<PAGE> 1
As filed with the Securities and Exchange Commission on August 8, 1997.
Registration No.333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT
INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
FNAL VARIABLE LIFE ACCOUNT I
(Exact name of trust)
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
(Name of depositor)
International Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
(Address of depositor's principal executive offices)
Joseph Scott
President Copy to:
First North American Life Assurance Company J. Sumner Jones
International Corporate Center at Rye Jones & Blouch
555 Theodore Fremd Avenue 1025 Thomas Jefferson St., NW
Rye, New York 10580 Suite 405 West
(Name and Address of Agent for Service) Washington, DC 20007-0805
Approximate date of commencement of proposed public offering: As soon after the
effective date of this Registration Statement as is practicable.
<TABLE>
<CAPTION>
Title of Securities Amount Proposed Amount of
Being Being Maximum Aggregate Registration
Registered Registered Offering Price Fee
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Variable Life See Note 1 See Note 2 $500.00
Insurance Contracts
- ------------------------------------------------------------------------------------------
</TABLE>
Note 1: These contracts are not issued in predetermined amounts or units.
Note 2: Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the Registrant declares that an indefinite number of securities
is being registered by this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
FNAL VARIABLE LIFE ACCOUNT I
Registration Statement on Form S-6
Cross-Reference Sheet
<TABLE>
<CAPTION>
FORM
N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
<S> <C>
1 ----- Cover Page; General Information About First North American, Variable Life Account I, And NASL Series Trust (First North
American's Variable Life Account I)
2 ----- Cover Page; General Information About First North American, Variable Life Account I, And NASL Series Trust (First North
American And Manufacturers Life)
3 ----- *
4 ----- Miscellaneous Matters (Distribution of the Policy)
5 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust (First North American's
Variable Life Account I)
6 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust (First North American's
Variable Life Account I)
7 ----- *
8 ----- *
9 ----- Miscellaneous Matters (Pending Litigation)
10 ----- Detailed Information About The Policies
11 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust (NASL Series Trust)
12 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust (NASL Series Trust)
13 ----- Detailed Information About The Policies (Charges and Deductions)
14 ----- Detailed Information About the Policies (Premium Provisions -Policy Issue and Initial Premium); Miscellaneous Matters
(Responsibilities Assumed By First North American)
15 ----- Detailed Information About The Policies (Premium Provisions -- Policy Issue and Initial Premium)
16 ----- **
17 ----- Detailed Information About The Policies (Policy Values -- Partial Withdrawals and Surrenders); Other Provisions --
Payment of Proceeds)
18 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust
19 ----- Detailed Information About The Policies (Other Provisions - Reports To Policyowners); Miscellaneous Matters
(Responsibilities Assumed By First North American)
20 ----- *
21 ----- Detailed Information About The Policies
22 ----- *
23 ----- **
24 ----- Detailed Information About the Policies (Other General Policy Provisions)
25 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust (First North American and
Manufacturers Life)
26 ----- *
27 ----- **
28 ----- Miscellaneous Matters (The Directors And Officers Of First North American)
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
29 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust (First North American And
Manufacturers Life)
30 ----- *
31 ----- *
32 ----- *
33 ----- *
34 ----- *
35 ----- **
36 ----- *
37 ----- *
38 ----- Miscellaneous Matters (Distribution of the Policy; Responsibilities Assumed By First North American)
39 ----- Miscellaneous Matters (Distribution of the Policy)
40 ----- *
41 ----- **
42 ----- *
43 ----- *
44 ----- Detailed Information About The Policies (Policy Values - Policy Value)
45 ----- *
46 ----- Detailed Information About The Policies (Policy Values - Partial Withdrawals and Surrenders; Other Provisions -- Payment
of Proceeds)
47 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust (NASL Series Trust)
48 ----- *
49 ----- *
50 ----- General Information About First North American, Variable Life Account I, And NASL Series Trust (First North American's
Variable Life Account I)
51 ----- Detailed Information About The Policies
52 ----- Detailed Information About The Policies (Miscellaneous Matters -- Portfolio Share Substitution)
53 ----- **
54 ----- *
55 ----- *
56 ----- *
57 ----- *
58 ----- *
59 ----- Financial Statements
</TABLE>
- ----------------
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 4
PART I
PROSPECTUS
<PAGE> 5
[LOGO]
PROSPECTUS
FNAL VARIABLE LIFE ACCOUNT I
VENTURE VUL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
This prospectus describes the flexible premium variable life insurance policy
(the "Policy") issued by First North American Life Assurance Company ("First
North American" or the "Company"), a stock life insurance company that is a
wholly-owned subsidiary of North American Security Life Insurance Company
("Security Life"), the ultimate parent of which is The Manufacturers Life
Insurance Company ("Manufacturers Life"). The Policies are designed to provide
lifetime insurance protection together with flexibility as to the timing and
amount of premium payments, the investments underlying the Policy Value and the
amount of insurance coverage. This flexibility allows the policyowner to pay
premiums and adjust insurance coverage in light of his or her current financial
circumstances and insurance needs. The Policies provide for: (1) a Net Cash
Surrender Value that can be obtained by partial withdrawals or surrender of the
Policy; (2) policy loans; and (3) an insurance benefit payable at the life
insured's death.
Policy Value may be accumulated on a fixed basis or vary with the investment
performance of the sub-accounts of First North American's FNAL Variable Life
Account I (the "Separate Account") to which the policyowner allocates net
premiums.
The assets of each sub-account will be used to purchase shares of a particular
investment portfolio ("Portfolio") of NASL Series Trust. The accompanying
prospectus for NASL Series Trust, and the corresponding statement of additional
information, describes the investment objectives of the Portfolios in which net
premiums may be invested. The Portfolios available for allocation of net
premiums are the: Pacific Rim Emerging Markets Trust, Science & Technology
Trust, International Small Cap Trust, Emerging Growth Trust, Pilgrim Baxter
Growth Trust, Small/Mid Cap Trust, International Stock Trust, Worldwide Growth
Trust, Global Equity Trust, Growth Trust, Equity Trust, Quantitative Equity
Trust (formerly the Common Stock Fund), Equity Index Trust, Blue Chip Growth
Trust, Real Estate Securities Trust, Value Trust, International Growth and
Income Trust, Growth and Income Trust, Equity-Income Trust, Balanced Trust,
Aggressive Asset Allocation Trust, Moderate Asset Allocation Trust, Conservative
Asset Allocation Trust, High Yield Trust, Strategic Bond Trust, Global
Government Bond Trust, Capital Growth Bond Trust, Investment Quality Bond Trust,
U.S. Government Securities Trust, Money Market Trust, Lifestyle Aggressive 1000
Trust, Lifestyle Growth 820 Trust, Lifestyle Balanced 640 Trust, Lifestyle
Moderate 460 Trust and Lifestyle Conservative 280 Trust (collectively the "NASL
Trusts"). Other sub-accounts and Portfolios may be added in the future.
Prospective purchasers should ask a First North American representative if
changing, or adding to, existing insurance coverage would be advantageous.
Prospective purchasers should note that it may not be advisable to purchase a
Policy as a replacement for existing insurance.
BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT
SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR NASL SERIES TRUST.
1
<PAGE> 6
The Securities and Exchange Commission maintains a Web site (http://www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First North American Life Assurance Company
International Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
Service Office:
International Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
TELEPHONE: 1-800-000-0000
(1-800-0000000)
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1998.
2
<PAGE> 7
PROSPECTUS CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction To Policies .............................................................
GENERAL INFORMATION ABOUT FIRST NORTH AMERICAN, ......................................
VARIABLE LIFE ACCOUNT I AND NASL SERIES TRUST ...............................
First North American and Manufacturers Life ........................
First North American's Variable Life Account I .....................
NASL Series Trust ..................................................
Investment Objectives and Certain Policies Of The Portfolios .......
DETAILED INFORMATION ABOUT THE POLICIES ..............................................
PREMIUM PROVISIONS ..........................................................
Policy Issue And Initial Premium ...................................
Premium Allocation .................................................
Premium Limitations ................................................
Short-Term Cancellation Right And "Free Look" Provisions ...........
INSURANCE BENEFIT ...........................................................
The Insurance Benefit ..............................................
No Lapse Guarantee .................................................
No Lapse Guarantee Cumulative Premium Test .........................
Death Benefit Guarantee ............................................
Death Benefit Options ..............................................
Death Benefit Option Changes .......................................
Face Amount Changes ................................................
POLICY VALUES ...............................................................
Policy Value .......................................................
Transfers Of Policy Value ..........................................
Policy Loans .......................................................
Partial Withdrawals And Surrenders .................................
Charges and Deductions .............................................
Deductions From Premiums ...........................................
Surrender Charges ..................................................
Monthly Deductions .................................................
Administration Charge ..............................................
Cost Of Insurance Charge ...........................................
Mortality And Expense Risks Charge .................................
Other Charges ......................................................
Special Provisions For Exchanges ...................................
The General Account ................................................
OTHER GENERAL POLICY PROVISIONS .............................................
Policy Default .....................................................
Policy Reinstatement ...............................................
Miscellaneous Policy Provisions ....................................
OTHER PROVISIONS ............................................................
Supplementary Benefits .............................................
Payment Of Proceeds ................................................
Reports To Policyowners ............................................
MISCELLANEOUS MATTERS .......................................................
Portfolio Share Substitution .......................................
Federal Income Tax Considerations ..................................
Tax Status Of The Policy ...........................................
Tax Treatment Of Policy Benefits ...................................
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Company's Taxes ...................................................
Distribution Of The Policy ............................................
Responsibilities Assumed By First North American ......................
Voting Rights .........................................................
Directors And Officers Of First North American ........................
Financial Statements ....................................................................
Appendices ..............................................................................
A. Sample Illustrations Of Policy Values, Cash Surrender Values And Death Benefits .....
B. Definitions .........................................................................
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS OF NASL SERIES TRUST, OR THE STATEMENT OF
ADDITIONAL INFORMATION OF NASL SERIES TRUST.
You are urged to examine this prospectus carefully. The INTRODUCTION TO POLICIES
will briefly describe the Flexible Premium Variable Life Insurance Policy. More
detailed information will be found within.
4
<PAGE> 9
INTRODUCTION TO POLICIES
The following summary is intended to provide a general description of the most
important features of the Policy. It is not comprehensive and is qualified in
its entirety by the more detailed information contained in this prospectus.
Unless otherwise indicated or required by the context, the discussion throughout
this prospectus assumes that the Policy has not gone into default, there is no
outstanding Policy Debt, and the death benefit is not determined by the corridor
percentage test (see "Death Benefit Options").
GENERAL
The Policy provides a death benefit in the event of the death of the life
insured.
Premium payments may be made at any time and in any amount, subject to certain
limitations.
After certain deductions, premiums will be allocated, according to the
policyowner's instructions, to one or more of the general account and the
sub-accounts of First North American's Variable Life Account I. Assets of the
sub-accounts of Variable Life Account I are invested in shares of a particular
Portfolio of NASL Series Trust. Allocation instructions may be changed at any
time and transfers among the accounts may be made subject to certain
restrictions (see "Transfers of Policy Value").
The Portfolios currently offered are the: Pacific Rim Emerging Markets Trust,
Science & Technology Trust, International Small Cap Trust, Emerging Growth
Trust, Pilgrim Baxter Growth Trust, Small/Mid Cap Trust, International Stock
Trust, Worldwide Growth Trust, Global Equity Trust, Growth Trust, Equity Trust,
Quantitative Equity Trust (formerly the Common Stock Fund), Equity Index Trust,
Blue Chip Growth Trust, Real Estate Securities Trust, Value Trust, International
Growth and Income Trust, Growth and Income Trust, Equity-Income Trust, Balanced
Trust, Aggressive Asset Allocation Trust, Moderate Asset Allocation Trust,
Conservative Asset Allocation Trust, High Yield Trust, Strategic Bond Trust,
Global Government Bond Trust, Capital Growth Bond Trust, Investment Quality Bond
Trust, U.S. Government Securities Trust, Money Market Trust, Lifestyle
Aggressive 1000 Trust, Lifestyle Growth 820 Trust, Lifestyle Balanced 640 Trust,
Lifestyle Moderate 460 Trust and Lifestyle Conservative 280 Trust (collectively
the "NASL Trusts"). Other sub-accounts and Portfolios may be added in the
future.
The Policy has a Policy Value reflecting premiums paid, the investment
performance of the accounts to which the policyowner has allocated premiums, and
certain charges for expenses and cost of insurance. The policyowner may obtain a
portion of the Policy Value by taking a policy loan or a partial withdrawal, or
by full surrender of the Policy.
DEATH BENEFIT
DEATH BENEFIT OPTIONS. The policyowner elects to have the Policy's death benefit
determined under one of two options:
- death benefit equal to the face amount of the Policy, or
- death benefit equal to the face amount of the Policy plus the Policy
Value.
Under either option, the death benefit may have to be increased to a multiple of
the Policy Value to satisfy the corridor percentage test under the definition of
life insurance in the Internal Revenue Code. See DETAILED INFORMATION ABOUT THE
POLICIES: INSURANCE BENEFIT -- "The Insurance Benefit" and "Death Benefit
Options."
THE POLICYOWNER MAY CHANGE THE DEATH BENEFIT OPTION. A change in the death
benefit option may be requested after the Policy has been in force for two
years. See Detailed Information About The Policies; Insurance Benefit -- "Death
Benefit Option Changes."
THE POLICYOWNER MAY INCREASE THE FACE AMOUNT. After the Policy has been in force
for two years, an increase in the face amount of the Policy may be requested
once per policy year. An increase in the face amount is subject to satisfactory
evidence of insurability and will usually result in the Policy's being subject
to new surrender charges. See DETAILED INFORMATION ABOUT THE POLICIES; INSURANCE
BENEFIT -- "Face Amount Changes."
5
<PAGE> 10
THE POLICYOWNER MAY DECREASE THE FACE AMOUNT. A decrease in the face amount may
be requested once per policy year after the Policy has been in force for one
year. A decrease in face amount may result in certain surrender charges and
deferred sales charges being deducted from the Policy Value. See DETAILED
INFORMATION ABOUT THE POLICIES; INSURANCE BENEFIT -- "Face Amount Changes."
PREMIUM PAYMENTS ARE FLEXIBLE
The policyowner may pay premiums at any time and in any amount, subject to
certain limitations. See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM
PROVISIONS -- "Policy Issue" and "Premium Limitations."
The policyowner must pay at least the Initial Premium to put the Policy in
force. See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS --
"Policy Limitations" and "Death Benefit Guarantee."
After the Initial Premium is paid there is no minimum premium required. However,
by complying with the Death Benefit Guarantee Cumulative Premium Test the
policyowner can ensure the Policy will not go into default for the first three
policy years. By complying with the No Lapse Guarantee Cumulative Premium Test,
the policy owner can ensure the policy will not go into default for the first
five policy years. For Policies with a face amount of at least $250,000, the
policyowner can ensure the Policy will not go into default (i) prior to the life
insured reaching age 100 if Death Benefit Option 1 is maintained throughout the
life of the Policy and (ii) prior to the life insured reaching age 85 if Death
Benefit Option 2 is selected at any time, by satisfying the Death Benefit
Guarantee Cumulative Premium Test, No Lapse Guarantee Cumulative Premium Test or
the Fund Value Test. See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM
PROVISIONS -- "No Lapse Guarantee" and "Death Benefit Guarantee."
Certain maximum premium limitations apply to the Policy to ensure the Policy
qualifies as life insurance under rules defined in the Internal Revenue Code.
See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS -- "Premium
Limitations."
SUMMARY OF CHARGES AND DEDUCTIONS
Charges under the Policy are assessed as:
(1) deductions from premiums
- the Company reserves the right to make a charge for state, local
and federal taxes in an amount not to exceed 3.60%
(2) surrender charges upon surrender, partial withdrawal in excess of the
Withdrawal Tier Amount, decrease in face amount or lapse
- deferred underwriting charge of $4.50 for each $1,000 of face amount
- deferred sales charge of a maximum of 50% of premiums paid up to a
maximum of 2.59 Target Premiums
(3) monthly deductions
- administration charge of $35 per month until the first policy
anniversary; thereafter, $10 per month (the right is reserved to
increase the administration charge by an additional amount of up to
$.01 per $1,000 of face amount per month)
- cost of insurance charge
- mortality and expense risks charge of 0.075% per month through the
later of the tenth policy anniversary and the policyowner's attained
age 60 and, thereafter, 0.0375 % per month
- supplementary benefit(s) charge(s)
6
<PAGE> 11
(4) Other Charges
Investment Management Fees and Expenses
Investment management fees paid by NASL Series Trust (excluding the
Lifestyle Trusts) range from .25% to 1.10% of the assets of the Portfolios.
Maximum expenses range from .15% to .75% of the assets of the Portfolios
(excluding the Lifestyle Trusts). Because each Lifestyle Trust will invest in
shares of Underlying Portfolios (all of the Portfolios except the Lifestyle
Trusts) each will bear its pro rata share of the fees and expenses incurred by
the Underlying Portfolios
(5) Certain Transfers
- transfer fee of $25 per transfer in excess of twelve transfers in
any policy year
- transfer fee of $5 for each transfer under the Dollar Cost Averaging
program when Policy Value does not exceed $15,000
For a complete discussion of charges and deductions see the heading Charges And
Deductions in this Introduction and the references therein, and see also the
heading Transfers Are Permitted in this Introduction and the references therein.
INVESTMENT OPTIONS
Premiums will be allocated, according to the policyowner's instructions, to any
combination of the general account or one or more of the sub-accounts of First
North American's Variable Life Account I.
Each sub-account of Variable Life Account I invests its assets in the shares of
one of the following portfolios:
<TABLE>
<S> <C>
- - Pacific Rim Emerging Markets Trust - Equity-Income Trust
- - Science & Technology Trust - Balanced Trust
- - International Small Cap Trust - Aggressive Asset Allocation Trust
- - Emerging Growth Trust - Moderate Asset Allocation Trust
- - Pilgrim Baxter Growth Trust - Conservative Asset Allocation Trust
- - Small/Mid Cap Trust - High Yield Trust
- - International Stock Trust - Strategic Bond Trust
- - Worldwide Growth Trust - Global Government Bond Trust
- - Global Equity Trust - Capital Growth Bond Trust
- - Growth Trust - Investment Quality Bond Trust
- - Equity Trust - U.S. Government Securities Trust
- - Quantitative Equity Trust - Money Market Trust
- - Equity Index Trust - Lifestyle Aggressive 1000 Trust
- - Blue Chip Growth Trust - Lifestyle Growth 820 Trust
- - Real Estate Securities Trust - Lifestyle Balanced 640 Trust
- - Value Trust - Lifestyle Moderate 460 Trust
- - International Growth and Income Trust - Lifestyle Conservative 280 Trust
- - Growth and Income Trust
</TABLE>
The policyowner may change the allocation of net premiums among the general
account and the sub-accounts at any time. See GENERAL INFORMATION ABOUT FIRST
NORTH AMERICAN, VARIABLE LIFE ACCOUNT I, AND NASL SERIES TRUST AND DETAILED
INFORMATION ABOUT THE POLICIES; Premium Provisions -- "Premium Allocation" and
Policy Values -- "Policy Value."
7
<PAGE> 12
THE POLICY VALUE
The Policy has a Policy Value which reflects the following: premium payments
made; investment performance of the sub-accounts to which amounts have been
allocated; interest credited by the Company to amounts allocated to the general
account; partial withdrawals; and deduction of charges described under "Charges
And Deductions" below.
The Policy Value is the sum of the values in the Investment Accounts, the
Guaranteed Interest Account and the Loan Account.
INVESTMENT ACCOUNT. An Investment Account is established under the Policy for
each sub-account of the Separate Account to which net premiums or transfer
amounts have been allocated. An Investment Account measures the interest of the
Policy in the corresponding sub-account.
The value of each Investment Account under the Policy varies each Business Day
and reflects the investment performance of the Portfolio shares held in the
corresponding sub-account. See DETAILED INFORMATION ABOUT THE POLICIES; Policy
Values -- "Policy Value."
GUARANTEED INTEREST ACCOUNT. The Guaranteed Interest Account consists of that
portion of the Policy Value based on net premiums allocated to, and amounts
transferred to, the general account of the Company.
First North American credits interest on amounts in the Guaranteed Interest
Account at an effective annual rate guaranteed to be at least 4%. See DETAILED
INFORMATION ABOUT THE POLICIES and The General Account.
LOAN ACCOUNT. When a policy loan is made, First North American will establish a
Loan Account under the Policy and will transfer an amount from the Investment
Accounts and the Guaranteed Interest Account to the Loan Account.
The Company will credit interest to amounts in the Loan Account at an effective
annual rate of at least 4%. The actual rate credited on loan amounts will be the
rate charged on loan amounts less an interest rate differential, currently
1.75%, except on Select Loan Amounts where the interest rate differential,
subject to change in certain circumstances, is currently 0%. See DETAILED
INFORMATION ABOUT THE POLICIES; Policy Values -- "Policy Loans."
TRANSFERS ARE PERMITTED. A policyowner may make transfers among the sub-accounts
of Variable Life Account I and the Company's general account, subject to certain
restrictions.
Twelve transfers per policy year may be made at no cost to the policyowner;
excess transfers will be permitted at a cost of $25 per transfer. All transfer
requests received at the same time are treated as a single transfer request.
Certain restrictions may apply to transfer requests. See DETAILED INFORMATION
ABOUT THE POLICIES; Policy Values -- "Policy Value."
USING THE POLICY VALUE
BORROWING AGAINST THE POLICY VALUE. The policyowner may borrow against the
Policy Value. The minimum loan amount is $500.
Loan interest will be charged on a fixed basis at an effective annual rate of
5.75%. See DETAILED INFORMATION ABOUT THE POLICIES; Policy Values -- "Policy
Loans."
A POLICYOWNER MAY MAKE A PARTIAL WITHDRAWAL OF THE POLICY VALUE. After a Policy
has been in force for two years the policyowner may make a partial withdrawal of
the Policy Value. The minimum withdrawal amount is $500. The policyowner may
specify that the withdrawal is to be made from a specific Investment Account or
the Guaranteed Interest Account.
A partial withdrawal may result in a reduction in the face amount of the Policy
and may also result in the assessment of a portion of the surrender charges to
which the Policy is subject. See DETAILED INFORMATION ABOUT THE POLICIES;
8
<PAGE> 13
Policy Values -- "Partial Withdrawals and Surrenders" and Charges and Deductions
- -- "Surrender Charges."
THE POLICY MAY BE SURRENDERED FOR ITS NET CASH SURRENDER VALUE. The Net Cash
Surrender Value is equal to the Policy Value less surrender charges, outstanding
monthly deductions due and the value of the Policy Debt. Surrender of a Policy
during the Surrender Charge Period will usually result in assessment of
surrender charges. See Detailed Information About the Policies; Policy Values --
"Partial Withdrawals and Surrenders" and Charges and Deductions -- "Surrender
Charges."
CHARGES AND DEDUCTIONS
1) DEDUCTIONS FROM PREMIUMS.
- the Company reserves the right to make a charge for state, local and
federal taxes in an amount not to exceed 3.60%
2) SURRENDER CHARGES. First North American will usually deduct a deferred
underwriting charge and a deferred sales charge if, during the Surrender
Charge Period:
- the Policy is surrendered for its Net Cash Surrender Value,
- a partial withdrawal in excess of the Withdrawal Tier Amount is made,
- a decrease in face amount is requested, or
- the Policy lapses.
The deferred underwriting charge is $4.50 for each $1,000 of face amount of life
insurance coverage initially or added by increase. In effect, the charge applies
only to the first $500,000 of face amount initially purchased or the first
$500,000 of each subsequent increase in face amount. Thus, the charge made in
connection with any one underwriting will not exceed $2,250.
The maximum deferred sales charge is 50% of premiums paid up to a maximum number
of Target Premiums that varies (from -- 0.52 to 2.59) according to the issue age
of the life insured, the face amount at issue and the amount of any increase.
The full amount of the deferred underwriting charge and the deferred sales
charge will be in effect for five years following Policy issue. Beginning in the
sixth year these charges grade downward over a maximum ten-year period. See
DETAILED INFORMATION ABOUT THE POLICIES; Charges And Deductions -- "Surrender
Charges."
In the event of a face amount increase, the surrender charges applicable to the
increase will be those rates that would apply if a Policy were issued to the
life insured at his or her then attained age and based on the amount of the
increase.
3) MONTHLY DEDUCTIONS. At the beginning of each policy month First North
American deducts from the Policy Value:
- an administration charge of $35 per month until the first policy
anniversary; thereafter $10 per month (the right is reserved to increase
the administration charge by an additional amount of up to $.01 per
$1,000 of face amount per month)
- a charge for the cost of insurance,
- a charge for mortality and expense risks of 0.075% per month through the
later of the tenth policy anniversary and the policyowner's attained age
60 and, thereafter, 0.0375% per month. This charge is assessed against the
value of the policyowner's investment accounts, and
- charge(s) for any supplementary benefit(s) added to the Policy.
The cost of insurance charge varies based on the net amount at risk under the
Policy and the applicable cost of insurance rate. Cost of insurance rates vary
according to issue age, the duration of the coverage, sex, any additional
ratings indicated
9
<PAGE> 14
in the policy, and risk class of the life insured. The maximum cost of insurance
rate that can be charged is guaranteed not to exceed the 1980 Commissioners
Standard Ordinary Smoker/Nonsmoker Mortality Tables. However, any additional
ratings as indicated in the Policy will be added to the cost of insurance rate.
See DETAILED INFORMATION ABOUT THE POLICIES; Charges and Deductions -- "Monthly
Deductions."
If the Policy is still in force when the life insured attains age 100, no
further monthly deductions will be taken from the Policy Value.
4) OTHER CHARGES. Charges will be imposed on certain transfers of Policy
Values, including a $25 charge for each transfer in excess of twelve per
policy year and a $5 charge for each Dollar Cost Averaging transfer if
Policy Value does not exceed $15,000. See Policy Values -- "Transfers Of
Policy Value."
Certain expenses are, or will be, assessed against the assets of the Portfolios,
as follows.
INVESTMENT MANAGEMENT FEES AND EXPENSES
Investment management fees paid by NASL Series Trust (excluding the Lifestyle
Trusts) range from .25% to 1.10% of the assets of the Portfolios.* Maximum
expenses range from .15% to .75% of the assets of the Portfolios (excluding the
Lifestyle Trusts).* Because each Lifestyle Trust will invest in shares of
Underlying Portfolios each will bear its pro rata share of the fees and expenses
incurred by the Underlying Portfolios. See DETAILED INFORMATION ABOUT THE
POLICIES; Charges and Deductions -- "Other Charges."
*NASL Financial Services, Inc. has voluntarily agreed to waive fees payable to
it and/or to reimburse expenses for a period of one year beginning January 1,
1997 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust (formerly Common Stock Fund),
Real Estate Securities Trust and Capital Growth Bond Trust for such period
from exceeding .50% of average net assets.
First North American reserves the right to charge or establish a provision for
any federal, state or local taxes that may be attributable to the Separate
Account or the operations of the Company with respect to the Policies in
addition to the deductions for state, local and federal taxes currently being
made.
SUPPLEMENTARY BENEFITS
A policyowner may choose to add certain supplementary benefits to the Policy.
These supplementary benefits include an accidental death benefit, life insurance
for additional insured persons, acceleration of benefits in the event of
terminal illness, term insurance option, a disability benefit to waive the cost
of monthly deductions and an option to ensure a guaranteed Policy Value.
The cost of any supplementary benefits will be deducted from the Policy Value
monthly. See DETAILED INFORMATION ABOUT THE POLICIES; Other Provisions --
"Supplementary Benefits."
DEFAULT
Unless the No Lapse Guarantee or Death Benefit Guarantee is in effect, the
Policy will go into default if the Net Cash Surrender Value at the beginning of
any policy month would go below zero after deducting the monthly charges then
due. The Policy will not go into default if the policy qualifies for the No
Lapse Guarantee or Death Benefit Guarantee. The Company will notify the
policyowner in the event the Policy goes into default, and will allow a grace
period in which the policyowner may make a premium payment sufficient to bring
the Policy out of default. If the required premium is not paid during the grace
period the Policy will terminate. See DETAILED INFORMATION ABOUT THE POLICIES;
Premium Provisions -- "Policy Default."
DEATH BENEFIT GUARANTEE
On Policies issued and maintained with a minimum face amount of $250,000, as
long as the Death Benefit Guarantee Cumulative Premium Test or, where
applicable, the Fund Value Test is satisfied, the Company guarantees that the
Policy will not go into default (i) prior to the life insured's attaining age
100 if Death Benefit Option 1 is maintained throughout
10
<PAGE> 15
the life of the Policy and (ii) prior to the life insured reaching age 85 if
Death Benefit Option 2 is selected at any time, regardless of the investment
performance of the Funds underlying the Policy Value. On Policies with face
amounts of less than $250,000 there is no Death Benefit Guarantee after the
third policy anniversary. See DETAILED INFORMATION ABOUT THE POLICIES; Premium
Provisions -- "Death Benefit Guarantee."
NO LAPSE GUARANTEE
On Policies issued with a face amount of at least $250,000, as long as the No
Lapse Guarantee Cumulative Premium Test is satisfied, First North American will
guarantee that the Policy will not go into default, even if a combination of
Policy loans, adverse investment experience and other factors should cause the
Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deductions due at the beginning of a policy month. For purposes of determining
the face amount at issue for the No Lapse Guarantee, the face amount shall
include any amounts purchased under the supplementary insurance option. The No
Lapse Guarantee Period is the first 5 Policy Years for life insureds with an
issue age up to and including 85. It is not offered to life insureds whose Issue
Age exceeds 85. See DETAILED INFORMATION ABOUT THE POLICIES; Premium Provisions
- -- "No Lapse Guarantee."
REINSTATEMENT
A terminated policy may be reinstated by the policyowner within either the
21-day or five-year period following the date of termination, providing certain
conditions are met. See DETAILED INFORMATION ABOUT THE POLICIES; Premium
Provisions -- "Policy Reinstatement."
FREE LOOK
A Policy may be returned for a refund of premium within the later of:
- 10 days after it is received
- 45 days after the application for the Policy is signed
- 10 days after First North American mails or delivers a notice of this
right of withdrawal.
If a policyowner requests an increase in face amount which results in new
surrender charges, the "free look" provision will also apply to the increase.
See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS --"Short-Term
Cancellation Right and 'Free Look' Provisions."
FEDERAL TAX MATTERS
First North American believes that a Policy issued on a standard risk class
basis should meet the definition of a life insurance contract as set forth in
Section 7702 of the Internal Revenue Code of 1986. With respect to a Policy
issued on a substandard basis, there is less guidance available to determine if
such a Policy would satisfy the Section 7702 definition of a life insurance
contract, particularly if the policyowner pays the full amount of premiums
permitted under such a Policy. Assuming that a Policy qualifies as a life
insurance contract for Federal income tax payments, a policyowner should not be
deemed to be in constructive receipt of Policy Value under a Policy until there
is a distribution from the Policy. Moreover, death benefits payable under a
Policy should be completely excludable from the gross income of the beneficiary.
As a result, the beneficiary generally should not be taxed on these proceeds.
See MISCELLANEOUS MATTERS -- FEDERAL INCOME TAX CONSIDERATIONS -- (TAX STATUS OF
THE POLICY).
Under certain circumstances, a Policy may be treated as a "Modified Endowment
Contract." If the Policy is a Modified Endowment Contract, then all pre-death
distributions, including Policy loans, will be treated first as a distribution
of taxable income and then as a return of investment in the Policy. In addition,
prior to age 59-1/2 any such distributions generally will be subject to a 10%
penalty tax. See MISCELLANEOUS MATTERS -- FEDERAL INCOME TAX CONSIDERATIONS --
(TAX TREATMENT OF POLICY BENEFITS).
If the Policy is not a Modified Endowment Contract, distributions generally will
be treated first as a return of investment in the Policy and then a disbursement
of taxable income. Moreover, loans will not be treated as distributions. Select
Loans
11
<PAGE> 16
may, however, be treated as taxable distributions. A policyowner considering the
use of systematic policy loans as one element of a comprehensive retirement
income plan should consult his or her personal tax adviser regarding the
potential tax consequences if such loans were to so reduce Policy Value that the
Policy would lapse, absent additional payments. The premium payment necessary to
avert lapse would increase with the age of the insured. Finally, neither
distributions nor loans under a Policy that is not a Modified Endowment Contract
are subject to the 10% penalty tax. See MISCELLANEOUS MATTERS -- FEDERAL INCOME
TAX CONSIDERATIONS -- (DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED
ENDOWMENT CONTRACTS).
The United States Congress has in the past considered, and in the future may
consider legislation that, if enacted, could change the tax treatment of life
insurance policies. In addition, the Treasury Department may amend existing
regulations, or adopt new interpretations of existing laws, state tax laws or,
if the policyowner is not a United States resident, foreign tax laws, which may
affect the tax consequences to him or her, the lives insured or the beneficiary.
These laws may change from time to time without notice and, as a result, the tax
consequences may be altered. There is no way of predicting whether, when or in
what form any such change would be adopted. Any such change could have a
retroactive effect regardless of the date of enactment. The Company suggests
that a tax adviser be consulted.
ESTATE AND GENERATION-SKIPPING TAXES
The proceeds of this life insurance policy may be taxable under Estate and
Generation-Skipping Tax provisions of the Internal Revenue Code. The policyowner
should consult his or her tax adviser regarding these taxes.
GENERAL INFORMATION ABOUT FIRST NORTH AMERICAN,
VARIABLE LIFE ACCOUNT I, AND NASL SERIES TRUST
FIRST NORTH AMERICAN AND MANUFACTURERS LIFE
First North American is a stock life insurance company organized under the laws
of New York in 1992. The Company's principal office is located at International
Corporate Center, 555 Theodore Fremd Avenue, Rye, New York 10580. The Company is
a wholly-owned subsidiary of North American Security Life Insurance Company,
("Security Life" or "Parent"). Security Life is a stock life insurance company
organized under the laws of Delaware in 1979 with its principal office located
at 116 Huntington Avenue, Boston, Massachusetts 02116.
The ultimate parent of the Company is Manufacturers Life. Prior to January 1,
1996, Security Life was a wholly owned subsidiary of North American Life
Assurance Company ("NAL"), a Canadian mutual life insurance company. On January
1, 1996 NAL and Manulife merged with the combined company retaining the Manulife
name.
Effective January 1, 1996, immediately following the merger of NAL and
Manufacturers Life, Security Life experienced a corporate restructuring which
resulted in the formation of a newly organized holding corporation, NAWL Holding
Co. ("NAWL"). NAWL holds all of the outstanding shares of Security Life and Wood
Logan Associates, Inc. ("WLA"). Manufacturers Life owns all class A shares of
NAWL, representing 85% of the voting shares of NAWL. Certain employees of WLA
own all class B shares, which represent the remaining 15% voting interest in
NAWL.
FIRST NORTH AMERICAN'S VARIABLE LIFE ACCOUNT I
First North American established its Variable Life Account I on May 6, 1997,
subject to approval by the Superintendent of Insurance of New York, as a
separate account under New York law. The Separate Account holds assets that are
segregated from all of First North American's other assets. The Separate Account
is currently used only to support variable life insurance policies.
First North American is the legal owner of the assets in the Separate Account.
The income, gains and losses of the Separate Account, whether or not realized,
are, in accordance with applicable contracts, credited to or charged against the
Account without regard to the other income, gains or losses of First North
American. First North American will at all times maintain assets in the Separate
Account with a total market value at least equal to the reserves and other
liabilities relating to variable benefits under all policies participating in
the Separate Account. These assets may not be charged with liabilities which
arise from any other business First North American conducts. However, all
obligations under the variable life insurance
12
<PAGE> 17
policies are general corporate obligations of First North American.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended ("1940 Act") as a
unit investment trust. A unit investment trust is a type of investment company
which invests its assets in specified securities, such as the shares of one or
more investment companies, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the SEC of
the management or investment policies or practices of the Separate Account. For
state law purposes the Separate Account is treated as a part or division of
First North American.
NASL SERIES TRUST
Each sub-account of the Separate Account will purchase shares only of a
particular NASL Trust. NASL Series Trust is registered under the 1940 Act as an
open-end management investment company. The Separate Account will purchase and
redeem shares of NASL Trusts at net asset value. Shares will be redeemed to the
extent necessary for First North American to provide benefits under the
Policies, to transfer assets from one sub-account to another or to the general
account as requested by policyowners, and for other purposes consistent with the
Policies. Any dividend or capital gain distribution received from a Portfolio
will be reinvested immediately at net asset value in shares of that Portfolio
and retained as assets of the corresponding sub-account.
NASL Series Trust shares are issued to fund benefits under both variable annuity
contracts and variable life insurance policies issued by the Company or life
insurance companies affiliated with the Company. First North American will
purchase shares through its general account for certain limited purposes
including initial portfolio seed money. For a description of the procedures for
handling potential conflicts of interest arising from the funding of such
benefits see the accompanying NASL Series Trust prospectus.
NASL Series Trust receives investment advisory services from NASL Financial
Services, Inc. NASL Financial Services, Inc. is a registered investment adviser
under the Investment Advisers Act of 1940. NASL Series Trust also employs
subadvisers. The following subadvisers provide investment subadvisory services
to the indicated portfolios:
<TABLE>
<CAPTION>
PORTFOLIO SUBADVISER
- --------- ----------
<S> <C>
AGGRESSIVE GROWTH PORTFOLIOS
Pacific Rim Emerging Markets Trust Manufacturers Adviser Corporation*
Science & Technology Trust T. Rowe Price Associates, Inc.
International Small Cap Trust Founders Asset Management, Inc.
Emerging Growth Trust Warburg, Pincus Counsellors, Inc.
Pilgrim Baxter Growth Trust Pilgrim Baxter & Associates, Ltd.
Small/Mid Cap Trust Fred Alger Management, Inc.
International Stock Trust Rowe Price-Fleming International, Inc.
GROWTH PORTFOLIOS
Worldwide Growth Trust Founders Asset Management, Inc.
Global Equity Trust Morgan Stanley Asset Management Inc.
Growth Trust Founders Asset Management, Inc.
Equity Trust Fidelity Management Trust Company
Quantitative Equity Trust Manufacturers Adviser Corporation*
(formerly Common Stock Fund)
Equity Index Trust Manufacturers Adviser Corporation*
Blue Chip Growth Trust T. Rowe Price Associates, Inc.
Real Estate Securities Trust Manufacturers Adviser Corporation*
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
PORTFOLIO SUBADVISER
- --------- ----------
<S> <C>
GROWTH & INCOME PORTFOLIOS
Value Trust Miller Anderson & Sherrerd, LLP
International Growth and Income Trust J.P. Morgan Investment Management Inc.
Growth and Income Trust Wellington Management Company
Equity-Income Trust T. Rowe Price Associates, Inc.
BALANCED PORTFOLIOS
Balanced Trust Founders Asset Management, Inc.
Aggressive Asset Allocation Trust Fidelity Management Trust Company
Moderate Asset Allocation Trust Fidelity Management Trust Company
Conservative Asset Allocation Trust Fidelity Management Trust Company
BOND PORTFOLIOS
High Yield Trust Miller Anderson & Sherrerd, LLP
Strategic Bond Trust Salomon Brothers Asset Management Inc
Global Government Bond Trust Oechsle International Advisors, L.P.
Capital Growth Bond Trust Manufacturers Adviser Corporation*
Investment Quality Bond Trust Wellington Management Company
U.S. Government Securities Trust Salomon Brothers Asset Management Inc
MONEY MARKET PORTFOLIOS
Money Market Trust Manufacturers Adviser Corporation*
LIFESTYLE PORTFOLIOS
Lifestyle Aggressive 1000 Trust Manufacturers Adviser Corporation*
Lifestyle Growth 820 Trust Manufacturers Adviser Corporation*
Lifestyle Balanced 640 Trust Manufacturers Adviser Corporation*
Lifestyle Moderate 460 Trust Manufacturers Adviser Corporation*
Lifestyle Conservative 280 Trust Manufacturers Adviser Corporation*
</TABLE>
- ----------
* Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
INVESTMENT OBJECTIVES AND CERTAIN POLICIES OF THE PORTFOLIOS
The investment objectives and certain policies of the Portfolios currently
available to policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met.
AGGRESSIVE GROWTH PORTFOLIOS
PACIFIC RIM EMERGING MARKETS TRUST. The investment objective of the Pacific Rim
Emerging Markets Trust is to achieve long-term growth of capital. Manufacturers
Adviser Corporation ("MAC") manages the Pacific Rim Emerging Markets Trust and
seeks to achieve this investment objective by investing in a diversified
portfolio that is comprised primarily of common stocks and equity-related
securities of corporations domiciled in countries of the Pacific Rim region.
SCIENCE & TECHNOLOGY TRUST. The investment objective of the Science & Technology
Trust is long-term growth of capital. Current income is incidental to the
portfolio's objective. T. Rowe Price Associates, Inc. manages the Science &
Technology Trust.
INTERNATIONAL SMALL CAP TRUST. The investment objective of the International
Small Cap Trust is to seek long-term capital appreciation. Founders Asset
Management, Inc. ("Founders") manages the International Small Cap Trust and will
pursue this objective by investing primarily in securities issued by foreign
companies which have total market capitalizations or annual revenues of $1
billion or less. These securities may represent companies in both established
and emerging economies throughout the world.
14
<PAGE> 19
EMERGING GROWTH TRUST. The investment objective of the Emerging Growth Trust is
maximum capital appreciation. Warburg, Pincus Counsellors, Inc. manages the
Emerging Growth Trust and will pursue this objective by investing primarily in a
portfolio of equity securities of domestic companies. The Emerging Growth Trust
ordinarily will invest at least 65% of its total assets in common stocks or
warrants of emerging growth companies that represent attractive opportunities
for maximum capital appreciation.
PILGRIM BAXTER GROWTH TRUST. The investment objective of the Pilgrim Baxter
Growth Trust is capital appreciation. Pilgrim Baxter & Associates, Ltd. ("PBHG")
manages the Pilgrim Baxter Growth Trust and seeks to achieve its objective by
investing in companies believed by PBHG to have an outlook for strong earnings
growth and the potential for significant capital appreciation.
SMALL/MID CAP TRUST. The investment objective of the Small/Mid Cap Trust is to
seek long term capital appreciation. Fred Alger Management, Inc. manages the
Small/Mid Cap Trust and will pursue this objective by investing at least 65% of
the portfolio's total assets (except during temporary defensive periods) in
small/mid cap equity securities.
INTERNATIONAL STOCK TRUST. The investment objective of the International Stock
Trust is to achieve long-term growth of capital. Rowe Price-Fleming
International, Inc. manages the International Stock Trust and seeks to obtain
this objective by investing primarily in common stocks of established, non-U.S.
companies.
GROWTH PORTFOLIOS
WORLDWIDE GROWTH TRUST. The investment objective of the Worldwide Growth Trust
is long-term growth of capital. Founders manages the Worldwide Growth Trust and
seeks to attain this objective by normally investing at least 65% of its total
assets in equity securities of growth companies in a variety of markets
throughout the world.
GLOBAL EQUITY TRUST. The investment objective of the Global Equity Trust is
long-term capital appreciation. Morgan Stanley Asset Management Inc. manages the
Global Equity Trust and intends to pursue this objective by investing primarily
in equity securities of issuers throughout the world, including U.S. issuers.
GROWTH TRUST. The investment objective of the Growth Trust is to seek long-term
growth of capital. Founders manages the Growth Trust and will pursue this
objective by investing, under normal market conditions, at least 65% of its
total assets in common stocks of well-established, high-quality growth companies
that Founders believes have the potential to increase earnings faster than the
rest of the market.
EQUITY TRUST. The principal investment objective of the Equity Trust is growth
of capital. Current income is a secondary consideration although growth of
income may accompany growth of capital. Fidelity Management Trust Company
manages the Equity Trust and seeks to attain the foregoing objective by
investing primarily in common stocks of United States issuers or securities
convertible into or which carry the right to buy common stocks.
QUANTITATIVE EQUITY TRUST (FORMERLY COMMON STOCK FUND). The investment objective
of the Quantitative Equity Trust is to achieve intermediate and long-term growth
through capital appreciation and current income by investing in common stocks
and other equity securities of well established companies with promising
prospects for providing an above-average rate of return. MAC manages the
Quantitative Equity Trust.
EQUITY INDEX TRUST. The investment objective of the Equity Index Trust is to
achieve investment results which approximate the total return of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. MAC manages the Equity Index Trust.
BLUE CHIP GROWTH TRUST. The primary investment objective of the Blue Chip Growth
Trust is to provide long-term growth of capital. Current income is a secondary
objective, and many of the stocks in the Portfolio are expected to pay
dividends. T. Rowe Price Associates, Inc. manages the Blue Chip Growth Trust.
REAL ESTATE SECURITIES TRUST. The investment objective of the Real Estate
Securities Trust is to achieve a combination of long-term capital appreciation
and satisfactory current income by investing in real estate related equity and
debt securities. MAC manages the Real Estate Securities Trust.
GROWTH & INCOME PORTFOLIOS
15
<PAGE> 20
VALUE TRUST. The investment objective of the Value Trust is to realize an
above-average total return over a market cycle of three to five years,
consistent with reasonable risk. Miller Anderson & Sherrerd, LLP ("MAS") manages
the Value Trust and seeks to attain this objective by investing primarily in
common and preferred stocks, convertible securities, rights and warrants to
purchase common stocks, ADRs and other equity securities of companies with
equity capitalizations usually greater than $300 million.
INTERNATIONAL GROWTH AND INCOME TRUST. The investment objective of the
International Growth and Income Trust is to seek long-term growth of capital and
income. The portfolio is designed for investors with a long-term investment
horizon who want to take advantage of investment opportunities outside the
United States. J.P. Morgan Investment Management Inc. manages the International
Growth and Income Trust.
GROWTH AND INCOME TRUST. The investment objective of the Growth and Income Trust
is to provide long-term growth of capital and income consistent with prudent
investment risk. Wellington Management Company manages the Growth and Income
Trust and seeks to achieve the Trust's objective by investing primarily in a
diversified portfolio of common stocks of U.S. issuers which Wellington
Management Company believes are of high quality.
EQUITY-INCOME TRUST. The investment objective of the Equity-Income Trust (prior
to December 31, 1996, the "Value Equity Trust") is to provide substantial
dividend income and also long term capital appreciation. T. Rowe Price
Associates, Inc. manages the Equity-Income Trust and seeks to attain this
objective by investing primarily in dividend-paying common stocks, particularly
of established companies with favorable prospects for both increasing dividends
and capital appreciation.
BALANCED PORTFOLIOS
BALANCED TRUST. The investment objective of the Balanced Trust is current income
and capital appreciation. Founders Asset Management, Inc. is the manager of the
Balanced Trust and seeks to attain this objective by investing in a balanced
portfolio of common stocks, U.S. and foreign government obligations and a
variety of corporate fixed-income securities.
AUTOMATIC ASSET ALLOCATION TRUSTS (AGGRESSIVE, MODERATE AND CONSERVATIVE). The
investment objective of each of the Automatic Asset Allocation Trusts is to
realize the highest potential total return consistent with a specified level of
risk tolerance -- conservative, moderate or aggressive. The amount of each
Portfolio's assets invested in each category of securities -- debt, equity, and
money market -- is dependent upon the judgment of Fidelity Management Trust
Company as to what percentages of each Portfolio's assets in each category will
contribute to the limitation of risk and the achievement of its investment
objective.
BOND PORTFOLIOS
HIGH YIELD TRUST. The investment objective of High Yield Trust is to realize an
above-average total return over a market cycle of three to five years,
consistent with reasonable risk. MAS manages the High Yield Trust and seeks to
attain this objective by investing primarily in high yield debt securities,
including corporate bonds and other fixed-income securities.
STRATEGIC BOND TRUST. The investment objective of the Strategic Bond Trust is to
seek a high level of total return consistent with preservation of capital. The
Strategic Bond Trust seeks to achieve its objective by giving its Subadviser,
Salomon Brothers Asset Management Inc ("SBAM") broad discretion to deploy the
Strategic Bond Trust's assets among certain segments of the fixed-income market
as SBAM believes will best contribute to the achievement of the portfolio's
objective.
GLOBAL GOVERNMENT BOND TRUST. The investment objective of the Global Government
Bond Trust is to seek a high level of total return by placing primary emphasis
on high current income and the preservation of capital. Oechsle International
Advisors, L.P. manages the Global Government Bond Trust and intends to pursue
this objective by investing primarily in a selected global portfolio of
high-quality, fixed-income securities of foreign and U.S. governmental entities
and supranational issuers.
CAPITAL GROWTH BOND TRUST. The investment objective of the Capital Growth Bond
Trust is to achieve growth of capital by investing in medium-grade or better
debt securities, with income as a secondary consideration. MAC manages the
Capital Growth Bond Trust. The Capital Growth Bond Trust differs from most
"bond" funds in that its primary objective is capital appreciation, not income.
16
<PAGE> 21
INVESTMENT QUALITY BOND TRUST. The investment objective of the Investment
Quality Bond Trust is to provide a high level of current income consistent with
the maintenance of principal and liquidity. Wellington Management Company
manages the Investment Quality Bond Trust and seeks to achieve the Trust's
objective by investing primarily in a diversified portfolio of investment grade
corporate bonds and U.S. Government bonds with intermediate to longer term
maturities.
U.S. GOVERNMENT SECURITIES TRUST. The investment objective of the U.S.
Government Securities Trust is to obtain a high level of current income
consistent with preservation of capital and maintenance of liquidity. SBAM
manages the U.S. Government Securities Trust and seeks to attain its objective
by investing a substantial portion of its assets in debt obligations and
mortgage-backed securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and derivative securities such as collateralized
mortgage obligations backed by such securities.
MONEY MARKET PORTFOLIO
MONEY MARKET TRUST. The investment objective of the Money Market Trust is to
obtain maximum current income consistent with preservation of principal and
liquidity. MAC manages the Money Market Trust and seeks to achieve this
objective by investing in high quality, U.S. dollar denominated money market
instruments.
LIFESTYLE PORTFOLIOS
LIFESTYLE AGGRESSIVE 1000 TRUST. The investment objective of the Lifestyle
Aggressive 1000 Trust is to provide long term growth of capital. Current income
is not a consideration. MAC seeks to achieve this objective by investing
approximately 100% of the Lifestyle Trust's assets in Underlying Portfolios
which invest primarily in equity securities.
LIFESTYLE GROWTH 820 TRUST. The investment objective of the Lifestyle Growth 820
Trust is to provide long term growth of capital with consideration also given to
current income. MAC seeks to achieve this objective by investing approximately
20% of the Lifestyle Trust's assets in Underlying Portfolios which invest
primarily in fixed income securities and approximately 80% of its assets in
Underlying Portfolios which invest primarily in equity securities.
LIFESTYLE BALANCED 640 TRUST. The investment objective of the Lifestyle Balanced
640 Trust is to provide a balance between high level of current income and
growth of capital with a greater emphasis given to capital growth. MAC seeks to
achieve this objective by investing approximately 40% of the Lifestyle Trust's
assets in Underlying Portfolios which invest primarily in fixed income
securities and approximately 60% of its assets in Underlying Portfolios which
invest primarily in equity securities.
LIFESTYLE MODERATE 460 TRUST. The investment objective of the Lifestyle Moderate
460 Trust is to provide a balance between a high level of current income and
growth of capital with a greater emphasis given to high income. MAC seeks to
achieve this objective by investing approximately 60% of the Lifestyle Trust's
assets in Underlying Portfolios which invest primarily in fixed income
securities and approximately 40% of its assets in Underlying Portfolios which
invest primarily in equity securities.
LIFESTYLE CONSERVATIVE 280 TRUST. The investment objective of the Lifestyle
Conservative 280 Trust is to provide a high level of current income with some
consideration also given to growth of capital. MAC seeks to achieve this
objective by investing approximately 80% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 60% of its assets in Underlying Portfolios which invest primarily
in equity securities.
A full description of the NASL Series Trust, its investment objectives, policies
and restrictions, the risks associated therewith, its expenses, and other
aspects of its operation is contained in the accompanying NASL Series Trust
prospectus, which should be read together with this prospectus.
DETAILED INFORMATION ABOUT THE POLICIES
PREMIUM PROVISIONS
POLICY ISSUE AND INITIAL PREMIUM
To purchase a Policy, an applicant must submit a completed application. First
North American will issue a Policy only if it
17
<PAGE> 22
has a face amount of at least $50,000 ($100,000 for preferred risk policies). A
Policy will generally be issued to persons between ages 0 and 90. In certain
circumstances the Company may at its sole discretion issue a Policy to persons
above age 90. Before issuing a Policy, First North American will require
evidence of insurability satisfactory to it. A life insured will have a risk
class of preferred/non-smoker, preferred/smoker, standard/non-smoker or
standard/smoker as determined by underwriting rules. Persons failing to meet
standard underwriting requirements nonetheless may be eligible to purchase a
Policy provided an additional rating is assigned. Acceptance of an application
is subject to the Company's insurance underwriting rules. Each Policy is issued
with a policy date from which policy years, policy months and policy
anniversaries are all determined. Each Policy also has an effective date which
is the date the Company becomes obligated under the Policy and when the first
monthly deductions are taken. If an application is accompanied by a check for at
least the Initial Premium and the application is accepted, the policy date will
be the date the application and check were received at the First North American
Service Office and the effective date will be the date First North American's
underwriters approve issuance of the Policy. If an application is accompanied by
a check for at least the Initial Premium, the life insured may be covered under
the terms of a conditional insurance agreement until the effective date. If an
application accepted by the Company is not accompanied by a check for at least
the Initial Premium, the Policy will be issued with a policy date which is seven
days after issuance of the Policy (the "issue date") and with an effective date
which is the date the Service Office receives at least the Initial Premium. In
certain situations a different policy date may be used. The Initial Premium must
be received within 60 days after the policy date; however, the Initial Premium
may be required within 30 days on Policies issued with Additional Ratings. If
the Initial Premium is not paid or if the application is rejected, the Policy
will be canceled and any premiums paid will be returned to the applicant.
Under certain circumstances a Policy may be issued with a backdated policy date.
A Policy will not be backdated more than six months before the date of the
application for the Policy. Monthly deductions will be made for the period the
policy date is backdated.
All premiums received prior to the effective date of a Policy will be credited
with interest from the date of receipt at the rate of return then being earned
on amounts allocated to the Money Market Trust. On the effective date, the
premiums paid plus interest credited, net of deductions for federal, state and
local taxes, will be allocated among the Investment Accounts or the Guaranteed
Interest Account in accordance with the policyowner's instructions.
All premiums received on or after the effective date of the Policy will be
allocated among the Investment Accounts or the Guaranteed Interest Account as of
the date the premiums were received at the First North American Service Office.
Monthly deductions are due on the policy date and at the beginning of each
policy month thereafter. However, if due prior to the effective date, they will
be taken on the effective date instead of the dates they were due.
PREMIUM ALLOCATION
Net Premiums may be allocated to either the Guaranteed Interest Account for
accumulation at a rate of interest equal to at least 4% or to one or more of the
Investment Accounts for investment in the Portfolio shares held by the
corresponding sub-account of the Separate Account. Allocations among the
Investment Accounts and the Guaranteed Interest Account are made as a percentage
of the Net Premium. The percentage allocation to any account may be any whole
number between zero and 100, provided the total percentage allocations equal
100. A policyowner may change the way in which Net Premiums are allocated at any
time without charge. The change will take effect on the date a written or
authorized telephonic request for change, in a format satisfactory to the
Company, is received at the First North American Service Office.
PREMIUM LIMITATIONS
After the payment of the Initial Premium, premiums may be paid at any time and
in any amount during the lifetime of the life insured subject to certain
limitations. After the Initial Premium, all premiums must be paid to the First
North American Service Office. Unlike traditional insurance, premiums are not
payable at specified intervals or in specified amounts. A Policy will be issued
with a Planned Premium which is based on the amount of premium the policyowner
wishes to pay. It is recommended that the Planned Premium be such that the No
Lapse Guarantee or Death Benefit Guarantee Cumulative Premium Test (see
Insurance Benefits -- "No Lapse Guarantee" and "Death Benefit Guarantee") will
be satisfied.
First North American will send notices to the policyowner setting forth the
Planned Premium at the payment interval selected by the policyowner, unless
payment is being made pursuant to a pre-authorized payment plan. However, the
18
<PAGE> 23
policyowner is under no obligation to make the indicated payment.
First North American will not accept any premium payment which is less than $50,
unless the premium is payable pursuant to a pre-authorized payment plan. In that
case the Company will accept a payment of as little as $10. First North American
may change these minimums on 90 days' written notice. The Policies also limit
the sum of the premiums that may be paid at any time in order to preserve the
qualification of the Policies as life insurance for federal tax purposes. These
limitations are set forth in each Policy. First North American reserves the
right to refuse or refund any premium payments that may cause the Policy to fail
to qualify as life insurance under applicable tax law.
SHORT-TERM CANCELLATION RIGHT AND "FREE LOOK" PROVISIONS
A Policy may be returned for a refund of the premium within 10 days after it is
received, within 45 days after the application for the Policy is signed, or
within 10 days after First North American mails or delivers a notice of right of
withdrawal, whichever is latest. The Policy can be mailed or delivered to the
First North American agent who sold it or to the First North American Service
Office. Immediately on such delivery or mailing, the Policy shall be deemed void
from the beginning. Within seven days after receipt of the returned Policy at
its Service Office, First North American will refund any premium paid. First
North American reserves the right to delay the refund of any premium paid by
check until the check has cleared.
If a policyowner requests an increase in face amount which results in new
surrender charges, he or she will have the same rights as described above to
cancel the increase. If canceled, the Policy Value and the surrender charges
will be recalculated to the amounts they would have been had the increase not
taken place. A policyowner may request a refund of all or any portion of
premiums paid during the free look period, and the Policy Value and the
surrender charges will be recalculated to the amounts they would have been had
the premiums not been paid.
INSURANCE BENEFIT
THE INSURANCE BENEFIT
If the Policy is in force at the time of the life insured's death, First North
American will pay an insurance benefit based on the death benefit option
selected by the policyowner upon receipt of due proof of death. The amount
payable will be the death benefit under the selected option, plus any amounts
payable under any supplementary benefits added to the Policy, less the value of
the Policy Debt at the date of death. The insurance benefit will be paid in one
sum unless another form of settlement option is agreed to by the beneficiary and
the Company. If the insurance benefit is paid in one sum, First North American
will pay interest from the date of death to the date of payment. If the life
insured should die after the Company's receipt of a request for surrender, no
insurance benefit will be payable, and First North American will pay only the
Net Cash Surrender Value.
NO LAPSE GUARANTEE
On Policies issued with a face amount of at least $250,000 (calculated as
described below), the policyowner may elect the No Lapse Guarantee. If elected,
as long as the No Lapse Guarantee Cumulative Premium Test (see below) is
satisfied during the No Lapse Guarantee Period, as described below, First North
American will guarantee that the Policy will not go into default (see OTHER
GENERAL PROVISIONS -- "Policy Default"), even if a combination of Policy loans,
adverse investment experience and other factors should cause the Policy's Net
Cash Surrender Value to be insufficient to meet the monthly deductions due at
the beginning of a policy month. For purposes of determining the face amount at
issue for the No Lapse Guarantee, the face amount shall include any amounts
purchased under the supplementary insurance option.
The No Lapse Guarantee Period is the first 5 Policy Years for life insureds with
an issue age up to and including 85. It is not offered to life insureds whose
Issue Age exceeds 85.
While the No Lapse Guarantee is in effect, First North American will determine
at the beginning of each policy month whether the No Lapse Guarantee Cumulative
Premium Test, described below, has been satisfied. If it has not been satisfied,
the Company will notify the policyowner of that fact and allow a 61-day grace
period in which the policyowner may make a premium payment sufficient to keep
the No Lapse Guarantee in effect. This required payment, as described in the
notification to the policyowner, will be equal to the outstanding premium
requirement as of the date the No Lapse
19
<PAGE> 24
Guarantee was not satisfied plus the Monthly No Lapse Guarantee Premium due for
the next two policy months. If the required payment is not received by the end
of the grace period, the No Lapse Guarantee will terminate, and the Policy
subsequently may go into default if the Policy's Net Cash Surrender Value is
insufficient to meet the monthly deductions due at the beginning of a policy
month. A death benefit option change will also terminate the No Lapse Guarantee
if it is in effect at the time of the change as will a decrease in face amount
below $250,000. The No Lapse Guarantee cannot be reinstated after it has been
terminated. See OTHER GENERAL POLICY PROVISIONS -- "Policy Default," and
INSURANCE BENEFIT -- "Death Benefit Option Changes."
NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST
The No Lapse Guarantee Cumulative Premium Test is satisfied if, as of the
beginning of the policy month, the sum of all premiums paid to date less any
partial withdrawals and less any Policy Debt is at least equal to the sum of the
Monthly No Lapse Guarantee Premiums due since the policy date, as follows:
The Policy will satisfy the No Lapse Guarantee Cumulative Premium Test if (a) is
greater than or equal to (b), where:
(a) is the sum of all premiums paid, less any partial withdrawals and
less any Policy Debt;
and
(b) is the sum of the Monthly No Lapse Guarantee Premiums due since the
policy date.
The Monthly No Lapse Guarantee Premium is one-twelfth of the No Lapse Guarantee
Premium. The No Lapse Guarantee Premium is set forth in the Policy. It is
subject to change if the face amount of the Policy is changed (see INSURANCE
BENEFIT -- "Face Amount Changes"), or if there is any change in the
supplementary benefits added to the Policy or in the risk class of any life
insured.
DEATH BENEFIT GUARANTEE
Policies With Face Amounts Of At Least $250,000. If elected by the policyowner,
on policies issued and maintained with a minimum face amount of $250,000, if the
Death Benefit Guarantee Cumulative Premium Test (see below) is satisfied, First
North American will guarantee that the Policy will not go into default (See
OTHER GENERAL POLICY PROVISIONS --"Policy Default") even if a combination of
policy loans, adverse investment experience or other factors should cause the
Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deductions due at the beginning of a policy month.
If elected by the policyowner, on Policies issued and maintained with a minimum
face amount of $250,000, if after the tenth policy anniversary the Death Benefit
Guarantee Cumulative Premium Test is not satisfied but the Fund Value Test (see
below) is satisfied, First North American will keep the Death Benefit Guarantee
in effect.
This Death Benefit Guarantee will expire at the end of a policy year specified
in the Policy, currently (i) the year in which the life insured reaches attained
age 100 if Death Benefit Option 1 is maintained throughout the life of the
Policy and (ii) the year in which the life insured reaches attained age 85 if
Death Benefit Option 2 is selected at any time. While the guarantee is in
effect, First North American will determine at the beginning of each policy
month whether the Death Benefit Guarantee Cumulative Premium Test or the Fund
Value Test has been satisfied. If neither has been satisfied, the Company will
notify the policyowner of that fact and allow a 61-day grace period in which the
policyowner may make a premium payment sufficient to keep the Death Benefit
Guarantee in effect. The required payment will be equal to the outstanding
premium required to meet the Death Benefit Guarantee Cumulative Premium Test at
the date neither test was satisfied, plus the Monthly Death Benefit Guarantee
Premium due for the next two policy months. If the required payment is not
received by the end of the grace period, the Death Benefit Guarantee will
terminate. Once the Death Benefit Guarantee is terminated, it cannot be
reinstated.
POLICIES WITH FACE AMOUNTS UNDER $250,000. On Policies with a face amount less
than $250,000 at issue or after face amount decrease, if the Death Benefit
Guarantee Cumulative Premium Test is satisfied in the first three years, First
North American will guarantee that the Policy will not go into default even if a
combination of policy loans, adverse investment experience or other factors
should cause the Policy's Net Cash Surrender Value to be insufficient to meet
the monthly deductions due at the beginning of a policy month. After the third
policy anniversary, there is no Death Benefit Guarantee
20
<PAGE> 25
on (a) Policies issued with face amounts of less than $250,000 or (b) Policies
on which a face amount decrease has resulted in a face amount of less than
$250,000.
DEATH BENEFIT GUARANTEE CUMULATIVE PREMIUM TEST. The Policy provides for a Death
Benefit Guarantee Cumulative Premium Test. The Death Benefit Guarantee
Cumulative Premium Test is satisfied if at the beginning of each policy month
the sum of all premiums paid to date less any partial withdrawals and any Policy
Debt is at least equal to the sum of the Monthly Death Benefit Guarantee
Premiums due since the policy date. The Death Benefit Guarantee Premium is set
forth in the Policy. It is subject to change if the face amount of the Policy or
the death benefit option is changed (see -- "Death Benefit Option Changes" and
"Face Amount Changes") or if there is any change in the supplementary benefits
added to the Policy or in the risk class of the life insured.
FUND VALUE TEST. The Policy provides for a Fund Value Test. The Fund Value Test
is applicable after the tenth anniversary of the Policy. The Fund Value Test is
satisfied if at the beginning of each policy month the Net Policy Value is
greater than or equal to the Gross Single Premium.
DEATH BENEFIT OPTIONS
The Policy permits the policyowner to select one of two death benefit options --
Option 1 and Option 2. Under Option 1 the death benefit is the face amount of
the Policy at the date of death or, if greater, the Policy Value at the date of
death multiplied by the applicable percentage in the table set forth below.
Under Option 2 the death benefit is the face amount of the Policy plus the
Policy Value at the date of death or, if greater, the Policy Value at the date
of death multiplied by the applicable percentage in the following table:
<TABLE>
<CAPTION>
Corridor Corridor Corridor Corridor
Age Percentage Age Percentage Age Percentage Age Percentage
<S> <C> <C> <C> <C> <C> <C> <C>
40 & below 250% 51 178% 62 126% 73 109%
41 243 52 171 63 124 74 107
42 236 53 164 64 122 75-90 105
43 229 54 157 65 120 91 104
44 222 55 150 66 119 92 103
45 215 56 146 67 118 93 102
46 209 57 142 68 117 94 101
47 203 58 138 69 116 95 & above 100
48 197 59 134 70 115
49 191 60 130 71 113
50 185 61 128 72 111
</TABLE>
Regardless of which death benefit option is in effect, the relationship of
Policy Value to death benefit will change whenever the "corridor percentages"
are used to determine the amount of the death benefit. This will occur whenever
multiplying the Policy Value by the applicable percentage set forth in the above
table results in a greater death benefit than would otherwise apply under the
selected option. For example, assume the life insured under a Policy with a face
amount of $100,000 has an attained age of 40. If Option 1 is in effect, the
corridor percentage will produce a greater death benefit whenever the Policy
Value exceeds $40,000 (250% x $40,000 = $100,000). If the Policy Value is less
than $40,000, an incremental change in Policy Value, up or down, will have no
effect on the death benefit. If the Policy Value is greater than $40,000, an
incremental change in Policy Value will result in a change in the death benefit
by a factor of 2.5. Thus, if the Policy Value were to increase to $40,010, the
death benefit would be increased to $100,025 (250% x $40,010 = $100,025).
If Option 2 were in effect in the above example, the corridor percentage would
produce a greater death benefit whenever the Policy Value exceeded $66,667 (250%
x 66,667 = 166,667). At that point the death benefit produced by multiplying the
Policy Value by 250% would result in a greater amount than adding the Policy
Value to the face amount of the Policy. If the Policy Value is less than
$66,667, an incremental change in Policy Value will have a dollar-for-dollar
effect on the death benefit. If the Policy Value is greater than $66,667, an
incremental change in Policy Value will result in a change in the death benefit
by a factor of 2.5 in the same manner as would be the case under Option 1 when
the corridor percentage determined the death benefit.
DEATH BENEFIT OPTION CHANGES
The death benefit option is selected initially by the policyowner in the
application. After the Policy has been in force for two years the death benefit
option may be changed effective as of any subsequent policy month. Written
request for a change
21
<PAGE> 26
must be received by First North American at least 30 days prior to the beginning
of a policy month in order to become effective on that date. The Company
reserves the right to limit a request for change if the change would cause the
Policy to fail to qualify as life insurance for tax purposes.
A change in death benefit option will result in a change in the Policy's face
amount in order to avoid any change in the amount of the death benefit.
If the change in death benefit is from Option 1 to Option 2, the new face amount
will be equal to the face amount prior to the change minus the Policy Value on
the effective date of the change. A change to Option 2 will not be allowed if it
would cause the face amount of the Policy to go below the minimum face amount of
$50,000 ($100,000 for preferred risk policies). A change of death benefit option
to Option 2 will shorten the death benefit guarantee period to the year in which
the life insured reaches attained age 85.
If the change in death benefit is from Option 2 to Option 1, the new face amount
will be equal to the face amount prior to the change plus the Policy Value on
the effective date of the change. The increase in face amount resulting from a
change to Option 1 will not affect the amount of surrender charges to which a
Policy may be subject. The Company has the right to require satisfactory
evidence of insurability before permitting a change from Option 2 to Option 1.
The Company does not currently require evidence of insurability when making this
change.
Policyowners who wish to have level insurance coverage should generally select
Option 1. Under Option 1, increases in Policy Value usually will reduce the net
amount of risk under a Policy which will reduce cost of insurance charges. This
means that favorable investment performance should result in a faster increase
in Policy Value than would occur under an identical Policy with Option 2 in
effect. However, the larger Policy Value which may result under Option 1 will
not affect the amount of the death benefit unless the corridor percentages are
used to determine the death benefit.
Policyowners who want to have the Policy Value reflected in the death benefit so
that any increases in Policy Value will increase the death benefit should
generally select Option 2. Under Option 2, the net amount at risk will remain
level unless the corridor percentages are used to determine death benefit, in
which case increases in Policy Value will increase the net amount at risk.
FACE AMOUNT CHANGES
Subject to certain limitations, a policyowner may, upon written request,
increase or decrease the face amount of the Policy. A change in face amount may
affect the Death Benefit Guarantee Premium, the monthly deductions and surrender
charges (see "Charges And Deductions"). Currently, each increase or decrease
(other than a decrease resulting from a partial withdrawal) in face amount must
be at least $50,000 ($100,000 for increases in preferred risk policies). First
North American reserves the right to increase or decrease the minimum face
amount change on 90 days' written notice to the policyowner. The Company also
reserves the right to limit a change in face amount to the extent necessary to
prevent the Policy from failing to qualify as life insurance for tax purposes.
INCREASES. Increases in face amount are subject to satisfactory evidence of
insurability. Increases may be made only once per policy year and only after the
second policy anniversary. An increase will become effective at the beginning of
the next policy month following the date First North American approves the
requested increase. The Company reserves the right to refuse a requested
increase if the life insured's age at the effective date of the increase would
be greater than the maximum issue age for new Policies at that time.
An increase in face amount will usually result in the Policy's being subject to
new surrender charges. The new surrender charges will be computed as if a new
Policy were being purchased for the increase in face amount. For purposes of
determining the new deferred sales charge, a portion of the Policy Value at the
time of the increase, and a portion of the premiums paid on or subsequent to the
increase, will be deemed to be premiums attributable to the increase. See
CHARGES AND DEDUCTIONS -- "Surrender Charges." Any increase in face amount to a
level less than the highest face amount previously in effect will have no effect
on the surrender charges to which the Policy is subject, since surrender
charges, if applicable, will have been assessed in connection with the prior
decrease in face amount. The insurance coverage eliminated by the decrease of
the oldest face amount will be deemed to be restored first. As with the purchase
of a Policy, a policyowner will have a free look right with respect to any
increase resulting in new surrender charges.
22
<PAGE> 27
No additional premium is required for a face amount increase. However, a premium
payment may be necessary to prevent the Policy from going into default, since
new surrender charges resulting from an increase would automatically reduce the
Net Cash Surrender Value of the Policy. Moreover, a new Death Benefit Guarantee
Premium will be determined.
DECREASES. A decrease in the face amount may be requested only once per policy
year and only after the Policy has been in force for one year. A decrease in
face amount will become effective at the beginning of the next policy month
following the receipt of a properly executed request. A decrease will not be
allowed if it would cause the face amount to go below the minimum face amount of
$50,000 ($100,000 for preferred risk policies).
A decrease in face amount during the Surrender Charge Period will usually result
in surrender charges being deducted from the Policy Value. See CHARGES AND
DEDUCTIONS -- "Surrender Charges." For purposes of determining surrender and
cost of insurance charges, a decrease will reduce face amount in the following
order: (a) the face amount provided by the most recent increase, then (b) the
face amounts provided by the next most recent increases successively, and
finally (c) the initial face amount.
POLICY VALUES
POLICY VALUE
A Policy has a Policy Value, a portion of which is available to the policyowner
by making a policy loan or partial withdrawal or upon surrender of the Policy.
See "Policy Loans" and "Partial Withdrawals And Surrenders" below. The Policy
Value may also affect the amount of the death benefit. See INSURANCE BENEFIT --
"Death Benefit Options." The Policy Value at any time is equal to the sum of the
Values in the Investment Accounts, the Guaranteed Interest Account and the Loan
Account. The following discussion relates only to the Investment Accounts.
Policy loans are discussed under "Policy Loans" and the Guaranteed Interest
Account is discussed under "The General Account." The portion of the Policy
Value based on the Investment Accounts is not guaranteed and will vary each
Business Day with the investment performance of the underlying Portfolio.
An Investment Account is established under each Policy for each sub-account of
the Separate Account to which net premiums or transfer amounts have been
allocated. Each Investment Account under a Policy measures the interest of the
Policy in the corresponding sub-account. The value of the Investment Account
established for a particular sub-account is equal to the number of units of that
sub-account credited to the Policy times the value of such units.
Units of a particular sub-account are credited to a Policy when net premiums are
allocated to that sub-account or amounts are transferred to that sub-account.
Units of a sub-account are canceled whenever amounts are deducted, transferred
or withdrawn from the sub-account. The number of units credited or canceled for
a specific transaction is based on the dollar amount of the transaction divided
by the value of the unit at the end of the Business Day on which the transaction
occurs. The number of units credited with respect to a premium payment will be
based on the applicable unit values at the end of the Business Day on which the
premium is received at the First North American Service Office or other office
or entity so designated by First North American.
Units are valued at the end of each Business Day. A Business Day is deemed to
end at the time of the determination of the net asset value of the Fund shares.
When an order involving the crediting or canceling of units is received after
the end of a Business Day or on a day which is not a Business Day, the order
will be processed on the basis of unit values determined at the end of the next
Business Day. Similarly, any determination of Policy Value, Investment Account
value or death benefit to be made on a day which is not a Business Day will be
made at the end of the next Business Day.
The value of a unit of each sub-account was initially fixed at $12.50. For each
subsequent Business Day the unit value is determined by multiplying the unit
value for the preceding Business Day by the "net investment factor" for the
particular sub-account for such subsequent Business Day. The net investment
factor for a sub-account for any Business Day is equal to (a) divided by (b),
where:
(a) is the net asset value of the underlying Portfolio shares held by that
sub-account at the end of such Business Day before any policy
transactions are made on that day;
(b) is the net asset value of the underlying Portfolio shares held by that
sub-account at the end of the immediately
23
<PAGE> 28
preceding Business Day after all policy transactions have been made for
that day.
First North American reserves the right to adjust the above formula for any
taxes determined by it to be attributable to the operations of the sub-account.
TRANSFERS OF POLICY VALUE
A policyowner may change the extent to which his or her Policy Value is based
upon any specific sub-account of the Separate Account or the Company's general
account. Such changes are made by transferring amounts from one or more
Investment Accounts or the Company's general account to other Investment
Accounts or the Company's general account. A policyowner is permitted to make
twelve transfers each policy year free of charge. Additional transfers in each
policy year may be made at a cost of $25 per transfer. This charge will be
allocated among the Investment Accounts and the Guaranteed Interest Account in
the same proportion as the amount transferred from each bears to the total
amount transferred. For this purpose all transfer requests received by First
North American on the same Business Day are treated as a single transfer
request.
The maximum amount that may be transferred from the Guaranteed Interest Account
in any one policy year is the greater of $500 or 15% of the Guaranteed Interest
Account value at the previous policy anniversary. Any transfer which involves a
transfer out of the Guaranteed Interest Account may not involve a transfer to
the Investment Account for the Money Market Trust.
Transfer requests must be in a format satisfactory to First North American and
in writing, or by telephone, if a currently valid telephone transfer
authorization form is on file. Although failure to follow reasonable procedures
may result in First North American's liability for any losses resulting from
unauthorized or fraudulent telephone transfers, First North American will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. First North American will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. Such
procedures include: confirming receipt of a valid telephone authorization form;
tape recording all telephone transactions; and providing written confirmation
thereof.
The policyowner may effectively convert his or her Policy to a fixed benefit
policy by transferring the Policy Value in all of the Investment Accounts to the
Guaranteed Interest Account and by changing his or her allocation of net
premiums entirely to the Guaranteed Interest Account. As long as the entire
Policy Value is allocated to the Guaranteed Interest Account, the Policy Value,
other values based thereon and the death benefit will be determinable and
guaranteed. The Investment Account values to be transferred to the Guaranteed
Interest Account will be determined as of the Business Day on which First North
American receives the request for conversion. There will be no change in the
issue age, risk class of the life insured or face amount as a result of the
conversion. A transfer of any or all of the Policy Value to the Guaranteed
Interest Account can be made at any time, even if a prior transfer has been made
during the policy month.
LIMITATIONS. To the extent that total surrenders, partial withdrawals and
transfers out of a sub-account exceed total net premium allocations and
transfers into that sub-account, portfolio securities of the underlying
Portfolio may have to be sold. Excessive sales of the investment portfolio
securities in such a situation could be detrimental to that Portfolio and to
policyowners with Policy Values allocated to sub-accounts investing in that
Portfolio. To protect the interests of all policyowners, the Policy's transfer
privilege is limited as described below.
So long as effecting net transfers out of the Equity Index Sub-account in a
particular Business Day would not reduce the number of shares of the underlying
Equity Index Trust outstanding at the close of the prior Business Day by more
than 5%, all such transfers will be effected. However, net transfers out of that
sub-account greater than 5% would be permitted only if, and to the extent that,
in the judgment of Manufacturers Adviser Corporation, they would not result in
detriment to the underlying Equity Index Trust or to the interests of
policyowners or others with assets allocated to that Portfolio. If and when
transfers must be limited to avoid such detriment, some requests will not be
effected. In determining which requests will be effected, transfers pursuant to
the Dollar Cost Averaging program will be effected first, followed by Asset
Allocation Balancer transfers, written requests next and telephone requests
last. Within each such group, requests will be processed in the order received,
to the extent possible. Policyowners whose transfer requests are not effected
will be so notified. Current SEC rules preclude the Company from processing at a
later date those requests that were not effected. Accordingly, a new transfer
request would have to be submitted in order to effect a transfer that was not
effected because of the limitations described in this paragraph. First North
American may be permitted to limit transfers in certain other circumstances. See
24
<PAGE> 29
Other Provisions -- "Payment Of Proceeds."
DOLLAR COST AVERAGING. First North American will offer policyowners a Dollar
Cost Averaging program. Under this program amounts will be automatically
transferred at predetermined intervals from one Investment Account to any other
Investment Account(s) or the Guaranteed Interest Account.
Under the Dollar Cost Averaging program the policyowner will designate an amount
to be transferred at predetermined intervals from one Investment Account into
any other Investment Account(s) or the Guaranteed Interest Account. Each
transfer under the Dollar Cost Averaging program must be of a minimum amount as
set by First North American. Once set, this minimum may be changed at any time
at the discretion of First North American. Currently, no charge will be made for
this program if the Policy Value exceeds $15,000 on the date of transfer.
Otherwise, there will be a charge of $5 for each transfer under this program.
The charge will be deducted from the value of the Investment Account out of
which the transfer occurs. If insufficient funds exist to effect a Dollar Cost
Averaging transfer, including the charge, if applicable, the transfer will not
be effected and the policyowner will be so notified. First North American
reserves the right to cease to offer this program on 90 days' written notice to
the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS. First North American will also offer
policyowners the ability to have amounts automatically transferred among
stipulated Investment Accounts to maintain an allocated percentage in each
stipulated Investment Account.
Under the Asset Allocation Balancer program the policyowner will designate an
allocation of Policy Value among Investment Accounts. At six month intervals,
beginning six months after the policy date, First North American will move
amounts among the Investment Accounts as necessary to maintain the policyowner's
chosen allocation. A change to the policyowner's premium allocation instructions
will automatically result in a change in Asset Allocation Balancer instructions
so that the two are identical unless the policyowner either instructs First
North American differently or a Dollar Cost Averaging request is in effect.
Currently, there is no charge for this program; however, First North American
reserves the right to institute a charge on 90 days' written notice to the
policyowner.
First North American reserves the right to cease to offer this program on 90
days' written notice to the policyowner.
POLICY LOANS
While the Policy is in force, the policyowner may borrow against the Policy
Value of his or her Policy. The Policy serves as the only security for the loan.
The minimum amount of any loan is $500. The maximum loan amount is the amount
which would cause the Modified Policy Debt to equal the loan value of the Policy
on the date of the loan. The loan value is the Policy's Cash Surrender Value
less the monthly deductions due to the next policy anniversary. The Modified
Policy Debt as of any date is the Policy Debt (the aggregate amount of policy
loans, including borrowed interest, less any loan repayments) plus the amount of
interest to be charged to the next policy anniversary, all discounted from the
next policy anniversary to such date at an annual rate of 4%. An amount equal to
the Modified Policy Debt is transferred to the Loan Account to ensure that a
sufficient amount will be available to pay interest on the Policy Debt at the
next policy anniversary.
For example, assume a Policy with a loan value of $5,000, no outstanding policy
loans and a loan interest rate of 5.75%. The maximum amount that can be borrowed
is an amount that will cause the Modified Policy Debt to equal $5,000. If the
loan is made on a policy anniversary, the maximum loan will be $4,917. This
amount at 5.75% interest will equal $5,200 one year later; $5,200 discounted to
the date of the loan at 4% (the Modified Policy Debt) equals $5,000. Because the
minimum rate of interest credited to the Loan Account is 4%, $5,000 must be
transferred to the Loan Account to ensure that $5,200 will be available at the
next policy anniversary to cover the interest accrued on the Policy Debt.
When a loan is made, First North American will deduct from the Investment
Accounts or the Guaranteed Interest Account, and transfer to the Loan Account,
an amount which will result in the Loan Account value being equal to the
Modified Policy Debt. The policyowner may designate how the amount to be
transferred to the Loan Account is allocated among the accounts from which the
transfer is to be made. In the absence of instructions, the amount to be
transferred will be allocated to each account in the same proportion as the
value in each Investment Account and the Guaranteed Interest Account bears to
the Net Policy Value. A transfer from an Investment Account will result in the
cancellation of units of the underlying sub-account equal in value to the amount
transferred from the Investment Account. However, since the Loan Account is part
of the Policy Value, transfers made in connection with a loan will not change
the Policy Value.
25
<PAGE> 30
A policy loan may result in a Policy's failing to satisfy the No Lapse Guarantee
and/or the Death Benefit Guarantee Cumulative Premium Test, since the Policy
Debt is subtracted from the sum of the premiums paid in determining whether the
Death Benefit Guarantee Cumulative Premium Test is satisfied. As a result, the
death benefit guarantee may terminate. See Insurance Benefit -- "No Lapse
Guarantee" and "Death Benefit Guarantee" and Other General Policy Provisions
- --"Policy Default." Moreover, if the death benefit guarantee is not in force, a
policy loan may cause a Policy to be more susceptible to going into default,
since a policy loan will be reflected in the Net Cash Surrender Value. See Other
General Policy Provisions -- "Policy Default." A policy loan will also affect
future Policy Values, since that portion of the Policy Value in the Loan Account
will increase in value at the crediting interest rate rather than varying with
the performance of the underlying Funds selected by the policyowner or
increasing in value at the rate of interest credited for amounts allocated to
the Guaranteed Interest Account. Policy loans may have tax consequences. A
policyowner considering the use of systematic policy loans as one element of a
comprehensive retirement income plan should consult his or her personal tax
adviser regarding the potential tax consequences if such loans were to so reduce
Policy Value that the Policy would lapse, absent additional payments. The
premium payment necessary to avert lapse would increase with the age of the
insured. See Miscellaneous Matters -- Federal Income Tax Considerations (Tax
Treatment of Policy Benefits). Finally, a policy loan will affect the amount
payable on the death of the life insured, since the death benefit is reduced by
the value of the Policy Debt at the date of death in arriving at the insurance
benefit.
INTEREST CHARGED ON POLICY LOANS. Interest on the Policy Debt will accrue daily
and be payable annually on the policy anniversary. The rate of interest charged
will be fixed at an effective annual rate of 5.75%. If the interest due on a
policy anniversary is not paid by the policyowner, the interest will be borrowed
against the Policy.
INTEREST CREDITED TO THE LOAN ACCOUNT. First North American will credit interest
to any amount in the Loan Account at an effective annual rate of at least 4%.
The actual rate credited is:
- On amounts up to the Policy's Select Loan Amount, the rate of interest
charged on the policy loan less an interest rate differential, currently
0%; provided, however, if at some time in the future it is determined
that the current differential could cause the loan to be treated as a
taxable distribution under any applicable ruling, regulation or court
decision, First North American has the right to increase the
differential on all subsequent Select Loan Amounts either (i) to an
amount that may be prescribed in such ruling, regulation or court
decision that would result in the transaction being treated as a loan
under federal tax law or (ii) if no amount is prescribed, to an amount
that First North American considers to be more likely to result in the
transaction being treated as a loan under Federal tax law.
- On amounts in excess of the Select Loan Amount as described above, the
rate of interest charged on the policy loan less an interest rate
differential, currently 1.75%.
Prior to the later of the tenth policy anniversary and the anniversary following
attained age 55, the amount available as a Select Loan is zero; after the later
of the tenth policy anniversary and the policy anniversary following attained
age 55, the amount available annually as a Select Loan is equal to 12% of the
Policy's Net Cash Surrender Value at the previous policy anniversary. The amount
available as a Select Loan applies to existing and new loans. If, at the time a
policyowner is considering a Select Loan, interest due currently on his or her
outstanding loans equals or exceeds the Select Loan Amount, the Select Loan
feature could not be used to withdraw additional cash from Policy Value. The
total of all loans, including the Select Loan Amount, cannot exceed the maximum
loan amount as described above.
To illustrate the amount available as a Select Loan, assume that a Policy has an
issue age of 47 and a Net Cash Surrender Value on the eleventh policy
anniversary of $10,000. The Select Loan Amount available during the twelfth
policy year is $1,200 (12% x $10,000). Assume that at the beginning of the
twelfth policy year, a loan of $1,500 is taken. $1,200 of that amount is
considered the Select Loan Amount, $300 an ordinary policy loan.
At the end of the twelfth policy year, assume that the Net Cash Surrender Value
is $9,000. The Select Loan Amount available during the thirteenth policy year is
$1,080 (12% x $9,000). If not already repaid, the $300 from the prior year's
loan that was not considered a Select Loan is immediately converted to a Select
Loan, leaving $780 of the Select Loan Amount available for the thirteenth policy
year (provided that the sum of all outstanding loans does not exceed the
Policy's maximum loan amount). The amount of any unpaid interest on the Select
Loan and the ordinary policy loan from the twelfth policy year also would be
borrowed as a Select Loan up to the maximum Select Loan Amount and thereby
reduce by
26
<PAGE> 31
that amount the $780 available for borrowing as a Select Loan during the
remainder of the thirteenth policy year.
LOAN ACCOUNT ADJUSTMENTS. When a loan is first taken out, and at specified
events thereafter, the value of the Loan Account is adjusted. Whenever the Loan
Account is adjusted, the difference between (i) the Loan Account before any
adjustment and (ii) the Modified Policy Debt at the time of adjustment, is
transferred between the Loan Account and the Investment Accounts or the
Guaranteed Interest Account. The amount transferred to or from the Loan Account
will be such that the value of the Loan Account is equal to the Modified Policy
Debt after the adjustment.
The specified events which cause an adjustment to the Loan Account are (i) a
policy anniversary, (ii) a partial or full loan repayment, (iii) a new loan
being taken out, or (iv) when an amount is needed to meet a monthly deduction. A
loan repayment may be implicit in that policy debt is effectively repaid upon
termination (i.e., upon death of the life insured, surrender or lapse of the
policy). In each of these instances, the Loan Account will be adjusted so that
any excess of the Loan Account over the Modified Policy Debt after the repayment
will be included in the termination proceeds.
Except as noted below in the Loan Repayments section, amounts transferred from
the Loan Account will be allocated to the Investment Accounts and the Guaranteed
Interest Account in the same proportion as the value in the corresponding "loan
sub-account" bears to the value of the Loan Account. A "loan sub-account" exists
for each Investment Account and for the Guaranteed Interest Account. Amounts
transferred to the Loan Account are allocated to the appropriate loan
sub-account to reflect the account from which the transfer was made.
LOAN ACCOUNT ILLUSTRATION. (Dollar amounts in this illustration have been
rounded to the nearest dollar.) The operation of the Loan Account may be
illustrated by consideration of a Policy with a loan value of $5,000, a loan
interest rate of 5.75%, and a maximum loan amount on a policy anniversary of
$4,917. For purposes of the illustration, assume that the Select Loan Amount is
zero. If a loan in the maximum amount of $4,917 is made, an amount equal to the
Modified Policy Debt, $5,000, is transferred to the Loan Account. At the next
policy anniversary the value of the Loan Account will have increased to $5,200
($5,000 x 1.04) reflecting interest credited at an effective annual rate of
4.0%. At that time the loan will have accrued interest charges of $283 ($4,917 x
.0575), bringing the Policy Debt to $5,200.
If the accrued interest charges are paid on the policy anniversary, the Policy
Debt will continue to be $4,917, and the Modified Policy Debt, reflecting
interest for the next policy year and discounting the Policy Debt and such
interest at 4%, will be $5,000. An amount will be transferred from the Loan
Account to the Guaranteed Interest Account or the Investment Accounts so that
the Loan Account value will equal the Modified Policy Debt. Since the Loan
Account value was $5,200, a transfer of $200 will be required ($5,200 --
$5,000).
If, however, the accrued interest charges of $283 are borrowed, an amount will
be transferred from the Investment Accounts and the Guaranteed Interest Account
so that the Loan Account value will equal the Modified Policy Debt recomputed at
the policy anniversary. The new Modified Policy Debt is the Policy Debt, $5,200,
plus loan interest to be charged to the next policy anniversary, $299 ($5,200 x
.0575), discounted at 4%, which results in a figure of $5,288. Since the value
of the Loan Account was $5,200, a transfer of $88 will be required. This amount
is equivalent to the 1.75% interest rate differential on the $5,000 transferred
to the Loan Account on the previous policy anniversary.
LOAN REPAYMENTS. Policy Debt may be repaid in whole or in part at any time prior
to the death of the life insured provided the Policy is in force. When a
repayment is made, the amount is credited to the Loan Account and a transfer is
made to the Guaranteed Interest Account or the Investment Accounts so that the
Loan Account at that time equals the Modified Policy Debt. Loan repayments will
first be allocated to the Guaranteed Interest Account until the associated loan
sub-account is reduced to zero. Loan repayments will then be allocated to each
Investment Account in the same proportion as the value in the corresponding loan
sub-account bears to the value of the Loan Account. Amounts paid to the Company
not specifically designated in writing as loan repayments will be treated as
premiums.
PARTIAL WITHDRAWALS AND SURRENDERS
After a Policy has been in force for two policy years, the policyowner may make
a partial withdrawal of the Net Cash Surrender Value. The minimum amount that
may be withdrawn is $500. The policyowner should specify the portion of the
withdrawal to be taken from each Investment Account and the Guaranteed Interest
Account. In the absence of instructions the withdrawal will be allocated among
such accounts in the same proportion as the Policy Value in each account bears
to the Net Policy Value. No more than one partial withdrawal may be made in any
one policy month.
27
<PAGE> 32
A partial withdrawal made during the Surrender Charge Period will usually result
in the assessment of a portion of the surrender charges to which the Policy is
subject (see Charges And Deductions -- "Surrender Charges") if the withdrawal is
in excess of the Withdrawal Tier Amount. The Withdrawal Tier Amount is equal to
10% of the Net Cash Surrender Value determined as of the previous policy
anniversary. The portion of a partial withdrawal that is considered to be in
excess of the Withdrawal Tier Amount includes all previous partial withdrawals
that have occurred in the current policy year. If the Option 1 death benefit is
in effect under a Policy from which a partial withdrawal is made, the face
amount of the Policy will be reduced. See CHARGES AND DEDUCTIONS -- SURRENDER
CHARGES (CHARGES ON PARTIAL WITHDRAWALS).
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any surrender charges and outstanding monthly deductions due (the
"Cash Surrender Value") minus the value of the Policy Debt. The Net Cash
Surrender Value will be determined at the end of the Business Day on which First
North American receives the Policy and a written request for surrender at its
Service Office. After a Policy is surrendered, the insurance coverage and all
other benefits under the Policy will terminate. Surrender of a Policy during the
Surrender Charge Period will usually result in the assessment by First North
American of surrender charges. See Charges And Deductions -- "Surrender
Charges."
CHARGES AND DEDUCTIONS
Charges under the Policy are assessed as (i) deductions from premiums, (ii)
surrender charges upon surrender, partial withdrawals, decreases in face amount
or lapse, (iii) monthly deductions, and (iv) other charges. These charges are
described below.
DEDUCTIONS FROM PREMIUMS
First North American currently makes no deduction of charges from premium
payments for state and local taxes. The maximum amount of deductions for such
charges which may be applicable to future premium payments is 2.35%. First North
American currently makes no deduction of a charge from premium payments for
federal taxes. The maximum amount of deduction for such a charge which may be
applicable to future premium payments is 1.25%.
SURRENDER CHARGES
First North American will assess surrender charges upon surrender, a partial
withdrawal of Policy Value in excess of the Withdrawal Tier Amount, a requested
decrease in face amount, or lapse. The charges will usually be assessed if any
of the above transactions occurs within the Surrender Charge Period unless the
charges have been previously deducted. There are two surrender charges -- a
deferred underwriting charge and a deferred sales charge.
DEFERRED UNDERWRITING CHARGE. The deferred underwriting charge is $4.50 for each
$1,000 of face amount of life insurance coverage initially purchased or added by
increase. In effect, the charge applies only to the first $500,000 of face
amount initially purchased or the first $500,000 of each subsequent increase in
face amount. Thus, the charge made in connection with any one underwriting will
not exceed $2,250. The amount of the charge remains level for five years.
Following the fifth year after issuance of the Policy or a face amount increase,
the charge applicable to the initial face amount or increase will decrease each
month by varying rates depending upon the life insured's issue age until the
charge has decreased to zero. The applicable percentage of the deferred
underwriting charges to which the Policy is subject is illustrated by Table 2.
28
<PAGE> 33
The deferred underwriting charge is designed to cover the administrative
expenses associated with underwriting and policy issue, including the costs of
processing applications, conducting medical examinations, determining the life
insured's risk class and establishing policy records.
DEFERRED SALES CHARGE. The maximum deferred sales charge is 50% of premiums paid
up to a maximum number of Target Premiums that varies (from -- 0.52 to 2.59)
according to the issue age of the life insured, the face amount at issue and the
amount of any increase. This charge compensates the Company for some of the
expenses of selling and distributing the Policies, including agents'
commissions, advertising, agent training and the printing of prospectuses and
sales literature.
The deferred sales charge deducted in any policy year is not specifically
related to sales expenses incurred in that year. Instead, the Company expects
that the major portion of the sales expenses attributable to a Policy will be
incurred during the first policy year, although the deferred sales charge might
be deducted up to fifteen years later. First North American anticipates that the
aggregate amounts received under the Policies for sales charges will be
insufficient to cover aggregate sales expenses. To the extent that sales
expenses exceed sales charges, First North American will pay the excess from its
other assets or surplus, including amounts derived from the mortality and
expense risks charge described below.
The Target Premium for the initial face amount is specified in the Policy. A
Target Premium will be computed for each increase in face amount above the
highest face amount of coverage previously in effect, and the policyowner will
be advised of each new Target Premium. Target Premiums depend upon the face
amount of insurance provided at issue or by an increase and the issue age and
sex of the life insured. The maximum number of Target Premiums subject to the
deferred sales charge varies, based on the issue age of the life insured, the
face amount at issue and the amount of any increase, according to Table 1:
29
<PAGE> 34
TABLE 1: NUMBER OF TARGET PREMIUMS SUBJECT TO DEFERRED SALES CHARGE
(APPLICABLE TO THE INITIAL FACE AMOUNT AND INCREASES)
<TABLE>
<CAPTION>
AGE $250,000 UNDER AGE $250,000 UNDER AGE $250,000 UNDER
OR MORE $250,000 OR MORE $250,000 OR MORE $250,000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 -0.44* 1.68 30 1.56 2.15 60 2.07 2.42
1 -0.52* 1.46 31 1.61 2.19 61 2.06 2.43
2 0.06 1.45 32 1.67 2.23 62 2.05 2.43
3 0.24 1.45 33 1.72 2.27 63 2.05 2.43
4 0.62 1.46 34 1.78 2.30 64 2.05 2.42
5 0.63 1.47 35 1.83 2.33 65 2.06 2.41
6 0.67 1.49 36 1.86 2.38 66 2.03 2.41
7 0.69 1.51 37 1.89 2.41 67 2.03 2.41
8 0.72 1.52 38 1.91 2.45 68 1.98 2.41
9 0.75 1.54 39 1.94 2.49 69 1.85 2.30
10 0.78 1.55 40 1.96 2.52 70 1.71 2.17
11 0.82 1.58 41 1.98 2.55 71 1.59 2.05
12 0.85 1.60 42 2.01 2.59 72 1.46 1.92
13 0.88 1.61 43 2.04 2.57 73 1.35 1.80
14 0.92 1.63 44 2.06 2.55 74 1.26 1.70
15 0.88 1.52 45 2.08 2.54 75 1.16 1.60
16 0.90 1.53 46 2.12 2.53 76 1.08 1.50
17 0.94 1.58 47 2.17 2.51 77 1.01 1.40
18 0.99 1.64 48 2.22 2.50 78 0.93 1.30
19 1.03 1.68 49 2.22 2.49 79 0.87 1.22
20 1.07 1.72 50 2.21 2.48 80 0.82 1.14
21 1.11 1.77 51 2.19 2.47 81 0.76 1.07
22 1.16 1.82 52 2.18 2.47 82 0.71 1.01
23 1.20 1.86 53 2.16 2.46 83 0.67 0.95
24 1.25 1.91 54 2.15 2.46 84 0.62 0.89
25 1.30 1.95 55 2.14 2.45 85 0.58 0.83
26 1.35 1.99 56 2.12 2.44 86 0.56 0.78
27 1.40 2.04 57 2.11 2.44 87 0.54 0.73
28 1.46 2.08 58 2.10 2.43 88 0.52 0.68
29 1.51 2.12 59 2.08 2.43 89 0.50 0.64
90 0.50 0.63
</TABLE>
* The negative Number of Target Premiums produces a negative Deferred Sales
Charge. When combined with the Deferred Underwriting Charge, the negative
Deferred Sales Charge reduces the total surrender charge.
The maximum deferred sales charge will be in effect for at least the first five
years of the Surrender Charge Period. After that, the portion of the deferred
sales charge that remains in effect will grade down at a rate that also varies
according to the issue age of the life insured until, at the end of the
Surrender Charge Period, there is no deferred sales charge. The table to be used
to reduce the applicable deferred sales charge during the Surrender Charge
Period is set forth in Table 2 to this Prospectus. The applicable table will be
set forth in each Policy and the policyowner will be informed of the table to be
used in connection with sales charges on increases in face amount.
In order to determine the deferred sales charge applicable to a face amount
increase, First North American will treat a portion of the Policy Value on the
date of increase as a premium attributable to the increase. In addition, a
portion of each premium paid on or subsequent to the increase will be attributed
to the increase. In each case, the portion attributable to the increase will be
the ratio of the "guideline annual premium" for the increase to the sum of the
guideline annual premiums for the initial face amount and all increases
including the requested increase.
30
<PAGE> 35
TABLE 2: DEFERRED UNDERWRITING CHARGES AND DEFERRED SALES CHARGES
<TABLE>
<CAPTION>
TRANSACTION OCCURS
AFTER
MONTHLY DEDUCTION
TAKEN
FOR LAST MONTH PERCENT OF DEFERRED UNDERWRITING CHARGES AND DEFERRED SALES CHARGE BY ISSUE AGE*
PRECEDING --------------------------------------------------------------------------------
END OF MONTH* AGE
MONTH 0-50 51 52 53 54 55+
----- ---- -- -- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
12 100% 100% 100% 100% 100% 100%
24 100% 100% 100% 100% 100% 100%
36 100% 100% 100% 100% 100% 100%
48 100% 100% 100% 100% 100% 100%
60 100% 100% 100% 100% 100% 100%
72 90% 88.89% 87.50% 85.71% 83.33% 80.00%
84 80% 77.78% 75.00% 71.43% 66.67% 60.00%
96 70% 66.67% 62.50% 57.14% 50.00% 40.00%
108 60% 55.56% 50.00% 42.86% 33.33% 20.00%
120 50% 44.44% 37.50% 28.57% 16.67% 0%
132 40% 33.33% 25.00% 14.28% 0%
144 30% 22.22% 12.50% 0%
156 20% 11.11% 0%
168 10% 0%
180 0%
</TABLE>
* Months not shown may be calculated by interpolation.
The following example illustrates how deferred underwriting and deferred sales
charges are calculated using data from Tables 1 and 2 above.
Assume a 36-year-old male (standard risk), at age 30, and who has paid $9,000 in
premiums under a Policy with a Target Premium of $593 and a face amount of
$100,000 surrenders his Policy during the last month of the sixth policy year.
A deferred underwriting charge of $405 would be assessed. The maximum deferred
underwriting charge of $450 ($4.50 per $1,000 of face amount x 100) would be
multiplied by the 90% listed in Table 2 as applicable to surrenders during the
last month of the sixth policy year [90% x ($4.50 x 100) = $405].
A deferred sales charge of $573.73 would also be assessed. According to Table 1,
the maximum number of Target Premiums subject to the deferred sales charge for a
person who was 30 years old when his or her Policy with a face amount less than
$250,000 was issued would be 2.15. Thus $1,274.95 (2.15 x $593) would be the
maximum amount of premiums subject to the 50% sales charge, producing a maximum
sales charge of $637.48 (50% x $1,274.95 = $637.48). Because the surrender
occurs during the last month of the sixth policy year, only 90% (from Table 2
for issue age 30) of the maximum sales charge remains applicable 90% x (.50 x
2.15 X $593) = $573.73].
CHARGES ON PARTIAL WITHDRAWALS. Whenever a portion of the surrender charges is
deducted as a result of a partial withdrawal of Policy Value in excess of the
Withdrawal Tier Amount, the Policy's remaining surrender charges will be reduced
by the amount of the charges taken. The surrender charges not assessed as a
result of the 10% free withdrawal provision remain in effect under the Policy
and may be assessed upon surrender or lapse, other partial withdrawals, or a
requested decrease in face amount. The portion of the surrender charges assessed
will be based on the ratio of the amount of the withdrawal in excess of the
Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy less the
Withdrawal Tier Amount immediately prior to the withdrawal. The surrender
charges will be deducted from each Investment Account and the Guaranteed
Interest Account in the same proportion as the amount of the withdrawal taken
from such account bears to the total amount of the withdrawal. If the amount in
the account is insufficient to pay the portion of the surrender charges
allocated to that account, then the portion of the withdrawal allocated to that
account will be reduced so that the withdrawal plus the portion of the surrender
charges allocated to that account equal the value of that account. Units equal
to the amount of the partial withdrawal taken, and surrender charges deducted,
from each Investment Account will be canceled based on
31
<PAGE> 36
the value of such units determined at the end of the Business Day on which First
North American receives a written request for withdrawal at its Service Office.
If the Option 1 death benefit is in effect under a Policy from which a partial
withdrawal is made, the face amount of the Policy will be reduced. If the death
benefit is equal to the face amount at the time of withdrawal, the face amount
will be reduced by the amount of the withdrawal plus the portion of the
surrender charges assessed. If the death benefit is based upon the Policy Value
times the applicable percentage set forth under Insurance Benefit -- "Death
Benefit Options" above, the face amount will be reduced only to the extent that
the amount of the withdrawal plus the portion of the surrender charges assessed
exceeds the difference between the death benefit and the face amount. Reductions
in face amount resulting from partial withdrawals will not incur any surrender
charges above the surrender charges applicable to the withdrawal. When the face
amount of a Policy is based on one or more increases subsequent to issuance of
the Policy, a reduction resulting from a partial withdrawal will be applied in
the same manner as a requested decrease in face amount, i.e., against the face
amount provided by the most recent increase, then against the next most recent
increases successively and finally against the initial face amount.
CHARGES ON DECREASES IN FACE AMOUNT. As with partial withdrawals, a portion of a
Policy's surrender charges will be deducted upon a decrease, or a cancellation
of an increase, in face amount requested by the policyowner. Since surrender
charges are determined separately for the initial face amount and each face
amount increase, and since a decrease in face amount will have a different
impact on each level of insurance coverage, the portion of the surrender charges
to be deducted with respect to each level of insurance coverage will be
determined separately. Such portion will be the same as the ratio of the amount
of the reduction in such coverage to the amount of such coverage prior to the
reduction.
As noted under Insurance Benefit -- "Face Amount Changes," decreases are applied
to the most recent increase first and thereafter to the next most recent
increases successively. The charges will be deducted from the Policy Value, and
the amount so deducted will be allocated among the Investment Accounts and the
Guaranteed Interest Account in the same proportion as the Policy Value in each
bears to the Net Policy Value. Whenever a portion of the surrender charges is
deducted as a result of a decrease in face amount, the Policy's remaining
surrender charges will be reduced by the amount of the charges taken.
CHARGES REMAINING AFTER FACE AMOUNT DECREASES OR PARTIAL WITHDRAWALS. Each time
a pro-rata deferred underwriting charge or a pro-rata deferred sales charge for
a face amount decrease or for a partial withdrawal is deducted, the remaining
deferred underwriting charge and deferred sales charge will be reduced
proportionately.
The remaining deferred underwriting charge will be calculated using Table 2
above. The actual remaining charge will be the result of (a) divided by (b),
multiplied by (c), where:
(a) is the grading percentage applicable to the life insured's issue age
and Policy duration;
(b) is the grading percentage applicable to the life insured's issued age
at the time of the last face amount decrease or partial withdrawal; and
(c) is the remaining deferred sales charge prior to the last face amount
decrease or partial withdrawal less the deferred underwriting charge
deducted for that face amount decrease or partial withdrawal.
The remaining deferred sales charge will be calculated using Table 1 above. The
actual remaining charge will be the result of (a) divided by (b), multiplied by
(c), where:
(a) (a) is the grading percentage applicable to the Policy duration;
(b) is the grading percentage at the time of the last face amount decrease
or partial withdrawal; and
(c) is the remaining deferred sales charge prior to the last face amount
decrease or partial withdrawal less the deferred sales charge deducted
for that face amount decrease or partial withdrawal.
Until the sum of premiums paid equals or exceeds the number of Target Premiums
subject to deferred sales charge multiplied by the Target Premium, subsequent
premium payments will increase the remaining deferred sales charge.
32
<PAGE> 37
MONTHLY DEDUCTIONS
Each month a deduction consisting of an administration charge, a charge for the
cost of insurance, a charge for mortality and expense risks, and charge(s) for
any supplementary benefit(s) (see Other Provisions -- "Supplementary Benefits")
is deducted from Policy Value. The monthly deduction will be allocated among the
Investment Accounts and (other than the mortality and expense risks charge) the
Guaranteed Interest Account in the same proportion as the Policy Value in each
bears to the Net Policy Value. Monthly deductions due prior to the effective
date will be taken on the effective date instead of the dates they were due. If
the Policy is still in force when the life insured attains age 100, no further
monthly deductions will be taken from the Policy Value.
ADMINISTRATION CHARGE
The monthly administration charge is $35 until the first anniversary and,
thereafter, $10 (the right is reserved to increase the administration charge by
an additional amount up to $.01 per $1,000 of face amount per month). The charge
is designed to cover certain administrative expenses associated with the Policy,
including maintaining policy records, collecting premiums and processing death
claims, surrender and withdrawal requests and various charges permitted under a
Policy.
COST OF INSURANCE CHARGE
The monthly charge for the cost of insurance is determined by multiplying the
applicable cost of insurance rate times the net amount at risk at the beginning
of each policy month. The cost of insurance rate is based on the life insured's
issue age, the duration of the coverage, sex and risk class. See Miscellaneous
Matters -- "Legal Considerations." The rate is determined separately for the
initial face amount and for each increase in face amount. Cost of insurance
rates will generally increase with the life insured's age. Any additional
ratings as indicated in the Policy will be added to the cost of insurance rate.
The cost of insurance rates used by First North American reflect its
expectations as to future mortality experience as based on current experience.
The rates may be changed from time to time on a basis which does not unfairly
discriminate within the class of life insureds. In no event will the cost of
insurance rate exceed the guaranteed rate set forth in the Policy except to the
extent tat an extra rate is imposed because of an additional rating applicable
to the life insured. The guaranteed rates are based on the 1980 Commissioners
Standard Ordinary Smoker/Nonsmoker Mortality Tables.
The net amount at risk to which the cost of insurance rate is applied is the
difference between the death benefit, divided by 1.0032737 (a factor which
reduces the net amount at risk for cost of insurance charge purposes by taking
into account assumed monthly earnings at an annual rate of 4%), and the Policy
Value. Because different cost of insurance rates may apply to different levels
of insurance coverage, the net amount at risk will be calculated separately for
each level of insurance coverage. When the Option 1 death benefit is in effect,
for purposes of determining the net amount at risk applicable to each level of
insurance coverage, the Policy Value is attributed first to the initial face
amount and then, if the Policy Value is greater than the initial face amount, to
each increase in face amount in the order made.
Because the calculation of the net amount at risk is different under the death
benefit options when more than one level of insurance coverage is in effect, a
change in the death benefit option may result in a different net amount at risk
for each level of insurance coverage than would have occurred had the death
benefit option not been changed. Since the cost of insurance is calculated
separately for each level of insurance coverage, any change in the net amount at
risk for a level of insurance coverage resulting from a change in the death
benefit option may affect the amount of the charge for the cost of insurance.
Partial withdrawals and decreases in face amount will also affect the manner in
which the net amount at risk for each level of insurance coverage is calculated.
MORTALITY AND EXPENSE RISKS CHARGE
First North American deducts a monthly charge from the Policy Value for the
mortality and expense risks it assumes under the Policies. This charge is made
at the beginning of each policy month at a rate of 0.075% through the later of
the tenth anniversary of the Policy and the policyowner's attained age of 60
and, thereafter, 0.0375%. It is assessed against the value of the policyowner's
Investment Accounts by cancellation of units in the same proportion as the value
of each Investment Account bears to the total value of the Investment Accounts.
The mortality risk assumed is that lives insured may live for a shorter period
of time than the Company estimated. The expense risk assumed is that expenses
incurred in issuing and
33
<PAGE> 38
administering the Policies will be greater than the Company estimated. First
North American estimates that virtually all of the mortality and expense risks
charge currently relates to expense risks. First North American will realize a
gain from this charge to the extent it is not needed to provide benefits and pay
expenses under the Policies.
OTHER CHARGES
Currently, First North American makes no charge against the Separate Account for
federal, state or local taxes that may be attributable to the Separate Account
or to the operations of the Company with respect to the Policies. However, if
First North American incurs any such taxes, it may make a charge therefor.
Charges will be imposed on certain transfers of Policy Values, including a $25
charge for each transfer in excess of twelve in a policy year and a $5 charge
for each Dollar Cost Averaging transfer when Policy Value does not exceed
$15,000. See Policy Values -- "Transfers Of Policy Value."
The Separate Account purchases shares of Portfolios at net asset value. The net
asset value of those shares reflects the following investment management fees
and expenses:
<TABLE>
<CAPTION>
INVESTMENT
MANAGEMENT EXPENSES
FEES OF UP TO
---- --------
<S> <C> <C>
Pacific Rim Emerging Markets Trust ....................................................... .850% .75%
Science & Technology Trust ............................................................... 1.100% .50%
International Small Cap Trust ............................................................ 1.100% .75%
Emerging Growth Trust .................................................................... 1.050% .50%
Pilgrim Baxter Growth Trust .............................................................. 1.050% .50%
Small/Mid Cap Trust ...................................................................... 1.000% .50%
International Stock Trust ................................................................ 1.050% .75%
Worldwide Growth Trust ................................................................... 1.000% .75%
Global Equity Trust ...................................................................... .900% .75%
Growth Trust ............................................................................. .850% .50%
Equity Trust ............................................................................. .750% .50%
Quantitative Equity Trust* ............................................................... .700% .50%
Equity Index Trust ....................................................................... .250% .15%
Blue Chip Growth Trust ................................................................... .925% .50%
Real Estate Securities Trust* ............................................................ .700% .50%
Value Trust .............................................................................. .800% .50%
International Growth and Income Trust .................................................... .950% .75%
Growth and Income Trust .................................................................. .750% .50%
Equity-Income Trust ...................................................................... .800% .50%
Balanced Trust ........................................................................... .800% .50%
Aggressive Asset Allocation Trust ........................................................ .750% .50%
Moderate Asset Allocation Trust .......................................................... .750% .50%
Conservative Asset Allocation Trust ...................................................... .750% .50%
High Yield Trust ......................................................................... .775% .50%
Strategic Bond Trust ..................................................................... .775% .50%
Global Government Bond Trust ............................................................. .800% .75%
Capital Growth Bond Trust* ............................................................... .650% .50%
Investment Quality Bond Trust ............................................................ .650% .50%
U.S. Government Securities Trust ......................................................... .650% .50%
Money Market Trust ....................................................................... .500% .50%
Lifestyle Aggressive 1000 Trust .......................................................... None** N/A***
Lifestyle Growth 820 Trust ............................................................... None** N/A***
Lifestyle Balanced 640 Trust ............................................................. None** N/A***
Lifestyle Moderate 460 Trust ............................................................. None** N/A***
Lifestyle Conservative 280 Trust ......................................................... None** N/A***
</TABLE>
* NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year beginning
January 1, 1997 to the extent necessary to prevent the total of advisory
fees and expenses for the Quantitative Equity Trust, Real Estate Securities
Trust and Capital Growth Bond Trust for such period from
34
<PAGE> 39
exceeding .50% of average net assets.
** Because each Lifestyle Trust will invest in shares of Underlying Portfolios
each will bear its pro rata share of the fees and expenses incurred by the
Underlying Portfolios.
*** The Adviser has agreed to pay the expenses of each of the Lifestyle Trusts
(other than the expenses of the Underlying Portfolios) for a period of one
year commencing January 1, 1997. After this one year period, this expense
reimbursement may be terminated at any time.
Detailed information concerning such fees and expenses is set forth under the
caption that accompanies this Prospectus and under the caption "Management of
The Trust" in the Prospectus for the NASL Series Trust that accompanies this
Prospectus.
THE GENERAL ACCOUNT
By virtue of exclusionary provisions, interests in the general account of First
North American have not been registered under the Securities Act of 1933 and the
general account has not been registered as an investment company under the 1940
Act. Accordingly, neither the general account nor any interests therein are
subject to the provisions of these acts, and as a result the staff of the SEC
has not reviewed the disclosures in this prospectus relating to the general
account. Disclosures regarding the general account may, however, be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in a prospectus.
The general account of First North American consists of all assets owned by the
Company other than those in its separate accounts. Subject to applicable law,
First North American has sole discretion over the investment of the assets of
the general account.
A policyowner may elect to allocate net premiums to the Guaranteed Interest
Account or to transfer all or a portion of the Policy Value to the Guaranteed
Interest Account from the Investment Accounts. Transfers from the Guaranteed
Interest Account to the Investment Accounts are subject to restrictions. See
Policy Values -- "Transfers Of Policy Value" and "Policy Value." First North
American will hold the reserves required for any portion of the Policy Value
allocated to the Guaranteed Interest Account in its general account. However, an
allocation of Policy Value to the Guaranteed Interest Account does not entitle
the policyowner to share in the investment experience of the general account.
Instead, First North American guarantees that the Policy Value in the Guaranteed
Interest Account will accrue interest daily at an effective annual rate of at
least 4%, without regard to the actual investment experience of the general
account. The Company may, at its sole discretion, credit a higher rate of
interest, although it is not obligated to do so. The policyowner assumes the
risk that interest credited may not exceed the guaranteed minimum rate of 4% per
year.
OTHER GENERAL POLICY PROVISIONS
POLICY DEFAULT
Unless the No Lapse Guarantee or Death Benefit Guarantee is in effect, a Policy
will go into default if the Policy's Net Cash Surrender Value at the beginning
of any policy month would go below zero after deducting the monthly deductions
then due. First North American will notify the policyowner of the default and
will allow a 61-day grace period in which the policyowner may make a premium
payment sufficient to bring the Policy out of default. The required payment will
be equal to the amount necessary to bring the Net Cash Surrender Value to zero,
if it was less than zero at the date of default, plus the monthly deductions due
at the date of default and at the beginning of each of the two policy months
thereafter, based on the Policy Value at the date of default. If the required
payment is not received by the end of the grace period, the Policy will
terminate and the Net Cash Surrender Value as of the date of default less the
monthly deductions then due will be paid to the policyowner. If the life insured
should die during the grace period following a Policy's going into default, the
Policy Value used in the calculation of the death benefit will be the Policy
Value as of the date of default and the insurance benefit payable will be
reduced by any outstanding monthly deductions due at the time of death.
POLICY REINSTATEMENT
A policyowner can reinstate a Policy which has terminated after going into
default at any time within 21 days following the
35
<PAGE> 40
date of termination without furnishing evidence of insurability, subject to the
following conditions:
(a) The life insured's risk class is standard or preferred.
(b) The life insured's attained age is less than 46.
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the five-year period following the date of
termination subject to the following conditions:
(a) The Policy must not have been surrendered for its Net Cash Surrender
Value at the request of the policyowner;
(b) Evidence of the life insured's insurability satisfactory to First
North American is furnished to it;
(c) A premium equal to the payment required during the 61-day grace period
following default to keep the Policy in force is paid to First North
American; and
(d) An amount equal to any amounts paid by First North American in
connection with the termination of the Policy is repaid to First North
American.
If the reinstatement is approved, the date of reinstatement will be the later of
the date of the policyowner's written request or the date the required payment
is received at the First North American Service Office.
MISCELLANEOUS POLICY PROVISIONS
BENEFICIARY. One or more beneficiaries of the Policy may be appointed by the
policyowner by naming them in the application. Beneficiaries may be appointed in
three classes -- primary, secondary and final. Thereafter the beneficiary may be
changed by the policyowner during the life insured's lifetime by giving written
notice to First North American in a form satisfactory to it unless an
irrevocable designation has been elected. If the life insured dies and there is
no surviving beneficiary, the policyowner, or the policyowner's estate if the
policyowner is the life insured, will be the beneficiary. If a beneficiary dies
before the seventh day after the death of the life insured, the Company will pay
the insurance benefit as if the beneficiary had died before the life insured.
INCONTESTABILITY. First North American will not contest the validity of a Policy
after it has been in force during the life insured's lifetime for two years from
the issue date. It will not contest the validity of an increase in face amount
or the addition of a supplementary benefit after such increase or addition has
been in force during the life insured's lifetime for two years. If a Policy has
been reinstated and been in force for less than two years from the reinstatement
date, the Company can contest any misrepresentation of a fact material to the
reinstatement.
MISSTATEMENT OF AGE OR SEX. If the life insured's stated age or sex or both in
the Policy are incorrect, First North American will change the face amount of
insurance so that the death benefit will be that which the most recent monthly
charge for the cost of insurance would have bought for the correct age and sex.
SUICIDE EXCLUSION. If the life insured dies by suicide within two years from the
issue date, First North American will pay only the premiums paid less any
partial withdrawals of the Net Cash Surrender Value and any amount in the Policy
Debt. If the life insured should die by suicide within two years after a face
amount increase, the death benefit for the increase will be limited to the
monthly deduction for the increase.
ASSIGNMENT. First North American will not be bound by an assignment until it
receives a copy of it at its Service Office. First North American assumes no
responsibility for the validity or effects of any assignment.
OTHER PROVISIONS
SUPPLEMENTARY BENEFITS
Subject to certain requirements, one or more supplementary benefits may be added
to a Policy, including those providing term insurance for additional insureds,
providing term insurance options, providing accidental death coverage, waiving
36
<PAGE> 41
monthly deductions upon disability, guaranteeing the Policy Value, accelerating
benefits in the event of terminal illness, and, in the case of corporate-owned
Policies, permitting a change of the life insured. More detailed information
concerning supplementary benefits may be obtained from an authorized agent of
the Company. The cost of any supplementary benefits will be deducted as part of
the monthly deduction. See Charges And Deductions -- "Monthly Deductions."
PAYMENT OF PROCEEDS
As long as the Policy is in force, First North American will ordinarily pay any
policy loans, partial withdrawals, Net Cash Surrender Value or any insurance
benefit within seven days after receipt at the First North American Service
Office of all the documents required for such a payment.
The Company may delay the payment of any policy loans, partial withdrawals, Net
Cash Surrender Value or the portion of any insurance benefit that depends on the
Guaranteed Interest Account value for up to six months; otherwise the Company
may delay payment for any period during which (i) the New York Stock Exchange is
closed for trading (except for normal holiday closings) or trading on the
Exchange is otherwise restricted; or (ii) an emergency exists as defined by the
SEC or the SEC requires that trading be restricted; or (iii) the SEC permits a
delay for the protection of policyowners. Also, transfers may be denied under
the circumstances stated in clauses (i), (ii) and (iii) above and under the
circumstances previously set forth. See Policy Values -- "Transfers Of Policy
Value."
REPORTS TO POLICYOWNERS
Within 30 days after each policy anniversary, First North American will send the
policyowner a statement showing, among other things, the amount of the death
benefit, the Policy Value and its allocation among the Investment Accounts, the
Guaranteed Interest Account and the Loan Account, the value of the units in each
Investment Account to which the Policy Value is allocated, any Loan Account
balance and any interest charged since the last statement, the premiums paid and
policy transactions made during the period since the last statement and any
other information required by law.
Within 10 days after any transaction involving purchase, sale, or transfer of
units of Investment Accounts, a confirmation statement will be sent.
Each policyowner will also be sent an annual and a semi-annual report for NASL
Series Trust which will include a list of the securities held in each Portfolio
as required by the 1940 Act.
MISCELLANEOUS MATTERS
PORTFOLIO SHARE SUBSTITUTION
Although First North American believes it to be highly unlikely, it is possible
that in the judgment of its management, one or more of the Portfolios may become
unsuitable for investment by the Separate Account because of a change in
investment policy or a change in the applicable laws or regulations, because the
shares are no longer available for investment, or for some other reason. In that
event, First North American may seek to substitute the shares of another
Portfolio or of an entirely different mutual fund. Before this can be done, the
approval of the SEC and the New York insurance department may be required.
First North American also reserves the right to combine other separate accounts
with the Separate Account to establish additional sub-accounts within the
Separate Account, to operate the Separate Account as a management investment
company or other form permitted by law, to transfer assets from this Separate
Account to another separate account and from another separate account to this
Separate Account, and to de-register the Separate Account under the 1940 Act.
Any such change would be made only if permissible under applicable federal and
New York state law.
The investment objectives of the Separate Account will not be changed materially
without first filing the change with the Insurance Commissioner of the State of
New York. Policyowners will be advised of any such change at the time it is
made.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary provides a general description of the federal income tax
considerations associated with the Policy
37
<PAGE> 42
and does not purport to be complete or to cover all situations. This discussion
is not intended as tax advice. Counsel or other competent tax advisers should be
consulted for more complete information. This discussion is based upon the
Company's understanding of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service (the "Service"). No
representation is made as to the likelihood of continuation of the present
federal income tax laws or of the current interpretations by the Service. WE DO
NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION
REGARDING THE POLICIES.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the use of such
Policies in any such arrangement, the value of which depends in part on its tax
consequences, is contemplated, a qualified tax adviser should be consulted for
advice on the tax attributes of the particular arrangement.
TAX STATUS OF THE POLICY
Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code") sets
forth a definition of a life insurance contract for federal tax purposes. The
Secretary of Treasury (the "Treasury") is authorized to prescribe regulations
implementing Section 7702. However, while proposed regulations and other interim
guidance have been issued, final regulations have not been adopted and guidance
as to how Section 7702 is to be applied is limited. If a Policy were determined
not to be a life insurance contract for purposes of Section 7702, such Policy
would not provide the tax advantages normally provided by a life insurance
policy.
With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
mortality charge regulations under Section 7702, issued on July 5, 1991) that
such a Policy should meet the Section 7702 definition of a life insurance
contract.
With respect to a Policy that is issued on a substandard basis (i.e., a premium
class involving higher-than-standard mortality risk), there is less guidance, in
particular as to how mortality and other expense requirements of Section 7702
are to be applied in determining whether such a Policy meets the Section 7702
definition of a life insurance contract. Thus, it is not clear whether or not
such a Policy would satisfy Section 7702, particularly if the policyowner pays
the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company may take whatever steps are appropriate and reasonable to attempt to
cause such a Policy to comply with Section 7702. For these reasons, the Company
reserves the right to restrict Policy transactions as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
Code (discussed above). The Separate Account, through NASL Series Trust, intends
to comply with the diversification requirements prescribed in Treas. Reg. Sec.
1.817-5, which affect how NASL Series Trust's assets are to be invested. The
Company believes that the Separate Account will thus meet the diversification
requirement, and the Company will monitor continued compliance with the
requirement.
In certain circumstances, owners of variable life insurance Policies may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their Policies. In those circumstances, income
and gains from the separate account assets would be includible in the variable
policyowner's gross income. The IRS has stated in published rulings that a
variable policyowner will be considered the owner of separate account assets if
the policyowner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury Department
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyowners may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets."
38
<PAGE> 43
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
Policy has many more Portfolios to which policyowners may allocate premium
payments and Policy Values than were available in the policies described in the
rulings. These differences could result in an owner being treated as the owner
of a pro rata portion of the assets of the Separate Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. The Company believes that the proceeds and cash value increases of a
Policy should be treated in a manner consistent with a fixed-benefit life
insurance policy for federal income tax purposes. Thus, the death benefit under
the Policy should be excludable from the gross income of the beneficiary under
Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, a change of insured, the addition of an accelerated death
benefit rider, or an assignment of the Policy may have federal income tax
consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each policyowner or beneficiary. Generally, the policyowner
will not be deemed to be in constructive receipt of the Policy Value, including
increments thereof, until there is a distribution. The tax consequences of
distributions from, and loans taken from or secured by, a Policy depend on
whether the Policy is classified as a "Modified Endowment Contract." Upon a
complete surrender or lapse of a Policy or when benefits are paid at a Policy's
maturity date, if the amount received plus the amount of indebtedness exceeds
the total investment in the Policy, the excess will generally be treated as
ordinary income subject to tax, regardless of whether the Policy is or is not a
Modified Endowment Contract.
MODIFIED ENDOWMENT CONTRACTS. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts," which applies
to Policies entered into or materially changed after June 20, 1988.
Because of the Policy's flexibility, classification as a Modified Endowment
Contract will depend on the individual circumstances of each Policy. In general,
a Policy will be a Modified Endowment Contract if the accumulated premiums paid
at any time during the first seven policy years exceed the sum of the net level
premiums which would have been paid on or before such time if the Policy
provided for paid-up future benefits after the payment of seven level annual
premiums. The determination of whether a Policy will be a Modified Endowment
Contract after a material change generally depends upon the relationship of the
death benefit and Policy Value at the time of such change and the additional
premiums paid in the seven years following the material change. If a premium is
received which would cause the Policy to become a Modified Endowment Contract
(MEC) within 23 days of the next policy anniversary, the Company will not apply
the portion of the premium which would cause MEC status (excess premium) to the
Policy when received. The excess premium will be placed in a suspense account
until the next anniversary date, at which point the excess premium along with
interest, earned on the excess premium at a rate of 3.5% from the date the
premium was received, will be applied to the Policy. The policyowner will be
advised of this action and will be offered the opportunity to have the premium
credited as of the original date received or to have the premium returned. If
the policyowner does not respond, the premium and interest will be applied to
the Policy as of the first day of the next anniversary.
If a premium is received which would cause the Policy to become a MEC more than
23 days prior to the next policy anniversary, the Company will refund any excess
premium to the policyowner. The portion of the premium which is not excess will
be applied as of the date received. The policyowner will be advised of this
action and will be offered the opportunity to return the premium and have it
credited to the account as of the original date received.
If, in connection with the application or issue of the Policy, the policyowner
acknowledges that the Policy is or will become a MEC, excess premiums that would
cause MEC status will be credited as of the date received.
Further, if a transaction occurs which reduces the face amount of the Policy
during the first seven years, the Policy will be retested retroactive to the
date of purchase, to determine compliance with the seven-pay test based on the
lower face amount.
39
<PAGE> 44
As well, if a reduction of the face amount occurs within seven years of a
material change, the Policy will be retested for compliance retroactive to the
date of the material change. Failure to comply would result in classification as
a Modified Endowment Contract regardless of any efforts by the Company to
provide a payment schedule that will not violate the seven-pay test.
The rules relating to whether a Policy will be treated as a Modified Endowment
Contract are extremely complex and cannot be adequately described in the limited
confines of this summary. Therefore, a current or prospective policyowner should
consult with a competent adviser to determine whether a transaction will cause
the Policy to be treated as a Modified Endowment Contract.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS. Policies
classified as Modified Endowment Contracts will be subject to the following tax
rules: First, all partial withdrawals from such a Policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of the
Policy Value immediately before the distribution over the investment in the
Policy (described below) at such time. Second, loans taken from or secured by
such a Policy are treated as partial withdrawals from the Policy and taxed
accordingly. Past-due loan interest that is added to the loan amount is treated
as a loan. Third, a 10% additional income tax is imposed on the portion of any
distribution (including distributions upon surrender) from, or loans taken from
or secured by, such a Policy that is included in income except where the
distribution or loan is made on or after the policyowner attains age 59-1/2, is
attributable to the policyowner's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
policyowner or the joint lives (or joint life expectancies) of the policyowner
and the policyowner's beneficiary.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS. A
distribution from a Policy that is not a Modified Endowment Contract is
generally treated as a tax-free recovery by the policyowner of the investment in
the Policy (described below) to the extent of such investment in the Policy, and
as a distribution of taxable income only to the extent the distribution exceeds
the investment in the Policy. An exception to this general rule occurs in the
case of a decrease in the Policy's death benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in a cash distribution to the policyowner in order for
the Policy to continue complying with the Section 7702 definitional limits. Such
a cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as
indebtedness of the policyowner. Select Loans may, however, be treated as a
distribution.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10% additional tax.
POLICY LOAN INTEREST. Generally, personal interest paid on any loan under a
Policy which is owned by an individual is not deductible. In addition, interest
on any loan under a Policy owned by a taxpayer and covering the life of any
individual who is an officer or employee of or is financially interested in the
business carried on by the taxpayer will not be tax deductible unless the
employee is a key person within the meaning of Section 264 of the Code. A
deduction will not be permitted for interest on a loan under a policy held on
the life of a key person to the extent the aggregate of such loans with respect
to contracts covering the key person exceeds $50,000. The number of employees
who can qualify as key persons depends in part on the size of the employer but
cannot exceed 20 individuals.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which has been excluded from gross
income of the policyowner (except that the amount of any loan from, or secured
by, a Policy that is a Modified Endowment Contract, to the extent such amount
has been excluded from gross income, will be disregarded), plus (iii) the amount
of any loan from, or secured by, a Policy that is a Modified Endowment Contract
to the extent that such amount has been included in the gross income of the
policyowner.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by the
Company (or its affiliates) to the same policyowner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in the gross income under Section 72(e) of the Code.
THE COMPANY'S TAXES
40
<PAGE> 45
As a result of the Omnibus Budget Reconciliation Act of 1990, insurance
companies are generally required to capitalize and amortize certain policy
acquisition expenses over a 10-year period rather than currently deducting such
expenses. This treatment applies to the deferred acquisition expenses of a
Policy and results in a significantly higher corporate income tax liability for
the Company. The Company makes a charge to premiums to compensate it for the
anticipated higher corporate income taxes.
At the present time, the Company makes no charge to the Separate Account for any
federal, state or local taxes that the Company incurs that may be attributable
to such Account or to the Policies. The Company, however, reserves the right in
the future to make a charge for any such tax or other economic burden resulting
from the application of the tax laws that it determines to be properly
attributable to the Separate Account or to the Policies.
DISTRIBUTION OF THE POLICY
Manufacturers Securities Services LLC ("Manufacturers Securities") will act as
the principal underwriter of, and continuously offer, the Policies pursuant to a
Distribution Agreement with First North American. [Manufacturers' ownership].
Manufacturers Securities is registered as a broker-dealer under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers. The Policies will be sold by registered representatives of either
Manufacturers Securities or other broker-dealers having distribution agreements
with Manufacturers Securities who are also authorized by the New York state
insurance department to do so. A registered representative will receive
first-year commissions not to exceed 50% of premiums paid up to the Target
Premium, commissions of 2% of premiums in excess thereof and, after the third
anniversary, 0.15% of the Policy Value per annum. In addition representatives
will be eligible for bonuses of up to 90% of first-year commissions.
Representatives who meet certain standards with regard to the sale of the
Policies and certain other policies issued by First North American or
Manufacturers Life will be eligible for additional compensation.
RESPONSIBILITIES ASSUMED BY FIRST NORTH AMERICAN
First North American has entered into an agreement with Manufacturers
Securities. pursuant to which First North American, on behalf of Manufacturers
Securities, will pay the sales commissions in respect of the Policies and
certain other policies issued by First North American, prepare and maintain all
books and records required to be prepared and maintained by Manufacturers
Securities with respect to the Policies and such other policies, and send all
confirmations required to be sent by Manufacturers Securities with respect to
the Policies and such other policies. Manufacturers Securities will promptly
reimburse First North American for all sales commissions paid by First North
American and will pay First North American for their other services under the
agreement in such amounts and at such times as agreed to by the parties.
Manufacturers Securities has also entered into a Service Agreement with First
North American pursuant to which Manufacturers Securities will provide to First
North American all issue, administrative, general services and recordkeeping
functions on behalf of First North American with respect to all of its insurance
policies including the Policies.
Finally, Manufacturers USA has entered into a reinsurance agreement with First
North American under which Manufacturers USA automatically reinsures policies
issued by First North American, such that total risk to First North American is
limited to $100.000 for the life of the insured.
VOTING RIGHTS
As stated above, all of the assets held in the sub-accounts of the Separate
Account will be invested in shares of a particular Portfolio of NASL Series
Trust. First North American is the legal owner of those shares and as such has
the right to vote upon matters that are required by the 1940 Act to be approved
or ratified by the shareholders of a mutual fund and to vote upon any other
matters that may be voted upon at a shareholders' meeting. However, First North
American will vote shares held in the sub-accounts in accordance with
instructions received from policyowners having an interest in such sub-accounts.
Shares held in each sub-account for which no timely instructions from
policyowners are received, including shares not attributable to Policies, will
be voted by First North American in the same proportion as those shares in that
sub-account for
41
<PAGE> 46
which instructions are received. Should the applicable federal securities laws
or regulations change so as to permit First North American to vote shares held
in the Separate Account in its own right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyowner is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding NASL Trust. The number will be determined as of a date chosen by
First North American, but not more than 90 days before the shareholders'
meeting. Fractional votes are counted. Voting instructions will be solicited in
writing at least 14 days prior to the shareholders' meeting.
First North American may, if required by state insurance officials, disregard
voting instructions if such instructions would require shares to be voted so as
to cause a change in the sub-classification or investment policies of one or
more of the Portfolios, or to approve or disapprove an investment management
contract. In addition, First North American itself may disregard voting
instructions that would require changes in the investment policies or investment
adviser, provided that First North American reasonably disapproves such changes
in accordance with applicable federal regulations. If First North American does
disregard voting instructions, it will advise policyowners of that action and
its reasons for such action in the next communication to policyowners.
DIRECTORS AND OFFICERS OF FIRST NORTH AMERICAN
The Directors and Officers of First North American, together with their
principal occupations during the past few years, are as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE Principal Occupation
COMPANY
<S> <C> <C>
Bruce Avedon Director* Consultant (self-employed).
Age:68
Kenneth H. Conrad Director* (To be completed.)
Age:44
John D. DesPrez III Director* Vice President, U.S. Annuities,
Manufacturers Life, September 1996 to
Age: 40 present; Director and President, Security
Life, September 1996 to present; Vice
President, Mutual Funds, Manufacturers Life,
January, 1995 to September 1996; President
and Chief Executive Officer, North American
Funds, March 1993 to September 1996; Vice
President and General Counsel, Security Life,
January 1991 to June 1994.
Stephanie Elliman Vice President and Chief
Administration Officer
Age:
Ruth Ann Flemming Director* (To be completed.)
Age:39
Bruce Gordon Director* Vice President, Pensions, Manulife.
Age:53
Peter S. Hutchison Director* Senior Vice President, Corporate Taxation,
Manufacturers Life, January 1996 to present;
Age:48 Executive Vice President and Chief Financial
Officer, North American Life Assurance
Company ("NAL"), September 1994 to
</TABLE>
42
<PAGE> 47
<TABLE>
<CAPTION>
NAME POSITION WITH THE Principal Occupation
COMPANY
<S> <C> <C>
December 31, 1995; Senior Vice President
and Chief Actuary, NAL, April 1992 to
August 1994; Vice President and Chief
Actuary, NAL, September 1990 to March
1992.
Tracy A. Kane Secretary and Counsel (To be completed.)
Age:
Neil M. Merkl, Esq. Director* Attorney (self-employed), April 1994 to
present; Partner, Wilson Elser, Etc., 1979 to
Age:66 1994.
Robert C. Perez, Ph.D. Director* Associate Professor, Iona College, Hagen
Business School.
Age:70
John Richardson Director and Chairman of
the Senior Vice President and General
Manager, Board of Directors* U.S.
Operations, Manufacturers Life, January
Age:59 1995 to present; Senior Vice
President and General Manager, Canadian
Operations, Manufacturers Life, June
1992 to January 1995; Senior Vice
President, Financial Services,
Manufacturers Life, prior to June 1992.
James K. Robinson Director* Attorney, Assistant Secretary, Eastman
Kodak Company.
Age:70
Joseph Scott Director* and President President, North American Funds, September
1996 to present; Vice President, Business
Age:48 Development and Marketing, North
American Funds, January 1996 to September
1996; Vice President, Annuities,
Manufacturers Life, January 1995 to
December 1995; Vice President, Distribution,
Manufacturers Life, January 1991 to
December 1994.
H. Douglas Wood Director* President, Wood Logan Associates, Inc.
Age:65
Richard C. Hirtle Director*, Vice President and Vice President, Chief Financial Officer,
Treasurer Annuities, Manufacturers Life, January 1996
Age: 41 to present; Vice President, Treasurer, Chief
Financial Officer, Security Life.
John G. Vrysen Director*, Vice President and Vice President and Chief Financial Officer,
Chief Actuary U.S. Operations, Manufacturers Life, January
Age: 41 1996 to present; Vice President and Chief
Actuary, Security Life.
</TABLE>
*Each Director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and qualified.
STATE REGULATIONS
43
<PAGE> 48
First North American is subject to regulation and supervision by the New York
Department of Insurance, which periodically examines its financial condition and
operations. It is also subject to the insurance laws and regulations of all
jurisdictions in which it is authorized to do business. The Policies have been
filed with insurance officials, and meet all standards set by law, in each
jurisdiction where they are sold.
First North American is required to submit annual statements of its operations,
including financial statements, to the insurance departments of the various
jurisdictions in which it does business for the purposes of determining solvency
and compliance with local insurance laws and regulations.
PENDING LITIGATION
No litigation is pending that would have a material effect upon the Separate
Account or NASL Series Trust.
ADDITIONAL INFORMATION
A registration statement under the Securities Act of 1933 has been filed with
the SEC relating to the offering described in this prospectus. This prospectus
does not include all the information set forth in the registration statement.
The omitted information may be obtained from the SEC's principal office in
Washington, D.C. upon payment of the prescribed fee.
For further information you may also contact First North American's Service
Office, the address and telephone number of which are on the cover page of this
prospectus.
LEGAL MATTERS
The legal validity of the policies has been passed on by James D. Gallagher,
Esq., Secretary and General Counsel of Manufacturers Life of America. Jones &
Blouch L.L.P., Washington, D.C., has passed on certain matters relating to the
federal securities laws.
EXPERTS
The financial statements for the period ended December 31, 1997 of First North
American and Variable Life Account I of First North American appearing in this
prospectus have been audited by Ernst & Young LLP, independent auditors, to the
extent indicated in their reports thereon also appearing elsewhere herein. Such
financial statements have been included herein in reliance upon such reports
given upon the authority of such firm as experts in auditing and accounting.
44
<PAGE> 49
FINANCIAL STATEMENTS
The financial statements of First North American included herein should be
considered only as bearing upon the ability of First North American to meet its
obligations under the Policies.
45
<PAGE> 50
CONSOLIDATED FINANCIAL STATEMENTS
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
WITH REPORT OF INDEPENDENT AUDITORS
TO BE FILED BY AMENDMENT
46
<PAGE> 51
APPENDIX A
SAMPLE ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER VALUES AND DEATH BENEFITS
The following tables have been prepared to help show how values under the Policy
change with investment performance. The tables include both Policy Values and
Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of
the values in the Investment Accounts, as the tables assume no values in the
Guaranteed Interest Account or Loan Account. The Cash Surrender Value is the
Policy Value less any applicable surrender charges. The tables illustrate how
Policy Values and Cash Surrender Values, which reflect all applicable charges
and deductions, and Death Benefits of the Policy on an insured of a given age
would vary over time if the return on the assets of the Portfolio was a uniform,
gross, after-tax, annual rate of 0%, 6% or 12%. The Policy Values, Death
Benefits and Cash Surrender Values would be different from those shown if the
returns averaged 0%, 6% or 12%, but fluctuated over and under those averages
throughout the years. The charges reflected in the tables include those for:
deductions from premiums for state, local and federal taxes, deferred
underwriting and sales charges, and monthly deductions for administration, cost
of insurance and mortality and expense risks.
The amounts shown for the Policy Value, Death Benefit and Cash Surrender Value
as of each policy year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because the expenses and fees borne by the Portfolios are deducted from the
gross return. The illustrations reflect an average of the Trusts' expenses,
which is approximately [ ]% on an annual basis. The gross annual rates of return
of 0%, 6% and 12% correspond to approximate net annual rates of return of --
[ ]%, [ ]% and [ ]%.
The tables assume that no premiums have been allocated to the Guaranteed
Interest Account, that planned premiums are paid on the policy anniversary and
that no transfers, partial withdrawals, policy loans, changes in death benefit
options or changes in face amount have been made. The tables reflect the fact
that no charges for federal, state or local taxes are currently made against the
Separate Account. If such a charge is made in the future, it would take a higher
gross rate of return to produce after-tax returns of 0%, 6% and 12% than it does
now.
There are two tables shown for each combination of age and death benefit option
for male non-smokers, one based on current cost of insurance and monthly
administration charges and the other based on the maximum administration
charges, deductions from premiums and cost of insurance charges based on the
1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables. The
current waiver of deductions from premiums and current monthly administration
charges and cost of insurance charges are not guaranteed and may be changed.
Upon request, First North American will furnish a comparable illustration based
on the proposed life insured's age, sex (unless unisex rates are required by
law) and risk class, any additional ratings and the death benefit option, face
amount and planned premium requested. Illustrations for smokers would show less
favorable results than the illustrations shown below.
From time to time, in advertisements or sales literature for the Policies that
quote performance data of one or more of the Portfolios, the Company may include
cash surrender values and death benefit figures computed using the same
methodology as that used in the following illustrations, but with the average
annual total return of the Portfolios for which performance data is shown in the
advertisement replacing the hypothetical rates of return shown in the following
tables. This information may be shown in the form of graphs, charts, tables and
examples.
47
<PAGE> 52
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 35 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$5,960 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
--------------------------------------- ---------------------------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value(3) Value(3)(4)(5) Benefit Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 6,258 $ 4,614 $ 0 $500,000 $ 4,926 $ 0 $500,000
2 12,829 9,409 2,932 500,000 10,326 3,849 500,000
3 19,728 14,073 7,596 500,000 15,903 9,426 500,000
4 26,973 18,604 12,127 500,000 21,659 15,182 500,000
5 34,579 22,993 16,516 500,000 27,592 21,114 500,000
6 42,566 27,267 21,437 500,000 33,733 27,904 500,000
7 50,953 31,389 26,207 500,000 40,055 34,873 500,000
8 59,758 35,363 30,829 500,000 46,566 42,032 500,000
9 69,004 39,183 35,296 500,000 53,266 49,380 500,000
10 78,712 42,851 39,612 500,000 60,168 56,929 500,000
15 135,039 58,691 58,691 500,000 97,745 97,745 500,000
20 206,927 69,614 69,614 500,000 140,660 140,660 500,000
25 298,676 74,682 74,682 500,000 189,924 189,924 500,000
30 415,774 71,195 71,195 500,000 250,643 250,643 500,000
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
-------------------------------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C>
1 $ 5,238 $ 8 $ 500,000
2 11,281 4,804 500,000
3 17,883 11,406 500,000
4 25,097 18,619 500,000
5 32,973 26,496 500,000
6 41,606 35,777 500,000
7 51,035 45,853 500,000
8 61,345 56,811 500,000
9 72,618 68,732 500,000
10 84,960 81,721 500,000
15 166,837 166,837 500,000
20 297,801 297,801 500,000
25 509,341 509,341 682,517
30 862,995 862,995 1,052,853
</TABLE>
- ----------
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b) no
policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees
payable to it and/or to reimburse expenses for a period of one year from
January 1, 1997 to the extent necessary to prevent the total of advisory
fees and expenses for the Quantitative Equity Trust, Real Estate
Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative
Premium Test or the Fund Value Test has been and continues to be met, the
Death Benefit Guarantee will keep the Policy in force on all policies for
the first three years and until age 100 on Policies issued and maintained
with a minimum face amount of $250,000 and Death Benefit Option 1; to age
85 on policies issued and maintained with a face amount of at least
$250,000 and if Death benefit Option 2 is selected at any time.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES
OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
48
<PAGE> 53
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 35 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$5,960 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
-------------------------------------- ---------------------------------------
End of Accumulated Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit
Year(1) (2) Value(3)(4) Value(3)(4)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 6,258 $ 4,339 $ 0 $500,000 $ 4,636 $ 0 $500,000
2 12,829 8,865 2,388 500,000 9,736 3,259 500,000
3 19,728 13,264 6,787 500,000 14,999 8,521 500,000
4 26,973 17,534 11,057 500,000 20,427 13,950 500,000
5 34,579 21,668 15,191 500,000 26,020 19,543 500,000
6 42,566 25,665 19,836 500,000 31,782 25,952 500,000
7 50,953 29,515 24,334 500,000 37,706 32,524 500,000
8 59,758 33,222 28,688 500,000 43,803 39,269 500,000
9 69,004 36,774 32,888 500,000 50,069 46,182 500,000
10 78,712 40,177 36,938 500,000 56,513 53,274 500,000
15 135,039 54,621 54,621 500,000 91,347 91,347 500,000
20 206,927 63,788 63,788 500,000 130,394 130,394 500,000
25 298,676 64,780 64,780 500,000 172,503 172,503 500,000
30 415,774 54,180 54,180 500,000 221,329 221,329 500,000
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
------------------------------------------
End of Policy Cash Death
Policy Value Surrender Benefit
Year(1) Value(3)(4)
<S> <C> <C> <C>
1 $ 4,934 $ 0 $500,000
2 10,643 4,166 500,000
3 16,877 10,400 500,000
4 23,684 17,207 500,000
5 31,115 24,638 500,000
6 39,231 33,402 500,000
7 48,090 42,908 500,000
8 57,771 53,237 500,000
9 68,348 64,462 500,000
10 79,919 76,681 500,000
15 156,432 156,432 500,000
20 278,219 278,219 500,000
25 474,575 474,575 635,931
30 802,301 802,301 978,807
</TABLE>
- ----------
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b) no
policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative
Premium Test or the Fund Value Test has been and continues to be met, the
Death Benefit Guarantee will keep the Policy in force on all policies for
the first three years and until age 100 on Policies issued and maintained
with a minimum face amount of $250,000 and Death Benefit Option 1; to age
85 on policies issued and maintained with a face amount of at least
$250,000 and if Death benefit Option 2 is selected at any time.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES
OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
49
<PAGE> 54
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 35 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$7,450 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
--------------------------------------- --------------------------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value(3) Value(3)(4)(5) Benefit Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,823 $ 6,069 $ 94 $506,069 $ 6,467 $ 492 $506,467
2 16,036 12,282 5,805 512,282 13,462 6,985 513,462
3 24,660 18,330 11,852 518,330 20,686 14,209 520,686
4 33,716 24,208 17,730 524,208 28,143 21,666 528,143
5 43,224 29,908 23,430 529,908 35,831 29,353 535,831
6 53,208 35,456 29,627 535,456 43,782 37,952 543,782
7 63,691 40,815 35,633 540,815 51,965 46,783 551,965
8 74,698 45,987 41,453 545,987 60,389 55,855 560,389
9 86,255 50,965 47,078 550,965 69,052 65,166 569,052
10 98,391 55,751 52,512 555,751 77,964 74,725 577,964
15 168,798 76,522 76,522 576,522 126,175 126,175 626,175
20 258,658 91,111 91,111 591,111 180,008 180,008 680,008
25 373,345 98,388 98,388 598,388 238,836 238,836 738,836
30 519,718 95,660 95,660 595,660 304,150 304,150 804,150
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
--------------------------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C>
1 $ 6,867 $ 892 $506,867
2 14,690 8,213 514,690
3 23,235 16,758 523,235
4 32,569 26,092 532,569
5 42,757 36,279 542,757
6 53,909 48,079 553,909
7 66,077 60,895 566,077
8 79,363 74,828 579,363
9 93,864 89,978 593,864
10 109,704 106,465 609,704
15 213,629 213,629 713,629
20 374,927 374,927 874,927
25 626,371 626,371 1,126,371
30 1,038,425 1,038,425 1,538,425
</TABLE>
- ----------
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b) no
policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees
payable to it and/or to reimburse expenses for a period of one year from
January 1, 1997 to the extent necessary to prevent the total of advisory
fees and expenses for the Quantitative Equity Trust, Real Estate
Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative
Premium Test or the Fund Value Test has been and continues to be met, the
Death Benefit Guarantee will keep the Policy in force on all policies for
the first three years and until age 100 on Policies issued and maintained
with a minimum face amount of $250,000 and Death Benefit Option 1; to age
85 on policies issued and maintained with a face amount of at least
$250,000 and if Death benefit Option 2 is selected at any time.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES
OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
50
<PAGE> 55
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 35 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$7,450 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
-------------------------------------- --------------------------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3)(4) Benefit Value Value(3)(4) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,823 $ 5,741 $ 0 $505,741 $ 6,122 $ 147 $506,122
2 16,036 11,635 5,158 511,635 12,759 6,282 512,759
3 24,660 17,368 10,891 517,368 19,611 13,133 519,611
4 33,716 22,937 16,460 522,937 26,680 20,203 526,680
5 43,224 28,336 21,858 528,336 33,965 27,488 533,965
6 53,208 33,562 27,732 533,562 41,471 35,641 541,471
7 63,691 38,604 33,422 538,604 49,190 44,008 549,190
8 74,698 43,465 38,931 543,465 57,131 52,597 557,131
9 86,255 48,134 44,248 548,134 65,289 61,402 565,289
10 98,391 52,615 49,376 552,615 73,672 70,433 573,672
15 168,798 71,810 71,810 571,810 118,751 118,751 618,751
20 258,658 84,481 84,481 584,481 168,237 168,237 668,237
25 373,345 87,346 87,346 587,346 218,672 218,672 718,672
30 519,718 77,359 77,359 577,359 269,816 269,816 769,816
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
--------------------------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value Value(3)(4) Benefit
<S> <C> <C> <C>
1 $ 6,504 $ 529 $ 506,504
2 13,929 7,452 513,929
3 22,037 15,560 522,037
4 30,889 24,412 530,889
5 40,550 34,073 540,550
6 51,094 45,264 551,094
7 62,593 57,411 562,593
8 75,143 70,609 575,143
9 88,833 84,947 588,883
10 103,777 100,538 603,777
15 201,528 201,528 701,528
20 352,334 352,334 852,334
25 583,336 583,336 1,083,336
30 957,183 957,183 1,457,183
</TABLE>
- ----------
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b) no
policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative
Premium Test or the Fund Value Test has been and continues to be met, the
Death Benefit Guarantee will keep the Policy in force on all policies for
the first three years and until age 100 on Policies issued and maintained
with a minimum face amount of $250,000 and Death Benefit Option 1; to age
85 on policies issued and maintained with a face amount of at least
$250,000 and if Death benefit Option 2 is selected at any time.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES
OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
51
<PAGE> 56
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$15,095 ANNUAL PLANNED PREMIUM*
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
--------------------------------------- ---------------------------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value(3) Value(3)(4)(5) Benefit Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 15,850 $10,720 $ 922 $500,000 $11,480 $1,683 $500,000
2 32,492 21,329 6,512 500,000 23,525 8,707 500,000
3 49,966 31,493 16,676 500,000 35,816 20,099 500,000
4 68,314 41,492 26,675 500,000 48,652 33,835 500,000
5 87,580 51,346 36,529 500,000 62,079 47,262 500,000
6 107,809 61,033 49,180 500,000 76,106 64,252 500,000
7 129,049 70,396 61,505 500,000 90,605 81,715 500,000
8 151,351 79,367 73,440 500,000 105,541 99,614 500,000
9 174,768 87,997 85,034 500,000 120,993 118,029 500,000
10 199,356 96,286 96,286 500,000 136,994 136,994 500,000
15 342,015 137,180 137,180 500,000 233,448 233,448 500,000
20 524,087 158,276 158,276 500,000 349,972 349,972 500,000
25 756,463 116,567 116,567 500,000 498,372 498,372 523,290
30 1,053,039 0 (5) 0(5) 500,000(5) 691,765 691,765 726,354
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
--------------------------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C>
1 $ 12,243 $ 2,446 $500,000
2 25,815 10,998 500,000
3 40,508 25,691 500,000
4 56,738 41,921 500,000
5 74,694 59,877 500,000
6 94,546 82,693 500,000
7 116,352 107,462 500,000
8 140,281 134,354 500,000
9 166,638 163,674 500,000
10 195,720 195,720 500,000
15 405,872 405,872 500,000
20 759,762 759,762 812,945
25 1,331,351 1,331,351 1,397,918
30 2,237,092 2,237,092 2,348,947
</TABLE>
- ----------
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b) no
policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees
payable to it and/or to reimburse expenses for a period of one year from
January 1, 1997 to the extent necessary to prevent the total of advisory
fees and expenses for the Quantitative Equity Trust, Real Estate
Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative
Premium Test or the Fund Value Test has been and continues to be met, the
Death Benefit Guarantee will keep the Policy in force on all policies for
the first three years and until age 100 on Policies issued and maintained
with a minimum face amount of $250,000 and Death Benefit Option 1; to age
85 on policies issued and maintained with a face amount of at least
$250,000 and if Death benefit Option 2 is selected at any time.
(5) In the absence of additional premium payments, the Policy will lapse,
unless the Death Benefit Guarantee is in effect.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES
OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
52
<PAGE> 57
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$15,095 ANNUAL PLANNED PREMIUM*
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
-------------------------------------- ---------------------------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3)(4) Benefit Value Value(3)(4) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 15,850 $ 10,044 $ 246 $500,000 $ 10,767 $ 970 $500,000
2 32,492 19,896 5,079 500,000 21,974 7,157 500,000
3 49,966 29,254 14,437 500,000 33,328 18,511 500,000
4 68,314 38,105 23,288 500,000 44,824 30,007 500,000
5 87,580 46,416 31,598 500,000 56,438 41,621 500,000
6 107,809 54,155 42,301 500,000 68,147 56,293 500,000
7 129,049 61,288 52,397 500,000 79,929 71,039 500,000
8 151,351 67,758 61,831 500,000 91,743 85,816 500,000
9 174,768 73,499 70,535 500,000 103,543 100,580 500,000
10 199,356 78,438 78,438 500,000 115,282 115,282 500,000
15 342,015 91,123 91,123 500,000 176,267 176,267 500,000
20 524,087 68,400 68,400 500,000 233,986 233,986 500,000
25 756,463 0(4) 0(4) 500,000(4) 281,220 281,220 500,000
30 1,053,039 0(4) 0(4) 500,000(4) 310,816 310,816 500,000
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
-------------------------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value Value(3)(4) Benefit
<S> <C> <C> <C>
1 $ 11,494 $ 1,696 $ 500,000
2 24,143 9,326 500,000
3 37,753 22,936 500,000
4 52,422 37,605 500,000
5 68,241 53,424 500,000
6 85,321 73,468 500,000
7 103,794 94,904 500,000
8 123,797 117,870 500,000
9 145,492 142,529 500,000
10 169,080 169,080 500,000
15 334,624 334,624 500,000
20 628,104 628,104 672,072
25 1,111,012 1,111,012 1,166,563
30 1,871,555 1,871,555 1,965,132
</TABLE>
- ----------
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b) no
policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative
Premium Test or the Fund Value Test has been and continues to be met, the
Death Benefit Guarantee will keep the Policy in force on all policies for
the first three years and until age 100 on Policies issued and maintained
with a minimum face amount of $250,000 and Death Benefit Option 1; to age
85 on policies issued and maintained with a face amount of at least
$250,000 and if Death benefit Option 2 is selected at any time.
(4) In the absence of additional premium payments, the Policy will lapse,
unless the Death Benefit Guarantee is in effect.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES
OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
53
<PAGE> 58
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$17,920 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
--------------------------------------- -------------------------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value(3) Value(3)(4)(5) Benefit Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 18,816 $13,397 $ 2,187 $513,397 $14,318 $ 3,108 $514,318
2 38,573 26,539 11,722 526,539 29,207 14,390 529,207
3 59,317 39,080 24,263 539,080 44,329 29,512 544,329
4 81,099 51,316 36,499 551,316 59,987 45,170 559,987
5 103,970 63,270 48,453 563,270 76,221 61,404 576,221
6 127,985 74,918 63,064 574,918 93,024 81,171 593,024
7 153,200 86,074 77,184 586,074 110,224 101,334 610,224
8 179,676 96,654 90,728 596,654 127,738 121,811 627,738
9 207,476 106,710 103,747 606,710 145,623 142,659 645,623
10 236,666 116,233 116,233 616,233 163,874 163,874 663,874
15 406,022 161,066 161,066 661,066 268,695 268,695 768,695
20 622,169 174,545 174,545 674,545 367,854 367,854 867,854
25 898,033 102,063 102,063 602,063 393,411 393,411 893,411
30 1,250,113 0 (5) 0(5) 500,000(5) 325,090 325,090 825,090
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
--------------------------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C>
1 $15,241 $ 4,031 $515,241
2 31,988 17,171 531,988
3 50,019 35,202 550,019
4 69,764 54,947 569,764
5 91,413 76,596 591,413
6 115,124 103,270 615,124
7 140,900 132,009 640,900
8 168,846 162,919 668,846
9 199,223 196,259 699,223
10 232,253 232,253 732,253
15 459,483 459,483 959,483
20 797,626 797,626 1,297,626
25 1,240,333 1,240,333 1,740,333
30 1,852,936 1,852,936 2,352,936
</TABLE>
- ----------
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b) no
policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees
payable to it and/or to reimburse expenses for a period of one year from
January 1, 1997 to the extent necessary to prevent the total of advisory
fees and expenses for the Quantitative Equity Trust, Real Estate
Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative
Premium Test or the Fund Value Test has been and continues to be met, the
Death Benefit Guarantee will keep the Policy in force on all policies for
the first three years and until age 100 on Policies issued and maintained
with a minimum face amount of $250,000 and Death Benefit Option 1; to age
85 on policies issued and maintained with a face amount of at least
$250,000 and if Death benefit Option 2 is selected at any time.
(5) Provided the Death Benefit Guarantee has been in effect, the Policy will
have been kept in force until the end of the policy year in which the
life insured reached attained age 85, at which time the Death Benefit
Guarantee will expire and in the absence of additional premium payments,
the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES
OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
54
<PAGE> 59
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$17,920 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
-------------------------------------- ----------------------------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3)(4) Benefit Value Value(3)(4) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 18,816 $ 12,623 $ 1,413 $512,623 $ 13,502 $ 2,292 $513,502
2 38,573 24,914 10,097 524,914 27,447 12,630 527,447
3 59,317 36,557 21,739 536,557 41,521 26,704 541,521
4 81,099 47,528 32,710 547,528 55,695 40,877 555,695
5 103,970 57,780 42,963 557,780 69,909 55,092 569,909
6 127,985 67,269 55,415 567,269 84,106 72,253 584,106
7 153,200 75,942 67,052 575,942 98,219 89,328 598,219
8 179,676 83,727 77,800 583,727 112,151 106,224 612,151
9 207,476 90,536 87,572 590,536 125,789 122,825 625,789
10 236,666 96,277 96,277 596,277 139,008 139,008 639,008
15 406,022 108,944 108,944 608,944 199,201 199,201 699,201
20 622,169 79,427 79,427 579,427 226,985 226,985 726,985
25 898,033 0(4) 0(4) 500,000(4) 181,773 181,733 681,773
30 1,250,113 0(4) 0(4) 0(4) 9,447 9,447 509,447
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
------------------------------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value Value(3)(4) Benefit
<S> <C> <C> <C>
1 $ 14,383 $ 3,173 $ 514,383
2 30,088 15,271 530,088
3 46,907 32,089 546,907
4 64,912 50,094 564,912
5 84,158 69,341 584,158
6 104,708 92,854 604,708
7 126,621 117,731 626,621
8 149,940 144,013 649,940
9 174,693 171,730 674,694
10 200,909 200,909 700,909
15 363,876 363,876 863,876
20 577,602 577,602 1,077,602
25 837,122 837,122 1,337,122
30 1,130,810 1,130,810 1,630,810
</TABLE>
- ----------
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b) no
policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative
Premium Test or the Fund Value Test has been and continues to be met, the
Death Benefit Guarantee will keep the Policy in force on all policies for
the first three years and until age 100 on Policies issued and maintained
with a minimum face amount of $250,000 and Death Benefit Option 1; to age
85 on policies issued and maintained with a face amount of at least
$250,000 and if Death benefit Option 2 is selected at any time.
(4) Provided the Death Benefit Guarantee has been in effect, the Policy will
have been kept in force until the end of the policy year in which the
life insured reached attained age 85, at which time the Death Benefit
Guarantee will expire and in the absence of additional premium payments,
the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES
OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT
ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
55
<PAGE> 60
APPENDIX B
DEFINITIONS
The following terms have the following meanings when used in this Prospectus:
ADDITIONAL RATING -- an addition to the cost of insurance rate for insureds who
do not meet at least the underwriting requirements of the standard risk class.
BUSINESS DAY -- any day that the New York Stock Exchange is open for trading and
trading is not restricted. The net asset value of the underlying shares of a
sub-account of the Separate Account will be determined at the end of each
Business Day.
CASH SURRENDER VALUE -- the Policy Value less the deferred sales charge, the
deferred underwriting charge and any outstanding monthly deductions due.
DEATH BENEFIT GUARANTEE CUMULATIVE PREMIUM TEST -- a test that, if satisfied in
the first three policy years and, where applicable, if satisfied in subsequent
policy years, will maintain the Death Benefit Guarantee. To satisfy the Death
Benefit Guarantee Cumulative Premium Test, the sum of premiums paid, less
withdrawals, and less policy loans, must equal or exceed the sum of Death
Benefit Guarantee Premiums since issue as at the beginning of each policy month.
DEATH BENEFIT GUARANTEE -- First North American's guarantee that the Policy will
not go into default even if a combination of policy loans, adverse investment
experience or other factors should cause the Policy's Net Cash Surrender Value
to be insufficient to meet the monthly deductions due at the beginning of a
policy month.
DEATH BENEFIT GUARANTEE PREMIUM -- a measure of premium used in determining
compliance with the Cumulative Premium Test. The Death Benefit Guarantee Premium
as an annual amount is established by the Company based on issue age, sex, risk
class, death benefit option, supplementary benefits and additional ratings.
EFFECTIVE DATE -- the date that First North American becomes obligated under the
Policy and when the first monthly deductions are taken.
FUND VALUE TEST -- a test which, if satisfied in applicable policy years will
maintain the Death Benefit Guarantee feature. To satisfy the Fund Value Test,
the Gross Single Premium at the beginning of any applicable policy month must
not be greater than the Net Policy Value.
GROSS SINGLE PREMIUM -- the amount of premium needed to endow the Policy to the
expiration of the Death Benefit Guarantee assuming 4% interest and current
charges.
GUARANTEED INTEREST ACCOUNT -- that part of the Policy Value which reflects the
value the policyowner has in the general account of First North American.
GUIDELINE ANNUAL PREMIUM (GAP) -- used to determine the proportion of premiums
and the Policy Value attributable to an increase in Face Amount for the purpose
of calculating the new Deferred Sales Charge after such increase.
INITIAL PREMIUM -- at least 1/12 of the Target Premium. The Initial Premium must
be received within 60 days after the policy date.
INVESTMENT ACCOUNT -- that part of the Policy Value which reflects the value the
policyowner has in one of the sub-accounts of the Separate Account.
ISSUE AGE -- the age on the nearest birthday, at policy date, as shown in the
Policy.
LOAN ACCOUNT -- that part of the Policy Value which reflects the value the
policyowner has transferred from the Guaranteed Interest Account or the
Investment Accounts as collateral for a policy loan.
MODIFIED POLICY DEBT -- as of any date, the Policy Debt plus the amount of
interest to be charged to the
56
<PAGE> 61
next policy anniversary, all discounted from the next policy anniversary to such
date at an annual rate of 4%.
MONTHLY DEATH BENEFIT GUARANTEE PREMIUM -- 1/12 of the Death Benefit Guarantee
Premium.
MONTHLY NO LAPSE GUARANTEE PREMIUM -- 1/12 of the No Lapse Guarantee Premium.
NET CASH SURRENDER VALUE -- the Cash Surrender Value less Policy Debt.
NET POLICY VALUE -- the Policy Value less the value in the Loan Account.
NET PREMIUM -- amount of premium allocated to the Investment Accounts or
Guaranteed Interest Account. It equals gross premiums less the deduction for
state, local and federal taxes.
NO LAPSE GUARANTEE -- First North American guarantees that the Policy will not
go into default even if a combination of Policy loans, adverse investment
experience and other factors should cause the Policy's Net Cash Surrender Value
to be insufficient to meet the monthly deductions due at the beginning of a
policy month.
NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST -- a test that, if satisfied in the
No Lapse Guarantee Period, will maintain the No Lapse Guarantee. To satisfy the
No Lapse Guarantee Cumulative Premium Test, the sum of premiums paid, less
withdrawals, and less Policy loans must equal or exceed the sum of No Lapse
Guarantee Premiums since issue as at the beginning of each policy month.
NO LAPSE GUARANTEE PERIOD -- is the first 5 policy years for life insureds with
an issue age up to and including 85. It is not offered to life insureds whose
Issue Age exceeds 85.
NO LAPSE GUARANTEE PREMIUM -- is a measure of premium used in determining
compliance with the No Lapse Guarantee Cumulative Premium Test. The No Lapse
Guarantee premium for each policyowner is set forth in the Policy.
PLANNED PREMIUM -- The premium the policyowner plans to pay periodically.
Subject to certain requirements of law, the Planned Premium may be changed at
any time.
POLICY DATE -- The date from which policy years, policy months and policy
anniversaries are determined. Monthly deductions are due on the policy date. If
a check for at least the Initial Premium accompanies the application, the policy
date is the date the application and check are received at the Service office.
If an application accepted by the Company is not accompanied by a check for the
Initial Premium, the policy will be issued with a policy date which is 7 days
after issuance of the policy.
POLICY DEBT -- as of any date, the aggregate amount of policy loans, including
borrowed interest, less any loan repayments.
POLICY VALUE -- the sum of the values in the Loan Account, the Guaranteed
Interest Account and the Investment Accounts.
SELECT LOAN -- A loan on which the differential between the interest credited
and the interest charged is currently 0%; provided, however, if at some time in
the future it is determined that the current differential could cause the loan
to be treated as a taxable distribution under any applicable ruling, regulation
or court decision, First North American has the right to increase the
differential on all subsequent Select Loans either (i) to an amount that may be
presented in such ruling, regulation or court decision that would result in the
transaction being treated as a loan under federal tax law or (ii) if no amount
is prescribed, to an amount that First North American feels would be more likely
to result in the transaction being treated as a loan under Federal tax law.
SELECT LOAN AMOUNT -- the amount of any Select Loan.
SERVICE OFFICE -- the office designated to service the Policies, which is shown
on the cover page of this prospectus.
SURRENDER CHARGE PERIOD -- the period (usually 15 years) following issuance of
the Policy or any increase in face amount during which surrender charges may be
assessed if the Policy is surrendered or
57
<PAGE> 62
lapsed, the face amount is decreased or a partial withdrawal takes place.
TARGET PREMIUM -- a premium amount used to measure the maximum deferred sales
charge under a Policy. The Target Premium for the initial face amount is set
forth in the Policy. The policyowner will be advised of the Target Premium for
any increase in face amount.
WITHDRAWAL TIER AMOUNT -- as of any date, the net Cash Surrender Value at the
previous anniversary multiplied by 10%.
58
<PAGE> 63
PART II
OTHER INFORMATION
UNDERTAKINGS
Undertaking to File Reports.
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940, as amended.
First North American Life Assurance Company (the "Company") hereby represents
that the fees and charges deducted under the contracts issued pursuant to this
registration statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
Rule 484 Undertaking.
Article 10 of the Charter of the Company provides as follows:
TENTH: No director of the Corporation shall be personally liable to the
Corporation or any of its shareholders for damages for any breach of duty as a
director; provided, however, the foregoing provision shall not eliminate or
limit (i) the liability of a director if a judgment or other final adjudication
adverse to such director established his or her such acts or omissions were in
bad faith or involved intentional misconduct or were acts or omissions (a) which
he or she knew or reasonably should have known violated the New York Insurance
Law or (b) which violated a specific standard of care imposed on directors
directly, and not by reference, by a provision of the New York Insurance Law (or
any regulations promulgated thereunder) or (c) which constituted a knowing
violation of any other law, or establishes that the director personally gained
in fact a financial profit or other advantage to which the director was not
legally entitled or (ii) the liability of a director for any act or omission
prior to the adoption of this Article by the shareholders of the Corporation.
Any repeal or modification of this Article by the shareholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
<PAGE> 64
Article VII of the By-laws of the Company provides as follows:
Section VII.1. Indemnification of Directors and Officers. The Corporation may
indemnify any person made, or threatened to be made, a party to an action by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he or she, his or her testator, testatrix or intestate, is or was
a director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of any other corporation of any type or
kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him or her in connection with the defense or settlement of such
action, or in connection with an appeal therein, if such director or officer
acted, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interests of the Corporation, except that no indemnification under this
Section shall be made in respect of (1) a threatened action, or a pending action
which is settled or is otherwise disposed of, or (2) any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation, unless and only to the extent that the court in which the action
was brought, or , if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
The Corporation may indemnify any person made, or threatened to be made, a party
to an action or proceeding (other than one by or in the right of the Corporation
to procure a judgment in its favor), whether civil or criminal, including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he or
she, his or her testator, testatrix or intestate, was a director or officer of
the Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he or she reasonably believed to be in, or, in the
case of service for any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise, not opposed to, the best
interests of the Corporation and, in criminal actions or proceedings, in
addition, had no reasonable cause to believe that his or her conduct was
unlawful.
The termination of any such civil or criminal action or proceeding by judgment,
settlement, conviction or upon a plea of nolo contendere, of its equivalent,
shall not in itself create a presumption that any such director or officer did
not act, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other
<PAGE> 65
enterprise, not opposed to, the best interest of the Corporation or that he or
she had reasonable cause to believe that his or her conduct was unlawful.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant 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 a claim for indemnification against such liabilities
(other than the payment by the registrant of ex penses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant 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.
<PAGE> 66
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The Prospectus, consisting of 58 pages;
Undertaking to file reports;
Representation pursuant to Section 26 of the Investment Company Act of
1940, as amended;
Rule 484 Undertaking;
The signatures;
Written consents of the following persons [To be filed by amendment];
Tracy A. Kane, Esq.
John G. Vrysen
Ernst & Young LLP
Cooper & Lybrand L.L.P.
Jones & Blouch L.L.P
The following exhibits are filed as part of this Registration Statement:
1. Copies of all exhibits required by paragraph A of the instructions as
to exhibits in Form N-8B-2 are set forth below under designations
based on such instructions:
<TABLE>
<CAPTION>
<S> <C> <C>
A(1) Resolutions of Board of Directors of First North
American Life Assurance Company establishing FNAL
Variable Life Account I. Filed herewith.
A(2) Not applicable.
A(3)(a)(i) Form of Distribution Agreement. [To be filed by amendment.]
A(3)(b)(i) Form of Specimen agreement. [To be filed by amendment.]
A(3)(b)(ii) Form of Specimen agreement between Distributor and dealers. [To be
filed by amendment.]
A(3)(c) Schedule of Sales Commissions. [To be filed by amendment.]
A(4) Not applicable.
A(5)(a) Form of Flexible Premium Variable Life Insurance Policy. Filed herewith.
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
<S> <C> <C>
A(6)(a) Articles of Incorporation of First North American
Life Assurance Company. Incorporated by reference to
Exhibit (b)(6)(i) to the Registration Statement on
Form N-4, file number 33-79112, filed September 2,
1992 on behalf of the FNAL Variable Account of First
North American Life Assurance Company.
A(6)(b) By-Laws of First North American Life Assurance
Company. Incorporated by reference to Exhibit
(b)(6)(ii) to the Registration Statement on Form N-
4, file number 33-79112, filed September 2, 1992 on
behalf of the FNAL Variable Account of First North
American Life Assurance Company.
A(7) Not applicable.
A(8)(a) Form of Service Agreement. [To be filed by amendment.]
A(8)(b) Form of Reinsurance Agreement between First North American Life
Assurance Company and The Manufacturers Life Insurance Company
(U.S.A.). [To be filed by amendment.]
A(9) Not applicable.
A(10) Form of Application for Flexible Premium Variable Life Insurance Policy.
Filed herewith.
</TABLE>
2. Opinion and consent of Tracy A. Kane, Esq., Secretary and General
Counsel of First North American Life Assurance Company. [To be filed
by amendment.]
3. No financial statements are omitted from the prospectus pursuant to
instruction 1(b) or (c) of Part I.
4. Not applicable.
5. Financial Data Schedule. [To be filed by amendment.]
6. Memorandum Regarding Issuance, Face Amount Increase, Redemption and
Transfer Procedures for the Policies. Filed herewith.
7. Power of Attorney. Incorporated by reference to Exhibit (b)(14) to
Form N-4, file number 33-79112, filed February 2, 1993 on behalf of
the FNAL Variable Account of First North American Life Assurance
Company.
<PAGE> 68
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the
registrant, FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY SEPARATE ACCOUNT B has
duly caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the city of Boston, and Commonwealth of Massachusetts, on the
7th day of August, 1997.
FIRST NORTH AMERICAN LIFE ASSURANCE
COMPANY SEPARATE ACCOUNT B
(Registrant)
By: FIRST NORTH AMERICAN LIFE ASSURANCE
COMPANY
(Depositor)
By: /s/ JOSEPH SCOTT
------------------
Joseph Scott
President
Attest
/s/ TRACY A. KANE
- -------------------
Tracy A. Kane
Secretary
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, this registration
statement has been signed by the following persons in the capacities indicated
on this 7th day of August, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ JOSEPH SCOTT Director and President August 7, 1997
_____________________________ (Principal Executive (Date)
Joseph Scott Officer)
*____________________________ Chairman of the Board August 7, 1997
John D. Richardson of Directors (Date)
*____________________________ Director August 7, 1997
John G. Vrysen (Date)
*____________________________ Director August 7, 1997
Kenneth H. Conrad (Date)
*____________________________ Director August 7, 1997
John D. DesPrez, III (Date)
*____________________________ Director August 7, 1997
Ruth Ann Flemming (Date)
*____________________________ Director August 7, 1997
Peter S. Hutchinson (Date)
*____________________________ Director August 7, 1997
Neil M. Merkl (Date)
*____________________________ Director August 7, 1997
Robert C. Perez (Date)
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
<S> <C> <C>
*____________________________ Director August 7, 1997
James K. Robinson (Date)
*____________________________ Director August 7, 1997
H. Douglas Wood (Date)
*____________________________ Director August 7, 1997
Bruce Avedon (Date)
*____________________________ Director August 7, 1997
Bruce Gordon (Date)
/s/ RICHARD C. HIRTLE Director, Vice President and August 7, 1997
_____________________________ Treasurer (Principal (Date)
Richard C. Hirtle Financial and Accounting
Officer)
*By: /s/ TRACY A. KANE August 7, 1997
___________________ (Date)
Tracy A. Kane
Attorney-in-Fact Pursuant
to Powers of Attorney
</TABLE>
<PAGE> 71
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1. A(1) Resolutions of Board of Directors of First North American Life
Assurance Company establishing FNAL Variable Life Account I
1. A(5)(a) Form of Flexible Premium Variable Life Insurance Policy
1. A(10) Form of Application for Flexible Premium Variable Life Insurance
Policy
6. Memorandum Regarding Issuance, Face Amount Increase,
Redemption and Transfer Procedures for the Policies
</TABLE>
<PAGE> 1
EXHIBIT 1.A(1)
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
I, KIMBERLY S. CICCARELLI, ASSISTANT SECRETARY of FIRST NORTH AMERICAN LIFE
ASSURANCE COMPANY (the "Company") do hereby certify that the following is a true
and correct copy of the action taken by the Board of Directors of the Company on
May 6 1997, and that the following resolutions are in full force and effect on
the date hereof:
Variable Life Separate Accounts
RESOLVED, that pursuant to Section 4240 of the New York Insurance Laws, and
subject to the approval of the Superintendent of Insurance of New York, the
Company hereby establishes two separate accounts which shall each be divided
into thirty five (35) variable sub-accounts for use in connection with the offer
and sale of variable life insurance contracts, the issuance of which is hereby
authorized. Such separate account is to be designated initially as the FNAL
Variable Life Account I and the FNAL Variable Life Account II (hereinafter
referred to as "Variable Life Accounts") and such sub-accounts shall be
designated the "Global Equity", "Blue Chip Growth", "Equity", "Equity-Income",
"Growth and Income", "International Growth and Income", "Strategic Bond",
"Global Government Bond", "Investment Quality Bond", "U.S. Government
Securities", "Money Market", "Aggressive Asset Allocation", "Moderate Asset
Allocation", "Conservative Asset Allocation", "Pacific Rim Emerging Markets",
"Growth", "Science & Technology", "Emerging Growth", "Pilgrim Baxter Growth",
"International Stock", "Worldwide Growth", "Quantitative Equity", "Equity
Index", "Value", "Real Estate Securities", "Balanced", "High Yield", "Capital
Growth Bond", "Conservative Lifestyle", "Moderate Lifestyle", "Balanced
Lifestyle", "Growth Lifestyle", "Aggressive Lifestyle", "Small/Mid Cap",
"International Small Cap", respectively; and it is
FURTHER RESOLVED, that each variable life insurance contract issued by the
Company shall provide that the portion of the assets of the separate account
equal to the reserves and other contract liabilities with respect to such
account shall not be chargeable with liabilities arising out of any other
business the Company may conduct and, consistent with the provisions of Section
4240 of the New York Insurance Laws, as amended, that income, gains and losses,
realized or unrealized, from assets allocated to the separate account shall be
credited or charged against such account without regard to other income, gains
or losses of the Company; and it is
FURTHER RESOLVED, that the officers of the Company are hereby authorized and
directed to take all such action as may be necessary or appropriate to cause the
separate account to comply with registration requirements of the Investment
Company Act of 1940 as it may be amended from time to time; and it is
FURTHER RESOLVED, that the officers of the Company are hereby authorized and
directed to take all such action as may be necessary or appropriate to cause the
separate account to comply with the registration requirements of the Securities
Act of 1933 as it may be amended from time to time; and it is
<PAGE> 2
FURTHER RESOLVED, that the officers of the Company are hereby authorized and
directed to perform all such acts and do all things as may, in their judgment
and discretion, be necessary or desirable to give full effect to these
resolutions so as to enable the Company to establish the separate account and
issue variable life insurance contracts, including, without limitation: (a) the
preparation, execution of, or amendment to, the custodian agreement,
underwriting agreements, and such other agreements and documents respecting such
separate account or contracts as they may deem necessary or desirable; (b) the
determination of the terms and conditions of the variable life insurance
contracts herein authorized, and (c) the determination of all other actions
requisite to obtain the qualification, registration or authorization for the
sale of variable life insurance contracts.
DATED at Boston, Massachusetts as of August 5, 1997.
/s/ KIMBERLY S. CICCARELLI
---------------------------------
KIMBERLY S. CICCARELLI
ASSISTANT SECRETARY
(CORPORATE SEAL)
<PAGE> 1
[EXHIBIT]
EXHIBIT 1.A(5)(a)
LIVES INSURED JOHN M DOE
POLICY NUMBER 12 345 678
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
ADJUSTABLE DEATH BENEFIT.
FLEXIBLE PREMIUMS PAYABLE DURING THE LIFE INSURED'S LIFETIME.
POLICY VALUES ALLOCATED TO AN INVESTMENT ACCOUNT REFLECT THE INVESTMENT
EXPERIENCE OF THE UNDERLYING SUB-ACCOUNT.
INVESTMENT OPTIONS DESCRIBED IN THE "POLICY VALUE COMPOSITION" AND THE
"INVESTMENT OPTIONS" PROVISIONS. NON-PARTICIPATING (NOT ELIGIBLE FOR DIVIDENDS).
In this policy "you" and "your" refer to the owner of the policy. "We", "us" and
"our" refer to First North American Life Assurance Company.
If the life insured dies while the policy is in force, we will pay the Insurance
Benefit to the beneficiary, subject to the provisions of the policy. The life
insured and the beneficiary are named on page 3 and the application for this
policy, a copy of which is attached to this policy.
YOUR NET PREMIUMS ARE ADDED TO YOUR POLICY VALUE. YOU MAY ALLOCATE THEM TO ONE
OR MORE OF THE INVESTMENT ACCOUNTS AND TO THE GUARANTEED INTEREST ACCOUNT.
THE PORTION OF YOUR POLICY VALUE THAT IS IN AN INVESTMENT ACCOUNT WILL VARY FROM
DAY TO DAY. THE AMOUNT IS NOT GUARANTEED; IT MAY INCREASE OR DECREASE, DEPENDING
ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS FOR THE INVESTMENT
ACCOUNTS THAT YOU HAVE CHOSEN.
THE PORTION OF YOUR POLICY VALUE THAT IS IN THE GUARANTEED INTEREST ACCOUNT WILL
ACCUMULATE, AFTER DEDUCTIONS, AT RATES OF INTEREST WE DETERMINE. SUCH RATES
WILL NOT BE LESS THAN 4% PER YEAR.
THE AMOUNT OF THE INSURANCE BENEFIT, OR THE DURATION OF THE INSURANCE COVERAGE,
OR BOTH, MAY BE VARIABLE OR FIXED UNDER SPECIFIED CONDITIONS AND MAY INCREASE OR
DECREASE AS DESCRIBED IN THE "PAYMENT OF PREMIUMS" PROVISION AND THE "INSURANCE
BENEFIT" PROVISION.
READ YOUR POLICY CAREFULLY. IT IS A CONTRACT BETWEEN YOU AND US.
RIGHT TO RETURN POLICY. WITHIN EITHER (1) TEN DAYS AFTER YOU RECEIVE YOUR
POLICY; OR (2) FORTY-FIVE DAYS AFTER YOU SIGN THE APPLICATION; OR (3) TEN DAYS
AFTER WE MAIL OR DELIVER A NOTICE OF RIGHT OF WITHDRAWAL, YOU CAN RETURN THE
POLICY FOR CANCELLATION BY DELIVERING OR MAILING IT TO US OR THE AGENT WHO SOLD
IT. IMMEDIATELY ON DELIVERY OR MAILING, THE POLICY WILL BE VOID FROM THE
BEGINNING. WE WILL REFUND IN FULL THE PAYMENT MADE.
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
International Corporate Center at Rye,
555 Theodore Fremd Avenue, Rye,
N.Y. 10580
/s/ J.M. Scott /s/ Tracy A. Kane [LOGO]
PRESIDENT SECRETARY
<PAGE> 2
[EXHIBIT]
TABLE OF CONTENTS
PAGE
Policy Information ....................................................... 3
Table Of Guaranteed Maximum Cost Of Insurance Rates ...................... 4
Definitions .............................................................. 5
Payment Of Premiums ...................................................... 6
Termination .............................................................. 7
Reinstatement ............................................................ 7
Insurance Benefit ........................................................ 7
Policy Value ............................................................. 8
Policy Value Composition ................................................. 9
Investment Options ....................................................... 11
Policy Loan Conditions ................................................... 12
Changing The Death Benefit Option Or The Face Amount ..................... 14
Surrender For Cash ....................................................... 17
Right To Postpone Payment Of Benefits .................................... 19
Right To Return Policy Or Cancel Increases ............................... 20
Age And Sex .............................................................. 20
Suicide .................................................................. 20
Beneficiary .............................................................. 20
Ownership And Assignment ................................................. 21
Protection Against Creditors ............................................. 21
Currency And Place Of Payment ............................................ 21
Contract ................................................................. 21
Validity ................................................................. 22
Non-Participating ........................................................ 22
Flexible Factors ......................................................... 22
How Values Are Computed .................................................. 22
Annual Statement ......................................................... 22
Tax Considerations ....................................................... 23
A copy of the application, any supplementary
benefits, and any endorsements will follow page 23.
Page 2
<PAGE> 3
[EXHIBIT]
POLICY INFORMATION
LIFE INSURED JOHN M DOE AGE AT POLICY DATE: 35
POLICY NUMBER 12 345 678 POLICY DATE: JAN 1 1998
OWNER JOHN M DOE ISSUE DATE: FEB 1 1998
BENEFICIARY AS DESIGNATED IN THE APPLICATION OR SUBSEQUENTLY CHANGED
PLAN FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE, NON-PARTICIPATING
FACE AMOUNT $50,000
DEATH BENEFIT OPTION 1
SEX MALE
PREMIUM MODE ANNUALLY
BEGINNING ON
MON DAY YEAR PLANNED PREMIUM
AUG 01 1997 $600
RATE CLASS STANDARD NON-SMOKER
ADDITIONAL $0.00 PER $1,000 OF FACE AMOUNT
RATE $0.00 PER $1,000 OF FACE AMOUNT FOR 0 YEARS
0% OF THE COST OF INSURANCE
THIS POLICY PROVIDES LIFE INSURANCE COVERAGE FOR THE LIFETIME OF THE LIFE
INSURED IF SUFFICIENT PREMIUMS ARE PAID. PREMIUM PAYMENTS IN ADDITION TO THE
PLANNED PREMIUM SHOWN MAY NEED TO BE MADE TO KEEP THIS POLICY AND COVERAGE IN
FORCE.
PAGE 3.0
<PAGE> 4
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF EXPENSE CHARGES
CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DESCRIBED IN THE POLICY VALUE
COMPOSITION PROVISION):
TWO DEDUCTIONS ARE MADE FROM EACH PREMIUM PAYMENT. THE DEDUCTIONS ARE
GUARANTEED NEVER TO EXCEED:
2.35% FOR STATE AND LOCAL TAXES, AND
1.25% FOR FEDERAL TAXES
MONTHLY ADMINISTRATIVE CHARGE:
AN AMOUNT IS DEDUCTED MONTHLY FROM THE POLICY VALUE. THE AMOUNT IS
GUARANTEED NEVER TO EXCEED:
(A) $0.01 PER $1,000 OF FACE AMOUNT, PLUS $35 DURING THE FIRST POLICY
YEAR, AND
(B) $0.01 PER $1,000 OF FACE AMOUNT, PLUS $10 DURING EACH SUBSEQUENT
YEAR
MORTALITY AND EXPENSE RISKS CHARGE:
THE FOLLOWING AMOUNT IS DEDUCTED MONTHLY FROM THE INVESTMENT ACCOUNT
VALUE:
(A) 0.075% UNTIL THE LATER OF THE TENTH POLICY ANNIVERSARY AND THE LIFE
INSURED'S AGE 60
(B) 0.0375% AFTER THE LATER OF THE TENTH POLICY ANNIVERSARY AND THE
LIFE INSURED'S AGE 60
PAGE 3.1
<PAGE> 5
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF EXPENSE CHARGES (CONTINUED)
DEFERRED UNDERWRITING CHARGE:
$4.50 FOR EACH $1,000 OF FACE AMOUNT, TO A MAXIMUM CHARGE OF $2,250 FOR
EACH LEVEL OF COVERAGE. (LEVEL OF COVERAGE REFERS TO THE INITIAL FACE
AMOUNT AND EACH SUBSEQUENT INCREASE IN FACE AMOUNT.)
THIS AMOUNT WILL BE DEDUCTED FROM THE POLICY VALUE UNDER CERTAIN
CONDITIONS. IT WILL REDUCE OVER TIME ACCORDING TO THE GRADING PERCENTAGES
SHOWN ON PAGE 3.4. SEE THE POLICY VALUE, CHANGING THE DEATH BENEFIT OPTION
OR THE FACE AMOUNT, AND SURRENDER FOR CASH PROVISIONS FOR DETAILS.
DEFERRED SALES CHARGE:
THE MAXIMUM AMOUNT IS 50% OF PREMIUMS PAID, UP TO A CERTAIN NUMBER OF
TARGET PREMIUMS, AS SHOWN ON PAGE 3.3.
THE DEFERRED SALES CHARGE WILL BE DEDUCTED FROM THE POLICY VALUE UNDER
CERTAIN CONDITIONS, EXCEPT AS DESCRIBED BELOW FOR AGES 0 AND 1. THE AMOUNT
CHANGES OVER TIME ACCORDING TO THE GRADING PERCENTAGES SHOWN ON PAGE 3.4.
SEE THE FOLLOWING PROVISIONS FOR DETAILS: POLICY VALUE, CHANGING THE DEATH
BENEFIT OPTION OR THE FACE AMOUNT, AND SURRENDER FOR CASH.
PAGE 3.2
<PAGE> 6
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF EXPENSE CHARGES (CONTINUED)
DEFERRED SALES CHARGE (CONTINUED):
NUMBER OF TARGET PREMIUMS SUBJECT TO DEFERRED SALES CHARGE
(APPLICABLE TO THE INITIAL FACE AMOUNT AND INCREASES)
<TABLE>
<CAPTION>
$250,000 UNDER $250,000 UNDER $250,000 UNDER
AGE OR MORE $250,000 AGE OR MORE $250,000 AGE OR MORE $250,000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0* -0.44 1.68 30 1.56 2.15 60 2.07 2.42
1* -0.52 1.46 31 1.61 2.19 61 2.06 2.43
2 0.06 1.45 32 1.67 2.23 62 2.05 2.43
3 0.24 1.45 33 1.72 2.27 63 2.05 2.43
4 0.62 1.46 34 1.78 2.30 64 2.05 2.42
5 0.63 1.47 35 1.83 2.33 65 2.06 2.41
6 0.67 1.49 36 1.86 2.38 66 2.03 2.41
7 0.69 1.51 37 1.89 2.41 67 2.03 2.41
8 0.72 1.52 38 1.91 2.45 68 1.98 2.41
9 0.75 1.54 39 1.94 2.49 69 1.85 2.30
10 0.78 1.55 40 1.96 2.52 70 1.71 2.17
11 0.82 1.58 41 1.98 2.55 71 1.59 2.05
12 0.85 1.60 42 2.01 2.59 72 1.46 1.92
13 0.88 1.61 43 2.04 2.57 73 1.35 1.80
14 0.92 1.63 44 2.06 2.55 74 1.26 1.70
15 0.88 1.52 45 2.08 2.54 75 1.16 1.60
16 0.90 1.53 46 2.12 2.53 76 1.08 1.50
17 0.94 1.58 47 2.17 2.51 77 1.01 1.40
18 0.99 1.64 48 2.22 2.50 78 0.93 1.30
19 1.03 1.68 49 2.22 2.49 79 0.87 1.22
20 1.07 1.72 50 2.21 2.48 80 0.82 1.14
21 1.11 1.77 51 2.19 2.47 81 0.76 1.07
22 1.16 1.82 52 2.18 2.47 82 0.71 1.01
23 1.20 1.86 53 2.16 2.46 83 0.67 0.95
24 1.25 1.91 54 2.15 2.46 84 0.62 0.89
25 1.30 1.95 55 2.14 2.45 85 0.58 0.83
26 1.35 1.99 56 2.12 2.44 86 0.56 0.78
27 1.40 2.04 57 2.11 2.44 87 0.54 0.73
28 1.46 2.08 58 2.10 2.43 88 0.52 0.68
29 1.51 2.12 59 2.08 2.43 89 0.50 0.64
90 0.50 0.63
</TABLE>
* THE NEGATIVE NUMBER OF TARGET PREMIUMS PRODUCES A NEGATIVE DEFERRED SALES
CHARGE. WHEN COMBINED WITH THE DEFERRED UNDERWRITING CHARGE, THE NEGATIVE
DEFERRED SALES CHARGE REDUCES THE TOTAL SURRENDER CHARGE.
PAGE 3.3
<PAGE> 7
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF EXPENSE CHARGES (CONTINUED)
TABLE OF GRADING PERCENTAGES FOR THE DEFERRED UNDERWRITING CHARGE AND THE
DEFERRED SALES CHARGE
AGES
<TABLE>
<CAPTION>
MONTH* 0-50 51 52 53 54 55+
<S> <C> <C> <C> <C> <C> <C>
12 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
24 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
36 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
48 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
60 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
72 90.00% 88.89% 87.50% 85.71% 83.33% 80.00%
84 80.00% 77.78% 75.00% 71.43% 66.67% 60.00%
96 70.00% 66.67% 62.50% 57.14% 50.00% 40.00%
108 60.00% 55.56% 50.00% 42.86% 33.33% 20.00%
120 50.00% 44.44% 37.50% 28.57% 16.67% 0%
132 40.00% 33.33% 25.00% 14.28% 0%
144 30.00% 22.22% 12.50% 0%
156 20.00% 11.11% 0%
168 10.00% 0%
180 0%
</TABLE>
* FOR POLICY MONTHS NOT SHOWN, THE GRADING PERCENTAGE CAN BE FOUND BY
INTERPOLATION.
PAGE 3.4
<PAGE> 8
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF VALUES
REFER TO YOUR POLICY PROVISIONS FOR DETAILS ON THE TERMS AND VALUES SHOWN IN
THIS TABLE.
<TABLE>
<S> <C>
GUIDELINE ANNUAL PREMIUM (GAP) $ 651.57
TARGET PREMIUM $ 369.50
GUIDELINE SINGLE PREMIUM $ 9,320.52
GUIDELINE LEVEL PREMIUM $ 753.49
MINIMUM ANNUAL PREMIUM (DEATH BENEFIT GUARANTEE)
- - TO THE POLICY ANNIVERSARY NEAREST AGE 70 $ 596.00
- - AGE 70 AND AFTER $ 655.50
NO LAPSE GUARANTEE PREMIUM $ 369.50
MINIMUM FACE AMOUNT $ 50,000
MINIMUM FACE AMOUNT INCREASE OR DECREASE $ 50,000
MINIMUM PAYMENT AMOUNT $ 50.00
- - IF PAYABLE BY PRE-AUTHORIZED PLAN $ 10.00
TRANSFER FEE $ 25.00
MAXIMUM GUARANTEED INTEREST
ACCOUNT TRANSFER PERCENTAGE 15%
MINIMUM PARTIAL NET CASH SURRENDER
VALUE WITHDRAWAL $ 500.00
PARTIAL WITHDRAWAL PERCENTAGE 10%
MINIMUM LOAN AMOUNT $ 500.00
ANNUAL LOAN INTEREST RATE 5.75%
LOAN INTEREST CREDITED DIFFERENTIAL
- - REGULAR LOAN AMOUNTS 1.75%
- - SELECT LOAN AMOUNTS 0.00%
DEATH BENEFIT DISCOUNT FACTOR 1.0032737
FIRST YEAR GUARANTEED MONTHLY 0.140
COST OF INSURANCE RATE PER THOUSAND
</TABLE>
PAGE 3.5
<PAGE> 9
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
LIST OF INVESTMENT FUNDS
THE SEPARATE ACCOUNT IS AUTHORIZED TO INVEST IN SHARES OF NASL SERIES TRUST OR
ANOTHER INVESTMENT COMPANY. EACH SUB-ACCOUNT OF THE SEPARATE ACCOUNT PURCHASES
SHARES IN THE FUNDS LISTED BELOW. WE WILL INFORM YOU OF ANY CHANGES IN THE
AVAILABLE FUNDS.
YOU MAY ALLOCATE NET PREMIUMS TO ANY OF THE FUNDS. YOUR INITIAL INVESTMENT
ALLOCATION IS SHOWN IN THE APPLICATION FOR THE POLICY.
SEE THE FOLLOWING PROVISIONS FOR DETAILS: POLICY VALUE, POLICY VALUE
COMPOSITION, AND INVESTMENT OPTIONS.
NASL SERIES TRUST PORTFOLIOS AND INVESTMENT OBJECTIVES
(1) THE PACIFIC RIM EMERGING MARKETS TRUST SEEKS TO PROVIDE LONG-TERM
GROWTH OF CAPITAL.
(2) THE SCIENCE AND TECHNOLOGY TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL. CURRENT INCOME IS INCIDENTAL TO THE PORTFOLIO'S OBJECTIVE.
(3) THE INTERNATIONAL SMALL CAP TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL
APPRECIATION.
(4) THE EMERGING GROWTH TRUST SEEKS TO PROVIDE MAXIMUM CAPITAL
APPRECIATION.
(5) THE PILGRIM BAXTER GROWTH TRUST SEEKS TO PROVIDE CAPITAL APPRECIATION.
(6) THE SMALL/MID CAP TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL
APPRECIATION.
(7) THE INTERNATIONAL STOCK TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL.
(8) THE WORLDWIDE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL.
(9) THE GLOBAL EQUITY TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL
APPRECIATION.
(10) THE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
(11) THE EQUITY TRUST SEEKS TO PROVIDE GROWTH OF CAPITAL. CURRENT INCOME IS
A SECONDARY CONSIDERATION ALTHOUGH GROWTH OF INCOME MAY ACCOMPANY
GROWTH OF CAPITAL.
(12) THE QUANTITATIVE EQUITY TRUST SEEKS TO ACHIEVE INTERMEDIATE AND
LONG-TERM GROWTH THROUGH CAPITAL APPRECIATION AND CURRENT INCOME.
PAGE 3.6
<PAGE> 10
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
LIST OF INVESTMENT FUNDS
(13) THE EQUITY INDEX TRUST SEEKS TO ACHIEVE INVESTMENT RESULTS WHICH
APPROXIMATE THE TOTAL RETURN OF PUBLICLY TRADED COMMON STOCKS IN THE
AGGREGATE, AS REPRESENTED BY THE STANDARD & POOR'S 500 COMPOSITE STOCK
PRICE INDEX.
(14) THE BLUE CHIP GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL. CURRENT INCOME IS A SECONDARY OBJECTIVE, AND MANY OF THE
STOCKS IN THE PORTFOLIO ARE EXPECTED TO PAY DIVIDENDS.
(15) THE REAL ESTATE SECURITIES TRUST SEEKS TO ACHIEVE A COMBINATION OF
LONG-TERM CAPITAL APPRECIATION AND SATISFACTORY CURRENT INCOME.
(16) THE VALUE TRUST SEEKS TO PROVIDE AN ABOVE-AVERAGE TOTAL RETURN OVER A
MARKET CYCLE OF THREE TO FIVE YEARS, CONSISTENT WITH REASONABLE RISK.
(17) THE INTERNATIONAL GROWTH AND INCOME TRUST SEEKS TO PROVIDE LONG-TERM
GROWTH OF CAPITAL AND INCOME.
(18) THE GROWTH AND INCOME TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL AND INCOME CONSISTENT WITH PRUDENT INVESTMENT RISK.
(19) THE EQUITY-INCOME TRUST SEEKS TO PROVIDE SUBSTANTIAL DIVIDEND INCOME
AND ALSO LONG-TERM CAPITAL APPRECIATION.
(20) THE BALANCED TRUST SEEKS TO PROVIDE CURRENT INCOME AND CAPITAL
APPRECIATION.
(21) THE AUTOMATIC ASSET ALLOCATION TRUSTS (AGGRESSIVE, MODERATE AND
CONSERVATIVE) SEEK TO OBTAIN THE HIGHEST POTENTIAL TOTAL RETURN
CONSISTENT WITH A SPECIFIED LEVEL OF RISK TOLERANCE -- AGGRESSIVE,
MODERATE AND CONSERVATIVE.
(22) THE HIGH YIELD TRUST SEEKS TO REALIZE AN ABOVE-AVERAGE TOTAL RETURN
OVER A MARKET CYCLE OF THREE TO FIVE YEARS, CONSISTENT WITH REASONABLE
RISK.
(23) THE STRATEGIC BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF TOTAL RETURN
CONSISTENT WITH PRESERVATION OF CAPITAL.
(24) THE GLOBAL GOVERNMENT BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF TOTAL
RETURN BY PLACING PRIMARY EMPHASIS ON HIGH CURRENT INCOME AND THE
PRESERVATION OF CAPITAL.
(25) THE CAPITAL GROWTH BOND TRUST SEEKS TO ACHIEVE GROWTH OF CAPITAL BY
INVESTING IN MEDIUM-GRADE OR BETTER DEBT SECURITIES, WITH INCOME AS A
SECONDARY CONSIDERATION.
PAGE 3.6 (CONTINUED)
<PAGE> 11
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
LIST OF INVESTMENT FUNDS
(26) THE INVESTMENT QUALITY BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME CONSISTENT WITH THE MAINTENANCE OF PRINCIPAL AND
LIQUIDITY.
(27) THE U.S. GOVERNMENT SECURITIES TRUST SEEKS TO OBTAIN A HIGH LEVEL OF
CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL AND MAINTENANCE
OF LIQUIDITY.
(28) THE MONEY MARKET TRUST SEEKS TO OBTAIN MAXIMUM CURRENT INCOME
CONSISTENT WITH PRESERVATION OF PRINCIPAL AND LIQUIDITY.
(29) THE LIFESTYLE AGGRESSIVE 1000 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH
OF CAPITAL. CURRENT INCOME IS NOT A CONSIDERATION.
(30) THE LIFESTYLE GROWTH 820 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL WITH CONSIDERATION ALSO GIVEN TO CURRENT INCOME.
(31) THE LIFESTYLE BALANCED 640 TRUST SEEKS TO PROVIDE A BALANCE BETWEEN A
HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL WITH A GREATER
EMPHASIS GIVEN TO CAPITAL GROWTH.
(32) THE LIFESTYLE MODERATE 460 TRUST SEEKS TO PROVIDE A BALANCE BETWEEN A
HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL WITH A GREATER
EMPHASIS GIVEN TO HIGH INCOME.
(33) THE LIFESTYLE CONSERVATIVE 280 TRUST SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME WITH SOME CONSIDERATION ALSO GIVEN TO GROWTH OF CAPITAL.
PAGE 3.6 (CONTINUED)
<PAGE> 12
[EXHIBIT]
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
SUPPLEMENTARY BENEFIT
BENEFIT ADDITIONAL LIFE
LIFE INSURED JAMES M DOE
AGE AT
EFFECTIVE DATE 35
EFFECTIVE DATE AUG 1 1997
BENEFICIARY AS DESIGNATED IN THE APPLICATION OR SUBSEQUENTLY CHANGED
AMOUNT $50,000
SEX MALE
RATE CLASS STANDARD NON-SMOKER
ADDITIONAL $0.00 PER $1,000 OF AMOUNT
RATE $0.00 PER $1,000 OF AMOUNT FOR 0 YEARS
0% OF THE BENEFIT COST
PAGE 3.7
<PAGE> 13
[EXHIBIT]
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
GUARANTEED MAXIMUM MONTHLY RATES PER $1,000
OF NET AMOUNT AT RISK
MALE, STANDARD NON-SMOKER
<TABLE>
<CAPTION>
LIFE LIFE LIFE
INSURED'S INSURED'S INSURED'S
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE RATE AGE RATE AGE RATE
$ $ $
<S> <C> <C> <C> <C> <C>
0 0.3483 35 0.1408 70 2.8858
1 0.0891 36 0.1475 71 3.1925
2 0.0825 37 0.1566 72 3.5466
3 0.0816 38 0.1666 73 3.9533
4 0.0791 39 0.1783 74 4.4100
5 0.0750 40 0.1908 75 4.9000
6 0.0716 41 0.2058 76 5.4216
7 0.0666 42 0.2208 77 5.9700
8 0.0633 43 0.2383 78 6.5391
9 0.0616 44 0.2558 79 7.1433
10 0.0608 45 0.2766 80 7.8058
11 0.0641 46 0.2991 81 8.5433
12 0.0708 47 0.3233 82 9.3766
13 0.0825 48 0.3491 83 10.3158
14 0.0958 49 0.3783 84 11.3425
15 0.1075 50 0.4091 85 12.4333
16 0.1191 51 0.4458 86 13.5666
17 0.1283 52 0.4883 87 14.7325
18 0.1333 53 0.5358 88 15.9075
19 0.1383 54 0.5908 89 17.1075
20 0.1400 55 0.6516 90 18.3491
21 0.1391 56 0.7191 91 19.6533
22 0.1366 57 0.7908 92 21.0625
23 0.1341 58 0.8683 93 22.6358
24 0.1308 59 0.9558 94 24.6375
25 0.1266 60 1.0533 95 27.4966
26 0.1233 61 1.1616 96 32.0458
27 0.1216 62 1.2850 97 40.0166
28 0.1200 63 1.4258 98 54.8316
29 0.1200 64 1.5850 99 83.3333
30 0.1200 65 1.7608
31 0.1225 66 1.9500
32 0.1250 67 2.1550
33 0.1291 68 2.3750
34 0.1341 69 2.6150
</TABLE>
The above rates will be adjusted for any Additional Rate shown in the
Policy Information section.
Page 4
<PAGE> 14
[EXHIBIT]
DEFINITIONS
AGE at a specific date means age on the nearest birthday. If no specific date is
mentioned, age means the life insured's age on the Policy Anniversary nearest to
the birthday.
BUSINESS DAY is any day that the New York Stock Exchange is open for trading,
and trading is not restricted. The net asset value of the underlying shares of a
sub-account will be determined on each Business Day.
CASH SURRENDER VALUE is the Policy Value less the deferred sales charge, the
deferred underwriting charge and any outstanding monthly deductions due.
EFFECTIVE DATE is the date we become obligated under this policy and when we
take the first monthly deductions. It is the later of the date our underwriters
approve issuance of this policy, or the date we receive at least the initial
premium at our Service Office.
GUARANTEED INTEREST ACCOUNT is that part of the Policy Value that reflects the
value you have in our general account.
GROSS SINGLE PREMIUM is the amount of premium necessary to endow the policy at
the age the Death Benefit Guarantee terminates, assuming an annual interest rate
of 4% and current charges.
GUIDELINE ANNUAL PREMIUM (GAP) is used to determine the proportion of premiums
and the Policy Value attributable to an increase in Face Amount for the purpose
of calculating the new Deferred Sales Charge after such increase.
INVESTMENT ACCOUNT is that part of the Policy Value that reflects the value you
have in one of the sub-accounts.
LOAN ACCOUNT is that part of the Policy Value that reflects the value you have
transferred from the Guaranteed Interest Account or the Investment Accounts as
collateral for a policy loan.
NET CASH SURRENDER VALUE is the Cash Surrender Value less the Policy Debt.
NET POLICY VALUE is the Policy Value less the value in the Loan Account.
NET PREMIUM is the gross premium less the deductions for state, local and
federal taxes. It is the amount of premium allocated to the Guaranteed Interest
Account or Investment Accounts.
POLICY DEBT is the aggregate amount of policy loans, including borrowed
interest, less any loan repayments.
POLICY VALUE is the sum of the values in the Loan Account, the Guaranteed
Interest Account and the Investment Accounts.
POLICY YEARS, POLICY MONTHS and POLICY ANNIVERSARIES are determined from the
Policy Date shown on Page 3.
SEPARATE ACCOUNT refers to a segregated account of First North American Life
Assurance Company that is not commingled with our general assets and
obligations.
SERVICE OFFICE is the office that we designate to service this policy.
SUB-ACCOUNT refers to one of the sub-accounts of the Separate Account.
SURRENDER CHARGE PERIOD is the period following issuance of the policy or
following any increase in Face Amount during which we will assess surrender
charges. Surrender charges will apply during this period if you surrender or
lapse the policy, decrease the Face Amount or make a partial withdrawal.
(continued)
Page 5
<PAGE> 15
[EXHIBIT]
DEFINITIONS (continued)
WRITTEN REQUEST must be in a form satisfactory to us, signed and dated by you,
and filed at our Service Office.
PAYMENT OF PREMIUMS
Premiums are payable during the life insured's lifetime. They are payable on or
before their due dates at our Service Office. On request, we will give you a
receipt signed by one of our officers. The Planned Premium you requested in the
application is shown in the Policy Information Section.
The initial premium is due on the Policy Date. The minimum amount required for
the initial premium is one-twelfth of the Target Premium shown in the Policy
Information section.
You may pay subsequent premiums in any amount and at any frequency, subject to
the following:
(a) premium payments are due at the beginning of each Policy Month,
(b) no premium payment may be less than the Minimum Payment Amount shown in
the Policy Information section. We may change this amount 90 days after
we send you written notice of the change;
(c) we have the right to refuse or refund any premium payments that may
cause this policy to fail to qualify as life insurance under applicable
tax law; and
(d) the sum of the premiums paid into this policy at any time may not
exceed the guideline premium limitation as of such time. The guideline
premium limitation is, as of any date, the greater of:
(1) the Guideline Single Premium, or
(2) the sum of the Guideline Level Premiums to such date.
The Guideline Single Premium and the Guideline Level Premium are shown in the
Policy Information section.
DEFAULT. Unless the No Lapse Guarantee or the Death Benefit Guarantee is in
effect, the policy will go into default if, at the beginning of any Policy
Month, the Net Cash Surrender Value would go below zero after we take the
Monthly Deductions that are due. The policy will not go into default if it
qualifies for the No Lapse Guarantee or the Death Benefit Guarantee.
GRACE PERIOD. We will allow 61 days from the date that the policy goes into
default, for you to pay the amount that is required to bring the policy out of
default. We will send you a notice specifying the required amount. The amount is
equal to (a) plus (b), where:
(a) is the amount necessary to bring the Net Cash Surrender Value to zero,
if it is less than zero at the date of default; and
(b) is the monthly deductions due, plus the next two monthly deductions.
If the life insured dies during the grace period, we will pay the Insurance
Benefit. The amount of the benefit will be as defined in the Insurance Benefit
provision, with the following modifications:
(a) we will reduce the Insurance Benefit by any outstanding Monthly
Deductions due; and
(b) in calculating the Death Benefit, we will use the Policy Value as of
the default date.
Page 6
<PAGE> 16
[EXHIBIT]
TERMINATION
This policy terminates on the earliest of the following dates:
(a) at the end of the grace period for which you have not paid any amount
that is due;
(b) on the date you surrender the policy for its Net Cash Surrender Value;
or
(c) on the date the life insured dies.
We will pay you the Net Cash Surrender Value as of the date of termination, less
the Monthly Deductions then due.
REINSTATEMENT
You can reinstate this policy only if it terminated at the end of a grace period
in which you did not make a required payment. You can reinstate the policy
within five years of the termination date if you:
(a) make a Written Request for reinstatement;
(b) provide us with written evidence of the life insured's insurability
that is satisfactory to us;
(c) pay a premium equal to the amount that was required during the 61-day
grace period following default; and
(d) repay any amount we had paid in connection with the termination of the
policy.
If we approve your request, your policy reinstatement date will be the later of
the date of your request or the date we receive the required payment at our
Service Office.
INSURANCE BENEFIT
If the life insured dies while the policy is in force, we will pay the Insurance
Benefit to the beneficiary on receiving due proof of death, subject to the Age
And Sex, Suicide and Validity provisions. If the life insured dies after we
receive your request for surrender, there will be no Insurance Benefit. We will
pay the amount payable under the Surrender For Cash provision instead.
INSURANCE BENEFIT. The Insurance Benefit payable is:
(a) the Death Benefit as described below,
plus (b) any amounts payable under any Supplementary Benefits that are
a part of the policy,
less (c) the value of the Policy Debt at the date of death.
DEATH BENEFIT. The Death Benefit will depend on whether Death Benefit Option 1
or 2 is in effect on the date of death.
Under Option 1, the Death Benefit is the greater of (a) and (b), where:
(a) is the Face Amount of the policy at the date of the life insured's
death, and
(b) is the Policy Value at the date of death, multiplied by the applicable
percentage as shown in the table below.
Under Option 2, the Death Benefit is the greater of (a) and (b), where:
(a) is the Face Amount of the policy, plus the Policy Value at the date of
the life insured's death, and
(continued)
Page 7
<PAGE> 17
[EXHIBIT]
INSURANCE BENEFIT (continued)
(b) is the Policy Value at the date of death, multiplied by the applicable
percentage as shown in the table below.
<TABLE>
<CAPTION>
* Age Applicable Percentage
----- ---------------------
<S> <C>
40 and under 250%
45 215%
50 185%
55 150%
60 130%
65 120%
70 115%
75 105%
90 105%
95 and above 100%
</TABLE>
* For ages not shown, the Applicable Percentage can be found by
interpolation.
INTEREST. We will pay the Insurance Benefit in one lump sum with interest
calculated from the date of death to the date of payment. The rate of interest
will be the rate currently paid for Insurance Benefits left on deposit with us.
POLICY VALUE
NET PREMIUMS ADDED. On the Business Day we receive your premium payments at our
Service Office, we add your Net Premium to your Policy Value. We will do this
before we take any deductions due on that Business Day. On the Business Day
coincident with or next following the Effective Date, we will add Net Premiums
received before the Effective Date into your Policy Value.
MONTHLY DEDUCTIONS. A deduction is due from your Policy at the beginning of each
Policy Month. The deduction covers monthly administrative charges and the cost
to provide the insurance coverage. Monthly Deductions are due until the life
insured's age 100.
On the Effective Date, we will take the Monthly Deductions that are due prior to
the Effective Date.
We will take the Monthly Deductions that are due on or after the Effective Date
on the date they are due.
The deduction for any Policy Month is the sum of the following amounts
determined at the beginning of that month:
(a) The Monthly Administrative Charge shown in the Table Of Expense Charges
in the Policy Information section,
(b) The Mortality and Expense Risks Charge shown in the Table Of Expense
Charges in the Policy Information section,
(c) The monthly Cost of Insurance for the life insured, and
(d) The monthly cost of any Supplementary Benefits that are a part of this
policy, as determined in accordance with such Supplementary Benefit.
COST OF INSURANCE. The Cost Of Insurance for a specific Policy Month is the rate
for the Cost Of Insurance for that month, as described below, multiplied by the
net amount at risk.
The net amount at risk is equal to the result of (a) minus (b), where:
(a) is the Death Benefit on the first day of the Policy Month, divided by
the Death Benefit Discount Factor shown in the Policy Information
section; and
(b) is the Policy Value on the first day of the Policy Month.
(continued)
Page 8
<PAGE> 18
[EXHIBIT]
POLICY VALUE (continued)
The rates for the Cost of Insurance, on the Policy Date, and subsequently for
each increase, are based on the life insured's age, sex, rate class, and the
duration that the coverage has been in force. We will determine Cost of
Insurance rates from time to time, on a basis that does not discriminate
unfairly within any class of lives insured.
The Cost of Insurance calculation will reflect any Additional Rate shown in the
Policy Information section. The Cost of Insurance rates will never exceed those
shown in the Table Of Guaranteed Maximum Cost Of Insurance Rates on page 4, plus
any Additional Rate.
OTHER DEDUCTIONS. We also make the following deductions from your Policy Value
as they occur.
We deduct a Deferred Underwriting Charge and a Deferred Sales Charge if any of
the following occurs during the Surrender Charge Period. If you,
(a) give up the policy for its Net Cash Surrender Value,
(b) make a partial withdrawal of the Net Cash Surrender Value,
(c) reduce the face amount of insurance, or
(d) do not pay an amount due at the end of a grace period, and the policy
terminates.
See the Surrender For Cash provision for details.
POLICY VALUE COMPOSITION
Your Policy Value at any time is equal to the sum of the values you have in the
Loan Account, the Guaranteed Interest Account and the Investment Accounts.
LOAN ACCOUNT VALUE. You can get a loan on this policy under certain conditions.
When you take out a loan, we transfer the amount of the loan from the Guaranteed
Interest Account and/or one or more of the Investment Accounts, into the Loan
Account. For details of the Loan Account see the Policy Loan Conditions
provision.
GUARANTEED INTEREST ACCOUNT VALUE. The amount you have in the Guaranteed
Interest Account at any time equals:
(a) Net Premiums allocated to it, plus
(b) amounts transferred to it, plus
(c) interest credited to it, less
(d) amounts deducted from it, less
(e) amounts transferred from it, less
(f) amounts withdrawn from it.
We will credit interest to amounts in the Guaranteed Interest Account, at an
annual rate of no less than 4%. We will set the actual rates from time to time.
For all transactions, we calculate interest from the date of the transaction.
INVESTMENT ACCOUNTS VALUE. The amount you have in an Investment Account at any
time equals the number of units in that Investment Account, multiplied by the
unit value of the corresponding Sub-Account at that time.
The number of units in an Investment Account at any time equals (a) minus (b),
where:
(a) is the number of units credited to the Investment Account because of
(1) Net Premiums allocated to it,
(2) amounts transferred to it; and
(continued)
Page 9
<PAGE> 19
POLICY VALUE COMPOSITION (continued)
(b) is the number of units canceled from the Investment Account because of
(1) amounts deducted from it,
(2) amounts transferred from it, and
(3) amounts withdrawn from it.
The number of units credited or canceled for a given transaction is equal to the
dollar amount of the transaction, divided by the unit value on the Business Day
of the transaction.
SEPARATE ACCOUNT AND SUB ACCOUNTS. The Separate Account is authorized to invest
in the shares of NASL Series Trust or another management investment company.
Each Sub-Account of the Separate Account purchases shares of a corresponding
Fund of NASL Series Trust or another management investment company. The Funds
are listed in the Policy Information section.
FUND SUBSTITUTION. A Fund might, in our judgment, become unsuitable for
investment by a Sub-Account. This might happen because of a change of investment
policy; or a change in the applicable laws or regulations; or because the shares
are no longer available for investment; or for some other reason.
If a Fund becomes unsuitable for investment, we have the right to substitute
another Fund or another management investment company. Before doing this, we
would first seek, where required, approval from the Securities and Exchange
Commission and the Insurance Commissioner of the state in which this policy is
delivered.
To the extent permitted by applicable federal and state law, we also have the
right, without your approval, to:
(a) create new separate accounts;
(b) combine any two or more separate accounts including the Separate
Account;
(c) make available additional Sub-Accounts investing in additional Funds of
NASL Series Trust, or another management investment company;
(d) operate the Separate Account as a management investment company under
the Investment Company Act of 1940 or in any other form permitted by
law;
(e) de-register the Separate Account under the Investment Company Act of
1940; and
(f) transfer assets between the Separate Account and other separate
accounts.
The investment objectives of the Separate Account will not be changed materially
without first filing the change with the Insurance Commissioner of our state of
domicile and with the Commissioner of Insurance of the state of New York. We
will inform you of any changes deemed to be material.
UNIT VALUES. We will determine the unit values for each Sub-Account at the end
of each Business Day. We will deem each Business Day to end at the time we
determine the net asset value of the underlying shares held by the Sub-Account.
When we need to determine a Policy Value or an amount after the end of a
Business Day, or on a day that is not a Business Day, we will do so on the next
Business Day.
(continued)
Page 10
<PAGE> 20
POLICY VALUE COMPOSITION (continued)
The unit value for each Sub-Account was established at $10 for the first
Business Day that an amount was allocated, or transferred to the particular
Sub-Account. For any subsequent Business Day, the unit value for that
Sub-Account is obtained by multiplying the unit value for the immediately
preceding Business Day by the net investment factor for the particular
Sub-Account on such subsequent Business Day.
NET INVESTMENT FACTOR. The net investment factor for a Sub-Account on any
Business Day is equal to (a) divided by (b), where:
(a) is the net asset value of the underlying Fund shares held by that
Sub-Account at the end of such Business Day before any policy
transactions are made on that day; and
(b) is the net asset value of the underlying Fund shares held by that
Sub-Account at the end of the immediately preceding Business Day after
all policy transactions were made for that day.
We reserve the right to adjust the above formula for any taxes determined by us
to be attributable to the operations of the Sub-Account.
ASSETS. The assets held in each Sub-Account are used to support the Policy
Values of Single and Flexible Premium Variable Life Insurance policies. The
Separate Account will be used to fund only variable life insurance benefits.
Income, gains and losses of the Separate Account are credited to, or charged
against, the applicable Sub-Accounts without regard to our other income, gains
and losses.
The assets of the Separate Account are our property. The part of the assets that
is equal to the Investment Account values in respect of all Single and Flexible
Premium Variable Life Insurance policies will not be charged with liabilities
from any other business we conduct. We can transfer any Separate Account assets
in excess of those Investment Account values to our general account.
INVESTMENT OPTIONS
ALLOCATIONS. You may allocate Net Premiums to the Guaranteed Interest Account or
any of the Investment Accounts. Unless you change the initial premium allocation
specified in your application for this policy, it will continue to apply to
subsequent premium payments.
Allocation percentages must be zero or a whole number not greater than 100. The
sum of the allocation percentages must equal 100. You may change the allocation
percentages by Written Request to our Service Office. The change will take
effect on the date we receive your request at our Service Office.
We will take monthly deductions from the Guaranteed Interest Account and the
Investment Accounts in the same proportion that the Policy Value in each of
these accounts bears to the Net Policy Value.
TRANSFERS. By Written Request you may transfer portions of your Policy Value
among the Investment Accounts and the Guaranteed Interest Account. We will also
permit telephone transfers if a currently valid authorization form is on file
with us. All transfers are subject to the following restrictions:
(continued)
Page 11
<PAGE> 21
INVESTMENT OPTIONS (continued)
(a) You can make as many transfers in a Policy Year as you want. There is
no charge for the first twelve transfers in any Policy Year. If you
make more than twelve transfers in any Policy Year, the Transfer Fee
shown in the Table of Values in the Policy Information section will
apply to each subsequent transfer in that Policy Year. We will consider
all transfer requests received on the same Business Day as one
transfer.
(b) The maximum amount that you can transfer out of the Guaranteed Interest
Account in any one Policy Year is limited to the greater of:
(1) the Maximum Guaranteed Interest Account Transfer Percentage
shown in the Policy Information section, multiplied by the
value in the Guaranteed Interest Account at the previous
Policy Anniversary; or
(2) $500.00.
(c) Any transfer out of the Guaranteed Interest Account may not involve a
transfer to the Investment Account for the Money-Market Fund.
(d) If a transfer would result in more than a 5% reduction in the number of
shares outstanding at the close of the previous Business Day in the
Equity Index Sub-Account, we can decline the transfer. If at a later
date you wish to make a previously declined transfer, we will require a
new transfer request.
POLICY LOAN CONDITIONS
POLICY DEBT. The policy debt as of any date equals (a) plus (b), minus (c),
where:
(a) is the total amount of loans borrowed as of such date,
(b) is the total amount of loan interest charges which have been borrowed
as of such date, and
(c) is the total amount of loan repayments as of such date.
MODIFIED POLICY DEBT. The modified policy debt as of any date equals the policy
debt as of such date, plus the loan interest to be charged to the next Policy
Anniversary. All are discounted from the next Policy Anniversary back to such
date at an annual rate of 4%.
AVAILABLE LOAN VALUE. While this policy is in force, you may obtain a loan from
us by Written Request. We may require a loan agreement from you as the policy is
the only security for the loan. On the date you take out a new loan, the amount
of the new loan cannot be greater than the amount which would cause the Modified
Policy Debt to equal the loan value as of that date. A loan must be for at least
the Minimum Loan Amount shown in the Policy Information Section.
The loan value on any date is the Cash Surrender Value, less the monthly
deductions due to the next Policy Anniversary.
TYPES OF LOAN. Select and Regular loans are available under this policy.
Select Loans are available beginning on the later of the tenth Policy
Anniversary and the life insured's Age 55. The amount available annually on a
Select Loan basis is equal to 12% of the Net Cash Surrender Value at the
previous Policy Anniversary. This amount applies to existing and new loan
amounts.
(continued)
Page 12
<PAGE> 22
POLICY LOAN CONDITIONS (continued)
Regular Loans are all loans taken out prior to the Select Loan period, and loans
taken out at any time in excess of the Select Loan amount.
LOAN ACCOUNT. When you take out a loan, or when loan interest charges are
borrowed, we transfer amounts from the Guaranteed Interest Account and/ or one
or more of the Investment Accounts into the Loan Account. The total amount
transferred is the difference between the Loan Account before the transfer and
the Modified Policy Debt as of the transfer date, so that the Loan Account value
after the transfer is the same as the Modified Policy Debt.
You may tell us how much of the transfer you wish to allocate to your value in
the Guaranteed Interest Account and each of the Investment Accounts. If you do
not tell us, we will allocate the transfer based on the proportion that your
value in the Guaranteed Interest Account and your value in the Investment
Accounts bear to the Net Policy Value.
When a transfer is allocated to an Investment Account, we will cancel units of
that Investment Account sufficient in value to cover the allocated amount. These
transfers do not count as a transfer for purposes of the Transfers section of
the Investment Options provision.
LOAN INTEREST CHARGED. Interest will accrue daily on the policy debt, and is
charged to the Loan Account annually in arrears at each Policy Anniversary. In
the event that you do not pay the loan interest charged, it will be borrowed
against the policy.
The annual Loan Interest Charged rate is 5.75%.
LOAN INTEREST CREDITED. We will credit interest daily to amounts in the Loan
Account at an annual rate of no less than 4%. The actual interest will accrue at
a different rate on Regular and Select Loan amounts. The rate at which interest
is credited is calculated by subtracting the Loan Interest Credited Differential
shown in the Policy Information section from the Loan Interest Charged rate.
We may reduce the Loan Interest Credited Differential on Regular Loans 90 days
after we send you written notice of the change.
We will increase the Loan Interest Credited Differential on Select Loans if at
any time it is determined that the differential would cause a Select Loan to be
taxable under any applicable ruling, regulation or court decision. We will
increase the differential to either of the following amounts, and send you
written notice of the change:
(a) the amount that may be prescribed in the ruling, regulation or court
decision; or
(b) if no amount is prescribed, an amount that we consider to be more
likely to result in the transaction being treated as loan under federal
tax law.
LOAN ACCOUNT ADJUSTMENTS. We will adjust the value of the Loan Account when you
take out a loan. We will also make an adjustment at other specified events
listed below. When we adjust the Loan Account, the difference between:
(a) the Loan Account before any adjustment; and
(b) the Modified Policy Debt at the time of adjustment,
is transferred between the Loan Account and the Investment Accounts, or the
Guaranteed Interest Account.
(continued)
Page 13
<PAGE> 23
POLICY LOAN CONDITIONS (continued)
The amount transferred to or from the Loan Account will be such that the value
of the Loan Account is equal to the Modified Policy Debt after the adjustment.
The specified events which cause an adjustment to the Loan Account are:
(a) a Policy Anniversary,
(b) a partial or full loan repayment,
(c) a new loan being taken out, or
(d) when an amount is needed to meet a monthly deduction.
A loan repayment may be implicit in that the policy debt is effectively repaid
upon termination of the policy. The policy terminates upon the death of the life
insured, or upon the surrender or lapse of the policy. In each of these
instances, we will adjust the Loan Account with any excess of the Loan Account
over the Policy Debt.
Except as noted below in the Loan Repayment section, amounts transferred from
the Loan Account will be allocated to the Guaranteed Interest Account and to the
Investment Accounts in the same proportion that the value in the corresponding
Loan Sub-Account bears to the value of the Loan Account. A Loan Sub-Account
exists for each Investment Account and for the Guaranteed Interest Account.
Amounts transferred to the Loan Account are allocated to the appropriate Loan
Sub-Account to reflect the account from which the transfer was made.
Loan Repayment. You may repay the policy debt in whole or in part at any time
prior to the death of the life insured, and while the policy is in force.
When you repay a loan, we credit the amount to the Loan Account, and make a
transfer to the Guaranteed Interest Account or the Investment Accounts, so that
the Loan Account at that time equals the Modified Policy Debt. We will allocate
loan repayments as follows:
(a) first to the Guaranteed Interest Account, until the associated Loan
Sub-Account is reduced to zero,
(b) then to each Investment Account in the same proportion that the value
in the corresponding Loan Sub-Account bears to the value of the Loan
Account.
While a loan exists, we will treat the amounts you pay as premiums unless you
request in writing that they be treated as loan repayments.
CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT
You may change your Death Benefit Option or your Face Amount of insurance by
Written Request. The applicable restrictions and conditions are noted below for
each type of change.
A change in Death Benefit Option or Face Amount of insurance will cause a change
in the Guideline Single Premium and Guideline Level Premium. We will inform you
of the new Guideline Single Premium and Guideline Level Premium amounts. We
reserve the right to limit any changes that would cause this policy to fail to
qualify as life insurance for tax purposes.
(continued)
Page 14
<PAGE> 24
CHANGING THE DEATH BENEFIT OPTION
OR THE FACE AMOUNT (continued)
CHANGES IN DEATH BENEFIT OPTION. You may change your Death Benefit Option after
the second Policy Anniversary. Changes will take effect at the beginning of the
Policy Month following the date we receive your Written Request, provided we
receive at least 30 days prior notice.
CHANGE FROM DEATH BENEFIT OPTION 1 TO OPTION 2. The face amount of insurance
after the change from Option 1 to Option 2 will be (a) minus (b), where:
(a) is the Face Amount of insurance immediately before the change, and
(b) is the Policy Value on the effective date of the change.
We will not allow the change in Death Benefit Option if it would cause the Face
Amount to decrease below the minimum shown in the Policy Information section.
CHANGE FROM DEATH BENEFIT OPTION 2 TO OPTION 1. The Face Amount of insurance
after the change from Option 2 to Option 1 will be (a) plus (b), where:
(a) is the Face Amount of insurance immediately before the change, and
(b) is the Policy Value on the effective date of the change.
An increase in Face Amount resulting from a change in death benefit will not
have any Deferred Underwriting Charge or Deferred Sales Charge associated with
it.
DECREASE IN FACE AMOUNT. You may decrease the Face Amount of insurance once
during each Policy Year after the first Policy Anniversary. A decrease in Face
Amount will take effect at the beginning of the Policy Month following the date
we receive your Written Request, provided we had at least 30 days prior notice.
If we did not get sufficient notice, the decrease will be effective on the next
Policy Month.
The minimum Face Amount Decrease is shown in the Policy Information section. We
may change this amount 90 days after we send you written notice of the change.
We will not allow a decrease if it would cause the Face Amount to go below the
Minimum Face Amount shown in the Policy Information section.
A decrease in Face Amount will reduce the Face Amount in the following order:
(a) the Face Amount provided by the most recent increase will decrease
first, followed by
(b) the next most recent increase until all increases are reduced, then
(c) the initial Face Amount.
If you decrease the initial Face Amount or an increase in Face Amount during the
Surrender Charge Period, we will deduct a Deferred Underwriting Charge and a
Deferred Sales Charge from the Policy Value. See the Decreases in Face Amount
Section of the Surrender For Cash provision for details.
(continued)
Page 15
<PAGE> 25
CHANGING THE DEATH BENEFIT OPTION
OR THE FACE AMOUNT (continued)
INCREASE IN FACE AMOUNT. You may increase the Face Amount of insurance once
during each Policy Year after the second Policy Anniversary. You will need to
provide us with satisfactory evidence of insurability. An increase in Face
Amount will take effect at the beginning of the Policy Month following the date
we approve your request.
We reserve the right to refuse increases if the life insured's age at the
effective date of the increase is greater than the maximum issue age for new
policies at that time. The Minimum Face Amount Increase is shown in the Policy
Information section. We may change this amount 90 days after we send you written
notice of the change.
The amount of insurance will increase in the following order:
(a) we will restore the amount reduced by the most recent decrease first,
followed by
(b) the next most recent decrease until all decreases are restored, then
(c) we will add the new amount of insurance.
There will be no new Deferred Underwriting Charge or Deferred Sales Charge
associated with increases due to (a) or (b) above. However, there will be a new
GAP and Target Premium amount, as well as a new Deferred Underwriting Charge and
Deferred Sales Charge associated with the increase in Face Amount under (c). We
will inform you of the new amounts at the time of the increase in Face Amount.
You will not necessarily have to pay additional premium with an increase in Face
Amount. If the Death Benefit Guarantee is not in force, the new Deferred
Underwriting Charge and Deferred Sales Charge may require an additional premium
payment to prevent the policy from going into default.
For Deferred Sales Charge purposes, the premiums attributable to the increase in
Face Amount at any time will be equal to (a) plus (b), where:
(a) is the proportion of the Policy Value on the date of the increase
attributable to the increase; and
(b) is the proportion of the premiums received on or after the date of
increase attributable to the increase.
The proportion of Policy Value or premiums attributable to the increase will
equal the ratio of (a) to (b),where:
(a) is the GAP for the increase, and
(b) is the sum of the GAPs for the initial Face Amount and all increases,
including the requested increase.
After an increase in Face Amount the proportion of each premium attributable to
the initial Face Amount is equal to the ratio of (a) to (b), where:
(a) is the GAP for the initial Face Amount, and
(b) is the sum of the GAPs for the initial Face Amount and all increases in
effect at that time.
Page 16
<PAGE> 26
SURRENDER FOR CASH
CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to (a) minus
(b), where:
(a) is the Policy Value on that date, and
(b) is the sum of any Deferred Sales Charge, Deferred Underwriting Charge,
and any outstanding monthly deductions.
NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash
Surrender Value, less the Policy Debt. You may surrender this policy for its Net
Cash Surrender Value at any time while the life insured is living. We will
determine the Net Cash Surrender Value at the end of the Business Day on which
we receive the policy and your Written Request for surrender at our Service
Office. After the date of surrender, no insurance will be in force.
DEFERRED UNDERWRITING CHARGE. If you surrender this policy for its Net Cash
Surrender Value or if it terminates at the end of a grace period during the
Surrender Charge Period, we will deduct a Deferred Underwriting Charge from the
Policy Value. A description of the Deferred Underwriting Charge is in the Policy
Information section.
DEFERRED SALES CHARGE. If you surrender this policy for its Net Cash Surrender
Value or if it terminates at the end of a grace period during the Surrender
Charge Period, we will deduct a Deferred Sales Charge from the Policy Value. A
description of the Deferred Sales Charge is in the Policy Information section.
DECREASES IN FACE AMOUNT. If you reduce the Face Amount of insurance during the
Surrender Charge Period, we will deduct a pro-rata Deferred Underwriting Charge
and a pro-rata Deferred Sales Charge from the Policy Value. We will allocate
this deduction to the Guaranteed Interest Account and the Investment Accounts in
the same manner as monthly deductions. See the Allocations section of the
Investment Options provision.
A decrease in Face Amount caused by a change from Death Benefit Option 1 to
Option 2 will not incur the pro-rata Deferred Underwriting Charge or the
Pro-rata Deferred Sales Charge described below.
CHARGES DEDUCTED FOR DECREASES. The amount of the charges deducted for a
decrease in Face Amount is equal to the sum of the pro-rata Deferred
Underwriting Charge and the pro-rata Deferred Sales Charge for the initial Face
Amount and any previous increase in Face Amount. This amount is the result of
(a) divided by (b), multiplied by (c), where:
(a) is the amount of the decrease in the initial Face Amount or previous
increase in Face Amount;
(b) is the amount of the corresponding initial Face Amount or previous
increase in Face Amount, prior to the decrease; and
(c) is the Deferred Underwriting Charge and Deferred Sales Charge for the
corresponding initial Face Amount or previous increase in Face Amount,
immediately prior to the decrease.
See the Charges Remaining After Face Amount Decreases Or Partial Withdrawals
section of this provision for a description of the charges remaining after
deduction of the pro-rata charges.
(continued)
Page 17
<PAGE> 27
SURRENDER FOR CASH (continued)
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. You may request a partial Net Cash
Surrender Value withdrawal once each Policy Month after the first two Policy
Years. You may make this request provided there is a Net Cash Surrender Value
for the policy. The partial Net Cash Surrender Value withdrawal will be made as
of the end of the Business Day on which we receive your Written Request.
The minimum amount that you may withdraw is the Minimum Partial Net Cash
Surrender Value Withdrawal Amount shown in the Policy Information section. You
may specify the accounts from which we should make the partial Net Cash
Surrender Value withdrawal. If you do not specify, we will make the withdrawal
in the same proportion that the value in the Guaranteed Interest Account and the
Investment Accounts bears to the Net Policy Value.
If a partial Net Cash Surrender Value withdrawal is above the Withdrawal Tier
Amount and occurs during the Surrender Charge Period, we will deduct a pro-rata
Deferred Underwriting Charge and a pro-rata Deferred Sales Charge from the
Policy Value.
The Withdrawal Tier Amount at any date is determined as (a) multiplied by (b),
where:
(a) is the Partial Withdrawal Percentage shown in the Policy Information
section; and
(b) is the Net Cash Surrender Value at the previous Policy Anniversary.
The portion of a partial Net Cash Surrender Value withdrawal that is considered
above the Withdrawal Tier Amount includes all previous partial Net Cash
Surrender Value withdrawals that have occurred in the current Policy Year.
If Death Benefit Option 1 is in effect at the time of the withdrawal, then the
Face Amount will be reduced by,
(a) the amount of the withdrawal plus the pro-rata Deferred Underwriting
Charge and the pro-rata Deferred Sales Charge, if at the time of the
withdrawal the Death Benefit equals the Face Amount, otherwise
(b) the amount, if any, by which the withdrawal plus the pro-rata Deferred
Underwriting Charge and the pro-rata Deferred Sales Charge exceeds the
difference between the Death Benefit and the Face Amount.
If there has been a prior increase in Face Amount, then the Face Amount will be
decreased in the same order as if you had requested the decrease. See the
Decrease in Face Amount section of the Changing The Death Benefit Option Or The
Face Amount provision.
CHARGES DEDUCTED FOR PARTIAL WITHDRAWALS. The amount of the charges deducted for
the partial withdrawal will equal the sum of the pro-rata Deferred Underwriting
Charge and the pro-rata Deferred Sales Charge for the initial Face Amount and
any previous increase in Face Amount. This amount is the result of (a) divided
by (b), multiplied by (c), where:
(a) is the amount of the partial Net Cash Surrender Value withdrawal in
excess of the Withdrawal Tier Amount;
(b) is the Net Cash Surrender Value prior to the withdrawal, in excess of
the Withdrawal Tier Amount; and
(c) is the Deferred Underwriting Charge and Deferred Sales Charge for the
corresponding initial face amount or previous increase in Face Amount,
immediately prior to the withdrawal.
(continued)
Page 18
<PAGE> 28
SURRENDER FOR CASH (continued)
We will allocate the charges among the Guaranteed Interest Account and the
Investment Accounts in the same proportion that the withdrawal from each account
bears to the total withdrawal.
If the withdrawal plus the pro-rata Deferred Underwriting Charge and the
pro-rata Deferred Sales Charge allocated to a particular account are greater
than the value of that account, we will reduce the portion of the withdrawal
allocated to that account. We will reduce the allocated portion so that the
withdrawal plus the pro-rata charges allocated to the account equal the value of
the account.
See the Charges Remaining After Face Amount Decreases Or Partial Withdrawals
section of this provision for a description of the charges remaining after
deduction of the pro-rata charges.
CHARGES REMAINING AFTER FACE AMOUNT DECREASES OR PARTIAL WITHDRAWALS. Each time
we deduct the pro-rata Deferred Underwriting Charge or the pro-rata Deferred
Sales Charge for a Face Amount decrease or for a partial withdrawal, we will
reduce the remaining Deferred Underwriting Charge and Deferred Sales Charge
proportionately.
The remaining Deferred Underwriting Charge will be calculated
using the table on Page 3.4 in the Policy Information Section. The actual
remaining charge will be the result of (a) divided by (b), multiplied by (c),
where:
(a) is the grading percentage applicable to the life insured's issue age
and policy duration;
(b) is the grading percentage applicable to the life insured's issue age at
the time of the last decrease or partial withdrawal; and
(c) is the remaining Deferred Underwriting Charge prior to the last
decrease or partial withdrawal, less the Deferred Underwriting Charge
deducted for that decrease or partial withdrawal.
The remaining Deferred Sales Charge will be calculated using the tables on Page
3.3 and Page 3.4 in the Policy Information Section. The actual remaining charge
will be the result of (a) divided by (b), multiplied by (c), where:
(a) is the grading percentage applicable to the policy duration;
(b) is the grading percentage at the time of the last decrease or partial
withdrawal; and
(c) is the remaining Deferred Sales Charge prior to the last decrease or
partial withdrawal, less the Deferred Sales Charge deducted for that
decrease or partial withdrawal.
Until the sum of premiums paid equals or exceeds the Number Of Target Premiums
Subject To Deferred Sales Charge multiplied by the Target Premium, subsequent
premium payments will increase the remaining Deferred Sales Charge.
RIGHT TO POSTPONE PAYMENT OF BENEFITS
We reserve the right to postpone the payment of Net Cash Surrender Values,
partial Net Cash Surrender Value withdrawals, policy loans and the portion of
Insurance Benefit that depend on Investment Account values, for any period
during which:
(a) the New York Stock Exchange (Exchange) is closed for trading (other
than customary week-end and holiday closings), or trading on the
Exchange is otherwise restricted;
(b) an emergency exists as defined by the Securities and Exchange
Commission (SEC), or the SEC requires that trading be restricted; or
(c) the SEC permits a delay for the protection of policyholders.
(continued)
Page 19
<PAGE> 29
RIGHT TO POSTPONE PAYMENT OF BENEFITS (continued)
We also reserve the right to postpone payments for up to six months if such
payments are based on values that do not depend on the investment performance of
the Sub-Accounts. In addition, we may deny transfers under the circumstances
stated in (a), (b) and (c) above, and in the Transfers section of the Investment
Options provision.
RIGHT TO RETURN POLICY OR CANCEL INCREASES
Within either (1) ten days after you receive your policy; or (2) forty-five days
after you sign the application; or (3) ten days after we mail or deliver a
notice of right of withdrawal, you can return the policy for cancellation by
delivering or mailing it to us or to the agent who sold it. Immediately on
delivery or mailing, the policy will be void from the beginning. We will refund
in full the premium paid.
If you request an increase in Face Amount which results in a new Deferred
Underwriting Charge or Deferred Sales Charge, you have the same rights as
described above to cancel the increase. If canceled, the Policy Value, the
Deferred Underwriting Charge and the Deferred Sales Charge will be recalculated
to the amounts they would have been, had the increase not taken place. You may
request a refund for all or a portion of premiums paid during this period. Upon
payment of the refund, we will recalculate the Policy Value, the Deferred
Underwriting Charge and the Deferred Sales Charge to the amounts they would have
been, had the premiums not been paid.
AGE AND SEX
If the life insured's age or sex was misstated in the application, we will
change the Face Amount of insurance. The new Face Amount will be determined so
that the Death Benefit will be that which the most recent Cost of Insurance
deduction would have purchased for the correct age and sex.
SUICIDE
If the life insured dies by suicide, within two years after the Issue Date, we
will pay only the premiums paid, less any partial Net Cash Surrender Value
withdrawals, less the amount of the Policy Debt. If the life insured dies by
suicide, within two years after the date an increase in Face Amount takes
effect, the Death Benefit for that increase will be limited to the monthly
deductions for the increase.
BENEFICIARY
The following four sections will apply unless there is a beneficiary appointment
in force that provides otherwise.
BENEFICIARY CLASSIFICATION. You can appoint beneficiaries for any Insurance
Benefit in three classes: primary, secondary and final. Beneficiaries in the
same class will share equally in any Insurance Benefit payable to them.
PAYMENT TO BENEFICIARIES. We will pay the Insurance Benefit:
(a) to any primary beneficiaries who are alive when the life insured dies; or
(b) if no primary beneficiary is then alive, to any secondary beneficiaries
who are then alive; or
(c) if no primary or secondary beneficiary is then alive, to any final
beneficiaries who are then alive.
(continued)
Page 20
<PAGE> 30
BENEFICIARY (continued)
CHANGE OF BENEFICIARY. During the life insured's lifetime you can change the
beneficiary by Written Request unless you make an irrevocable designation. We
are not responsible if the change does not achieve your purpose.
DEATH OF BENEFICIARY. If no beneficiary is alive when the life insured dies, the
Insurance Benefit will belong to you; or to your estate if you are the life
insured. If a beneficiary dies before the seventh day after the death of the
life insured, we will pay the Insurance Benefit as if the beneficiary had died
before the life insured.
OWNERSHIP AND ASSIGNMENT
While the life insured is living, you as owner can, without any beneficiary's
consent:
(a) receive any amount payable under your policy;
(b) exercise all rights and privileges granted by the policy; and
(c) assign the policy.
An assignment does not bind us until we receive it in writing at our Service
Office. We are not responsible for its validity or its effects. It should be
filed with us in duplicate. We will return a copy.
TRUSTEE OWNER. Should the owner be a trustee, payment to the trustee(s) of any
amount to which the trustee(s) is (are) entitled under the policy, either by
death or otherwise, will fully discharge us from all liability under the policy
to the extent of the amount so paid.
SUCCESSOR OWNER. Upon the owner's death during the life insured's lifetime, a
named successor owner will, if then living, have all the owner's rights and
interest in the policy. During the life insured's lifetime, the owner, without
the consent of any beneficiary or any successor owner, can cancel or change the
designation of successor owner. This may be done from time to time by agreement
in writing with us.
PROTECTION AGAINST CREDITORS
If permitted by state law, all payments shall be exempt from the debts and
contracts of the owners and beneficiaries, and from seizure by court order.
CURRENCY AND PLACE OF PAYMENT
All payments to or by us will be in U.S. currency. We will make payments from
our Service Office. We may require proof that the person claiming any payment is
entitled to it.
CONTRACT
The policy, application, supplementary benefits, and any endorsements form your
whole contract. A copy of the application is attached to the policy and deemed a
part of it. We will not be bound by any statement that is not in the application
or the policy.
Only our President or one of our Vice-Presidents can agree to amend or modify
the policy or waive any of its provisions. Any change must be in writing.
Statements made by you or the life insured are representations, not warranties.
We will not use any statement by you or the life insured to deny a claim, unless
it is written in the application.
Page 21
<PAGE> 31
VALIDITY
We cannot contest the validity of your policy after it has been in force during
the life insured's lifetime for two years from the Issue Date. We cannot contest
the validity of an increase in face amount or an addition of a Supplementary
Benefit after such increase or addition has been in force during the life
insured's lifetime for two years from the date of such increase or addition.
We can contest after that time limit if the policy has been reinstated and has
been in force during the life insured's lifetime for less than two years from
the reinstatement date. If this is the case, we can only contest the validity in
respect of any fact material to the reinstatement that was misrepresented.
NON-PARTICIPATING
Your policy is non-participating. It does not earn dividends.
FLEXIBLE FACTORS
When determining the rate of interest to be used in crediting interest to the
portion of the Policy Value in the Guaranteed Interest Account, and any changes
in that rate, we will consider the following factors: expected mortality and
persistency experience; expected investment earnings; and expected operating
expenses. We will consider the same factors when we determine the actual cost of
insurance; the deductions from premiums for federal, state and local taxes;
administrative charges; and whenever changes are made to any of these charges.
We will not try to recover any losses in earlier years by increasing your
charges in later years.
Adjustments to flexible factors will be by class and be determined by us from
time to time based on future expectations for such factors. Any change will be
determined in accordance with procedures and standards on file with the
Insurance Commissioner of the State of New York.
HOW VALUES ARE COMPUTED
We provide Cash Surrender Values that are at least equal to those required by
law. A detailed statement of the method of computing the values of this policy
has been filed with the insurance department of the state in which this policy
is delivered. This statement is available on request from our Service Office.
We base minimum Cash Surrender Values and reserves on the Commissioners 1980
Standard Ordinary Smoker/Non-Smoker Mortality Table. We also use these tables as
the basis for determining maximum Cost of Insurance rates. Values are computed
at an interest rate of 4% per year.
ANNUAL STATEMENT
Within 30 days after each Policy Anniversary, we will send you a report showing:
(a) the Death Benefit;
(b) the Policy Value;
(c) the current allocation of money in the Guaranteed Interest Account, the
Loan Account and each of the Investment Accounts;
(d) the value of the units in each chosen Investment Account;
(e) any Policy Debt balance and loan interest charged since the last report;
(f) the premiums paid and policy transactions for the year; and
(g) any further information required by law.
Page 22
<PAGE> 32
TAX CONSIDERATIONS
It is the intent that this policy be considered as life insurance for tax
purposes. The Death Benefit is designed to comply with Section 7702 of the
Internal Revenue Code of 1986, or any other equivalent section of the Code.
We do not give tax advice and this provision should not be construed to mean
that the Death Benefit and Policy Value will be exempt from the future actions
of any tax authority.
Page 23
<PAGE> 33
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
ADJUSTABLE DEATH BENEFIT.
FLEXIBLE PREMIUMS PAYABLE DURING THE LIFE INSURED'S LIFETIME.
POLICY VALUES ALLOCATED TO AN INVESTMENT ACCOUNT REFLECT THE
INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNT.
INVESTMENT OPTIONS DESCRIBED IN THE "POLICY VALUE
COMPOSITION" AND THE "INVESTMENT OPTIONS" PROVISIONS.
NON-PARTICIPATING (NOT ELIGIBLE FOR DIVIDENDS).
IMPORTANT NOTICE
To claim a benefit or request a change in your policy,
contact our nearest representative. Or write to our Service
Office at the address below.
Please tell us promptly of any change in your address.
WE STRONGLY URGE THAT, BEFORE YOU TAKE ANY ACTION TO REPLACE
THIS OR ANY OTHER POLICY, YOU ASK THE ADVICE OF THE COMPANY
THAT ISSUED THE POLICY.
Service Office
International Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, N.Y. 10580
Toll Free Number: 1-800-827-4546
<PAGE> 1
EXHIBIT 1A(10)
APPLICATION FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
FIRST NORTH AMERICAN
LIFE ASSURANCE COMPANY
[LOGO]
<PAGE> 2
[EXHIBIT]
INSTRUCTIONS TO REGISTERED REPRESENTATIVE
1. The agent or broker using this form must be a Registered Representative of an
NASD firm.
2. This package contains the following forms: a) Application for Life
Insurance including a Request
for Taxpayer Identification
Number
b) Authorization to Obtain
Information and the Notice of
Disclosure of Information
c) Temporary Life Insurance
Agreement and Receipt
d) General Avocation
Questionnaire
e) Request form for Automatic
Premium Payment
3. All questions on the application must be answered. If a CHANGE is made to an
answer given by the Proposed Life Insured, the CHANGE MUST BE INITIALLED BY
THE PROPOSED LIFE INSURED. The same holds true for questions answered by the
Proposed Owner.
4. Whenever the PROPOSED POLICY IS TO BE OWNED BY SOMEONE OTHER THAN THE
PROPOSED LIFE INSURED, the Proposed Owner must sign the application. If the
proposed Owner is a CORPORATION, the application must be signed by one of the
corporation's Officers. In addition, under the signature, the corporation's
exact name and the title of the signing officer must be PRINTED or the
Corporate seal stamped. The Proposed Life Insured may only sign if he/she is
the majority stockholder and signs a such (e.g. "President and majority
stockholder of the XYZ corporation").
5. The AUTHORIZATION to OBTAIN INFORMATION must always be signed by the Proposed
Life Insured, or by the parent or guardian in the case of juvenile insurance.
The Notice of Disclosure of Information MUST always be given to the Proposed
Life Insured, or to the parent or guardian of a Juvenile Proposed Insured.
6. To qualify for TEMPORARY LIFE INSURANCE, the Proposed Life Insured must be
able to answer all 3 questions on the Notice Portion "No" and the Proposed
Life Insured must be age 70 or younger. If ANY answer is "Yes" and/or the
Proposed Life Insured is over age 70, DO NOT collect any money and DO NOT
detach the receipt. If the Proposed Life Insured qualifies for Temporary Life
Insurance, collect at least one-twelfth of the annual premium, complete the
ENTIRE NOTICE AND RECEIPT PORTION, detach the RECEIPT PORTION and give it to
the Proposed Owner. IN ALL CASES, answer the appropriate question in the
"Registered Representative" Section, so that the Service Office knows whether
the agreement has been issued or not.
NOTE: COVERAGE UNDER THE TEMPORARY LIFE INSURANCE AGREEMENT IS LIMITED TO A
MAXIMUM OF $1,000,000 ON INDIVIDUAL LIFE PLANS, $5,000,000 ON SURVIVORSHIP
PLANS, AND $200,000 FOR INSURANCE ON JUVENILES.
7. Life Insurance applications on JUVENILES must be completed by one of the
child's parents or a legally appointed guardian. All questions pertaining to
the Proposed Life Insured and Owner must be answered. If the payor applies
for disability waiver benefit, a separate and full application must be
completed by him/her, including the medical section, as well as any
applicable questionnaires. If neither the owner nor the payor is one of the
child's parents or a legal guardian, then a PARENT OR GUARDIAN MUST CONSENT
to the application by signing on the last line of the "Signatures" section on
page 6 of the application and check off the appropriate box to show whether
mother, father or guardian.
NOTE: APPLICATIONS WILL NOT BE ACCEPTED UNTIL THE CHILD IS AT LEAST 15 DAYS
OLD.
8. The Request for TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION must be
completed as part of every application. The Internal Revenue Service requires
life insurance companies and other financial institutions that make interest
and/or dividend payments to maintain a file of certified Tax Identification
Numbers for all policyowners.
APPLICATION SUPPLEMENT FOR INVESTMENT ALLOCATION AND INVESTOR SUITABILITY,
FORM NB4031NY, MUST BE COMPLETED AND SUBMITTED WITH THIS APPLICATION
<PAGE> 3
[EXHIBIT]
APPLICATION FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
(hereinafter referred to as The Company)
Application No.
PLEASE PRINT & USE BLACK INK. ANY CHANGES MUST BE
INITIALLED BY THE PROPOSED INSURED AND/OR OWNER. Policy No. ________
PROPOSED LIFE INSURED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1a. Name (first, middle, last) 1b. Date of Birth (mmm/dd/yyyy) 1c. Place of Birth 1d. Soc. Sec. No./Tax I.D. No.
_____________________________________________________________________________________________________________________________
1e. Sex 1f. Occupation 1g. Specific Duties 1h. How Long?
_____________________________________________________________________________________________________________________________
1i. Home Address City State Zip 1j. How Long?
_____________________________________________________________________________________________________________________________
1k. Employer Name and Address City State Zip 1l. How Long?
_____________________________________________________________________________________________________________________________
OWNER IF OTHER THAN PROPOSED LIFE INSURED
2a. Name (first, middle, last) 2b. Date of Birth (mmm/dd/yy) 2c. Occupation 2d. Relationship to Proposed Life Insured
_____________________________________________________________________________________________________________________________
2e. Address City State Zip
_____________________________________________________________________________________________________________________________
2f. Employer Name and Address City State Zip
_____________________________________________________________________________________________________________________________
2g. If home address or employer has changed in last 2 years, give details:
_____________________________________________________________________________________________________________________________
SUCCESSOR OWNER - RECOMMENDED FOR JUVENILE INSURANCE - NOT RECOMMENDED FOR BUY-SELL OR CORPORATE-OWNED
3a. Name 3b. Relationship to Owner 3c. Soc. Sec. No./Tax I.D. No.
_____________________________________________________________________________________________________________________________
BENEFICIARY(IES) SUBJECT TO CHANGE BY OWNER
4a. Primary 4b. Relationship to Proposed Life Insured
_____________________________________________________________________________________________________________________________
4c. Secondary 4d. Relationship to Proposed Life Insured
_____________________________________________________________________________________________________________________________
SEND PREMIUM NOTICES TO:
5a. [ ] Insured [ ] Owner [ ] Business [ ] Residence [ ] Other (give details below):
5b. Name Address City State Zip
LIFE INSURANCE IN FORCE:
6a. Total insurance in force on the Proposed Life Insured's life $______________
6b. Total insurance currently pending with all companies, including this application $________________. Of this total, what amount
of insurance do you intend to accept? $__________________
6c. List policies in force
</TABLE>
<TABLE>
<CAPTION>
Year of Accidental GI Option [CHECK MARK]
Company Issue Group? Face Amount Death Amount Business Personal
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
</TABLE>
YES NO
7. Have you ever been declined for insurance, or been
offered insurance with restricted benefits or at other than
standard rates? [ ] [ ]
8. Is this insurance to replace, or will it cause a change in,
or involve a loan under, any insurance or annuity policy on any
Proposed Life Insured's life or in any insurance or annuity
policy owned by the Owner? IF "YES", TO EITHER 7 OR 8, GIVE
DETAILS BELOW: [ ] [ ]
_______________________________________________________________________________
Page 1
<PAGE> 4
[EXHIBIT]
<TABLE>
<S> <C> <C> <C>
APPLICATION NO. PLEASE PRINT
POLICY APPLIED FOR
9a. Plan (non-participating):___________________________________
9b. Face Amount (policy only, excluding Supplementary Benefits): $___________
9c. If an additional or optional policy is being applied for in a separate application, state plan and amount.
__________________________________________________________________________________________
9d. Loan Interest Rate (Check [X] loan rate applicable to the policy being applied for) [ ] 5.75% [ ] 8% [ ] Variable
9e. If a supplementary benefit applied for cannot be approved, should the policy be issued
without it? [ ] Yes [ ] No [ ] Not Applicable
9f. Is a policy guarantee being applied for? [ ] Yes [ ] No [ ] Not Applicable
If "Yes", indicate type of policy guarantee: [ ] No Lapse Guarantee
[ ] Death Benefit Guarantee
SUPPLEMENTARY BENEFITS
SINGLE-LIFE PLANS SURVIVORSHIP PLANS
10. [ ] Total Disability Waiver of Monthly Deductions 11. [ ] Policy Split Option
[ ] Guaranteed Policy Value [ ] Four Year Term (EPR)
[ ] Additional Life (number of lives _________ maximum 6) [ ] Other (state which) ______________________
[ ] Other (state which)__________________________________ __________________________________________
_____________________________________________________ __________________________________________
PREMIUMS
11a. Frequency: [ ] Annual [ ] Semi [ ] Quarterly [ ] Monthly [ ] Single
11b. If monthly, [ ] Automatic Transfer
11c. Planned Premium $__________________________
11d. Additional "once only" premium $________________________
11e. Amount paid with application $________________________
DEATH BENEFIT
12. [ ] OPTION 1: Face Amount [ ] OPTION 2: Face Amount Plus Policy Value
SPECIAL REQUESTS
13.
HOME OFFICE NOTES
14.
</TABLE>
Page 2
<PAGE> 5
[EXHIBIT]
APPLICATION NO. PLEASE PRINT
<TABLE>
<CAPTION>
SMOKING QUESTIONS
Yes No
<S> <C> <C>
15a. Have you used tobacco in any form during the past 2 years
(including cigars, cigarillos, a pipe, chewing tobacco or
cigarettes)? ............................................................. [ ] [ ]
15b. Do you use any medication or product containing nicotine? ................ [ ] [ ]
15c. Have you smoked any cigarettes during the past 12 months?
If "Yes" how many? ....................................................... [ ] [ ]
15d. Were you previously a cigarette smoker but have now stopped? ............. [ ] [ ]
If "Yes," when did you stop? Give month and year: ________________________
AVOCATION QUESTIONS
Yes No
16a. Do you have any part-time or seasonal occupation? ........................ [ ] [ ]
16b. Do you expect to change your occupation? .................................. [ ] [ ]
16c. Do you expect to change your country of residence?
If "Yes," give details: .................................................. [ ] [ ]
17a. Have you flown as a student pilot, licensed pilot or crew
member in any aircraft (including ultralight planes) in
the past 2 years? ........................................................ [ ] [ ]
17b. Are any such flights planned in the future? .............................. [ ] [ ]
17c. Have you engaged in any form of motor vehicle or power boat
racing, sky diving, skin or scuba diving, parachuting,
hang-gliding, mountain climbing or ballooning in the last
2 years? ................................................................. [ ] [ ]
18a. What is your Drivers License Number?____________________ State____________ [ ] [ ]
18b. Have you been convicted of 3 or more moving violations
within the past 3 years? ................................................. [ ] [ ]
18c. Have you been convicted of driving while intoxicated or
while otherwise impaired? If "Yes," give details;_________________________ [ ] [ ]
FINANCIAL QUESTIONS
COMPLETE WHEN AMOUNT OF INSURANCE IS $250,000 AND MORE OR WHEN APPLYING FOR
BUSINESS INSURANCE FOR ANY AMOUNT, OR INSURANCE ON THE LIFE OF A JUVENILE FOR
ANY AMOUNT.
19. What is the purpose of this insurance?
(e.g., estate conservation, buy-sell, keyman)________________________________________
20. How was the need for this amount determined?
(Please submit copies of financial statement(s),
estate analysis, contractual agreements, etc.)_______________________________________
21a. Gross annual earned income (salary, commissions, bonuses, etc.) $____________________
21b. Gross annual unearned income
(dividends, interest, net real estate income, etc.) $________________________________
21c. Total Assets?__________ 21b. Total Liabilities? $________
21e. Personal Net Worth? $_________
Juvenile Insurance:
22a. Are all brothers and sisters equally insured? [ ] Yes [ ] No
If "No," give details:_______________________________________________________________
22b. Are parent(s)/guardian covered by life insurance? [ ] Yes [ ] No
If "Yes," how much is in force?______________________________________________________
If "No," why not?____________________________________________________________________
BUSINESS INSURANCE: Provide the following information on your company
Current Year Previous Year
23a. Assets ...................................... $____________ $____________
23b. Liabilities ................................. $____________ $____________
23c. Gross Sales ................................. $____________ $____________
23d. Net income after taxes ...................... $____________ $____________
23e. Fair Market Value of business ............... $____________
23f. What percentage of the business is owned by the proposed Life Insured? ______________%
23g. Are other partners/owners/executives being insured?
Give details:_________________________________________________________________________
24. In the past 5 years, has the Proposed Life Insured
or the business had any major financial problems
(bankruptcy, etc.)? [ ] Yes [ ] No
If "Yes," give details:_______________________________________________________________
______________________________________________________________________________________
</TABLE>
Page 3
<PAGE> 6
[EXHIBIT]
<TABLE>
<CAPTION>
Application No. PLEASE PRINT
MEDICAL QUESTIONS - PLEASE PROVIDE DETAILS TO "YES" ANSWERS IN THE SPACE BELOW
<S> <C>
25. Have 2 or more of your immediate family members (parents, brothers and sisters) prior to age 65, died of or been diagnosed as
having coronary artery disease, stroke or kidney disease? [ ] Yes [ ] No
- -----------------------------------------------------------------------------------------------------------------------------------
26. Family History L Age Give Details of Present Health D Age Cause of Death
----------------- I -------------------------------------------- E -----------------------------------------------------
Father V C
----------------- I -------------------------------------------- E -----------------------------------------------------
Mother N A
----------------- G -------------------------------------------- S -----------------------------------------------------
Brothers E
and D
Sisters
- -----------------------------------------------------------------------------------------------------------------------------------
27a. Your Height __________________ 27b. Your Weight ____________ 27c. Any weight loss in the last year? [ ] Yes [ ] No
28a. Name and address of personal or attending doctor: 28b. Date last consulted? _________________________________________
____________________________________________________ 28c. Reason and any medication/treatment given: ___________________
____________________________________________________ _________________________________________________________________
____________________________________________________ _________________________________________________________________
28d. List any medications you are taking currently: ______________________________________________________________________________
Yes No
29. SO FAR AS YOU KNOW, WITHIN THE LAST 10 YEARS HAVE YOU EVER BEEN DIAGNOSED BY A MEMBER OF THE
MEDICAL PROFESSION AS HAVING:
a.) Chest pain, shortness of breath, heart murmur, high blood pressure, stroke, irregular heart beat,
or any other disease or disorder of the heart or arteries? ..................................................... [ ] [ ]
b.) Diabetes or disease of any glands? ............................................................................. [ ] [ ]
c.) Mental or emotional disorder, nervous breakdown, convulsions, epilepsy, paralysis or any other disorder of the
brain or nervous system? ....................................................................................... [ ] [ ]
d.) Arthritis, gout, or any bone, joint, muscle or skin disorder? .................................................. [ ] [ ]
e.) Asthma, bronchitis, pneumonia, emphysema or any lung disorder? ................................................. [ ] [ ]
f.) Cirrhosis, hepatitis, ulcer, colitis, diverticulitis, ileitis, or other disease of the liver, gall bladder,
stomach or intestines? ......................................................................................... [ ] [ ]
g.) Prostate or testicular disease, disease of the uterus, ovaries or breast? ...................................... [ ] [ ]
h.) Anemia, leukemia, clotting disorders, platelet disorders, infections, or sources of blood loss? ................ [ ] [ ]
i.) Disorder of the urinary tract or kidneys - sugar, albumin or blood in the urine? ............................... [ ] [ ]
j.) Cancer or tumors? .............................................................................................. [ ] [ ]
k.) An operation or admission to a hospital or any other health care facility for observation, treatment of any
illness or diagnostic tests, including treadmill stress test for insurance (excluding an HIV test)? ............ [ ] [ ]
l.) Any other health impairment or medically treated condition? .................................................... [ ] [ ]
m.) Treatment or advice from a physician, or licensed practitioner, regarding alcohol or drug use? ................. [ ] [ ]
30. Within the last 10 years have you been diagnosed by a member of the medical profession as having
Acquired Immune Deficiency Syndrome (AIDS) or AIDS Related Complex (ARC)? ...................................... [ ] [ ]
PLEASE PROVIDE DETAILS TO ANY "YES" ANSWERS (If more space is required, use the Medical Questions Continuation Sheet)
- -----------------------------------------------------------------------------------------------------------------------------------
Question Name, Address and Phone No. of Duration
Number Date Attending Doctor and Hospital of Condition Reason and any treatment given
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
NB4777NY (0198)
<PAGE> 7
[EXHIBIT]
APPLICATION NO.
================================================================================
REQUEST FOR TAXPAYER IDENTIFICATION AND CERTIFICATION
(To Be Completed By Owner/Taxpayer)
In order to comply with IRS regulations regarding Social Security Number
Tax Identification Numbers and Backup Tax Withholding,
individuals and sole proprietors MUST give their |_|_|_|-|_|_|-|_|_|_|_|
Social Security Number. Other entities MUST give
their Employer Identification Number.
If you have no number or you have applied for a Employer Identification
number and are waiting for one to be issued, write Number
"APPLIED FOR" in the boxes. You then have 60 days
to supply your TIN number to us. After 60 days, |_|_|-|_|_|_|_|_|_|_|
The Company must begin Backup Tax Withholding.
CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), AND
(2) I am not subject to Backup Tax Withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to Backup
Tax Withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to Backup
Tax Withholding (does not apply to real estate transactions, mortgage
interest paid, the acquisition or abandonment of secured property,
contributions to an individual retirement arrangement (IRA), and payments
other than interest and dividends).
CERTIFICATION INSTRUCTIONS - You MUST cross out item (2) above if you have been
notified by the IRS that you are currently subject to Backup Tax Withholding
because of underreporting interest or dividends on your tax return.
Signed at ___________________ this ____ day of ___________________________ ____
City/State Month Year
(X) _________________________________________
Signature of Owner/Taxpayer
Page 5
<PAGE> 8
Application No.
SIGNATURES
The Proposed Life Insured (or Parent or Guardian) has read the statements and
answers to the medical evidence portion and they are complete and true to the
best of his/her knowledge of belief. The Proposed Life Insured hereby agrees
that they shall form part of the application for life insurance for which such
medical evidence was required by The Company.
The Proposed Life Insured (or Parent or Guardian) acknowledges receipt of the
Notice of Disclosure of Information.
The Proposed Life Insured and Owner (or Parent or Guardian) agree that: 1.) The
statements and answers in this application are complete and true to the best of
their knowledge and belief. 2.) UNLESS THE TERMS AND CONDITIONS OF THE
TEMPORARY LIFE INSURANCE AGREEMENT ARE SATISFIED SO THAT INSURANCE IS PROVIDED
UNDER THAT AGREEMENT, INSURANCE UNDER ANY POLICY ISSUED ON THE APPLICATION WILL
BECOME EFFECTIVE ONLY WHEN THE FIRST PREMIUM HAS BEEN PAID IN FULL AND THE
POLICY HAS BEEN DELIVERED; PROVIDED THAT AT THE TIME OF DELIVERY THERE HAS BEEN
NO DETERIORATION IN THE INSURABILITY OF ANY PERSON PROPOSED FOR LIFE INSURANCE
AS STATED IN THE APPLICATION, SINCE THE DATE OF THE APPLICATION. They are aware
The Company has underwriting rules to determine insurability.
THE PROPOSED LIFE INSURED AND OWNER (OR PARENT OR GUARDIAN) UNDERSTAND THAT
UNDER THE POLICY APPLIED FOR, THE AMOUNT OF THE INSURANCE BENEFITS, THE
DURATION OF THE INSURANCE COVERAGE, AND THE POLICY VALUE MAY INCREASE OR
DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE CHOSEN INVESTMENT
ACCOUNT AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. ILLUSTRATIONS OF BENEFITS,
INCLUDING DEATH BENEFITS, POLICY VALUES AND CASH SURRENDER VALUES ARE AVAILABLE
UPON REQUEST.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME, AND SHALL ALSO BE SUBJECT TO A
CIVIL PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE
CLAIM FOR EACH SUCH VIOLATION.
<TABLE>
<CAPTION>
<S> <C>
Signed at ___________________ this _____________ day of _____________________________ _______
City/State Month Year
(X) _________________________________________________________ (X)___________________________________________________________
Witness Signature of Proposed Life Insured
(X) _________________________________________________________ (X)___________________________________________________________
Witness Signature of Owner, of other than Proposed Life Insured
(X) _________________________________________________________ (X)___________________________________________________________
Witness Signature of any Proposed Juvenile Life Insured over age 10
(X) _________________________________________________________ (X)___________________________________________________________
Signature of Registered Representative Consent of Parent or Guardian, if other than Owner
if other than Witness [ ] Father [ ] Mother [ ] Guardian
All other Registered Representatives sharing commissions for this policy must also sign here.
(X) _________________________________________________________ (X)___________________________________________________________
Signature of Registered Representative Place and Date
(X) _________________________________________________________ (X)___________________________________________________________
Signature of Registered Representative Place and Date
(X) _________________________________________________________ (X)___________________________________________________________
Countersignature of Licensed Resident Agent
(where required by law)
</TABLE>
Page 6
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
APPLICATION NO. PLEASE PRINT
TO BE ANSWERED BY THE REGISTERED REPRESENTATIVE (REQUIRED FOR ALL APPLICATIONS)
1. If the Owner is a Corporation, Partnership, Trust or other legal entity, the NASD requires such entity to provide The Company
with documentation detailing the name(s) of all individuals authorized to transact business on behalf of the entity. This
requirement will be satisfied by submitting a copy of the Corporation Resolution, Partnership Agreement, or Certification by
Trustee form.
List the name(s) of individual(s) authorized to transact business on behalf of the entity:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. Temporary Life Insurance Agreement issued? [ ] Yes [ ] No
3. To the best of your knowledge, is this insurance intended to replace, or will it cause a change in, or involve a loan under,
any insurance or annuity policy on the life of any Proposed Life Insured or in any insurance or annuity policy owned by the
Owner?
[ ] Yes [ ] No
If "Yes", give details and complete any replacement forms that are required. Advise whether any policy being replaced was
itself a replacement policy within the past 5 years.
4. Is this a 1035 exchange? [ ] Yes [ ] No
If "Yes", how many policies will be exchanged?
-------------------------------------------------------------------------------
List policies:
- -----------------------------------------------------------------------------------------------------------------------------------
Type of Contract
Company Name Policy No. (Annuity, Life, Term, Annuitant/Insured Owner
Endowment)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
5. Additional information to be used in assessing suitability. (Please give information if annual premium is more than 3% of
annual income, if spouse's income is to be included in determining suitability, if answers to income and net worth have not
been provided, etc.):
--------------------------------------------------------------------------------------------------------
6. If you are sharing the commissions for this policy with another agent(s) or entity(ies), please complete the following:
- -----------------------------------------------------------------------------------------------------------------------------------
Name of Agent/Entity Agent Code Share Remarks
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total 100%
----------
I certify that I have truly and accurately recorded on the application all the information supplied by the Proposed Life Insured
(or Parent or Guardian).
I certify that a current prospectus (and any supplement) for the policy applied for has been given to the Proposed Life Insured,
and to the Owner if other than the Proposed Life Insured, and that no sales materials other than those approved by the appropriate
regulating authorities have been used.
(X) (X)
-------------------------------------------------- -----------------------------------------------------
Signature of Registered Representative Place and Date
All other Registered Representatives sharing commissions for this policy must also sign here.
(X) (X)
-------------------------------------------------- -----------------------------------------------------
Signature of Registered Representative Place and Date
(X) (X)
-------------------------------------------------- -----------------------------------------------------
Signature of Registered Representative Place and Date
Office of Has this application been approved by the Office of Supervisory Jurisdiction? [ ] Yes [ ] No
Supervisory If answer is "No", explain:
Jurisdiction
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
- ------------------------------------------- ------------------------------------------- -----------------------------------
Name of Broker/Dealer Registered Principal Signature Date (Month/Day/Year)
</TABLE>
Page 7
<PAGE> 10
EXHIBIT
<PAGE> 11
<TABLE>
<S> <C>
====================================================================
GENERAL AVOCATION QUESTIONNAIRE
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
(hereinafter referred to as The Company) [LOGO]
Application No.
ANSWER ONLY THOSE QUESTIONS WHICH RELATE TO THE ACTIVITIES OF THE PROPOSED INSURED.
A SIGNATURE IS REQUIRED ON THE REVERSE IF ANY OF THE QUESTIONS ARE ANSWERED.
- ------------------------------------------------------------------------------------------------------------------------------------
Proposed Life Insured Name Policy Number
| | | |
___________________________________________________________________________________________________________|__|__|__|__|__|__|__|__|
- ------------------------------------------------------------------------------------------------------------------------------------
HANG GLIDING QUESTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
1. How frequently do you hang glide?
- ------------------------------------------------------------------------------------------------------------------------------------
2. Are you a member of an organized club? [ ] Yes [ ] No Do you hang glide professionally? [ ] Yes [ ] No
How high do you usually fly? _________________________ feet
- ------------------------------------------------------------------------------------------------------------------------------------
3. What is the greatest height ____________________ distance ____________________ duration ______________________ flown?
- ------------------------------------------------------------------------------------------------------------------------------------
4. Have you or do you intend to attempt any height, distance, or duration records? [ ] Yes [ ] No If "Yes" give details:
- ------------------------------------------------------------------------------------------------------------------------------------
5. Have you ever flown or do you intend to fly experimental hang gliding equipment of either a manufacturer's or your own design?
[ ] Yes [ ] No If "Yes" give details:
- ------------------------------------------------------------------------------------------------------------------------------------
SKY DIVING QUESTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
1. How long have you been sky diving? _____ years. Are you a member of a recognized Parachute Club? [ ] Yes [ ] No
If "Yes" give details:
- ------------------------------------------------------------------------------------------------------------------------------------
2. How many jumps (a)have you made in the last 12 months? _______________ (b)did you make 12 to 24 months ago? _______________
(c)do you expect to make in the next 12 months? _______________
- ------------------------------------------------------------------------------------------------------------------------------------
3. From what altitude do you normally jump? _______________ feet
- ------------------------------------------------------------------------------------------------------------------------------------
4. Do you participate in sky diving exhibitions and/or competitions? [ ] Yes [ ] No If "Yes" give details:
- ------------------------------------------------------------------------------------------------------------------------------------
5. Do you receive remuneration for sky diving activity? [ ] Yes [ ] No If "Yes" give details:
- ------------------------------------------------------------------------------------------------------------------------------------
6. Are you a member of a military parachutist organization? [ ] Yes [ ] No If "Yes" give details:
- ------------------------------------------------------------------------------------------------------------------------------------
ORGANIZED AUTOMOBILE AND MOTORCYCLE RACING QUESTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
1. Do you engage in organized automobile racing? [ ] Yes [ ] No Organized Motorcycle racing? [ ] Yes [ ] No
Type of vehicle used in races:
- ------------------------------------------------------------------------------------------------------------------------------------
2. How many races did you enter in the last 12 months? __________ The last 12 to 24 months? __________ Next 12 months? __________
- ------------------------------------------------------------------------------------------------------------------------------------
3. What is the maximum speed attained? __________________________ 4. The average speed? ________________________
- ------------------------------------------------------------------------------------------------------------------------------------
5. If drag racing, elapsed time _________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
6. What class of racing or competition do you engage in? (e.g.: Automobile - midget, sports car, stock car, championship, drag,
sprint, etc., Motorcycle - hill climbing, cross country, drag, track)
- ------------------------------------------------------------------------------------------------------------------------------------
7. Indicate type of track and surface used:
- ------------------------------------------------------------------------------------------------------------------------------------
8. Purpose of racing: [ ] Professional [ ] Amateur [ ] Both (give details):
- ------------------------------------------------------------------------------------------------------------------------------------
9. Have you ever done or do you intend to do any stunt driving? [ ] Yes [ ] No If "Yes" give details:
- ------------------------------------------------------------------------------------------------------------------------------------
10. Have you had any accidents related to driving? [ ] Yes [ ] No If "Yes" give details:
(See Over)
- ------------------------------------------------------------------------------------------------------------------------------------
[BAR CODE]
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
AVIATION QUESTIONS
<S> <C>
1. Flying time as pilot: (a) Number of hours flown in command ______ hours (b) Date of last flight _______________________
(c) Type of license currently held [ ] Student [ ] Private [ ] Commercial [ ] Senior Commercial [ ] ATR
(d) Do you hold a valid instrument rating? [ ] Yes [ ] No
- -----------------------------------------------------------------------------------------------------------------------------------
2. As pilot, student or air crew on nonscheduled flights:
Number of hours flown in last 12 months _________ hours Last 12-24 months __________ hours Next 12 months __________ hours
- -----------------------------------------------------------------------------------------------------------------------------------
3. Purpose of Flying (Present and Future) [ ] Pleasure [ ] Commercial [ ] Military [ ] Business [ ] Other (give details):
- -----------------------------------------------------------------------------------------------------------------------------------
4. Category, class and type of aircraft flown:
- -----------------------------------------------------------------------------------------------------------------------------------
5. Have you ever had an accident, been grounded, fined or reprimanded for violation of air regulations? [ ] Yes [ ] No
If "Yes" give details:
- -----------------------------------------------------------------------------------------------------------------------------------
6. Do you engage or expect to engage in charter flying, freight transport, instructing, testing, crop-dusting, survey and patrol,
sightseeing, photography?
[ ] Yes [ ] No [ ] Other If "Yes" or "Other" give details:
SKIN AND SCUBA DIVING QUESTIONS
1. Do you dive for pleasure? [ ] Yes [ ] No Commercial purposes? [ ] Yes [ ] No [ ] Snorkel [ ] Scuba
- -----------------------------------------------------------------------------------------------------------------------------------
2. Indicate type of diving (if applicable) [ ] Instruction [ ] Construction [ ] Salvage
[ ] Search work [ ] Ice diving [ ] Night diving
- -----------------------------------------------------------------------------------------------------------------------------------
3. Where do you dive? [ ] Inland Waters [ ] Sea or Ocean [ ] Other (give details)
- -----------------------------------------------------------------------------------------------------------------------------------
4. Diving History: 5. Do you dive alone? [ ] Yes [ ] No If "Yes" give details:
(in feet) Last 12 Months Next 12 Months
----------------------------------------------------- -----------------------------------------------------------
No. of Average No. of Average 6. (a) Are you a certified diver? [ ] Yes [ ] No
Dives Time Dives Time (b) Are you a member of an organized club?
- --------------------------------------------------------------------- [ ] Yes [ ] No
Less than 50 If "Yes" give details:
- ---------------------------------------------------------------------
50 - 75
- ---------------------------------------------------------------------
75 - 100
- ---------------------------------------------------------------------
100 & over
- ---------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
7. Have you ever had an accident related to diving? [ ] Yes [ ] No If "Yes" give details:
MOUNTAIN CLIMBING QUESTIONS
1. How long have you been mountain climbing?
- -----------------------------------------------------------------------------------------------------------------------------------
2. At what level do you currently climb?
- -----------------------------------------------------------------------------------------------------------------------------------
3. How often do you climb?
- -----------------------------------------------------------------------------------------------------------------------------------
4. During which seasons?
- -----------------------------------------------------------------------------------------------------------------------------------
5. Give locations including names of mountains and their corresponding level of difficulty:
- -----------------------------------------------------------------------------------------------------------------------------------
6. What attempts do you have planned in the future?
- -----------------------------------------------------------------------------------------------------------------------------------
I HAVE READ THE ABOVE STATEMENTS AND ANSWERS AND THEY ARE COMPLETE AND TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF. I UNDERSTAND
THEY WILL FORM A PART OF THE APPLICATION TO THE COMPANY FOR INSURANCE ON MY LIFE.
Signed at ____________________________________________________________ this _______ day of ____________________________ __________
City/State Month Year
(X) _________________________________________________ (X) _______________________________________________________________
Witness Signature of Proposed Life Insured
(X) _______________________________________________________________
Signature of Owner or Payor, if applying for Disability
Premium Waiver or Disability Waiver of Monthly Deductions
</TABLE>
Form NB4028NY
<PAGE> 13
EXHIBIT
<PAGE> 14
======================================================
Notice Regarding Temporary Life Insurance Agreement
and Receipt
First North American Life Assurance Company
(hereinafter referred to as The Company)
DO NOT DETACH
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Application No. Policy No. Name of Proposed Life Insured
- --------------------------------------------------------------------------------------------------------------------------
HEALTH QUESTIONS.
Has the Proposed Life Insured under this application:
YES NO
(a) within the last 12 months been treated or had treatment recommended by a member of the
medical profession for any heart problem, stroke, cancer or pneumonia? .............................. [ ] [ ]
(b) within the last 60 days had or been advised to have any additional medical diagnostic test,
treatment or surgery not yet performed (excluding an HIV test)? ..................................... [ ] [ ]
(c) within the last 2 years, been declined for life or disability income insurance? ..................... [ ] [ ]
Signed at ____________________________________________ this ________ day of ____________________________________ ___________
City/State Month Year
(X) _________________________________________ (X) _________________________________________________________________________
Witness Signature of Proposed Life Insured
(X) _________________________________________ (X) _________________________________________________________________________
Witness Signature of Owner (if other than Proposed Life Insured)
(X) _________________________________________ (X) _________________________________________________________________________
Witness Signature of Parent or Guardian (if minor child is Proposed Life Insured)
=============================================================================================================================
[BAR CODE]
Form NB4074NY (1097)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Detach and give to Owner
</TABLE>
======================================================
Temporary Life Insurance Agreement and Receipt
First North American Life Assurance Company
(hereinafter referred to as The Company)
<TABLE>
<CAPTION>
<S> <C>
The Company acknowledges receipt of $ ____________________________ as a premium for life insurance applied for on the life of
_________________________________________________________________ for Application number ____________________________________
_____________________________________________ (X) _________________________________________________________________________
Date Signature of Agent or Registered Representative
</TABLE>
ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO THE COMPANY AND ADDRESS TO:
INTERNATIONAL CORPORATE CENTER AT RYE, 555 THEODORE FREMD AVENUE, SUITE C-209,
RYE, NEW YORK 10580. DO NOT MAKE CHECKS PAYABLE TO THE AGENT OR LEAVE THE PAYEE
BLANK.
The Company will pay a death benefit to the beneficiary named in the
Application if any Proposed Life Insured or the survivor under a Survivorship
Plan dies while this Agreement is in effect, subject to the terms and
conditions set out below.
1. LIMITED AMOUNT OF INSURANCE. The amount of coverage under this Agreement
will be the lesser of: (a) the amount of insurance applied for including any
supplementary benefits and accidental death benefit if the Proposed Life
Insured's death is caused by an accident; and (b) $1,000,000 ($5,000,000 for
Survivorship plans or $200,000 for juvenile insurance). This maximum amount
of coverage applies to the total amount under this Agreement and any other
Temporary Life Insurance Agreement with The Company covering the Proposed
Life Insured. If there are two or more persons proposed for insurance, this
maximum amount applies to the total coverage.
(See Over)
===============================================================================
Form NB4074NY (1097)
<PAGE> 15
2. ACCIDENTAL DEATH BENEFIT LIMITATION. If the benefits applied for
include an accidental death benefit, no such benefit will be paid in
respect of a death caused by: (a) voluntarily taking or absorbing of
any drug, medicine sedative or poison (except in connection with any
Proposed Life Insured's employment) unless prescribed by a licensed
doctor other than the Proposed Life Insured; (b) suicide whether sane
or insane or (c) travel in any aircraft other than as a passenger.
3. TEMPORARY LIFE INSURANCE AGREEMENT. If any of questions (a) (b) or (c)
in the Notice Regarding Temporary Life Insurance Agreement and Receipt
is answered "yes" or left blank, no money will be accepted and no
coverage will be provided under this Agreement.
4. DATE INSURANCE BEGINS. Insurance under this Agreement will begin on
the date of this Agreement if The Company's Application for Life
Insurance has been completed and a payment has been received by The
Company for at least one-twelfth of the annual premium for the basic
plan and any riders or supplementary benefits requested in the
Application. If payment is made by check or draft, no insurance will
be provided by this Agreement unless the check or draft is honored when
first presented for payment.
5. DATE INSURANCE ENDS - 90 DAY MAXIMUM. Insurance under this Agreement
will end on the earliest of: (a) the 90th day after the date of this
Agreement; (b) the day before the date insurance takes effect under the
policy applied for; (c) the date The Company offers insurance other
than as applied for; or (d) the date The Company mails notice to the
applicant that the Application is declined and refunds the premium
paid.
6. SUICIDE. If any person proposed for insurance, commits suicide, The
Company will only be liable for a refund of the premium paid.
7. MISREPRESENTATION. If there is any material misrepresentation in the
answers to the Health Questions in the Notice Regarding Temporary Life
Insurance Agreement and Receipt, the Application or in any Medical
Evidence Exam form submitted to The Company related to any Proposed
Life Insured, The Company will only be liable for a refund of the
premium paid.
8. OTHER CONDITIONS. No one is authorized to: (a) accept any premium for
any Proposed Life Insured under 15 days of age or over age 70 (nearest
birthday) as at the date of this Agreement; or (b) change or waive any
provision of this Agreement.
THE ABOVE EXCLUSIONS APPLY EXCEPT AS OTHERWISE PROVIDED BY APPLICABLE STATE LAW.
<PAGE> 16
EXHIBIT
<PAGE> 17
===========================================
AUTHORIZATION TO OBTAIN INFORMATION
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
(hereinafter referred to as The Company)
Application No.
I hereby give permission to any physician, medical care provider, hospital,
clinic, laboratory, insurance company or MIB Inc. (The Medical Information
bureau) or any other similar person or organization to give The Company and to
its reinsurers, information about me or any of my minor children who are to be
insured. The information collected by The Company may relate to the symptoms,
examination, diagnosis, treatment or prognosis of any physical or mental
condition. Although information related to drug or alcohol abuse is protected
from disclosure by Federal Regulation 42 CFR Part 2. I give permission to The
Company to collect this information for those purposes which are described
below. I understand that I can revoke this permission to collect information
related to drug or alcohol abuse at any time, but any revocation will not
affect such information that has already been collected and relied on by The
Company. Information collected under this Authorization will be used by The
Company to evaluate my application for insurance, to evaluate a claim for
benefits, or for reinsurance or other insurance purposes. I understand that I
have a right to receive a copy of this form. I agree that a photocopy of this
form will be as valid as the original. This Authorization will be valid for
two years from the date shown below. I acknowledge receipt of the Notice of
Disclosure of Information.
Date(mmm/dd/yy) (X)
------------------------- ----------------------------------
Signature of Proposed Life Insured
Name(s) of minor child(ren) (X)
proposed for insurance ------------- ----------------------------------
Witness
- ---------------------------------------- (X)
---------------------------------
Signature of Parent or Guardian
(if minor children proposed for
insurance)
==============================================================================
N B 4 1 1 0 N V
Form NB4116NY (1097)
- ------------------------------------------------------------------------------
Detach and give to Proposed Life Insured
===========================================
AUTHORIZATION TO OBTAIN INFORMATION
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
(hereinafter referred to as The Company)
Application No.
This brief description of our underwriting process is designed to help you
understand how an application for life insurance is handled, the types and
sources of information we may collect about you, the circumstances under which
we may disclose that information to others and your right to learn the nature
and substance of that information upon written request. The purpose of the
underwriting process is to make sure that you qualify for life insurance under
the rules of The Company and, assuming you do, establish the proper premium
charge for that insurance. The underwriting process assures that the cost of
insurance is distributed equitably among all policyowners, and that each
individual pays his or her fair share. The information necessary to evaluate
your application is dependent upon your age, the amount of insurance you are
applying for, your medical history, your occupation, your avocations and other
personal information. Your answers on the application are the principal source
of information, however additional sources of information may be required.
Information given in your application may be made available to other insurance
companies to which you make application for life or health insurance coverage
or to which a claim is being submitted. Information you provide will be
treated as confidential. The Company may, however, make a brief report thereon
to the Medical Information Bureau (M.I.B.), a non-profit membership
organization of life Insurance companies which operates an information exchange
on behalf of its members. Upon request by another member insurance company to
which you have applied for life or health insurance coverage or to which a
claim is submitted, M.I.B. will supply such company with the information it may
have in its files. Upon receipt of a request from you, the Bureau will arrange
disclosure of any information it may have in your file. (Medical information
will be disclosed only to your attending physician). If you question the
accuracy of information in the Bureau's file, you may contact the Bureau and
seek a correction in accordance with the procedures set forth in the Federal
Fair Credit Reporting Act. The address of the Bureau's Information Office is
Post Office Box 105, Essex Station, Boston, Massachusetts 02112; telephone
number (617) 426-3660. The Company may also release information in its file to
other life insurance companies to whom you may apply for life or health
insurance, or to whom a claim for benefits may be submitted. As part of our
normal procedure, an investigative consumer report may be prepared concerning
character, general reputation, personal characteristics and mode of living,
except as may be related directly or indirectly to your sexual orientation.
This information will be obtained through a personal interview and/or
interviews with friends, neighbors and associates. A complete and accurate
disclosure of the nature and scope of the investigative consumer report, if one
is prepared, will be provided to you upon written request to the Senior
Underwriting Consultant, First North American Life Assurance Company,
International Corporate Center at Rye, 555 Theodore Fremd Avenue, Suite C-209,
Rye, New York 10580.
- -------------------------------------------------------------------------------
Form NB4116NY (1097)
<PAGE> 18
EXHIBIT
<PAGE> 19
----------------------------------------------
APPLICATION SUPPLEMENT FOR
INVESTMENT ALLOCATION AND INVESTOR SUITABILITY
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
(hereinafter referred to as The Company)
Required with all Applications for Flexible Premium Variable Life Insurance.
Please print and use black ink. Any changes must be initialled by the Owner. A
signature is required on the reverse side.
This form is to be used at the time of initial application only. Please use
Investment Option Changes Form (IM5085CF) for changes after the policy has been
issued.
This Application Supplement is deemed to be part of Application No. _________
Policy No: ___________ Name of Proposed Life Insured ____________________
(Same as shown on the Application for Flexible Premium Variable Life Insurance)
- --------------------------------------------------------------------------------
INVESTMENT ALLOCATION OF NET PREMIUMS
- --------------------------------------------------------------------------------
Choose one or more of the accounts listed below by indicating percentages of
net premium. There are no minimum percentages, but allocation percentages must
be whole numbers. TOTAL MUST BE 100%.
VARIABLE ACCOUNTS
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIOS: BALANCED PORTFOLIOS:
<S> <C> <C> <C>
[ ] Pacific Rim Emerging Markets Trust _________% [ ] Balanced Trust _________%
[ ] Science & Technology Trust _________% Automatic Asset Allocation Trusts
[ ] International Small Cap Trust _________% [ ] Aggressive _________%
[ ] Emerging Growth Trust _________% [ ] Moderate _________%
[ ] Pilgrim Baxter Growth Trust _________% [ ] Conservative _________%
[ ] Small/Mid Cap Trust _________%
[ ] International Stock Trust _________% BOND PORTFOLIOS:
[ ] High Yield Trust _________%
GROWTH PORTFOLIOS: [ ] Strategic Bond Trust _________%
[ ] Worldwide Growth Trust _________% [ ] Global Government Bond Trust _________%
[ ] Global Equity Trust _________% [ ] Capital Growth Bond Trust _________%
[ ] Growth Trust _________% [ ] Investment Quality Bond Trust _________%
[ ] Equity Trust _________% [ ] U.S. Government Securities Trust _________%
[ ] Quantitative Equity Trust _________%
[ ] Equity Index Trust _________% MONEY MARKET PORTFOLIO:
[ ] Blue Chip Growth Trust _________% [ ] Money Market Trust _________%
[ ] Real Estate Securities Trust _________%
LIFESTYLE PORTFOLIOS:
GROWTH & INCOME PORTFOLIOS: [ ] Lifestyle Aggressive 1000 Trust _________%
[ ] Value Trust _________% [ ] Lifestyle Growth 820 Trust _________%
[ ] International Growth and Income Trust _________% [ ] Lifestyle Balanced 640 Trust _________%
[ ] Growth and Income Trust _________% [ ] Lifestyle Moderate 460 Trust _________%
[ ] Equity-Income Trust _________% [ ] Lifestyle Conservative 280 Trust _________%
</TABLE>
GUARANTEED ACCOUNT
[ ] Guaranteed Interest Account _________%
NOTE: The maximum amount that may be transferred from the Guaranteed Interest
Account (GIA) in any one policy year is the greater of $500 or 15% of the GIA
value at the previous policy anniversary.
(See Over)
- --------------------------------------------------------------------------------
Page 1 of 2
Form NB4031NY (1097)
<PAGE> 20
- --------------------------------------------------------------------------------
INVESTOR SUITABILITY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
These questions apply to the OWNER of the policy. All questions must be answered. Yes No
1. Have you received a current prospectus for the policy applied for? .............................. [ ] [ ]
Date of prospectus ______________________ Date of supplement ____________________
2. DO YOU UNDERSTAND THAT UNDER THE POLICY APPLIED FOR:
(a) The amount of the insurance benefits, or the duration of the insurance coverage,
or both, may be variable or fixed? .......................................................... [ ] [ ]
(b) The amount of the insurance benefits, the duration of the insurance coverage, and your
policy value, may increase or decrease depending on the investment experience of the
chosen investment accounts and are not guaranteed as to dollar amount? ...................... [ ] [ ]
3. With that in mind, is the policy in accord with your insurance objectives and your anticipated
financial needs? ................................................................................ [ ] [ ]
4. PURPOSE OF INSURANCE
PERSONAL: [ ] Estate creation [ ] Estate conservation
BUSINESS: [ ] Buy-sell [ ] Deferred compensation [ ] Keyman [ ] Pension Trust
[ ] Other: ____________________________________________________________________________________
____________________________________________________________________________________
5. ANNUAL INCOME OF OWNER
[ ] $ 250,000 plus [ ] $ 35,000 to $ 49,999 [ ] $ 15,000 to $ 19,999
[ ] $ 100,000 to $ 249,999 [ ] $ 25,000 to $ 34,999 [ ] $ 10,000 to $ 14,999
[ ] $ 50,000 to $ 99,999 [ ] $ 20,000 to $ 24,999 [ ] Under $10,000
6. NET WORTH OF OWNER
[ ] $ 1,000,000 plus [ ] $ 100,000 to $249,999
[ ] $ 500,000 to $ 999,999 [ ] Under $100,000
[ ] $ 250,000 to $ 499,999
</TABLE>
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Signed at ____________________________ this _______ day of _______________19 ___
City/State
(X) ___________________________________ (X) ____________________________________
Witness (Registered Representative) Signature of Owner
(X) ______________________________________________
Name of Registered Representative (PRINT NAME)
All Registered Representatives sharing commissions must sign this form.
- --------------------------------------------------------------------------------
TELEPHONE TRANSFER/ALLOCATION CHANGE AUTHORIZATION
- --------------------------------------------------------------------------------
I understand and agree that: Telephone transfers and allocation changes will be
subject to the conditions of the policy, the administrative requirements of The
Company, and the provisions of the policy's prospectus.
The Company may act on telephone instructions from the Owner or any such person,
if the policy is jointly owned. The Company, its agents, representatives or
employees who act on its behalf will not be subject to any claim, liability,
loss, expense or cost if it acted in good faith upon telephone instructions it
reasonably believes to be genuine in reliance on this signed authorization. The
Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures shall consist of
confirming a valid telephone authorization form is on file, tape recording
conversations, and providing written confirmation thereof.
The Company, at its option alone and without prior or subsequent notice to the
Owner, or any other person or representative of the Owner, may record all or
part of any telephone conversation containing telephone transfer and/or
allocation change instructions.
All terms of authorization are binding upon the agents, heirs and assignees of
the Owner.
This Telephone Transfer/Allocation Change Authorization will be effective until
such time as: (a) written revocation is received by The Company's Service
Office, or (b) The Company discontinues this privilege, whichever occurs first.
(X) ________________________________ (X) __________________________________
Date (mmm/dd/yy) Signature of Owner
- --------------------------------------------------------------------------------
Page 2 of 2
Form NB4031NY (1097)
<PAGE> 1
EXHIBIT 6
FIRST NORTH AMERICAN LIFE ASSURANCE COMPANY
VENTURE VUL
MEMORANDUM REGARDING ISSUANCE, FACE AMOUNT INCREASE, REDEMPTION AND TRANSFER
PROCEDURES FOR THE POLICIES
This document sets forth information called for by paragraph (b)(12)(iii) of
Rule 6e-3(T) under the Investment Company Act of 1940 ("1940 Act") with respect
to procedures relating to issuance, face amount increase, redemption and
transfer transactions under Flexible Premium Variable Life Insurance Policies
("Policies") participating in FNAL Variable Life Account I of First North
American Life Assurance Company ("First North American" or "Company"). Such
paragraph provides exemptions from Sections 22(c), 22(d), 22(e) and 27(c)(1) of
the 1940 Act, and Rule 22c-1 thereunder, to the extent necessary to comply with
other provisions of Rule 6e-3(T) or with state insurance laws and regulations
and established administrative procedures of the Company, provided the
procedures are reasonable, fair and not discriminatory to policy-holders and are
disclosed in the Company's registration statement under the 1940 Act.
1. GENERAL
Units of a particular sub-account of Variable Life Account I are credited to a
Policy when net premiums are allocated to that sub-account or amounts are
transferred to that sub-account. Units of a sub-account are canceled whenever
amounts are deducted, transferred or withdrawn from the sub-account. The number
of units credited or canceled for a specific transaction is based on the dollar
amount of the transaction divided by the value of the unit on the Business Day
on which the transaction occurs or, in the case of errors, should have occurred,
except as set forth under 2(a) below with respect to deductions when no units
exist. The number of units credited with respect to a premium payment will be
based on the applicable unit values for the Business Day on which the premium is
received at the First North American Service Office or other office or entity so
designated by First North American, except for any premiums received before the
policy date as to which the applicable unit values will be the values determined
on such date.
Units are valued at the end of each Business Day. A Business Day is deemed to
end at the time of the determination of the net asset value of the Fund shares.
When an order involving the crediting or canceling of units is received after
the end of a Business Day or on a day which is not a Business Day, the order
will be processed on the basis of unit values determined on the next Business
Day. Similarly, any determination of Policy Value, Investment Account value or
death benefit to be made on a day which is not a Business Day will be made on
the next Business Day.
2. ISSUANCE AND RELATED TRANSACTIONS
(a) Applications and Policy Issuance.
To purchase a Policy, an applicant must submit a completed application. First
North American will issue a Policy only if it has a face amount of at least
$50,000 ($100,000 for preferred status policies). A Policy will generally be
issued to persons between the ages of 0 and 90. In certain circumstances the
Company may in its sole discretion issue a Policy to persons above age 90. Upon
receipt of a completed application, the Company will follow certain insurance
underwriting (e.g. evaluation of risks) procedures designed to determine whether
the applicant is insurable. This process may involve such verification
procedures as medical examinations and blood testing and may require that
further information be provided by the proposed insured before a determination
can be made. A Policy will not be issued until the underwriting procedure has
been completed. A life insured will have a risk class of preferred/ non-smoker,
preferred/smoker, standard/non-smoker, or standard/ smoker. Persons failing to
meet standard underwriting requirements nonetheless may be eligible to purchase
a Policy provided an Additional Rating is assigned. Acceptance of an
application is subject to the Company's insurance underwriting rules.
<PAGE> 2
2
Each Policy is issued with a policy date from which policy years, policy months
and policy anniversaries are all determined. Each Policy has an effective date
which is the date the Company becomes obligated under the Policy and when the
first monthly deductions are taken. If an application is accompanied by a check
for at least the Initial Premium and the application is accepted, the policy
date will be the date the application and check were received at the First North
American Service Office and the effective date will be the date First North
American's underwriters approve issuance of the Policy. A policy may be approved
for issuance conditional upon receipt of additional information. (If an
application is accompanied by a check for all or a portion of the Initial
Premium, the life insured may be covered under the terms of a conditional
insurance agreement until the effective date.) If an application accepted by the
Company is not accompanied by a check for the Initial Premium, the Policy will
be issued with a policy date which is 7 days after issuance of the Policy and
with an effective date which is the date the Service Office receives at least
the Initial Premium. In certain situations a different policy date may be used.
The Initial Premium must be received within 60 days after the policy date,
however, the Initial Premium may be required within 30 days of the policy date
on certain Policies issued with Additional Ratings. If the Initial Premium is
not paid or if the application is rejected, the Policy will be canceled and any
premiums paid will be returned to the applicant.
Under certain circumstances a Policy may be issued with a backdated policy date.
A Policy will not be backdated more than six months before the date of the
application for the Policy. Monthly deductions will be made for the period the
policy date is backdated.
All premiums received prior to the effective date of a Policy will be credited
with interest from the date of receipt at the rate of return then being earned
on amounts allocated to the Money-Market Fund. On the effective date the
premiums paid plus interest credited, net of deductions for federal, state and
local taxes, will be allocated among Investment Accounts and the Guaranteed
Interest Account in accordance with the policyowner's instructions.
All premiums received, on or after the effective date, will be allocated among
Investment Accounts or the Guaranteed Interest Account using unit values as of
the date the premiums were received at the First North American Service Office.
Monthly deductions are due on the policy date and at the beginning of each
policy month thereafter. However, if due prior to the effective date, they will
be taken using unit values as of the effective date instead of the dates they
were due. If in the unlikely scenario where a deduction is to be made as of a
date when no units exist, the deduction will be taken as of the date following
when units first exist.
(b) Payment of Premiums.
After the payment of the Initial Premium, premiums may be paid at any time and
in any amount during the lifetime of the life insured subject to the limitations
on premium amount described hereinafter. After the Initial Premium, all premiums
must be paid to the First North American Service Office or other office or
entity so designated by First North American. First North American will not
accept any premium payment which is less than $50, unless the premium is payable
pursuant to a pre-authorized payment plan. In that case the Company will accept
a payment for as little as $10. First North American may change these minimums
on 90 days' written notice. The Policies also limit the sum of the premiums that
may be paid at any time so as to preserve the qualification of the Policies as
life insurance for federal tax purposes. These limitations are set forth in each
Policy. First North American reserves the right to refuse or refund any premium
payments that may cause the Policy to fail to qualify as life insurance under
applicable tax law.
(c) Deductions from Premiums.
First North American currently makes no deduction of charges from premium
payments for state and local taxes. The maximum amount of deductions for such
charges which may be applicable to future premium payments is 2.35%. First North
American currently makes no deduction of a charge from premium payments for
federal taxes. The maximum amount of deduction for such a charge which may be
applicable to future premium payments is
<PAGE> 3
3
1.25%.
(d) Reinstatement.
A policyowner can reinstate a Policy which has terminated after going into
default at any time within 21 days following the date of termination without
furnishing evidence of insurability, subject to the following conditions:
(a) The life insured's risk class is standard or preferred;
(b) The life insured's attained age is less than 46.
A policyowner can reinstate a Policy which has terminated after going into
default (described hereinafter) at any time within the five year period
following the date of termination subject to the following conditions:
(a) The Policy must not have been surrendered for its Net Cash Surrender
Value at the request of the policyowner;
(b) Evidence of the life insured's insurability satisfactory to First North
American is furnished to it;
(c) A premium equal to the payment required during the 61 day grace period
following default to keep the Policy in force is paid to First North American;
and
(d) An amount equal to any amounts paid by First North American in
connection with the termination of the Policy is repaid to First North American.
If the reinstatement is approved, the date of reinstatement will be the later of
the date of the policyowner's written request or the date the required payment
is received at the First North American Service Office or other office or entity
so designated by First North American. At reinstatement, the Policy Value,
surrender charges, and loan account will be reinstated to what they were at the
date of default. After reinstatement, surrender charges will remain in force for
the remainder of the Surrender Period, as measured from the date of default.
Cost of insurance charges after reinstatement will reflect the actual age of the
life insured.
3. FACE AMOUNT INCREASES
Subject to certain limitations, a policyowner may, upon written request,
increase the face amount of the Policy. Currently, an increase in face amount
must be at least $50,000 ($100,000 for preferred status policies). First North
American reserves the right to increase or decrease the minimum face amount
change on 90 days' written notice to the policyowner.
Increases in face amount are subject to satisfactory evidence of insurability.
Increases may be made only once per policy year and only after the second policy
year. An increase will become effective at the beginning of the policy month
next following the date First North American approves the requested increase.
The Company reserves the right to refuse a requested increase if the life
insured's age at the effective date of the increase would be greater than the
maximum issue age for new Policies at that time.
An increase in face amount will usually result in the Policy's being subject to
new surrender charges. The new surrender charges will be computed as if a new
Policy were being purchased for the increase in face amount. For purposes of
determining the new deferred sales charge, a portion of the Policy Value at the
time of the increase, and a portion of the premium paid on or subsequent to the
increase, will be deemed to be premiums attributable to the increase. Any
increase in face amount to a level less than the highest face amount previously
in effect will have no effect on the surrender charges to which the Policy is
subject, since surrender charges, if applicable, will have been assessed in
connection with the prior decrease in face amount. The insurance coverage
eliminated by the decrease of the oldest face amount will be deemed to be
restored first. As with the purchase of a Policy, a policyowner will have a free
look right with respect to any increase resulting in new surrender charges.
<PAGE> 4
4
No additional premium is required for a face amount increase. However, a premium
payment may be necessary to avoid the Policy's going into default, since new
surrender charges resulting from an increase would automatically reduce the Net
Cash Surrender Value of the Policy. However, a new Death Benefit Guarantee
Premium will be determined.
4. REDEMPTIONS AND RELATED TRANSACTIONS
(a) Surrenders and Partial Withdrawals.
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any surrender charges and outstanding monthly deductions due (the
"Cash Surrender Value") minus the value of the Policy Debt. The Net Cash
Surrender Value will be determined as of the end of the Business Day on which
First North American received the Policy and a written request for surrender at
its Service Office. After a Policy is surrendered, the insurance coverage and
all other benefits under the Policy will terminate.
After a Policy has been in force for two policy years, the policyowner may make
a partial withdrawal of the Net Cash Surrender Value. The minimum amount that
may be withdrawn is $500. The policyowner should specify the portion of the
withdrawal to be taken from each Investment Account and the Guaranteed Interest
Account. In the absence of instructions the withdrawal will be allocated among
such accounts in the same proportion that the Policy Value in each account bears
to the Net Policy Value. No more than one partial withdrawal may be made in any
one policy month.
If the Option 1 death benefit is in effect under a Policy from which a partial
withdrawal is made, the face amount of the Policy will be reduced. If the death
benefit is equal to the face amount at the time of withdrawal, the face amount
will be reduced by the amount of the withdrawal plus the portion of the
surrender charges assessed. If the death benefit is based upon the Policy Value
times the applicable percentage as set forth in the Policy, the face amount will
be reduced only to the extent that the amount of the withdrawal plus the portion
of the surrender charge assessed exceeds the difference between the death
benefit and the face amount. Reductions in face amount resulting from partial
withdrawals will not incur any surrender charges above the surrender charges
applicable to the withdrawal. When the face amount of a Policy is based on one
or more increases subsequent to issuance of the Policy, a reduction resulting
from a partial withdrawal will be applied in the same manner as a requested
decrease in face amount, i.e., against the face amount provided by the most
recent increase, then against the next most recent increase successively and
finally against the initial face amount.
(b) Decreases in Face Amount.
Subject to certain limitations, a policyowner may, upon written request,
decrease the face amount of the Policy. Currently, a decrease in face amount
must be at least $50,000 ($100,000 for preferred status policies). First North
American reserves the right to increase or decrease the minimum face amount
change on 90 days' written notice to the policyowner. The Company reserves the
right to limit a decrease in face amount so as to prevent the Policy from
failing to qualify as life insurance for tax purposes.
A decrease in the face amount may be requested after the first Policy
anniversary. In addition, during the two year period following an increase in
the face amount the policy-owner may elect at any time to cancel the increase. A
decrease in face amount will be effective at the beginning of the month next
following the receipt of a written request. A decrease will not be allowed if it
would cause the face amount to go below the minimum face amount of $50,000
($100,000 for preferred risk policies).
A decrease in face amount during the Surrender Charge Period will usually result
in surrender charges being deducted from the Policy Value. For purposes of
determining surrender and cost of insurance
<PAGE> 5
5
charges, a decrease will reduce face amount in the following order: (a) the face
amount provided by the most recent increase, then (b) the face amounts provided
by the next recent increases successively, and finally (c) the initial face
amount.
(c) Default.
The Policy provides for a Death Benefit Guarantee Cumulative Premium Test and a
No Lapse Guarantee Cumulative Premium Test. These tests are subject to change if
the face amount of the Policy or the death benefit option is changed or if there
is any change in the supplementary benefits added to the Policy or in the rate
classification of any life insured. If the Death Benefit Guarantee Cumulative
Premium Test or the No Lapse Guarantee Cumulative Premium Test is satisfied,
First North American will guarantee that the Policy will not go into default
even if a combination of policy loans, adverse investment experience or other
factors should cause the Policy's Net Cash Surrender Value to be insufficient to
meet the monthly deductions due at the beginning of a Policy Month. For
policies issued and maintained with a minimum face amount of $250,000, the death
benefit guarantee will expire at the end of a Policy Year specified in the
Policy, currently (i) the year in which the life insured reaches, or would have
reached, attained age 100 if death benefit option 1 is maintained throughout the
life of the Policy and (ii) the year in which the life insured reaches, or would
have reached, attained age 85 if death benefit option 2 is selected at any time.
The no lapse guarantee will expire at the end of five years. On policies with
face amounts of less than $250,000, there is no death benefit guarantee after
the third policy anniversary. It is not offered to life insureds whose Issue
Age exceeds 85.
A Policy will go into default if at the beginning of any Policy Month the
Policy's Net Cash Surrender Value would go below zero after deducting the
monthly deductions then due except that in any policy year, the Policy will not
go into default if the death benefit guarantee or no lapse guarantee is in
effect. First North American will notify the policyowner of the default and
allow a 61 day grace period in which the policyowner may make a premium payment
sufficient to bring the Policy out of default. The required premium will be
equal to the amount necessary to bring the Net Cash Surrender Value to zero, if
it was less than zero as of the date of default, plus the monthly deductions due
at the date of default, and payable for the next two Policy Months. If the
required payment is not received by the end of the grace period, the Policy will
terminate and the Net Cash Surrender Value as of the date of default less the
monthly deduction then due will be paid to the policyowner (subject to any
applicable limitation on surrender charges).
A payment made to bring a Policy out of default will be treated as a regular
premium payment except that any monthly deductions then due will be taken
immediately after the allocation of the payment among Investment Accounts or the
Guaranteed Interest Account. Units canceled in connection with the assessment of
such monthly deductions will be based on the unit values as of the date the
payment was made.
(d) Surrender Charges
First North American will usually assess surrender charges upon surrender or
lapse of a Policy, a partial withdrawal of Policy Value or a requested decrease
in face amount. The charges will be assessed if any of the above transactions
occurs within the Surrender Charge Period unless the charges have been
previously deducted. There are two surrender charges -- a deferred underwriting
charge and a deferred sales charge.
Deferred Underwriting Charge. The deferred underwriting charge is $4.50 for each
$1,000 of face amount of insurance.
The deferred underwriting charge applicable to each level of insurance coverage
cannot exceed $2,250. The amount of the charge remains level for five years.
Following the fifth year after issuance of the Policy or a face amount increase,
the charge applicable to the initial face amount or increase will decrease each
month by varying rates depending upon the life insured's issue age until the
charge has decreased to zero. The applicable percentage of the deferred
underwriting charge to which the Policy is subject is illustrated by Table 2.
<PAGE> 6
6
Deferred Sales Charges. The maximum deferred sales charge is equal to 50% of the
premiums paid under the Policy up to a maximum of 2.59 Target Premiums described
below.
The deferred sales charge may not exceed 50% of premiums paid up to a maximum
number of Target Premiums that varies (from -0.52 to 2.59) according to the
issue age of the life insured, face amount at issue and amount of any increase.
Target Premiums depend upon the face amount of insurance provided at issue or by
an increase and the issue age and sex (unless unisex rates are required by law)
of the life insured and, in the case of certain Policies issued in group or
sponsored arrangements providing for reduction in cost of insurance charges, the
amount of insurance coverage. The Target Premium will be computed for each
increase in face amount above the highest face amount of coverage previously in
effect, and the policyowner will be advised of such Target Premium. The number
of Target Premiums subject to the deferred sales charge varies from person to
person based on the issue age of the life insured, the face amount at issue, and
the amount of any increase according to Table 1:
TABLE 1: NUMBER OF TARGET PREMIUMS SUBJECT TO DEFERRED SALES CHARGE
(APPLICABLE TO THE INITIAL FACE AMOUNT AND INCREASES)
<TABLE>
<CAPTION>
AGE $250,000 UNDER AGE $250,000 UNDER AGE $250,000 UNDER
OR MORE $250,000 OR MORE $250,000 OR MORE $250,000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 -0.44* 1.68 30 1.56 2.15 60 2.07 2.42
1 -0.52* 1.46 31 1.61 2.19 61 2.06 2.43
2 0.06 1.45 32 1.67 2.23 62 2.05 2.43
3 0.24 1.45 33 1.72 2.27 63 2.05 2.43
4 0.62 1.46 34 1.78 2.30 64 2.05 2.42
5 0.63 1.47 35 1.83 2.33 65 2.06 2.41
6 0.67 1.49 36 1.86 2.38 66 2.03 2.41
7 0.69 1.51 37 1.89 2.41 67 2.03 2.41
8 0.72 1.52 38 1.91 2.45 68 1.98 2.41
9 0.75 1.54 39 1.94 2.49 69 1.85 2.30
10 0.78 1.55 40 1.96 2.52 70 1.71 2.17
11 0.82 1.58 41 1.98 2.55 71 1.59 2.05
12 0.85 1.60 42 2.01 2.59 72 1.46 1.92
13 0.88 1.61 43 2.04 2.57 73 1.35 1.80
14 0.92 1.63 44 2.06 2.55 74 1.26 1.70
15 0.88 1.52 45 2.08 2.54 75 1.16 1.60
16 0.90 1.53 46 2.12 2.53 76 1.08 1.50
17 0.94 1.58 47 2.17 2.51 77 1.01 1.40
18 0.99 1.64 48 2.22 2.50 78 0.93 1.30
19 1.03 1.68 49 2.22 2.49 79 0.87 1.22
20 1.07 1.72 50 2.21 2.48 80 0.82 1.14
21 1.11 1.77 51 2.19 2.47 81 0.76 1.07
22 1.16 1.82 52 2.18 2.47 82 0.71 1.01
23 1.20 1.86 53 2.16 2.46 83 0.67 0.95
24 1.25 1.91 54 2.15 2.46 84 0.62 0.89
25 1.30 1.95 55 2.14 2.45 85 0.58 0.83
26 1.35 1.99 56 2.12 2.44 86 0.56 0.78
27 1.40 2.04 57 2.11 2.44 87 0.54 0.73
28 1.46 2.08 58 2.10 2.43 88 0.52 0.68
29 1.51 2.12 59 2.08 2.43 89 0.50 0.64
90 0.50 0.63
</TABLE>
* The negative Number of Target Premiums produces a negative Deferred Sales
Charge. When combined with the Deferred Underwriting Charge, the negative
Deferred Sales Charge reduces the total surrender charge.
The portion of the deferred sales charge that remains in effect will grade
down at a rate that also varies
<PAGE> 7
7
according to the issue age of the life insured until, at the end of the
Surrender Charge Period, there is no deferred sales charge. The table to be used
to reduce the applicable deferred sales charge during the Surrender Charge
Period are set forth in Table 2 to this Prospectus. The applicable table will be
set forth in each Policy and the policyowner will be informed of the table to be
used in connection with sales charges on increases in face amount.
In order to determine the deferred sales charge applicable to a face amount
increase, First North American will treat a portion of the Policy Value on the
date of increase as a premium attributable to the increase. In addition, a
portion of each premium paid subsequent to the increase will be attributed to
the increase. In each case, the portion attributable to the increase will be the
ratio of the "guideline annual premium" for the increase to the sum of the
guideline annual premiums for the initial face amount and all increases
including the requested increase.
TABLE 2: DEFERRED UNDERWRITING CHARGES AND DEFERRED SALES CHARGES
<TABLE>
<CAPTION>
TRANSACTION OCCURS
AFTER
MONTHLY DEDUCTION
TAKEN
FOR LAST MONTH PERCENT OF DEFERRED UNDERWRITING CHARGES AND DEFERRED SALES CHARGE BY ISSUE AGE*
PRECEDING --------------------------------------------------------------------------------
END OF MONTH* AGE
------------------- --------------------------------------------------------------------------------
MONTH 0-50 51 52 53 54 55+
------------------- -------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
12 100% 100% 100% 100% 100% 100%
24 100% 100% 100% 100% 100% 100%
36 100% 100% 100% 100% 100% 100%
48 100% 100% 100% 100% 100% 100%
60 100% 100% 100% 100% 100% 100%
72 90% 88.89% 87.50% 85.71% 83.33% 80.00%
84 80% 77.78% 75.00% 71.43% 66.67% 60.00%
96 70% 66.67% 62.50% 57.14% 50.00% 40.00%
108 60% 55.56% 50.00% 42.86% 33.33% 20.00%
120 50% 44.44% 37.50% 28.57% 16.67% 0%
132 40% 33.33% 25.00% 14.28% 0%
144 30% 22.22% 12.50% 0%
156 20% 11.11% 0%
168 10% 0%
180 0%
</TABLE>
* Months not shown may be calculated by interpolation.
Charges on Partial Withdrawals. Both the deferred sales charge and the deferred
underwriting charges are applicable in the event of a partial withdrawal of the
Net Cash Surrender Value. A portion of the surrender charges applicable to the
initial face amount and to each increase in face amount will be deducted as a
result of the withdrawal. The portion to be deducted will be the same as the
ratio of the amount of the withdrawal above the Withdrawal Tier Amount to the
Net Cash Surrender Value prior to the withdrawal. The charges will be deducted
from the Policy Value, and the amount so deducted will be allocated among the
Investment Accounts and the Guaranteed Interest Account in the same proportion
that the withdrawal is allocated among such accounts. If the amount in the
account is not sufficient to pay the portion of the surrender charges allocated
to that account, then the portion of the withdrawal allocated to that account
will be reduced so that the withdrawal plus the portion of the surrender charges
allocated to that account equal the value of that account. Units equal to the
amount of the partial withdrawal taken, and surrender charges deducted, from
each Investment Account will be canceled based on the value of such units
determined at the end of the Business Day on which First North American received
a written request for withdrawal at its Service Office. Whenever a portion of
the surrender charges are deducted as a result of a partial withdrawal, the
Policy's remaining surrender charges will be reduced by the amount of the
charges taken.
<PAGE> 8
8
The surrender charges not assessed as a result of the 10% free withdrawal
provision remain in effect under the policy and may be assessed upon surrender
or lapse, other partial withdrawals or a requested decrease in face amount.
Charges on Decreases in Face Amount. As with partial withdrawals, a portion of a
Policy's surrender charges will be deducted upon a decrease in or cancellation
of face amount requested by the policyowner. Since surrender charges are
determined separately for the initial face amount and each face amount increase
and since a decrease in face amount will have a different impact on each level
of insurance coverage, the portion of the surrender charges to be deducted with
respect to each level of insurance coverage will be determined separately. Such
portion will be the same as the ratio of the amount of the reduction in such
coverage to the amount of such coverage prior to the reduction. Decreases are
applied to the most recent increase first and thereafter to the next most recent
increases successively. The charges will be deducted from the Policy Value, and
the amount so deducted will be allocated among the Investment Accounts and the
Guaranteed Interest Account in the same proportion that the Policy Value in each
bears to the Net Policy Value. Whenever a portion of the surrender charges is
deducted as a result of a decrease in face amount, the Policy's remaining
surrender charges will be reduced by the amount of the charges taken.
(e) Payment of Proceeds.
If the Policy is in force at the time of the life insured's death, First North
American will pay an insurance benefit based on the death benefit option
selected by the policyowner upon receipt of due proof of death. The amount
payable will be the death benefit under the selected option, plus any amounts
payable under any supplementary benefits added to the Policy, less the value of
the Policy Debt at the date of death. The insurance benefit will be paid in one
sum unless another form of settlement option is agreed to by the beneficiary and
the Company. If the insurance benefit is paid in one sum, First North American
will pay interest from the date of death to the date of payment.
If the life insured should die after the Company's receipt of a request for
surrender, no insurance benefit will be payable, and First North American will
pay only the Net Cash Surrender Value. If the life insured should die during the
grace period following a Policy's going into default, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit payable will be reduced by any outstanding
monthly deductions due at the time of death. If the life insured dies by suicide
within two years from the policy date, First North American will pay only the
premiums paid less any partial withdrawals of the Net Cash Surrender Value and
any amount in the Loan Account. If the life insured should die by suicide within
two years after a face amount increase, the death benefit for the increase will
be limited to the monthly deductions for the increase.
As long as the Policy is in force, First North American will ordinarily pay any
policy loans, partial withdrawals, Net Cash Surrender Value or any insurance
benefit within seven days after receipt at the First North American Service
Office of all the documents required for such a payment. The Company may delay
the payment of any policy loans, partial withdrawals, Net Cash Surrender Value
or the portion of any insurance benefit that depends on the Guaranteed Interest
Account value for up to six months; otherwise the Company may delay payment (i)
for any period during which the New York Stock Exchange is closed for trading
(except for normal holiday closings) or trading on the Exchange is otherwise
restricted; (ii) an emergency exists as defined by the Securities and Exchange
Commission ("SEC"), or the SEC requires that trading be restricted; or (iii) the
SEC permits a delay for the protection of policy-owners. Transfers also may be
deferred under the circumstances set forth in clauses (i), (ii) and (iii) above
and in certain other circumstances. See Policy Values -- "Transfers of Policy
Values."
5. TRANSFERS OF POLICY VALUES AND RELATED PROCEDURES
(a) Transfers.
<PAGE> 9
9
Under the Policies a policyowner may change the extent to which his or her
Policy Value is based upon any specific sub-account of the Separate Account or
the Company's general account. Such changes are made by transferring amounts
from one or more Investment Accounts or the Guaranteed Interest Account to other
Investment Accounts or the Guaranteed Interest Account. A policyowner is
permitted to make twelve transfers per policy year free of charge. Additional
transfers may be made at a cost of $25.00 per transfer. For this purpose all
transfer requests received by the First North American Service Office on the
same Business Day are treated as a single transfer request.
The maximum amount that may be transferred from the Guaranteed Interest Account
in any one policy year is the greater of $500 or 15% of the Guaranteed Interest
Account value at the previous policy anniversary. Any transfer which involves a
transfer out of the Guaranteed Interest Account may not involve a transfer to
the Investment Account for the Money-Market Trust (the "Fund"). Transfer
requests must be in a format satisfactory to First North American and in writing
or by telephone, if a currently valid telephone transfer request form has been
received. First North American may be permitted to delay the effective date of
any transfer in certain circumstances. See below and see Other Provisions
- --"Payment of Proceeds."
To the extent that surrenders, partial withdrawals and transfers out of a
sub-account exceed net premium allocations and transfers into that sub-account,
portfolio securities of the underlying Fund may have to be sold. Excessive sales
of the Fund's portfolio securities in such a situation could be detrimental to
that Fund and to policyowners with Policy Values allocated to sub-accounts
investing in that Fund. To protect the interests of all policyowners, the
Policy's transfer privilege is limited as described below.
So long as effecting net transfers out of the Equity Index sub-account in a
particular Business Day would not reduce the number of shares of the underlying
Equity Index Trust outstanding at the close of the prior Business Day by more
than 5%, all such requests will be effected. However, net transfers out of an
Investment Account greater than 5% would be permitted only if, and to the extent
that, in the judgment of Manufacturers Advisers Corporation, they would not
result in detriment to the underlying Equity Index Trust or to the interests of
policyowners or others with assets allocated to that Portfolio. If and when
transfers must be limited to avoid such detriment, some requests will not be
effected. In determining which requests will be effected, transfers pursuant to
the Dollar Cost Averaging program will be effected first, followed by Asset
Allocation Balancer transfers, written requests next and telephone requests
last. Within each such group, requests will be processed in the order received,
to the extent possible. Policyowners whose transfer requests are not effected
will be so notified. Current SEC rules preclude First North American from
delaying until a later date the processing of requests that were not effected.
Accordingly, a new transfer request would have to be submitted in order to
effect a transfer that was not effected because of the limitations described in
this paragraph.
(b) Dollar Cost Averaging.
First North American will offer policyowners a Dollar Cost Averaging program.
Under this program amounts will be automatically transferred at fixed times from
one Investment Account to any other Investment Account(s) or the Guaranteed
Interest Account.
Under the Dollar Cost Averaging program the policyowner will designate a dollar
amount of available assets which will be transferred at predetermined intervals
from one Investment Account into any other Investment Account(s) or the
Guaranteed Interest Account. Each transfer under the Dollar Cost Averaging
program must be of a minimum amount as set by First North American. Once set,
this minimum may be changed at any time at the discretion of First North
American. Currently, no charge will be made for this program if the Policy Value
exceeds $15,000 on the date of transfer. Otherwise, there will be a charge of
$5.00 for each transfer under this program which fee will be deducted from the
value of the sub-account out of which the transfer occurs. First North American
reserves the right to discontinue this program.
(c) Asset Allocation Balancer Transfers.
<PAGE> 10
10
First North American will also offer policyowners the ability to have amounts
automatically transferred among stipulated accounts to maintain an allocated
percentage in each stipulated account.
Under the Asset Allocation Balancer program the policyowner will designate an
allocation of Policy Value among Investment Accounts. At six month intervals,
beginning six months after the policy date, First North American will move
amounts among the Investment Accounts as necessary to maintain the policyowner's
chosen allocation. A change to the policyowner's premium allocation instructions
will automatically result in a change in Asset Allocation Balancer instructions
so that the two are identical unless the policyowner instructs First North
American differently or has a Dollar Cost Averaging request in effect.
Currently, there is no charge for this program. First North American reserves
the right to institute a charge or to discontinue this program on 90 days'
written notice.
(d) Policy Loans.
While the Policy is in force, the policyowner may borrow against the Policy
Value of his or her Policy. The minimum amount of any loan is $500. The maximum
loan amount is the amount which would cause the Modified Policy Debt to equal
the loan value of the Policy on the date of the loan. The loan value is the
Policy's Cash Surrender Value less the monthly deductions due to the next policy
anniversary. The monthly deductions due for this purpose will be projected
assuming no further premiums are paid, current cost of insurance rates and a 4%
net interest rate. The Modified Policy Debt as of any date is the Policy Debt
(the aggregate amount of policy loans, including borrowed interest, less any
loan repayments) plus the amount of interest to be charged to the next policy
anniversary, all discounted from the next policy anniversary to such date at an
annual rate of 4 percent. When a loan is made, First North American will deduct
from the Investment Accounts or the Guaranteed Interest Account, and transfer to
the Loan Account, an amount which will result in the Loan Account value being
equal to the Modified Policy Debt. The policyowner may designate how the amount
to be transferred to the Loan Account is allocated among the accounts from which
the transfer is to be made. In the absence of instructions, the amount to be
transferred will be allocated to each account in the same proportion that the
value in each Investment Account and the Guaranteed Interest Account bears to
the Net Policy Value. A transfer from an Investment Account will result in the
cancellation of units of the underlying sub-account equal in value to the amount
transferred from the Investment Account. However, since the Loan Account is part
of the Policy Value, transfers made in connection with a loan will not change
the Policy Value.
When a loan is first taken out, and at specified events thereafter, the value of
the Loan Account is adjusted. Whenever the Loan Account is adjusted the
difference between (i) the Loan Account before any adjustment and (ii) the
Modified Policy Debt at the time of adjustment, is transferred between the Loan
Account and the Investment Accounts or the Guaranteed Interest Account. The
amount transferred to or from the Loan Account will be such that the value of
the Loan Account is equal to the Modified Policy Debt after the adjustment.
The specified events which cause an adjustment to the Loan Account are (i) a
policy anniversary, (ii) a partial or full loan repayment, (iii) a new loan
being taken out, or (iv) when an amount is needed to meet a monthly deduction. A
loan repayment may be implicit in that policy debt is effectively repaid upon
termination, that is upon death of the life insured, surrender or lapse of the
policy. In each of these instances, the Loan Account will be adjusted with any
excess of the Loan Account over the Modified Policy Debt after the repayment
being included in the termination proceeds.
Except as noted below, amounts transferred from the Loan Account will be
allocated to the Investment Accounts and the Guaranteed Interest Account in the
same proportion that the value in the corresponding "loan sub-account" exists
for each Investment Account and for the Guaranteed Interest Account. Amounts
transferred to the Loan Account are allocated to the appropriate loan
sub-account to reflect the account from which the transfer was made.
<PAGE> 11
11
Policy Debt may be repaid in whole or in part at any time prior to the death of
the life insured provided the Policy is in force. When a payment is made, the
amount is credited to the Loan Account and a transfer is made to the Guaranteed
Interest Account or the Investment Accounts so that the Loan Account at that
time equals the Modified Policy Debt. Loan repayments will first be allocated to
the Guaranteed Interest Account until the associated loan sub-account is reduced
to zero. Loan repayments will then be allocated to each Investment Account in
the same proportion that the value in the corresponding loan sub-account bears
to the value of the Loan Account. Amounts paid to the Company not specifically
designated in writing as loan repayments will be treated as premiums.
6. COST OF INSURANCE
The monthly charge for the cost of insurance rate is determined by multiplying
the applicable cost of insurance rate times the net amount at risk at the
beginning of each policy month. The cost of insurance rate is based on the life
insured's issue age, sex, risk class, and the duration of the insurance
coverage_*/. The rate is determined separately for the initial face amount and
for each increase in face amount. Cost of insurance rates will generally
increase with the life insured's age. Any Additional Ratings as indicated in the
Policy will be added to the cost of insurance rate.
The cost of insurance rates used by First North American reflect its
expectations as to future mortality experience. The rates may be changed from
time to time on a basis which does not unfairly discriminate within the class of
life insureds. In no event will the cost of insurance rate exceed the guaranteed
rates set forth in the Policy except to the extent that an extra rate is imposed
because of an additional rating applicable to the life insured. The guaranteed
rates are based on the 1980 Commissioners Smoker/Nonsmoker Standard Ordinary
Mortality Tables.
The net amount at risk to which the cost of insurance rate is applied is the
difference between the death benefit, divided by 1.0032737 (a factor which
reduces the net amount at risk for the cost of insurance charge purposes by
taking into account assumed monthly earnings at an annual rate of 4%), and the
Policy Value.
Because different cost of insurance rates may apply to different levels of
insurance coverage, the net amount at risk will be calculated separately for
each level of insurance coverage. When the Option 1 death benefit is in effect,
for purposes of determining the net amount at risk applicable to each level of
insurance coverage, the Policy Value is attributed first to the initial face
amount and then, if the Policy Value is greater than the initial face amount, to
each increase in face amount in the order made.
_*/ If the life insured's stated age or sex or both in the Policy are incorrect,
First North American will change the face amount of insurance so that the death
benefit will be that which the most recent monthly charge for the cost of
insurance would have bought for the correct age and sex.
<PAGE> 12
12
Because the calculation of the net amount at risk is different under the death
benefit options when more than one level of insurance coverage is in effect, a
change in the death benefit option may result in a different net amount at risk
for each level of insurance coverage than would have occurred had the death
benefit option not been changed. Since the cost of insurance is calculated
separately for each level of insurance coverage, any change in the net amount at
risk for a level of insurance coverage resulting from a change in the death
benefit option may affect the amount of the charge for the cost of insurance.
Partial withdrawals and decreases in face amount will also affect the manner in
which the net amount at risk for each level of insurance coverage is calculated.
7. INCOMPLETE ALLOCATION REQUEST
If an incomplete change in premium allocation request is received a letter
requesting a corrected allocation request will be sent to the policyowner.
8. UNPAID CHECKS
When an unpaid item is received, a premium reversal will be made effective the
date of the original premium payment and the General Account of the Company will
absorb the gain or loss of this backdated transaction. The policyowner will be
notified in writing of the unpaid item.
