 31, 2001

$3,015 

$1,703,462 

$86,976 

$(31,772)

$1,761,681 

See accompanying notes.

KEYPORT LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the 2
month period
ended December 31,

For the 10 month period ended October 31,




Year Ended December 31,

2001

2001

2000

1999

Cash flows from operating activities:

  Net income

$     86,976 

$     16,755 

$    142,585 

$    94,659 

  Adjustments to reconcile net income to net cash

       provided by operating activities:

         Cumulative effect of accounting changes

-

60,847

         Non-cash derivative activity

(116,870)

94,048 

         Interest credited to policyholders

107,315 

498,668

539,643 

526,574 

         Net realized investment (gains) losses

(2,454)

22,790 

35,796 

41,510 

         Net change in unrealized and undistributed losses 

            (gains) in private equity limited partnerships

-

17,088 

(31,604)

-

         Net amortization on investments

(5,000)

(11,544)

59,836 

79,508 

         Change in deferred policy acquisition costs

(12,117)

(64,985)

9,023 

(17,446)

         Change in current and deferred income taxes

48,624 

(41,200)

5,783 

53,060 

         Net change in other assets and liabilities

19,551 

(116,807)

22,487 

2,876 

                 Net cash provided by operating activities

126,025 

475,660 

783,549 

780,741 

Cash flows from investing activities:

  Investments purchased - available for sale

(1,499,445)

(1,973,207)

(3,802,286)

(4,835,872)

  Investments sold - available for sale

1,654,960 

2,026,942 

2,877,082 

4,322,679 

  Investments matured - available for sale

-

86,626 

894,779 

823,252 

  Increase in policy loans

(4,022)

(11,092)

(21,346)

(20,708)

  Decrease in mortgage loans

345 

2,217 

2,692 

42,992 

  Other invested assets sold (purchased), net

(28,665)

46,111 

8,336 

(17,344)

                 Net cash  provided by (used in)

                         investing activities

123,173 

177,597 

(40,743)

314,999 

Cash flows from financing activities:

     Withdrawals from policyholder accounts

(472,341)

(1,993,388)

(2,249,950)

(2,108,889)

     Deposits to policyholder accounts

453,393 

1,565,504 

1,569,168 

894,414 

     Dividends paid to Parent

-

(10,034)

(30,000)

     Net change in securities lending

30,900 

(106,709)

600,386 

505,013 

                           Net cash provided by (used in) 

                               financing activities

11,952 

(534,593)

(90,430)

(739,462)

Change in cash and cash equivalents

261,150 

118,664 

652,376 

356,278 

Cash and cash equivalents at beginning of period

1,846,943 

1,728,279 

1,075,903 

719,625 

Cash and cash equivalents at end of period

$ 2,108,093 

$ 1,846,943 

$ 1,728,279 

$ 1,075,903 

See accompanying notes.

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

1. Change of Control

Through October 31, 2001, Keyport Life Insurance Company ("the Company") was a wholly owned subsidiary of Liberty Financial Companies, Incorporated ("LFC"), which is a majority-owned, indirect subsidiary of Liberty Mutual Insurance Company ("Liberty Mutual").

On May 3, 2001, LFC announced that it had reached a definitive agreement to sell its annuity and bank marketing businesses to Sun Life Financial Services Inc. ("Sun Life Financial"), a Canadian holding company and parent of Sun Life Assurance Company of Canada ("Sun Life"). The transaction was subject to customary conditions to closing, including receipt of approvals by various state insurance regulators in the U.S., certain other regulatory authorities in the U.S. and Canada and LFC's shareholders.

Effective after the close of business on October 31, 2001, all required approvals had been obtained and Sun Life of Canada (U.S.) Holdings, Inc., an indirect subsidiary of Sun Life, acquired the Company for approximately $1.7 billion in cash. As part of the acquisition, Sun Life Financial (U.S.) Holdings, Inc., another indirect subsidiary of Sun Life, acquired Independent Financial Marketing Group ("IFMG"), an affiliate of the Company ($20 million of the total purchase price was allocated to IFMG). The acquisition of the Company and IFMG complements both Sun Life Financial's product array and distribution capabilities and advances Sun Life Financial towards its strategic goal of reaching a top 10 position in target product markets in North America. Sun Life Financial also expects to reduce costs through economies of scale.

The acquisition was accounted for using the purchase method under Statement of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". Under the purchase method of accounting, the assets acquired and liabilities assumed are recorded at estimated fair value at the date of acquisition. The Company is in the process of completing the valuations of a portion of the assets acquired; thus, the allocation of the purchase price is subject to refinement.

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of November 1, 2001 (in thousands):

 

Assets:

 

 

  Fixed-maturity securities

$     10,609,150

 

  Equity securities

35,313

 

  Mortgage loans

7,216

 

  Policy loans

631,916

 

  Value of business acquired

105,400

 

  Goodwill

714,755

 

  Intangible assets

12,100

 

  Deferred taxes

217,633

 

  Other invested assets

363,586

 

  Cash and cash equivalents

1,846,887

 

  Other assets acquired

465,152

 

  Separate account assets

3,941,527

 

          Total assets acquired

18,950,635

 

  

 

 

Liabilities:

 

 

  Policy liabilities

12,052,071

 

  Other liabilities

1,262,045

 

  Separate accounts

3,930,042

 

          Total liabilities assumed

17,244,158

 

 

 

 

Net assets acquired

$      1,706,477

Intangible assets acquired primarily consist of state insurance licenses ($10.1 million) that are not subject to amortization. The remaining $2.0 million of intangible assets relate to product rights that have a weighted-average useful life of 7 years. Most of the goodwill is expected to be deductible for tax purposes.

2. Accounting Policies

Organization

The Company offers a diversified line of fixed, indexed and variable annuity products designed to serve the growing retirement savings market. These annuity products are sold through a wide-ranging network of banks, agents and security dealers throughout the United States.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

Principles of Consolidation

The consolidated financial statements include the Company and its wholly owned subsidiaries, Independence Life and Annuity Company ("Independence Life"), Keyport Benefit Life Insurance Company ("Keyport Benefit"), Liberty Advisory Services Corp. (through October 31, 2001) and Keyport Financial Services Corp. ("KFSC"). On October 31, the Company transferred its ownership interest in Liberty Advisory Service Corp., through a dividend, to Liberty Financial.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), which vary in certain respects from reporting practices prescribed or permitted by state insurance regulatory authorities. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investments

Investments in debt and equity securities classified as available for sale are carried at fair value, and after tax unrealized gains and losses (net of adjustments to deferred policy acquisition costs and value of business acquired) are reported as a separate component of accumulated other comprehensive income (loss). The cost basis of securities is adjusted for declines in value that are determined to be other than temporary. Realized investment gains and losses are calculated on a first-in, first-out basis, net of adjustments for amortization of deferred policy acquisition costs and value of business acquired.

For the mortgage-backed bond portion of the fixed-maturity investment portfolio, the Company recognizes income using a constant effective yield based on anticipated prepayments over the estimated economic life of the security. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments, and any resulting adjustment is included in net investment income.

Mortgage loans are carried at amortized cost. Policy loans are carried at the unpaid principal balances plus accrued interest and do not exceed the net cash surrender value of the related insurance policy.

Investments in private equity limited partnerships, which are included in other invested assets, are accounted for on either the cost method or equity method. The equity method of accounting is used for all partnerships in which the Company has an ownership interest in excess of 3%.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

The net change in unrealized and undistributed gains in private equity limited partnerships primarily represents increases/(decreases) in the fair value of the underlying investments of the private equity limited partnerships that are accounted for under the equity method. The net change of ($17.1) million and $31.6 million in unrealized and undistributed (losses)/gains is recorded net of the related amortization of deferred policy acquisition costs of $(31.7) million and $58.7 million, and net of the amounts realized, which are recognized in investment income of $31.4 million and $13.3 million, for the 10 month period ended October 31, 2001 and the year ended December 31, 2000, respectively. The financial information for these investments is obtained directly from the private equity limited partnerships on a periodic basis. There can be no assurance that any unrealized and undistributed gains/(losses) will ultimately be realized or that the Company will not incur losses in the future on such investments. The corresponding amount in 1999 was insignificant.

Fee Income

Fees from investment advisory services are recognized as revenues when services are provided. Revenues from fixed and variable annuities and single-premium whole life policies include mortality charges, surrender charges, policy fees, and contract fees and are recognized when earned.

Deferred Policy Acquisition Costs

Deferred policy acquisition costs relate to the costs of acquiring new business, which vary with, and are primarily related to, the production of new annuity business. Such acquisition costs include commissions, costs of policy issuance, and underwriting and selling expenses. These costs are deferred and amortized with interest in relation to the present value of estimated gross profits from mortality; investment spread and expense margins over the estimated lives of the contracts. This amortization is reviewed annually and adjusted retrospectively when the Company revises its estimate of current or future gross profits to be realized, including realized and unrealized gains and losses from investments.

Deferred policy acquisition costs are adjusted for amounts relating to unrealized gains and losses on available for sale fixed-maturity securities. This adjustment, net of tax, is included with the change in net unrealized investment gains or losses that is credited or charged directly to accumulated other comprehensive income (loss). Deferred policy acquisition costs were increased by $0.6 million and $43.6 million at December 31, 2001 and December 31, 2000, respectively, relating to this adjustment.

Although realization of deferred policy acquisition costs is not assured, the Company believes it is more likely than not that all of these costs will be realized. The amount of deferred policy acquisition costs considered realizable, however, could be reduced in the near term if the estimates of gross profits or total revenues discussed above are reduced. The amount of amortization of deferred policy acquisition costs could be revised in the near term if any of the estimates discussed above are revised.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

Value of Business Acquired

The value of business acquired represents the actuarial-determined present value of projected future gross profits from policies in force at the date of their acquisition. This amount is amortized in proportion to the projected emergence of profits over the estimated lives of the contracts. Interest is accrued on the unamortized balance at the contract rate of 5% for the year ended December 31, 2001.

The value of business acquired is adjusted for amounts relating to the recognition of unrealized investment gains and losses. This adjustment, net of tax, is included with the change in net unrealized investment gains or losses that is credited or charged directly to accumulated other comprehensive income (loss). Value of business acquired was increased by $5.7 million at December 31, 2001 relating to this adjustment.

Estimated future net amortization expense of the value of business acquired as of December 31, 2001 is as follows (in thousands):

2002

$ 19,016

2003

17,497

2004

15,639

2005

13,709

2006

11,632

Thereafter

17,662

Total

$ 95,155

Goodwill

Goodwill represents the difference between the purchase price paid and the fair value of the net assets acquired in connection with the acquisition of the Company. In accordance with SFAS 142, Goodwill will be tested for impairment on an annual basis beginning in 2002.

Intangible Assets

Intangible assets consist of state insurance licenses ($10.1 million) that are not subject to amortization and $2.0 million of product rights that have a weighted-average useful life of 7 years.

Separate Account Assets and Liabilities

The assets and liabilities resulting from variable annuities, variable life policies are segregated in separate accounts. Separate account assets consist principally of investments in mutual funds and fixed maturities and are carried at fair value. Investment income and changes in mutual fund asset values are allocated to the policyholders and, therefore, do not affect the operating results of the Company. The Company earns separate account fees for providing administrative services and bearing the mortality risk related to these contracts. The difference between investment income and interest credited on the institutional accounts was reported as separate account fee income through October 31, 2001. Effective November 1, 2001, the separate institutional accounts were classified as general account assets. Investment income and interest credited were reported as components of net investment income and interest credited, respectively.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

As of December 31, 2001 and 2000, the Company also classified $28.3 million and $45.7 million, respectively, of investments in certain mutual funds sponsored by former affiliates of the Company as separate account assets.

Policy Liabilities

Policy liabilities consist of deposits received plus credited interest, less accumulated policyholder charges, assessments, and withdrawals related to deferred annuities and single-premium whole life policies. Policy benefits that are charged to expense include benefit claims incurred in the period in excess of related policy account balances.

Income Taxes

Income taxes have been provided using the liability method in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."

The Company files a consolidated federal income tax return with its life insurance subsidiaries, Independence Life and Keyport Benefit. Liberty Advisory Services Corp. ("LASC") and KFSC also file consolidated federal and state income tax returns. The Company and its life insurance subsidiaries will be eligible to file a consolidated return with Sun Life Assurance Company of Canada - U.S. Operations Holdings, Inc. ("US Holdco") beginning in 2006. US Holdco is a member of the Sun Life Financial Group Insurance Holding Company system and is an indirect subsidiary of Sun Life Assurance Company of Canada.

The Company and its life insurance subsidiaries have a tax-sharing agreement that allocates income taxes to the Company and its subsidiaries as if each entity were to file separate income tax returns. Tax benefits resulting from losses are paid to the extent such losses are utilized in the consolidated income tax return. LASC and KFSC also have a tax-sharing agreement (through October 31, 2001) with the same terms as those outlined above.

Cash Equivalents

Short-term investments having a maturity of three months or less when purchased are classified as cash equivalents.

Reclassifications

Certain prior-year amounts have been reclassified to conform to the 2001 presentation.

3. Accounting Changes

The cumulative effect of accounting changes, net of tax, for the ten-month period ended October 31, 2001 of $60.8 million includes a loss of $54.3 million relating to the adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of SFAS No. 133" (collectively hereafter referred to as the "Statement") in the quarter ended March 31, 2001 and a loss of $6.5 million relating to the adoption of Emerging Issues Task Force ("EITF") Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" in the quarter ended June 30, 2001.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

The Company adopted the Statement on January 1, 2001. The Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset by the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in operations.

The cumulative effect, reported after tax and net of related effects on deferred policy acquisition costs, upon adoption of the Statement at January 1, 2001 decreased net income and stockholder's equity by $54.3 million. The adoption of the Statement may increase volatility in future reported income due, among other reasons, to the requirements of defining an effective hedging relationship under the Statement as opposed to certain hedges the Company believes are effective economic hedges. The Company anticipates that it will continue to utilize its current risk management philosophy, which includes the use of derivative instruments.

The Company adopted EITF Issue No. 99-20 on April 1, 2001. EITF Issue 99-20 governs the method of recognizing interest income and impairment on asset-backed investment securities. EITF Issue No. 99-20 requires the Company to update the estimate of cash flows over the life of certain retained beneficial interests in securitization transactions and purchased benefecial interests in securitized financial assets. Pursuant to EITF Issue No. 99-20, based on current information and events, if the Company estimates that the fair value of its beneficial interests is not greater than or equal to its carrying value and if there has been a decrease in the estimated cash flows since the last revised estimate, considering both timing and amount, then an other-than-temporary impairment should be recognized. The cumulative effect, reported after tax and net of related effects on deferred policy acquisition costs, upon adoption of EITF Issue No. 99-20 on April 1, 2001 decreased net income by $6.5 million with a related increase to accumulated other comprehensive income of $1.8 million.

4. Accounting for Derivatives and Hedging Activities

All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered into, the Company designates the derivative as either (1) a hedge of the fair value of a recognized asset ("fair value hedge") or (2) utilizes the derivative as an economic hedge ("non-designated derivative"). Changes in the fair value of a derivative that is highly effective and is designated and qualifies as a fair value hedge, along with the loss or gain on the hedged asset attributable to the hedged risk, are recorded in current period operations as a component of net derivative gains. Changes in the fair value of non-designated derivatives are reported in current period operations as a component of net derivative gains.

The Company issues equity-indexed annuity contracts that contain a derivative instrument that is "embedded" in the contract. Upon issuing the contract, the embedded derivative is separated from the host contract (annuity contract), is carried at fair value, and is considered a non-designated derivative.

The Company purchases call options and futures on the S&P 500 Index to economically hedge its obligation under the annuity contract to provide returns based upon this index. The call options and futures are non-designated derivatives. In addition, the Company utilizes non-designated total return swap agreements to hedge certain contract obligations.

As a component of its investment strategy and to reduce its exposure to interest rate risk, the Company utilizes interest rate swap agreements. Interest rate swap agreements are agreements to exchange with a counterparty interest rate payments of differing character (e.g., fixed-rate payments exchanged for variable-rate payments) based on an underlying principal balance (notional principal) to hedge against interest rate changes. Prior to October 31, 2001, the interest rate swap agreements were designated and qualified as fair value hedges. The ineffective portion of the fair value hedges, net of related effects on deferred policy acquisition costs, resulted in a loss of ($2.6) million for the ten-month period ended October 31, 2001.

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedging transactions. This process included linking all fair value hedges to specific assets on the balance sheet. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.

When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value hedge, the derivative will continue to be carried on the balance sheet at its fair value and changes in fair value will be reported in operations. The subsequent fair value changes in the hedged asset will no longer be reported in current period operations.

Effective November 1 2001, in conformity with Sun Life accounting policies, the Company discontinued hedge accounting and classified its interest rate swap agreements as non-designated derivatives. The Company believes that these derivatives provide economic hedges and the cost of formally documenting the effectiveness of the fair value of the hedged assets in accordance with the provisions of SFAS 133 was not justified. The increase in the swap values, net of related effects on the value of business acquired, resulted in income of $64.9 million for the two-month period ended December 31, 2001. The change in values of the call options, futures, and the embedded derivative, net of related effects on the value of business acquired, resulted in income of $35.1 million for the two-month period ended December 31, 2001.

Outstanding derivatives, shown in notional amounts along with their carrying value and fair value, are as follows (in thousands):

 

 

 

Assets /(Liabilities)

 

Notional Amounts

 

 

Carrying Value

 

Fair
Value

 

 

12/31/2001

 

 

12/31/2001

 

12/31/2001

 

 

 

 

 

 

 

 

Interest rate swaps

 

$2,172,526

 

 

$ (71,906)

 

$ (71,906)

Total return swaps

 

1,035,438

 

 

42,171 

 

42,171 

S&P 500 Index call options

 

-

 

 

56,125 

 

56,125 

 

 

 

Assets /(Liabilities)

 

Notional Amounts

 

 

Carrying Value

 

Fair
Value

 

 

12/31/2000

 

 

12/31/2000

 

12/31/2000

 

 

 

 

 

 

 

 

Interest rate swaps

 

$2,797,750

 

 

$ (33,450)

 

$ (33,450)

Total return swaps

 

1,031,595

 

 

23,936 

 

23,936 

S&P 500 Index call options

 

-

 

 

337,712 

 

58,164 

The interest rate and total return swap agreements expire in 2002 through 2029. The S&P 500 call options and futures maturities range from 2002 to 2008.

At December 31, 2001 and 2000, the Company had approximately $92.5 million and $111.1 million, respectively, of unamortized premium in call option contracts.

Fair values for swap and cap agreements are based on current settlement values. The current settlement values are based on quoted market prices and brokerage quotes, which utilize pricing models or formulas using current assumptions. Fair values for call options and futures contracts are based on quoted market prices.

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

There are risks associated with some of the techniques the Company uses to match its assets and liabilities. The primary risk associated with swap, cap and call option agreements is the risk associated with counterparty nonperformance. The Company believes that the counterparties to its swap, cap and call option agreements are financially responsible and that the counterparty risk associated with these transactions is minimal. Futures contracts trade on organized exchanges and, therefore, have minimal credit risk.

5. Investments

Fixed Maturities

The amortized cost, gross unrealized gains and losses, and fair value of fixed-maturity securities are as follows (in thousands):



December 31, 2001


Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 



Fair Value

 

 

 

 

 

 

 

 

    U.S. Treasury securities

$      228,136

 

$            18

 

$      (3,795)

 

$      224,359

    Other U.S. Government securities

6,276

 

-

 

(377)

 

5,899

    Mortgage-backed securities of U.S.

 

 

 

 

 

 

 

       government corporations and

 

 

 

 

 

 

 

       agencies

965,478

 

3,351

 

(12,803)

 

956,026

    Debt securities issued by foreign

 

 

 

 

 

 

 

       governments

27,586

 

4,134

 

(402)

 

31,318

    Corporate securities

6,518,474

 

92,030

 

(79,776)

 

6,530,728

    Other mortgage-backed securities

2,542,605

 

5,588

 

(52,851)

 

2,495,342

    Asset-backed securities

1,490,306

 

19,463

 

(22,317)

 

1,487,452

    Senior secured loans

280,770

 

2,477

 

(14,700)

 

268,547

 

 

 

 

 

 

 

 

          Total fixed maturities

$ 12,059,631

 

$ 127,061

 

$ (187,021)

 

$ 11,999,671



December 31, 2000


Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 



Fair Value

 

 

 

 

 

 

 

 

    U.S. Treasury securities

$       40,243

 

$    1,711

 

$      (111)

 

$       41,843

    Mortgage-backed securities of U.S.

 

 

 

 

 

 

 

      government corporations and

 

 

 

 

 

 

 

      agencies

893,123

 

16,219

 

(5,401)

 

903,941

    Debt securities issued by foreign

 

 

 

 

 

 

 

      governments

102,180

 

632

 

(265)

 

102,547

    Corporate securities

5,597,632

 

88,876

 

(215,877)

 

5,470,631

    Other mortgage-backed securities

2,403,173

 

74,566

 

(17,698)

 

2,460,041

    Asset-backed securities

1,683,361

 

20,716

 

(21,753)

 

1,682,324

    Senior secured loans

8,807

 

-

 

(1,846)

 

6,961

 

 

 

 

 

 

 

 

          Total fixed maturities

$10,728,519

 

$202,720

 

$(262,951)

 

$10,668,288

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

5. Investments (continued)

At December 31, 2001 and 2000, gross unrealized gains on equity securities and investments in separate accounts aggregated $4.7 million and $13.4 million, respectively. Gross unrealized losses aggregated to $7.9 million at December 31, 2000.

The change in net unrealized investment gains (losses) on securities included in accumulated other comprehensive income (loss) for the ten-month period ended October 31, 2001 and for the years ended December 31, 2000 and 1999 include: gross unrealized gains (losses) on securities of $415.5 million, $213.4 million, and $(473.9) million, respectively, reclassification adjustments for realized investment losses into net income of $29.3 million, $45.9 million, and $53.5 million, respectively, and adjustments to deferred policy acquisition costs of $(343.3) million, $(192.3) million, and $302.0 million, respectively. The above amounts are shown before income tax expense (benefit) of $16.4 million, $(67.3) million, and $68.5 million, respectively. The income tax (benefit) expense recorded in other comprehensive income includes a change in the valuation allowance of $(9.7) million, $(90.7) million, and $109.9 million, respectively, related to unrealized capital losses on available for sale securities for the ten-month period ended October 31, 2001 and for the years ended December 31, 2000 and 1999, respectively.

The change in net unrealized investment gains (losses) on securities included in accumulated other comprehensive income (loss) for the two-month period ended December 31, 2001 include: gross unrealized (losses) on securities of $(52.4) million, reclassification adjustments for realized investment gains into net income of $(2.8) million, and adjustments to value of business acquired and deferred acquisition costs of $5.7 million and $0.6 million, respectively. The above amounts are shown before the income tax benefit of $17.1 million.

No investment in any person or its affiliates (other than bonds issued by agencies of the United States government) exceeded ten percent of stockholder's equity at December 31, 2001. At December 31, 2001, the Company did not have a material concentration of financial instruments in a single investee, industry or geographic location.

At December 31, 2001, $1.2 billion of fixed maturities were below investment grade.

Contractual Maturities

The amortized cost and fair value of fixed maturities by contractual maturity as of December 31, 2001 are as follows (in thousands):

 

Amortized Cost

 

Fair
Value

 

 

 

 

Due in one year or less

$     392,782

 

$     393,827

Due after one year through five years

2,867,449

 

2,856,646

Due after five years through ten years

2,961,223

 

2,954,897

Due after ten years

839,788

 

855,481

 

7,061,242

 

7,060,851

Mortgage and asset-backed securities

4,998,389

 

4,938,820

 

$ 12,059,631

 

$ 11,999,671

Actual maturities may differ because borrowers may have the right to call or prepay obligations.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

5. Investments (continued)

Net Investment Income

Net investment income is summarized as follows (in thousands):

 

2 months ended

 

10 months ended

 


Year Ended December 31,

 

12/31/2001

 

10/31/2001

 

2000

 

1999

 

 

 

 

 

 

 

 

Fixed maturities

$ 141,185 

 

$ 678,035 

 

$807,884 

 

$814,701 

Mortgage loans and other invested assets

110 

 

34,273 

 

85,717 

 

28,364 

Policy loans

5,752 

 

30,701 

 

36,985 

 

36,306 

Equity securities

797 

 

9,651 

 

276 

 

1,513 

Cash and cash equivalents

377 

 

917 

 

27,368 

 

20,822 

     Gross investment income

148,221 

 

753,577 

 

958,230 

 

901,706 

Investment expenses

(3,303)

 

(17,936)

 

(21,014)

 

(19,300)

Amortization of options and interest rate caps

-

 

-

 

(80,408)

 

(77,190)

 

 

 

 

 

 

 

 

      Net investment income

$ 144,918 

 

$ 735,641 

 

$856,808 

 

$805,216 

As of December 31, 2001 and 2000, the carrying value of non-income-producing fixed-maturity investments was $81.8 million and $24.4 million, respectively.

Net Realized Investment Gains (Losses)

Net realized investment gains (losses) are summarized as follows (in thousands):

 

2 months ended

 

10 months ended

 


Year Ended December 31,

 

12/31/2001

 

10/31/2001

 

2000

 

1999

Fixed maturities available for sale:

 

 

 

 

 

 

 

   Gross gains

$   12,509 

 

$   19,374 

 

$ 35,430 

 

$ 48,066 

   Gross losses

(9,716)

 

(7,510)

 

(70,474)

 

(79,825)

   Other than temporary declines in value

-

 

(42,800)

 

(16,731)

 

(18,276)

 

2,793 

 

(30,936)

 

(51,775)

 

(50,035)

 

 

 

 

 

 

 

 

Equity securities

-

 

1,665 

 

-

 

-

Investments in separate accounts

-

 

-

 

4,386 

 

-

Other invested assets

-

 

-

 

1,497 

 

(3,457)

 

 

 

 

 

 

 

 

Gross realized investment gains (losses)

2,793  

 

(29,271)

 

(45,892)

 

(53,492)

 

 

 

 

 

 

 

 

Amortization adjustments of deferred policy

 

 

 

 

 

 

 

     acquisition costs and value of business acquired

(339)

 

6,481 

 

10,096 

 

11,982 

 

 

 

 

 

 

 

 

Net realized investment gains (losses)

$      2,454 

 

$   (22,790)

 

$(35,796)

 

$(41,510)

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

6. Income Taxes

Income tax expense (benefit) is summarized as follows (in thousands):

 

2 months ended

 

10 months ended

 

Year ended
December 31,

 

12/31/2001

 

10/31/2001

 

2000

 

1999

 

 

 

 

 

 

 

 

Current

$ (1,859)

 

$ 89,493 

 

$ 96,219 

 

$(10,310)

Deferred

48,692 

 

(53,128)

 

(29,667)

 

56,287 

Valuation allowance

-

 

(9,730)

 

(9,424)

 

- 

$46,833 

$ 26,635 

$ 57,128 

$ 45,977 

A reconciliation of income tax expense, with the expected federal income tax expense computed at the applicable federal income tax rate of 35%, is as follows (in thousands):

 

2 months ended

 

10 months ended

 

Year ended
December 31,

 

12/31/2001

 

10/31/2001

 

2000

 

1999

 

 

 

 

 

 

 

 

Expected income tax expense

$46,833 

 

$36,483 

 

$69,899 

 

$49,223 

Increase (decrease) in income taxes resulting from:

 

 

 

 

 

 

 

    Nontaxable investment income

(195)

 

(1,002)

 

(2,704)

 

(2,111)

    Amortization of goodwill

-

 

366 

 

440 

 

440 

    Change in valuation allowance

-

 

(9,730)

 

(9,424)

 

-

    Other, net

195 

 

518 

 

(1,083)

 

(1,575)

Income tax expense

$46,833 

 

$26,635 

 

$57,128 

 

$45,977 

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

6. Income Taxes (continued)

The components of deferred income taxes are as follows (in thousands):

 

December 31,

 

2001

 

2000

Deferred income tax assets:

   Deferred policy acquisition costs

$105,444 

 

$         -

   Policy liabilities

62,311 

 

65,635 

   Guaranty fund expense

1,557 

 

2,346 

   Excess of book over tax basis of investments

3,653 

 

 

   Net operating loss carryforwards

-

 

1,108 

   Deferred fees

-

 

2,433 

  Net unrealized capital losses

17,108 

 

19,155 

 

190,073

 

90,677 

   Valuation allowance

-

 

(9,730)

         Total deferred income tax assets

190,073 

 

80,947 

 

 

 

 

Deferred income tax liabilities:

 

 

 

   Deferred policy acquisition costs

         -

 

(160,089)

   Excess of book over tax basis of investments

-

 

(72,861)

   Separate account assets

-

 

(2,476)

   Other

(4,218)

 

(7,136)

        Total  deferred tax  liabilities

(4,218)

 

(242,562)

           Net deferred income tax asset (liability)

$185,855 

 

$(161,615)

Income taxes paid were $64.0 million for the ten-month period ended October 31, 2001 and $51.5 million in 2000. In 1999, a tax refund of $7.5 million was received.

As part of the Stock Purchase Agreement between Sun Life Financial and Liberty Financial, Liberty Financial is obligated to reimburse the Company for any federal, state or local taxes arising from certain tax elections under Section 338(h) of the Internal Revenue Code of 1986. Liberty Financial has given notice to the Company of certain objections it has with the calculation of these taxes. The amount in dispute is approximately $37 million. Under the agreement, if Sun Life Financial and Liberty Financial cannot agree on the amount of taxes due, the matter shall be submitted for arbitration. It is not yet possible to know whether arbitration will be necessary. The Company currently assumes the entire amount will be recoverable from Liberty Financial.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

7. Retirement Plans

Prior to the acquisition by Sun Life of Canada (U.S.) Holdings, Inc., the Company's employees and certain employees of Liberty Financial were eligible to participate in the Liberty Financial Companies, Inc. Pension Plan (the "Plan"). It was the Company's practice to fund amounts for the Plan sufficient to meet the minimum requirements of the Employee Retirement Income Security Act of 1974. Additional amounts were contributed from time to time when deemed appropriate by the Company. Under the Plan, all employees were vested after five years of service. Benefits were based on years of service, the employee's average pay for the highest five consecutive years during the last ten years of employment and the employee's estimated social security retirement benefit. The Company also had an unfunded nonqualified Supplemental Pension Plan ("Supplemental Plan") collectively with the Plan (the "Plans") to replace benefits lost due to limits imposed on Plan benefits under the Internal Revenue Code. Plan assets consisted principally of investments in certain mutual funds sponsored by an affiliated company.

Pension cost related to the Plans is as follows (in thousands):

 

10 months
ended

 


Year Ended December 31,

 

10/31/2001

 

2000

 

1999

Pension cost consists of:

 

 

 

 

 

   Service cost benefits earned during the period

$   706 

 

$  734 

 

$1,017 

   Interest cost on projected benefit obligation

1,046 

 

1,184 

 

1,065 

   Expected return on Plan assets

(719)

 

(829)

 

(724)

   Net amortization and deferred amounts

11 

 

18 

 

143 

 

 

 

 

 

 

Total net periodic pension cost

$ 1,044 

 

$1,107 

 

$1,501 

The assumptions used to develop the accrued pension obligation and pension cost are as follows:

 

 

 

 

 

 

 

2001

 

2000

 

1999

 

 

 

 

 

 

Discount rate

7.75%

 

7.75%

 

7.75%

Rate of increase in compensation level

4.50

 

4.50

 

4.50

Expected long-term rate of return on assets

9.00

 

9.00

 

9.00

The Company provides various other funded and unfunded defined contribution plans, which include savings and investment plans and supplemental savings plans (under Liberty Financial through October 31, 2001 and Sun Life thereafter). Expenses related to these defined contribution plans totaled $0.8 million for the 10 month period ended October 31, 2001, and $0.9 million and $0.9 million for the years ended December 31, 2000 and 1999, respectively.

As a result of the acquisition of the Company by Sun Life of Canada (U.S.) Holdings, Inc., the Liberty Financial Pension Plan was terminated effective November 1, 2001. The employees of the Company will be eligible to participate in a plan sponsored by Sun Life when they achieve 1,000 hours of service. The gain or loss on the termination of the Plan does not have any effect on the Company's financial statements as Liberty Financial is responsible for such gain or loss.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

8. Fair Value of Financial Instruments

The following discussion outlines the methodologies and assumptions used to determine the estimated fair value of the Company's financial instruments. The aggregate fair-value amounts presented herein do not necessarily represent the underlying value of the Company, and, accordingly, care should be exercised in deriving conclusions about the Company's business or financial condition based on the fair-value information presented herein.

The following methods and assumptions were used by the Company in determining estimated fair value of financial instruments:

Fixed maturities and equity securities: Fair values for fixed-maturity securities are based on quoted market prices, where available. For fixed maturities not actively traded, the fair values are determined using values from independent pricing services, or, in the case of private placements, are determined by discounting expected future cash flows using a current market rate applicable to the yield, credit quality and maturity of the securities. The fair values for equity securities are based on quoted market prices.

Mortgage loans: The fair value of mortgage loans is determined by discounting future cash flows to the present at current market rates, using expected prepayment rates.

Policy loans: The carrying value of policy loans approximates fair value.

Other invested assets: The carrying value of private equity limited partnerships and all other assets classified as other invested assets in the accompanying consolidated balance sheet approximate their fair value. Fair values for call options are based on market prices quoted by the counterparty to the respective call option contract. Call options were carried at unamortized premium plus intrinsic value at December 31, 2000 and 1999, respectively.

Cash and cash equivalents: The carrying value of cash and cash equivalents approximates fair value.

Separate accounts, assets and liabilities: The estimated fair value of assets held in separate accounts is based on quoted market prices. The fair value of liabilities related to separate accounts is the amount payable on demand, which includes surrender charges.

Policy liabilities: Deferred annuity contracts are assigned fair value equal to current net surrender value. Annuitized contracts are valued based on the present value of the future cash flows at current pricing rates.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

8. Fair Value of Financial Instruments (continued)

The fair values and carrying values of the Company's financial instruments are as follows (in thousands):

 

December 31,

December 31,

 

2001

 

2000

 

Carrying
Value

Fair
Value

 

Carrying
Value

 

Fair
Value

Assets:

 

 

 

 

 

 

  Fixed-maturity securities

$ 11,999,671

$ 11,999,671

 

$ 10,668,288

 

$ 10,668,288

  Equity securities

39,658

39,658

 

76,427

 

76,427

  Mortgage loans

6,871

7,645

 

9,433

 

10,496

  Policy loans

635,938

635,938

 

620,824

 

620,824

  Other invested assets

521,259

521,259

 

783,043

 

808,495

  Cash and cash equivalents

2,108,083

2,108,083

 

1,728,279

 

1,728,279

  Separate accounts

2,560,831

2,560,831

 

4,212,488

 

4,212,488

Liabilities:

 

 

 

 

 

 

  Policy liabilities

13,627,126

13,186,518

 

11,968,489

 

11,476,275

  Separate accounts

2,532,557

2,532,557

 

4,166,787

 

4,166,787

9. Quarterly Financial Data (Unaudited)

The following is a tabulation of the unaudited quarterly results of operations (in thousands):

 

 

 

 

 

 

 

2001 periods

2001 Quarters

Month ended

2 Months ended

 

March 31

 

June 30

 

September 30

 

October 31

 

December 31

 

 

 

 

 

 

 

 

 

 

Net investment income, including

 

 

 

 

 

 

 

 

 

   distributions from private equity

 

 

 

 

 

 

 

 

 

   limited partnerships

$ 234,919 

 

$ 235,766 

 

$ 195,391 

 

$ 69,565

 

$ 144,918

Interest credited to policyholders

148,494 

 

153,361 

 

148,099 

 

48,714

 

107,315

Investment spread

86,425 

 

82,405 

 

47,292 

 

20,851

 

37,603

Net realized investment (losses)/

 

 

 

 

 

 

 

 

 

     gains

(14,372)

 

(3,421)

 

(14,021)

 

9,024

 

2,454

Net derivative income (losses)

(3,823)

 

8,526 

 

(6,537)

 

2,280

 

99,972

Net change in unrealized and

 

 

 

 

 

 

 

 

 

   undistributed gains (losses) in

 

 

 

 

 

 

 

 

 

   private equity limited

 

 

 

 

 

 

 

 

 

   partnerships

2,656 

 

(17,261)

 

(2,483)

 

-

 

-

Fee income

18,448 

 

19,850 

 

17,795 

 

7,736

 

10,953

Pretax income (loss) before

 

 

 

 

 

 

 

 

 

   cumulative effect of accounting

 

 

 

 

 

 

 

 

 

   changes

38,179 

 

41,964 

 

(977)

 

25,071

 

133,809

Net (loss) income

(23,877)

 

21,241 

 

1,469 

 

17,922

 

86,976

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

9. Quarterly Financial Data (Unaudited) (continued)

 

 

 

2000 Quarters

 

 

 

March 31

 

June 30

 

September 30

 

December 31

 

 

 

 

 

 

 

 

Net investment income, including

 

 

 

 

 

 

 

   distributions from private equity

 

 

 

 

 

 

 

   limited partnerships

$ 204,724 

 

$ 215,224 

 

$ 212,896 

 

$ 223,964 

Interest credited to policyholders

127,289 

 

133,226 

 

135,758 

 

143,370 

Investment spread

77,435 

 

81,998 

 

77,138 

 

80,594 

Net realized investment losses

(7,708)

 

(9,570)

 

(12,358)

 

(6,160)

Net change in unrealized and

 

 

 

 

 

 

 

   undistributed gains in private

 

 

 

 

 

 

 

   equity limited partnerships

14,983 

 

7,462 

 

5,895 

 

3,264 

Fee income

18,162 

 

19,433 

 

20,816 

 

21,247 

Pretax income

58,397 

 

49,105 

 

46,371 

 

45,840 

Net income

38,150 

 

32,524 

 

36,614 

 

35,297 

In 2000, the Company restated its first and second quarter results of operations and related unaudited quarterly financial statements to reflect the after-tax net change in unrealized and undistributed gains in private equity limited partnerships. The net increase in net income resulting from such changes was $9.7 million for the quarter ended March 31, 2000 and $4.9 million for the quarter ended June 30, 2000.

10. Statutory Information

The Company's primary insurance company, Keyport Life Insurance Company, is domiciled in the State of Rhode Island and prepares its statutory financial statements in accordance with accounting principles and practices prescribed or permitted by the State of Rhode Island Insurance Department. Statutory surplus and capital and statutory net (loss) income differ from stockholder's equity and net income reported in accordance with GAAP primarily because policy acquisition costs are expensed when incurred, policy liabilities are based on different assumptions and income tax expense reflects only taxes paid or currently payable. The Company's statutory surplus and net income (loss) are as follows (in thousands):

 

Year ended December 31,

 

2001

 

2000

 

1999

 

 

 

 

 

 

Statutory surplus and capital

$ 571,051 

 

$ 805,235 

 

$ 877,821

Statutory net (loss) income

(136,238)

 

(5,877)

 

116,289

Effective January 1, 2001, the State of Rhode Island required that insurance companies domiciled in the State of Rhode Island prepare their statutory basis financial statements in accordance with the NAIC Accounting Practices and Procedures manual, version effective January 1, 2001, subject to any deviations prescribed or permitted by the Commissioner of Insurance of the State of Rhode Island.

 

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

10. Statutory Information (continued)

Accounting changes adopted to conform to the provisions of the NAIC Accounting Practices and Procedures manual, version effective January 1, 2001, are reported as changes in accounting principles for statutory purposes. As a result of these changes, the Company reported an adjustment on a statutory basis that decreased unassigned surplus by $17.4 million as of January 1, 2001, which was primarily due to deferred tax assets and liabilities established as of that date.

The Company's ability to pay dividends is subject to certain restrictions. Current Rhode Island insurance law permits the payment of dividends or distributions from the Company to its parent, which, together with dividends and distributions paid during the preceding 12 months, do not exceed the lesser of (i) 10% of statutory surplus as of the preceding December 31 or (ii) the net gain from operations for the preceding fiscal year. Any proposed dividend in excess of this amount is called an "extraordinary dividend" and may not be paid until it is approved by the Commissioner of Insurance of the State of Rhode Island. The Company paid $.1 million, $10.0 million, and $30.0 million in dividends to Liberty Financial in 2001, 2000 and 1999, respectively. In connection with the Sun Life acquisition, the Company will not be allowed to make any dividend payments for a period of 18 months without the prior approval of the Rhode Island Insurance Department. Subsequent to the 18 month period, the amounts of dividends that the Company will be able to pay will be based upon current Rhode Island insurance law.

11. Transactions with Affiliated Companies

The Company reimbursed Liberty Financial and certain affiliates for expenses incurred on its behalf for the ten-month period ended October 31, 2001 and the years ended December 31, 2000 and 1999. These reimbursements included corporate, general and administrative expenses, corporate overhead, such as executive and legal support, and investment management services. The total amounts reimbursed were $6.1 million, $7.5 million, and $7.7 million for the ten-month period ended October 31, 2001 and the years ended December 31, 2000 and 1999, respectively. In addition, certain affiliated companies distribute the Company's products and were paid $47.1 million, $39.4 million, and $18.3 million by the Company for the ten-month period ended October 31, 2001 and the years ended December 31, 2000, and 1999, respectively.

There were no material related party transactions during the two months ended December 31, 2001.

12. Commitments and Contingencies

Leases

The Company leases data processing equipment, furniture and certain office facilities from others under operating leases expiring in various years through 2008. Rental expense amounted to $7.1 million, $6.5 million, and $5.8 million for the ten-month period ended October 31, 2001 and for the years ended December 31, 2000 and 1999, respectively. The following are the minimum future rental payments under noncancelable operating leases having remaining terms in excess of one year at December 31, 2001 (in thousands):

2002

$      4,637

2003

4,648

2004

4,692

2005

4,735

2006

4,801

Thereafter

5,562

$    29,075

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

Legal Matters

The Company is involved at various times in litigation common to its business. In the opinion of management, provisions made for potential losses are adequate, and the resolution of any such litigation is not expected to have a material adverse effect on the Company's financial condition or its results of operations.

Regulatory Matters

Under existing guaranty fund laws in all states, insurers licensed to do business in those states can be assessed for certain obligations of insolvent insurance companies to policyholders and claimants. The actual amount of such assessments will depend upon the final outcome of rehabilitation proceedings and will be paid over several years.

Investments

The Company has extended commitments to fund additional investments in private equity limited partnerships of $200.7 million.

13. Summary of Material Differences Between Accounting Principles Generally Accepted in the United States and in Canada

The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). These accounting principles differ in certain material respects from accounting principles generally accepted in Canada (Cdn GAAP), including the requirements of the Office of the Superintendent of Financial Institutions Canada. The differing basis of accounting primarily changes the incidence of profit recognition over the life of an insurance contract and certain investment valuation and income recognition practices. Regardless of the accounting basis chosen, the total profit of an insurance contract will not change.

Effective after the close of business on October 31, 2001, the Company was acquired by Sun Life of Canada (U.S.) Holdings, Inc., a holding company within the Sun Life Financial holding company system. The financial statement impact of differences in accounting principles between U.S. GAAP and Cdn GAAP as of December 31, 2001 and for the two-months ended December 31, 2001, as well as a description of the material differences, follow (in thousands).

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

A) Reconciliation of selected U.S. GAAP financial statement information to Cdn. GAAP:

i) Consolidated Statements of Income:

(Amounts in US $)

Two month period ended
December 31, 2001

 

 

U.S. GAAP

Cdn. GAAP

 

REVENUE

 

 

 

Premiums

$              -

$     453,393

 

Net investment income

37,603

145,018

 

Derivative (loss) gain

99,972

11,309

Net realized losses

2,454

 

Fee income

10,953

11,467

 

 

150,982

621,187

 

 

 

POLICY BENEFITS AND EXPENSES

 

Payments to policyholders,

 

   beneficiaries and depositors

1,128

391,770

 

Increase in actuarial liabilities

-

142,352

 

Net transfer to segregated funds

-

20,501

 

Acquisition expense amortization

1,439

-

 

Amortization of value of business acquired

3,828

-

Other expenses

10,778

40,406

 

 

17,173

595,029

 

 

 

Operating income before income taxes

133,809

26,158

 

Income taxes

46,833

9,155

 

 

 

Net operating income

$      86,976

$       17,003

 

ii) Comprehensive Income (Loss):

U.S. GAAP includes the concept of comprehensive income (loss). Comprehensive income (loss) is a measure of changes in the equity of the Company during the year and includes both net income (loss) and the unrealized gains and losses on available for sale securities. Additionally, other comprehensive income (loss) includes changes to deferred policy acquisition costs ("DAC") and the income tax impact arising from the unrealized gains and losses of available for sale securities.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

13. Summary of Material Differences Between Accounting Principles Generally Accepted in the United States and in Canada (continued)

iii) Consolidated Balance Sheets:

 

December 31, 2001

 

 

U.S. GAAP

Cdn. GAAP

 

ASSETS

 

 

 

Fixed maturities

$   11,999,671

$  12,059,628

 

Common stocks

39,658

33,949

 

Mortgage loans

6,871

6,871

 

Policy loans

635,938

635,938

 

Other invested assets

521,259

590,610

 

Cash and short-term investments*

2,108,093

955,232

 

Invested assets

15,311,490

14,282,228

 

 

 

Accrued investment income

183,576

183,576

 

Deferred income taxes***

185,855

405,529

 

Deferred policy acquisition costs

28,299

-

 

Value of business acquired

95,155

-

 

Goodwill

714,755

1,194,356

 

Intangible assets

12,100

12,100

 

Receivable for investments sold

21,797

21,797

 

Federal income tax recoverable

1,622

-

 

Other assets

28,330

54,603

 

Separate account assets**

2,560,831

-

 

Total assets

$ 19,143,810

$  16,154,189

 

 

 

Segregated fund net assets

$                 -

$    2,532,558

 

 

 

 

 

LIABILITIES AND CAPITAL AND SURPLUS

 

 

 

Reserves for future policy benefits

$ 13,627,126

$ 14,356,602

 

Payable for investments purchased and loaned

1,165,609

12,748

 

Deferred net realized gains

-

2,493

 

Federal income taxes payable

-

2,449

 

Other liabilities

56,837

56,417

 

Separate account liabilities**

2,532,557

-

 

Total liabilities

17,382,129

14,430,709

 

 

 

 

 

Stockholder's equity

1,761,681

1,723,480

 

 

 

 

 

Total liabilities and stockholder's equity

$ 19,143,810

$ 16,154,189

 

 

 

 

 

Segregated fund contract liabilities

 $                 -

$   2,532,558

 

* Cdn. GAAP terminology is short-term securities.

** Cdn. GAAP terminology is segregated fund net assets and segregated fund contract liabilities.

*** Cdn. GAAP terminology is future income tax asset/liability.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

13. Summary of Material Differences Between Accounting Principles Generally Accepted in the United States and in Canada (continued)

iv) Consolidated Statements of Stockholder's Equity:

 

Two month period ended December 31, 2001

 

U.S. GAAP

Cdn. GAAP

 

 

 

Common stock

 

 

Balance, beginning of period

$    3,015 

$    3,015

Activity

- 

-

Balance, end of period

3,015 

3,015

 

Paid in capital

Balance, beginning of period

1,703,462 

1,703,462

Activity

- 

-

Balance, end of period

1,703,462 

1,703,462

 

Retained earnings

Balance, beginning of period

- 

-

Net income

86,976 

17,003

Balance, end of period

86,976 

17,003

 

 

 

Accumulated other comprehensive
   (loss) income

 

Balance, beginning of period

- 

-

Changes for the period

(31,772)

-

Balance, end of period

(31,772)

-

 

 

 

Total stockholder's equity

$1,761,681 

$1,723,480

 

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

13. Summary of Material Differences Between Accounting Principles Generally Accepted in the United States and in Canada (continued)

v) Effect of material differences between U.S. GAAP and Cdn. GAAP net income (loss):

For the material differences between U.S. GAAP and Cdn. GAAP net income (loss) listed below, please refer to the following section for a description of the differences in accounting policies.

 

 

 

 

 

 

Two month period ended December 31, 2001

Net income in accordance with U.S. GAAP

 

 

$    86,976 

Adjustments related to:

 

 

 

 

 

Investments:

 

 

 

 

 

    Fixed maturities

 

 

 

 

 

(2,355)

    Common stocks

 

 

 

 

 

- 

    Derivative instruments

 

 

 

(88,663)

    Limited partnerships

 

 

 

 

- 

    Other invested assets

 

 

 

 

- 

Total investments

 

 

 

 

(91,018)

Deferred acquisition costs:

 

 

 

 

    Deferred acquisition costs

 

 

 

(29,738)

    Deferred acquisition costs - amortization and interest

 

1,439 

Total deferred acquisition costs

 

 

 

(28,299)

Value of business acquired:

    Value of business acquired - amortization and interest

3,828 

Total value of business acquired

3,828 

Actuarial liabilities & other policyholder revenues and expenses:

 

    Premium and fees revenue

 

 

 

453,907 

    Payments to policyholders, beneficiaries and depositors

 

(283,216)

    Actuarial liabilities

 

 

 

 

(142,352)

    Net transfer to segregated funds

(20,501)

Total actuarial liabilities & other policyholder revenues and expenses

7,838 

Income tax effect of above adjustments

 

 

(37,678)

Net income in accordance with Cdn. GAAP

 

$    17,003 

 

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

13. Summary of Material Differences Between Accounting Principles Generally Accepted in the United States and in Canada (continued)

B) The following describes the material accounting policy differences between U.S. GAAP and Cdn. GAAP applicable to the Company:

For a complete description of U.S. GAAP accounting and actuarial policies, please refer to Note 2.

i) Fixed Maturities: Under U.S. GAAP, fixed maturities are carried at fair value. The fixed maturities are classified as available for sale and after tax unrealized gains and losses (net of adjustments to DAC) are reported as a separate component of accumulated other comprehensive income. Realized investment gains and losses are calculated on a first-in, first-out basis, net of adjustments for DAC amortization. Under Cdn. GAAP, bonds are carried at amortized cost. Realized gains and losses are deferred and amortized to income using the constant yield method over the remaining period to maturity. Deferred realized gains (losses), net, on bonds at December 31, 2001 are $2,493.

ii) Stocks: Under U.S. GAAP, common stocks are carried at fair value. Common stocks are classified as available for sale and after tax unrealized gains and losses (net of adjustments to DAC) are reported as a separate component of accumulated other comprehensive income (loss). Realized investment gains and losses are calculated on a first-in, first-out basis, net of adjustments for DAC amortization. Under Cdn. GAAP, stocks are originally recorded at cost. The carrying value is adjusted annually by 15% of the difference between market value and previously adjusted carrying value. Realized gains and losses are deferred and amortized into income at the rate of 15% per year. There were no material deferred realized gains and (losses), net, on stocks at December 31, 2001.

iii) Limited Partnerships: Under U.S. GAAP, limited partnerships, which are included in other invested assets, are accounted for on either the cost method or the equity method. The equity method of accounting is used for all partnerships in which the Company has an ownership in excess of 3%. Under Cdn. GAAP, accounting for limited partnerships follows the accounting practices for the underlying investments in the partnerships. The Company invests in partnerships with underlying stock investments and therefore accounts for partnership investments on a method consistent with the accounting for stocks. There were no deferred realized gains and (losses), net, on limited partnerships at December 31, 2001.

iv) Derivatives: The Company uses interest rate swaps, total return swaps, cap agreements and call options to hedge its obligations to provide returns to its policyholders. Under U.S. GAAP, the Company has adopted and implemented Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset by the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in operations.

Under Cdn. GAAP, all the Company's derivatives are eligible for hedge accounting. Realized gains and losses are treated in a manner consistent with realized gains and losses of the underlying hedged assets or liabilities. The reporting basis does not affect the economic viability of any hedges.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

13. Summary of Material Differences Between Accounting Principles Generally Accepted in the United States and in Canada (continued)

v) Deferred policy acquisition costs: DAC relates to the costs of acquiring new business, which vary with, and are primarily related to, the production of new annuity business. Such acquisition costs include commissions, costs of policy issuance, and underwriting and selling expenses. Under U.S. GAAP, these costs are deferred and amortized in relation to the present value of estimated gross profits from mortality; investment spread and expense margins over the estimated lives of the contracts. DAC is adjusted for amounts relating to unrealized gains and losses on available for sale fixed-maturity securities. This adjustment, net of tax, is included with the change in net unrealized investment gains or losses that is credited or charged directly to accumulated other comprehensive income. Under Cdn. GAAP, costs of acquiring new insurance and annuity business are implicitly recognized in actuarial liabilities. The effect is to recognize these expenses over the premium paying period.

vi) Future income tax asset and liability: Under both U.S. and Cdn. GAAP, the Company provides for future income taxes on temporary differences between book and tax assets and liabilities. Differences between U.S. GAAP and Cdn. GAAP arise from differing accounting policies for assets and liabilities, the presentation of a valuation allowance in U.S. GAAP for future tax assets and differences in the recognition of tax rate changes. Differences are as follows:

 

 

2001

 

Future income tax asset

Future income tax liability

 

U.S. GAAP

Cdn GAAP

U.S. GAAP

Cdn GAAP

 

 

 

 

 

Investments

$    20,761

$           -

$          -

$    38,923

Actuarial liabilities

62,311

311,226

-

-

Deferred acquisition costs

105,444

105,444

-

-

Other

1,557

27,782

4,218

-

Total

$  190,073

$    444,452

$     4,218

$    38,923

vii) Actuarial liabilities and contract holder deposits: Under U.S. GAAP, actuarial liabilities consists of deposits received plus interest, less accumulated policyholder charges, assessments and withdrawals related to deferred annuities and single-premium whole life policies. Policy benefits that are charged to expense include benefit claims incurred in the period in excess of related policy account balances. Under Cdn. GAAP, actuarial liabilities are calculated in accordance with generally accepted actuarial practice. This method uses the best estimate assumptions for future experience factors adjusted to provide modest margins for adverse deviation in each experience factor.

viii) Deferred net realized gains: Under U.S. GAAP, realized investment gains and losses are calculated on a first-in, first-out basis, net of adjustments for DAC amortization. Cdn. GAAP defers and amortizes realized gains and losses on sales of invested assets.

ix) Premium revenue, fee income, maturities, and surrenders, and interest on claims and deposits: Under U.S. GAAP, amounts received for fixed and variable annuities and single-premium whole life policies, including mortality charges, surrender charges, policy fees and contract fees, are recognized when earned. Fees from investment advisory services are recognized as revenues when services are provided. Under Cdn. GAAP, premiums for universal life and other investment type contracts are recorded as revenue, and a liability for future policy benefits is established as a charge to income. Interest accrued on contracts is shown as an increase in actuarial liabilities.

 

KEYPORT LIFE INSURANCE COMPANY

Notes to Consolidated Financial Statements

(in thousands)

13. Summary of Material Differences Between Accounting Principles Generally Accepted in the United States and in Canada (continued)

x) Segregated funds: Under U.S. GAAP, the assets and liabilities resulting from variable annuities and variable life policies are segregated in separate accounts; any excess of the separate account assets over separate account liabilities represents the Company's investment in certain segregated funds sponsored by affiliates of the Company and the Company's separate account liabilities to policyholders are carried at an amount equal to the accumulated separate account assets attributable to policyholders. Under Cdn. GAAP, assets and liabilities of segregated funds are shown separately from general assets and liabilities of the Company. The Company's investment in segregated funds is included in other invested assets, and the Company's segregated fund liabilities to policyholders are measured at surrender value.

C) Statement of Cash Flows: Under U.S. GAAP, deposits, maturities, and withdrawals are reflected as financing activities. Under Cdn. GAAP, deposits, maturities and withdrawals related to investment-type contracts are included in operating activities; these cash flow items are as follows:

 

2001

Deposits and withdrawals reclassified to operating activities:

 

Deposits to policyholders' accounts

$ 453,393 

Withdrawals from policyholders' accounts

(412,271)

</R>

 

 

 

 

 

PART C

 

 

 

Item 24. Financial Statements and Exhibits

<R>

(a)

Financial Statements:

 

Included in Part B:

 

Variable Account A:

 

Statement of Assets and Liabilities - December 31, 2001

 

Statement of Operations and Changes in Net Assets for the years ended December 31, 2001 and 2000

 

Notes to Financial Statements

 

Keyport Life Insurance Company:

 

Consolidated Balance Sheet - December 31, 2001 and 2000

 

Consolidated Income Statement for the ten-month period ended October 31, 2001 and the two-month period ended December 31, 2001 and for the years ended December 31, 2000 and 1999

 

Consolidated Statement of Stockholder's Equity for the ten-month period ended October 31, 2001 and the two-month period ended December 31, 2001 and for the years ended December 31, 2000 and 1999

 

Consolidated Statement of Cash Flows for the ten-month period ended October 31, 2001 and the two-month period ended December 31, 2001 and for the years ended December 31, 2000 and 1999

 

Notes to Consolidated Financial Statements

</R>

(b)

Exhibits:

 

*

(1)

Resolution of the Board of Directors establishing Variable Account A

 

(2)

Not applicable

*

(3a)

Principal Underwriter's Agreement

*

(3b)

Specimen Agreement between Principal Underwriter and Dealer

+

(4a)

Specimen Variable Annuity Contract of Keyport Life Insurance Company

**

(4b)

Form of Individual Retirement Annuity Endorsement

+

(5)

Form of Application for a Variable Annuity Contract

<R>

 

 

+++

(6a)

Amended and Restated Articles of Incorporation of Keyport Life Insurance Company

+++

(6b)

Amended and Restated By-Laws of Keyport Life Insurance Company

</R>

 

 

 

(7)

Not applicable

++

(8)

Participation Agreement Among Rydex Variable Trust, PADCO Financial Services, Inc. and Keyport Life Insurance Company

++

(9)

Opinion and Consent of Counsel

 

(10)

Consent of Independent Auditors

 

(11)

Not applicable

 

(12)

Not applicable

#

(13)

Schedule for Computations of Performance Quotations

<R>

(14)

Not applicable

+++

(15)

Chart of Affiliations

+++

(16)

Powers of Attorney

</R>

*

Incorporated by reference to Registration Statement (File No. 333-1043) filed on or about February 16, 1996.

 

 

**

Incorporated by reference to Registration Statement (File No. 333-84701) filed on or about August 6, 1999.

 

 

***

Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement (File No. 333-84701) filed on or about December 10, 1999.

 

 

+

Incorporated by reference to Registration Statement (File No. 333-92947) filed on or about December 17, 1999.

 

 

++

Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement (File No. 333-92947) filed on or about March 1, 2000.

<R>

 

+++

Incorporated by reference to Post-Effective Amendment No. 37 to Registration Statement (File No. 333-1043) filed on or about February 26, 2002.

</R>

 

#

To be filed by Amendment

Item 25. Directors and Officers of the Depositor.

<R>

Name and Principal

Positions and Offices

Business Address*

With Depositor

 

 

James C. Baillie

Director

Torys

 

Suite 3000, Maritime Life Tower

 

Toronto, Ontario MSK 1N2

 

 

 

David D. Horn

Director

257 Lake Street

 

P.O. Box 24

 

New Vineyard, ME 04956

 

 

 

Angus A. MacNuaghton

Director

481 Kingswood Lane

 

Danville, CA 94506

 

 

 

James A. McNulty, III

President and Director

Sun Life Financial

 

One Sun Life Executive Park

 

Wellesley Hills, MA 02481

 

 

 

C. James Prieur

Director

Sun Life Assurance Company of Canada

 

150 King Street West

 

Toronto, Ontario Canada M5H 1J9

 

 

 

S. Caesar Raboy

Director

220 Boylston Street

 

Boston, MA 02110

 

 

 

Donald A. Stewart

Director

Sun Life Assurance Company of Canada

 

150 King Street West

 

Toronto, Ontario

 

Canada M5H 1J9

 

 

 

William W. Stinson

Director

2000 Somervale Court, #2402

 

Calgary, Alberta Canada T2Y 4J1

 

 

 

James M.A. Anderson

Vice President, Investments

One Sun Life Executive Park

 

Wellesley Hills, MA 02481

 

 

 

Robin L. Camara

Vice President, Human Resources and

One Sun Life Executive Park

Administrative Services

Wellesley Hills, MA 02481

 

 

 

Peter F. Demuth

Vice President, Chief Strategy and

One Sun Life Executive Park

Business Development Officer

Wellesley Hills, MA 02481

 

 

 

Mark W. DeTora

Vice President, Individual Insurance

One Sun Life Executive Park

 

Wellesley Hills, MA 02481

 

 

 

Ronald J. Fernandes

Vice President, Operations, Retirement Products

112 Worcester Street

and Services

Wellesley Hills, MA 02481

 

 

 

Ellen B. King

Assistant Vice President and Senior Counsel and

One Sun Life Executive Park

Secretary

Wellesley Hills, MA 02481

 

 

 

Philip K. Polkinghorn

Vice President, Operations, Retirement Products

112Worcester Street

and Services

Wellesley Hills, MA 02481

 

 

 

Davey S. Scoon

Vice President & Chief Financial and

One Sun Life Executive Park

Administrative Officer & Treasurer

Wellesley Hills, MA 02481

 

 

 

James R. Smith

Vice President and Chief Information Officer

One Sun Life Executive Park

 

Wellesley Hills, MA 02481

 

 

 

Robert P. Vrolyk

Vice President and Actuary

One Sun Life Executive Park

 

Wellesley Hills, MA 02481

 

</R>

Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant.

     The Depositor controls the Registrant, KMA Variable Account, Keyport 401 Variable Account, Keyport Variable Account I, and Keyport Variable Account II, under the provisions of Rhode Island law governing the establishment of these separate accounts of the Company.

<R>

     The Depositor controls Keyport Financial Services Corp. ("KFSC"), a Massachusetts corporation functioning as a broker/dealer of securities, through 100% stock ownership of KFSC. KFSC files separate financial statements.

</R>

     The Depositor controls Independence Life and Annuity Company ("Independence Life"), a Rhode Island corporation functioning as a life insurance company, through 100% stock ownership. Independence Life files separate financial statements.

     The Depositor controls Keyport Benefit Life Insurance Company ("Keyport Benefit"), a New York corporation functioning as a life insurance company, through 100% stock ownership. Keyport Benefit files separate financial statements.

<R>

     The chart for the affiliations of the Depositor is incorporated by reference to Post-Effective Amendment No. 37 to Registration Statement (File No. 333-1043) filed on or about February 26, 2002.

Item 27. Number of Contract Owners.

     As of March 31, 2002, there were 2 qualified contract owners and 28 non-qualified contract owners.

</R>

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 issued by ICI Mutual Insurance Company, Federal Insurance Company, Firemen's Fund Insurance Company, CNA and Lumberman's Mutual Casualty Company. 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.

<R>

     Keyport Financial Services Corp. (KFSC) is principal underwriter of the variable annuity and variable life insurance contracts and receives no compensation for its services. KFSC is the principal underwriter for Variable Account A of Keyport Life Insurance Company. KFSC is also principal underwriter for Variable Account J and Variable Account K of Liberty Life Assurance Company of Boston; for Variable Account A of Keyport Benefit Life Insurance Company; for the KMA Variable Account and Keyport Variable Account-I of Keyport Life Insurance Company; and for the Independence Variable Annuity Separate Account and Independence Variable Life Separate Account of Independence Life and Annuity Company.

The directors and officers of Keyport Financial Services Corp. are:

Name and Principal

Position and Offices

Business Address*

with Underwriter

 

 

Paul T. Holman

Director and Assistant Clerk

 

 

James J. Klopper

Director, President and Clerk

 

 

Daniel C. Bryant

Vice President

 

 

Rogelio P. Japlit

Treasurer

* One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.

</R>

Item 30. Location of Accounts and Records.

     Keyport Life Insurance Company, 125 High Street, Boston, Massachusetts 02110.

Item 31. Management Services.

     Not applicable.

Item 32. Undertakings.

     (a) 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;

     (b) 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 or equivalent electronic method; and

     (c) 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.

Representation

     Depositor represents that the fees and charges deducted under the contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Depositor. Further, this representation applies to each form of the contract described in a prospectus and statement of additional information included in this registration statement.

 

 

 

SIGNATURES

 

 

 

<R>

 

 

SIGNATURES

 

 

As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed on its behalf, in the City of Boston and Commonwealth of Massachusetts, on this 25th day of April, 2002.

 

Variable Account A

 

(Registrant)

 

 

 

 

BY:

Keyport Life Insurance Company

 

(Depositor)

 

 

 

 

BY:

/s/ James A. McNulty, III

 

James A. McNulty, III

 

President

 

 

 

 

 

     As required by the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

 

/s/ James C. Baillie*

/s/ James A. McNulty, III

    April 25, 2002     

James C. Baillie

James A. McNulty, III

Date

Director

President

 

 

(Principal Executive Officer)

 

 

 

 

/s/ David D. Horn*

 

 

David D. Horn

/s/ Davey S. Scoon

    April 25, 2002     

Director

Davey S. Scoon

Date

 

Vice President, Chief Financial and

 

 

Administrative Officer and Treasurer

 

 

(Principal Financial and Accounting Officer)

 

/s/ Angus A. MacNuaghton*

 

 

Angus A. MacNuaghton

 

 

Director

 

 

 

 

 

/s/ James A. McNulty, III*

 

 

James A. McNulty, III

 

 

Director

 

 

 

 

 

/s/ C. James Prieur*

 

 

C. James Prieur

 

 

Director

 

 

 

 

 

/s/ S. Caesar Raboy*

 

 

S. Caesar Raboy

 

 

Director

 

 

 

 

 

/s/ Donald A. Stewart*

 

 

Donald A. Stewart

 

 

Director

 

 

 

 

 

/s/ William W. Stinson*

 

 

William W. Stinson

 

 

Director

 

 

 

*BY:

/s/ James J. Klopper

April 25, 2002

 

James J. Klopper

Date

 

Attorney-in-Fact

 

* James J. Klopper has signed this document on the indicated date on behalf of the above Directors of the Depositor pursuant to powers of attorney duly executed by such persons and incorporated by reference to Post-Effective Amendment No. 37 to the Registration Statement (File No. 333-1043) filed on or about February 26, 2002.

</R>

 

 

Exhibits

 

Item

Page

 

 

(10)

Consent of Independent Auditors