<PAGE> 1
As filed with the Securities and Exchange Commission on April 7, 1997.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NASL VARIABLE ACCOUNT
(Exact name of Registrant)
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
(Name of Depositor)
116 Huntington Avenue
Boston, Massachusetts 02116
(Address of Depositor's Principal Executive Offices)
(617) 266-6008
(Depositor's Telephone Number Including Area Code)
James D. Gallagher Copy to:
Vice President, Secretary and J. Sumner Jones, Esq.
General Counsel Jones & Blouch
North American Security Life 1025 Thomas Jefferson Street, N.W.
Insurance Company Washington, DC 20007
73 Tremont Street
Boston, Massachusetts 02108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this registration statement.
Individual Deferred Combination Fixed and Variable Annuity Contracts -- Pursuant
to Rule 24f-2 under the Investment Company Act of 1940, an indefinite number of
securities is being registered by the 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 this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement
<PAGE> 2
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
NASL VARIABLE ACCOUNT
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 Item Caption in Prospectus
Part A ---------------------
- ------
<S> <C>
1...................................Cover Page
2...................................Special Terms
3...................................Summary
4...................................Performance Data;
Financial Statements
5...................................General Information about
North American Security Life
Insurance Company, NASL
Variable Account and NASL
Series Trust
6...................................Charges and Deductions;
Withdrawal Charge; Reduction
or Elimination of Withdrawal
Charge; Administration Fees;
Distribution Fee; Mortality and Expense Risk
Charge; Taxes; Appendix A; Appendix B
7...................................Accumulation Provisions;
Company Approval;
Purchase Payments;
Accumulation
Units; Net
Investment Factor;
Transfers Among
Investment
Options; Telephone
Transactions;
Special Transfer
Services - Dollar
Cost Averaging;
Asset Rebalancing
Program;
Withdrawals;
Special Withdrawal
Services the
Income Plan;
Contract Owner
Inquiries; Other
Contract
Provisions;
Ownership;
Beneficiary;
Modification
8...................................Annuity Provisions; General;
Annuity Options; Determination of Amount
of the First Variable Annuity Payment;
Annuity Units and the Determination of
Subsequent Variable Annuity
Payments; Transfers After Maturity Date
9...................................Accumulation Provisions;
Death Benefit Before
Maturity Date; Annuity
Provisions; Death Benefit
on or After Maturity Date
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
10..................................Accumulation Provisions;
Purchase Payments; Accumula-
tion Units; Value of Accumula-
tion Units; Net Investment
Factor; Distribution of
Contracts
11..................................Withdrawals; Restrictions
under the Texas Optional
Retirement Program; Accumula-
tion Provisions; Purchase
Payments; Other Contract
Provisions; Ten Day Right to
Review
12..................................Federal Tax Matters; Intro-
duction; The Company's Tax
Status; Taxation of Annuities
in General; Diversification
Requirements; Qualified
Retirement Plans
13..................................Legal Proceedings
14..................................Statement of Additional
Information - Table of Contents
Part B .............................Caption in Statement of
- ------ Additional Information
----------------------
15..................................Cover Page
16..................................Table of Contents
17..................................General History and
......... Information.
18..................................Services-Accountants;
......... Services-Servicing Agent
19..................................Not Applicable
20..................................Services - Principal Underwriter
21..................................Performance Data
22..................................Not Applicable
23..................................Financial Statements
</TABLE>
<PAGE> 4
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5
Annuity Service Office Mailing Address
116 Huntington Avenue Post Office Box 9230
Boston, Massachusetts 02116 Boston, Massachusetts
(617) 266-6008 02205-9230
(800) 344-1029
- --------------------------------------------------------------------------------
NASL VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
OF
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
This Prospectus describes a flexible purchase payment individual deferred
fixed and variable annuity contract (the "contract") issued by North American
Security Life Insurance Company ("the Company"), a stock life insurance company
the ultimate parent of which is The Manufacturers Life Insurance Company
("Manulife"). The contract is designed for use in connection with retirement
plans which may or may not qualify for special federal income tax treatment.
The contract provides for the accumulation of contract values and the
payment of annuity benefits on a variable and/or fixed basis. The contract
offers thirty-five investment options: thirty-four variable and a one year fixed
account. The contract value during the accumulation period and annuity payments,
if selected on a variable basis, will vary according to the investment
performance of the sub-accounts of NASL Variable Account (the "Variable
Account"). The Variable Account is a separate account established by the
Company. Purchase payments and earnings on those purchase payments may be
allocated to and transferred among one or more of thirty-four sub-accounts of
the Variable Account. The assets of each sub-account are invested in shares of
NASL Series Trust (the "Trust"), a mutual fund having an investment portfolio
for each sub-account of the Variable Account (see the accompanying Prospectus of
the Trust). Fixed contract values may be accumulated under the one year fixed
account investment option. Except as specifically noted herein and as set forth
under the caption "FIXED ACCOUNT INVESTMENT OPTION" below, this prospectus
describes only the variable portion of the contract.
Shares of the Trust are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
Additional information about the contract and the Variable Account is
contained in a Statement of Additional Information, dated the same date as this
Prospectus, which has been filed with the Securities and Exchange Commission
(the "Commission") and is incorporated herein by reference. The Statement of
Additional Information is available without charge upon request by writing the
Company at the above address or telephoning (617) 266-6008. In addition, the
Commission maintains a Web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference, and other
information regarding registrants that file electronically with the Commission.
The table of contents for the Statement of Additional Information is included on
page ___ of this Prospectus.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS INFORMATION ABOUT THE VARIABLE ACCOUNT AND THE VARIABLE PORTION OF THE
CONTRACT THAT A PROSPECTIVE PURCHASER SHOULD KNOW BEFORE INVESTING.
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.
The date of this Prospectus is ________, 1997
<PAGE> 6
<TABLE>
TABLE OF CONTENTS
<CAPTION>
<S> <C>
SPECIAL TERMS ............................................ Taxes ...............................................
SUMMARY...................................................
TABLE OF ACCUMULATION UNIT VALUES......................... FEDERAL TAX MATTERS ......................................
GENERAL INFORMATION ABOUT NORTH INTRODUCTION ..........................................
AMERICAN SECURITY LIFE INSURANCE THE COMPANY'S TAX STATUS ..............................
COMPANY, NASL VARIABLE ACCOUNT AND TAXATION OF ANNUITIES IN GENERAL ......................
NASL SERIES TRUST......................................... Tax Deferral During Accumulation Period .............
North American Security Life Insurance Company....... Taxation of Partial and Full Withdrawals ............
NASL Variable Account................................ Taxation of Annuity Payments ........................
NASL Series Trust.................................... Taxation of Death Benefit Proceeds ..................
DESCRIPTION OF THE CONTRACT .............................. Penalty Tax on Premature Distributions ..............
ACCUMULATION PROVISIONS ............................... Aggregation of Contracts ............................
Purchase Payments ................................... QUALIFIED RETIREMENT PLANS ............................
Payment Enhancements................................. Qualified Plan Types ................................
Accumulation Units .................................. Direct Rollovers ....................................
Value of Accumulation Units ......................... FEDERAL INCOME TAX WITHHOLDING.........................
Net Investment Factor ............................... GENERAL MATTERS...........................................
Transfers Among Investment Options .................. Tax Deferral.........................................
Maximum Number of Investment Options................. Performance Data.....................................
Telephone Transactions .............................. Financial Statements.................................
Special Transfer Services - Dollar Cost Averaging.... Asset Allocation and Timing Services.................
Asset Rebalancing Program............................ Restrictions Under the Texas Optional
Withdrawals.......................................... Retirement Program..............................
Telephone Redemptions ............................... Distribution of Contracts ...........................
Special Withdrawal Services - the Income Plan ....... Contract Owner Inquiries.............................
Loans................................................ Legal Proceedings ...................................
Death Benefit Before Maturity Date................... Other Information ...................................
ANNUITY PROVISIONS .................................... STATEMENT OF ADDITIONAL INFORMATION-
General ............................................. TABLE OF CONTENTS......................................
Annuity Options ..................................... APPENDIX A: EXAMPLES OF CALCULATION OF
Determination of Amount of the First Variable WITHDRAWAL CHARGE......................................
Annuity Payment...................................... APPENDIX B: STATE PREMIUM TAXES..........................
Annuity Units and the Determination of APPENDIX C: MAXIMUM MATURITY AGES
Subsequent Variable Annuity Payments ............. IN PENNSYLVANIA........................................
Transfers After Maturity Date ....................... APPENDIX D: EXAMPLES OF PAYMENT
Death Benefit on or After Maturity Date.............. Enhancement CALCULATION................................
OTHER CONTRACT PROVISIONS .............................
Ten Day Right to Review .............................
Ownership ...........................................
Annuitant ...........................................
Beneficiary .........................................
Modification ........................................
Company Approval ....................................
Misstatement and Proof of Age, Sex or Survival.......
FIXED ACCOUNT INVESTMENT OPTION...........................
CHARGES AND DEDUCTIONS ...................................
Withdrawal Charges ..................................
Reduction or Elimination of Withdrawal Charges ......
Administration Fees..................................
Mortality and Expense Risk Charge ...................
</TABLE>
2
<PAGE> 7
SPECIAL TERMS
The following terms as used in this Prospectus have the indicated meanings:
Accumulation Unit - A unit of measure that is used to calculate the value
of the variable portion of the contract before the maturity date.
Annuitant - Any natural person or persons whose life is used to determine
the duration of annuity payments involving life contingencies. If the contract
owner names more than one person as an "annuitant," the second person named
shall be referred to as "co-annuitant." The "annuitant" and "co-annuitant" will
be referred to collectively as "annuitant." The "annuitant" is as designated on
the contract specification page or in the application, unless changed.
Annuity Option - The method selected by the contract owner for annuity
payments made by the Company. At the maturity date, the Company will provide a
variable annuity with payments guaranteed for 10 years and for the lifetime of
the annuitant, if the annuitant lives more than 10 years. This will be the
annuity option under the contract unless changed.
Annuity Service Office - The service office of the Company is P.O. Box
9230, Boston, Massachusetts 02205-9230.
Annuity Unit - A unit of measure that is used after the maturity date to
calculate variable annuity payments.
Beneficiary - The person, persons or entity entitled to the death benefit
under the contract upon the death of a contract owner or, in certain
circumstances, an annuitant. The beneficiary is as specified in the application,
unless changed. If there is a surviving contract owner, that person will be
deemed the beneficiary.
Contingent Beneficiary - The person, persons or entity to become the
beneficiary if the beneficiary is not alive. The contingent beneficiary is as
specified in the application, unless changed.
Contract Anniversary - The anniversary of the contract date.
Contract Date - The date of issue of the contract.
Contract Value - The total of the investment account values and, if
applicable, any amount in the loan account attributable to the contract.
Contract Year - The period of twelve consecutive months beginning on the
contract date or any anniversary thereof.
Debt - Any amounts in the loan account attributable to the contract plus
any accrued loan interest. The loan provision is applicable to certain qualified
contracts only.
Due Proof of Death - Due Proof of Death is required upon the death of the
contract owner or annuitant, as applicable. One of the following must be
received at the Annuity Service Office within one year of the date of death:
(a) A certified copy of a death certificate;
(b) A certified copy of a decree of a court of competent jurisdiction as
to the finding of death; or
(c) Any other proof satisfactory to us.
Death Benefits will be paid within 7 days of receipt of due proof of death and
all required claim forms by the Company's Annuity Service Office.
Fixed Annuity - An annuity option with payments which are predetermined and
guaranteed as to dollar amount.
General Account - All the assets of the Company other than assets in
separate accounts.
3
<PAGE> 8
Investment Account - An account established by the Company which represents
a contract owner's interest in an investment option prior to the maturity date.
Investment Account Value - The value of a contract owner's investment in an
investment account.
Investment Options - The investment choices available to contract owners.
Currently, there are thirty-four variable account investment options and a one
year fixed investment option under the contract.
Loan Account - The portion of the general account that is used for
collateral when a loan is taken.
Maturity Date - The date on which annuity benefits commence. The maturity
date is the date specified on the contract specifications page and is generally
the first day of the month following the later of the annuitant's 85th birthday
or the tenth contract anniversary, unless changed.
Net Purchase Payment - The purchase payment less the amount of premium tax,
if any, plus any applicable payment enhancement.
Non-Qualified Contracts - Contracts which are not issued under qualified
plans.
Owner or Contract Owner - The person, persons (co-owner) or entity entitled
to all of the ownership rights under the contract. The owner has the legal right
to make all changes in contractual designations where specifically permitted by
the contract. The owner is as specified in the application, unless changed.
Payment Enhancement - The amount added to the contract by the Company at
the time a contract owner makes a purchase payment.
Portfolio or Trust Portfolio - A separate investment portfolio of the
Trust, a mutual fund in which the Variable Account invests, or of any successor
mutual fund.
Purchase Payment - An amount paid by a contract owner to the Company as
consideration for the benefits provided by the contract.
Qualified Contracts - Contracts issued under qualified plans.
Qualified Plans - Retirement plans which receive favorable tax treatment
under Section 401, 403, 408 or 457 of the Internal Revenue Code of 1986, as
amended.
Separate Account - A segregated account of the Company that is not
commingled with the Company's general assets and obligations.
Sub-Account(s) - One or more of the sub-accounts of the Variable Account.
Each sub-account is invested in shares of a different Trust portfolio.
Valuation Date - Any date on which the New York Stock Exchange is open for
business and the net asset value of a Trust portfolio is determined.
Valuation Period - Any period from one valuation date to the next, measured
from the time on each such date that the net asset value of each portfolio is
determined.
Variable Account - The Variable Account, which is a separate account of the
Company.
4
<PAGE> 9
Variable Annuity - An annuity option with payments which: (1) are not
predetermined or guaranteed as to dollar amount, and (2) vary in relation to the
investment experience of one or more specified sub-accounts.
5
<PAGE> 10
SUMMARY
The Contract. The contract offered by this Prospectus is a flexible
purchase payment individual deferred combination fixed and variable annuity
contract. The contract provides for the accumulation of contract values and the
payment of annuity benefits on a variable and/or fixed basis.
Retirement Plans. The contract may be issued pursuant to either
non-qualified retirement plans or plans qualifying for special income tax
treatment under the Internal Revenue Code, such as individual retirement
accounts and annuities, pension and profit-sharing plans for corporations and
sole proprietorships/partnerships ("H.R. 10" and "Keogh" plans), tax-sheltered
annuities, and state and local government deferred compensation plans. (See
"QUALIFIED RETIREMENT PLANS")
Purchase Payments. A contract may be issued upon the making of an initial
purchase payment of $10,000 or more. Minimum subsequent purchase payments must
be $30. Purchase payments may be made at any time, except that if a purchase
payment would cause the contract value to exceed $1,000,000, or the contract
value already exceeds $1,000,000, additional purchase payments will be accepted
only with the prior approval of the Company. The Company may, at its option,
cancel a contract at the end of any two consecutive contract years in which no
purchase payments have been made, if both (i) the total purchase payments made
over the life of the contract, less any withdrawls, are less than $2,000; and
(ii) the contract value at the end of such two year period is less than $2,000.
The cancellation of contract privileges may vary in certain states in order to
comply with the requirements of insurance laws and regulations in such state.
(See "PURCHASE PAYMENTS")
Payment Enhancement. At the time a purchase payment is paid to the Company
by a contract owner, the Company will add a payment enhancement to the owner's
contract. The payment enhancement depends on the cumulative amount of purchase
payments. The next higher payment enhancement may be applied to the initial
payment. To receive the higher percentage the contract owner must provide
satisfactory evidence that the total payments within 13 months of the issue date
will be equal to or in excess of the next payment enhancement cumulative
purchase payment breakpoint. If total purchase payments received within the 13
month period do not equal or exceed the amount approved, the Company reserves
the right to recover from the contract the excess payment enhancement added to
the contract. The payment enhancement is funded from the Company's general
account. The payment enhancement is allocated among investment options in the
same proportion as the applicable purchase payment. The amount available as a
death benefit is reduced by payment enhancements applied in the prior 12 month
period (See "DEATH BENEFIT BEFORE MATURITY DATE"). The amount returned if the
contract owner exercises his or her right to return the contract during the "ten
day right to review" period is reduced by any payment enhancements applied. (See
"TEN DAY RIGHT TO REVIEW"). (See generally "PAYMENT ENHANCEMENT")
Investment Options. Purchase payments may be allocated among the
thirty-five investment options currently available under the contract:
thirty-four variable account investment options and a one year fixed investment
option. Due to current administrative capabilities, a contract owner is limited
to a maximum of seventeen investment options (including all fixed account
investment options) during the period prior to the maturity date of the
contract. The thirty-four variable investment options are the thirty-four
sub-accounts of the Variable Account, a separate account established by the
Company. The sub-accounts invest in corresponding portfolios of the Trust: the
Pacific Rim Emerging Markets Trust, the Science & Technology Trust, the
International Small Cap Trust, the Emerging Growth Trust, the Pilgrim Baxter
Growth Trust, the Small/Mid Cap Trust, the International Stock Trust, the
Worldwide Growth Trust, the Global Equity Trust, the Growth Trust, the Equity
Trust, the Quantitative Equity Trust, the Blue Chip Growth Trust, the Real
Estate Securities Trust, the Value Trust, the International Growth and Income
Trust, the Growth and Income Trust, the Equity-Income Trust, the Balanced Trust,
the Aggressive Asset Allocation Trust, the High Yield Trust, the Moderate Asset
Allocation Trust, the Conservative Asset Allocation Trust, the Strategic Bond
Trust, the Global Government Bond Trust, the Capital Growth Bond Trust, the
Investment Quality Bond Trust, the U.S. Government Securities Trust, the Money
Market Trust, the Lifestyle Aggressive 1000 Trust, the Lifestyle Growth 820
Trust, the Lifestyle Balanced 640 Trust, the Lifestyle Moderate 460 Trust and
the Lifestyle Conservative 280 Trust (see the accompanying Prospectus of the
Trust). The contract value during the accumulation period and monthly annuity
payments, if selected on a variable basis, will reflect the investment
performance of the sub-accounts selected. (See "NASL VARIABLE ACCOUNT").
Purchase payments may also be allocated to the one year fixed account
investment option. Under the fixed account investment option, the Company
guarantees the principal value of purchase payments and the rate of interest
credited to the investment account for the term of the guarantee period. The
portion of the contract value in the fixed account investment
6
<PAGE> 11
option and monthly annuity payments, if selected on a fixed basis, will reflect
such interest and principal guarantees. (See "FIXED ACCOUNT INVESTMENT OPTION").
Subject to certain regulatory limitations, the Company may elect to add,
subtract or substitute investment options.
Transfers. Prior to the maturity date, amounts may be transferred among the
investment options. After the maturity date, amounts may be transferred from one
sub-account to another. There is no transaction charge for transfers. Transfers
from any investment account must be at least $300 or, if less, the entire
balance in the investment account. If, after the transfer the amount remaining
in the Investment Account of the contract from which the transfer is made is
less than $100, then the Company will transfer the entire amount instead of the
requested amount. The Company may impose certain additional limitations on
transfers. (See "TRANSFERS AMONG INVESTMENT OPTIONS" and "TRANSFERS AFTER
MATURITY DATE"). Transfer privileges may also be used under a special service
offered by the Company to dollar cost average an investment in the contract.
(See "SPECIAL TRANSFER SERVICES - DOLLAR COST AVERAGING")
7
<PAGE> 12
Withdrawals. Prior to the earlier of the maturity date or the death of the
contract owner, the owner may withdraw all or a portion of the contract value.
The amount withdrawn from any investment account must be at least $300 or, if
less, the entire balance of the investment account. If a partial withdrawal plus
any applicable withdrawal charge would reduce the contract value to less than
$300, the withdrawal request will be treated as a request to withdraw the entire
contract value. A withdrawal charge and an administration fee may be imposed.
(See "WITHDRAWALS") A withdrawal may be subject to a penalty tax. (See "FEDERAL
TAX MATTERS") Withdrawal privileges may also be exercised pursuant to the
Company's systematic withdrawal plan service. (See "SPECIAL WITHDRAWAL SERVICES
- - SYSTEMATIC WITHDRAWAL PLAN")
Loans. The Company offers a loan privilege to owners of contracts issued in
connection with Section 403(b) qualified plans that are not subject to Title I
of ERISA. Owners of such contracts may obtain loans using the contract as the
only security for the loan. The effective cost of a contract loan is 2% per year
of the amount borrowed. (See "LOANS")
Death Benefits. The Company will pay the death benefit described below
(which, as defined, is net of any debt) to the beneficiary if any contract owner
dies before the maturity date. If there is a surviving contract owner, that
contract owner will be deemed to be the beneficiary. No death benefit is payable
on the death of any annuitant, except that if any contract owner is not a
natural person, the death of any annuitant will be treated as the death of an
owner. The death benefit will be determined as of the date on which written
notice and proof of death and all required claim forms are received at the
Company's Annuity Service Office.
If any contract owner dies and the oldest owner had an attained age of less
than 81 years on the contract date, the death benefit will be determined as
follows: The death benefit during the first nine contract years will be the
greater of: (a) the contract value less any payments enhancements applied in the
12 month period prior to the date of death, or (b) the excess of (i) the sum of
all purchase payments less any payment enhancements applied in the 12 month
period prior to the date of death over (ii) the sum of any amounts deducted in
connection with partial withdrawals. After the ninth contract year the death
benefit will be the greater of : (a) the contract value less any payment
enhancements applied in the 12 month period prior to the date of death or (b)
the excess of (i) the sum of all purchase payments less any payment enhancements
applied in the 12 month period prior to the date of death over (ii) the sum of
any amounts deducted in connection with partial withdrawals or (c) the death
benefit on the last day of the ninth contract year, plus the sum of all purchase
payments made and less any amount deducted in connection with partial
withdrawals since then, and less any payment enhancements applied in the 12
month period prior to the date of death.
If any contract owner dies and the oldest owner had an attained age greater
than 80 on the contract date, the death benefit will be the contract value less
any applicable withdrawal charges. If there is any debt under the contract, the
death benefit equals the death benefit, as described above, less such debt. (See
"DEATH BENEFIT BEFORE MATURITY DATE"). If the annuitant dies after the maturity
date and annuity payments have been selected based on an annuity option
providing for payments for a guaranteed period, the Company will make the
remaining guaranteed payments to the beneficiary. (See "DEATH BENEFIT ON OR
AFTER MATURITY DATE").
Annuity Payments. The Company offers a variety of fixed and variable
annuity options. Periodic annuity payments will begin on the maturity date. The
contract owner selects the maturity date, frequency of payment and annuity
option. (See "ANNUITY PROVISIONS")
Ten Day Review. Within 10 days of receipt of a contract, the contract owner
may cancel the contract by returning it to the Company. (See "TEN DAY RIGHT TO
REVIEW")
Charges and Deductions. The following table and Example are designed to
assist contract owners in understanding the various costs and expenses that
contract owners bear directly and indirectly. The table reflects expenses of the
separate account and the underlying portfolio company. In addition to the items
listed in the following table, premium taxes may be applicable to certain
contracts. The items listed under "Contract Owner Transaction Expenses" and
"Separate Account Annual Expenses" are more completely described in this
Prospectus (see "CHARGES AND DEDUCTIONS"). The items listed under "Trust Annual
Expenses" are described in detail in the accompanying Trust Prospectus to which
reference should be made.
8
<PAGE> 13
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
Deferred sales load (as percentage of purchase payments)*
<CAPTION>
NUMBER OF COMPLETE YEARS
PURCHASE PAYMENT IN CONTRACT WITHDRAWAL CHARGE PERCENTAGE
<S> <C>
0 8.5%
1 8.5%
2 8%
3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9 0%
</TABLE>
ANNUAL CONTRACT FEE............................................... $40(1)
(1) The $40 annual administration fee will not be assessed prior to the
maturity date if at the time of its assessment the sum of all investment
accounts is greater than or equal to $100,000.
<TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<S> <C>
Mortality and expense risk fees.................................... 1.25%
Administration fee ................................................ 0.30%
Total Separate Account Annual Expenses............................. 1.55%
</TABLE>
<TABLE>
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets)
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets........ 0.850% 0.300% 1.150%
Science & Technology................ 1.100% 0.100%* 1.200%
International Small Cap............. 1.100% 0.190% 1.290%
Emerging Growth..................... 1.050% 0.100%* 1.150%
Pilgrim Baxter Growth............... 1.050% 0.300%* 1.350%
Small/Mid Cap....................... 1.000% 0.100% 1.100%
International Stock................. 1.050% 0.200%* 1.250%
Worldwide Growth.................... 1.000% 0.300%* 1.300%
Global Equity....................... 0.900% 0.110% 1.010%
</TABLE>
9
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
Growth.............................. 0.850% 0.160% 1.010%
Equity.............................. 0.750% 0.050% 0.800%
Quantitative Equity**............... 0.700%** 0.060% 0.760%**
Blue Chip Growth.................... 0.925% 0.050% 0.975%
Real Estate Securities**............ 0.700%** 0.100% 0.800%**
Value............................... 0.800% 0.050%* 0.850%
International Growth and Income..... 0.950% 0.160% 1.110%
Growth and Income................... 0.750% 0.050% 0.800%
Equity-Income....................... 0.800% 0.050% 0.850%
Balanced............................ 0.800% 0.150%* 0.950%
Aggressive Asset Allocation......... 0.750% 0.150% 0.900%
High Yield.......................... 0.775% 0.145%* 0.920%
Moderate Asset Allocation........... 0.750% 0.090% 0.840%
Conservative Asset Allocation....... 0.750% 0.120% 0.870%
Strategic Bond...................... 0.775% 0.085% 0.860%
Global Government Bond.............. 0.800% 0.100% 0.900%
Capital Growth Bond**............... 0.650%** 0.100% 0.750%**
Investment Quality Bond............. 0.650% 0.080% 0.730%
U.S. Government Securities.......... 0.650% 0.060% 0.710%
Money Market........................ 0.500% 0.050% 0.550%
</TABLE>
<TABLE>
<CAPTION>
MINIMUM TOTAL TRUST MAXIMUM TOTAL TRUST
ANNUAL EXPENSES*** ANNUAL EXPENSES****
<S> <C> <C> <C>
Lifestyle Aggressive 1000# 0.760% 1.350%
Lifestyle Growth 820# 0.720% 1.260%
Lifestyle Balanced 640# 0.680% 1.180%
Lifestyle Moderate 460# 0.630% 1.090%
Lifestyle Conservative 280# 0.590% 1.010%
</TABLE>
* Based on estimates of payments to be made during the current fiscal year.
** "Total Trust Annual Expenses" for the Quantitative Equity, Real Estate
Securities and Capital Growth Bond Trusts do not reflect an agreement by NASL
Financial Services, Inc. ("NASL Financial") voluntarily to waive fees payable to
it and/or reimburse expenses for a period of one year commencing January 1, 1997
to the extent necessary to prevent "Total Trust Annual Expenses" for each such
Trust from exceeding .50% of average net assets. "Management Fees" for each such
Trust do not reflect estimated fee waivers by NASL Financial pursuant to such
agreement. If such waivers were reflected "Management Fees" would be 0.440%,
0.400% and 0.400% for the Quantitative Equity Trust, Real Estate Securities
Trust and the Capital Growth Bond Trust, respectively.
*** Minimum Fees are determined assuming the following allocation for the
Underlying Portfolios: Lifestyle Aggressive 1000 Trust, 100% Quantitative Equity
Trust; Lifestyle Growth 820 Trust, 80% Quantitative Equity Trust, 20% Money
Market Trust; Lifestyle Balanced 640 Trust, 60% Quantitative Equity Trust, 40%
Money Market Trust; Lifestyle Moderate 460 Trust, 40% Quantitative Equity Trust,
60% Money Market Trust; Lifestyle Conservative 280 Trust, 20% Quantitative
Equity Trust, 80% Money Market Trust.
**** Maximum Fees are determined assuming the following allocation for the
Underlying Portfolios: Lifestyle Aggressive 1000 Trust, 100% Pilgrim Baxter
Growth Trust; Lifestyle Growth 820 Trust, 80% Pilgrim Baxter Growth Trust, 20%
High Yield Trust; Lifestyle Balanced 640 Trust, 60% Pilgrim Baxter Growth
Trust, 40% High Yield Trust; Lifestyle Moderate 460 Trust, 40% Pilgrim Baxter
Growth Trust, 60% High Yield Trust; Lifestyle Conservative 280 Trust, 20%
Pilgrim Baxter Growth Trust, 80% High Yield Trust.
#Each Lifestyle Trust will invest in shares of the Underlying Portfolios.
Therefore, each Lifestyle Trust will, in addition to its own expenses, such as
certain Other Expenses, bear its pro rata share of the fees and expenses
incurred by the Underlying Portfolios and the investment return of each
Lifestyle Trust will be net of the Underlying Portfolio expenses. NASL Financial
has voluntarily agreed to pay the expenses of each Lifestyle Trust (excluding
the expenses of the Underlying Portfolios). This expense
10
<PAGE> 15
<TABLE>
reimbursement may be terminated at any time after December 31, 1997. If such
expense reimbursement was not in effect, Total Trust Annual Expenses would be
.04% higher (based on estimates of the expenses of the Lifestyle Trusts for the
current fiscal year) as noted in the chart below:
<CAPTION>
Minimum Total Trust Maximum Total Trust
Annual Expenses*** Annual Expenses****
<S> <C> <C>
Lifestyle Aggressive 1000 Trust 0.800% 1.390%
Lifestyle Growth 820 Trust 0.760% 1.300%
Lifestyle Balanced 640 Trust 0.720% 1.220%
Lifestyle Moderate 460 Trust 0.670% 1.130%
Lifestyle Conservative 280 Trust 0.630% 1.050%
</TABLE>
EXAMPLE
<TABLE>
A contract owner would pay the following expenses on a $1,000 investment,
assuming a 3% payment enhancement and a 5% annual return on assets, if the
contract owner surrendered the contract at the end of the applicable time
period:
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS* 10 YEARS*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $110 $169 $211 $320
Science & Technology................ $110 $170
International Small Cap............. $111 $173 $218 $334
Emerging Growth..................... $110 $169
Pilgrim Baxter Growth............... $112 $174
Small/Mid Cap....................... $109 $167 $209 $315
International Stock................. $111 $172
Worldwide Growth.................... $111 $173
Global Equity....................... $109 $165 $204 $306
Growth.............................. $109 $165 $204 $306
Equity.............................. $107 $158 $193 $285
Quantitative Equity................. $106 $157 $191 $281
Blue Chip Growth.................... $108 $163 $202 $303
Real Estate Securities.............. $107 $158 $193 $285
Value............................... $107 $160
International Growth and Income..... $110 $168 $209 $316
Growth and Income................... $107 $158 $193 $285
Equity-Income....................... $107 $160 $196 $290
Balanced............................ $108 $163
Aggressive Asset Allocation......... $108 $161 $199 $295
High Yield.......................... $108 $162
Moderate Asset Allocation........... $107 $159 $195 $289
Conservative Asset Allocation....... $107 $160 $197 $292
Strategic Bond...................... $107 $160 $197 $291
Global Government Bond.............. $108 $161 $199 $295
Capital Growth Bond................. $106 $156 $191 $280
Investment Quality Bond............. $106 $156 $190 $278
U.S. Government Securities.......... $106 $155 $189 $276
Money Market........................ $104 $150 $180 $259
Lifestyle Aggressive 1000**......... $109 $166
Lifestyle Growth 820**.............. $108 $164
Lifestyle Balanced 640**............ $108 $162
Lifestyle Moderate 460**............ $107 $160
</TABLE>
11
<PAGE> 16
<TABLE>
<S> <C> <C>
Lifestyle Conservative 280**........ $107 $158
</TABLE>
* The example of expenses for certain Trusts contains only one year and three
year examples since they are newly formed Trusts.
**The Example of Expenses for the Lifestyle Trust is calculated using the
midpoint of the minimum and maximum fees set forth under Trust Annual Operating
Expenses.
<TABLE>
A contract owner would pay the following expenses on a $1,000 investment,
assuming a 3% payment enhancement and a 5% annual return on assets, if the
contract owner annuitized as provided in the contract or did not surrender the
contract at the end of the applicable time period:
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS* 10 YEARS*
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $29 $89 $151 $320
Science & Technology................ $29 $90
International Small Cap............. $30 $93 $158 $334
Emerging Growth..................... $29 $89
Pilgrim Baxter Growth............... $31 $95
Small/Mid Cap....................... $28 $87 $149 $315
International Stock................. $30 $92
Worldwide Growth.................... $30 $93
Global Equity....................... $28 $85 $144 $306
Growth.............................. $28 $85 $144 $306
Equity.............................. $25 $78 $133 $285
Quantitative Equity................. $25 $77 $131 $281
Blue Chip Growth.................... $27 $83 $142 $303
Real Estate Securities.............. $25 $78 $133 $285
Value............................... $26 $80
International Growth and Income..... $29 $88 $149 $316
Growth and Income................... $25 $78 $133 $285
Equity-Income....................... $26 $80 $136 $290
Balanced............................ $27 $83
Aggressive Asset Allocation......... $26 $81 $139 $295
High Yield.......................... $27 $82
Moderate Asset Allocation........... $26 $79 $135 $289
Conservative Asset Allocation....... $26 $80 $137 $292
Strategic Bond...................... $26 $80 $137 $291
Global Government Bond.............. $26 $81 $139 $295
Capital Growth Bond................. $25 $76 $131 $280
Investment Quality Bond............. $25 $76 $130 $278
U.S. Government Securities.......... $24 $75 $129 $278
Money Market........................ $23 $70 $120 $259
Lifestyle Aggressive 1000**......... $28 $86
Lifestyle Growth 820**.............. $27 $84
Lifestyle Balanced 640**............ $27 $82
Lifestyle Moderate 460**............ $26 $80
Lifestyle Conservative 280**........ $25 $78
</TABLE>
* The example of expenses for certain Trusts contains only one year and three
year examples since they are newly formed Trusts.
**The Example of Expenses for the Lifestyle Trust is calculated using the
midpoint of the minimum and maximum fees set forth under Trust Annual Operating
Expenses.
12
<PAGE> 17
For purposes of presenting the foregoing Example, the Company has made
certain assumptions mandated by the Commission. The Company has assumed that,
where applicable, the maximum sales load is deducted, that there are no
transfers or other transactions and that the "Other Expenses" line item under
"Trust Annual Expenses" will remain the same. Such assumptions, which are
mandated by the Commission in an attempt to provide prospective investors with
standardized data with which to compare various annuity contracts, do not take
into account certain features of the contract and prospective changes in the
size of the Trust which may operate to change the expenses borne by contract
owners. Consequently, the amounts listed in the Example above should not be
considered a representation of past or future expenses and actual expenses borne
by contract owners may be greater or lesser than those shown.
In addition, for purposes of calculating the values in the above Example,
the Company has translated the $40 annual administration charge listed under
"Annual Contract Fee" to a 0.08% annual asset charge based on a $50,000
estimated approximate average size of contracts of this series. So translated,
such charge would be higher for smaller contracts and lower for larger
contracts.
* * * * * * * *
The above summary is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus and Statement of Additional Information
and the accompanying Prospectus and Statement of Additional Information for the
Trust, to which reference should be made.
GENERAL INFORMATION ABOUT NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY,
NASL VARIABLE ACCOUNT AND NASL SERIES TRUST
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
North American Security Life Insurance Company ("the Company") is a stock
life insurance company organized under the laws of Delaware in 1979. The
Company's principal office is located at 116 Huntington Avenue, Boston,
Massachusetts 02116. The ultimate parent of the Company is The Manufacturers
Life Insurance Company ("Manulife"), a Canadian mutual life insurance company
based in Toronto, Canada. Prior to January 1, 1996, the Company 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.
NASL VARIABLE ACCOUNT
The Company established the Variable Account on August 24, 1984 as a
separate account under Delaware law. The income, gains and losses, whether or
not realized, from assets of the Variable Account are, in accordance with the
contracts, credited to or charged against the Variable Account without regard to
other income, gains or losses of the Company. Nevertheless, all obligations
arising under the contracts are general corporate obligations of the Company.
Assets of the Variable Account may not be charged with liabilities arising out
of any other business of the Company.
The Variable Account is registered with the Commission 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.
Registration under the 1940 Act does not involve supervision by the Commission
of the management or investment policies or practices of the Variable Account.
If deemed by the Company to be in the best interests of persons having voting
rights under the contracts, the Variable Account may be operated as a management
company under the 1940 Act or it may be deregistered under such Act in the event
such registration is no longer required.
There are currently thirty-four sub-accounts within the Variable Account.
The Company reserves the right, subject to compliance with applicable law, to
add other sub-accounts, eliminate existing sub-accounts, combine sub-accounts or
transfer assets
13
<PAGE> 18
in one sub-account to another sub-account established by the Company or an
affiliated company. The Company will not eliminate existing sub-accounts or
combine sub-accounts without the prior approval of the appropriate state or
federal regulatory authorities.
NASL SERIES TRUST
The assets of each sub-account of the Variable Account are invested in
shares of a corresponding portfolio of the Trust. A description of each
portfolio is set forth below. The Trust is registered under the 1940 Act as an
open-end management investment company. Each of the portfolios is diversified
for purposes of the 1940 Act, except for the Global Government Bond Trust,
Emerging Growth Trust and the five Lifestyle Trusts which are non-diversified.
The Trust receives investment advisory services from NASL Financial Services,
Inc.
<TABLE>
The Trust currently has fourteen subadvisers who manage all of the
portfolios:
<CAPTION>
SUBADVISER SUBADVISER TO
---------- -------------
<S> <C>
Fred Alger Management, Inc. Small/Mid Cap Trust
Founders Asset Management, Inc. Growth Trust
Worldwide Growth Trust
Balanced Trust
International Small Cap Trust
Oechsle International Advisors, L.P. Global Government Bond Trust
Fidelity Management Trust Company Equity Trust
Conservative Asset Allocation Trust
Moderate Asset Allocation Trust
Aggressive Asset Allocation Trust
Wellington Management Company, LLP Growth and Income Trust
Investment Quality Bond Trust
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
J.P. Morgan Investment Management Inc. International Growth and Income Trust
T. Rowe Price Associates, Inc. Science & Technology Trust
Blue Chip Growth Trust
Equity-Income Trust
Rowe Price-Fleming International, Inc. International Stock Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Warburg, Pincus Counsellors, Inc. Emerging Growth Trust
Pilgrim Baxter & Associates, Ltd. Pilgrim Baxter Growth Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Capital Growth Bond Trust
Money Market Trust
Lifestyle Trusts
</TABLE>
14
<PAGE> 19
The following is a brief description of each portfolio:
The PACIFIC RIM EMERGING MARKETS TRUST seeks long-term growth of capital by
investing in a diversified portfolio that is comprised primarily of common
stocks and equity-related securities of corporations domiciled in countries in
the Pacific Rim region.
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital. Current
income is incidental to the portfolio's objective.
The INTERNATIONAL SMALL CAP TRUST seeks capital appreciation by investing
primarily in securities issued by foreign companies which have total market
capitalization or annual revenues of $1 billion or less. These securities may
represent companies in both established and emerging economies throughout the
world.
The EMERGING GROWTH TRUST seeks maximum capital appreciation 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.
The PILGRIM BAXTER GROWTH TRUST seeks capital appreciation by investing in
companies believed by the subadviser to have an outlook for strong earnings
growth and the potential for significant capital appreciation.
The SMALL/MID CAP TRUST seeks long-term capital appreciation by investing
at least 65% of its total assets (except during temporary defensive periods) in
small/mid cap equity securities. As used herein small/mid cap equity securities
are equity securities of companies that, at the time of purchase, have total
market capitalization between $500 million and $5 billion.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by
investing primarily in common stocks of established, non-U.S. companies.
The WORLDWIDE GROWTH TRUST seeks long-term growth of capital by normally
investing at least 65% of its total assets in equity securities of growth
companies in a variety of markets throughout the world.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by investing
primarily in equity securities throughout the world, including U.S. issuers and
emerging markets.
The GROWTH TRUST seeks long-term growth of capital by investing at least
65% of the portfolio's total assets in the common stocks of well-established,
high-quality growth companies that the subadviser believes have the potential to
increase earnings faster than the rest of the market.
The EQUITY TRUST seeks growth of capital by investing primarily in common
stocks of United States issuers and securities convertible into or carrying the
right to buy common stocks.
The QUANTITATIVE EQUITY TRUST seeks 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.
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of capital
(current income is a secondary objective) and many of the stocks in the
portfolio are expected to pay dividends.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of
long-term capital appreciation and satisfactory current income by investing in
real estate related equity and debt securities.
15
<PAGE> 20
The VALUE TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk, 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.
The INTERNATIONAL GROWTH AND INCOME TRUST seeks long-term growth of capital
and income by investing, under normal circumstances, at least 65% of its total
assets in equity securities of foreign issuers. The portfolio may also invest in
debt securities of corporate or sovereign issuers rated A or higher by Moody's
or S&P or, if unrated, of equivalent credit quality as determined by the
subadviser. Under normal circumstances, the portfolio will be invested
approximately 85% in equity securities and 15% in fixed income securities.
The GROWTH AND INCOME TRUST seeks long-term growth of capital and income,
consistent with prudent investment risk, by investing primarily in a diversified
portfolio of common stocks of United States issuers which the subadviser
believes are of high quality.
The EQUITY-INCOME TRUST seeks to provide substantial dividend income and
also long-term capital appreciation by investing primarily in dividend-paying
common stocks, particularly of established companies with favorable prospects
for both increasing dividends and capital appreciation.
The BALANCED TRUST seeks current income and capital appreciation by
investing in a balanced portfolio of common stocks, U.S. and foreign government
obligations and a variety of corporate fixed-income securities.
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, by
investing primarily in high yield debt securities, including corporate bonds and
other fixed-income securities.
The AUTOMATIC ASSET ALLOCATION TRUSTS seek the highest potential total
return consistent with a specified level of risk tolerance -- conservative,
moderate or aggressive -- by investing primarily in the kinds of securities in
which the Equity, Investment Quality Bond, U.S. Government Securities and Money
Market Trusts may invest.
* The AGGRESSIVE ASSET ALLOCATION TRUST seeks the highest total return
consistent with an aggressive level of risk tolerance. This Trust attempts to
limit the decline in portfolio value in very adverse market conditions to 15%
over any three year period.
* The MODERATE ASSET ALLOCATION TRUST seeks the highest total return
consistent with a moderate level of risk tolerance. This Trust attempts to limit
the decline in portfolio value in very adverse market conditions to 10% over any
three year period.
* The CONSERVATIVE ASSET ALLOCATION TRUST seeks the highest total return
consistent with a conservative level of risk tolerance. This Trust attempts to
limit the decline in portfolio value in very adverse market conditions to 5%
over any three year period.
The STRATEGIC BOND TRUST seeks a high level of total return consistent with
preservation of capital by giving its subadviser broad discretion to deploy the
portfolio's assets among certain segments of the fixed-income market as the
subadviser believes will best contribute to achievement of the portfolio's
investment objective.
The GLOBAL GOVERNMENT BOND TRUST seeks a high level of total return by
placing primary emphasis on high current income and the preservation of capital
by investing primarily in a global portfolio of high-quality, fixed-income
securities of foreign and United States governmental entities and supranational
issuers.
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. The Capital Growth Bond Trust differs from most "bond" funds in
that its primary objective is capital appreciation, not income.
16
<PAGE> 21
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by investing
primarily in a diversified portfolio of investment grade corporate bonds and
U.S. Government bonds with intermediate to longer term maturities. The portfolio
may also invest up to 20% of its assets in non-investment grade fixed income
securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income
consistent with preservation of capital and maintenance of liquidity, by
investing 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.
The MONEY MARKET TRUST seeks maximum current income consistent with
preservation of principal and liquidity by investing in high quality money
market instruments with maturities of 397 days or less issued primarily by
United States entities.
The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long-term growth of
capital (current income is not a consideration) by investing 100% of the
Lifestyle Trust's assets in other portfolios of the Trust ("Underlying
Portfolios") which invest primarily in equity securities.
The LIFESTYLE GROWTH 820 TRUST seeks to provide long-term growth of capital
with consideration also given to current income 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.
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 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.
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 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.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of
current income with some consideration also given to growth of capital by
investing approximately 80% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in fixed income securities and approximately
20% of its assets in Underlying Portfolios which invest primarily in equity
securities.
In pursuing the Strategic Bond, High Yield and Investment Quality Bond
Trusts' investment objective, each portfolio expects to invest a portion of its
assets in high yield securities, commonly known as "junk bonds" which also
present a high degree of risk. The risks of these securities include price
volatility and risk of default in the payment of interest and principle. See
"Risk Factors Relating to High Yield Securities" contained in the NASL Series
Trust prospectus before investing in either Trust.
In pursuing the Pacific Rim Emerging Markets, International Stock,
Worldwide Growth, International Small Cap, Global Equity, Strategic Bond,
International Growth and Income, High Yield and Global Government Bond Trusts'
investment objective, each portfolio may invest up to 100% of its assets in
foreign securities which may present additional risks. See "Foreign Securities"
in the NASL Series Trust prospectus before investing in any of these Trusts.
If the shares of a Trust portfolio are no longer available for investment
or in the Company's judgment investment in a Trust portfolio becomes
inappropriate in view of the purposes of the Variable Account, the Company may
eliminate the shares of a portfolio and substitute shares of another portfolio
of the Trust or another open-end registered investment company. Substitution may
be made with respect to both existing investments and the investment of future
purchase payments. However, no such substitution will be made without notice to
the contract owner and prior approval of the Commission to the extent required
by the 1940 Act.
17
<PAGE> 22
The Company will vote shares of the Trust portfolios held in the Variable
Account at meetings of shareholders of the Trust in accordance with voting
instructions received from the persons having the voting interest under the
contracts. The number of portfolio shares for which voting instructions may be
given will be determined by the Company in the manner described below, not more
than 90 days prior to the meeting of the Trust. Trust proxy material will be
distributed to each person having the voting interest under the contract
together with appropriate forms for giving voting instructions. Portfolio shares
held in the Variable Account that are attributable to contract owners and as to
which no timely instructions are received and portfolio shares held in the
Variable Account that are beneficially owned by the Company will be voted by the
Company in proportion to the instructions received.
Prior to the maturity date, the person having the voting interest under a
contract is the contract owner and the number of votes as to each portfolio for
which voting instructions may be given is determined by dividing the value of
the investment account corresponding to the sub-account in which such portfolio
shares are held by the net asset value per share of that portfolio. After the
maturity date, the person having the voting interest under a contract is the
annuitant and the number of votes as to each portfolio for which voting
instructions may be given is determined by dividing the reserve for the contract
allocated to the sub-account in which such portfolio shares are held by the net
asset value per share of that portfolio. Generally, the number of votes tends to
decrease as annuity payments progress since the amount of reserves attributable
to a contract will usually decrease after commencement of annuity payments. The
Company reserves the right to make any changes in the voting rights described
above that may be permitted by the federal securities laws or regulations or
interpretations of these laws or regulations.
A full description of the Trust, including the investment objectives,
policies and restrictions of each of the portfolios is contained in the
Prospectus for the Trust which accompanies this Prospectus and should be read by
a prospective purchaser before investing.
DESCRIPTION OF THE CONTRACT
ACCUMULATION PROVISIONS
PURCHASE PAYMENTS
Purchase payments are paid to the Company at its Annuity Service Office.
The minimum initial purchase payment is $10,000. Minimum subsequent purchase
payments must be at least $30. Purchase payments may be made at any time. The
Company may provide for purchase payments to be automatically withdrawn from a
contract owner's bank account on a periodic basis. If a purchase payment would
cause the contract value to exceed $1,000,000 or the contract value already
exceeds $1,000,000, additional purchase payments will be accepted only with the
prior approval of the Company.
The Company may, at its option, cancel a contract at the end of any two
consecutive contract years in which no purchase payments have been made, if both
(i) the total purchase payments made over the life of the contract, less any
withdrawals, are less than $2,000; and (ii) the contract value at the end of
such two year period is less than $2,000. The cancellation of contract
privileges may vary in certain states in order to comply with the requirements
of insurance laws and regulations in such state. Upon cancellation the Company
will pay the contract owner the contract value computed as of the valuation
period during which the cancellation occurs less any debt and less the annual
$40 administration fee. The amount paid will be treated as a withdrawal for
Federal tax purposes and thus may be subject to income tax and to a 10% penalty
tax. (See "FEDERAL TAX MATTERS")
Purchase payments are allocated among the investment options in accordance
with the percentages designated by the contract owner. The contract owner may
change the allocation of subsequent purchase payments at any time upon written
notice to the Company or by telephone in accordance with the Company's telephone
transfer procedures.
PAYMENT ENHANCEMENTS
At the time a purchase payment is paid to the Company by a contract owner,
the Company will add a payment enhancement to the owner's contract. The payment
enhancement is funded from the Company's general account. The payment
enhancement is allocated among investment options in the same proportion as the
applicable purchase payment.
18
<PAGE> 23
The amount available as a death benefit is reduced by payment enhancements
applied in the prior 12 month period (See "DEATH BENEFIT BEFORE MATURITY DATE").
The amount returned if the contract owner exercises his or her right to return
the contract during the "ten day right to review" period is reduced by any
payment enhancements applied. (See "TEN DAY RIGHT TO REVIEW").
<TABLE>
The payment enhancement depends on the cumulative amount of purchase
payments. The payment enhancements, as a percentage of purchase payments are set
out below:
<CAPTION>
CUMULATIVE PURCHASE PAYMENTS PAYMENT ENHANCEMENT
<S> <C>
Less than $500,000 3.0%
$500,000 or more but less than $2,500,000 4.0%
$2,500,000 or more 5.0%
</TABLE>
Payment enhancements are payable only as a percentage of each specific purchase
payment. An example of the calculation of the payment enhancement is set forth
in Appendix D.
Payment enhancements are not considered to be "investment in the contract" for
income tax purposes. (See "FEDERAL TAX MATTERS").
Letter of Intent. The next higher payment enhancement percentage may be applied
to the initial purchase payment. To receive the higher percentage, the contract
owner must provide the Company with evidence satisfactory to the Company that
the contract owner will submit total purchase payments within 13 months of the
issue date of the contract sufficient to achieve one of the breakpoints shown
above under "Cumulative Purchase Payments" (referred to as a "Letter of
Intent"). Satisfactory evidence will require, but is not limited to, a minium
initial purchase payment of at least 50% of the breakpoint at which the Payment
Enhancement is to be determined. The Company reserves the right to recover an
amount from the contract if total purchase payments received within 13 months
from the issue date of the contract do not equal or exceed the amount of the
breakpoint used to determine the payment enhancement. The amount the Company may
recover is the greater of (a) or (b) where:
(a) is the amount of Payment Enhancement applied to the contract less the amount
of Payment Enhancement that would have been applied to the contract had the
contract owner not submitted a Letter of Intent (the "Excess Payment
Enhancement"), and
(b) the contract value multiplied by the ratio of the excess payment enhancement
over total purchase payments applied to the contract.
Amounts recovered will be withdrawn from each investment option in the same
proportion that the value of the investment account of each investment option
bears to the contract value. If the amount recovered exceeds the contract value,
the Company will terminate the contract without value.
IF THE CONTRACT OWNER FAILS TO INFORM THE COMPANY THAT HE OR SHE INTENDS TO
SUBMIT MULTIPLE PAYMENTS WITHIN 13 MONTHS OF THE CONTRACT ISSUE DATE, THE
CONTRACT MAY RECEIVE A LOWER PAYMENT ENHANCEMENT PERCENTAGE THAN WOULD OTHERWISE
BE AVAILABLE FOR THE CONTRACT.
ACCUMULATION UNITS
The Company will establish an investment account for the contract owner for
each investment option to which such contract owner allocates purchase payments.
Purchase payments (and any payment enhancement included therewith) are credited
to such investment accounts in the form of accumulation units. The number of
accumulation units to be credited to each investment
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account is determined by dividing the net purchase payment allocated to that
investment account by the value of an accumulation unit for that investment
account for the valuation period during which the purchase payment is received
at the Company's Annuity Service Office complete with all necessary information
or, in the case of the first purchase payment, pursuant to the procedures
described below.
Initial purchase payments received by mail will usually be credited in the
valuation period during which received at the Annuity Service Office, and in any
event not later than two business days after receipt of all information
necessary for processing issuance of the contract. The applicant will be
informed of any deficiencies preventing processing if the contract cannot be
issued and the purchase payment credited within two business days after receipt.
If the deficiencies are not remedied within five business days, the purchase
payment will be returned promptly to the applicant, unless the applicant
specifically consents to the Company's retaining the purchase payment until all
necessary information is received. Initial purchase payments received by wire
transfer from broker-dealers will be credited in the valuation period during
which received where such broker-dealers have made special arrangements with the
Company.
VALUE OF ACCUMULATION UNITS
The value of accumulation units will vary from one valuation period to the
next depending upon the investment results of the particular sub-accounts to
which purchase payments are allocated. The value of an accumulation unit for
each sub-account was arbitrarily set at $10 or $12.50 for the first valuation
period under other contracts issued by the Company. The value of an accumulation
unit for any subsequent valuation period is determined by multiplying the value
of an accumulation unit for the immediately preceding valuation period by the
net investment factor for such sub-account (described below) for the valuation
period for which the value is being determined.
NET INVESTMENT FACTOR
The net investment factor is an index used to measure the investment
performance of a sub-account from one valuation period to the next. The net
investment factor for each sub-account for any valuation period is determined by
dividing (a) by (b) and subtracting (c) from the result:
Where (a) is:
(1) the net asset value per share of a portfolio share held in the
sub-account determined at the end of the current valuation period, plus
(2) the per share amount of any dividend or capital gain distributions
made by the portfolio on shares held in the sub-account if the
"ex-dividend" date occurs during the current valuation period.
Where (b) is:
the net asset value per share of a portfolio share held in the
sub-account determined as of the end of the immediately preceding valuation
period.
Where (c) is:
a factor representing the charges deducted from the sub-account on a
daily basis for administrative expenses, and mortality and expense risks.
Such factor is equal on an annual basis to 1.55% (0.30% for administrative
expenses and 1.25% for mortality and expense risks).
The net investment factor may be greater or less than or equal to one;
therefore, the value of an accumulation unit may increase, decrease or
remain the same.
TRANSFERS AMONG INVESTMENT OPTIONS
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Before the maturity date the contract owner may transfer amounts among the
investment options at any time and without charge upon written notice to the
Company or by telephone if the contract owner authorizes the Company in writing
to accept telephone transfer requests. Accumulation units will be canceled from
the investment account from which amounts are transferred and credited to the
investment account to which amounts are transferred. The Company will effect
such transfers so that the contract value on the date of the transfer will not
be affected by the transfer. The contract owner must transfer at least $300 or,
if less, the entire value of the investment account. If after the transfer the
amount remaining in the investment account is less than $100, then the Company
will transfer the entire amount instead of the requested amount. The Company
reserves the right to limit, upon notice, the maximum number of transfers a
contract owner may make to one per month or six at any time within a contract
year. In addition, the Company reserves the right to defer the transfer
privilege at any time that the Company is unable to purchase or redeem shares of
the Trust portfolios. The Company also reserves the right to modify or terminate
the transfer privilege at any time in accordance with applicable law.
MAXIMUM NUMBER OF INVESTMENT OPTIONS
Due to current administrative capabilities, a contract owner is limited to
a maximum of seventeen investment options (including the one year fixed account
investment option) during the period prior to the maturity date of the contract
(the "Contract Period"). In calculating this limit for each contract owner,
investment options to which the contract owner has allocated purchase payments
at any time during the Contract Period will be counted toward the seventeen
maximum even if the contract owner no longer has contract value allocated to the
investment option.
TELEPHONE TRANSACTIONS
Contract owners are permitted to request transfers/redemptions by
telephone. The Company will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine. To be
permitted to request a transfer/redemption by telephone, a contract owner must
elect the option on the Application. (If a contract owner does not initially
elect an option in the Application form, he or she may request authorization by
executing an appropriate authorization form provided by the Company upon
request.) The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and may only be liable for
any losses due to unauthorized or fraudulent instructions where it fails to
employ its procedures properly. Such procedures include the following. Upon
telephoning a request, contract owners will be asked to provide their account
number, and if not available, their social security number. For the contract
owner's and Company's protection, all conversations with contract owners will be
tape recorded. All telephone transactions will be followed by a confirmation
statement of the transaction.
SPECIAL TRANSFER SERVICES - DOLLAR COST AVERAGING
The Company administers a Dollar Cost Averaging ("DCA") program which
enables a contract owner to pre-authorize a periodic exercise of the contractual
transfer rights described above. Contract owners entering into a DCA agreement
instruct the Company to transfer monthly a predetermined dollar amount from any
sub-account or the one year fixed account investment option to other
sub-accounts until the amount in the sub-account from which the transfer is made
or the one year fixed account investment option is exhausted. The DCA program is
generally suitable for contract owners making a substantial deposit to the
contract and who desire to control the risk of investing at the top of a market
cycle. The DCA program allows such investments to be made in equal installments
over time in an effort to reduce such risk. Contract owners interested in the
DCA program may elect to participate in the program on the contract application
or by separate application. Contract owners may obtain a separate application
and full information concerning the program and its restrictions from their
securities dealer or the Annuity Service Office.
ASSET REBALANCING PROGRAM
The Company administers an Asset Rebalancing Program which enables a
contract owner to indicate to the Company the percentage levels he or she would
like to maintain in particular portfolios. The contract owner's contract value
will be automatically rebalanced pursuant to the schedule described below to
maintain the indicated percentages by transfers among the portfolios. The entire
contract value must be included in the Asset Rebalancing Program. Other
investment programs, such as the DCA program, or other transfers or withdrawals
may not work in concert with the Asset Rebalancing Program. Therefore, contract
owners should
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monitor their use of these other programs and any other transfers or withdrawals
while the Asset Rebalancing Program is being used. Contract owners interested in
the Asset Rebalancing Program may obtain a separate application and full
information concerning the program and its restrictions from their securities
dealer or the Annuity Service Office.
Asset rebalancing will only be permitted on the following time schedules:
(i) quarterly on the 25th day of the last month of the quarter (or the
next business day if the 25th is not a business day);
(ii) semi-annually on June 25th or December 26th (or the next business day
if these dates are not business days); or
(iii) annually on December 26th (or the next business day if December 26th
is not a business day).
WITHDRAWALS
Prior to the earlier of the maturity date or the death of the contract
owner, the owner may withdraw all or a portion of the contract value upon
written request, complete with all necessary information to the Company's
Annuity Service Office. For certain qualified contracts, exercise of the
withdrawal right may require the consent of the qualified plan participant's
spouse under the Internal Revenue Code and regulations promulgated by the
Treasury Department. In the case of a total withdrawal, the Company will pay the
contract value as of the date of receipt of the request at its Annuity Service
Office, less the annual $40 administration fee if applicable, any debt and any
applicable withdrawal charge, and the contract will be canceled. In the case of
a partial withdrawal, the Company will pay the amount requested and cancel that
number of accumulation units credited to each investment account necessary to
equal the amount withdrawn from each investment account plus any applicable
withdrawal charge deducted from such investment account. (See "CHARGES AND
DEDUCTIONS")
When making a partial withdrawal, the contract owner should specify the
investment options from which the withdrawal is to be made. The amount requested
from an investment option may not exceed the value of that investment option
less any applicable withdrawal charge. If the contract owner does not specify
the investment options from which a partial withdrawal is to be taken, the
withdrawal will be taken pro rata from the investment options: taking from each
investment option an amount which bears the same relationship to the total
amount withdrawn as the value of such investment option bears to the total
investment account values.
There is no limit on the frequency of partial withdrawals; however, the
amount withdrawn must be at least $300 or, if less, the entire balance in the
investment option. If after the withdrawal (and deduction of any withdrawal
charge) the amount remaining in the investment option is less than $100, the
Company will treat the partial withdrawal as a withdrawal of the entire amount
held in the investment option. If a partial withdrawal plus any applicable
withdrawal charge would reduce the contract value to less than $300, the Company
will treat the partial withdrawal as a total withdrawal of the contract value.
The amount of any withdrawal will be paid promptly, and in any event within
seven days of receipt of the request, complete with all necessary information at
the Company's Annuity Service Office, except that the Company reserves the right
to defer the right of withdrawal or postpone payments for any period when: (1)
the New York Stock Exchange is closed (other than customary weekend and holiday
closings), (2) trading on the New York Stock Exchange is restricted, (3) an
emergency exists as a result of which disposal of securities held in the
Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Variable Account's net assets, or (4)
the Commission, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions described in (2) and (3) exist.
Withdrawals from the contract may be subject to income tax and a 10%
penalty tax. Withdrawals are permitted from contracts issued in connection with
Section 403(b) qualified plans only under limited circumstances. (See "FEDERAL
TAX MATTERS")
TELEPHONE REDEMPTIONS
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The contract owner may request the option to withdraw a portion of the
contract value by telephone by completing the application described under
"Telephone Transactions" above. The Company reserves the right to impose maximum
withdrawal amounts and procedural requirements regarding this privilege. For
additional information on Telephone Redemptions see "Telephone Transactions"
above.
SPECIAL WITHDRAWAL SERVICES - THE INCOME PLAN
The Company administers an Income Plan ("IP") which enables a contract
owner to pre-authorize a periodic exercise of the contractual withdrawal rights
described above. Contract owners entering into an IP agreement instruct the
Company to withdraw a level dollar amount from specified investment options on a
periodic basis. The total of IP withdrawals in a contract year is limited to not
more than 10% of the purchase payments made to ensure that no withdrawal charge
will ever apply to an IP withdrawal. If an additional withdrawal is made from a
contract participating in an IP, the IP will terminate automatically and may be
reinstated only on or after the next contract anniversary pursuant to a new
application. The IP is not available to contracts participating in the dollar
cost averaging program or for which purchase payments are being automatically
deducted from a bank account on a periodic basis. IP withdrawals will be free of
withdrawal charges. IP withdrawals may, however, be subject to income tax and a
10% penalty tax. (See "FEDERAL TAX MATTERS") Contract owners interested in an IP
may obtain a separate application and full information concerning the program
and its restrictions from their securities dealer or the Annuity Service Office.
LOANS
The Company offers a loan privilege only to owners of contracts issued in
connection with Section 403(b) qualified plans that are not subject to Title I
of ERISA. Owners of such contracts may obtain loans using the contract as the
only security for the loan. Loans are subject to provisions of the Code and to
applicable retirement program rules (collectively, "loan rules"). Tax advisers
and retirement plan fiduciaries should be consulted prior to exercising loan
privileges.
Under the terms of the contract, the maximum loan value is equal to 80% of
the contract value, although loan rules may serve to reduce such maximum loan
value in some cases. The amount available for a loan at any given time is the
loan value less any outstanding debt. Debt equals the amount of any loans plus
accrued interest. Loans will be made only upon written request from the owner.
The Company will make loans within seven days of receiving a properly completed
loan application (applications are available from the Annuity Service Office),
subject to postponement under the same circumstances that payment of withdrawals
may be postponed. (See "WITHDRAWALS")
When an owner requests a loan, the Company will reduce the owner's
investment in the investment accounts and transfer the amount of the loan to the
loan account, a part of the Company's general account. The owner may designate
the investment accounts from which the loan is to be withdrawn. Absent such a
designation, the amount of the loan will be withdrawn from the investment
accounts in accordance with the rules for making partial withdrawals. (See
"WITHDRAWALS") The contract provides that owners may repay contract debt at any
time. Under applicable loan rules, loans generally must be repaid within five
years, repayments must be made at least quarterly and repayments must be made in
substantially equal amounts. When a loan is repaid, the amount of the repayment
will be transferred from the loan account to the investment accounts. The owner
may designate the investment accounts to which a repayment is to be allocated.
Otherwise, the repayment will be allocated in the same manner as the owner's
most recent purchase payment. On each contract anniversary, the Company will
transfer from the investment accounts to the loan account the amount by which
the debt on the contract exceeds the balance in the loan account.
The Company charges interest of 6% per year on contract loans. Loan
interest is payable in arrears and, unless paid in cash, the accrued loan
interest is added to the amount of the debt and bears interest at 6% as well.
The Company credits interest with respect to amounts held in the loan account at
a rate of 4% per year. Consequently, the net cost of loans under the contract is
2%. If on any date debt under a contract exceeds the contract value, the
contract will be in default. In such case the owner will receive a notice
indicating the payment needed to bring the contract out of default and will have
a thirty-one day grace period within which to pay the default amount. If the
required payment is not made within the grace period, the contract may be
foreclosed (terminated without value).
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The amount of any debt will be deducted from the death benefit otherwise
payable under the contract. (See "DEATH BENEFIT BEFORE MATURITY DATE") In
addition, debt, whether or not repaid, will have a permanent effect on the
contract value because the investment results of the investment accounts will
apply only to the unborrowed portion of the contract value. The longer debt is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the investment results are greater than the rate
being credited on amounts held in the loan account while the debt is
outstanding, the contract value will not increase as rapidly as it would have if
no debt were outstanding. If investment results are below that rate, the
contract value will be higher than it would have been had no debt been
outstanding.
DEATH BENEFIT BEFORE MATURITY DATE
In General. The following discussion applies principally to contracts that
are not issued in connection with qualified plans, i.e., a "non-qualified
contract." The requirements of the tax law applicable to qualified plans, and
the tax treatment of amounts held and distributed under such plans, are quite
complex. Accordingly, a prospective purchaser of the contract to be used in
connection with a qualified plan should seek competent legal and tax advice
regarding the suitability of the contract for the situation involved and the
requirements governing the distribution of benefits, including death benefits,
from a contract used in the plan. In particular, a prospective purchaser who
intends to use the contract in connection with a qualified plan should consider
that the contract provides a death benefit (described below) that could be
characterized as an incidental death benefit. There are limits on the amount of
incidental benefits that may be provided under certain qualified plans and the
provision of such benefits may result in currently taxable income to plan
participants. (See "FEDERAL TAX MATTERS")
Amount of Death Benefit. If any contract owner dies and the oldest owner
had an attained age of less than 81 years on the contract date, the death
benefit will be determined as follows: The death benefit during the first nine
contract years will be the greater of: (a) the contract value less any payments
enhancements applied in the 12 month period prior to the date of death, or (b)
the excess of (i) the sum of all purchase payments less any payment enhancements
applied in the 12 month period prior to the date of death over (ii) the sum of
any amounts deducted in connection with partial withdrawals. After the
ninth contract year, the death benefit will be the greater of : (a) the contract
value less any payment enhancements applied in the 12 month period prior to the
date of death or (b) the excess of (i) the sum of all purchase payments less any
payment enhancements applied in the 12 month period prior to the date of death
over (ii) the sum of any amounts deducted in connection with partial withdrawals
or (c) the death benefit on the last day of the ninth contract year, plus the
sum of all purchase payments made and any amount deducted in connection with
partial withdrawals since then and less any payment enhancements applied in the
12 month period prior to the date of death.
If any contract owner dies and the oldest owner had an attained age greater
than 80 on the contract date, the death benefit will be the contract value less
any applicable withdrawal charges.
The determination of the death benefit will be made on the date written
notice and proof of death, as well as all required claims forms, are received at
the Company's Annuity Service Office. No person is entitled to the death benefit
until this time. In addition, partial withdrawals include amounts applied under
an annuity option under the contract. Also, amounts deducted in connection with
partial withdrawals include charges imposed on a partial withdrawal, but not
amounts charged to the contract in payment of the annual administration fee. If
there is any debt under the contract, the death benefit equals the death
benefit, as described above, less such debt.
Payment of Death Benefit. The Company will pay the death benefit (which, as
defined above, is net of any debt) to the beneficiary if any contract owner dies
before the maturity date. If there is a surviving contract owner, that contract
owner will be deemed to be the beneficiary. No death benefit is payable on the
death of any annuitant, except that if any contract owner is not a natural
person, the death of any annuitant will be treated as the death of an owner. On
the death of the last surviving annuitant, the contract owner, if a natural
person, will become the annuitant unless the contract owner designates another
person as the annuitant.
The death benefit may be taken in the form of a lump sum immediately. If
not taken immediately, the contract will continue subject to the following: (1)
The beneficiary will become the contract owner. (2) Any excess of the death
benefit over the contract value will be allocated to the owner's investment
accounts in proportion to their relative values on the date of the Company's
receipt at its Annuity Service Office of due proof of the owner's death. (3) No
additional purchase payments
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may be made. (4) If the beneficiary is not the deceased owner's spouse,
distribution of the contract owner's entire interest in the contract must be
made within five years of the owner's death, or alternatively, distribution may
be made as an annuity, under one of the annuity options described below, which
begins within one year of the owner's death and is payable over the life of the
beneficiary or over a period not extending beyond the life expectancy of the
beneficiary. Upon the death of the beneficiary, the death benefit will equal the
contract value which must be distributed immediately in a single sum. (5) If the
owner's spouse is the beneficiary, the spouse continues the contract as the new
owner. In such a case, the distribution rules described in "(4)" applicable when
a contract owner dies will apply when the spouse, as the owner, dies. (6) If any
contract owner dies and the oldest owner had an attained age of less than 81 on
the contract date, withdrawal charges are not applied on payment of the death
benefit (whether taken through a partial or total withdrawal or applied under an
annuity option). If any contract owner dies and the oldest owner had an attained
age greater than 80 on the contract date, withdrawal charges will be assessed
only upon payment of the death benefit (if such charges are otherwise
applicable), so that if the death benefit is paid in a subsequent year, a lower
withdrawal charge will be applicable.
If any annuitant is changed and any contract owner is not a natural person,
the entire interest in the contract must be distributed to the contract owner
within five years.
A substitution or addition of any contract owner may result in resetting
the death benefit to an amount equal to the contract value as of the date of the
change and treating such value as a payment made on that date for purposes of
computing the amount of the death benefit. This treatment of contract value as a
payment is not included in cumulative purchase payments and is not eligible for
a payment enhancement. No such change in death benefit will be made if the
individual whose death will cause the death benefit to be paid is the same after
the change in ownership or if ownership is transferred to the owner's spouse.
Death benefits will be paid within seven days of the date the amount of the
death benefit is determined, as described above, subject to postponement under
the same circumstances that payment of withdrawals may be postponed. (See
"WITHDRAWALS")
ANNUITY PROVISIONS
GENERAL
The proceeds of the contract payable on death, withdrawal or the contract
maturity date may be applied to the annuity options described below, subject to
the distribution of death benefit provisions. (See "DEATH BENEFIT BEFORE
MATURITY DATE")
Generally, annuity benefits under the contract will begin on the maturity
date. The maturity date is the date specified on the contract specifications
page, unless changed. If no date is specified, the maturity date is the maximum
maturity date described below. The maximum maturity date is the first day of the
month following the later of the 85th birthday of the annuitant or the tenth
contract anniversary. See Appendix C for contracts issued in Pennsylvania. The
contract owner may specify a different maturity date at any time by written
request at least one month before both the previously specified and the new
maturity date. The new maturity date may not be later than the maximum maturity
date unless the Company consents. Maturity dates which occur at advanced ages,
e.g., past age 85, may in some circumstances have adverse income tax
consequences. (See "FEDERAL TAX MATTERS"). Distributions from qualified
contracts may be required before the maturity date.
The contract owner may select the frequency of annuity payments. However,
if the contract value at the maturity date is such that a monthly payment would
be less than $20, the Company may pay the contract value, less any debt, in one
lump sum to the annuitant on the maturity date.
ANNUITY OPTIONS
Annuity benefits are available under the contract on a fixed or variable
basis, or any combination of fixed and variable bases. Upon purchase of the
contract, and on or before the maturity date, the contract owner may select one
or more of the annuity options described below on a fixed and/or variable basis
(except Option 5 which is available on a fixed basis only) or choose an
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alternate form of settlement acceptable to the Company. If an annuity option is
not selected, the Company will provide as a default option variable annuity
payments in proportion to the Investment Account Value of each investment option
at the maturity date, such payments to be made for a period certain of 10 years
and continuing thereafter during the lifetime of the annuitant. Treasury
Department regulations may preclude the availability of certain annuity options
in connection with certain qualified contracts.
The following annuity options are guaranteed in the contract.
Option 1(a): Non-Refund Life Annuity - An annuity with payments during the
lifetime of the annuitant. No payments are due after the death of the
annuitant. Since there is no guarantee that any minimum number of payments
will be made, an annuitant may receive only one payment if the annuitant
dies prior to the date the second payment is due.
Option 1(b): Life Annuity with Payments Guaranteed for 10 Years - An
annuity with payments guaranteed for 10 years and continuing thereafter
during the lifetime of the annuitant. Since payments are guaranteed for 10
years, annuity payments will be made to the end of such period if the
annuitant dies prior to the end of the tenth year.
Option 2(a): Joint & Survivor Non-Refund Life Annuity - An annuity with
payments during the lifetimes of the annuitant and a designated
co-annuitant. No payments are due after the death of the last survivor of
the annuitant and co-annuitant. Since there is no guarantee that any
minimum number of payments will be made, an annuitant or co-annuitant may
receive only one payment if the annuitant and co-annuitant die prior to the
date the second payment is due.
Option 2(b): Joint & Survivor Life Annuity with Payments Guaranteed for 10
Years - An annuity with payments guaranteed for 10 years and continuing
thereafter during the lifetimes of the annuitant and a designated
co-annuitant. Since payments are guaranteed for 10 years, annuity payments
will be made to the end of such period if both the annuitant and the
co-annuitant die prior to the end of the tenth year.
In addition to the foregoing annuity options which the Company is
contractually obligated to offer at all times, the Company currently offers the
following annuity options. The Company may cease offering the following annuity
options at any time and may offer other annuity options in the future.
Option 3: Life annuity with Payments Guaranteed for 5, 15 or 20 Years - An
Annuity with payments guaranteed for 5, 15 or 20 years and continuing
thereafter during the lifetime of the annuitant. Since payments are
guaranteed for the specific number of years, annuity payments will be made
to the end of the last year of the 5, 15 or 20 year period.
Option 4: Joint & Two-Thirds Survivor Non-Refund Life Annuity - An annuity
with full payments during the joint lifetime of the annuitant and a
designated co-annuitant and two-thirds payments during the lifetime of the
survivor. Since there is no guarantee that any minimum number of payments
will be made, an annuitant or co-annuitant may receive only one payment if
the annuitant and co-annuitant die prior to the date the second payment is
due.
Option 5: Period Certain Only Annuity for 5, 10, 15 or 20 years - An
annuity with payments for a 5, 10, 15 or 20 year period and no payments
thereafter.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
The first variable annuity payment is determined by applying that portion
of the contract value used to purchase a variable annuity, measured as of a date
not more than ten business days prior to the maturity date (minus any applicable
premium taxes), to the annuity tables contained in the contract. (The amount of
the first and all subsequent fixed annuity payments is determined on the same
basis using the portion of the contract value used to purchase a fixed annuity.)
The rates contained in such tables depend upon the annuitant's sex and age (as
adjusted depending on the annuitant's year of birth) and the annuity option
selected. Under such tables, the longer the life expectancy of the annuitant
under any life annuity option or the duration of any period for which payments
are guaranteed under the option, the smaller will be the amount of the first
monthly variable annuity payment. The rates are based on the 1983 Table A
projected at Scale G, assume births in year 1942 and reflect an assumed interest
rate of 3% per year.
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ANNUITY UNITS AND THE DETERMINATION OF SUBSEQUENT VARIABLE ANNUITY PAYMENTS
Variable annuity payments subsequent to the first will be based on the
investment performance of the sub-accounts selected. The amount of such
subsequent payments is determined by dividing the amount of the first annuity
payment from each sub-account by the annuity unit value of such sub-account (as
of the same date the contract value to effect the annuity was determined) to
establish the number of annuity units which will thereafter be used to determine
payments. This number of annuity units for each sub-account is then multiplied
by the appropriate annuity unit value as of a uniformly applied date not more
than ten business days before the annuity payment is due, and the resulting
amounts for each sub-account are then totaled to arrive at the amount of the
payment to be made. The number of annuity units remains constant during the
annuity payment period.
The value of an annuity unit for each sub-account for any valuation period
is determined by multiplying the annuity unit value for the immediately
preceding valuation period by the net investment factor for that sub-account
(see "NET INVESTMENT FACTOR") for the valuation period for which the annuity
unit value is being calculated and by a factor to neutralize the assumed
interest rate.
A 3% assumed interest rate is built into the annuity tables in the contract
used to determine the first variable annuity payment. A higher assumption would
mean a larger first annuity payment, but more slowly rising subsequent payments
when actual investment performance exceeds the assumed rate, and more rapidly
falling subsequent payments when actual investment performance is less than the
assumed rate. A lower assumption would have the opposite effect. If the actual
net investment performance is 3% annually, annuity payments will be level.
TRANSFERS AFTER MATURITY DATE
Once variable annuity payments have begun, the contract owner may transfer
all or part of the investment upon which such payments are based from one
sub-account to another. Transfers will be made upon notice to the Company at
least 30 days before the due date of the first annuity payment to which the
change will apply. Transfers after the maturity date will be made by converting
the number of annuity units being transferred to the number of annuity units of
the sub-account to which the transfer is made, so that the next annuity payment
if it were made at that time would be the same amount that it would have been
without the transfer. Thereafter, annuity payments will reflect changes in the
value of the new annuity units. The Company reserves the right to limit, upon
notice, the maximum number of transfers a contract owner may make per contract
year to four. Once annuity payments have commenced, no transfers may be made
from a fixed annuity option to a variable annuity option or from a variable
annuity option to a fixed annuity option. In addition, the Company reserves the
right to defer the transfer privilege at any time that the Company is unable to
purchase or redeem shares of the Trust portfolios. The Company also reserves the
right to modify or terminate the transfer privilege at any time in accordance
with applicable law.
DEATH BENEFIT ON OR AFTER MATURITY DATE
If annuity payments have been selected based on an annuity option providing
for payments for a guaranteed period, and the annuitant dies on or after the
maturity date, the Company will make the remaining guaranteed payments to the
beneficiary. Any remaining payments will be made as rapidly as under the method
of distribution being used as of the date of the annuitant's death. If no
beneficiary is living, the Company will commute any unpaid guaranteed payments
to a single sum (on the basis of the interest rate used in determining the
payments) and pay that single sum to the estate of the last to die of the
annuitant and the beneficiary.
OTHER CONTRACT PROVISIONS
TEN DAY RIGHT TO REVIEW
The contract owner may cancel the contract by returning it to the Company's
Annuity Service Office or agent at any time within 10 days after receipt of the
contract. Within 7 days of receipt of the contract by the Company, the Company
will pay the contract value, less any debt and any payment enhancement, computed
at the end of the valuation period during which the contract is received by the
Company, to the contract owner.
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No withdrawal charge is imposed upon return of the contract within the ten
day right to review period. The ten day right to review may vary in certain
states in order to comply with the requirements of insurance laws and
regulations in such states. When the contract is issued as an individual
retirement annuity under Internal Revenue Code section 408, during the first 7
days of the 10 day period, the Company will return all purchase payments if this
is greater than the amount otherwise payable.
OWNERSHIP
The contract owner is the person entitled to exercise all rights under the
contract. Prior to the maturity date, the contract owner is the person
designated in the contract specifications page or as subsequently named. On and
after the maturity date, the annuitant is the contract owner. If amounts become
payable to any beneficiary under the contract, the beneficiary is the contract
owner.
In the case of non-qualified contracts, ownership of the contract may be
changed or the contract may be collaterally assigned at any time prior to the
maturity date, subject to the rights of any irrevocable beneficiary. Assigning a
contract, or changing the ownership of a contract, may be treated as a
distribution of the contract value for Federal tax purposes. (See "FEDERAL TAX
MATTERS") A change of any contract owner may result in resetting the death
benefit to an amount equal to the contract value as of the date of the change
and treating such value as a purchase payment made on that date for purposes of
computing the amount of the death benefit. This purchase payment will not be
included in cumulative purchase payments and is not eligible for a payment
enhancement. (See "DEATH BENEFIT BEFORE MATURITY DATE").
Any change of ownership or assignment must be made in writing. Any change
must be approved by the Company. Any assignment and any change, if approved,
will be effective as of the date the Company receives the request at its Annuity
Service Office. The Company assumes no liability for any payments made or
actions taken before a change is approved or an assignment is accepted or
responsibility for the validity or sufficiency of any assignment. An absolute
assignment will revoke the interest of any revocable beneficiary.
In the case of qualified contracts, ownership of the contract generally may
not be transferred except by the trustee of an exempt employees' trust which is
part of a retirement plan qualified under Section 401 of the Internal Revenue
Code or as otherwise permitted by applicable IRS regulations. Subject to the
foregoing, a qualified contract may not be sold, assigned, transferred,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose to any person other than
the Company.
ANNUITANT
The annuitant is any natural person or persons whose life is used to
determine the duration of annuity payments involving life contingencies. If the
contract owner names more than one person as an "annuitant," the second person
named shall be referred to as "co-annuitant." The annuitant is as designated on
the contract specifications page or in the application, unless changed.
On the death of the annuitant, the co-annuitant, if living, becomes the
annuitant. If there is no living co-annuitant, the owner becomes the annuitant.
In the case of certain qualified contracts, there are limitations on the ability
to designate and change the annuitant and the co-annuitant.
BENEFICIARY
The beneficiary is the person, persons or entity designated in the contract
specifications page or as subsequently named. However, if there is a surviving
contract owner, that person will be treated as the beneficiary. The beneficiary
may be changed subject to the rights of any irrevocable beneficiary. Any change
must be made in writing, approved by the Company and if approved, will be
effective as of the date on which written. The Company assumes no liability for
any payments made or actions taken before the change is approved. If no
beneficiary is living, the contingent beneficiary will be the beneficiary. The
interest of any beneficiary is subject to that of any assignee. If no
beneficiary or contingent beneficiary is living, the beneficiary is the estate
of the deceased contract owner. In the case of certain qualified contracts,
regulations promulgated by the Treasury Department prescribe certain limitations
on the designation of a beneficiary.
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MODIFICATION
The contract may not be modified by the Company without the consent of the
contract owner, except as may be required to make it conform to any law or
regulation or ruling issued by a governmental agency. The provisions of the
contract shall be interpreted so as to comply with the requirements of Section
72(s) of the Internal Revenue Code.
COMPANY APPROVAL
The Company reserves the right to accept or reject any contract application
at its sole discretion.
MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL
The Company may require proof of age, sex or survival of any person upon
whose age, sex or survival any payment depends. If the age or sex of the
annuitant has been misstated, the benefits will be those that would have been
provided for the annuitant's correct age and sex. If the Company has made
incorrect annuity payments, the amount of any underpayment will be paid
immediately and the amount of any overpayment will be deducted from future
annuity payments.
FIXED ACCOUNT INVESTMENT OPTION
Securities Registration. Due to certain exemptive and exclusionary
provisions, interests in the one year fixed account investment option are not
registered under the Securities Act of 1933, as amended, ("1933 Act") and the
Company's general account is not registered as an investment company under the
1940 Act. Accordingly, neither interests in the one year fixed account
investment option nor the general account are subject to the provisions or
restrictions of the 1933 Act or the 1940 Act and the staff of the Commission has
not reviewed the disclosures in the Prospectus relating thereto. Disclosures
relating to interests in the fixed account investment option and the general
account, however, may be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy of statements made in a
registration statement.
Guarantee. Pursuant to a Guarantee Agreement dated March 31, 1996,
Manulife, the ultimate parent of the Company, unconditionally guarantees to the
Company on behalf of and for the benefit of the Company and owners of fixed
annuity contracts issued by the Company that it will, on demand, make funds
available to the Company for the timely payment of contractual claims under
fixed annuity contracts issued after June 27, 1984. This Guarantee covers the
fixed portion of the contracts described in this Prospectus. This Guarantee may
be terminated by Manulife on notice to the Company. Termination will not affect
Manulife's continuing liability with respect to all fixed annuity contracts
issued prior to the termination of the Guarantee except if: (i) the liability to
pay contractual claims under the contracts is assumed by another insurer or (ii)
the Company is sold and the buyer's guarantee is substituted for the Manulife
guarantee.
Reinsurance. Effective June 30, 1995, the Company entered into a
Reinsurance Agreement with Peoples Security Life Insurance Company ("Peoples")
pursuant to which Peoples reinsures certain amounts with respect to the fixed
account portion of the contract described in this Prospectus. Under this
Reinsurance Agreement, the Company remains liable for the contractual
obligations of the contracts' fixed account and Peoples agrees to reimburse the
Company for certain amounts and obligations in connection with the fixed
account. Peoples contractual liability runs solely to the Company, and no
contract owner shall have any right of action against Peoples. Peoples is a
wholly-owned subsidiary of Louisville, Kentucky based Providian Corporation, a
diversified financial services corporation.
Investment Option. A one year fixed account investment option is available
under the contract. Under the one year fixed account investment option, the
Company guarantees the principal value of purchase payments and the rate of
interest credited to the investment account for the term of the guarantee
period. The portion of the contract value in the one year fixed account
investment option and monthly annuity payments if selected on a fixed basis,
will reflect such interest and principal guarantees. The guaranteed interest
rates on new amounts allocated or transferred to a fixed investment account are
determined from time-to-time by the Company in accordance with market
conditions. In no event will the guaranteed rate of interest be less than 3%.
Once an interest rate is guaranteed for a fixed investment account, it is
guaranteed for the duration of the guarantee period and may not be changed by
the Company.
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Investment Accounts. Contract owners may allocate purchase payments, or
make transfers from the variable investment options, to the one year fixed
account investment option at any time prior to the maturity date. The Company
establishes a separate investment account each time the contract owner allocates
or transfers amounts to the fixed account investment option. Amounts may not
be allocated to a fixed account investment option that would extend the
guarantee period beyond the maturity date.
Renewals. At the end of a guarantee period, the contract owner may
establish a new investment account with a one year guarantee period at the then
current interest rate or transfer the amounts to a variable account investment
option, all without the imposition of any charge. In the case of renewals within
one year of the maturity date, the only fixed account investment option
available is to have interest accrued up to the maturity date at the then
current interest rate for one year guarantee periods.
If the contract owner does not specify the renewal option desired, the
Company will select the one year fixed account investment option. In the case of
a renewal within one year of the maturity date, the Company will credit interest
up to the maturity date at the then current interest rate for one year guarantee
periods.
Transfers. Prior to the maturity date, the contract owner may transfer
amounts from the fixed account investment option to the variable account
investment options at the end of the guaranteed period; however, amounts may be
transferred prior to the end of the guarantee period pursuant to the Dollar Cost
Averaging program.
Where there are multiple investment accounts within the one year fixed
account investment option, amounts must be transferred from the one year fixed
account investment option on a first-in-first-out basis.
Withdrawals. The contract owner may make total and partial withdrawals of
amounts held in the one year fixed account investment option at any time prior
to the maturity date or his or her death. Withdrawals from the fixed account
investment option will be made in the same manner and be subject to the same
limitations as set forth under "WITHDRAWALS" plus the following provisions also
apply to withdrawals from the fixed account investment option: (1) the Company
reserves the right to defer payment of amounts withdrawn from the fixed account
investment option for up to six months from the date it receives the written
withdrawal request (if a withdrawal is deferred for more than 30 days pursuant
to this right, the Company will pay interest on the amount deferred at a rate
not less than 3% per year (or such higher rate as may be required by the
applicable state or jurisdiction)); and (2) if there are multiple investment
accounts under the fixed account investment option, amounts must be withdrawn
from such accounts on a first-in-first-out basis.
If the contract owner does not specify the investment options from which a
partial withdrawal is to be taken, a partial withdrawal will be taken from the
variable account investment options until exhausted and then from the one year
fixed account investment option.
Withdrawals from the contract may be subject to income tax and a 10%
penalty tax. Withdrawals are permitted from contracts issued in connection with
Section 403(b) qualified plans only under limited circumstances. (See "FEDERAL
TAX MATTERS" below.)
Loans. The Company offers a loan privilege only to owners of contracts
issued in connection with Section 403(b) qualified plans that are not subject to
Title I of ERISA. Owners of such contracts may obtain loans using the contract
as the only security for the loan. Owners of such contracts may borrow amounts
allocated to the fixed investment account in the same manner and subject to the
same limitations as set forth under "LOANS" above.
Fixed Annuity Options. Subject to the distribution of death benefits
provisions (see "DEATH BENEFIT BEFORE MATURITY DATE" above), on death,
withdrawal or the maturity date of the contract, the proceeds may be applied to
a fixed annuity option. (See "ANNUITY OPTIONS" above) The amount of each fixed
annuity payment is determined by applying the portion of the proceeds (less any
applicable premium taxes) applied to purchase the fixed annuity to the
appropriate table in the contract. If the table in use by the Company is more
favorable to the contract owner, the Company will substitute that table. The
Company guarantees the dollar amount of fixed annuity payments.
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CHARGES AND DEDUCTIONS
Charges and deductions under the contracts are assessed against purchase
payments, contract values or annuity payments. Currently, there are no
deductions made from purchase payments, except for premium taxes in certain
states. In addition, there are deductions from and expenses paid out of the
assets of the Trust portfolios that are described in the accompanying Prospectus
of the Trust.
WITHDRAWAL CHARGES
If a withdrawal is made from the contract before the maturity date, a
withdrawal charge (contingent deferred sales charge) may be assessed against
amounts withdrawn attributable to purchase payments that have been in the
contract less than ten complete contract years. There is never a withdrawal
charge with respect to earnings accumulated in the contract, certain other free
withdrawal amounts described below or purchase payments that have been in the
contract more than ten complete contract years. In no event may the total
withdrawal charges exceed 8.5% of the amount invested. The amount of the
withdrawal charge and when it is assessed are discussed below:
1. Each withdrawal from the contract is allocated first to the "free
withdrawal amount" and second to "unliquidated purchase payments". In any
contract year, the free withdrawal amount for that year is the greater of (1)
the excess of the contract value on the date of withdrawal over the unliquidated
purchase payments (the accumulated earnings on the contract) or (2) the excess
of (i) over (ii), where (i) is 10% of total purchase payments and (ii) is all
prior partial withdrawals in that contract year. Withdrawals allocated to the
free withdrawal amount may be withdrawn without the imposition of a withdrawal
charge. The free withdrawal amount will be applied to a requested withdrawal,
first, to withdrawals from variable account investment options and then to
withdrawals from the one year fixed account investment option.
2. If a withdrawal is made for an amount in excess of the free withdrawal
amount, the excess will be allocated to purchase payments which will be
liquidated on a first-in first-out basis. On any withdrawal request, the Company
will liquidate purchase payments equal to the amount of the withdrawal request
which exceeds the free withdrawal amount in the order such purchase payments
were made: the oldest unliquidated purchase payment first, the next purchase
payment second, etc. until all purchase payments have been liquidated.
3. Each purchase payment (or portion thereof) liquidated in connection with
a withdrawal request is subject to a withdrawal charge based on the length of
time the purchase payment has been in the contract. The amount of the withdrawal
charge is calculated by multiplying the amount of the purchase payment being
liquidated by the applicable withdrawal charge percentage obtained from the
table below.
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS
PURCHASE PAYMENT IN CONTRACT WITHDRAWAL CHARGE PERCENTAGE
---------------------------- ----------------------------
<S> <C>
1 8.5%
2 8%
3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9 0%
</TABLE>
The total withdrawal charge will be the sum of the withdrawal charges for
the purchase payments being liquidated.
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4. The withdrawal charge is deducted from the contract value remaining
after the contract owner is paid the amount requested, except in the case of a
complete withdrawal when it is deducted from the amount otherwise payable. In
the case of a partial withdrawal, the amount requested from an investment
account may not exceed the value of that investment account less any applicable
withdrawal charge.
5. There is generally no withdrawal charge on distributions made as a
result of the death of the contract owner or, if applicable, the annuitant (see
"Death Benefit Before Maturity Date -- Amount of Death Benefit"), and no
withdrawal charges are imposed on the maturity date if the contract owner
annuitizes as provided in the contract.
The amount collected from the withdrawal charge will be used to reimburse
the Company for the compensation paid to cover selling concessions to
broker-dealers, preparation of sales literature and other expenses related to
sales activity.
For examples of calculation of the withdrawal charge, see Appendix A.
REDUCTION OR ELIMINATION OF WITHDRAWAL CHARGES
The amount of the withdrawal charge on a contract may be reduced or
eliminated when sales of the contracts are made to individuals or to a group of
individuals in such a manner that results in savings of sales expenses. The
entitlement to such a reduction in the withdrawal charge will be determined by
the Company in the following manner:
1. The size and type of group to which sales are to be made will be
considered. Generally, sales expenses for a larger group are smaller than for a
smaller group because of the ability to implement large numbers of contracts
with fewer sales contacts.
2. The total amount of purchase payments to be received will be considered.
Per dollar sales expenses are likely to be less on larger purchase payments than
on smaller ones.
3. Any prior or existing relationship with the Company will be considered.
Per contract sales expenses are likely to be less when there is a prior or
existing relationship because of the likelihood of implementing the contract
with fewer sales contacts.
4. The level of commissions paid to selling broker-dealers will be
considered. Certain broker-dealers may offer the contract in connection with
financial planning programs offered on a fee for service basis. In view of the
financial planning fees, such broker-dealers may elect to receive lower
commissions for sales of the contracts, thereby reducing the Company's sales
expenses.
5. There may be other circumstances of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, it is determined that
there will be a reduction in sales expenses, the Company will provide a
reduction in the withdrawal charge. The withdrawal charge will be eliminated
when a contract is issued to an officer, director or employee (or a relative
thereof) of the Company, Manulife, the Trust or any of their affiliates. In no
event will reduction or elimination of the withdrawal charge be permitted where
such reduction or elimination will be unfairly discriminatory to any person.
ADMINISTRATION FEES
Except as noted below, the Company will deduct each year an annual
administration fee of $40 as partial compensation for the cost of providing all
administrative services attributable to the contracts and the operations of the
VariableAccount and the Company in connection with the contracts. However, if
prior to the maturity date the contract value is equal to or greater than
$100,000 at the time of the fee's assessment, the fee will be waived. Prior to
the maturity date, this administration fee is deducted on the last day of each
contract year. It is withdrawn from each investment option in the same
proportion that the value of such investment option bears to the contract value.
If the entire contract is withdrawn on other than the last day of any contract
year, the $40 administration fee will be deducted from the amount paid. During
the annuity period, the fee is deducted on a pro-rata basis from each annuity
payment.
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A daily fee in an amount equal to 0.30% of the value of each variable
investment account on an annual basis is deducted from each sub-account as an
administration fee. The fee is designed to compensate the Company for the cost
of providing administrative services attributable to the contracts and the
operations of the Variable Account and the Company in connection with the
contracts. This asset based administration fee will not be deducted from the
fixed account investment option. The fee will be reflected in the contract value
as a proportionate reduction in the value of each investment account. Because
the administration fee is a percentage of assets rather than a flat amount,
larger contracts will in effect pay a higher proportion of the administrative
expenses than smaller contracts.
The Company does not expect to recover from such fees any amount in excess
of its accumulated administrative expenses. Even though administrative expenses
may increase, the Company guarantees that it will not increase the amount of the
administration fees.
MORTALITY AND EXPENSE RISK CHARGE
The mortality risk assumed by the Company is the risk that annuitants may
live for a longer period of time than estimated. The Company assumes this
mortality risk by virtue of annuity rates incorporated into the contract which
cannot be changed. This assures each annuitant that his longevity will not have
an adverse effect on the amount of annuity payments. Also, the Company
guarantees that if the contract owner dies before the maturity date, it will pay
a death benefit. (See "DEATH BENEFIT BEFORE MATURITY DATE") The expense risk
assumed by the Company is the risk that the administration charges or withdrawal
charge may be insufficient to cover actual expenses.
To compensate it for assuming these risks, the Company deducts from each of
the sub-accounts a daily charge in an amount equal to 1.25% of the value of the
variable investment accounts on an annual basis, consisting of 0.80% for the
mortality risk and 0.45% for the expense risk. The charge will be reflected in
the contract value as a proportionate reduction in the value of each investment
account. The rate of the mortality and expense risk charge cannot be increased.
If the charge is insufficient to cover the actual cost of the mortality and
expense risks undertaken, the Company will bear the loss. Conversely, if the
charge proves more than sufficient, the excess will be profit to the Company and
will be available for any proper corporate purpose including, among other
things, payment of distribution expenses. The mortality and expense risk charge
is not assessed against the fixed account investment option.
TAXES
The Company reserves the right to charge, or provide for, certain taxes
against purchase payments, contract values or annuity payments. Such taxes may
include premium taxes or other taxes levied by any government entity which the
Company determines to have resulted from the (i) establishment or maintenance of
the Variable Account, (ii) receipt by the Company of purchase payments, (iii)
issuance of the contacts, or (iv) commencement or continuance of annuity
payments under the contracts. In addition, the Company will withhold taxes to
the extent required by applicable law.
Except for residents in Pennsylvania, South Dakota and Kentucky premium
taxes will be deducted from the contract value used to provide for fixed or
variable annuity payments unless required otherwise by applicable law. The
amount deducted will depend on the premium tax assessed in the applicable
state. State premium taxes currently range from 0% to 3.5% depending on the
jurisdiction and the tax status of the contract and are subject to change by
the legislature or other authority. (See "APPENDIX B: STATE PREMIUM TAXES") For
residents of Pennsylvania, South Dakota and Kentucky the following premium tax
assessment will apply: A premium tax will be assessed against all non-qualified
purchase payments received from contract owners who are residents of South
Dakota. The rate of tax is 1.25% for South Dakota residents. If the Kentucky
Revenue Cabinet's policy change on premium taxes becomes effective as expected,
premium tax will be assessed against all purchase payments received on or after
July 1, 1997 from contract owners who are residents of Kentucky. The rate of
tax is 2.00% for Kentucky residents. Purchase payments received for the period
October 1, 1992 through September 7, 1995 for non-qualified contracts of
Pennsylvania residents will be assessed a 2.00% premium tax; purchase payments
received on or after September 8, 1995 will not be assessed a premium tax. For
purchase payments received on or after October 1, 1992 (July 1, 1997 for
Kentucky), the state premium tax will be collected upon payment of any
withdrawal benefits, upon any annuitization or payment of death benefits. For
payments received prior to October 1, 1992 (July
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<PAGE> 38
1, 1997 for Kentucky) the premium tax will deducted upon annuitization only. In
the states of Pennsylvania and South Dakota, purchase payments received in
connection with the funding of a qualified plan are exempt from state premium
tax.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion of the federal income tax treatment of the
contract is not exhaustive, does not purport to cover all situations, and is not
intended as tax advice. A qualified tax adviser should always be consulted with
regard to the application of law to individual circumstances. This discussion is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Department regulations, and interpretations existing on the date of this
Prospectus. These authorities, however, are subject to change by Congress, the
Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences associated
with the purchase of a contract. In addition, the Company makes no guarantee
regarding any tax treatment -- federal, state or local -- of any contract or of
any transaction involving a contract.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under the Code. Since the
operations of the Variable Account are a part of, and are taxed with, the
operations of the Company, the Variable Account is not separately taxed as a
"regulated investment company" under the Code. Under existing federal income tax
laws, investment income and capital gains of the Variable Account are not taxed
to the extent they are applied under a contract. The Company does not anticipate
that it will incur any federal income tax liability attributable to such income
and gains of the Variable Account, and therefore the Company does not intend to
make provision for any such taxes. If the Company is taxed on investment income
or capital gains of the Variable Account, then the Company may impose a charge
against the Variable Account in order to make provision for such taxes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any
increase in the contract value is generally not taxable to the contract owner or
annuitant until received, either in the form of annuity payments, as
contemplated by the contract, or in some other form of distribution. However,
certain requirements must be satisfied in order for this general rule to apply,
including: (1) the contract must be owned by an individual (or treated as owned
by an individual), (2) the investments of the Variable Account must be
"adequately diversified" in accordance with Treasury Department regulations, (3)
the Company, rather than the owner, must be considered the owner of the assets
of the Variable Account for federal tax purposes, and (4) the contract must
provide for appropriate amortization, through annuity payments, of the
contract's purchase payments and earnings, e.g., the maturity date must not
occur at too advanced an age.
Non-Natural Owner. As a general rule, deferred annuity contracts held by
"non-natural persons" such as a corporation, trust or other similar entity, as
opposed to a natural person, are not treated as annuity contracts for federal
tax purposes. The investment income on such contracts is taxed as ordinary
income that is received or accrued by the owner of the contract during the
taxable year. There are several exceptions to this general rule for non-natural
contract owners. First, contracts will generally be treated as held by a natural
person if the nominal owner is a trust or other entity which holds the contract
as an agent for a natural person. However, this special exception will not apply
in the case of any employer who is the nominal owner of an annuity contract
under a non-qualified deferred compensation arrangement for its employees.
In addition, exceptions to the general rule for non-natural contract owners
will apply with respect to (1) contracts acquired by an estate of a decedent by
reason of the death of the decedent, (2) certain qualified contracts, (3)
certain contracts purchased by employers upon the termination of certain
qualified plans, (4) certain contracts used in connection with structured
settlement agreements, and (5) contracts purchased with a single premium when
the annuity starting date (as defined in the tax law) is no later
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<PAGE> 39
than a year from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during the annuity period.
Diversification Requirements. For a contract to be treated as an annuity
for federal income tax purposes, the investments of the Variable Account must be
"adequately diversified" in accordance with Treasury Department Regulations. The
Secretary of the Treasury has issued regulations which prescribe standards for
determining whether the investments of the Variable Account are "adequately
diversified." If the Variable Account failed to comply with these
diversification standards, a contract would not be treated as an annuity
contract for federal income tax purposes and the contract owner would generally
be taxable currently on the excess of the contract value over the premiums paid
for the contract.
Although the Company does not control the investments of the NASL Series
Trust, it expects that the Trust will comply with such regulations so that the
Variable Account will be considered "adequately diversified."
Ownership Treatment. In certain circumstances, a variable annuity contract
owner may be considered the owner, for federal income tax purposes, of the
assets of the separate account used to support his or her contract. In those
circumstances, income and gains from such separate account assets would be
includible in the contract owner's gross income. The Internal Revenue Service
(the "Service") has stated in published rulings that a variable contract owner
will be considered the owner of separate account assets if the owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. In addition, the Treasury Department
announced, in connection with the issuance of regulations concerning investment
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, 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 policyholders may direct their investments to particular sub-accounts [of
a separate account] without being treated as owners of the underlying assets."
As of the date of this Prospectus, no such guidance has been issued.
The ownership rights under this contract are similar to, but different in
certain respects from, those described by the Service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of this contract has the choice of many more investment
options to which to allocate premiums and contract values, and may be able to
transfer among investment options more frequently than in such rulings. These
differences could result in the contract owner being treated as the owner of the
assets of the Variable Account and thus subject to current taxation on the
income and gains from those assets. In addition, the Company does not know what
standards will be set forth in the regulations or rulings which the Treasury
Department has stated it expects to issue. The Company therefore reserves the
right to modify the contract as necessary to attempt to prevent the contract
owner from being considered the owner of the assets of the Variable Account.
Delayed Maturity Dates. If the contract's maturity date occurs (or is
scheduled to occur) at a time when the annuitant has reached an advanced age,
e.g., past age 85, it is possible that the contract would not be treated as an
annuity for federal income tax purposes. In that event, the income and gains
under the contract could be currently includible in the owner's income.
The remainder of this discussion assumes that the contract will be treated
as an annuity contract for federal income tax purposes and that the Company will
be treated as the owner of the Variable Account assets.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal, amounts received are includible in
income to the extent the contract value before the withdrawal exceeds the
"investment in the contract." In the case of a full withdrawal, amounts received
are includible in income to the extent they exceed the "investment in the
contract." For these purposes the investment in the contract at any time equals
the total of the purchase payments made under the contract to that time (to the
extent such payments were neither deductible when made nor excludible from
income as, for example, in the case of certain employer contributions to
qualified plans) less any amounts previously received from the contract which
were not included in income. In this regard, the payment enhancements provided
under a contract are not treated as purchase payments and thus do not increase
the investment in the contract.
Other than in the case of certain qualified contracts, any amount received
as a loan under a contract, and any assignment or pledge (or agreement to assign
or pledge) any portion of the contract value, is treated as a withdrawal of such
amount or portion.
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<PAGE> 40
(Loans, assignments and pledges are permitted only in limited circumstances
under qualified contracts.) The investment in the contract is increased by the
amount includible in income with respect to such assignment or pledge, though it
is not affected by any other aspect of the assignment or pledge (including its
release). If an individual transfers an annuity contract without adequate
consideration to a person other than the owner's spouse (or to a former spouse
incident to divorce), the owner will be taxed on the difference between the
"contract value" and the "investment in the contract" at the time of transfer.
In such case, the transferee's investment in the contract will be increased to
reflect the increase in the transferor's income.
The contract provides a death benefit that in certain circumstances may
exceed the greater of the purchase payments and the contract value. As described
elsewhere in this Prospectus, the Company imposes certain charges with respect
to the death benefit. It is possible that those charges (or some portion
thereof) could be treated for federal income tax purposes as a partial
withdrawal from the contract.
There may be special income tax issues present in situations where the
owner and the annuitant are not the same person and are not married to one
another. A tax advisor should be consulted in those situations.
TAXATION OF ANNUITY PAYMENTS
Normally, the portion of each annuity payment taxable as ordinary income is
equal to the excess of the payment over the exclusion amount. In the case of
variable annuity payments, the exclusion amount is the "investment in the
contract" (defined above) allocated to the variable annuity option, adjusted for
any period certain or refund feature, when payments begin to be made divided by
the number of payments expected to be made (determined by Treasury Department
regulations which take into account the annuitant's life expectancy and the form
of annuity benefit selected). In the case of fixed annuity payments, the
exclusion amount is the amount determined by multiplying (1) the payment by (2)
the ratio of the investment in the contract allocated to the fixed annuity
option, adjusted for any period certain or refund feature, to the total expected
value of annuity payments for the term of the contract (determined under
Treasury Department regulations).
Once the total amount of the investment in the contract is excluded using
these ratios, annuity payments will be fully taxable. If annuity payments cease
because of the death of the annuitant and before the total amount of the
investment in the contract is recovered, the unrecovered amount generally will
be allowed as a deduction to the annuitant in his or her last taxable year.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a non-qualified contract because of the
death of an owner or the annuitant. Prior to the maturity date, such death
benefit proceeds are includible in income as follows: (1) if distributed in a
lump sum, they are taxed in the same manner as a full withdrawal, as described
above, or (2) if distributed under an annuity option, they are taxed in the same
manner as annuity payments, as described above. After the maturity date, where a
guaranteed period exists under an annuity option and the annuitant dies before
the end of that period, payments made to the beneficiary for the remainder of
that period are includible in income as follows: (1) if received in a lump sum,
they are includible in income to the extent that they exceed the unrecovered
investment in the contract at that time, or (2) if distributed in accordance
with the existing annuity option selected, they are fully excludable from income
until the remaining investment in the contract is deemed to be recovered, and
all annuity payments thereafter are fully includible in income.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any payment from a
non-qualified contract unless the payment is: (a) received on or after the
contract owner reaches age 59 1/2; (b) attributable to the contract owner's
becoming disabled (as defined in the tax law); (c) made to a beneficiary on or
after the death of the contract owner or, if the contract owner is not an
individual, on or after the death of the primary annuitant (as defined in the
tax law); (d) made as a series of substantially equal periodic payments (not
less frequently than annually) for the life (or life expectancy) of the
annuitant or for the joint lives (or joint life expectancies) of the annuitant
and designated beneficiary (as defined in the tax law); (e) made under an
annuity contract purchased with a single premium when the annuity starting date
(as defined in the tax law) is no later than a year from purchase of the annuity
and substantially equal periodic payments are made, not less frequently than
annually, during the annuity period; or (f) made with
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<PAGE> 41
respect to certain annuities issued in connection with structured settlement
agreements. (A similar penalty tax, applicable to distributions from certain
qualified contracts, is discussed below.)
AGGREGATION OF CONTRACTS
In certain circumstances, the amount of an annuity payment or a withdrawal
from a contract that is includible in income may be determined by combining some
or all of the non-qualified contracts owned by an individual. For example, if a
person purchases a contract offered by this Prospectus and also purchases at
approximately the same time an immediate annuity, the Service may treat the two
contracts as one contract. In addition, if a person purchases two or more
deferred annuity contracts from the same insurance company (or its affiliates)
during any calendar year, all such contracts will be treated as one contract.
The effects of such aggregation are not clear; however, it could affect the
amount of a withdrawal or an annuity payment that is taxable and the amount
which might be subject to the penalty tax described above.
QUALIFIED RETIREMENT PLANS
The contracts are also designed for use in connection with certain types of
retirement plans which receive favorable treatment under the Code. Numerous
special tax rules apply to the participants in such qualified plans and to the
contracts used in connection with such qualified plans. Therefore, no attempt is
made in this Prospectus to provide more than general information about use of
the contract with the various types of qualified plans.
The tax rules applicable to qualified plans vary according to the type of
plan and the terms and conditions of the plan itself. For example, for both
withdrawals and annuity payments under certain qualified contracts, there may be
no "investment in the contract" and the total amount received may be taxable.
Also, loans from qualified contracts, where allowed, are subject to a variety of
limitations, including restrictions as to the amount that may be borrowed, the
duration of the loan, and the manner in which the loan must be repaid. (Owners
should always consult their tax advisors and retirement plan fiduciaries prior
to exercising their loan privileges.) Both the amount of the contribution that
may be made, and the tax deduction or exclusion that the owner may claim for
such contribution, are limited under qualified plans. If this contract is used
in connection with a qualified plan, the owner and annuitant must be the same
individual. If a co-annuitant is named, all distributions made while the
annuitant is alive must be made to the annuitant. Also, if a co-annuitant is
named who is not the annuitant's spouse, the annuity options which are available
may be limited, depending on the difference in ages between the annuitant and
co-annuitant. Furthermore, the length of any guarantee period may be limited in
some circumstances to satisfy certain minimum distribution requirements under
the Code.
In addition, special rules apply to the time at which distributions must
commence and the form in which the distributions must be paid. For example,
failure to comply with minimum distribution requirements applicable to qualified
plans will result in the imposition of an excise tax. This excise tax generally
equals 50% of the amount by which a minimum required distribution exceeds the
actual distribution from the qualified plan. In the case of IRAs, distributions
of minimum amounts (as specified in the tax law) must generally commence by
April 1 of the calendar year following the calendar year in which the owner
attains age 70 1/2. In the case of certain other qualified plans, distributions
of such minimum amounts must generally commence by the later of this date or
April 1 of the calendar year following the calendar year in which the employee
retires.
There is also a 10% penalty tax on the taxable amount of any payment from
certain qualified contracts (but not section 457 plans). (The amount of the
penalty tax is 25% of the taxable amount of any payment received from a "SIMPLE
retirement account" during the 2 year period beginning on the date the
individual first participated in any qualified salary reduction arrangement (as
defined in the tax law) maintained by the individual's employer.) There are
exceptions to this penalty tax which vary depending on the type of qualified
plan. In the case of an "Individual Retirement Annuity" ("IRA"), including a
"SIMPLE IRA," exceptions provide that the penalty tax does not apply to a
payment (a) received on or after the contract owner reaches age 59 1/2, (b)
received on or after the owner's death or because of the owner's disability (as
defined in the tax law), or (c) made as a series of substantially equal periodic
payments (not less frequently than annually) for the life (or life expectancy)
of the owner or for the joint lives (or joint life expectancies) of the owner
and designated beneficiary (as defined in the tax law). These exceptions, as
well as certain others not described herein, generally apply to taxable
distributions from other qualified plans (although, in the case of plans
qualified under sections 401 and 403, exception "c" above for substantially
equal periodic payments applies only if the owner has separated from service).
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<PAGE> 42
When issued in connection with a qualified plan, a contract will be amended
as generally necessary to conform to the requirements of the plan. However,
contract owners, annuitants, and beneficiaries are cautioned that the rights of
any person to any benefits under qualified plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the contract. In addition, the Company shall not be bound by terms and
conditions of qualified plans to the extent such terms and conditions contradict
the contract, unless the Company consents.
Qualified Plan Types
Following are brief descriptions of various types of qualified plans in
connection with which the Company may issue a contract.
Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA." IRAs are subject to limits on the
amounts that may be contributed, the persons who may be eligible and on the time
when distributions may commence. Also, distributions from certain other types of
qualified retirement plans may be "rolled over" on a tax-deferred basis into an
IRA.
IRAs generally may not provide life insurance coverage, but they may
provide a death benefit that equals the greater of the premiums paid and the
contract value. The contract provides a death benefit that in certain
circumstances may exceed the greater of the purchase payments and the contract
value. It is possible that the contract's death benefit could be viewed as
providing life insurance coverage with the result that the contract would not be
viewed as satisfying the requirements of an IRA.
Simplified Employee Pensions (SEP-IRAs). Section 408(k) of the Code
allows employers to establish simplified employee pension plans for their
employees, using the employees' IRAs for such purposes, if certain criteria are
met. Under these plans the employer may, within specified limits, make
deductible contributions on behalf of the employees to IRAs. As discussed above
(see Individual Retirement Annuities), there is some uncertainty regarding the
treatment of the contract's death benefit for purposes of the tax rules
governing IRAs (which would include SEP-IRAs). Employers intending to use the
contract in connection with such plans should seek competent advice.
SIMPLE IRAs. Section 408(p) of the Code permits certain small employers to
establish "SIMPLE retirement accounts," including SIMPLE IRAs, for their
employees. Under SIMPLE IRAs, certain deductible contributions are made by both
employees and employers. SIMPLE IRAs are subject to various requirements,
including limits on the amounts that may be contributed, the persons who may be
eligible, and the time when distributions may commence. As discussed above (see
Individual Retirement Annuities), there is some uncertainty regarding the proper
characterization of the contract's death benefit for purposes of the tax rules
governing IRAs (which would include SIMPLE IRAs). EMPLOYERS intending to use the
contract in connection with such plans should seek competent advice.
Corporate and Self-Employed ("H.R. 10" and "Keogh") Pension and
Profit-Sharing Plans. Sections 401(a) and 403(a) of the Code permit corporate
employers to establish various types of tax-favored retirement plans for
employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10" or "Keogh", permits self-employed
individuals also to establish such tax-favored retirement plans for themselves
and their employees. Such retirement plans may permit the purchase of the
contracts in order to provide benefits under the plans. The contract provides a
death benefit that in certain circumstances may exceed the greater of the
purchase payments and the contract value. It is possible that such death benefit
could be characterized as an incidental death benefit. There are limitations on
the amount of incidental benefits that may be provided under pension and profit
sharing plans. In addition, the provision of such benefits may result in current
taxable income to participants. Employers intending to use the contract in
connection with such plans should seek competent advice.
Tax-Sheltered Annuities. Section 403(b) of the Code permits public school
employees and employees of certain types of charitable, educational and
scientific organizations specified in section 501(c)(3) of the Code to have
their employers purchase annuity contracts for them and, subject to certain
limitations, to exclude the amount of purchase payments from gross income for
tax purposes. These annuity contracts are commonly referred to as "tax-sheltered
annuities". Purchasers of the contracts for such purposes should seek competent
advice as to eligibility, limitations on permissible amounts of purchase
payments and other tax consequences associated with the contracts. In
particular, purchasers should consider that the contract provides a death
benefit that in certain circumstances may exceed the greater of the purchase
payments and the contract value. It is possible that such death
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<PAGE> 43
benefit could be characterized as an incidental death benefit. If the death
benefit were so characterized, this could result in currently taxable income to
purchasers. In addition, there are limitations on the amount of incidental
benefits that may be provided under a tax-sheltered annuity. Even if the death
benefit under the contract were characterized as an incidental death benefit, it
is unlikely to violate those limits unless the purchaser also purchases a life
insurance contract as part of his or her tax-sheltered annuity plan.
Tax-sheltered annuity contracts must contain restrictions on withdrawals of
(i) contributions made pursuant to a salary reduction agreement in years
beginning after December 31, 1988, (ii) earnings on those contributions, and
(iii) earnings after 1988 on amounts attributable to salary reduction
contributions (and earnings on those contributions) held as of the last day of
the year beginning before January 1, 1989. These amounts can be paid only if the
employee has reached age 59 1/2, separated from service, died, or become
disabled (within the meaning of the tax law), or in the case of hardship (within
the meaning of the tax law). Amounts permitted to be distributed in the event of
hardship are limited to actual contributions; earnings thereon cannot be
distributed on account of hardship. Amounts subject to the withdrawal
restrictions applicable to section 403(b)(7) custodial accounts may be subject
to more stringent restrictions. (These limitations on withdrawals do not apply
to the extent the Company is directed to transfer some or all of the contract
value to the issuer of another tax-sheltered annuity or into a section 403(b)(7)
custodial account.)
Deferred Compensation Plans of State and Local Governments and Tax-Exempt
Organizations. Section 457 of the Code permits employees of state and local
governments and tax-exempt organizations to defer a portion of their
compensation without paying current taxes. The employees must be participants in
an eligible deferred compensation plan. Generally, a contract purchased by a
state or local government or a tax-exempt organization will not be treated as an
annuity contract for federal income tax purposes. Those who intend to use the
contracts in connection with such plans should seek competent advice.
DIRECT ROLLOVERS
If the contract is used in connection with a retirement plan that is
qualified under sections 401(a), 403(a), or 403(b) of the Code, any "eligible
rollover distribution" from the contract will be subject to "direct rollover"
and mandatory withholding requirements. An eligible rollover distribution
generally is any taxable distribution from such qualified plans, excluding
certain amounts such as (i) minimum distributions required under section
401(a)(9) of the Code, and (ii) certain distributions for life, life expectancy,
or for 10 years or more which are part of a "series of substantially equal
periodic payments."
Under these requirements, federal income tax equal to 20% of the eligible
rollover distribution will be withheld from the amount of the distribution.
Unlike withholding on certain other amounts distributed from the contract,
discussed below, the owner cannot elect out of withholding with respect to an
eligible rollover distribution. However, this 20% withholding will not apply if,
instead of receiving the eligible rollover distribution, the distributee elects
to have it directly transferred to certain qualified plans. Prior to receiving
an eligible rollover distribution, a notice will be provided explaining
generally the direct rollover and mandatory withholding requirements and how to
avoid the 20% withholding by electing a direct rollover.
FEDERAL INCOME TAX WITHHOLDING
The Company will withhold and remit to the U.S. Government a part of the
taxable portion of each distribution made under a contract unless the
distributee notifies the Company at or before the time of the distribution that
he or she elects not to have any amounts withheld. In certain circumstances, the
Company may be required to withhold tax. The withholding rates applicable to the
taxable portion of periodic annuity payments are the same as the withholding
rates generally applicable to payments of wages. In addition, the withholding
rate applicable to the taxable portion of non-periodic payments (including
withdrawals prior to the maturity date) is 10%. As discussed above, the
withholding rate applicable to eligible rollover distributions is 20%.
GENERAL MATTERS
TAX DEFERRAL
The status of the contract as an annuity generally allows all earnings on
the underlying investments to be tax-deferred until withdrawn or until annuity
payments begin. (See "FEDERAL TAX MATTERS"). This tax deferred treatment may be
beneficial to contract owners in building assets in a long-term investment
program.
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PERFORMANCE DATA
From time to time the Variable Account may publish advertisements
containing performance data relating to its sub-accounts. For periods prior
to , performance data will be hypothetical figures based on the
assumption that a contract offered by this Prospectus was issued when the
sub-accounts first became available for investment under other contracts offered
by the Company. Hypothetical performance figures will also be furnished for
sub-accounts investing in NASL Series Trust portfolios established on December
31, 1996 in connection with the merger of Manulife Series Fund, Inc. with and
into NASL Series Trust. Such figures are based on the assumption that the
sub-accounts had been available for investment under a contract offered by this
Prospectus when the applicable Manulife Series Fund, Inc. portfolio first became
available under contracts issued by affiliates of the Company. The sub-accounts
may advertise both "STANDARDIZED" and "non-standardized" total return figures,
although "STANDARDIZED" figures will always accompany non-standardized figures.
Standardized performance data will consist of total return quotations, which
will always include quotations for recent one year and, when applicable, five
and ten year periods and, where less than ten years, for the period subsequent
to the date each sub-account first became available for investment. Such
quotations for such periods will be the average annual rates of return required
for an initial purchase payment of $1,000 to equal the actual contract value
attributable to such purchase payment on the last day of the period, after
reflection of all charges. Standardized total return figures will be quoted
assuming redemption at the end of the period. Such figures may be accompanied by
non-standardized total return figures that are calculated on the same basis as
the standardized returns except that the calculations assume no redemption at
the end of the period. In addition to the non-standardized returns, each of the
sub-accounts may from time to time quote aggregate non-standardized total
returns for other time periods. Except as noted above, performance figures used
by the Variable Account are based on the actual historical performance of its
sub-accounts for specified periods, and the figures are not intended to indicate
future performance. More detailed information on the computations is set forth
in the Statement of Additional Information.
FINANCIAL STATEMENTS
Financial Statements for the Variable Account and the Company are contained
in the Statement of Additional Information.
ASSET ALLOCATION AND TIMING SERVICES
The Company is aware that certain third parties are offering asset
allocation and timing services in connection with the contracts. In certain
cases the Company has agreed to honor transfer instructions from such asset
allocation and timing services where it has received powers of attorney, in a
form acceptable to it, from the contract owners participating in the service.
THE COMPANY DOES NOT ENDORSE, APPROVE OR RECOMMEND SUCH SERVICES IN ANY WAY AND
CONTRACT OWNERS SHOULD BE AWARE THAT FEES PAID FOR SUCH SERVICES ARE SEPARATE
AND IN ADDITION TO FEES PAID UNDER THE CONTRACTS.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 830.105 of the Texas Government Code permits participants in the
Texas Optional Retirement Program ("ORP") to withdraw their interest in a
variable annuity contract issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education, (2) retirement,
(3) death, or (4) the participant's attainment of age 70 1/2. Accordingly,
before any amounts may be distributed from the contract, proof must be furnished
to the Company that one of these four events has occurred. The foregoing
restrictions on withdrawal do not apply in the event a participant in the ORP
transfers the contract value to another contract or another qualified custodian
during the period of participation in the ORP. Loans are not available under
contracts subject to the ORP.
DISTRIBUTION OF CONTRACTS
NASL Financial Services, Inc. ("NASL Financial"), 116 Huntington Avenue,
Boston, Massachusetts 02116, a wholly-owned subsidiary of the Company, is the
principal underwriter of the contracts in addition to providing advisory
services to the Trust. NASL Financial is a broker-dealer registered under the
Securities Exchange Act of 1934 ("1934 Act") and a member of the National
Association of Securities Dealers, Inc. ("NASD"). NASL Financial has entered
into a NON-exclusive promotional agent agreement with Wood Logan Associates,
Inc. ("Wood Logan"). Wood Logan is a broker-dealer registered under the 1934 Act
and a member of the NASD. Wood Logan is a wholly owned subsidiary of a holding
company that is 85% owned by Manulife and approximately 15% owned by the
principals of Wood Logan. Sales of the contracts will be made by registered
representatives of
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<PAGE> 45
broker-dealers authorized by NASL Financial to sell the contracts. Such
registered representatives will also be licensed insurance agents of the
Company. Under the promotional agent agreement, Wood Logan will recruit and
provide sales training and licensing assistance to such registered
representatives. In addition, Wood Logan will prepare sales and promotional
materials for the Company's approval. NASL Financial will pay distribution
compensation to selling brokers in varying amounts which under normal
circumstances are not expected to exceed 4% of purchase payments plus UP TO .75%
of the contract value per year commencing 18 MONTHS after each purchase payment.
NASL Financial may from time to time pay additional compensation pursuant to
promotional contests. Additionally, in some circumstances, NASL Financial will
provide reimbursement of certain sales and marketing expenses. NASL Financial
will pay the promotional agent for providing marketing support for the
distribution of the contracts.
CONTRACT OWNER INQUIRIES
All contract owner inquiries should be directed to the Company's Annuity
Service Office at P.O. Box 9230, Boston, Massachusetts 02205-9230.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or
to which the assets of the Variable Account are subject. Neither the Company nor
NASL Financial are involved in any litigation that is of material importance in
relation to their total assets or that relates to the Variable Account.
OTHER INFORMATION
A registration statement has been filed with the Commission under the 1933
Act with respect to the contracts described in this Prospectus. Not all the
information set forth in the registration statement, amendments and exhibits
thereto has been included in this Prospectus. Statements contained in this
Prospectus or the Statement of Additional Information concerning the content of
the contracts and other legal instruments are only summaries. For a complete
statement of the terms of these documents, reference should be made to the
instruments filed with the Commission.
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<S> <C>
General Information and History........................... 3
Performance Data.......................................... 3
SERVICE
Independent Auditors............................... 6
Servicing Agent.................................... 6
Principal Underwriter.............................. 6
Cancellation of Contract.................................. 6
Financial Statements...................................... 7
</TABLE>
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APPENDIX A
EXAMPLE OF CALCULATION OF WITHDRAWAL CHARGE
EXAMPLE 1 - Assume a single payment of $50,000 is made into the contract, A 3%
payment enhancement of $1,500 is credited to contract value, no additional
payments are made and there are no partial withdrawals. The table below
illustrates five examples of the withdrawal charges that would be imposed if the
contract is completely withdrawn. All contract values are hypothetical.
<TABLE>
<CAPTION>
CONTRACT YEAR HYPOTHETICAL FREE WITHDRAWAL PAYMENTS WITHDRAWAL CHARGE
CONTRACT VALUE AMOUNT LIQUIDATED
------------------
PERCENT AMOUNT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2 $55,000 $5,000 (a) $50,000 8.50% $4,250
4 $50,500 $5,000 (b) $45,500 7.00% $3,185
6 $60,000 $10,000 (c) $50,000 5.00% $2,500
8 $80,000 $30,000 (d) $50,000 3.00% $1,500
10 $70,000 $20,000 (e) $50,000 0.00% $0
(a) During any contract year the free withdrawal amount is the greater of (i)
the contract value less unliquidated payments (accumulated earnings), or
(ii) 10% of total payments made under the contract less any partial
withdrawals in that contract year. in the second contract year the earnings
under the contract are $5,000 ($55,000 - $50,000 = $5,000), and 10% of
payments is equal to $5,000 (0.10 x $50,000 = $5,000). consequently, on
total withdrawal $5,000 is withdrawn free of the withdrawal charge, the
entire $50,000 payment is liquidated and the withdrawal charge is assessed
against such liquidated payment (the lesser of (i) total unliquidated
payments, or (ii) contract value less free withdrawal amount).
(b) In the example for the fourth contract year, there were no earnings in the
contract, therefore the free withdrawal amount is equal to 10% of payments
(0.10 x $50,000 = $5,000) and the withdrawal charge is only applied to
payments liquidated.
(c) In the example for the sixth contract year, the accumulated earnings of
$10,000 is greater than 10% of payments ($5,000), therefore the free
withdrawal amount is equal to the accumulated earnings of $10,000 and the
withdrawal charge is applied to the payments liquidated.
(d) In the example for the eighth contract year, the accumulated earnings of
$30,000 is greater than 10% of payments ($5,000), therefore the free
withdrawal amount is equal to the accumulated earnings of $30,000 and the
withdrawal charge is applied to the payments liquidated.
(e) There is no withdrawal charge on any payments that have been in the
contract for at least 10 years.
</TABLE>
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EXAMPLE 2 - Assume a single payment of $50,000 is made into the contract, a 3%
payment enhancement of $1,500 is credited to contract value, no transfers are
made, no additional payments are made and there are a series of four partial
withdrawals made during the third contract year of $2,000, $5,000, $7,000 and
$8,000.
<TABLE>
<CAPTION>
HYPOTHETICAL PARTIAL FREE WITHDRAWAL PAYMENTS WITHDRAWAL CHARGE
CONTRACT VALUE WITHDRAWAL AMOUNT LIQUIDATED -------------------
REQUESTED PERCENT AMOUNT
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$65,000 $2,000 $15,000 (a) $ 0 8.00% $ 0
$49,000 $5,000 $ 3,000 (b) $2,000 8.00% $160
$52,000 $7,000 $ 4,000 (c) $3,000 8.00% $240
$44,000 $8,000 $ 0 (d) $8,000 8.00% $640
<FN>
(a) The free withdrawal amount during any contract year is the greater of (i)
the contract value less unliquidated payments (accumulated earnings), or
(ii) 10% of payments less 100% of all prior withdrawals in that contract
year. For the first example, accumulated earnings of $15,000 ($65,000 -
$50,000 = $15,000) is the free withdrawal amount since it is greater than
10% of payments less prior withdrawals ($5,000 - $0). The amount requested
($2,000) is less than the free withdrawal amount. therefore, payments are
not liquidated and no withdrawal charge applies.
(b) The contract has negative accumulated earnings ($49,000 - $50,000
< 0), so the free withdrawal amount is limited to 10% of payments less
100% of all prior withdrawals during the contract year. since $2,000 has
already been withdrawn in the current contract year, the remaining free
withdrawal during the third contract year is $3,000. the $5,000 partial
withdrawal will consist of $3,000 free of withdrawal charge, and the
remaining $2,000 will be subject to a withdrawal charge and will result in
payments being liquidated. the remaining unliquidated payments after the
$5,000 partial withdrawal is $48,000 ($50,000 - $2,000 = $48,000).
(c) The contract has increased in value to $52,000. The unliquidated payments
are $48,000 which results in $4,000 of accumulated earnings ($52,000 -
$48,000 = $4,000) which is greater than 10% of payments less prior
withdrawals this contract year ($5,000 - $2,000 - $5,000 [less than sign]
0). hence the free withdrawal amount is $4,000 leaving $3,000 of the
$7,000 partial withdrawal subject to a withdrawal charge. the unliquidated
payments are reduced by $3,000 to $45,000.
(d) The free withdrawal amount is zero since the contract has negative
accumulated earnings ($44,000 - $45,0000 [less than sign] 0) and the full
10% of payments ($5,000) has already been withdrawn. the full amount of
$8,000 will result in payments being liquidated subject to a withdrawal
charge. at the beginning of the next contract year the full 10% of
payments would be available for withdrawal requests during that contract
year.
</TABLE>
43
<PAGE> 48
APPENDIX B
STATE PREMIUM TAXES
Premium taxes vary according to the state and are subject to change. In many
jurisdictions there is no tax at all. For current information, a tax adviser
should be consulted.
<TABLE>
<CAPTION>
TAX RATE
QUALIFIED NON-QUALIFIED
STATE CONTRACTS CONTRACTS
- -----------------------------------------------------------------------
<S> <C> <C>
CALIFORNIA.................... .50% 2.35%
DISTRICT OF COLUMBIA.......... 2.25% 2.25%
KANSAS........................ .00 2.00%
KENTUCKY...................... 2.00% 2.00%
MAINE......................... .00 2.00%
NEVADA........................ .00 3.50%
PUERTO RICO................... 1.00% 1.00%
SOUTH DAKOTA.................. .00 1.25%
TEXAS ........................ .04% .04%
WEST VIRGINIA................. 1.00% 1.00%
WYOMING....................... .00 1.00%
</TABLE>
44
<PAGE> 49
APPENDIX C
MAXIMUM MATURITY AGES IN PENNSYLVANIA
For all contracts issued in Pennsylvania the maximum maturity age based upon the
issue age of the annuitant is as follows:
<TABLE>
<CAPTION>
ISSUE AGE MAXIMUM MATURITY AGE
- -----------------------------------------------------
<S> <C>
70 or less 85
71-75 86
76-80 88
81-85 90
86-90 93
91-93 96
94-95 98
96-97 99
98-99 101
100-101 102
102 103
103 104
104 105
105 106
</TABLE>
It is required that the annuitant exercise a settlement annuity option no
later than the maximum maturity age stated above. For example an annuitant age
60 at issue must exercise a settlement option prior to the attainment of age 86.
The Company will use the issue age of the youngest named annuitant in the
determination of the required settlement option date.
If contracts are issued with annuitants over age 80, a withdrawal charge
could be imposed if they terminate the contract rather than elect a settlement
option upon attainment of the maximum maturity age. This is a result of the
restrictions by Pennsylvania in combination with the 9-year withdrawal charge
schedule of the contract.
45
<PAGE> 50
APPENDIX D
EXAMPLES OF PAYMENT ENHANCEMENT CALCULATIONS
The payment enhancement is determined based on the cumulative amount of payments
applied to your contract. The payment enhancements, as a percentage of payments,
are shown in the table below.
<TABLE>
<CAPTION>
Payment
Cumulative Payments Enhancement
<S> <C>
$10,000 TO $499,999 3.0%
$500,000 TO $2,499,999 4.0%
$2,500,000 AND ABOVE 5.0%
</TABLE>
Payment enhancements are payable only as a percentage of each specific payment
applied to your contract. The two examples below demonstrate how the payment
enhancement is calculated:
EXAMPLE 1 - Assume an initial payment of $400,000 and a subsequent payment of
$200,000 are made into the contract. Payment enhancements would be determined as
follows*:
(A) A payment enhancement of $12,000 (3% x $400,000) would be allocated among
the investment options in proportion to the allocation of the $400,000
initial payment.
(B) A payment enhancement of $8,000 (4% x $200,000) would be allocated among
the investment options in proportion to the allocation of the $200,000
subsequent payment.
EXAMPLE 2 - Assume an initial payment of $200,000 and a subsequent payment of
$400,000 are made into the contract. Payment enhancements would be determined as
follows*:
(A) A payment enhancement of $6,000 (3% x $200,000) would be allocated among
the investment options in proportion to the allocation of the $200,000
initial payment.
(B) A payment enhancement of $16,000 (4% x $400,000) would be allocated among
the investment options in proportion to the allocation of the $400,000
subsequent payment.
*Unless the company receives a letter of intent that the additional purchase
payments will be received within 13 months of the issue date of the contract. if
the company receives a letter of intent, the payment enhancement will be
determined using the payment enhancement percentage associated with the total
amount of purchase payments set forth in the letter of intent. (See "payment
enhancement")
46
<PAGE> 51
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 52
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
NASL VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
OF
NORTH AMERICAN SECURITY
LIFE INSURANCE COMPANY
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL DEFERRED
VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
This Statement of Additional Information is not a Prospectus. It contains
information in addition to that described in the Prospectus and should be read
in conjunction with the Prospectus dated the same date as this Statement of
Additional Information. The Prospectus may be obtained by writing North American
Security Life Insurance Company (the "Company") at the Annuity Service Office,
P.O. Box 9230, Boston, Massachusetts 02205-9230 or telephoning (617) 266-6008.
The date of this Statement of Additional Information is , 1997.
North American Security Life Insurance Company
116 Huntington Avenue
Boston, Massachusetts 02116
(617) 266-6008
- --------------------------------------------------------------------------------
<PAGE> 53
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
General Information and History.................................... 3
Performance Data................................................... 3
Services
Independent Auditors........................................ 6
Servicing Agent............................................. 6
Principal Underwriter....................................... 6
Cancellation of Contract........................................... 7
Financial Statements............................................... 8
</TABLE>
3
<PAGE> 54
GENERAL INFORMATION AND HISTORY
The NASL Variable Account ("Variable Account") is a separate investment
account of the Company, a stock life insurance company organized under the laws
of Delaware in 1979. The ultimate parent of the Company is The Manufacturers
Life Insurance Company ("Manulife"), a Canadian mutual life insurance Company
based in Toronto, Canada. Prior to January 1, 1996, the Company 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.
PERFORMANCE DATA
Each of the sub-accounts may in its advertising and sales materials quote
total return figures. For periods prior to , 1997 performance data will
be hypothetical figures based on the assumption that a contract offered by the
Prospectus was issued when the sub-accounts first became available for
investment under other contracts offered by the Company. Hypothetical
performance figures will also be furnished for sub-accounts investing in NASL
Series Trust portfolios established on December 31, 1996 in connection with the
merger of Manulife Series Fund, Inc. with and into NASL Series Trust. Such
figures are based on the assumption that the sub-accounts had been available for
investment under a contract offered by this Prospectus when the applicable
Manulife Series Fund, Inc. portfolio first became available under contracts
issued by affiliates of the Company. The sub-accounts may advertise both
"standardized" and "non-standardized" total return figures, although
standardized figures will always accompany non-standardized figures. Such
figures will always include the average annual total return for recent one year
and, when applicable, five and ten year periods and, where less than ten years,
the period since the sub-account first became available for investment. Where
the period since inception is less than one year, the total return quoted will
be the aggregate return for the period. The average annual total return is the
average annual compounded rate of return that equates a purchase payment to the
market value of such purchase payment on the last day of the period for which
such return is calculated. The aggregate total return is the percentage change
(not annualized) that equates a purchase payment to the market value of such
purchase payment on the last day of the period for which such return is
calculated. For purposes of the calculations it is assumed that an initial
payment of $1,000 is made on the first day of the period for which the return is
calculated. In calculating standardized return figures, all recurring charges
(all asset charges (mortality and expense risk fees, administrative fees and
distribution fees)) are reflected, and the asset charges are reflected in
changes in unit values. Standardized total return figures will be quoted
assuming redemption at the end of the period. Such figures may be accompanied by
non-standardized total return figures that are calculated on the same basis as
the standardized returns except that the calculations assume no redemption at
the end of the period. The Company believes such non-standardized figures are
useful to contract owners who wish to assess the performance of an ongoing
contract of the size that is meaningful to the individual contract owner.
4
<PAGE> 55
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
=====================================================================================
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR INCEPTION DATE
10 YEARS, WHICHEVER
IS SHORTER
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging % N/A 0.90% 10/4/94
Markets*
- -------------------------------------------------------------------------------------
International Small Cap N/A N/A % 3/4/96
- -------------------------------------------------------------------------------------
Small/Mid Cap N/A N/A % 3/4/96
- -------------------------------------------------------------------------------------
Global Equity % % % 3/18/88
- -------------------------------------------------------------------------------------
Growth N/A N/A % 7/15/96
- -------------------------------------------------------------------------------------
Equity % % %# 6/18/85
- -------------------------------------------------------------------------------------
Quantitative Equity* % % % 4/30/87
- -------------------------------------------------------------------------------------
Blue Chip Growth % N/A % 12/11/92
- -------------------------------------------------------------------------------------
Real Estate Securities* % % % 4/30/87
- -------------------------------------------------------------------------------------
Int'l Growth & Income % N/A % 1/09/95
- -------------------------------------------------------------------------------------
Growth and Income % % % 4/23/91
- -------------------------------------------------------------------------------------
Equity-Income % N/A % 2/19/93
- -------------------------------------------------------------------------------------
Aggressive Asset Allocation % % % 8/03/89
- -------------------------------------------------------------------------------------
Moderate Asset Allocation % % % 8/03/89
- -------------------------------------------------------------------------------------
Conservative Asset % % % 8/03/89
Allocation
- -------------------------------------------------------------------------------------
Strategic Bond % N/A % 2/19/93
- ----------------------------------------------------------------------------
Global Government Bond % % % 3/18/88
- ----------------------------------------------------------------------------
Capital Growth Bond* % % %# 6/26/84
- ----------------------------------------------------------------------------
Investment Quality Bond** % % % 4/23/91
- ----------------------------------------------------------------------------
U.S. Government % % % 5/01/89
Securities***
- ----------------------------------------------------------------------------
Money Market % % %# 6/18/85
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 56
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
=====================================================================================
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR INCEPTION DATE
10 YEARS, WHICHEVER
IS SHORTER
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging % N/A 4.45% 10/4/94
Markets*
- -------------------------------------------------------------------------------------
International Small Cap N/A N/A % 3/4/96
- -------------------------------------------------------------------------------------
Small/Mid Cap N/A N/A % 3/4/96
- -------------------------------------------------------------------------------------
Global Equity % % % 3/18/88
- -------------------------------------------------------------------------------------
Growth N/A N/A % 7/15/96
- -------------------------------------------------------------------------------------
Equity % % %# 6/18/85
- -------------------------------------------------------------------------------------
Quantitative Equity* % % % 4/30/87
- -------------------------------------------------------------------------------------
Blue Chip Growth % N/A % 12/11/92
- -------------------------------------------------------------------------------------
Real Estate Securities* % % % 4/30/87
- -------------------------------------------------------------------------------------
Int'l Growth & Income % N/A % 1/09/95
- -------------------------------------------------------------------------------------
Growth and Income % % % 4/23/91
- -------------------------------------------------------------------------------------
Equity-Income % N/A % 2/19/93
- -------------------------------------------------------------------------------------
Aggressive Asset Allocation % % % 8/03/89
- -------------------------------------------------------------------------------------
Moderate Asset Allocation % % % 8/03/89
- -------------------------------------------------------------------------------------
Conservative Asset % % % 8/03/89
Allocation
- -------------------------------------------------------------------------------------
Strategic Bond % N/A % 2/19/93
- -------------------------------------------------------------------------------------
Global Government Bond % % % 3/18/88
- -------------------------------------------------------------------------------------
Capital Growth Bond* % % %# 6/26/84
- -------------------------------------------------------------------------------------
Investment Quality Bond** % % % 4/23/91
- -------------------------------------------------------------------------------------
U.S. Government % % % 5/01/89
Securities***
- -------------------------------------------------------------------------------------
Money Market % % %# 6/18/85
- -------------------------------------------------------------------------------------
</TABLE>
#10 YEAR AVERAGE ANNUAL RETURN.
* On December 31, 1996, Manulife Series Fund, Inc. merged with NASL Series
Trust. Performance presented for these sub-accounts is based upon the
performance of the respective predecessor Manulife Series Fund portfolio for
periods to December 31, 1996. Performance for each of these sub-accounts is
based on the historical expenses and performance of the predecessor Manulife
Series Fund portfolio and does not reflect the current expenses that an investor
would INCUR as a holder of units of the sub-account.
6
<PAGE> 57
** Because the Investment Quality Bond Trust changed its subadviser and
investment objective effective April 23, 1991, the Company has elected to quote
performance for the Investment Quality Bond Sub-account only since the date of
change in order to quote returns representative of its current objective and
produced by its current portfolio manager. Per share information concerning the
period prior to the change appears in the Trust's Prospectus. Average annual
total rates of return for the one, five, and ten year periods for the
sub-account are available upon request.
*** The U.S. Government Securities Sub-account commenced operations on
March 18, 1988 by investing in shares of the Convertible Securities Trust. That
Trust changed its investment objective and its investment Subadviser effective
May 1, 1989, pursuant to a vote of its shareholders. In view of the change in
investment objective and portfolio manager, the U.S. Government Securities
Sub-account has elected to quote performance only since the date of the change
in order to quote returns representative of its current objective and produced
by its current portfolio manager. Per share information concerning the period
prior to the change appears in the Trust's Prospectus. Average annual total
rates of return for the one, five, and ten year periods for the sub-account are
available upon request.
* * * * *
In addition to the non-standardized returns quoted above, each of the
sub-accounts may from time to time quote aggregate non-standardized total
returns calculated in the same manner as set forth above for other time periods.
From time to time the Trust may include in its advertising and sales literature
general discussions of economic theories, including but not limited to,
discussions on how demographic and political trends can affect the financial
markets. Further, the Trust may also include in its advertising and sales
literature specific information on each of the Trust's subadvisers, including
but not limited to, research capabilities of a subadviser, assets under
management, information relating to other clients of a subadviser, and other
generalized information.
SERVICES
INDEPENDENT AUDITORS
The financial statements of the Company and the Variable Account at
December 31, 1996 and for the year ended appearing in this Statement of
Additional Information have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
is included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The consolidated balance sheet as of December 31, 1995 and the consolidated
statements of operations, capital surplus, and cash flows for each of the two
years in the period ended December 31, 1995, appearing in this Statement of
Additional Information have been included herein in reliance on the report,
which includes language explaining the basis of accounting used and whose
opinion is modified in consideration of the fact that such basis of accounting
after 1996 (upon issuance of 1996 financial statements) differs from generally
accepted accounting principles, of Coopers & Lybrand L.L.P., independent
accountants given on the authority of said firm as experts in accounting and
auditing.
The financial statements of the Company which are included in the Statement
of Additional Information should be considered only as bearing on the ability of
the Company to meet its obligations under the contracts. They should not be
considered as bearing on the investment performance of the assets held in the
Variable Account.
SERVICING AGENT
Vantage Computer Systems, Inc. ("Vantage") provides to the Company a
computerized data processing recordkeeping system for variable annuity
administration. Vantage provides various daily, semimonthly, monthly, semiannual
and annual reports including: daily updates on accumulation unit values,
variable annuity participants and transactions, agent production and
commissions; semimonthly commission statements; monthly summaries of agent
production and daily transaction reports;
7
<PAGE> 58
semiannual statements for contract owners; and annual contract owner tax
reports. Vantage receives approximately $7.50 per policy per year, plus certain
other fees paid by the Company for the services provided.
PRINCIPAL UNDERWRITER
NASL Financial Services, Inc., a wholly-owned subsidiary of the Company,
serves as principal underwriter of the contracts. Contracts are offered on a
continuous basis. The aggregate dollar amount of underwriting commissions paid
to NASL Financial Services, Inc. in 1996, 1995 and 1994 were $83,031,288,
$68,782,161 and $69,999,469, respectively. The amounts retained by NASL
Financial Services, Inc. during such periods were $0, $0 and $0, respectively.
8
<PAGE> 59
PART C
OTHER INFORMATION
<PAGE> 60
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
(1) Financial Statements of the Registrant, NASL Variable Account
(Part B of the registration statement)(to be filed by amendment).
(2) Financial Statements of the Depositor, North American Security
Life Insurance Company (Part B of the registration statement)(to
be filed by amendment).
(b) Exhibits
(1) (i) Resolution of the Board of Directors of North American
Security Life Insurance Company establishing the NASL
Variable Account - Incorporated by reference to Exhibit
(A)(1) to Form S-6, file number 2-93435, filed September 24,
1984 on behalf of the NASL Variable Account of North
American Security Life Insurance Company.
(ii) Resolution of the Board of Directors of North American
Security Life Insurance Company redesignating existing
sub-accounts and dividing the NASL Variable Account to
create additional sub-accounts, dated May 30, 1995 -
Incorporated by reference to Exhibit (b)(1)(ii) to
post-effective amendment no. 2 to Form N-4, file number
33-77878, filed March 1, 1996.
(iii)Resolution of the Board of Directors of North American
Security Life Insurance Company redesignating existing
sub-accounts and dividing the NASL Variable Account to
create additional sub-accounts, dated February 28, 1996 --
Incorporate by reference to Exhibit (b)(1)(ii) to
post-effective amendment no. 3 to Form N-4, file number
33-77878, filed February 28, 1997.
(iv) Resolution of the Board of Directors of North American
Security Life Insurance Company redesignating existing
sub-accounts and dividing the NASL Variable Account to
create additional sub-accounts, dated September 30, 1996 --
Incorporated by reference to Exhibit (b)(1)(iv) to
post-effective amendment no. 3 to Form N-4, file number
33-77878, filed February 28, 1997.
(2) Agreements for custody of securities and similar investments -
Not Applicable.
(3) (i) Underwriting Agreement between North American Security Life
Insurance Company (Depositor) and NASL Financial Services,
Inc. (Underwriter) -- Incorporated by reference to Exhibit
(A)(3)(a) to
<PAGE> 61
Form S-6, file number 2-93435, filed September 24, 1984 on
behalf of the NASL Variable Account of North American
Security Life Insurance Company.
(ii) Promotional Agent Agreement between NASL Financial Services,
Inc. (Underwriter), North American Security Life Insurance
Company (Depositor), Wood Logan Associates, Inc.
(Promotional Agent) and NAWL Holding Company, Inc.--
Incorporated by reference to Exhibit (b)(3)(ii) to
post-effective amendment no. 3 to Form N-4, file number
33-77878, filed February 28, 1997.
(iii)Form of broker-dealer agreement between North American
Security Life Insurance Company, NASL Financial Services,
Inc. (Underwriter), Wood Logan Associates, Inc. (Promotional
Agent) and broker-dealers -- Incorporated by reference to
Exhibit (b)(3)(iii) to pre-effective amendment no. 1 to Form
N-4, file number 33-9960, filed February 2, 1987 on behalf
of the NASL Variable Account of North American Security Life
Insurance Company.
(4) (i) Specimen Flexible Purchase Payment Individual Deferred
Variable Annuity Contract, Non-Participating - Filed
herewith.
(5) Specimen Application for Flexible Purchase Payment Individual
Deferred Combination Fixed and Variable Annuity Contract,
Non-Participating. - Filed herewith.
(6) (i) Certificate of Incorporation of North American Security Life
Insurance Company -- Incorporated by reference to Exhibit
(A)(6) to Form S-6, file number 2-93435, filed September 24,
1984 on behalf of the NASL Variable Account of North
American Security Life Insurance Company.
(ii) By-laws of North American Security Life Insurance Company -
Incorporated by reference to Exhibit (b)(6)(ii) to
post-effective amendment no. 2 to Form N-4, file number
33-77878, filed March 1, 1996.
(7) (i) Contract of reinsurance in connection with the variable
annuity contracts being offered - Reinsurance and Accounts
Receivable Agreements between North American Security Life
Insurance Company and ITT Lyndon Life, effective December
31, 1993, and Amendments thereto effective January 1, 1994
and December 31, 1994. Incorporated by reference to Exhibit
(b)(7) to Form N-4, file number 33-76684 filed March 2, 1995
on behalf of the NASL
<PAGE> 62
Variable Account of North American Security Life Insurance
Company.
(ii) Contract of reinsurance in connection with the variable
annuity contracts being offered - Variable Annuity
Guaranteed Death Benefit Reinsurance Contract between North
American Security Life Insurance Company and Connecticut
General Life Insurance Company, effective July 1, 1995 -
Incorporated by reference to Exhibit (b)(7)(ii) to
post-effective amendment no. 2 to Form N-4, file number
33-77878, filed March 1, 1996.
(iii)Contract of reinsurance in connection with the variable
annuity contracts being offered - Contract between North
American Security Life Insurance Company and Swiss Re
America, effective August 1, 1995 - Incorporated by
reference to Exhibit (b)(7)(iii) to post-effective amendment
no. 2 to Form N-4, file number 33-77878, filed March 1,
1996.
(8) Other material contracts not made in the ordinary course of
business which are to be performed in whole or in part on or
after the date the registration statement is filed:
(i) Form of Remote Service Agreement dated November 1, 1996
betwen North American Security Life Insurance Company and
CSC Continuum Inc. -- Incorporated by reference to Exhibit
(b)(8)(i) to post-effective amendment no. 3 to Form N-4,
file number 33-77878, filed February 28, 1997.
(9) Opinion of Counsel and consent to its use as to the legality of
the securities being registered -- Filed herewith.
(10) (i) Written consent of Ernst & Young L.L.P., independent
auditors -- (To be filed by amendment).
(ii) Written consent of Coopers & Lybrand L.L.P, independent
accountants -- (To be filed by amendment).
(11) All financial statements omitted from Item 23, Financial
Statements - Not Applicable
(12) Agreements in consideration for providing initial capital between
or among Registrant, Depositor, Underwriter or initial contract
owners -- Not Applicable.
<PAGE> 63
(13) Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 21 --
Incorporated by reference to Exhibit (b)(13) to Form N-4, file
number 33-28455, filed May 7, 1989 on behalf of the NASL Variable
Account of North American Security Life Insurance Company.
Additional files incorporated by reference to exhibit (b)(13) to
NASL Variable Account Registration Statement on Form N-4 File No.
33-77878, dated April 18, 1994. Additional schedule for
computation incorporated by reference to Exhibit (b)(13) to
post-effective amendment no. 2 to Form N-4, file number 33-76162,
filed March 1, 1996.
(14) Financial Data Schedule -- (To be filed by amendment).
(15) (i) Powers of Attorney - North American Security Life Insurance
Company Directors -- Incorporated by reference to Exhibit (b)(14)
to Form N-4, file number 33-55712, filed March 22, 1993 on behalf
of the NASL Variable Account of North American Security Life
Insurance Company.
(ii) Power of Attorney - North American Security Life Insurance
Company Treasurer (Principal Financial and Accounting
Officer) -- Incorporated by reference to Exhibit (b)(14)(b)
to Form N-4, file no. 33-28455, filed April 2, 1993 on
behalf of the NASL Variable Account of North American
Security Life Insurance Company.
Item 25. Directors and Officers of the Depositor.
----------------------------------------
OFFICERS AND DIRECTORS OF NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
Name and Principal
Business Address Position with Security Life
- ---------------- ---------------------------
<S> <C>
John D. Richardson Chairman of the Board of Directors
200 Bloor Street East
North Tower 11th Floor
Toronto, Ontario
Canada M4W-1E5
Peter S. Hutchison Director
200 Bloor Street East
North Tower 11th Floor
Toronto, Ontario
Canada M4W-1E5
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
<S> <C>
John D. DesPrez III President and Director
73 Tremont Street
Boston, MA 02108
James Boyle Vice President, Administration and Chief Administrative Officer
116 Huntington Avenue
Boston, MA 02116
John G. Vrysen Vice President and Chief Actuary
73 Tremont Street
Boston, MA 02108
Hugh McHaffie Vice President, Product Management
73 Tremont Street
Boston, MA 02108
Richard C. Hirtle Vice President, Treasurer and Chief Operating Officer
73 Tremont Street
Boston, MA 02108
James D. Gallagher Vice President, Secretary and General Counsel
73 Tremont Street
Boston, MA 02108
Joseph Scott Vice President, Accumulation Life Products
73 Tremont Street
Boston, MA 02108
Janet Sweeney Vice President, Corporate Services
73 Tremont Street
Boston, MA 02108
</TABLE>
Item 26. Persons Controlled by or Under Common Control with Depositor or
Registrant.
---------------------------------------------------------------
THE MANUFACTURERS LIFE INSURANCE COMPANY
(Subsidiaries Organization Chart- including certain Significant Investments)
<TABLE>
<CAPTION>
THE MANUFACTURERS LIFE INSURANCE COMPANY (CANADA)
<S> <C>
1. ManuLife Holdings (Hong Kong) Limited - H.K. (100%)
2. ManuLife Financial Systems (Hong Kong) Limited - H.K. (100%)
3. P.T. Asuransi Jiwa Dharmala Manulife - Indonesia (51%)
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
<S> <C>
4. WT (SW) Properties Ltd. - U.K. (100%)
5. OUB Manulife Pte. Ltd. - Singapore (50%)
6. Manulife (Malaysia) SDN. BHD. - Malaysia (100%)
7. Manulife (Thailand) Ltd. - Thailand (100%)
8. Young Poong Manulife Insurance Company - Korea (50%)
9. Ennal, Inc. - Ohio (100%)
10. First North American Realty, Inc. - Minnesota (100%)
11. NAL Resources Limited - Alberta (100%)
(a) Nottingham Gas Limited - Saskatchewan (31%)
12. Nottingham Gas Limited - Saskatchewan (31%)
13. 484551 Ontario Limited - Ontario (100%)
(a) 911164 Ontario Limited - Ontario (100%)
14. Peel-de Maisonneuve Investments Ltd. - Canada (50%)
(a) 2932121 Canada Inc. - Canada (100%)
15. Balmoral Developments Inc. - Canada (100%)
16. KY Holding Corporation - Canada (100%)
17. 165351 Canada Limited - Canada (100%)
18. 172846 Canada Limited - Canada (100%)
19. 576986 Ontario Inc. - Ontario (100%)
20. Cantay Holdings Inc. - Ontario (100%)
21. Manufacturers Life Capital Corporation Inc. - Canada (100%)
22. Elliott & Page Asset Management Ltd. - Canada (100%)
23. 495603 Ontario Limited - Ontario (100%)
24. 994744 Ontario Inc. - Ontario (100%)
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
<S> <C>
25. The North American Group Inc. - Ontario (100%)
26. Manulife Investment Management Corporation - Canada (100%)
(a) 159139 Canada Inc. - Canada (50%)
i. Altamira Management Ltd. - Canada (60.96%)
A. ACI2 Limited - Cayman (100%)
a/ Regent Pacific Group Limited-Cayman (63.8%)
a.1 Manulife Regent Investment Corporation -
Barbados (100%) [50% by Regent Pacific Group Limited
and 50% by Manulife Data Services Inc.]
b.1 Manulife Regent Investment Asia Limited -
Hong Kong (100%)
B. Altamira Financial Services Inc. - Ontario (100%)
a/ AIS Securities (Partnership) - Ontario (100%) [5% by
Altamira Financial Services, Inc. and 95% by
Altamira Investment Services Inc.]
b/ Altamira Investment Services Inc. - Ontario (100%)
(a) AIS Securities (Partnership) - Ontario (100%)[95% by
by Altamira Investment Services Inc. and 5% by
Altamira Financial Services Inc.]
(b) Altamira (Alberta) Ltd. - Alberta (100%)
(c) Capital Growth Financial Services Inc. -
Ontario (100%)
27. Manulife International Investment Management Limited - U.K. (100%)
(a) Manulife International Fund Management Limited - U.K. (100%)
28. Manulife (International) Limited - Bermuda (100%)
(a) The Manufacturers (Pacific Asia) Insurance Company Limited
- Hong Kong (100%)
(b) Newtime Consultants Limited - Hong Kong (100%)
29. Manulife Data Services Inc.- Barbados (100%)
(a) Manulife Regent Investment Corporation - Barbados - (100%)
[50% by Manulife Data Services Inc. and 50% by Regent
Pacific Group Limited]
(b) Manulife Regent Investment Asia Limited - Hong Kong (100%)
30. FNA Financial Inc. - Canada (100%)
(a) NAL Trustco Inc. - Ontario (100%)
(b) First North America Insurance Company - Canada (100%)
(c) Elliott & Page Limited - Ontario (100%)
(d) Seamark Asset Management Ltd. - Canada (69.175%)
(e) NAL Resources Management Limited - Canada (100%)
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
<S> <C>
(i) NAL Energy Inc. - Alberta (100%)
31. ManuCab Ltd. - Canada (100%)
(a) Plazcab Service Limited - Canada (100%)
32. Townvest Inc. - Ontario (100%)
33. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
(a) The Manufacturers Life Insurance Company (U.S.A.) - Michigan (100%)
(b) Manulife Holding Corporation - Delaware (100%)
i. Manufacturers Life Mortgage Securities
Corporation - Delaware (100%)
ii. Manulife Property Management of Washington, D.C., Inc.
- Washington D.C. (100%)
iii. Capital Design Corporation - California - (100%)
iv. ManEquity, Inc. - Colorado (100%)
v. Manulife Service Corporation - Colorado (100%)
vi. Succession Planning International Inc. - Wisconsin (100%)
(c) The Manufacturers Life Insurance Company of America - Michigan (100%)
i. Manulife Series Fund, Inc. - Maryland (100%)
ii. Manufacturers Adviser Corporation - Colorado (100%)
(d) Manulife Reinsurance Limited - Bermuda (100%)
34. The Manufacturers Investment Corporation - Michigan (100%)
35. Capitol Bankers Life Insurance Company - Minnesota (100%)
36. NAWL (North American Wood Logan Holding Company) - Delaware (85%)
(a) Wood Logan Associates Inc. - Connecticut (100%)
(i) Wood Logan Distributors - Connecticut (100%)
(b) North American Security Life Insurance Company - Delaware (100%)
(i) NASL Financial Services, Inc. - Massachusetts (100%)
(ii) First North American Life Assurance Company - New York (100%)
37. Manulife (International) Reinsurance Limited - Bermuda (100%)
(a) Manulife (International) P&C Limited - Bermuda (100%)
(b) Manufacturers P&C Limited - Barbados (100%)
38. Manulife Financial Holdings Limited - Ontario (100%)
(a) 742166 Ontario Inc. - Ontario (100%)
(b) Family Realty Firstcorp Limited - Ontario (100%)
(c) Thos. N. Shea Investment Corporation Limited - Ontario (100%)
(d) Manulife Bank of Canada - Canada (100%)
i. Manulife Securities International Ltd. - Canada (100%)
</TABLE>
<PAGE> 68
Item 27. Number of Contract Owners.
--------------------------
As of the date of filing this registration statement there were no contracts
outstanding.
Item 28. Indemnification.
----------------
Article 9 of the Articles of Incorporation of the Company provides as follows:
NINTH: A director of this corporation shall not be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
except to the extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended. Any repeal or modification of the foregoing
sentence shall not adversely affect any right or protection of a director of the
corporation existing hereunder with respect to any act or omission occurring
prior to such repeal or modification.
Article XIV of the By-laws of the Company provides as follows:
Each Director or officer, whether or not then in office, shall be
indemnified by the Company against all costs and expenses reasonably incurred by
or imposed upon him or her, including legal fees, in connection with or
resulting from any claim, action, suit or proceeding, whether civil, criminal or
administrative, in which he or she may become involved as a party or otherwise,
by reason of his or her being or having been a Director or officer of the
Company.
(1) Indemnity will not be granted to any Director or officer with respect
to any claim, action, suit or proceeding which shall be brought against such
Director or officer by or in the right of the Company, and
(2) Indemnification for amounts paid and expenses incurred in settling such
action, claim, suit or proceeding, will not be granted, until it shall be
determined by a disinterested majority of the Board of Directors or by a
majority of any disinterested committee or group of persons to whom the question
may be referred by the Board, that said Director or officer did indeed act in
good faith and in a manner he or she reasonably believed to be in, or not
adverse, to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonably cause to believe that his or her
conduct was legal, and that the payment of such costs, expenses, penalties or
fines is in the interest of the Company, and not contrary to public policy or
other provisions of law.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendre or its equivalent, shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he or she reasonably believed to be in, or not adverse, to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Indemnification shall be made by the corporation upon determination by a
disinterested majority of the Board of Directors or of a majority of any
disinterested committee or group or persons to
<PAGE> 69
whom the question may be referred to by said Board, that the person did indeed
act in good faith and in a manner he or she reasonably believed to be in, or not
adverse, to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonably cause to believe that his or her
conduct was legal.
The foregoing right to indemnity shall not be exclusive of any other rights
to which such Director or officer may be entitled as a matter of law.
The foregoing right to indemnity shall also extend to the estate of any
deceased Director or officer with respect to any such claim, action, suit or
proceeding in which such Director or officer or his or her estate may become
involved by reason of his or her having been a Director or officer of the
Company, and subject to the same conditions outlined above.
Section IX, paragraph D of the Promotional Agent Agreement among the Company
(referred to therein as "Security Life"), NASL Financial and Wood/Logan
(referred to therein as "Promotional Agent") provides as follows:
a. NASL Financial and Security Life agree to indemnify and hold harmless
Promotional Agent, its officers, directors and employees against any and
all losses, claims, damages or liabilities to which they may become subject
under the Securities Act of 1933 ("1933 Act"), the 1934 Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or any omission or alleged
omission to state a material fact required to be stated or necessary to
make the statements made not misleading in any registration statement for
the Contracts filed pursuant to the 1933 Act or any prospectus included as
a part thereof, as from time to time amended and supplemented, or any
advertisement or sales literature approved in writing by NASL Financial or
Security Life pursuant to Section VI, paragraph B of this Agreement.
b. Promotional Agent agrees to indemnify and hold harmless NASL Financial and
Security Life, their officers, directors and employees against any and all
losses, claims, damages or liabilities to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon: (i) any oral or written misrepresentation by Promotional Agent
or its officers, directors, employees or agents unless such
misrepresentation is contained in any registration statement for the
Contracts or Fund shares, any prospectus included as a part thereof, as
from time to time amended and supplemented, or any advertisement or sales
literature approved in writing by NASL Financial pursuant to Section VI,
paragraph B of this Agreement or, (ii) the failure of Promotional Agent or
its officers, directors, employees or agents to comply with any applicable
provisions of this Agreement.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
<PAGE> 70
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 expenses 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.
Item 29. Principal Underwriters.
-----------------------
a. North American Funds
First North American Life Assurance Company
<TABLE>
<CAPTION>
b. Name and Principal Positions and Offices
Business Address with Underwriter
---------------- ----------------
<S> <C>
John D. Richardson* Chairman & Director
Richard C. Hirtle** President & Director
John D. DesPrez III** Director
James D. Gallager** Vice President, General Counsel
John G. Vrysen** Treasurer
Brian H. Buckley** Clerk
Lori-Ann Herbsmann*** Assistant Clerk - New York Operations
Kimberly S. Ciccarelli** Assistant Clerk
E. Paige Sabine** Assistant Clerk
</TABLE>
*200 Bloor Street East ***International Corporate Center at Rye
North Tower 11th Floor 555 Theodore Fremd Avenue
Toronto, Ontario Rye, New York 10580
<PAGE> 71
Canada, M4W-1E5
**73 Tremont Street
Boston, MA 02108
c. None.
Item 30. Location of Accounts and Records.
---------------------------------
All books and records are maintained at 116 Huntington Avenue, Boston, MA 02116
and at 73 Tremont Street, Boston, MA 02108.
Item 31. Management Services.
--------------------
None.
Item 32. Undertakings.
-------------
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
North American Security Life Insurance 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.
<PAGE> 72
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, NASL Variable Account, has caused this Registration
Statement to be signed on its behalf, in the City of Boston, and Commonwealth of
Massachusetts on this 3rd day of April, 1997.
NASL VARIABLE ACCOUNT
---------------------
(Registrant)
By: NORTH AMERICAN SECURITY
------------------------
LIFE INSURANCE COMPANY
------------------------
(Depositor)
By: /s/ JOHN D. DESPREZ III
------------------------------
John D. DesPrez III, President
Attest:
/s/ JAMES D. GALLAGHER
- -----------------------------
James D. Gallagher, Secretary
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Depositor has duly caused this Registration
Statement to be signed on its behalf by the undersigned on the 3rd day of April,
1997 in the City of Boston, and Commonwealth of Massachusetts.
NORTH AMERICAN SECURITY
----------------------
LIFE INSURANCE COMPANY
----------------------
(Depositor)
By: /s/ JOHN D. DESPREZ III
------------------------------
John D. DesPrez III, President
Attest:
/s/ JAMES D. GALLAGHER
- ------ ----------------------
James D. Gallagher, Secretary
<PAGE> 73
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities with the Depositor and on
the dates indicated.
SIGNATURE TITLE DATE
/s/ JOHN D. DESPREZ Director and President April 3, 1997
---------------------- (Principal Executive -------------
John D. DesPrez Officer) (Date)
*
---------------------- Director April 3, 1997
Peter S. Hutchison -------------
(Date)
---------------------- Director and Chairman April 3, 1997
John D. Richardson of the Board -------------
(Date)
/s/ RICHARD C. HIRTLE Vice President and April 3, 1997
---------------------- Treasurer (Principal -------------
Richard C. Hirtle Financial and Accounting (Date)
Officer)
*By: /s/ RICHARD C. HIRTLE April 3, 1997
----------------------- --------------
Richard C. Hirtle (Date)
Attorney-in-Fact
Pursuant to Powers
of Attorney
<PAGE> 74
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
(b)(4)(i) Specimen Individual Deferred Variable Annuity Contract
(b)(5) Specimen Application
(b)(9) Opinion as to the Legality of the Securities Being Issued
</TABLE>
<PAGE> 1
[NASL LOGO]
NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXECUTIVE OFFICE: ANNUITY SERVICE OFFICE: HOME OFFICE
116 Huntington Avenue P.O. Box 818 Dover, Delaware
Boston, MA 02116 Boston, MA 02117-0818
1-800-344-1029
THIS IS A LEGAL CONTRACT - READ IT CAREFULLY.
WE AGREE to pay the benefits of this Contract in accordance with its terms.
THIS CONTRACT is issued in consideration of the Payments.
TEN DAY RIGHT TO REVIEW
THE CONTRACT OWNER MAY CANCEL THE CONTRACT BY RETURNING IT TO OUR ANNUITY
SERVICE OFFICE OR AGENT AT ANY TIME WITHIN 10 DAYS AFTER RECEIPT OF THE
CONTRACT. WITHIN 7 DAYS OF RECEIPT OF THE CONTRACT BY US, WE WILL PAY THE
CONTRACT VALUE, LESS ANY PAYMENT ENHANCEMENTS, COMPUTED AT THE END OF THE
VALUATION PERIOD DURING WHICH THE CONTRACT IS RECEIVED BY US, TO THE CONTRACT
OWNER.
SIGNED FOR THE COMPANY at its Executive Office, Boston, Massachusetts,
on the Contract Date.
DETAILS OF VARIABLE ACCOUNT PROVISIONS ON PAGE 8
DETAILS OF FIXED ACCOUNT PROVISIONS ON PAGE 9
[FACSIMILE SIGNATURE] [FACSIMILE SIGNATURE]
Vice President President
Flexible Payment Deferred Combination Fixed and Variable Annuity
Non-Participating
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT ARE VARIABLE AND NOT GUARANTEED AS
TO FIXED DOLLAR AMOUNT.
VENTURE.015 SAMPLE
<PAGE> 2
INTRODUCTION
This is a flexible payment deferred combination fixed and variable annuity. This
Contract provides that prior to the Maturity Date, the Contract Value for an
Owner will accumulate on either a fixed or variable basis or a combination of
both. After the Maturity Date, annuity payments may be either fixed or variable,
or a combination of fixed and variable.
The variable portion of the Contract will vary with the investment performance
of an Owner's Variable Account. The fixed portion of the Contract will
accumulate based on interest rates guaranteed by the Company for the period
selected.
If you select annuity payments on a variable basis, the payment amount will vary
with the investment performance of the Variable Account.
You must allocate Payments among one or more Investment Options. The Investment
Options are identified on the Contract Specifications Page.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Contract Specifications Page Page
PART 1 - DEFINITIONS 1
PART 2 - GENERAL PROVISIONS 2
PART 3 - OWNERSHIP 4
PART 4 - BENEFITS 5
PART 5 - PAYMENTS 7
PART 6 - VARIABLE ACCOUNT PROVISIONS 8
PART 7 - FIXED ACCOUNT PROVISIONS 9
PART 8 - ANNUITY PROVISIONS 10
PART 9 - TRANSFERS 11
PART 10 - WITHDRAWAL PROVISIONS 12
PART 11 - FEES AND DEDUCTIONS 13
PART 12 - LOAN PROVISION 14
PART 13 - PAYMENT OF CONTRACT BENEFITS 14
VENTURE.015 SAMPLE
<PAGE> 3
CONTRACT SPECIFICATIONS PAGE
TYPE OF CONTRACT: [QUALIFIED] PLAN TYPE: [403B]
CONTRACT DATE: [01/07/1997] MATURITY DATE: [04/01/2027]
INITIAL PAYMENT: [$ 10,000.00] CONTRACT NUMBER: [000000001]
GOVERNING LAW: [APPLICABLE STATE]
INITIAL ALLOCATION OF NET PAYMENT: (SEE REVERSE FOR ALL AVAILABLE OPTIONS)
FIXED INVESTMENT OPTIONS: INITIAL INITIAL
INTEREST RATE GUARANTEE
PERIOD EXPIRES
[1-YEAR] [20.00%] [4.70%] [01/07/1998]
VARIABLE INVESTMENT OPTIONS:
[GROWTH & INCOME] [80.00%]
-------
TOTAL 100.00%
PAYMENT ENHANCEMENTS
PAYMENT
CUMULATIVE PAYMENTS: ENHANCEMENT
[FROM $10,000.00 TO $499,999.99 3.0%
FROM $500,000.00 TO $2,499,999.99 4.0%
FROM $2,500,000.00 AND ABOVE 5.0%]
THIS PLAN IS INTENDED TO QUALIFY UNDER THE INTERNAL REVENUE CODE FOR TAX-FAVORED
STATUS. LANGUAGE CONTAINED IN THIS CONTRACT REFERRING TO FEDERAL TAX STATUS OR
RULES IS INFORMATIONAL AND INSTRUCTIONAL AND THIS LANGUAGE IS NOT SUBJECT TO
APPROVAL OR DISAPPROVAL BY THE STATE IN WHICH THE CONTRACT IS ISSUED FOR
DELIVERY. PLEASE SEEK THE ADVICE OF YOUR OWN TAX ADVISOR REGARDING YOUR
INDIVIDUAL TAX TREATMENT.
OWNER: [JOHN DOE] CO-OWNER: [ ]
ANNUITANT: [JOHN DOE] AGE: [35]
CO-ANNUITANT: [ ] BENEFICIARY: [JANE DOE]
VENTURE.015 SAMPLE
<PAGE> 4
CONTRACT SPECIFICATIONS PAGE (CONTINUED)
FEES AND DEDUCTIONS
ASSET FEE: [1.55%]
ANNUAL ADMINISTRATION FEE: [$40.00(1)]
(1) Prior to the Maturity Date, when the Annual Administration Fee is to
be assessed, if the sum of all Investment Accounts exceeds
[$100,000.00], the Annual Administration Fee will be waived.
<TABLE>
<CAPTION>
TABLE OF WITHDRAWAL CHARGES
CONTRACT TOTAL WITHDRAWAL
YEAR CHARGE
-------- ----------------
<S> <C>
[0 8.50%
1 8.50%
2 8.00%
3 7.00%
4 6.00%
5 5.00%
6 4.00%
7 3.00%
8 2.00%
9+ 0.00%]
</TABLE>
OWNER: [JOHN DOE] CO-OWNER: [ ]
ANNUITANT: [JOHN DOE] AGE: [35]
CO-ANNUITANT: [ ] BENEFICIARY: [JANE DOE]
VENTURE.015 SAMPLE
<PAGE> 5
CONTRACT SPECIFICATIONS PAGE (CONTINUED)
AVAILABLE INVESTMENT OPTIONS
FIXED INVESTMENT OPTIONS
[1-YEAR]
VARIABLE INVESTMENT OPTIONS
[PACIFIC RIM EMERGING MARKETS MANUFACTURERS ADVISER CORPORATION]
[SCIENCE & TECHNOLOGY T. ROWE PRICE ASSOCIATES, INC.]
[INTERNATIONAL SMALL CAP FOUNDERS ASSET MANAGEMENT, INC.]
[EMERGING GROWTH WARBURG, PINCUS COUNSELLORS, INC.]
[PILGRIM BAXTER GROWTH PILGRIM BAXTER & ASSOCIATES]
[SMALL/MID CAP FRED ALGER MANAGEMENT, INC.]
[INTERNATIONAL STOCK ROWE PRICE-FLEMING INTERNATIONAL, INC.]
[WORLDWIDE GROWTH FOUNDERS ASSET MANAGEMENT, INC.]
[GLOBAL EQUITY MORGAN STANLEY ASSET MANAGEMENT INC.]
[GROWTH FOUNDERS ASSET MANAGEMENT, INC.]
[EQUITY FIDELITY MANAGEMENT TRUST COMPANY]
[QUANTITATIVE EQUITY MANUFACTURERS ADVISER CORPORATION]
[BLUE CHIP GROWTH T. ROWE PRICE ASSOCIATES, INC.]
[REAL ESTATE SECURITIES MANUFACTURERS ADVISER CORPORATION]
[VALUE MILLER ANDERSON & SHERRERD, LLP]
[INTERNATIONAL GROWTH & INCOME J.P. MORGAN INVESTMENT MANAGEMENT, INC.]
[GROWTH AND INCOME WELLINGTON MANAGEMENT COMPANY, LLP]
[EQUITY-INCOME T. ROWE PRICE ASSOCIATES, INC.]
[BALANCED FOUNDERS ASSET MANAGEMENT, INC.]
[AGGRESSIVE ASSET ALLOCATION FIDELITY MANAGEMENT TRUST COMPANY]
[HIGH YIELD MILLER ANDERSON & SHERRERD, LLP]
[MODERATE ASSET ALLOCATION FIDELITY MANAGEMENT TRUST COMPANY]
[CONSERVATIVE ASSET ALLOCATION FIDELITY MANAGEMENT TRUST COMPANY]
[STRATEGIC BOND SALOMON BROTHERS ASSET MANAGEMENT INC.]
[GLOBAL GOVERNMENT BOND OECHSLE INTERNATIONAL ADVISORS, L.P.]
[CAPITAL GROWTH BOND MANUFACTURERS ADVISER CORPORATION]
[INVESTMENT QUALITY BOND WELLINGTON MANAGEMENT COMPANY, LLP]
[U.S. GOVERNMENT SECURITIES SALOMON BROTHERS ASSET MANAGEMENT INC.]
[MONEY MARKET MANUFACTURERS ADVISER CORPORATION]
[LIFESTYLE PORTFOLIOS: MANUFACTURERS ADVISER CORPORATION
CONSERVATIVE 280
MODERATE 460
BALANCED 640
GROWTH 820
AGGRESSIVE 1000]
VENTURE.015 SAMPLE
<PAGE> 6
CONTRACT SPECIFICATIONS PAGE
TYPE OF CONTRACT: [NON-QUALIFIED] PLAN TYPE:
CONTRACT DATE: [01/07/1997] MATURITY DATE: [04/01/2047]
INITIAL PAYMENT: [$ 10,000.00] CONTRACT NUMBER: [000000002]
GOVERNING LAW: [APPLICABLE STATE]
INITIAL ALLOCATION OF NET PAYMENT: (SEE REVERSE FOR ALL AVAILABLE OPTIONS)
FIXED INVESTMENT OPTIONS: INITIAL INITIAL
INTEREST RATE GUARANTEE
PERIOD EXPIRES
[1-YEAR] [20.00%] [4.70%] [01/07/1998]
VARIABLE INVESTMENT OPTIONS:
[GROWTH & INCOME] [80.00%]
-------
TOTAL 100.00%
PAYMENT ENHANCEMENTS
PAYMENT
CUMULATIVE PAYMENTS: ENHANCEMENT
[FROM $10,000.00 TO $499,999.99 3.0%
FROM $500,000.00 TO $2,499,999.99 4.0%
FROM $2,500,000.00 AND ABOVE 5.0%]
OWNER: [JOHN DOE] CO-OWNER: [ ]
ANNUITANT: [JOHN DOE] AGE: [35]
CO-ANNUITANT: [ ] BENEFICIARY: [JANE DOE]
VENTURE.015 SAMPLE
<PAGE> 7
CONTRACT SPECIFICATIONS PAGE (CONTINUED)
FEES AND DEDUCTIONS
ASSET FEE: [1.55%]
ANNUAL ADMINISTRATION FEE: [$40.00(1)]
(1) Prior to the Maturity Date, when the Annual Administration Fee is to
be assessed, if the sum of all Investment Accounts exceeds
[$100,000.00], the Annual Administration Fee will be waived.
<TABLE>
<CAPTION>
TABLE OF WITHDRAWAL CHARGES
CONTRACT TOTAL WITHDRAWAL
YEAR CHARGE
-------- ----------------
<S> <C>
[0 8.50%
1 8.50%
2 8.00%
3 7.00%
4 6.00%
5 5.00%
6 4.00%
7 3.00%
8 2.00%
9+ 0.00%]
</TABLE>
OWNER: [JOHN DOE] CO-OWNER: [ ]
ANNUITANT: [JOHN DOE] AGE: [35]
CO-ANNUITANT: [ ] BENEFICIARY: [JANE DOE]
VENTURE.015 SAMPLE
<PAGE> 8
AVAILABLE INVESTMENT OPTIONS
FIXED INVESTMENT OPTIONS
[1-YEAR]
VARIABLE INVESTMENT OPTIONS
[PACIFIC RIM EMERGING MARKETS MANUFACTURERS ADVISER CORPORATION]
[SCIENCE & TECHNOLOGY T. ROWE PRICE ASSOCIATES, INC.]
[INTERNATIONAL SMALL CAP FOUNDERS ASSET MANAGEMENT, INC.]
[EMERGING GROWTH WARBURG, PINCUS COUNSELLORS, INC.]
[PILGRIM BAXTER GROWTH PILGRIM BAXTER & ASSOCIATES]
[SMALL/MID CAP FRED ALGER MANAGEMENT, INC.]
[INTERNATIONAL STOCK ROWE PRICE-FLEMING INTERNATIONAL, INC.]
[WORLDWIDE GROWTH FOUNDERS ASSET MANAGEMENT, INC.]
[GLOBAL EQUITY MORGAN STANLEY ASSET MANAGEMENT INC.]
[GROWTH FOUNDERS ASSET MANAGEMENT, INC.]
[EQUITY FIDELITY MANAGEMENT TRUST COMPANY]
[QUANTITATIVE EQUITY MANUFACTURERS ADVISER CORPORATION]
[BLUE CHIP GROWTH T. ROWE PRICE ASSOCIATES, INC.]
[REAL ESTATE SECURITIES MANUFACTURERS ADVISER CORPORATION]
[VALUE MILLER ANDERSON & SHERRERD, LLP]
[INTERNATIONAL GROWTH & INCOME J.P. MORGAN INVESTMENT MANAGEMENT, INC.]
[GROWTH AND INCOME WELLINGTON MANAGEMENT COMPANY, LLP]
[EQUITY-INCOME T. ROWE PRICE ASSOCIATES, INC.]
[BALANCED FOUNDERS ASSET MANAGEMENT, INC.]
[AGGRESSIVE ASSET ALLOCATION FIDELITY MANAGEMENT TRUST COMPANY]
[HIGH YIELD MILLER ANDERSON & SHERRERD, LLP]
[MODERATE ASSET ALLOCATION FIDELITY MANAGEMENT TRUST COMPANY]
[CONSERVATIVE ASSET ALLOCATION FIDELITY MANAGEMENT TRUST COMPANY]
[STRATEGIC BOND SALOMON BROTHERS ASSET MANAGEMENT INC.]
[GLOBAL GOVERNMENT BOND OECHSLE INTERNATIONAL ADVISORS, L.P.]
[CAPITAL GROWTH BOND MANUFACTURERS ADVISER CORPORATION]
[INVESTMENT QUALITY BOND WELLINGTON MANAGEMENT COMPANY, LLP]
[U.S. GOVERNMENT SECURITIES SALOMON BROTHERS ASSET MANAGEMENT INC.]
[MONEY MARKET MANUFACTURERS ADVISER CORPORATION]
[LIFESTYLE PORTFOLIOS: MANUFACTURERS ADVISER CORPORATION
CONSERVATIVE 280
MODERATE 460
BALANCED 640
GROWTH 820
AGGRESSIVE 1000]
VENTURE.015 SAMPLE
<PAGE> 9
PART 1 DEFINITIONS
- --------------------------------------------------------------------------------
WE AND YOU "We", "us" and "our" means North American Security
Life Insurance Company. "You" or "your" means the
Owner of this Contract.
ACCUMULATION UNIT A unit of measure that is used to calculate the
value of the variable portion of this Contract
before the Maturity Date.
ANNUITANT Any individual person or persons whose life is
used to determine the duration of annuity payments
involving life contingencies. The Annuitant is as
designated on the Contract Specifications Page and
application, unless changed.
ANNUITY OPTION The method selected by you for annuity payments
made by us.
ANNUITY SERVICE OFFICE Any office designated by us for the receipt of
Payments and processing of Contract Owner
requests.
ANNUITY UNIT A unit of measure that is used after the Maturity
Date to calculate Variable Annuity payments.
BENEFICIARY The person, persons or entity to whom certain
benefits are payable following the death of an
Owner, or in certain circumstances, an Annuitant.
CONTINGENT BENEFICIARY The person, persons or entity who becomes the
Beneficiary if the Beneficiary is not alive.
CONTRACT ANNIVERSARY The anniversary of the Contract Date.
CONTRACT DATE The date of issue of this Contract as specified on
the Contract Specifications Page.
CONTRACT VALUE The total of the Investment Account Values and, if
applicable, any amount in the Loan Account
attributable to the Contract.
CONTRACT YEAR The period of twelve consecutive months beginning
on the Contract Date or any anniversary
thereafter.
DEBT Any amounts in the Loan Account attributable to
the Contract plus any accrued loan interest. The
loan provision is applicable to certain Qualified
Contracts only.
FIXED ANNUITY An Annuity Option with payments which are
predetermined and guaranteed as to dollar amount.
GENERAL ACCOUNT All the assets of North American Security Life
Insurance Company other than assets in separate
accounts.
INTERNAL REVENUE CODE The Internal Revenue Code of 1986, as amended from
(IRC) time to time, and any successor statute of similar
purposes.
INVESTMENT ACCOUNT An account established by us which represents your
interest in an Investment Option prior to the
Maturity Date.
INVESTMENT ACCOUNT VALUE The value of your investment in an Investment
Account.
INVESTMENT OPTIONS The Investment Options can be either fixed or
variable. The Investment Options available under
this Contract are shown on the Contract
Specifications Page and application.
LOAN ACCOUNT The portion of the General Account that is used
for collateral when a loan is taken.
VENTURE.015 1 SAMPLE
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MATURITY DATE The date on which annuity benefits commence. It is
the date specified on the Contract Specifications
Page, unless changed.
NET PAYMENT The Payment less the amount of premium tax, if
any, deducted from the Payment, plus any
applicable Payment Enhancement.
NON-QUALIFIED CONTRACTS Contracts which are not issued under Qualified
Plans.
OWNER OR CONTRACT OWNER The person, persons or entity entitled to the
ownership rights under this Contract. The owner is
as designated on the Contract Specifications Page
and application, unless changed.
PORTFOLIO OR TRUST A separate portfolio of NASL Series Trust, a
PORTFOLIO mutual fund in which the Variable Account invests,
or any successor mutual fund.
PAYMENT ENHANCEMENT An amount we will add to the Contract at the time
a Payment is applied to your Contract.
PAYMENT An amount paid to us by you as consideration for
the benefits provided by this Contract.
QUALIFIED CONTRACTS Contracts issued under Qualified Plans.
QUALIFIED PLANS Retirement plans which receive favorable tax
treatment under section 401, 403, 408 or 457, of
the Internal Revenue Code of 1986, as amended.
SEPARATE ACCOUNT A segregated account of North American Security
Life Insurance Company that is not commingled with
our general assets and obligations.
SUB-ACCOUNT(S) One or more of the Sub-Accounts of the Variable
Account. Each Sub-Account is invested in shares of
a different Trust Portfolio.
VALUATION DATE Any date on which the New York Stock Exchange is
open for business and the net asset value of a
Trust Portfolio is determined.
VALUATION PERIOD Any period from one Valuation Date to the next,
measured from the time on each such date that the
net asset value of each Portfolio is determined.
VARIABLE ACCOUNT NASL Variable Account, which is a separate account
of North American Security Life Insurance Company.
VARIABLE ANNUITY An Annuity Option with payments which: (1) are not
predetermined or guaranteed as to dollar amount,
and (2) vary in relation to the investment ex-
perience of one or more specified variable
Sub-Accounts.
PART 2 GENERAL PROVISIONS
- --------------------------------------------------------------------------------
ENTIRE CONTRACT The entire contract consists of this Contract, any
Contract endorsements, and a copy of the
application if one is attached to this Contract
when issued. Only our President, Vice-President or
Secretary may agree to change or waive any
provisions of this Contract. The change or waiver
must be in writing.
We will not change or modify this Contract without
your consent except as may be required to make it
conform to any applicable law or regulation or any
ruling issued by a government agency.
VENTURE.015 2 SAMPLE
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The benefits and values available under this
Contract are not less than the minimum required by
any statute of the state in which this Contract is
issued. We have filed a detailed statement of the
method used to calculate the benefits and values
with the Department of Insurance in the state in
which this Contract is issued, if required by law.
BENEFICIARY The Beneficiary is as designated in the Contract
Specifications Page and application, unless
changed. However, if there is a surviving Owner,
that person will be treated as the Beneficiary. If
no such Beneficiary is living, the Beneficiary is
the "Contingent Beneficiary". If no Beneficiary or
Contingent Beneficiary is living, the Beneficiary
is the estate of the deceased Owner.
CHANGE OF MATURITY DATE Prior to the Maturity Date, you may request in
writing a change of the Maturity Date. Any
extension of the Maturity Date will be subject to
our prior approval.
ASSIGNMENT You may assign this Contract at any time prior to
the Maturity Date. No assignment will be binding
on us unless it is written in a form acceptable to
us and received at the Annuity Service Office. We
will not be liable for any payments made or
actions we take before the assignment is accepted
by us. An absolute assignment will revoke the
interest of any revocable Beneficiary. We will not
be responsible for the validity of any assignment.
CLAIMS OF CREDITORS To the extent permitted by law, no benefits
payable under this Contract will be subject to the
claims of your, the Beneficiary's or the
Annuitant's creditors.
MISSTATEMENT AND PROOF We may require proof of age, sex or survival of
OF AGE, SEX OR SURVIVAL any person upon whose age, sex or survival any
payments depend. If the age or sex of the
Annuitant has been misstated, the benefits will be
those which the Payments would have provided for
the correct age and sex. If we have made incorrect
annuity payments, the amount of any underpayment
will be paid immediately. The amount of any
overpayment will be deducted from future annuity
payments.
ADDITION, DELETION We reserve the right, subject to compliance with
SUBSTITUTION OF applicable law, to make additions to, deletions
INVESTMENT OPTIONS from, or substitutions for the Portfolio shares
that are held by the Variable Account or that the
Variable Account may purchase. We reserve the
right to eliminate the shares of any of the
eligible Portfolios and to substitute shares of
another Portfolio of the Trust, or of another
open-end registered investment company, if the
shares of any eligible Portfolio are no longer
available for investment, or if in our judgment
further investment in any eligible Portfolio
should become inappropriate in view of the
purposes of the Variable Account. We will not
substitute any shares attributable to your
interest in a Sub-Account without notice to you
and prior approval of the Securities and Exchange
Commission to the extent required by the
Investment Company Act of 1940. Nothing contained
herein shall prevent the Variable Account from
purchasing other securities for other series or
classes of contracts, or from effecting a
conversion between shares of another open-end
investment company.
We reserve the right, subject to compliance with
applicable law, to establish additional
Sub-Accounts which would invest in shares of a new
Portfolio of the Trust or in shares of another
open-end investment company. We also reserve the
right to eliminate existing Sub-Accounts, to
combine Sub-Accounts or to transfer assets in a
Sub-Account to another Separate Account
established by us or an affiliated company. In the
event of any such substitution or change, we may,
by appropriate endorsement, make such changes in
this and other Contracts as may be necessary or
appropriate to reflect such substitutions or
change. If deemed by us to be in the best
interests of persons having voting rights under
the Contracts, the Variable Account may be
operated as a management company under the
Investment Company Act of 1940 or it may be
deregistered under such Act in the event such
registration is no longer required.
VENTURE.015 3 SAMPLE
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NON-PARTICIPATING Your Contract is non-participating and will not
share in our profits or surplus earnings. We will
pay no dividends on your Contract.
REPORTS At least once each year we will send you a report
containing information required by the Investment
Company Act of 1940 and applicable state law.
INSULATION The portion of the assets of the Variable Account
equal to the reserves and other contract
liabilities with respect to such account are not
chargeable with liabilities arising out of any
other business we may conduct. Moreover, the
income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account
shall be credited to or charged against such
account without regard to our other income, gains
or losses.
CURRENCY AND PLACE OF All payments made to or by us shall be made in the
PAYMENTS lawful currency of the United States of America at
the Annuity Service Office or elsewhere if we
consent.
NOTICES AND ELECTIONS To be effective, all notices and elections you
make under this Contract must be in writing,
signed by you and received by us at the Annuity
Service Office. Unless otherwise provided in
this Contract, all notices, requests and elections
will be effective when received by us, complete
with all necessary information and your signature,
at the Annuity Service Office.
GOVERNING LAW This Contract will be governed by the laws of the
jurisdiction indicated on the Contract
Specifications Page.
SECTION 72(s) The provisions of this Contract shall be
interpreted so as to comply with the requirements
of Section 72(s) of the Internal Revenue Code.
PART 3 OWNERSHIP
- --------------------------------------------------------------------------------
GENERAL Before the Maturity Date, the Owner of this
Contract shall be the person, persons or entity
designated on the Contract Specifications Page and
application or the latest change filed with us. On
the Maturity Date, the Annuitant becomes the Owner
of the Contract. If amounts become payable to the
Beneficiary under the Contract, the Beneficiary
becomes the Owner of the Contract.
CHANGE OF OWNER, Subject to the rights of an irrevocable
ANNUITANT, BENEFICIARY Beneficiary, you may change the Owner, Annuitant,
or Beneficiary by written request in a form
acceptable to us and which is received at the
Annuity Service Office. The Annuitant may not be
changed after the Maturity Date. You need not send
us the Contract unless we request it. Any change
must be approved by us. If approved, any change in
Beneficiary will take effect on the date you
signed the request. If approved, any change in
Owner or Annuitant will take effect on the date we
received the request at the Annuity Service
Office. We will not be liable for any payments or
actions taken before the change is approved.
VENTURE.015 4 SAMPLE
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The substitution or addition of any Owner may
result in the resetting of the Death Benefit to an
amount equal to the Contract Value as of the date
of such change. For purposes of subsequent
calculations of the Death Benefit, described in
Part 4, Benefits, Death Benefit Before Maturity
Date, the Contract Value on the date of the change
will be treated as a Payment made on that date.
This Payment will not be included in cumulative
Payments and is not eligible for a Payment
Enhancement. In addition, all Payments made and
all amounts deducted in connection with partial
withdrawals prior to the date of the change of
Owner will not be considered in the determination
of the Death Benefit. Furthermore, the Death
Benefit on the last day of the previous Contract
Year shall be set to zero as of the date of the
Owner Change. This paragraph will not apply if (a)
the individual whose death will cause the Death
Benefit to be paid is the same after the change of
Owner, or (b) if Ownership is transferred to your
spouse.
If any Annuitant is changed and any Owner is not
an individual, the entire interest in the Contract
must be distributed to the Owner within five years
of the change.
PART 4 BENEFITS
- --------------------------------------------------------------------------------
ANNUITY BENEFITS We will pay a monthly income to the Annuitant, if
living, on the Maturity Date. Payments can be
fixed or variable, or a combination of fixed and
variable. Annuity benefits will commence on the
Maturity Date and continue for the period of time
provided for under the Annuity Option selected.
We may pay the Contract Value, less Debt, on the
Maturity Date in one lump sum if the monthly
income is less than $20.
On or before the Maturity Date you must select how
the Contract Value will be used to provide the
monthly income. You may select a Fixed or Variable
Annuity. Unless you indicate otherwise, we will
provide either variable or fixed, or a combination
variable and fixed annuity payments in proportion
to the Investment Account Value of each Investment
Option at the Maturity Date. Annuity Payments will
continue for 10 years or the lifetime of the
Annuitant, if longer.
If a Variable Annuity is used, the amount of the
first monthly annuity payment will be obtained
from the appropriate option table under the
"Payment of Contract Benefits" Section. Subsequent
monthly annuity payments will vary based on the
investment experience of the Sub-Account(s) used
to effect the annuity. The method used to
calculate the amount of the initial and subsequent
payments is described under the "Variable Annuity
Payments" Section of Part 8 of this Contract.
If a Fixed Annuity is used, the portion of the
Contract Value used to effect a Fixed Annuity will
be applied to the appropriate table contained in
this Contract. If the table in use by us on the
Maturity Date is more favorable to you, we will
use that table. We guarantee the dollar amount of
fixed annuity payments.
DEATH BENEFIT BEFORE A Death Benefit will be determined as of the date
MATURITY DATE on which written notice and proof of death and all
required claim forms are received at the Company's
Annuity Service Office.
VENTURE.015 5 SAMPLE
<PAGE> 14
1. If any Owner dies and the oldest Owner had an
attained age of less than 81 years on the Contract
Date, the Death Benefit during the first nine
contract years will be equal to the greater of (a)
or (b) less an amount equal to all Payment
Enhancements applied within the 12 month period
prior to the date of death where:
(a) is the Contract Value; and
(b) is the sum of all Payments made, less any
amount deducted in connection with partial
withdrawals.
After the ninth contract year, the death benefit
will be the greater of (a), (b), or (c), less an
amount equal to all Payment Enhancements applied
within the 12 month period prior to the date of
death where:
(a) is the Contract Value; and
(b) is the sum of all Payments made, less any
amount deducted in connection with partial
withdrawals; and
(c) is the Death Benefit on the last day of the
ninth contract year, plus the sum of all
Payments made, less any amount deducted in
connection with partial withdrawals, since
then.
2. If any Owner dies and the oldest Owner had an
attained age of 81 or greater on the Contract
Date, the Death Benefit will be the Contract Value
less any applicable Withdrawal Charges.
If there is any Debt, the Death Benefit equals the
amount described above less the Debt under the
Contract.
DEATH OF ANNUITANT: On the death of the last
surviving Annuitant, the Owner becomes the new
Annuitant, if the Owner is an individual. If any
Owner is not an individual the death of any
Annuitant is treated as the death of an Owner and
the Death Benefit will be determined by
substituting the Annuitant for the Owner as described
below.
DEATH OF OWNER: We will pay the Death Benefit to the
Beneficiary if any Owner dies prior to the Maturity
Date. The Death Benefit may be taken in one sum
immediately, in which case the Contract will
terminate. If the Death Benefit is not taken in one
sum immediately, the Contract will continue subject
to the following provisions:
(a) The Beneficiary becomes the Contract Owner.
(b) The excess, if any, of the Death Benefit over
the Contract Value will be allocated to and
among the Investment Accounts in proportion to
their values as of the date on which the Death
Benefit is determined.
(c) No additional Payments may be applied to the
Contract.
(d) If the Beneficiary is not the deceased Owner's
spouse, the entire interest in the Contract must
be distributed under one of the following
options:
(i) The entire interest in the Contract must
be distributed over the life of the
Beneficiary, or over a period not extending
beyond the life expectancy of the
Beneficiary, with distributions beginning
within one year of the Owner's death; or
(ii) the entire interest in the Contract must be
distributed within 5 years of the Owner's
Death.
VENTURE.015 6 SAMPLE
<PAGE> 15
If the Beneficiary dies before the
distributions required by (i) or (ii) are
complete, the entire remaining Contract Value
must be distributed in a lump sum immediately.
(e) If the Beneficiary is the deceased Owner's
spouse, the Contract will continue with the
surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary
(and, if no Beneficiary is so named, the
surviving spouse's estate will be the
Beneficiary). Upon the death of the surviving
spouse, the Death Benefit will equal the
Contract Value at the time of the surviving
spouse's death, and the entire interest in the
Contract must be distributed to the new
Beneficiary in accordance with the provisions
of (d) (i) or (d) (ii) above.
(f) Withdrawal Charges will be waived on any
withdrawals, unless the Death Benefit payable
upon the Owner's death was defined under
provision 2., Death Benefit Before Maturity
Date above. If the Death Benefit was so
defined, Withdrawal Charges will be assessed
at the time a withdrawal occurs.
If there is more than one Beneficiary, the
foregoing provisions will independently apply to
each Beneficiary.
DEATH BENEFIT ON OR If annuity payments have been selected based on an
AFTER MATURITY DATE Annuity Option providing for payments for a
guaranteed period, and the Annuitant dies on or
after the Maturity Date, we will make the
remaining guaranteed payments to the Beneficiary.
Any remaining payments will be made as rapidly as
under the method of distribution being used as of
the date of the Annuitant's death. If no
Beneficiary is living, we will commute any unpaid
guaranteed payments to a single sum (on the basis
of the interest rate used in determining the
payments) and pay that single sum to the estate of
the last to die of the Annuitant and the
Beneficiary.
PROOF OF DEATH Proof of death is required upon the death of the
Annuitant or the Owner. Proof of death is one of
the following received at the Annuity Service
Office:
(a) A certified copy of a death certificate.
(b) A certified copy of a decree of a court of
competent jurisdiction as to the finding of
death.
(c) Any other proof satisfactory to us.
PART 5 PAYMENTS
- --------------------------------------------------------------------------------
GENERAL All Payments under this Contract are payable at
the Annuity Service Office or such other place as
we may designate.
The initial Payment is shown on the Contract
Specifications Page. Additional Payments may be
made at any time. However, each additional Payment
must be at least $30. If a Payment would cause the
Contract Value to exceed $1,000,000, or the
Contract Value already exceeds $1,000,000, no
additional Payments will be accepted without our
prior approval.
VENTURE.015 7 SAMPLE
<PAGE> 16
NONPAYMENT OF PAYMENTS If, prior to the Maturity Date, no Payments are
FOR TWO YEARS made for two consecutive Contract Years, and if
both:
(a) the total Payments made, less any partial
withdrawals, are less than $2,000; and
(b) the Contract Value at the end of such two year
period is less than $2,000;
We may cancel the Contract and pay you the
Contract Value (measured as of the Valuation
Period during which the cancellation occurs), less
the Debt and Annual Administration Fee.
PAYMENT ENHANCEMENT We will add a Payment Enhancement to each Payment
applied to this Contract. The amount of a Payment
Enhancement is determined as a percentage of each
Payment received by us. The percentage used in
determining the Payment Enhancement, shown on the
Contract Specifications Page, is based on the
cumulative amount of Payments applied to this
Contract.
The next higher Payment Enhancement percentage, as
shown on the Contract Specificiations Page, may be
applied to the initial Payment. To receive the
higher percentage you must provide satisfactory
evidence that the total Payments within 13 months
of the Issue Date will be equal to or in excess of
the next Payment Enhancement breakpoint. We
reserve the right to recover an amount from your
Contract if total Payments received within 13
months of the Issue Date do not achieve the
breakpoint used to determine the Payment
Enhancement percentage. The amount we may recover
is the greater of (a) or (b), where:
(a) is the amount of Payment Enhancements in
excess of what would have been payable without
satisfactory evidence of expected total
Payments; and
(b) is the Contract Value multiplied by the ratio
of excess Payment Enhancements over total
Payments received.
Amounts recovered will be withdrawn from each
Investment Option in the same proportion that the
value of the Investment Accounts of each
Investment Option bears to the Contract Value. If
the amount to be recovered exceeds your Contract
Value, we will terminate the Contract without
value.
NET PAYMENTS The Payment less the amount of premium tax, if
any, deducted from the Payment, plus any
applicable Payment Enhancement.
ALLOCATION OF NET When we receive Payments, the Net Payments will be
PAYMENTS allocated among Investment Options in accordance
with the allocation percentages shown on the
Contract Specifications Page. You may change the
allocation of subsequent Net Payments at any time,
without charge, by giving us written notice.
PART 6 VARIABLE ACCOUNT PROVISIONS
- --------------------------------------------------------------------------------
INVESTMENT ACCOUNT We will establish a separate Investment Account
for you for each variable Investment Option to
which you allocate amounts. The Investment Account
represents the number of your Accumulation Units
in an Investment Option.
INVESTMENT ACCOUNT VALUE The Investment Account Value of an Investment
Account is determined by (a) times (b) where:
VENTURE.015 8 SAMPLE
<PAGE> 17
(a) equals the number of Accumulation Units
credited to the Investment Account, and
(b) equals the value of the appropriate
Accumulation Unit.
ACCUMULATION UNITS We will credit Net Payments to your Investment
Accounts in the form of Accumulation Units. The
number of Accumulation Units to be credited to
each Investment Account of the Contract will be
determined by dividing the Net Payment allocated
to that Investment Account by the Accumulation
Unit value for that Investment Account.
Accumulation Units will be adjusted for any
transfers and will be canceled on payment of a
Death Benefit, withdrawal, maturity or assessment
of certain charges based on their value for the
Valuation Period in which such transaction occurs.
VALUE OF ACCUMULATION The Accumulation Unit value for any Valuation
UNIT Period is determined by multiplying the
Accumulation Unit value for the immediately
preceding Valuation Period by the "net investment
factor" for the Investment Account for the
Valuation Period for which the value is being
determined. The value of an Accumulation Unit may
increase, decrease or remain the same from one
Valuation Period to the next.
NET INVESTMENT FACTOR The net investment factor for a variable
Investment Account is an index that measures the
investment performance of a Sub-Account from one
Valuation Period to the next. The net investment
factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the
result where:
(a) is the net result of:
(1) the net asset value per share of a
Portfolio share held in the Sub-Account
determined as of the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or
capital gain distributions made by the
Portfolio on shares held in the Sub-
Account if the "ex-dividend" date occurs
during the current Valuation Period, and
(b) is the net asset value per share of a
Portfolio share held in the Sub-Account
determined as of the end of the immediately
preceding Valuation Period, and
(c) is the Asset Fee as defined in Part 11, Fees
and Deductions.
The net investment factor may be greater or less
than, or equal to, one.
PART 7 FIXED ACCOUNT PROVISIONS
- --------------------------------------------------------------------------------
INVESTMENT ACCOUNT We will establish a separate Investment Account
for you each time you allocate amounts to a fixed
Investment Option. Amounts invested in these
Investment Accounts will earn interest at the
guaranteed rate in effect on the date the amounts
are allocated for the duration of the guarantee
period.
We will determine guaranteed rates from time to
time for Net Payments, renewal amounts and amounts
transferred to a fixed Investment Option. In no
event will a guaranteed rate under a fixed
Investment Account be less than 3%.
VENTURE.015 9 SAMPLE
<PAGE> 18
GUARANTEE PERIODS The guarantee period will be the duration of the
fixed Investment Option selected, measured from
the date the amount is allocated to the Investment
Account. Amounts cannot be allocated to a fixed
Investment Option that would extend the guarantee
period beyond the Maturity Date.
RENEWALS The renewal amount is the Investment Account Value
at the end of the particular guarantee period. The
renewal amount will be automatically renewed in
the same fixed Investment Option at the end of the
guarantee period, unless you specify otherwise. If
renewal in a particular fixed Investment Option
would result in the guarantee period for that
fixed Investment Account extending beyond the
Maturity Date, the renewal amount may not be
renewed in that fixed Investment Option. The
renewal amount will be applied to the longest
guarantee period of a fixed Investment Option that
does not extend beyond the Maturity Date.
INVESTMENT ACCOUNT VALUE The amount in an Investment Account will
accumulate at a rate of interest determined by us
and in effect on the date the amount is allocated
to the Investment Account. The Investment Account
Value is the accumulated value of the amount
invested in the Investment Account reduced by any
withdrawals, loans, transfers or charges taken
from the Investment Account.
PART 8 ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PAYMENTS The amount of the first variable annuity payment
is determined by applying the portion of the
Contract Value used to effect a Variable Annuity,
measured as of a date not more than 10 business
days prior to the Maturity Date (minus any
applicable premium taxes), to the appropriate
tables(s) contained in this Contract. If the table
in use by us on the Maturity Date is more
favorable to you, we will use that table.
Subsequent payments will be based on the
investment performance of one or more Sub-Accounts
as you select. The amount of such payments is
determined by the number of Annuity Units credited
for each Sub-Account. Such number is determined by
dividing the portion of the first payment
allocated to that Sub-Account by the Annuity Unit
value for that Sub-Account determined as of the
same date that the Contract Value to effect
annuity payments was determined. This number of
Annuity Units for each Sub-Account is then
multiplied by the appropriate Annuity Unit value
for each subsequent determination date, which is a
uniformly applied date not more than 10 business
days before the payment is due.
MORTALITY AND EXPENSE We guarantee that the dollar amount of each
GUARANTEE variable annuity payment will not be affected by
changes in mortality and expense experience.
ANNUITY UNIT VALUE The value of an Annuity Unit for each Sub-Account
for any Valuation Period is determined as follows:
(a) The net investment factor for the Sub-Account
for the Valuation Period for which the Annuity
Unit value is being calculated is multiplied
by the value of the Annuity Unit for the
preceding Valuation Period; and
(b) The result is adjusted to compensate for the
interest rate assumed in the tables used to
determine the first variable annuity payment.
The dollar value of Annuity Units may increase,
decrease or remain the same from one Valuation
Period to the next.
VENTURE.015 10 SAMPLE
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FIXED ANNUITY PAYMENTS The amount of each fixed annuity payment is
determined by applying the portion of the Contract
Value used to effect a Fixed Annuity measured as
of a date not more than 10 business days prior to
the Maturity Date (minus any applicable premium
taxes) to the appropriate table contained in this
Contract. If the table in use by us on the
Maturity Date is more favorable to you, we will
use that table.
We guarantee the dollar amount of fixed annuity
payments.
PART 9 TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS Before the Maturity Date you may transfer amounts
among Investment Accounts of the Contract. There
is no transaction charge for transfers. Amounts
will be canceled from the Investment Accounts from
which amounts are transferred and credited to the
Investment Account to which amounts are
transferred. We will effect such transfers so that
the Contract Value on the date of transfer will
not be affected by the transfer. We reserve the
right to limit, upon notice, the maximum number of
transfers you may make per Contract Year to one
per month or six at any time within a Contract
Year.
You must transfer at least $300 or, if less, the
entire amount in the Investment Account each time
you make a transfer. If, after the transfer, the
amount remaining in the Investment Account from
which the transfer is made is less than $100, then
we will transfer the entire amount instead of the
requested amount.
We reserve the right to defer the transfer
privilege at any time that we are unable to
purchase or redeem shares of the Trust Portfolios.
In addition, in accordance with applicable law,
the Company reserves the right to modify or
terminate the transfer privilege at any time.
Amounts may not be transferred from a fixed
Investment Account unless those amounts have been
in the fixed Investment Account for at least one
year.
Once variable annuity payments have begun, you may
transfer all or part of the investment upon which
your variable annuity payments are based from one
Sub-Account to another. To do this, we will
convert the number of variable Annuity Units you
hold in the Sub-Account from which you are
transferring to a number of variable Annuity Units
of the Sub-Account to which you are transferring
so that the amount of a variable annuity payment,
if it were made at that time, would not be
affected by the transfer. After that, your
variable annuity payments will reflect changes in
the values of your new variable Annuity Units. You
must give us notice at least 30 days before the
due date of the first variable annuity payment to
which the transfer will apply. We reserve the
right to limit, upon notice, the maximum number of
transfers you may make per Contract Year after
variable annuity payments have begun to four.
After the Maturity Date, transfers will not be
allowed from a fixed to a variable Annuity Option,
or from a variable to a fixed Annuity Option.
VENTURE.015 11 SAMPLE
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PART 10 WITHDRAWAL PROVISIONS
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CONTRACT VALUE Your Contract Value is equal to the total of the
Investment Account Values and, if applicable, any
amount in the Loan Account attributable to the
Contract.
PAYMENTS OF WITHDRAWALS You may withdraw part or all of the Contract
Value, less any Debt, at any time before the
earlier of your death or the Maturity Date, by
sending us a written request. We will pay all
withdrawals within seven days of receipt at the
Annuity Service Office subject to postponement in
certain circumstances, as specified below.
SUSPENSION OF PAYMENTS We may defer the right of withdrawal from, or
postpone the date of payments from, the variable
Investment Accounts for any period when: (1) the
New York Stock Exchange is closed (other than
customary weekend and holiday closings); (2)
trading on the New York Stock Exchange is
restricted; (3) an emergency exists as a result of
which disposal of securities held in the Variable
Account is not reasonably practicable or it is not
reasonably practicable to determine the value of
the Variable Account's net assets; or (4) the
Securities and Exchange Commission, by order, so
permits for the protection of security holders;
provided that applicable rules and regulations of
the Securities and Exchange Commission shall
govern as to whether the conditions described in
(2) and (3) exist.
We may defer the right of withdrawal from the
fixed Investment Accounts for not more than six
months from the day we receive written request and
the Contract, if required. If such payments are
deferred 30 days or more, the amount deferred will
earn interest at a rate not less than 3% per year
or at a rate determined by applicable state law.
TOTAL WITHDRAWAL Upon receipt of your request to withdraw all of
your Contract Value, we will terminate the
Contract and pay you the Contract Value, less any
applicable Debt, Withdrawal Charges and the Annual
Administration Fee.
PARTIAL WITHDRAWAL If you are withdrawing part of the Contract Value,
you should specify the amount that should be
withdrawn from each Investment Option of the
Contract. If there are multiple Investment
Accounts under a fixed Investment Option, the
requested amount from that Investment Option must
be withdrawn from those Investment Accounts on a
first-in-first-out basis. If you do not specify,
the requested amount will be withdrawn in the
following order:
(a) Variable Investment Accounts on a pro rata
basis,
(b) Fixed Investment Options, beginning with the
shortest guarantee period first and the
longest guarantee period last.
We will deduct the Withdrawal Charge from the
Contract Value remaining after payment of the
requested amount.
WITHDRAWAL CHARGE If a withdrawal is made from the Contract before
the Maturity Date, a Withdrawal Charge (contingent
deferred sales charge) may be assessed against
Payments. The amount of the Withdrawal Charge and
when it is assessed is discussed below:
1. The free withdrawal amount is defined as the
greater of:
(a) the excess of the Contract Value on the
date of withdrawal over the unliquidated
Payments, or
VENTURE.015 12 SAMPLE
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(b) the excess of (i) over (ii), where:
(i) equals 10% of total Payments; and
(ii) equals 100% of all prior partial
withdrawals, in that contract year.
The free withdrawal amount may be withdrawn free
of a Withdrawal Charge.
The free withdrawal amount will be applied to your
requested withdrawal in the following order:
(a) withdrawals from the variable Investment
Accounts,
(b) withdrawals from fixed Investment Options
beginning with the shortest guarantee period
first and the longest guarantee period last.
2. If a withdrawal is made for an amount greater than
the free withdrawal amount, Payments will be
liquidated on a first-in-first-out basis. We will
liquidate Payments in the order such Payments
were made: the oldest unliquidated Payment first,
the next Payment second, etc...until all Payments
have been liquidated.
3. Any Payments liquidated are subject to a
Withdrawal Charge based on the length of time the
Payment has been in this Contract. The Withdrawal
Charge is determined by multiplying the amount of
the Payment being liquidated by the applicable
Withdrawal Charge Percentage obtained from the
table shown on the Contract Specifications Page.
The total Withdrawal Charge will be the sum of the
Withdrawal Charges for the Payments being
liquidated.
4. The Withdrawal Charge is deducted from the
Contract Value remaining after you are paid the
amount requested, except in the case of a complete
withdrawal when it is deducted from the amount
otherwise payable. In the case of a partial
withdrawal, the amount requested from an
Investment Account may not exceed the value of
that Investment Account less any applicable
Withdrawal Charge.
FREQUENCY AND AMOUNT OF You may make as many partial withdrawals as you
PARTIAL WITHDRAWAL wish. Any withdrawal from an Investment Account of
the Contract must be at least $300 or the entire
balance of the Investment Account, if less. If
after the withdrawal, the amount remaining in the
Investment Account is less than $100, then we will
consider the withdrawal request to be a request
for withdrawal of the entire amount held in the
Investment Account. If a partial withdrawal would
reduce the Contract Value to less than $300, then
we will treat the partial withdrawal request as a
total withdrawal of the Contract Value.
PART 11 FEES AND DEDUCTIONS
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ASSET FEE To compensate us for assuming mortality and
expense risks, and certain administration
expenses, we deduct from each variable Investment
Option a fee each Valuation Period at the annual
rate specified on the Contract Specifications
Page. A portion of this Asset Fee may also be used
to reimburse us for distribution expenses. This
fee is reflected in the Net Investment Factor used
to determine the value of Accumulation Units and
Annuity Units of the Contract.
VENTURE.015 13 SAMPLE
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ANNUAL ADMINISTRATION FEE To compensate us for assuming certain
administrative expenses, we charge an Annual
Administration Fee as specified on the Contract
Specification Page. Prior to the Maturity Date,
the Annual Administration Fee is deducted on each
Contract Anniversary. It is withdrawn from each
Investment Option in the same proportion that the
value of the Investment Accounts of each
Investment Option bears to the Contract Value. If
the Contract Value is totally withdrawn on any
date other than the Contract Anniversary, we will
deduct the total amount of the Annual
Administration Fee from the amount paid. During
the annuity period, the Annual Administration Fee
is deducted on a pro rata basis from each annuity
payment.
TAXES We reserve the right to charge certain taxes
against your Payments (either at the time of
payment or liquidation), Contract Value, payment
of Death Benefit or annuity payments, as
appropriate. Such taxes may include any premium
taxes or other taxes levied by any government
entity which we, in our sole discretion, determine
have resulted from the establishment or
maintenance of the Variable Account, or from the
receipt by us of Payments, or from the issuance of
this Contract, or from the commencement or
continuance of annuity payments under this
Contract.
PART 12 LOAN PROVISION (CERTAIN QUALIFIED CONTRACTS ONLY)
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GENERAL This loan provision applies only to certain
Qualified Contracts. All provisions and terms of a
loan are included in the Qualified Plan
Endorsement, if attached.
PART 13 PAYMENT OF CONTRACT BENEFITS
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GENERAL Benefits payable under this Contract may be
applied in accordance with one or more of the
Annuity Options described below, subject to any
restrictions of Internal Revenue Code section
72(s).
ALTERNATE ANNUITY OPTIONS Instead of settlement in accordance with the
Annuity Options described below, you may choose an
alternate form of settlement acceptable to us.
DESCRIPTION OF ANNUITY Option 1: Life Annuity
OPTIONS
(a) Life Non-Refund. We will make payments during
the lifetime of the Annuitant. No payments are
due after the death of the Annuitant.
(b) Life 10-Year Certain. We will make payments
for 10 years and after that during the
lifetime of the Annuitant. No payments are due
after the death of the Annuitant or, if later,
the end of the 10-year period certain.
Option 2: Joint and Survivor Life Annuity
The second Annuitant named shall be referred to as
the Co-Annuitant.
(a) Joint and Survivor Non-Refund. We will make
payments during the joint lifetime of the
Annuitant and Co-Annuitant. Payments will then
continue during the remaining lifetime of the
survivor. No payments are due after the death
of the last survivor of the Annuitant and
Co-Annuitant.
VENTURE.015 14 SAMPLE
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(b) Joint and Survivor with 10-Year Certain. We
will make payments for 10 years and after that
during the joint lifetime of the Annuitant and
Co-Annuitant. Payments will then continue
during the remaining lifetime of the survivor.
No payments are due after the death of the
survivor of the Annuitant and Co-Annuitant or,
if later, the end of the 10-year period
certain.
ANNUITY PAYMENT RATES The annuity payment rates on the attached tables
show, that for each $1,000 applied, the dollar
amount of both (a) the first monthly variable
annuity payment based on the assumed interest rate
of 3% and (b) the monthly fixed annuity payment,
when this payment is based on the minimum
guaranteed interest rate of 3% per year. The
annuity payment rates for payments made on a less
frequent basis (quarterly, semiannual or annual)
will be quoted by us upon request.
The annuity payment rates are based on the 1983
Table A projected at Scale G with interest at the
rate of 3% per annum and assume births in year
1942. The amount of each annuity payment will
depend upon the sex and adjusted age of the
Annuitant, the Co-Annuitant, if any, or other
payee. The adjusted age is determined from the
actual age nearest birthday at the time the first
monthly annuity payment is due, as follows:
Calendar Year of Birth Adjustment to Actual Age
---------------------- ------------------------
1899-1905 +6
1906-1911 +5
1912-1918 +4
1919-1925 +3
1926-1932 +2
1933-1938 +1
1939-1945 0
1946-1951 -1
1952-1958 -2
1959-1965 -3
1966-1972 -4
1973-1979 -5
1980-1986 -6
1987-1993 -7
1994- -8
The dollar amount of annuity payment for any age
or combination of ages not shown following or for
any other form of Annuity Option agreed to by us
will be quoted on request.
VENTURE.015 15 SAMPLE
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<TABLE>
AMOUNT OF FIRST MONTHLY PAYMENT
PER $1000 OF CONTRACT VALUE
OPTION 1: LIFE ANNUITY
<CAPTION>
Option 1(A): Non-Refund Option 1(B): 10-Year Certain
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Adjusted Age Adjusted Age
of Annuitant Male Female of Annuitant Male Female
- --------------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 4.27 3.86 55 4.22 3.84
60 4.69 4.19 60 4.61 4.15
65 5.25 4.61 65 5.10 4.55
70 6.02 5.19 70 5.71 5.07
75 7.01 5.99 75 6.42 5.73
80 8.34 7.10 80 7.20 6.52
85 10.13 8.64 85 7.97 7.37
</TABLE>
<TABLE>
OPTION 2: JOINT AND SURVIVOR LIFE ANNUITY
<CAPTION>
Option 2(A): Non-Refund
Age of Co-Annuitant
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Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
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<S> <C> <C> <C> <C> <C>
55 3.25 3.39 3.55 3.72 3.87
60 3.41 3.60 3.81 4.02 4.21
65 3.62 3.87 4.14 4.41 4.67
70 3.89 4.21 4.57 4.95 5.29
75 4.24 4.67 5.17 5.67 6.11
80 4.71 5.30 5.97 6.63 7.19
85 5.35 6.15 7.05 7.92 8.60
<CAPTION>
Option 2(B): 10 Year Certain
Age of Co-Annuitant
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Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
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55 3.25 3.39 3.55 3.72 3.87
60 3.41 3.60 3.80 4.01 4.21
65 3.62 3.86 4.13 4.41 4.66
70 3.89 4.21 4.56 4.92 5.24
75 4.24 4.66 5.13 5.58 5.95
80 4.69 5.25 5.85 6.39 6.78
85 5.28 6.00 6.71 7.27 7.67
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</TABLE>
Monthly installments for ages not shown will be furnished on request.
VENTURE.015 16 SAMPLE
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NORTH AMERICAN
SECURITY LIFE INSURANCE COMPANY
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<PAGE> 1
<TABLE>
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Flexible Payment Deferred Variable Annuity Application. Payment (or original of exchange/transfer request) must accompany
Application. Please make check payable to NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY (the "Company") and address to:
P.O. Box 9230 GMF, BOSTON, MA 02205-9230 PLEASE PRINT
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<S> <C>
1. OWNERS (Applicants) 4. MY INVESTMENT
Name* ___________________________________________________________ Allocate payment with application of $_____________________
First Middle Last as indicated below. (Minimum Initial Investment of $10,000
Address__________________________________________________________ Allocation percentages must total 100%):
Street
__________________________________________________________ ___% [Manufacturers Adviser Pac Rim Emerging Mkts (038)]
City State Zip ___% [T. Rowe Price Science & Tech (046)]
___% [Founders Int'l Small Cap (036)]
Sex [ ] M [ ] F Date of Birth __________/_____/_____ ___% [Warburg Pincus Emerging Growth (050)]
Month Day Year ___% [Pilgrim Baxter Growth (052)]
___% [Fred Alger Small/Mid Cap (041)]
Daytime Phone Number: ( ) _____________________________________ ___% [Rowe Price-Fleming Int'l Stock (054)]
___% [Founders Worldwide Growth (056)]
- ------------------------------ ---------------------------- ___% [Morgan Stanley Global Equity (039)]
/ / / / / / / / / / or / / / / / / / / / / ___% [Founders Growth (035)]
- ------------------------------ ---------------------------- ___% [Fidelity Equity (031)]
Social Security Number Tax ID Number ___% [Manufacturers Adviser Quant Equity (053)]
___% [T. Rowe Price Blue Chip Growth (042)]
Client Brokerage Acct.# (If applicable): ________________________ ___% [Manufacturers Adviser Real Estate Securities (057)]
================================================================== ___% [Miller Anderson Value (055)]
CO-OWNER (Optional) ___% [J.P. Morgan Int'l Growth & Income (043)]
___% [Wellington Management Growth & Income (047)]
Name* ___________________________________________________________ ___% [T. Rowe Price Equity-Income (037)]
First Middle Last ___% [Founders Balanced (058)]
___% [Fidelity Aggr Asset Allocation (034)]
Sex [ ] M [ ] F Date of Birth __________/_____/_____ ___% [Miller Anderson High Yield (059)]
Month Day Year ___% [Fidelity Mod Asset Alloc (033)]
___% [Fidelity Cons Asset Alloc (032)]
- ------------------------------ ---------------------------- ___% [Salomon Brothers Strategic Bond (045)]
/ / / / / / / / / / or / / / / / / / / / / ___% [Oechsle Global Gov't Bond (040)]
- ------------------------------ ---------------------------- ___% [Manufacturers Adviser Capital Growth Bond (060)]
Social Security Number Tax ID Number ___% [Wellington Management Inv Quality Bond (048)]
================================================================== ___% [Salomon Brothers U.S. Gov't Securities (044)]
2. ANNUITANTS (If different from Owner) ___% [Manufacturers Adviser Money Market (049)]
Name* ___________________________________________________________ FIXED ACCOUNT
First Middle Last ___% [1 Year (051)]
Address__________________________________________________________
Street LIFESTYLE PORTFOLIOS
__________________________________________________________ ___% [Cons 280 (184)] ___% [Mod 460 (185)]
City State Zip ___% [Bal 640 (186)] ___% [Grwth 820 (187)]
___% [Aggr 1000 (188)]
Sex [ ] M [ ] F Date of Birth __________/_____/_____
Month Day Year
Daytime Phone Number: ( ) _____________________________________
- ------------------------------
/ / / / / / / / / /
- ------------------------------
Social Security Number
==================================================================
CO-ANNUITANT (Optional)
Name* ___________________________________________________________
First Middle Last
Sex [ ] M [ ] F Date of Birth __________/_____/_____
Month Day Year
- ------------------------------
/ / / / / / / / / /
- ------------------------------
Social Security Number
================================================================== -----------------------------------------------------------
3. BENEFICIARIES
(Enclose signed letter if more information is required) REMARKS
Name* ___________________________________________________________
First Middle Last Relationship
------------------------------
/ / / / / / / / / /
Date of Birth ______/___/____ ------------------------------
Month Day Year Social Security Number
Name* ___________________________________________________________
First Middle Last Relationship
------------------------------
/ / / / / / / / / /
Date of Birth ______/___/____ ------------------------------
Month Day Year Social Security Number
==================================================================
CONTINGENT BENEFICIARY
Name* ___________________________________________________________
First Middle Last Relationship
------------------------------
/ / / / / / / / / /
Date of Birth ______/___/____ ------------------------------ -----------------------------------------------------------
Month Day Year Social Security Number
VENTURE.APP.015 * Unless subsequently changed in accordance with terms of Contract issued.
</TABLE>
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<TABLE>
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<S> <C> <C>
5. TYPE OF PLAN (Must be completed)
[[ ] Non-Qualified or] [ ] [IRA Rollover] [ ] [IRA Transfer] [ ] [IRA Tax Year]______________
[ ] [Profit Sharing] [ ] [401(k)] [ ] [SEP IRA Tax Year]__________
[ ] [Money Purchase] [ ] [Keogh (HR-10)] [ ] [403(b) IF ERISA [ ]]
[ ] [Defined Benefit] [ ] [457] [ ] [Other _____________________]
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REPLACEMENT
Will this Annuity replace or change any other insurance or annuity? [ ] No [ ] Yes
(State company and contract number in Remarks, and attach replacement forms.)
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6. SIGNATURES (Irrevocable Beneficiary, if designated, must also sign application)
STATEMENT OF APPLICANT: I/We agree that the Contract I/we have applied for shall not take effect until the later of: (1) the
issuance of the Contract, or (2) receipt by the Company at its Annuity Service Office of the first payment required under the
Contract. The information above is true and complete to the best of my/our knowledge and belief and is correctly recorded. I/We
agree to be bound by the representations made in this application and acknowledge the receipt of an effective Prospectus describing
the Contract applied for. The Contract I/we have applied for is suitable for my/our insurance investment objectives, financial
situation and needs. When utilizing Check Plus or the Income Plan, I/we agree that if any debit/transfer is erroneously received by
the bank indicated on the enclosed voided check, or is not honored upon presentation, any accumulation units may be canceled, and
agree to hold the Company harmless from any loss due to such electronic debits/transfers. I/We understand that unless I/we elect
otherwise in the remarks section, the Maturity Date will be the later of the Annuitant's 85th birthday, or 10 years from the
Contract Date.
I/WE UNDERSTAND THAT ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THE CONTRACT APPLIED FOR, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
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Signed in (State) Date Signed Signature of Owner/Applicant Signature of Co-Owner
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Signature of Annuitant (if different from Owner) Signature of Co-Annuitant (if different from Owner Signature of Irrevocable
Beneficiary (if designated)
STATEMENT OF AGENT: Will this contract replace or change any existing life insurance or annuity in this or any other
company? [ ] Yes [ ] No If yes, please explain under Remarks. I certify I am authorized and qualified to discuss the Contract
herein applied for.
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Signature of Agent Print Full Name Name of Firm
Agent Number ________________________ Agent Phone Number ___________________________ State License ID Number _______________________
</TABLE>
VENTURE.APP.015
<PAGE> 1
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
116 Huntington Avenue
Boston, MA 02116
April 3, 1997
To whom it may concern,
This opinion is written in reference to the flexible purchase payment individual
deferred combination fixed and variable annuity contracts (the "Contracts") to
be issued by North American Security Life Insurance Company, a Delaware
corporation (the "Company"), with respect to the variable portion of which a
Registration Statement on Form N-4 (the "Registration Statement") is being filed
under the Securities Act of 1933, as amended (the "Act").
As General Counsel to the Company, I have examined such records and documents
and reviewed such question of law as I deemed necessary for purposes of this
opinion.
1. The Company has been duly incorporated under the laws of the state of
Delaware and is a validly existing corporation.
2. NASL Variable Account (the "Variable Account") is a separate account of the
Company and is duly created and validly existing pursuant to Title 18, Section
2932(a) of the Delaware Code, as amended.
3. The portion of the assets to be held in the Variable Account equal to the
reserves and other liabilities under the Contracts is not chargeable with
liabilities arising out of any other business the Company may conduct.
4. The Contracts, when issued in accordance with the prospectus contained in the
effective Registration Statement and upon compliance with applicable local law,
will be legal and binding obligations of the Company.
I consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement.
Very truly yours,
James D. Gallagher
James D. Gallagher
General Counsel, Vice President and
Secretary
