<PAGE> 1
As filed with the Securities and Exchange Commission on February 25, 1998.
Registration No. 33-76162
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 16
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
(formerly NASL Variable Account)
(Exact name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
(formerly North American Security Life Insurance Company)
(Name of Depositor)
116 Huntington Avenue
Boston, Massachusetts 02116
(Address of Depositor's Principal Executive Offices)
(617) 266-6004
(Depositor's Telephone Number Including Area Code)
James D. Gallagher
Vice President, Secretary
and General Counsel
The Manufacturers Life Insurance Company Copy to:
of North America J. Sumner Jones, Esq.
73 Tremont Street Jones & Blouch L.L.P.
Boston, Massachusetts 02108 1025 Thomas Jefferson Street, NW
(Name and Address of Agent for Service) Washington, DC 20007
_______________________
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on (date) pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_X_ on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
*The Prospectus contained in this registration statement also relates to
variable annuity contracts covered by earlier registration statements under File
Nos. 33-28455, 33-9960 and 2-93435.
<PAGE> 2
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT
A
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
N-4 Item Caption in Prospectus
Part A
<TABLE>
<S> <C>
1...................................Cover Page
2...................................Special Terms
3...................................Summary
4...................................Values; Performance Data; Financial Statements
5...................................General Information about The Manufacturers Life Insurance Company of North
America, The Manufacturers Life Insurance Company of North America Separate
Account A and Manufacturers Investment Trust
6...................................Charges and Deductions; Withdrawal Charge; Reduction or Elimination of
Withdrawal Charge; Administration Fees; Reduction or Elimination of Annual
Administration 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
Systematic Withdrawal 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
10..................................Accumulation Provisions; Purchase Payments; Accumulation Units; Value of
Accumulation Units; Net Investment Factor; Distribution of Contracts
11..................................Withdrawals; Restrictions under the Texas Optional Retirement Program;
Accumulation Provisions; Purchase Payments; Other Contract Provisions; Ten
Day Right to Review
12..................................Federal Tax Matters; Introduction; 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
</TABLE>
N-4 Item Caption in Statement of
Part B Additional Information
<TABLE>
<S> <C>
15..................................Cover Page
16..................................Table of Contents
17..................................General History and Information.
18..................................Services-Accountants; Services-Servicing Agent
19..................................Not Applicable
20..................................Principal Underwriter
21..................................Performance Data
22..................................Not Applicable
23..................................Financial Statements
</TABLE>
<PAGE> 3
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
SUPPLEMENT TO PROSPECTUS
FOR THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
DATED MAY 1, 1998
NEW INVESTMENT PORTFOLIOS
The variable portion of your contract contains three additional investment
options. Each portfolio is a series of Merrill Lynch Variable Series Funds, Inc.
("Merrill Variable Funds"). The portfolios are not available for investment for
Ven 1 and Ven 3 contract owners. Set forth below is a brief description of each
portfolio's investment objective and certain policies relating to that objective
and a schedule of fees applicable to that portfolio.
The portfolios are only available through certain broker dealer firms. Please
call your broker dealer representative for eligibility.
INVESTMENT OBJECTIVE AND POLICIES
Merrill Lynch Special Value Focus Fund. The investment objective of the Merrill
Lynch Special Value Focus Fund is long-term capital growth. Merrill Lynch Asset
Management, L.P. ("MLAM") manages the Merrill Lynch Special Value Focus Fund and
seeks to achieve this investment objective by investing primarily in common
shares of small companies and emerging growth companies regardless of size.
Merrill Lynch Basic Value Focus Fund. The investment objective of the Merrill
Lynch Basic Value Focus Fund is capital appreciation and secondarily income.
MLAM manages the Merrill Lynch Basic Value Focus Fund and seeks to achieve this
investment objective by investing in securities, primarily equities, that
management of the portfolio believes are undervalued and therefore represent
basic investment value.
Merrill Lynch Developing Capital Markets Focus Fund. The investment objective of
the Merrill Lynch Developing Capital Markets Focus Fund is long-term capital
appreciation. MLAM manages the Merrill Lynch Developing Capital Markets Focus
Fund and will pursue this objective by investing in securities, principally
equities, of issuers in countries having smaller capital markets.
The Merrill Lynch Developing Capital Markets Focus Fund may invest 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 principal. See "Risks of High Yield Securities"
in the Merrill Lynch Variable Series Funds, Inc. prospectus dated September 12,
1997. The Merrill Lynch Developing Capital Markets Focus Fund may also invest up
to 100% of its assets in foreign securities which present additional risks. See
"Other Portfolio Strategies - Foreign Securities" in the Merrill Lynch Variable
Series Funds, Inc. prospectus dated September 12, 1997.
For more information on the new portfolios and their investment adviser, see the
Merrill Variable Funds' prospectus dated September 12, 1997.
FEE TABLE AND EXAMPLE
The Contract Owner or owner (collectively, "Contract Owner") Transaction
Expenses, Annual Contract Fee and Separate Account Annual Expenses are as set
forth in the current Fee Table with respect to existing portfolios. Annual
Expenses and Example are amended to include the following portfolios:
Annual Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Other Total Company
Expenses 12b-1 Fees Expenses Annual Expenses
-------- ---------- -------- ---------------
<S> <C> <C> <C> <C>
Merrill Lynch Special Value Focus Fund 0.75% 0.15% 0.04%* 0.94%
Merrill Lynch Basic Value Focus Fund 0.60% 0.15% 0.04%* 0.79%
Merrill Lynch Developing Capital Markets Focus Fund 1.00% 0.15% 0.25%* 1.40%
</TABLE>
*Based on estimates of payments to be made during the current fiscal year.
MLAM and Merrill Lynch Life Agency, Inc. have entered into a Reimbursement
Agreement that limits the operating expenses paid by each portfolio in a given
year to 1.25% of its average net assets. This Reimbursement Agreement is
expected to remain in effect for the current year. Pursuant to the
Reimbursement Agreement, the Developing Capital Markets Focus Fund was
reimbursed for a portion of its operation expenses for 1997. Absent the
reimbursement, "Other Expenses" for this portfolio would have been [0.31]%.
Expenses shown for all other portfolios do not reflect any reimbursement under
the Reimbursement Agreement.
<PAGE> 5
EXAMPLE
A Contract Owner would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets, if the Contract Owner surrendered the
contract at the end of the applicable time period:
<TABLE>
<CAPTION>
Portfolio 1 Year 3 Years
--------- ------ -------
<S> <C> <C>
Merrill Lynch Special Value Focus Fund $80 $124
Merrill Lynch Basic Value Focus Fund $78 $120
Merrill Lynch Developing Capital Markets Focus Fund $84 $137
</TABLE>
A Contract Owner would pay the following expenses on a $1,000 investment,
assuming 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:
<TABLE>
<CAPTION>
Portfolio 1 Year 3 Years
--------- ------ -------
<S> <C> <C>
Merrill Lynch Special Value Focus Fund $24 $75
Merrill Lynch Basic Value Focus Fund $23 $70
Merrill Lynch Developing Capital Markets Focus Fund $29 $89
</TABLE>
TABLE OF ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
Sub-Account Unit Value at Unit Value at Number of Units
- ---------- Start of Year End of Year at End of Year
------------- ----------- --------------
<S> <C> <C> <C>
Merrill Lynch Special Value Focus Fund
1997* $ $
Merrill Lynch Basic Value Focus Fund
1997*
Merrill Lynch Developing Capital Markets Focus Fund
1997*
</TABLE>
*Units were first credited on -------------------, 1997.
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
Merrill Lynch Variable Series Funds, Inc. is registered under the Investment
Company Act of 1940, as amended (the "1940 Act") as an open-end management
investment company. Each of the portfolios is diversified for purposes of the
1940 Act, with the exception of the Developing Capital Markets Focus Fund which
is non-diversified so that it may invest more than 5% of its assets in issuers
in countries having smaller capital markets. Merrill Variable Funds receive
investment advisory services from Merrill Lynch Asset Management, L.P. The
Merrill Variable Funds are subject to a Rule 12b-1 fee of up to .15% of a
portfolio's net assets.
A full description of Merrill Variable Funds, including the investment
objectives, policies and restrictions of each portfolio is contained in Merrill
Variable Funds' prospectus and should be read by a prospective purchaser before
investing. Shares of Merrill Variable Funds 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.
PLEASE NOTE THE MERRILL VARIABLE FUNDS ARE NOT AVAILABLE FOR ERISA GOVERNED
PLANS.
SUPPLEMENT DATED MAY 1, 1998
V7.SUP598
V20/21.SUP598
V22/23.SUP598
<PAGE> 6
Annuity Service Office Mailing Address
116 Huntington Avenue Post Office Box 9230
Boston, Massachusetts 02116 Boston, Massachusetts
(617) 266-6004 02205-9230
(800) 344-1029
THE MANUFACTURES LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT NON-PARTICIPATING
This Prospectus describes a flexible purchase payment individual
deferred combination fixed and variable annuity contract (the "contract") issued
by The Manufacturers Life Insurance Company of North America, formerly 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.
Prior to October, 1993, the Company issued two classes of variable
annuity contracts which are no longer being issued but under which purchase
payments may continue to be made "Ven 3" contracts, which were sold during the
period from November, 1986 until October, 1993, and "Ven 1" contracts, which
were sold during the period from June, 1985 until June, 1987. The Company also
has a class of variable annuity contracts which are no longer being issued,
except in the states of Maryland, New Jersey and Oregon, but under which
purchase payments may continue to be made ("Ven 7 contracts"). This Prospectus
principally describes the contract offered by this Prospectus but also describes
the Ven 7, Ven 3 and Ven 1 contracts (collectively, "prior contracts"). The
principal differences between the contract offered by this Prospectus and the
prior contracts relate to the investment options available under the contracts,
charges made by the Company, death benefit provisions and in the case of Ven 7
contracts, a minimum interest rate to be credited for any guarantee period under
the fixed portion of the contract (see "Appendices C and D").
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 forty investment options: thirty-five variable and five fixed. The
variable portion of the contract value and annuity payments, if selected on a
variable basis, will vary according to the investment performance of the
sub-accounts of The Manufacturers Life Insurance Company of North America
Separate Account A, formerly 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-five sub-accounts of the Variable
Account. The assets of each sub-account are invested in shares of Manufacturers
Investment Trust, formerly 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 one, three, five and seven year fixed account investment options and a one
year dollar cost averaging fixed investment option. Except as specifically noted
herein and as set forth under the caption "FIXED ACCOUNT INVESTMENT OPTIONS"
below, this Prospectus describes only the variable portion of the contract.
Additional information about the variable portion of the contract and
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 "SEC") 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 (800) 344-1029. In
addition, the SEC 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 SEC.
The table of contents for the Statement of Additional Information is included on
page 43 of this Prospectus.
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.
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 SEC NOR HAS THE SEC
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 7
The date of this Prospectus is May 1, 1998
V20/21.PRO598
<PAGE> 8
TABLE OF CONTENTS
SPECIAL TERMS ............................................ 3
SUMMARY .................................................. 5
TABLE OF ACCUMULATION UNIT VALUES......................... 11
GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH
AMERICA, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE
ACCOUNT A AND MANUFACTURERS
INVESTMENT TRUST.......................................... 13
The Manufacturers Life Insurance Company of
North America...................................... 13
The Manufacturers Life Insurance Company of
North America Separate Account A................... 14
Manufacturers Investment Trust....................... 14
DESCRIPTION OF THE CONTRACT .............................. 18
ACCUMULATION PROVISIONS ............................... 18
Purchase Payments ................................... 18
Accumulation Units .................................. 19
Value of Accumulation Units ......................... 19
Net Investment Factor ............................... 19
Transfers Among Investment Options .................. 20
Maximum Number of Investment Options................. 20
Telephone Transactions .............................. 20
Special Transfer Services - Dollar Cost Averaging.... 20
Asset Rebalancing Program............................ 21
Withdrawals.......................................... 21
Special Withdrawal Services -the Income Plan......... 22
Loans................................................ 22
Death Benefit Before Maturity Date................... 23
ANNUITY PROVISIONS .................................... 24
General ............................................. 24
Annuity Options ..................................... 25
Determination of Amount of the First Variable
Annuity Payment.................................... 26
Annuity Units and the Determination of Subsequent
Variable Annuity Payments ......................... 26
Transfers After Maturity Date ....................... 26
Death Benefit on or After Maturity Date.............. 26
OTHER CONTRACT PROVISIONS ............................. 27
Ten Day Right to Review ............................. 27
Ownership ........................................... 27
Beneficiary ......................................... 27
Annuitant ........................................... 27
Modification ........................................ 28
Company Approval .................................... 28
Misstatement and Proof of Age, Sex or Survival....... 28
FIXED ACCOUNT INVESTMENT OPTiONS....................... 28
GUARANTEED INCOME FOR TOMORROW BENEFIT.................
CHARGES AND DEDUCTIONS.................................... 32
Withdrawal Charges .................................. 32
Reduction or Elimination of Withdrawal Charge ....... 33
Administration Fees.................................. 34
Reduction or Elimination of Annual
Administration Fee................................. 35
Mortality and Expense Risk Charge ................... 35
Taxes ............................................... 35
FEDERAL TAX MATTERS ...................................... 36
INTRODUCTION .......................................... 36
THE COMPANY'S TAX STATUS .............................. 36
TAXATION OF ANNUITIES IN GENERAL ...................... 36
Tax Deferral During Accumulation Period ............. 36
<PAGE> 9
Taxation of Partial and Full Withdrawals ............ 37
Taxation of Annuity Payments ........................ 38
Taxation of Death Benefit Proceeds .................. 38
Penalty Tax on Premature Distributions .............. 38
Aggregation of Contracts ............................ 39
QUALIFIED RETIREMENT PLANS............................. 39
Qualified Plan Types ................................ 40
Direct Rollovers .................................... 41
FEDERAL INCOME TAX WITHHOLDING......................... 42
GENERAL MATTERS........................................... 42
Tax Deferral......................................... 42
Performance Data..................................... 42
Financial Statements................................. 42
Asset Allocation and Timing Services................. 42
Distribution of Contracts ........................... 43
Contract Owner Inquiries............................. 43
Confirmation Statements.............................. 43
Legal Proceedings ................................... 43
Other Information ................................... 43
STATEMENT OF ADDITIONAL INFORMATION-
TABLE OF CONTENTS...................................... 43
APPENDIX A: EXAMPLES OF CALCULATION OF
WITHDRAWAL CHARGE...................................... 44
APPENDIX B: STATE PREMIUM TAXES.......................... 46
APPENDIX C - PRIOR CONTRACTS (VEN 7)...................... 47
APPENDIX D - PRIOR CONTRACTS (VEN 3 AND VEN 1)............ 55
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.
<PAGE> 10
Annuity Option - The method selected by the contract owner (or as
specified in the contract if no selection is made) for annuity payments made by
the Company.
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 at 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.
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-five variable and four fixed investment
options under the contract.
Loan Account - The portion of the general account that is used for
collateral when a loan is taken.
Market Value Charge - A charge that may be assessed if amounts are
withdrawn or transferred from the three, five or seven year investment options
prior to the end of the interest rate guarantee period.
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. See Appendix C for
information on the Maturity Date for Ven 7 contracts and Appendix D for
information on the Maturity Date for Ven 3 and Ven 1 contracts.
4
<PAGE> 11
Net Purchase Payment - The purchase payment less the amount of premium
tax.
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. The maximum issue age is 85.
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, 408A 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 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.
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> 12
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. Except as
specifically noted herein and as set forth under the caption "FIXED ACCOUNT
INVESTMENT OPTIONS" below, this Prospectus describes only the variable portion
of the contract.
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 of 1986, as amended (the "Code"), such
as individual retirement accounts and annuities, including Roth IRAs, 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. Except as noted below, the minimum initial purchase
payment is $5,000 for Non-Qualified Contracts and $2,000 for Qualified
Contracts. The minimum initial purchase payment is $3,500 if the source of such
payment was a direct rollover of an eligible rollover distribution from a
qualified plan under Section 401(a) of the Code or a Tax Sheltered Annuity
described in Section 403(b) of the Code, all or part of which assets are
invested in a group annuity contract issued by The Manufacturers Life Insurance
Company (U.S.A.). 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 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 (see "PURCHASE PAYMENTS").
Investment Options. Purchase payments may be allocated among the forty
investment options currently available under the contract: thirty-five variable
account investment options and five fixed account investment options. 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-five
variable account investment options are the thirty-five 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, Small Company Value Trust, the Equity Trust, the Growth
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 portion of the contract value in the Variable Account and monthly
annuity payments, if selected on a variable basis, will reflect the investment
performance of the sub-accounts selected (see "THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A"). Purchase payments may also be
allocated to the five fixed account investment options: one, three, five and
seven year guaranteed investment accounts and a one year dollar cost averaging
fixed investment account. Under the fixed account investment options, 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
options and monthly annuity payments, if selected on a fixed basis, will reflect
such interest and principal guarantees (see "FIXED ACCOUNT INVESTMENT OPTIONS").
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 variable account investment options and from the variable account investment
options to the fixed account investment options without charge. In addition,
amounts may be transferred prior to the maturity date among the fixed account
investment options and from the fixed account investment options to the variable
account investment options, subject to a one year holding period requirement
(with certain exceptions) and a market value charge which may apply to such a
transfer (see "FIXED ACCOUNT INVESTMENT OPTIONS"). After the maturity date,
transfers are not permitted from variable annuity options to fixed annuity
options or from fixed annuity options to variable annuity options. 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
6
<PAGE> 13
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").
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 income
tax and a 10% 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 - THE INCOME 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").
Confirmation Statements. Owners will be sent confirmation statements
for certain transactions in their account. Owners should carefully review these
statements to verify their accuracy. Any mistakes should immediately be reported
to the Company's Annuity Service Office. If the owner fails to notify the
Company's Annuity Service Office of any mistake within 60 days of the mailing of
the confirmation statement, the owner will be deemed to have ratified the
transaction.
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.
Contracts Issued Prior to May 1, 1998. If any contract owner dies on or
prior to his or her 85th birthday 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: During the first contract year, the death benefit will be the greater
of: (a) the contract value or (b) the sum of all purchase payments made, less
any amounts deducted in connection with partial withdrawals. During any
subsequent contract year, the death benefit will be the greater of: (a) the
contract value or (b) the death benefit on the last day of the previous contract
year, plus any purchase payments made and less any amounts deducted in
connection with partial withdrawals since then.
If any contract owner dies after his or her 85th birthday and the
oldest owner had an attained age of less than 81 years on the contract date, the
death benefit will be the greater of: (a) the contract value or (b) the excess
of (i) the sum of all purchase payments over (ii) the sum of any amounts
deducted in connection with partial withdrawals. 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
at the time of payment of benefits. For contracts issued on or after October 1,
1997, any withdrawal charges applied against the death benefit shall be waived
by the Company.
Contracts Issued After May 1, 1998. 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: During the first contract year, the
death benefit will be the greater of: (a) the contract value or (b) the sum of
all purchase payments made, less any amounts deducted in connection with partial
withdrawals. During any subsequent contract year, the death benefit will be the
greater of: (a) the contract value or (b) the death benefit on the last day of
the previous contract year, plus any purchase payments made and less any amounts
deducted in connection with partial withdrawals since then. If any contract
owner dies on or after his or her 81st birthday, the death benefit will be the
greater of (a) contract value or (b) the death benefit on the last day of the
contract year ending just prior to the owner's 81st birthday, plus any payments
made, less amounts deducted in connection with partial withdrawals.
If any contract owner dies and the oldest owner had an attained age of
81 years or greater on the contract date, the death benefit will be the greater
of: (a) the contract value or (b) the excess of (i) the sum of all purchase
payments over (ii) the sum of any amounts deducted in connection with partial
withdrawals.
In the states of _____, the death benefit described under "Contracts
Issued Prior to May 1, 1998" will continue to apply to contracts issued after
May 1, 1998.
7
<PAGE> 14
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"). For
information on the death benefit applicable to Ven 7 contracts see Appendix C
and to Ven 1 and Ven 3 contracts see Appendix D.
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").
Guaranteed Income For Tomorrow Benefit. The Guaranteed Income For
Tomorrow Benefit (the "Income Benefit") guarantees a minimum lifetime fixed
income benefit in the form of fixed monthly annuity payments. The Income Benefit
is based on the aggregate net purchase payments applied to the contract,
accumulated at interest, minus an adjustment for any partial withdrawals (the
"Income Base"). The amount of the monthly annuity payment provided by the Income
Benefit is determined by applying the Income Base to the monthly income factors
set forth in the Income Benefit Rider. Because the fixed annuity options
provided for in the contract are based on the contract value at the time of
annuitization, the amount of the monthly payments under such options may exceed
the monthly payments provided by the Income Benefit Rider. If the Income Benefit
is exercised and the annuity payment available under the contract is greater
than the monthly payment provided by the Income Benefit Rider, the Company will
pay the monthly annuity payment available under the contract. The Income Benefit
is available for contracts issued on or after May 1, 1998. The Income Benefit is
currently not available in the following states:__________ and is not available
for Ven 7, Ven 3 or Ven 1 contracts (see "GUARANTEED INCOME FOR TOMORROW
BENEFIT").
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.
CONTRACT OWNER TRANSACTION EXPENSES
See Appendix C for additional information regarding contract owner transaction
expenses for Ven 7 contracts. See Appendix D for information regarding contract
owner transaction expenses for Ven 3 and Ven 1 contracts.
Deferred sales load (as percentage of purchase payments)
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS WITHDRAWAL CHARGE
PURCHASE PAYMENT IN PERCENTAGE
CONTRACT
- --------------------------------------------------------------------------------
<S> <C>
0 6%
1 6%
2 5%
3 5%
4 4%
5 3%
6 2%
7+ 0%
</TABLE>
ANNUAL CONTRACT FEE............................................... $30(1)
- ----------
(1)The $30 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
8
<PAGE> 15
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and expense risk fees....................................1.25%
Administration fee - asset based..................................0.15%
Total Separate Account Annual Expenses.............................1.40%
OPTIONAL INCOME RIDER FEE..........................................0.25%(2)
(as a percentage of the Income Base)
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets........ 0.850% 0.570% 1.420%
Science & Technology................ 1.100% 0.160% 1.260%
International Small Cap............. 1.100% 0.210% 1.310%
Emerging Growth..................... 1.050% 0.060% 1.110%
Pilgrim Baxter Growth............... 1.050% 0.130% 1.180%
Small/Mid Cap....................... 1.000% 0.050% 1.050%
International Stock................. 1.050% 0.330% 1.380%
Worldwide Growth.................... 1.000% 0.320% 1.320%
Global Equity....................... 0.900% 0.110% 1.010%
Small Company Value................. 1.050% 0.100%* 1.150%
Equity.............................. 0.750% 0.050% 0.800%
Growth.............................. 0.850% 0.110% 1.950%
Quantitative Equity................. 0.700% 0.070% 0.770%
Blue Chip Growth.................... 0.925% 0.050% 0.975%
Real Estate Securities.............. 0.700% 0.070% 0.770%
Value............................... 0.800% 0.160% 0.960%
International Growth and Income..... 0.950% 0.170% 1.120%
Growth and Income................... 0.750% 0.040% 0.790%
Equity-Income....................... 0.800% 0.050% 0.850%
Balanced............................ 0.800% 0.080% 0.880%
Aggressive Asset Allocation......... 0.750% 0.150% 0.900%
High Yield.......................... 0.775% 0.110% 0.885%
Moderate Asset Allocation........... 0.750% 0.100% 0.850%
Conservative Asset Allocation....... 0.750% 0.140% 0.890%
Strategic Bond...................... 0.775% 0.100% 0.875%
Global Government Bond.............. 0.800% 0.130% 0.930%
Capital Growth Bond................. 0.650% 0.080% 0.730%
Investment Quality Bond............. 0.650% 0.090% 0.740%
U.S. Government Securities.......... 0.650% 0.070% 0.720%
Money Market ....................... 0.500% 0.040% 0.540%
Lifestyle Aggressive 1000#.......... 0% 1.116%** 1.116%
Lifestyle Growth 820#............... 0% 1.048%** 1.048%
Lifestyle Balanced 640#............. 0% 0.944%** 0.944%
Lifestyle Moderate 460#............. 0% 0.850%** 0.850%
</TABLE>
- ----------
(2)If the Guaranteed Income for Tomorrow Benefit is elected, this fee is
deducted on each contract anniversary. The Guaranteed Minimum Income Benefit is
not available for Ven 7, Ven 3 or Ven 1 contracts (see "GUARANTEED INCOME FOR
TOMORROW BENEFIT").
9
<PAGE> 16
<TABLE>
<S> <C> <C> <C>
Lifestyle Conservative 280#......... 0% 0.708%** 0.708%
</TABLE>
*Based on estimates of payments to be made during the current fiscal year.
**Reflects expenses of the Underlying Portfolios. Manufacturers Securities
Services, LLC has voluntarily agreed to pay the expenses of each Lifestyle Trust
(excluding the expenses of the Underlying Portfolios). This voluntary expense
reimbursement may be terminated at any time. If such expense reimbursement was
not in effect, Total Trust Annual Expenses would be .04% higher (based on
expenses of the Lifestyle Trusts for the fiscal year December 31, 1997) as noted
in the chart below:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Aggressive 1000........... 0% 1.156% 1.156%
Lifestyle Growth 820................ 0% 1.088% 1.088%
Lifestyle Balanced 640.............. 0% 0.984% 0.984%
Lifestyle Moderate 460.............. 0% 0.890% 0.890%
Lifestyle Conservative 280.......... 0% 0.748% 0.748%
</TABLE>
#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.
EXAMPLE
A contract owner would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets, if the contract owner surrendered the
contract at the end of the applicable time period:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS+ 5 YEARS * 10 YEARS*
YEARS*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $84 $138 $182 $192 $321
Science & Technology................ 83 133 174 184 305
International Small Cap............. 83 134 177 187 310
Emerging Growth..................... 81 129 167 177 291
Pilgrim Baxter Growth............... 82 131 170 180 298
Small/Mid Cap....................... 81 127 164 174 285
International Stock................. 84 136 180 190 317
Worldwide Growth.................... 83 135 177 187 311
Global Equity....................... 81 126 162 172 281
Small Company Value................. 82 130
Equity.............................. 79 120 151 161 260
Growth.............................. 80 124 159 169 275
Quantitative Equity................. 78 119 150 160 257
Blue Chip Growth.................... 80 125 160 170 277
Real Estate Securities.............. 78 119 150 160 257
Value............................... 80 125 159 169 276
International Growth and Income..... 82 129 167 177 292
Growth and Income................... 78 120 151 161 259
Equity-Income....................... 79 121 154 164 265
Balanced............................ 79 122 155 165 268
Aggressive Asset Allocation......... 80 123 156 166 270
High Yield.......................... 79 122 155 165 268
Moderate Asset Allocation........... 79 121 154 164 265
Conservative Asset Allocation....... 79 123 156 166 269
Strategic Bond...................... 79 122 155 165 267
Global Government Bond.............. 80 124 158 168 273
Capital Growth Bond................. 78 118 148 158 253
Investment Quality Bond............. 78 118 148 158 254
U.S. Government Securities.......... 78 118 147 157 252
</TABLE>
10
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C> <C>
Money Market........................ 76 112 138 148 233
Lifestyle Aggressive 1000........... 82 129 167 177 291
Lifestyle Growth 820................ 81 127 164 174 285
Lifestyle Balanced 640.............. 80 124 158 168 274
</TABLE>
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS+ 5 YEARS * 10 YEARS*
- ----------------------------------------------------------------------------------------------------------------------
YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lifestyle Moderate 460.............. 79 121 154 164 265
Lifestyle Conservative 280.......... 78 117 146 156 250
</TABLE>
+For Ven 7 contracts only (as described in Appendix C). The difference in
amounts is attributable to the different withdrawal
charges. See Appendix C.
*The example of expenses for the Small Company Value Trust contains figures for
only one and three years since it is a newly created portfolio.
A contract owner would pay the following expenses on a $1,000 investment,
assuming 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:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS* 10 YEARS*
- ---------------------------------------------------------------------------------------------------
YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $29 $89 $152 $321
Science & Technology................ 28 85 144 305
International Small Cap............. 28 86 147 310
Emerging Growth..................... 26 80 137 291
Pilgrim Baxter Growth............... 27 82 140 298
Small/Mid Cap....................... 25 78 134 285
International Stock................. 29 88 150 317
Worldwide Growth.................... 28 86 147 311
Global Equity....................... 25 77 132 281
Small Company Value................. 26 81
Equity.............................. 23 71 121 260
Growth.............................. 24 75 129 275
Quantitative Equity................. 23 70 120 257
Blue Chip Growth.................... 25 76 130 277
Real Estate Securities.............. 23 70 120 257
Value............................... 25 76 129 276
International Growth and Income..... 26 80 137 292
Growth and Income................... 23 70 121 259
Equity-Income....................... 23 72 124 265
Balanced............................ 24 73 125 268
Aggressive Asset Allocation......... 24 74 126 270
High Yield.......................... 24 73 125 268
Moderate Asset Allocation........... 23 72 124 265
Conservative Asset Allocation....... 24 73 126 269
Strategic Bond...................... 24 73 125 267
Global Government Bond.............. 24 75 128 273
Capital Growth Bond................. 22 69 118 253
Investment Quality Bond............. 22 69 118 254
U.S. Government Securities.......... 22 68 117 252
Money Market........................ 20 63 108 233
Lifestyle Aggressive 1000........... 26 80 137 291
Lifestyle Growth 820................ 25 78 134 285
Lifestyle Balanced 640.............. 24 75 128 274
Lifestyle Moderate 460.............. 23 72 124 265
Lifestyle Conservative 280.......... 22 68 116 250
</TABLE>
11
<PAGE> 18
*The example of expenses for the Small Company Value Trust contains figures for
only one and three years since it is a newly created portfolio.
For purposes of presenting the foregoing Example, the Company has made
certain assumptions mandated by the SEC. 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 SEC
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 $30 annual administration charge listed
under "Annual Contract Fee" to a 0.063% annual asset charge based on the $47,500
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. This Prospectus
generally describes only the variable aspects of the contract, except where
fixed aspects are specifically mentioned.
TABLE OF ACCUMULATION UNIT VALUES+
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997.............................. $12.500000 $
Science & Technology
1997.............................. $12.500000 $
International Small Cap
1996.............................. $12.500000 $13.493094 2,508,877.311
1997.............................. 13.493094
Emerging Growth
1997.............................. $12.500000 $
Pilgrim Baxter Growth
1997.............................. $12.500000 $
Small/Mid Cap
1996.............................. $12.500000 $13.215952 4,970,485.965
1997.............................. 13.215952
International Stock
1997.............................. $12.500000 $
Worldwide Growth
1997.............................. $12.500000 $
Global Equity
1994.............................. $16.715126 $15.500933 951,915.210
1995.............................. 15.500933 16.459655 3,472,776.106
1996.............................. 16.459655 18.276450 6,625,243.867
1997.............................. 18.276450
Small Company Value
1997.............................. $12.500000 $
Equity
1994.............................. $14.381312 $14.786831 891,587.416
1995.............................. 14.786831 20.821819 5,881,806.714
</TABLE>
12
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
1996.............................. 20.821819 24.664354 12,141,813.159
1997.............................. 24.664354
Growth
1996.............................. $12.500000 $13.727312 1,629,270.725
1997.............................. 13.727312
Quantitative Equity
1997.............................. $12.500000 $
</TABLE>
13
<PAGE> 20
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Blue Chip Growth
1994.............................. $ 8.699511 $ 8.837480 427,027.154
1995.............................. 8.837480 11.026969 3,534,123.332
1996.............................. 11.026969 13.688523 7,508,607.872
1997.............................. 13.688523
Real Estate Securities
1997.............................. $12.500000 $
Value
1997.............................. $12.500000 $
International Growth and Income
1995.............................. $10.000000 $10.554228 2,338,302
1996.............................. 10.554228 11.718276 6,224,551.234
1997.............................. 11.718276
Growth and Income
1994.............................. $13.239339 $13.076664 675,761.489
1995.............................. 13.076664 16.660889 4,936,977.686
1996.............................. 16.660889 20.178770 11,948,147.164
1997.............................. 20.178770
Equity-Income
1994.............................. $11.375744 $11.107620 747,374.695
1995.............................. 11.107620 13.548849 4,453,647.654
1996.............................. 13.548849 16.011513 12,141,813.159
1997.............................. 16.011513
Balanced
1997.............................. $12.500000 $
Aggressive Asset Allocation
1994.............................. $12.538660 $12.381395 202,014.859
1995.............................. 12.381395 14.990551 963,754.656
1996.............................. 14.990551 16.701647 1,725,531.634
1997.............................. 16.701647
High Yield
1997.............................. $12.500000 $
Moderate Asset Allocation
1994.............................. $12.522239 $12.396295 462,460.272
1995.............................. 12.396295 14.752561 2,139,216.556
1996.............................. 14.752561 15.995076 3,599,312.544
1997.............................. 15.995076
Conservative Asset Allocation
1994.............................. $12.478545 $12.298940 128,525.165
1995.............................. 12.298940 14.320582 716,489.411
1996.............................. 14.320582 15.113142 1,281,095.343
1997.............................. 15.113142
Strategic Bond
1994.............................. $10.192707 $ 9.965972 191,924.981
1995.............................. 9.965972 11.716972 1,392,653.448
1996.............................. 11.716972 13.250563 4,418,383.860
1997.............................. 13.250563
Global Government Bond
1994.............................. $14.734788 $14.630721 194,131.021
1995.............................. 14.630721 17.772344 952,156.169
1996.............................. 17.772344 19.803954 1,613,888.548
1997.............................. 19.803954
Capital Growth Bond
1997.............................. $12.500000 $
</TABLE>
14
<PAGE> 21
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Quality Bond
1994.............................. $14.307698 $14.216516 128,932.292
1995.............................. 14.216516 16.751499 889,906.187
1996.............................. 16.751499 16.943257 1,828,328.994
1997.............................. 16.943257
U.S. Government Securities
1994.............................. $14.188969 $14.111357 231,053.897
1995.............................. 14.111357 16.083213 1,744,509.872
1996.............................. 16.083213 16.393307 2,512,596.677
1997.............................. 16.393307
Money Market
1994.............................. $13.453100 $13.623292 870,982.381
1995.............................. 13.623292 14.190910 3,204,791.061
1996.............................. 14.190910 14.699636 5,629,209.351
1997.............................. 14.699636
Lifestyle Aggressive 1000
1997.............................. $12.500000 $
Lifestyle Growth 820
1997.............................. $12.500000 $
Lifestyle Balanced 640
1997.............................. $12.500000 $
Lifestyle Moderate 460
1997.............................. $12.500000 $
Lifestyle Conservative 280
1997.............................. $12.500000 $
</TABLE>
+For the TABLE OF ACCUMULATION UNIT VALUES for Ven 7 contracts see Appendix C
and for Ven 3 and Ven 1 contracts see Appendix D.
* Units under this series of contracts were first credited under the
sub-accounts on August 9, 1994, except in the case of International Growth and
Income where units were first credited on January 9, 1995, Small/Mid Cap and
International Small Cap where units were first credited on March 4, 1996, Growth
where units were first credited on July 15, 1996, Pacific Rim Emerging Markets,
Science & Technology, Emerging Growth, Pilgrim Baxter Growth, International
Stock, Worldwide Growth, Quantitative Equity, Real Estate Securities, Value,
Balanced, High Yield, Capital Growth Bond, Lifestyle Aggressive 1000, Lifestyle
Growth 820, Lifestyle Balanced 640, Lifestyle Moderate 460, Lifestyle
Conservative 280 where units were first credited on January 1, 1997 and Small
Company Value where units were first credited on October 1, 1997.
GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A
AND MANUFACTURERS INVESTMENT TRUST
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
The Manufacturers Life Insurance Company of North America (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.
On January 19, 1998, the Board of Directors of Manulife asked the
management of Manulife to prepare a plan for conversion of Manulife from a
mutual life insurance company to an investor-owned, publicly-traded stock
company. Any demutualization plan for Manulife is subject to the approval of the
Manulife Board of Directors and policyholders as well as regulatory approval.
15
<PAGE> 22
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A
The Company established The Manufacturers Life Insurance Company of
North America Separate Account A (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 SEC under the Investment
Company Act of 1940, as amended (the "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 SEC 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.
The Company reserves the right to add other sub-accounts, eliminate
existing sub-accounts, combine sub-accounts or transfer assets 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. See Appendix D for information on sub-accounts available
to Ven 1 contracts.
MANUFACTURERS INVESTMENT TRUST
The assets of each sub-account of the Variable Account are invested in
shares of a corresponding portfolio of the Manufacturers Investment Trust (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 Manufacturers Securities Services, LLC ("MSS"), the successor to
NASL Financial Services, Inc.
The Trust currently has fifteen subadvisers who manage all of the
portfolios:
<TABLE>
<CAPTION>
SUBADVISER SUBADVISER TO
---------- -------------
<S> <C>
Fidelity Management Trust Company Equity Trust
Conservative Asset Allocation Trust
Moderate Asset Allocation Trust
Aggressive Asset Allocation Trust
Founders Asset Management LLC Growth Trust
Worldwide Growth Trust
Balanced Trust
International Small Cap Trust
Fred Alger Management, Inc. Small/Mid Cap Trust
J.P. Morgan Investment Management Inc. International Growth and Income 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
Miller Anderson & Sherrerd, LLP Value Trust
</TABLE>
16
<PAGE> 23
<TABLE>
<S> <C>
High Yield Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Oechsle International Advisors, L.P. Global Government Bond Trust
SUBADVISER SUBADVISER TO
Pilgrim Baxter & Associates, Ltd. Pilgrim Baxter Growth Trust
Rosenberg Institutional Equity Management Small Company Value Trust
Rowe Price-Fleming International, Inc. International Stock Trust
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
T. Rowe Price Associates, Inc. Science & Technology Trust
Blue Chip Growth Trust
Equity-Income Trust
Warburg Pincus Asset Management, Inc. Emerging Growth Trust
Wellington Management Company, LLP Growth and Income Trust
Investment Quality Bond Trust
</TABLE>
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.
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<PAGE> 24
The SMALL COMPANY VALUE TRUST seeks long term growth of capital by
investing in equity securities of smaller companies which are traded principally
in the markets of the United States.
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 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 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.
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 Investor Services, Inc. or Standard & Poor's Corporation or, if unrated,
of equivalent credit quality as determined by the subadviser.
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.
o 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.
o 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.
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<PAGE> 25
o 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.
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 principal. See
"Risk Factors Relating to High Yield Securities" contained in the Trust
prospectus before investing in any of these Trusts.
19
<PAGE> 26
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 Trust prospectus before investing in any of these Trusts.
If the shares of a portfolio are no longer available for investment or
in the Company's judgment investment in a 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 SEC to the extent required by the 1940
Act.
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. Except as noted below, the minimum initial purchase payment is $5,000
for Non-Qualified Contracts and $2,000 for Qualified Contracts. The minimum
initial purchase payment is $3,500 if the source of such payment was a direct
rollover of an eligible rollover distribution from a qualified plan under
Section 401(a) of the Code or a Tax Sheltered Annuity described in Section
403(b) of the Code, all or part of which assets are invested in a group annuity
contract issued by The Manufacturers Life Insurance Company (U.S.A.). 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
$30 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. In addition,
contract owners have the option to participate in the Guarantee Plus Program
administered by the Company. Under the Guarantee Plus Program the initial
purchase payment is split between the fixed and variable investment options. A
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<PAGE> 27
percentage of the initial purchase payment is allocated to the chosen fixed
account, such that, at the end of the guaranteed period the fixed account will
have grown to an amount at least equal to the total initial purchase payment.
The percentage depends upon the current interest rate of the fixed investment
option. The balance of the initial purchase payment is allocated among the
variable investment options as indicated on the contract specifications page.
Contract owners may elect to participate in the Guarantee Plus Program and may
obtain full information concerning the program and its restrictions from their
securities dealers or the Annuity Service Office. 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.
See Appendix D for information on purchase payments applicable to Ven 3
and Ven 1 contracts.
ACCUMULATION UNITS
The Company will establish an investment account for the contract owner
for each variable account investment option to which such contract owner
allocates purchase payments. Purchase payments are credited to such investment
accounts in the form of accumulation units. The following discussion of
accumulation units, the value of accumulation units and the net investment
factor formula pertains only to the accumulations in the variable account
investment options. The parallel discussion regarding accumulations in the fixed
account investment options appears elsewhere in this Prospectus (see "FIXED
ACCOUNT INVESTMENT OPTIONS").
The number of accumulation units to be credited to each investment
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 after receipt,
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 either $10.00 or $12.50 for the first
valuation period under contracts similar to the contracts described in this
Prospectus. 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:
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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 1.40%
(0.15% for administrative expenses and 1.25% for mortality and expense
risks). The charges deducted from the sub-account reduce the value of
the accumulation units for the sub-account.
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
Before the maturity date the contract owner may transfer amounts among
the variable account investment options and from such investment options to the
fixed account 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.
See Appendix D for information on Transfer Among Investment Options applicable
to Ven 1 and Ven 3 contracts.
MAXIMUM NUMBER OF INVESTMENT OPTIONS
Due to current administrative capabilities, a contract owner is limited
to a maximum of 17 investment options (including all fixed account investment
options) 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 17 maximum
even if the contract owner no longer has contract value allocated to these
investment options.
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 one year fixed account investment option is exhausted. Except in the states
of _______, a special one year fixed account investment option (the "One Year
DCA Account") may be established under the DCA program to make automatic monthly
transfers. In the first eleven months the amount transferred is equal to one
eleventh of the amount allocated to the One Year DCA Account and in the twelfth
month the remaining balance of the One Year DCA Account is transferred. Only
initial and subsequent net payments may be
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<PAGE> 29
allocated to the One Year DCA Account. 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. See Appendix D for information on the DCA
program applicable to Ven 1 and Ven 3 contracts. There is no charge for
participation in the DCA program.
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. (Fixed
Account Investment Options are not eligible for participation in the Asset
Rebalancing Program.) The entire value of the variable investment accounts 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 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. There is no charge for participation in the Asset
Rebalancing Program.
For rebalancing programs begun on or after October 1, 1996 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).
Rebalancing will continue to take place on the last business day of every
calendar quarter for rebalancing programs begun prior to October 1, 1996.
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 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 $30 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, a partial
withdrawal will be taken from the variable account investment options until
exhausted and then from the fixed account investment options, beginning with the
shortest guarantee period first and ending with the longest guarantee period
last. If the partial withdrawal is less than the total value in the variable
account investment options, the withdrawal will be taken pro rata from the
variable account investment options: taking from each such variable account
investment option an amount which bears the same relationship to the total
amount withdrawn as the value of such variable account investment option bears
to the total value of all the contract owner's investments in variable account
investment options.
For the rules governing the order and manner of withdrawals from the
fixed account investment options, see "FIXED ACCOUNT INVESTMENT OPTIONS."
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
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<PAGE> 30
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 from the variable account investment
options 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 SEC, by order, so permits
for the protection of security holders; provided that applicable rules and
regulations of the SEC 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. 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 or
market value 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 and market value 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 advisors
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
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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).
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.
See Appendix D for information on Loans applicable to Ven 1 and Ven 3
contracts.
DEATH BENEFIT BEFORE MATURITY DATE
For information on the death benefit applicable to Ven 7 contracts see Appendix
C and to Ven 1 and Ven 3 contracts see Appendix D.
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.
Contracts Issued Prior to May 1, 1998. If any contract owner dies on or
prior to his or her 85th birthday 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: During the first contract year, the death benefit will be the greater
of: (a) the contract value or (b) the sum of all purchase payments made, less
any amounts deducted in connection with partial withdrawals. During any
subsequent contract year, the death benefit will be the greater of: (a) the
contract value or (b) the death benefit on the last day of the previous contract
year, plus any purchase payments made and less any amounts deducted in
connection with partial withdrawals since then.
If any contract owner dies after his or her 85th birthday and the
oldest owner had an attained age of less than 81 years on the contract date, the
death benefit will be the greater of: (a) the contract value or (b) the excess
of (i) the sum of all purchase payments over (ii) the sum of any amounts
deducted in connection with partial withdrawals. 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
at the time of payment of benefits. For contracts issued on or after October 1,
1997, any withdrawal charges applied against the death benefit shall be waived
by the Company.
Contracts Issued After May 1, 1998. 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: During the first contract year, the
death benefit will be the greater of: (a) the contract value or (b) the sum of
all purchase payments made, less any amounts deducted in connection with partial
withdrawals. During any subsequent contract year, the death benefit will be the
greater of: (a) the contract value or (b) the death benefit on the last day of
the previous contract year, plus any purchase payments made and less any amounts
deducted in connection with partial withdrawals since then. If any contract
owner dies on or after his or her 81st
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birthday, the death benefit will be the greater of (a) contract value or (b) the
death benefit on the last day of the contract year ending just prior to the
owner's 81st birthday, plus any payments made, less amounts deducted in
connection with partial withdrawals.
If any contract owner dies and the oldest owner had an attained age of
81 years or greater on the contract date, the death benefit will be the greater
of: (a) the contract value or (b) the excess of (i) the sum of all purchase
payments over (ii) the sum of any amounts deducted in connection with partial
withdrawals.
In the states of _____, the death benefit described under "Contracts
Issued Prior to May 1, 1998" will continue to apply to contracts issued after
May 1, 1998.
Determination of Death Benefit. 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 may be made. (4) If the beneficiary is not the
deceased's owner 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. In addition, a death benefit
will be paid upon the death of the spouse. For purposes of calculating the death
benefit payable upon the death of the spouse, the death benefit paid upon the
first owner's death will be treated as a purchase payment to the contract. In
addition, the death benefit on the last day of the previous contract year (or
the last day of the contract year ending just prior to the owner's 81st
birthday, if applicable) shall be set to zero as of the date of the first
owner's death. (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. For contracts
issued after October 1, 1997, any withdrawal charge applied against the death
benefit shall be waived.
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. That amount distributed will be reduced by charges
which would otherwise apply upon withdrawal.
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. 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").
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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. 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
alternate form of settlement acceptable to the Company. If an annuity option is
not selected, the Company will provide as a default option annuity payments on a
fixed, variable or combined fixed and variable basis 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.
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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, except for contracts issued in connection with certain employer
sponsored plans where sex-based tables may not be used. 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. For information on
annuity rates for Ven 7 contracts see Appendix C and for Ven 1 and Ven 3
contracts see Appendix D.
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. A pro-rata portion of the administration fee will be
deducted from each annuity payment.
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
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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, computed at the
end of the valuation period during which the contract is received by the
Company, to the contract owner.
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 Sections 408 or 408A of the Code, 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 (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 Code or as
otherwise permitted by applicable Internal Revenue Service ("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.
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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. For information regarding the beneficiary
for Ven 7 contracts see Appendix C and for Ven 3 and Ven 1 see Appendix D.
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, 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.
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 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 OPTIONS
For information on Fixed Account Investment Options for Ven 7 contracts see
Appendix C and for Ven 3 and Ven 1 contracts see Appendix D.
Due to certain exemptive and exclusionary provisions, interests in the
fixed account investment options are not registered under the Securities Act of
1933, as amended, (the "1933 Act") and the Company's general account is not
registered as an investment company under the 1940 Act. Accordingly, neither
interests in the fixed account investment options nor the general account are
subject to the provisions or restrictions of the 1933 Act or the 1940 Act and
the staff of the SEC has not reviewed the disclosures in this Prospectus
relating thereto. Disclosures relating to interests in the fixed account
investment options 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.
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 by 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
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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.
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 Options. Currently, there are five fixed account investment
options under the contract: one, three, five and seven year investment accounts
and a one year DCA fixed investment account may be established under the DCA
program to make automatic monthly transfers from a one year fixed account to one
or more variable investment options (see "SPECIAL TRANSFER SERVICES - DOLLAR
COST AVERAGING" for details). The Company may offer additional fixed account
investment options for any yearly period from two to ten years. Fixed investment
accounts provide for the accumulation of interest on purchase payments at
guaranteed rates for the duration of the guarantee period. 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. Notwithstanding the foregoing, with respect to contracts issued in
the State of Oregon, no purchase payments may be invested, transferred or
reinvested into any fixed account investment option with a guarantee period of
more than one year within 15 years of the maturity date, and no purchase
payments may be invested in the one year fixed account investment option within
six years of the maturity date.
Investment Accounts. Contract owners may allocate purchase payments, or
make transfers from the variable investment options, to the fixed account
investment options 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 a 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 the same guarantee period at the then
current interest rate, select a different fixed account investment option or
transfer the amounts to a variable account investment option, all without the
imposition of any charge. The contract owner may not select a guarantee period
that would extend beyond the maturity date. 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 same guarantee period as has just expired, so long as
such period does not extend beyond the maturity date. In the event a renewal
would extend beyond the maturity date, the Company will select the longest
period that will not extend beyond such date, except in the case of a renewal
within one year of the maturity date in which case the Company will credit
interest up to the maturity date at the then current interest rate for one year
guarantee periods.
Market Value Charge. Any amount withdrawn, transferred or borrowed from
an investment account prior to the end of the guarantee period may be subject to
a market value charge. A market value charge will be calculated separately for
each investment account affected by a transaction to which a market value charge
may apply. The market value charge for an investment account will be calculated
by multiplying the amount withdrawn or transferred from the investment account
by the adjustment factor described below.
The adjustment factor is determined by the following formula:
0.75x(B-A)xC/12 where:
A - The guaranteed interest rate on the investment account.
B - The guaranteed interest rate available, on the date the request is
processed, for amounts allocated to a new investment account with the
same length of guarantee period as the investment account from which
the amounts are being withdrawn.
C - The number of complete months remaining to the end of the guarantee
period.
For purposes of applying this calculation, the maximum difference
between "B" and "A" will be 3%. The adjustment factor may never be less than
zero.
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The total market value charge will be the sum of the market value
charges for each investment account being withdrawn. Where the guaranteed rate
available on the date of the request is less than the rate guaranteed on the
investment account from which the amounts are being withdrawn (B-A in the
adjustment factor is negative), there is no market value charge. There is only a
market value charge when interest rates have increased (B-A in the adjustment
factor is positive).
There will be no market value charge on withdrawals from the fixed
account investment options in the following situations: (a) death of the
contract owner; (b) amounts withdrawn to pay fees or charges; (c) amounts
applied at the maturity date to purchase an annuity at the guaranteed rates
provided in the contract; (d) amounts withdrawn from investment accounts within
one month prior to the end of the guarantee period; (e) amounts withdrawn from a
one-year fixed investment account; and (f) amounts withdrawn in any contract
year that do not exceed 10% of total purchase payments less any prior partial
withdrawals in that year.
Notwithstanding application of the foregoing formula, in no event will
the market value charge (i) be greater than the amount by which the earnings
attributable to the amount withdrawn or transferred from an investment account
exceed an annual rate of 3%, (ii) together with any withdrawal charges for an
investment account be greater than 10% of the amount transferred or withdrawn,
or (iii) reduce the amount payable on withdrawal or transfer below the amount
required under the non-forfeiture laws of the state with jurisdiction over the
contract. The cumulative effect of the market value and withdrawal charges
could, however, result in a contract owner receiving total withdrawal proceeds
of less than the contract owner's investment in the contract.
Transfers. Prior to the maturity date, the contract owner may transfer
amounts among the fixed account investment options and from the fixed account
investment options to the variable account investment options, subject to the
following conditions. An amount in a fixed investment account may not be
transferred until held in such account for at least one year, except transfers
may be made pursuant to the Dollar Cost Averaging program. Consequently, except
as noted above, amounts in one year investment accounts effectively may not be
transferred prior to the end of the guarantee period. Amounts in any other
investment accounts may be transferred after the one year holding period has
been satisfied, but the market value charge described above may apply to such a
transfer. The market value charge, if applicable, will be deducted from the
amount transferred.
The contract owner must specify the fixed account investment option
from or to which a transfer is to be made. Where there are multiple investment
accounts within a fixed account investment option, amounts must be withdrawn
from the 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 fixed account investment options at any time prior to his or
her death. Withdrawals from fixed account investment options 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 fixed
account investment options: (1) the Company reserves the right to defer payment
of amounts withdrawn from fixed account investment options 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); (2) if
there are multiple investment accounts under a fixed account investment option,
amounts must be withdrawn from such accounts on a first-in-first-out basis; and
(3) the market value charge described above may apply to withdrawals from any
investment option except for a one year investment option. In the event a market
value charge applies to a withdrawal from a fixed investment account, it will be
calculated with respect to the full amount in the investment account and
deducted from the amount payable in the case of a total withdrawal. In the case
of a partial withdrawal, the market value charge will be calculated on the
amount requested and deducted, if applicable, from the remaining investment
account value.
Where a contract owner requests a partial withdrawal from a contract in
excess of the amounts in the variable account investment options and does not
specify the fixed account investment options from which the withdrawal is to be
made, such withdrawal will be made from the investment options beginning with
the shortest guarantee period. Within such sequence, where there are multiple
investment accounts within a fixed account investment option, withdrawals will
be made on a first-in-first-out basis. For this purpose, the one year DCA fixed
account investment option is considered to have a shorter guarantee period than
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").
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 fixed investment accounts in the same manner and subject to the
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<PAGE> 39
same limitations as set forth under "LOANS". The market value charge described
above may apply to amounts transferred from the fixed investment accounts to the
loan account in connection with such loans and, if applicable, will be deducted
from the amount so transferred.
Fixed Annuity Options. Subject to the distribution of death benefits
provisions (see "DEATH BENEFIT BEFORE MATURITY DATE"), on death, withdrawal or
the maturity date of the contract, the proceeds may be applied to a fixed
annuity option (see "ANNUITY OPTIONS"). 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.
GUARANTEED INCOME FOR TOMORROW BENEFIT
The Guaranteed Income For Tomorrow Benefit (the "Income Benefit")
guarantees a minimum lifetime fixed income benefit in the form of fixed monthly
annuity payments. The Income Benefit is based on the aggregate net purchase
payments applied to the contract, accumulated at interest, minus an adjustment
for any partial withdrawals. The amount of the monthly annuity payment provided
by the Income Benefit is determined by applying the Income Base, described
below, to the annuity purchase rates set forth in the Income Benefit Rider.
Because the fixed annuity options provided for in the contract are based on the
contract value at the time of annuitization, the amount of the monthly payments
under such options may exceed the monthly payments provided by the Income
Benefit Rider. If the Income Benefit is exercised and the annuity payment
available under the contract is greater than the monthly payment provided by the
Income Benefit Rider, the Company will pay the monthly annuity payment available
under the contract. The Income Benefit is available for contracts issued on or
after May 1, 1998. The Income Benefit is currently not available in the
following states:__________ and is not available for Ven 7, Ven 3 or Ven 1
contracts.
Income Base. The Income Base is equal to (a) less (b), where (a) is the
sum of all payments made, accumulated at the growth factor indicated below
starting on the date each payment is allocated to the contract, and (b) is the
sum of Income Base reductions on a pro rata basis in connection with partial
withdrawals taken, accumulated at the growth factor indicated below starting on
the date each deduction occurs. The growth factor is 6% per annum for annuitant
issue ages up to age 75, and 4% per annum for annuitant issue ages 76 or older.
The growth factor is reduced to 0% once the annuitant has attained age 85.
Income Base reduction on a pro rata basis is equal to the Income Base
immediately prior to a partial withdrawal multiplied by the percentage reduction
in contract value resulting from a partial withdrawal.
If the Income Benefit is added to the contract after the contract date,
the Income Base on the date the rider is issued (the "Rider Date") is the
contract value on the Rider Date. For purposes of subsequent calculation of the
Income Base, the contract value on the Rider Date will be treated as a purchase
payment made on the Rider Date. In addition, all purchase payments made and all
amounts deducted in connection with partial withdrawals prior to the Rider Date
will not be considered in determining the Income Base.
The Income Base is also reduced for any withdrawal charge remaining on
the date the Income Benefit is exercised. The Company reserves the right to
reduce the Income Base by any premium taxes that may apply.
The Income Base is used solely for purposes of calculating the Income
Benefit and does not provide a contract value or guarantee performance of any
investment option.
Step-Up of Income Base. Within 30 days immediately following any
contract anniversary, the owner may elect to step-up the Income Base to the
contract value on that contract anniversary by sending the Company a written
request. If the owner elects to step-up the Income Base, the earliest date that
the owner may exercise the Income Benefit is extended to the seventh contract
anniversary following the most recent date the Income Base was stepped-up to
contract value (the "Step-Up Date").
Following a step-up of the Income Base, the Income Base as of the
Step-Up Date is equal to the contract value on the Step-Up Date. For purposes of
subsequent calculation of the Income Base, the contract value on the Step-Up
Date will be treated as a purchase payment made on that date. In addition, all
payments made and all amounts deducted in connection with partial withdrawals
prior to the Step-Up Date will not be considered in determining the Income Base.
Conditions of Exercise of the Income Benefit. The Income Benefit may
be exercised subject to the following conditions:
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1. The Income Benefit must be exercised within 30 days immediately
following an Election Date. An Election Date is the seventh or later contract
anniversary following the date the income benefit is elected or, in the case of
a step-up of the Income Base, the seventh or later contract anniversary
following the Step-Up Date.
2. The Income Benefit must be exercised by the later of (i) the
contract anniversary immediately prior to the annuitant's 85th birthday or (ii)
the tenth contract anniversary.
Monthly Income Factors. The Income Benefit may be used to purchase a
guaranteed lifetime income under the following annuity options: (1) Life Annuity
with a 10-Year Period Certain or (2) Joint and Survivor Life Annuity with a
20-Year Period Certain.
Option 1: Life Annuity with a 10-Year Period certain. 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: Joint and Survivor Life Annuity with a 20-Year Period
Certain. An annuity with payments guaranteed for 20 years and
continuing thereafter during the lifetime of the annuitant and a
designated co-annuitant. Since payments are guaranteed for 20 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 twentieth
year.
The monthly income factors depend upon the annuitant's (and
co-annuitant's, if any) sex and age (nearest birthday) and the annuity option
selected. The factors are based on the 1983 Table A projected at Scale G, and
reflect an assumed interest rate of 3% per year.
Illustrated below are Income Benefit amounts per $100,000 of initial
payments, for a male annuitant and a female co-annuitant both age 60 (at issue),
on contract anniversaries as indicated below, assuming no subsequent payments or
withdrawals and assuming there was no step-up of the Income Base.
<TABLE>
<CAPTION>
Income Benefit-Annual
Income Benefit-Annual Income Income Joint & Survivor
Contract Anniversary Life Annuity with 10 Year Life Annuity with 20 Year
at Election Period Certain Period Certain
-------------------------------- ------------------------------- ---------------------------
<S> <C> <C>
7 $ 9,797 $ 7,830
10 $12,593 $ 9,842
15 $19,124 $14,293
</TABLE>
Income Rider Fee. The risk assumed by the Company associated with the
Income Benefit is that the annuity benefits payable under the Income Benefit are
greater than the annuity benefits that would have been payable had the owner
selected another annuity benefit permitted by the contract (see "ANNUITY
PROVISIONS"). To compensate the Company for this risk, the Company charges an
annual Income Rider Fee (the "Rider Fee"). On or before Maturity Date, the Rider
Fee is deducted on each contract anniversary. The amount of the Rider Fee is
equal to [.25%] multiplied by the Income Base in effect on that contract
anniversary. The fee is 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.
In the case of full withdrawal of contract value on any date other than
the contract anniversary, the Company will deduct the Rider Fee from the amount
paid upon withdrawal. In the case of a full withdrawal, the Rider Fee is equal
to [.25%] multiplied by the Income Base immediately prior to withdrawal. The
Rider Fee will not be deducted during the annuity period. For purposes of
determining the Rider Fee, annuity payment commencement shall be treated as a
full withdrawal.
THE INCOME BENEFIT DOES NOT PROVIDE CONTRACT VALUE OR GUARANTEE
PERFORMANCE OF ANY INVESTMENT OPTION. BECAUSE THIS BENEFIT IS BASED ON
CONSERVATIVE ACTUARIAL FACTORS, THE LEVEL OF LIFETIME INCOME THAT IT GUARANTEES
MAY OFTEN BE LESS THAN THE LEVEL THAT WOULD BE PROVIDED BY APPLICATION OF
CONTRACT VALUE AT CURRENT ANNUITY FACTORS. THEREFORE, THE INCOME BENEFIT SHOULD
BE REGARDED AS A SAFETY NET. AS DESCRIBED ABOVE UNDER "INCOME BENEFIT,"
WITHDRAWALS WILL REDUCE THE INCOME BENEFIT.
CHARGES AND DEDUCTIONS
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<PAGE> 41
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
For information on Withdrawal Charges for Ven 7 contracts see Appendix C and for
Ven 3 and Ven 1 contracts see Appendix D.
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 seven 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 seven complete contract years. In no event may the total
withdrawal charges exceed 6% of the amount invested. The amount of the
withdrawal charge and when it is assessed is 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 fixed account investment options beginning with those with the
shortest guarantee period first and the longest guarantee period last.
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.
NUMBER OF COMPLETE YEARS OF
PURCHASE PAYMENT IN WITHDRAWAL CHARGE
CONTRACT PERCENTAGE
0 6%
1 6%
2 5%
3 5%
4 4%
5 3%
6 2%
7+ 0%
The total withdrawal charge will be the sum of the withdrawal charges
for the purchase payments being liquidated.
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.
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<PAGE> 42
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.
Withdrawals from the fixed account investment options may be subject to a market
value charge in addition to the withdrawal charge described above (see "FIXED
ACCOUNT INVESTMENT OPTIONS").
REDUCTION OR ELIMINATION OF WITHDRAWAL CHARGE
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.
Withdrawal Charge Waiver in Connection with Clinton's Administration's
Fiscal Year 1999 Budget Proposal
The Clinton administration's Fiscal Year 1999 Budget proposal dated
February 2, 1998 (the "1999 Budget Proposal") contains proposals to change the
taxation of non-qualified annuity contracts (see "FEDERAL TAX MATTERS -
Introduction"). While it is uncertain whether the 1999 Budget Proposal will
become law, if the 1999 Budget Proposal is enacted substantially as proposed,
withdrawal charges will be waived on purchase payments made on or after February
2, 1998, provided such amounts are withdrawn within 60 days of the date that the
1999 Budget Proposal becomes law. The Company reserves the right to terminate
this withdrawal charge waiver at any time. If the waiver is terminated, purchase
payments made from February 2, 1998 to the termination date of the waiver will
not be subject to withdrawal charge as provided above. This waiver does not
affect a contract owner's right to cancel a contract within the ten day right to
review period (see "OTHER CONTRACT PROVISIONS - Ten Day Right to Review").
Withdrawals may be subject to income tax to the extent of earnings under the
contract and, if made prior to age 59-1/2, generally will be subject to a 10%
IRS penalty tax (see "FEDERAL TAX MATTERS - Taxation of Partial and Full
Withdrawals"). The waiver of the withdrawal charge does not apply to Ven 3 and
Ven 1 contracts.
ADMINISTRATION FEES
For information on the Administration Fee applicable to Ven 7 contracts see
Appendix C and to Ven 3 and Ven 1 contracts see Appendix D.
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Except as noted below, the Company will deduct each year an annual
administration fee of $30 as partial compensation for the cost of providing all
administrative services attributable to the contracts and the operations of the
Variable Account 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 $30 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.
A daily charge in an amount equal to 0.15% of the value of each
variable investment account on an annual basis is also deducted from each
sub-account to reimburse the Company for administrative expenses. This asset
based administrative charge will not be deducted from the fixed account
investment options. The charge will be reflected in the contract value as a
proportionate reduction in the value of each variable investment account.
Because this portion of the administrative fee is a percentage of assets rather
than a flat amount, larger contracts will in effect pay a higher proportion of
this portion of the administrative expense 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.
REDUCTION OR ELIMINATION OF ANNUAL ADMINISTRATION FEE
The amount of the annual administration fee 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
administration expenses. The entitlement to such a reduction or elimination of
the administration charges will be determined by the Company in the following
manner:
1. The size and type of group to which administrative services are to
be provided will be considered.
2. The total amount of purchase payments to be received will be
considered.
3. There may be other circumstances of which the Company is not
presently aware, which could result in reduced administrative expense.
If, after consideration of the foregoing factors, it is determined that
there will be a reduction or elimination of administration expenses, the Company
will provide a reduction in the annual administration fee. In no event will
reduction or elimination of the administration fees be permitted where such
reduction or elimination will be unfairly discriminatory to any person. The
Company may waive all or a portion of the administration fee when a contract is
issued to an officer, director or employee, or relative thereof, of the Company,
Manulife, the Trust or any of their affiliates.
MORTALITY AND EXPENSE RISK CHARGE
For information on Mortality and Expense Risk Charges for Ven 1 contracts see
Appendix D.
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 .8% for
the mortality risk and .45% for the expense risk. The charge will be reflected
in the contract value as a proportionate reduction in the value of each variable
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
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things, payment of distribution expenses. The mortality and expense risk charge
is not assessed against the fixed account investment options.
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 of those states which apply premium taxes upon
receipt of purchase payments, premium taxes will be deducted from the contract
value used to provide for fixed or variable annuity payments. For residents of
those states which apply premium taxes upon receipt of purchase payments,
premium taxes will be deducted upon payment of any withdrawal benefits, upon any
annuitization, or payment of death benefits. 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").
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 advisor should always be consulted with
regard to the application of law to individual circumstances. This discussion is
based on 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.
The 1999 Budget Proposal contains proposals to change the taxation of
non-qualified annuity contracts. The 1999 Budget Proposal proposes to tax
exchanges of variable contracts for fixed contracts, exchanges of fixed
contracts for variable contracts, exchanges of variable contracts for variable
contracts and reallocation within variable contracts. Currently, owners of
annuity contracts may exchange their contracts for another annuity without
currently incurring tax, and reallocations among investment options are not
treated as a taxable exchange. In addition, the 1999 Budget Proposal proposes
that the contract owner's basis in annuity contracts be reduced annually by
1.25% of the cash value for purposes of determining the taxable gain on
surrenders, withdrawals, and all annuity payments except those made for life at
the rates guaranteed in the contract. Currently, basis in annuity contracts is
not reduced by this amount. The 1999 Budget Proposal states that it generally
would apply only to contracts issued after the date of first congressional
committee action, but that the new exchange and reallocation rules would also
apply to any existing contract that was materially changed. While it is
uncertain whether the 1999 Budget Proposal will become law, if the 1999 Budget
Proposal is enacted substantially as proposed, withdrawal charges will be waived
(see "CHARGES AND DEDUCTIONS Reduction or Elimination of Withdrawal Charge").
The waiver of the withdrawal charge does not apply to Ven 3 and Ven 1 contracts.
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 provisions 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 provisions for such taxes.
TAXATION OF ANNUITIES IN GENERAL
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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 Owners. 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
income 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
than a year from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during the annuity period.
Loss of Interest Deduction Where Contracts are Held by or for the
Benefit of Certain Non-Natural Persons. In the case of contracts issued after
June 8, 1997 to a non-natural taxpayer (such as a corporation or a trust), or
held for the benefit of such an entity, recent changes in the tax law may result
in otherwise deductible interest no longer being deductible by the entity,
regardless of whether the interest relates to debt used to purchase or carry the
contract. However, this interest deduction disallowance does not affect
contracts where the income on such contracts is treated as ordinary income that
is received or accrued by the owner during the taxable year. Entities that are
considering purchasing the contract, or entities that will be beneficiaries
under a contract, should consult a tax advisor.
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 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 IRS 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 IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner
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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.
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. (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 his or her interest in 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). A simplified method of determining the taxable
portion of annuity payments applies to contracts issued in connection with
certain qualified plans other than IRAs.
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
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Amounts may be distributed from a 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 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 IRS 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
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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" or an "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).
In addition, the penalty tax does not apply to certain distributions from IRAs
taken after December 31, 1997 which are used for qualified first time home
purchases or for higher education expenses. Special conditions must be met to
qualify for these two exceptions to the penalty tax. Owners wishing to take a
distribution from an IRA for these purposes should consult their tax advisor.
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 "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. The contract may not,
however, be used in connection with an "Education IRA" under Section 530 of the
Code.
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
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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 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.
Roth IRAs. Recently enacted Section 408A of the Code permits eligible
individuals to contribute to a type of IRA known as a "Roth IRA." Roth IRAs
differ from other IRAs in several respects. Among the differences is that,
although contributions to a Roth IRA are not deductible, "qualified
distributions" from a Roth IRA will be excludable from income. Additionally, the
eligibility and mandatory distribution requirements for Roth IRAs differ from
non-Roth IRAs. Furthermore, a rollover may be made to a Roth IRA only if it is a
"qualified rollover contribution." A "qualified rollover contribution" is a
rollover contribution to a Roth IRA from another Roth IRA or from a non-Roth
IRA, but only if such rollover contribution meets the rollover requirements for
IRAs under Section 408(d)(3) of the Code. In the case of a qualified rollover
contribution or a transfer from a non-Roth IRA to a Roth IRA, any portion of the
amount rolled over which would be includible in gross income were it not part of
a qualified rollover contribution or a nontaxable transfer will be includible in
gross income. However, the 10 percent penalty tax on premature distributions
generally will not apply.
All or part of amounts in a non-Roth IRA may be converted into a Roth
IRA. Such a conversion can be made without taking an actual distribution from
the IRA. For example, an individual may make a conversion by notifying the IRA
issuer or trustee, whichever is applicable. The conversion of an IRA to a Roth
IRA is a special type of qualified rollover distribution. Hence, the IRA
participant must be eligible to make a qualified rollover distribution in order
to convert an IRA to a Roth IRA. A conversion typically will result in the
inclusion of some or all of the IRA value in gross income, as described above.
Persons with adjusted gross incomes in excess of $100,000 or who are married and
file a separate return are not eligible to make a qualified rollover
contribution or a transfer in a taxable year from a non-Roth IRA to a Roth IRA.
Any "qualified distribution" from a Roth IRA is excludible from gross
income. A "qualified distribution" is a payment or distribution which satisfies
two requirements. First, the payment or distribution must be (a) made after the
owner attains age 59-1/2, (b) made after the owner's death, (c) attributable to
the owner being disabled, or (d) a qualified first-time
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homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Code.
Second, the payment or distribution must be made in a taxable year that is at
least five years after (a) the first taxable year for which a contribution was
made to any Roth IRA established for the owner, or (b) in the case of a payment
or distribution properly allocable to a qualified rollover contribution from a
non-Roth IRA (or income allocable thereto), the taxable year in which the
rollover contribution was made. A distribution from a Roth IRA which is not a
qualified distribution is generally taxed in the same manner as a distribution
from non-Roth IRAs. Distributions from a Roth IRA need not commence at age
70-1/2.
As described 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 include Roth IRAs).
Persons intending to use the contract in connection with a Roth IRA 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 and rollovers from non-Roth IRAs to Roth
IRAs) 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.
PERFORMANCE DATA
Each of the sub-accounts may in its advertising and sales materials
quote total return figures. The sub-accounts may advertise both "standardized"
and "non-standardized" total return figures, although standardized figures will
always accompany non-standardized figures. Non-standardized total return figures
may be quoted assuming both (i) redemption at the end of the time period and
(ii) not assuming redemption at the end of the time period. Standardized figures
include total return figures from: (i) the inception date of the sub-account of
the Variable Account which invests in the portfolio or (ii) ten years, whichever
period is shorter. Non-standardized figures include total return numbers from:
(i) inception date of the portfolio or (ii) ten year, whichever period is
shorter. 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 inception date of the sub-account, in the case of
standardized returns, and the inception date of the portfolio, in the case of
non-standardized returns. 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
44
<PAGE> 51
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. For
total return figures quoted for periods prior to the commencement of the
offering of the contract standardized performance data will be the historical
performance of the Trust portfolio from the date the applicable sub-account of
the Variable Account first became available for investment under other contracts
offered by the Company, adjusted to reflect current contract charges. In the
case of non-standardized performance, performance figures will be the historical
performance of the Trust portfolio from the inception date of the portfolio (or
in the case of the Trust portfolios created in connection with the merger of
Manulife Series Fund, Inc. into the Trust, the inception date of the applicable
predecessor Manulife Series Fund portfolio), adjusted to reflect current
contract charges. Past performance figures quoted are not intended to indicate
future performance of any sub-account. 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.
DISTRIBUTION OF CONTRACTS
MSS located at 73 Tremont Street, Boston, Massachusetts 02108, a
Delaware limited liability company controlled by the Company, is the principal
underwriter of the contracts in addition to providing advisory services to the
Trust. MSS is a broker-dealer registered under the Securities Exchange Act of
1934 (the "1934 Act") and a member of the National Association of Securities
Dealers, Inc. ("NASD"). MSS 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 62.5% owned by The
Manufacturers Life Insurance Company (U.S.A.), 22.5% owned by MRL Holding, LLC
and 15% owned by the principals of Wood Logan. Sales of the contracts will be
made by registered representatives of broker-dealers authorized by MSS 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. MSS will pay distribution compensation to
selling brokers in varying amounts which under normal circumstances are not
expected to exceed 6% of purchase payments and 0.75% of the contract value per
year beginning in the second contract year. MSS may from time to time pay
additional compensation pursuant to promotional contests. Additionally, in some
circumstances, MSS will provide reimbursement of certain sales and marketing
expenses. MSS 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.
CONFIRMATION STATEMENTS
Owners will be sent confirmation statements for certain transactions in
their account. Owners should carefully review these statements to verify their
accuracy. Any mistakes should immediately be reported to the Company's Annuity
Service Office. If the owner fails to notify the Company's Annuity Service
Office of any mistake within 60 days of the mailing of the confirmation
statement, the owner will be deemed to have ratified the transaction.
LEGAL PROCEEDINGS
45
<PAGE> 52
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 MSS 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 SEC under the 1933 Act
with respect to the variable portion of the contracts discussed 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 SEC.
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
General Information and History........................................ 3
Performance Data....................................................... 3
Services
Independent Auditors............................................ 18
Servicing Agent................................................. 18
Principal Underwriter........................................... 18
Cancellation of Contract........................................ 18
Financial Statements................................................... 19
46
<PAGE> 53
APPENDIX A
EXAMPLES OF CALCULATION OF WITHDRAWAL CHARGE*
EXAMPLE 1 - Assume a single payment of $50,000 is made into the contract, no
transfers are made, no additional payments are made and there are no partial
withdrawals. The table below illustrates four examples of the withdrawal charges
that would be imposed if the contract is completely withdrawn, based on
hypothetical contract values.
<TABLE>
<CAPTION>
CONTRACT HYPOTHETICAL FREE WITHDRAWAL
YEAR CONTRACT WITHDRAWAL PAYMENTS CHARGE
VALUE AMOUNT LIQUIDATED
---------------------------------
PERCENT AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2 55,000 5,000(a) 50,000 6% 3,000
4 50,500 5,000(b) 45,500 5% 2,275
6 60,000 10,000(c) 50,000 3% 1,500
8 70,000 20,000(d) 50,000 0% 0
</TABLE>
- ----------
(a) During any contract year the free withdrawal amount is the greater of
accumulated earnings, or 10% of the total payments made under the
contract less any prior partial withdrawals in that contract year. In
the second contract year the earnings under the contract and 10% of
payments both equal $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 (contract value less free withdrawal amount).
(b) In the example for the fourth contract year, the accumulated earnings
of $500 is less than 10% of payments, therefore the free withdrawal
amount is equal to 10% of payments ($50,000 X 10% = $5,000) and the
withdrawal charge is only applied to payments liquidated (contract
value less free withdrawal amount).
(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 (contract
value less free withdrawal amount).
(d) There is no withdrawal charge on any payments liquidated that have been
in the contract for at least 7 years.
EXAMPLE 2 - Assume a single payment of $50,000 is made into the contract, 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 WITHDRAWAL FREE WITHDRAWAL
CONTRACT REQUESTED WITHDRAWAL PAYMENTS CHARGE
VALUE AMOUNT LIQUIDATED
---------------------------------
PERCENT AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
65,000 2,000 15,000(a) 0 5% 0
49,000 5,000 3,000(b) 2,000 5% 100
52,000 7,000 4,000(c) 3,000 5% 150
44,000 8,000 0(d) 8,000 5% 400
</TABLE>
- ----------
(a) The free withdrawal amount during any contract year is the greater of
the contract value less the unliquidated payments (accumulated
earnings), or 10% of payments less 100% of all prior withdrawals in
that contract year. For the first example, accumulated earnings of
$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 so no payments are
liquidated and no withdrawal charge applies.
47
<PAGE> 54
(b) The contract has negative accumulated earnings ($49,000-$50,000), so
the free withdrawal amount is limited to 10% of payments less all prior
withdrawals. Since $2,000 has already been withdrawn in the current
contract year, the remaining free withdrawal amount 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 result in payments being liquidated.
The remaining unliquidated payments are $48,000.
(c) The contract has increased in value to $52,000. The unliquidated
payments are $48,000 so the accumulated earnings are $4,000, which is
greater than 10% of payments less prior withdrawals
($5,000-$2,000-$5,000<0). Hence the free withdrawal amount is $4,000.
Therefore, $3,000 of the $7,000 partial withdrawal will be subject to a
withdrawal charge and result in payments being liquidated. The
remaining unliquidated payments are $45,000.
(d) The free withdrawal amount is zero since the contract has negative
accumulated earnings ($44,000-$45,000) 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 again for withdrawal requests during that year.
*Example does not illustrate withdrawal charges applicable to Ven 7, Ven 3 or
Ven 1 contracts.
48
<PAGE> 55
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
advisor 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%
KENTUCKY ............................................ 2.00% 2.00%
MAINE ............................................... .00 2.00%
NEVADA .............................................. .00 3.50%
PUERTO RICO.......................................... 1.00% 1.00%
SOUTH DAKOTA*........................................ .00 1.25%
WEST VIRGINIA........................................ 1.00% 1.00%
WYOMING ............................................. .00 1.00%
</TABLE>
* Premium tax paid upon receipt of premium (no tax at annuitization if tax paid
on premium at issue).
49
<PAGE> 56
APPENDIX C
PRIOR CONTRACTS
The Company has a class of variable annuity contract which is no longer
being issued, except in the states of ________, but under which purchase
payments may continue to be made ("prior contract" or "Ven 7 contracts"), which
were sold during the period from August, 1989 until February, 1995 and which
continue to be sold in _______.
The principal differences between the contract offered by this
Prospectus and the prior contract relate to the investment options available
under the contracts, a minimum interest rate to be credited for any guarantee
period under the fixed portion of the contracts, the charges made by the Company
and the death benefit provisions.
INVESTMENT OPTIONS
The investment options under the prior contract differ as follows from
the investment options described in this Prospectus. The prior contract does not
allow for investments in the five and seven year fixed account investments
options. The prior contract allows investments in a six year fixed account
investment option not available under the contract offered by this Prospectus.
The prior contract does not provide the Company the authority to offer
additional fixed account investment options for any yearly period from two to
ten years.
FIXED ACCOUNT MINIMUM INTEREST GUARANTEE
The minimum interest rate to be credited for any guarantee period under
the fixed portion of the prior contract is 4%.
MARKET VALUE CHARGE
For purposes of calculating the market value adjustment factor (see
"FIXED ACCOUNT INVESTMENT OPTIONS - Market Value Charge") the maximum difference
between "B" and "A" will be 3% under the prior contract. The adjustment factor
will never be greater than 2x(A-4%) and never less than zero. ("A" is the
guaranteed interest rate on the investment account. "B" is the guaranteed
interest rate available, on the date the request is processed, for amounts
allocated to a new investment account with the same length of guarantee period
as the investment account from which the amounts are being withdrawn.)
There will be no market value charge on withdrawals from the fixed
account investment options in the following situations: (a) death of the
annuitant; (b) amounts withdrawn to pay fees or charges; (c) amounts applied at
the maturity date to purchase an annuity as provided in the contract; (d)
amounts withdrawn from three and six year investment accounts within one month
prior to the end of the guarantee period; and (e) amounts withdrawn in any year
that do not exceed 10% of total purchase payments less any prior partial
withdrawals in that contract year.
Notwithstanding application of the market value adjustment factor
formula, in no event will the market value charge (i) exceed the earnings
attributable to the amount withdrawn from an investment account, (ii) together
with any withdrawal charges for an investment account be greater than 10% of the
amount transferred or withdrawn, or (iii) reduce the amount payable on
withdrawal or transfer below the amount required under the nonforfeiture laws of
the state with jurisdiction over the contract. The cumulative effect of the
market value and withdrawal charges (or the effect of the withdrawal charge
itself) could, however, result in an owner receiving total withdrawal proceeds
of less than the owner's investment in the contract.
WITHDRAWAL CHARGES
The withdrawal charges under the prior contract differ from the
withdrawal charges described in this Prospectus.
Prior Contract Withdrawal Charge
The withdrawal charge assessed under the prior contract is as follows:
If a withdrawal is made from the contract by an owner 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 for the owner less than six 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
50
<PAGE> 57
contract more than six complete contract years. In no event may the total
withdrawal charges exceed 6% of the total purchase payments. The amount of the
withdrawal charge and when it is assessed is discussed below:
1. Each withdrawal 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) 10% of total purchase payments less
any prior partial withdrawals in that contract year. Withdrawals allocated to
the free withdrawal amount may be withdrawn without the imposition of a
withdrawal charge.
2. If an owner makes a withdrawal 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.
NUMBER OF COMPLETE YEARS WITHDRAWAL CHARGE
PURCHASE PAYMENT IN CONTRACT PERCENTAGE
0 6%
1 6%
2 5%
3 4%
4 3%
5 2%
6+ 0%
The total withdrawal charge will be the sum of the withdrawal charges
for the purchase payments being liquidated.
4. The withdrawal charge is deducted from the contract value remaining
after the 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 and market value charge.
5. There is generally no withdrawal charge on distributions made as a
result of the death of the annuitant or owner and no withdrawal charges are
imposed on the maturity date if the owner annuitizes as provided in the
contract.
ADMINISTRATION FEES
The prior contract makes no provision for the waiver of the $30 annual
administration fee when prior to the maturity date the contract value equals or
exceeds $100,000 at the time of the fee's assessment.
DEATH BENEFIT PROVISIONS
Prior Contract Death Benefit Provisions
The provisions governing the death benefit prior to the maturity date
under the prior contract are as follows:
Death of Annuitant who is not the Owner. The Company will pay the
minimum death benefit, less any debt, to the beneficiary if the owner is not the
annuitant and the annuitant dies before the owner and before the maturity date.
If there is more than one such annuitant, the minimum death benefit will be paid
on the death of the last surviving co-annuitant. The minimum death benefit will
be paid either as a lump sum or in accordance with any of the annuity options
available under the contract. An election to receive the death benefit under an
annuity option must be made within 60 days after the date on which the death
benefit first becomes payable. Rather than receiving the minimum death benefit,
the beneficiary may elect to continue the
51
<PAGE> 58
contract as the new owner. (In general, a beneficiary who makes such an election
will nonetheless be treated for Federal income tax purposes as if he or she had
received the minimum death benefit.)
Death of Annuitant who is the Owner. The Company will pay the minimum
death benefit, less any debt, to the beneficiary if the owner is the annuitant,
dies before the maturity date and is not survived by a co-annuitant. If the
contract is a non-qualified contract, the owner is the annuitant and the owner
dies before the maturity date survived by a co-annuitant, the Company, instead
of paying the minimum death benefit to the beneficiary, will pay to the
successor owner an amount equal to the amount payable on total withdrawal
without reduction for any withdrawal charge. If the contract is a non-qualified
contract, distribution of the minimum death benefit to the beneficiary (or of
the amount payable to the successor owner) must be made within five years after
the owner's death. If the beneficiary or successor owner, as appropriate, is an
individual, in lieu of distribution within five years of the owner's death,
distribution may be made as an annuity which begins within one year of the
owner's death and is payable over the life of the beneficiary (or the successor
owner, as appropriate) or over a period not in excess of the life expectancy of
the beneficiary (or the successor owner, as appropriate). If the owner's spouse
is the beneficiary (or the successor owner, as appropriate) that spouse may
elect to continue the contract as the new owner in lieu of receiving the
distribution. In such a case, the distribution rules applicable when an owner
dies generally will apply when that spouse, as the owner, dies.
Death of Owner who is not the Annuitant. If the owner is not the
annuitant and dies before the maturity date and before the annuitant, the
successor owner will become the owner of the contract. If the contract is a
non-qualified contract, an amount equal to the amount payable on total
withdrawal, without reduction for any withdrawal charge, will be paid to the
successor owner. Distribution of the amount to the successor owner must be made
within five years of the owner's death. If the successor owner is an individual,
in lieu of distribution within five years of the owner's death, distribution may
be made as an annuity which begins within one year of the owner's death and is
payable over the life of the successor owner (or over a period not greater than
the successor owner's life expectancy). If the owner's spouse is the successor
owner, that spouse may elect to continue the contract as the new owner in lieu
of receiving the distribution. In such a case, the distribution rules applicable
when an owner dies generally will apply when that spouse, as the owner, dies.
For purposes of these death benefit provisions applicable on an owner's
death (whether or not such owner is an annuitant), if a non-qualified contract
has more than one individual owner, death benefits must be paid as provided in
the prior contract upon the death of any such owner. If both owners are
individuals, the distributions will be made to the remaining owner rather than
to the successor owner.
Entity as Owner. In the case of a non-qualified contract where the
owner is not an individual (for example, the owner is a corporation or a trust),
the special rules stated in this paragraph apply. For purposes of distributions
of death benefits before the maturity date, any annuitant will be treated as the
owner, and a change in the annuitant or any co-annuitant shall be treated as the
death of the owner. In the case of distributions which result from a change in
an annuitant when the annuitant does not actually die, the amount distributed
will be reduced by charges which would otherwise apply upon withdrawal.
If a non-qualified contract has both an individual and a non-individual
owner, death benefits must be paid as provided in the prior contract upon the
death of any annuitant, a change in any annuitant, or the death of any
individual owner, whichever occurs earlier.
The minimum death benefit during the first six contract years will be
equal to the greater of: (a) the contract value on the date due proof of death
and all required claim forms are received at the Company's Annuity Service
Office, or (b) the sum of all purchase payments made, less any amount deducted
in connection with partial withdrawals. During any subsequent six contract year
period, the minimum death benefit will be the greater of (a) the contract value
on the date due proof of death and all required claim forms are received at the
Company's Annuity Service Office, or (b) the minimum death benefit on the last
day of the previous six contract year period plus any purchase payments made and
less any amount deducted in connection with partial withdrawals since then. If
the annuitant dies after the first of the month following his or her 85th
birthday, the minimum death benefit will be the contract value on the date due
proof of death and all required claim forms are received at the Company's
Annuity Service Office.
Death benefits will be paid within seven days of receipt of due proof
of death and all required claim forms at the Company's Annuity Service Office,
subject to postponement under the same circumstances that payment of withdrawals
may be postponed.
OTHER CONTRACT PROVISIONS
52
<PAGE> 59
Contract Maturity Date
Under the prior contract, the maturity date is the later of the first
day of the month following the 85th birthday of the annuitant or the sixth
contract anniversary. The prior contract allows the owner to 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 must be
the first day of a month no later than the first day of the month following the
85th birthday of the annuitant.
Annuity Tables Assumed Interest Rate
A 4% assumed interest rate is built into the annuity tables in the
prior contract used to determine the first variable annuity payment to be made
under that contract.
Beneficiary
Under the prior contract certain provisions relating to beneficiary are
as follows:
The beneficiary is the person, persons or entity designated in the
application or as subsequently named. The beneficiary may be changed during the
lifetime of the annuitant 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.
Prior to the maturity date, if no beneficiary survives the annuitant, the
contract owner or the contract owner's estate will be the beneficiary. The
interest of any beneficiary is subject to that of any assignee. In the case of
certain qualified contracts, regulations promulgated by the Treasury Department
prescribe certain limitations on the designation of a beneficiary.
GUARANTEED INCOME FOR TOMORROW BENEFIT
The Guaranteed Income for Tomorrow Benefit is not available for Ven 7
contracts.
TABLE OF ACCUMULATION UNIT VALUES
Ven 7 Contracts
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997.............................. $12.500000
Science & Technology
1997.............................. $12.500000
International Small Cap
1996.............................. $12.500000 $13.493094 3,114,351
1997.............................. 13.493094
Emerging Growth
1997.............................. $12.500000
Pilgrim Baxter Growth
1997.............................. $12.500000
Small/Mid Cap
1996.............................. $12.500000 $13.215952 5,250,942
1997.............................. 13.215952
International Stock
1997.............................. $12.500000
Worldwide Growth
1997.............................. $12.500000
</TABLE>
53
<PAGE> 60
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity
1989.............................. $10.038462 12.259530 1,599,855
1990.............................. 12.259530 10.827724 3,216,667
1991.............................. 10.827724 12.044260 4,968,734
1992.............................. 12.044260 11.790318 7,560,807
1993.............................. 11.790318 15.450341 18,493,192
1994.............................. 15.450341 15.500933 28,273,754
1995.............................. 15.500933 16.459655 25,947,632
1996 16.459655 18.276450 23,363,742
1997 18.276450
Small Company Value
1997 $12.500000
Equity
1989.............................. $ 9.695125 $12.208846 1,443,222
1990.............................. 12.208846 10.618693 1,044,365
1991.............................. 10.618693 12.349952 3,238,479
1992.............................. 12.349952 13.143309 10,082,924
1993.............................. 13.143309 15.075040 18,691,511
1994.............................. 15.075040 14.786831 27,046,973
1995.............................. 14.786831 20.821819 31,264,936
1996.............................. 20.821819 24.664354 30,156,559
1997.............................. 24.664354
Growth
1996 $12.500000 $13.727312 1,704,337
1997 13.727312
Quantitative Equity
1997 $12.500000
Blue Chip Growth
1992.............................. $10.000000 $ 9.923524 2,614,367
1993.............................. 9.923524 9.413546 8,733,734
1994.............................. 9.413546 8.837480 12,682,151
1995.............................. 8.837480 11.026969 16,013,892
1996.............................. 11.026969 13.688523 16,253,601
1997.............................. 13.688523
Real Estate Securities
1997.............................. $12.500000
Value
1997.............................. $12.500000
International Growth and Income
1995.............................. $10.000000 $10.554228 4,340,859
1996.............................. 10.554228 11.718276 6,310,744
1997.............................. 11.718276
Growth and Income
1991.............................. $10.874875 $10.973500 3,689,377
1992.............................. 10.973500 11.927411 8,573,365
1993.............................. 11.927411 12.893007 16,816,664
1994.............................. 12.893007 13.076664 22,827,949
1995.............................. 13.076640 16.660889 25,312,482
1996.............................. 16.660889 20.178770 26,519,026
1997.............................. 20.178770
</TABLE>
54
<PAGE> 61
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity-Income
1993.............................. $10.000000 $11.175534 5,061,871
1994.............................. 11.175534 11.107620 13,006,071
1995.............................. 11.107620 13.548849 16,254,844
1996.............................. 13.548849 16.011513 17,199,292
1997.............................. 16.011513
Balanced
1997.............................. $12.500000
Aggressive Asset Allocation
1989.............................. $10.000000 $ 9.824046 7,476,667
1990.............................. 9.824046 8.982210 3,434,253
1991.............................. 8.982210 10.891189 5,038,265
1992.............................. 10.891189 11.623893 6,990,120
1993.............................. 11.623893 12.642493 8,147,578
1994.............................. 12.642493 12.381395 9,915,078
1995.............................. 12.381395 14.990551 9,004,834
1996.............................. 14.990551 16.701647 7,824,895
1997.............................. 16.701647
High Yield
1997.............................. $12.500000
Moderate Asset Allocation
1989.............................. $10.000000 $ 9.973206 2,137,590
1990.............................. 9.973206 9.221559 11,521,935
1991.............................. 9.221559 11.023964 15,739,307
1992 ............................. 11.023964 11.772128 21,949,044
1993.............................. 11.772128 12.775798 30,338,231
1994.............................. 12.775798 12.396295 31,579,176
1995.............................. 12.396295 14.752561 28,508,685
1996.............................. 14.752561 15.995076 23,443,602
1997.............................. 15.995076
Conservative Asset Allocation
1989.............................. $10.000000 $10.052759 11,861,277
1990.............................. 10.052759 9.531831 5,005,473
1991.............................. 9.531831 11.166459 6,075,773
1992.............................. 11.166459 11.821212 9,218,954
1993.............................. 11.821212 12.705196 12,271,114
1994.............................. 12.705196 12.298940 11,519,563
1995.............................. 12.298940 14.320582 10,207,673
1996.............................. 14.320582 15.113142 8,273,488
1997.............................. 15.113142
Strategic Bond
1993.............................. $10.000000 $10.750617 3,628,986
1994.............................. 10.750617 9.965972 6,059,065
1995.............................. 9.965972 11.716972 6,153,987
1996.............................. 11.716972 13.250563 7,575,451
1997.............................. 13.250563
</TABLE>
55
<PAGE> 62
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Government Bond
1989.............................. $10.097842 $10.404562 300,163
1990.............................. 10.404562 11.642912 503,123
1991.............................. 11.642912 13.302966 1,406,253
1992.............................. 13.302966 13.415849 3,990,936
1993.............................. 13.415849 15.741586 9,235,552
1994.............................. 15.741586 14.630721 10,820,359
1995.............................. 14.630721 17.772344 9,377,776
1996.............................. 17.772344 19.803954 8,200,560
1997.............................. 19.803954
Capital Growth Bond
1997.............................. $12.500000
Investment Quality Bond
1989.............................. $10.937890 $12.008936 1,924,256
1990.............................. 12.008936 11.517610 226,591
1991.............................. 11.517610 13.183268 1,133,721
1992.............................. 13.183268 13.936240 2,633,165
1993.............................. 13.936240 15.118716 4,666,274
1994.............................. 15.118716 14.216516 5,662,391
1995.............................. 14.216516 16.751499 5,445,294
1996.............................. 16.751499 16.943257 4,762,551
1997.............................. 16.943257
U.S. Government Securities
1990.............................. $10.826483 $11.596537 515,572
1991.............................. 11.596537 13.037076 1,496,429
1992.............................. 13.037076 13.651495 7,034,773
1993.............................. 13.651495 14.49073_ 11,566,348
1994.............................. 14.490734 14.111357 9,903,906
1995.............................. 14.111357 16.083213 8,402,470
1996.............................. 16.083213 16.393307 6,673,517
1997.............................. 16.393307
Money Market
1989.............................. $10.865066 $11.634481 1,480,696
1990.............................. 11.634481 12.364687 2,465,280
1991.............................. 12.364687 12.890414 3,340,971
1992.............................. 12.890414 13.137257 4,636,753
1993.............................. 13.137257 13.303085 7,413,316
1994.............................. 13.303085 13.623292 12,741,277
1995.............................. 13.623292 14.190910 9,721,732
1996.............................. 14.190910 14.699636 10,149,260
1997.............................. 14.699636
</TABLE>
56
<PAGE> 63
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Aggressive 1000
1997.............................. $12.500000
Lifestyle Growth 820
1997.............................. $12.500000
Lifestyle Balanced 640
1997.............................. $12.500000
Lifestyle Moderate 460
1997.............................. $12.500000
Lifestyle Conservative 280
1997.............................. $12.500000
</TABLE>
* Units under this series of contracts were first credited under the
sub-accounts on August 7, 1989, except in the case of Growth and Income where
units were first credited on April 23, 1991, Blue Chip Growth where units were
first credited on December 11, 1992, Equity-Income and Strategic Bond where
units were first credited on February 19, 1993, International Growth and Income
where units were first credited on January 9, 1995, Small/Mid Cap and
International Small Cap where units were first credited on March 4, 1996, Growth
where units were first credited on July 15, 1996, Pacific Rim Emerging Markets,
Science & Technology, Emerging Growth, Pilgrim Baxter Growth, International
Stock, Worldwide Growth, Quantitative Equity, Real Estate Securities, Value,
Balanced, High Yield, Capital Growth Bond, Lifestyle Aggressive 1000, Lifestyle
Growth 820, Lifestyle Balanced 640, Lifestyle Moderate 460, Lifestyle
Conservative 280 where units were first credited on January 2, 1997 and Small
Company Value where units were first credited on October 1, 1997.
57
<PAGE> 64
APPENDIX D
PRIOR CONTRACTS
Prior to October, 1993, the Company issued two classes of variable
annuity contracts which are no longer being issued but under which purchase
payments may continue to be made ("prior contracts" or "Ven 3 contracts"), which
were sold during the period from November, 1986 until October, 1993 and "Ven 1
contracts", which were sold during the period from June, 1985 until June, 1987.
The principal differences between the contract offered by this
Prospectus and the prior contracts relate to the investment options available
under the contracts, charges made by the Company and death benefit provisions.
EXPENSE SUMMARY
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 Appendix (see "Other Contract
Charges") and in the 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.
CONTRACT OWNERS TRANSACTION EXPENSES
Ven 1 and Ven 3 Contracts
Deferred sales load (as percentage of purchase payments)
NUMBER OF COMPLETE YEARS WITHDRAWAL CHARGE
PURCHASE PAYMENT IN PERCENTAGE
CONTRACT
0 5%
1 5%
2 5%
3 5%
4 5%
5+ 0%
Ven 1 and Ven 3 Contracts
ANNUAL CONTRACT FEE.................................................... $30
Ven 1 Contracts
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and expense risk fees......................................... 1.30%
Total Separate Account Annual Expenses.................................. 1.30%
58
<PAGE> 65
Ven 3 Contracts
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and expense risk fees........................................ 1.25%
Administration fee - asset based....................................... 0.15%
Total Separate Account Annual Expenses................................. 1.40%
Ven 1 and Ven 3 Contracts
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets)
See "SUMMARY - TRUST ANNUAL EXPENSES" in the Prospectus.
Ven 1 Contracts
EXAMPLE
A contract owner would pay the following expenses on a $1,000
investment, assuming 5% annual return on assets, if the contract owner
surrendered the contract at the end of the applicable time period:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity.............................. $69 $118 $167 $252
Investment Quality Bond............. 68 116 164 246
Money Market........................ 66 110 154 225
</TABLE>
A contract owner would pay the following expenses on a $1,000
investment, assuming 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:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity ............................. $22 $68 $117 $252
Investment Quality Bond............. 22 67 114 246
Money Market........................ 20 60 104 225
</TABLE>
Ven 3 Contracts
EXAMPLE
A contract owner would pay the following expenses on a $1,000
investment, assuming 5% annual return on assets, if the contract owner
surrendered the contract at the end of the applicable time period:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS* 10 YEARS*
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $75 $138 $203 $323
Science & Technology................ 74 134 195 308
International Small Cap............. 74 135 198 312
Emerging Growth..................... 72 129 188 293
Pilgrim Baxter Growth............... 73 131 191 300
Small/Mid Cap....................... 72 128 185 287
International Stock................. 75 137 201 319
Worldwide Growth.................... 74 135 198 313
Global Equity....................... 72 127 183 283
</TABLE>
59
<PAGE> 66
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS* 10 YEARS*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small Company Value................. 73 131
Equity.............................. 70 121 172 262
Growth.............................. 71 125 180 277
Quantitative Equity................. 69 120 171 259
Blue Chip Growth.................... 71 126 181 280
Real Estate Securities.............. 69 120 171 259
Value............................... 71 125 180 278
International Growth and Income..... 73 130 188 294
Growth and Income................... 69 120 172 261
Equity-Income....................... 70 122 175 267
Balanced............................ 70 123 176 270
Aggressive Asset Allocation......... 70 123 177 272
High Yield.......................... 70 123 177 271
Moderate Asset Allocation........... 70 122 175 267
Conservative Asset Allocation....... 70 123 177 271
Strategic Bond...................... 70 123 176 270
Global Government Bond.............. 71 124 179 275
Capital Growth Bond................. 69 119 169 255
Investment Quality Bond............. 69 119 169 256
U.S. Government Securities.......... 69 118 168 254
Money Market........................ 67 113 159 235
Lifestyle Aggressive 1000........... 73 130 188 294
Lifestyle Growth 820................ 72 128 185 287
Lifestyle Balanced 640.............. 71 125 180 277
Lifestyle Moderate 460.............. 70 122 175 267
Lifestyle Conservative 280.......... 69 118 168 253
</TABLE>
* The example of expenses for the Small Company Value Trust contains figures for
only one and three years since it is a newly created portfolio.
A contract owner would pay the following expenses on a $1,000
investment, assuming 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:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS* 10 YEARS*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $29 $90 $153 $323
Science & Technology................ 28 85 145 308
International Small Cap............. 28 87 148 312
Emerging Growth..................... 26 81 138 293
Pilgrim Baxter Growth............... 27 83 141 300
Small/Mid Cap....................... 26 79 135 287
International Stock................. 29 89 151 319
Worldwide Growth.................... 28 87 148 313
Global Equity....................... 25 78 133 283
Small Company Value................. 27 82
Equity.............................. 23 71 122 262
Growth.............................. 25 76 130 277
Quantitative Equity................. 23 71 121 259
Blue Chip Growth.................... 25 77 131 280
Real Estate Securities.............. 23 71 121 259
Value............................... 25 76 130 278
International Growth and Income..... 26 81 138 294
Growth and Income................... 23 71 122 261
Equity-Income....................... 24 73 125 267
Balanced............................ 24 74 126 270
Aggressive Asset Allocation......... 24 74 127 272
</TABLE>
60
<PAGE> 67
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS* 10 YEARS*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Yield.......................... 24 74 127 271
Moderate Asset Allocation........... 24 73 125 267
Conservative Asset Allocation....... 24 74 127 271
Strategic Bond...................... 24 74 126 270
Global Government Bond.............. 24 75 129 275
Capital Growth Bond................. 22 69 119 255
Investment Quality Bond............. 23 70 119 256
U.S. Government Securities.......... 22 69 118 254
Money Market........................ 21 64 109 235
Lifestyle Aggressive 100............ 26 81 138 294
Lifestyle Growth 820................ 26 79 135 287
Lifestyle Balanced 640.............. 25 76 130 277
Lifestyle Moderate 460.............. 24 73 125 267
Lifestyle Conservative 280.......... 22 69 118 253
</TABLE>
* The example of expenses for the Small Company Value Trust contains figures for
only one and three years since it is a newly created portfolio.
INVESTMENT OPTIONS
The Ven 3 and Ven 1 contracts do not provide for a fixed-dollar
accumulation prior to the maturity date. Thus the descriptions in this
Prospectus of the Fixed Account Investment Options, Loans and the transfer and
Dollar Cost Averaging provisions, to the extent that they relate to the fixed
account investment options, are not applicable to the prior contracts. Ven 1
differs further in that only three of the thirty-five sub-accounts of the
Variable Account are available for the investment of contract values, namely,
the Equity Trust, the Investment Quality Bond Trust and the Money Market Trust.
WITHDRAWAL CHARGES
The withdrawal charges under the prior contracts differ from the
withdrawal charges described in this Prospectus.
Ven 3 Withdrawal Charge.
The withdrawal charge assessed under the Ven 3 contract is as follows:
If a withdrawal is made from the contract before the maturity date, a
5% withdrawal charge (contingent deferred sales charge) may be assessed. The
amount of the withdrawal charge and when it is assessed are discussed below:
1. Withdrawals are allocated to purchase payments on a
first-in-first-out basis. Each time a contract owner requests a withdrawal,
whether or not a withdrawal charge is assessed, the Company will liquidate
purchase payments equal to the amount requested 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.
Once all purchase payments have been liquidated, additional withdrawals will be
allocated to the remaining contract value.
2. A withdrawal charge will be assessed against purchase payments
liquidated in excess of the free withdrawal amount. The free withdrawal amount
in any contract year is the greater of: (i) 10% of the contract value at the
beginning of the contract year, or (ii) 10% of the total purchase payments made
in the current contract year and the preceding 4 contract years plus the amount
of all unliquidated purchase payments made 5 or more contract years prior to the
current contract year. Therefore, no withdrawal charge will apply to any
purchase payment that has been in the contract for at least 5 years. After all
purchase payments have been liquidated, any remaining contract value
(accumulated earnings) may be withdrawn free of charge.
3. 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. The
withdrawal charge is deducted from the contract value by canceling accumulation
units of a value equal to the charge and is deducted from each investment
account ("subdivision") in proportion to the amount withdrawn from each
investment account. 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.
61
<PAGE> 68
4. Under no circumstances will the total of all withdrawal charges
exceed 5% of total purchase payments.
There is no withdrawal charge on distributions made as a result of the
death of the annuitant or contract owner. There is also no withdrawal charge on
amounts applied to an annuity option at the maturity date, as provided in the
contract.
Ven 1 Withdrawal Charge.
The withdrawal charge ("surrender charge") assessed under the Ven 1
contract is as follows:
If a contract is surrendered, in whole or in part, before the maturity
date, a withdrawal charge may be assessed. The amount of the withdrawal charge
and when it is assessed are discussed below:
The withdrawal charge is 5% of the lesser of (1) the amount surrendered
or (2) the total of all purchase payments made within the sixty months
immediately preceding the date of surrender. The charge is deducted from the
contract value remaining after the contract owner is paid the amount requested,
except in the case of a complete surrender when it is deducted from the amount
otherwise payable. After the first contract year, no withdrawal charge will be
made on that part of the first surrender in any contract year which does not
exceed 10% of the contract value computed as of the date of such surrender. The
right to surrender up to 10% of the contract value free of any withdrawal charge
does not apply to qualified contracts issued as tax-sheltered annuities under
Section 403(b) of the Internal Revenue Code. There is no withdrawal charge on
distributions made as a result of the death of the annuitant or contract owner.
Under no circumstances will the total of all withdrawal charges exceed 9% of
total purchase payments.
The withdrawal charge will be deducted from the contract value by
canceling accumulation units of a value equal to the charge. It will be made
from each investment account in proportion to the amount withdrawn from such
investment account.
OTHER CONTRACT CHARGES
The Ven 1 contract provides for the deduction from each sub-account
each valuation period of a charge at an effective annual rate of 1.30% of the
contract reserves allocated to such sub-account, consisting of .8% for the
mortality risk assumed by the Company and .5% for the expense risk assumed by
the Company. However, there is no administration charge under the Ven 1 contract
other than the $30 annual administration fee. The Ven 1 and Ven 3 contracts make
no provision for the waiver of the $30 annual administration fee when prior to
the maturity date the contract value equals or exceeds $100,000 at the time of
the fee's assessment.
DEATH BENEFIT PROVISIONS
Ven 3 Death Benefit Provisions
The provisions governing the death benefit prior to the maturity date
under the Ven 3 contract are as follows:
Death of Owner. The Company will pay a minimum death benefit to the
beneficiary if the contract owner is the annuitant and dies before the maturity
date. If the contract owner is not the annuitant and the contract owner dies
before the annuitant and before the maturity date (or the contract owner is the
annuitant and there is a surviving co-annuitant), instead of a minimum death
benefit, the Company will distribute the contract owner's entire interest in the
contract (the contract value determined on the date due proof of death and all
required claim forms are received at the Company's Annuity Service Office) to
the contract owner's estate or to a successor owner. Distributions to a
beneficiary, successor owner, or estate, as appropriate, will be made no later
than 5 years after the contract owner's death, unless (1) the contract owner's
spouse is the beneficiary or successor owner (in which case the spouse will be
treated as the owner and distribution will be made no later than the date on
which distribution would be required in accordance with this paragraph after the
death of the spouse), or (2) the distribution is made to the beneficiary or
successor owner who is an individual, begins not later than a year after the
contract owner's death, and is made over a period not greater than the life
expectancy of that beneficiary or successor owner.
Death of Annuitant. A minimum death benefit will be paid to the
beneficiary if the contract owner is not the annuitant and the annuitant dies
before the contract owner and before the maturity date. If there is a
co-annuitant, the minimum death benefit will be paid on the death of the last
surviving co-annuitant.
62
<PAGE> 69
Entity as Owner. If the contract is not owned by an individual, for
example, if it is owned by a corporation or a trust, the special rules stated in
this paragraph apply. A change in the annuitant shall be treated as the death of
the owner for purposes of these special distribution rules and the Company will
distribute the contract owner's entire interest in the contract. Distributions
to the contract owner or to the beneficiary, as appropriate, will be made not
later than 5 years after the annuitant's death, unless (1) the annuitant's
spouse is the beneficiary (in which case the spouse will be treated as the
contract owner and distribution will be made no later than the date on which
distribution would be required in accordance with this paragraph after the death
of the spouse), or (2) the distribution is made to a beneficiary who is an
individual, begins not later than a year after the annuitant's death, and is
made over a period not greater than the life expectancy of that beneficiary.
General Provisions. If there is more than one individual contract
owner, death benefits must be paid as provided in the contract upon the death of
any such contract owner.
If there is both an individual and a non-individual contract owner,
death benefits must be paid as provided in the contract upon the death of the
annuitant or any individual contract owner, whichever occurs earlier.
Due proof of death and all required claim forms are required upon the
death of the contract owner or annuitant.
During the first five contract years, the minimum death benefit payable
to a beneficiary upon death of the annuitant is the greater of (a) the contract
value on the date due proof of death and all required claim forms are received
at the Company's Annuity Service Office, or (b) the sum of all purchase payments
made, less any amount deducted in connection with partial withdrawals. During
any subsequent five contract year period, the minimum death benefit will be the
greater of (a) the contract value on the date due proof of death and all
required claim forms are received at the Company's Annuity Service Office, or
(b) the minimum death benefit determined in accordance with these provisions as
of the last day of the previous five contract year period plus any purchase
payments made and less any amount deducted in connection with partial
withdrawals since then. The death benefit will be paid within seven days of
receipt of due proof of death and all required claim forms at the Company's
Annuity Service Office, subject to postponement under the same circumstances
that payment of withdrawals may be postponed.
Ven 1 Death Benefit Provisions
The death benefit provisions of the Ven 1 contract are as described
above for the Ven 3 contract except that (i) the Ven 1 contract does not provide
for the designation of successor owners or co-annuitants or changes of
annuitants and (ii) the Ven 1 contract does not make special adjustments to the
minimum death benefit for subsequent five contract year periods.
OTHER CONTRACT PROVISIONS
Transfers
Under Ven 3 and Ven 1 contracts, owners may transfer all or part of
their contract value to a fixed annuity contract issued by the Company at any
time. In such case, the Company will waive any withdrawal charge that would
otherwise be applicable under the terms of the contract. Similarly, the Company
will permit holders of such fixed contracts to transfer certain contract values
to the Variable Account. In such case, the contract values transferred will be
attributable to certain purchase payments made under the fixed contract. For
purposes of calculating the withdrawal charge under the contract, the contract
date will be deemed to be the date of the earliest purchase payment transferred
from the fixed contract and the date of other purchase payments transferred will
be deemed to be the dates actually made under the fixed contract. A transfer of
all or a part of the contract value from one contract to another may be treated
as a distribution of all or a part of the contract value for Federal tax
purposes.
Under the Ven 1 contract, a contract owner may transfer prior to the
maturity date amounts among investment accounts of the contract without charge,
but such transfers cannot be made on more than two occasions in any contract
year. After annuity payments have been made for at least 12 months under a Ven 1
contract, all or a portion of the assets held in a sub-account with respect to
the contract may be transferred by the annuitant to one or more other
sub-accounts. Such transfers can be made only once each 12 months upon notice to
the Company at least 30 days before the due date of the first annuity payment to
which the change will apply.
Annuity Option Provisions
63
<PAGE> 70
Under Ven 3 and Ven 1 contracts, there is no prescribed maturity date
that will govern in the absence of contract owner selection. The owner must
select a maturity date in the application. If no annuity option is selected by
the owner of a Ven 3 or Ven 1 contract, the automatic option will be on a
variable, not fixed, basis.
Ven 3 and Ven 1 contracts require a minimum contract value in order to
effect an annuity -- $2,000 for a Ven 3 contract and $5,000 for a Ven 1
contract, except for certain qualified Ven 1 contracts where the minimum is
$3,500. Ven 3 and Ven 1 contracts prescribe no minimum amount for the first
annuity payment but reserve the right to change the frequency of annuity
payments if the first annuity payment would be less than $50.
Purchase Payments
The provisions governing purchase payments under Ven 1 contracts are as
follows: For qualified contracts, the minimum purchase payment is $25. For
non-qualified contracts, the minimum initial purchase payment is $5,000 and the
minimum subsequent purchase payment is $300. The Company may refuse to accept
any purchase payment in excess of $10,000 per contract year.
Annuity Rates
The annuity rates guaranteed in the Ven 1 contract differ from those
guaranteed in the contract described in the Prospectus for annuitants of certain
ages.
Annuity Tables Assumed Interest Rate
A 4% assumed interest rate is built into the annuity tables in the Ven
1 and Ven 3 contracts used to determine the first variable annuity payment to be
made under those contracts.
Beneficiary
Under the Ven 3 and Ven 1 contracts certain provisions relating to
beneficiary are as follows:
The beneficiary is the person, persons, or entity designated in the
application or as subsequently named. The beneficiary may be changed during the
lifetime of the annuitant 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.
Prior to the maturity date, if no beneficiary survives the annuitant, the
contract owner or the contract owner's estate will be the beneficiary. The
interest of any beneficiary is subject to that of any assignee. In the case of
certain qualified contracts, regulations promulgated by the Treasury Department
prescribe certain limitations on the designation of a beneficiary.
GUARANTEED INCOME FOR TOMORROW BENEFIT
The Guaranteed Income for Tomorrow Benefit is not available for Ven 3
or Ven 1 contracts.
TABLE OF ACCUMULATION UNIT VALUES
Ven 3 Contracts
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997.............................. $12.500000
Science & Technology
1997.............................. $12.500000
International Small Cap
1996.............................. $12.500000 $13.493094 227,222.471
1997..............................
Emerging Growth
1997.............................. $12.500000
</TABLE>
64
<PAGE> 71
<TABLE>
<S> <C> <C> <C>
Pilgrim Baxter Growth
1997.............................. $12.500000
Small/Mid Cap++
1996.............................. $12.500000 13.215952 293,765.467
1997..............................
International Stock
1997.............................. $12.500000
Worldwide Growth
1997.............................. $12.500000
</TABLE>
65
<PAGE> 72
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity
1988.............................. $10.000000 $10.038462 187,978.790
1989.............................. 10.038462 12.259530 1,599,855.768
1990.............................. 12.259530 10.827724 2,578,853.673
1991.............................. 10.827724 12.044260 2,395,298.635
1992.............................. 12.044260 11.790318 2,262,222.969
1993.............................. 11.790318 15.450341 3,100,733.209
1994.............................. 15.450341 15.500933 3,543,341.154
1995.............................. 15.500933 16.459655 2,642,703.724
1996.............................. 16.459655 18.276450 2,070,671.367
1997..............................
Small Company Value
1997.............................. $12.500000
Equity
1987.............................. $10.000000* $ 8.144663 4,242,221.369
1988.............................. 8.144663 9.695125 13,563,655.062
1989.............................. 9.695125 12.208846 1,443,222.778
1990 ............................. 12.208846 10.618693 2,192,929.561
1991.............................. 10.618693 12.349952 3,748,439.163
1992.............................. 12.349952 13.143309 4,354,245.114
1993.............................. 13.143309 15.075040 4,165,733.576
1994.............................. 15.075040 14.786831 2,684,785.345
1995.............................. 14.786831 20.821819 2,572,695.681
1996.............................. 20.821819 24.664354 2,196,812.816
1997..............................
Growth
1996.............................. $12.500000 $13.727312 79,415.926
1997.............................. 13.727312
Quantitative Equity
1997.............................. $12.500000
Blue Chip Growth
1992.............................. $10.000000 $ 9.923524 356,487.848
1993.............................. 9.923524 9.413546 586,908.649
1994.............................. 9.413546 8.837480 576,875.573
1995.............................. 8.837480 11.026969 683,051.399
1996.............................. 11.026969 13.688523 731,368.138
1997.............................. 13.688523
Real Estate Securities
1997.............................. $12.500000
Value
1997.............................. $12.500000
International Growth and Income
1995.............................. 10.000000 10.554228 227,050.855
1996.............................. 10.554228 11.718276 281,119.474
1997.............................. 11.718276
Growth and Income
1991.............................. 10.000000 10.973500 1,530,130.493
1992.............................. 10.973500 11.927411 2,211,083.415
1993.............................. 11.927411 12.893007 2,248,648.359
1994.............................. 12.893007 13.076664 2,043,186.985
1995.............................. 13.076664 16.660889 2,105,056.205
1996.............................. 16.660889 20.178770 1,828,514.772
1997.............................. 20.178770
</TABLE>
66
<PAGE> 73
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity-Income
1993.............................. 10.000000 11.175534 251,822.076
1994.............................. 11.175534 11.107620 562,603.632
1995.............................. 11.107620 13.548849 818,646.261
1996.............................. 13.548849 16.011513 751,884.340
1997.............................. 16.011513
Balanced
1997.............................. $12.500000
Aggressive Asset Allocation
1989.............................. $10.000000 $9.824046 7,476,667.034
1990.............................. 9.824046 8.982210 6,387,718.448
1991.............................. 8.982210 10.891189 6,407,235.310
1992.............................. 10.891189 11.623893 6,026,587.849
1993.............................. 11.623893 12.642493 5,042,331.574
1994.............................. 12.642493 12.381395 3,562,197.567
1995.............................. 12.381395 14.990551 2,708,444.950
1996.............................. 14.990551 16.701647 2,195,447.490
1997.............................. 16.701647
High Yield
1997.............................. $12.500000
Moderate Asset Allocation
1989.............................. $10.000000 $9.973206 2,137,590.858
1990.............................. 9.973206 9.221559 23,978,405.670
1991.............................. 9.221559 11.023964 22,330,124.078
1992.............................. 11.023964 11.772128 20,887,367.134
1993.............................. 11.772128 12.775798 17,512,695.707
1994.............................. 12.775798 12.396295 12,484,174.615
1995.............................. 12.396295 14.752561 9,042,096.910
1996.............................. 14.752561 15.995076 7,206,776.711
Conservative Asset Allocation
1989.............................. $10.000000 $10.052759 11,861,277.612
1990.............................. 10.052759 9.531831 10,705,080.076
1991.............................. 9.531831 11.166459 8,708,253.007
1992.............................. 11.166459 11.821212 7,777,630.143
1993.............................. 11.821212 12.705196 6,463,981.799
1994.............................. 12.705196 12.298940 4,556,265.387
1995.............................. 12.298940 14.320582 3,177,786.472
1996.............................. 14.320582 15.113142 2,507,618.496
1997.............................. 15.113142
Strategic Bond
1993.............................. 10.000000 10.750617 163,195.638
1994.............................. 10.750617 9.965972 181,540.594
1995.............................. 9.965972 11.716972 211,267.468
1996.............................. 11.716972 13.250563 258,026.189
1997.............................. 13.250563
</TABLE>
67
<PAGE> 74
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Government Bond
1988.............................. $10.000000 $10.097842 108,831.804
1989.............................. 10.097842 10.404562 300,163.262
1990.............................. 10.404562 11.642912 470,980.068
1991.............................. 11.642912 13.302966 692,920.988
1992.............................. 13.302966 13.415849 976,794.214
1993.............................. 13.415849 15.741586 1,551,958.318
1994.............................. 15.741586 14.630721 1,018,783.920
1995.............................. 14.630721 17.772344 793,225.829
1996.............................. 17.772344 19.803954 648,725.739
1997.............................. 19.803954
Capital Growth Bond
1997.............................. $12.500000
Investment Quality Bond
1987.............................. $10.000000 $10.357400 2,234,030.945
1988.............................. 10.357400 10.937890 10,253,483.698
1989.............................. 10.937890 12.008936 1,924,256.679
1990.............................. 12.008936 11.517610 1,423,403.443
1991.............................. 11.517610 13.183268 1,720,219.933
1992.............................. 13.183268 13.936240 1,572,065.442
1993.............................. 13.936240 15.118716 1,119,425.316
1994.............................. 15.118716 14.216516 841,610.498
1995.............................. 14.216516 16.751499 734,994.414
1996.............................. 16.751499 16.943257 597,720.778
1997.............................. 16.943257
U.S. Government Securities
1988.............................. $10.000000 $9.702201 10,203.403
1989.............................. 9.702201 10.826483 300,163.430
1990.............................. 10.826483 11.596537 366,010.353
1991.............................. 11.596537 13.037076 720,491.624
1992.............................. 13.037076 13.651495 1,938,232.553
1993.............................. 13.651495 14.490734 1,478,270.571
1994.............................. 14.490734 14.111357 909,659.824
1995.............................. 14.111357 16.083213 954,067.593
1996.............................. 16.083213 16.393307 710,502.942
1997.............................. 16.393307
Money Market
1987.............................. $10.000000 $10.317570 510,079.365
1988.............................. 10.317570 10.865066 983,327.102
1989.............................. 10.865066 11.634481 1,480,696.936
1990.............................. 11.634481 12.364687 4,430,249.555
1991.............................. 12.364687 12.890414 2,754,467.033
1992.............................. 12.890414 13.137257 2,138,783.498
1993.............................. 13.137257 13.303085 1,659,478.414
1994.............................. 13.303085 13.623292 3,357,660.681
1995.............................. 13.623292 14.190910 2,370,449.919
1996.............................. 14.190910 14.699636 1,577,496.585
1997.............................. 14.699636
Lifestyle Aggressive 1000
1997.............................. $12.500000
Lifestyle Growth 820
1997.............................. $12.500000
Lifestyle Balanced 640
1997.............................. $12.500000
</TABLE>
68
<PAGE> 75
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR* AT END OF YEAR AT END OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Moderate 460
1997.............................. $12.500000
Lifestyle Conservative 280
1997.............................. $12.500000
</TABLE>
* Units under this series of contracts were first credited under the
sub-accounts on November, 1986, except in the case of Investment Quality Bond
and Money Market where units were first credited on May 4, 1987, Global Equity,
Global Government Bond and U.S. Government Securities where units were first
credited on March 18, 1988, Aggressive Asset Allocation, Moderate Asset
Allocation and Conservative Asset Allocation where units were first credited on
August 3, 1989, Growth and Income where units were first credited on April 23,
1991, Blue Chip Growth where units were first credited on December 11, 1992,
Equity-Income and Strategic Bond where units were first credited on February 19,
1993, International Growth and Income where units were first credited on January
9, 1995, Small/Mid Cap and International Small Cap where units were first
credited on March 4, 1996, Growth where units were first credited on July 15,
1996, Pacific Rim Emerging Markets, Science & Technology, Emerging Growth,
Pilgrim Baxter Growth, International Stock, Worldwide Growth, Quantitative
Equity, Real Estate Securities, Value, Balanced, High Yield, Capital Growth
Bond, Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced 640,
Lifestyle Moderate 460, Lifestyle Conservative 280 where units were first
credited on January 2, 1997 and Small Company Value where units were first
credited on October 1, 1997.
TABLE OF ACCUMULATION UNIT VALUES
Ven 1 Contracts
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR AT END OF YEAR AT END OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity*
1985.............................. $10.000000 $10.734987 385.265
1986.............................. 10.734987 12.558028 4,651.489
1987.............................. 12.558028 13.248428 179,246.825
1988.............................. 13.248428 15.787546 146,228.732
1989.............................. 15.787546 19.902359 108,382.617
1990.............................. 19.902359 17.329021 93,278.975
1991.............................. 17.329021 20.176180 88,873.664
1992.............................. 20.176180 21.495619 39,451.366
1993.............................. 21.495619 24.681624 29,876.682
1994.............................. 24.681624 24.235928 24,893.636
1995.............................. 24.235928 34.164256 18,792.722
1996.............................. 34.164256 40.513296 18,983.608
1997.............................. 40.513296
Investment Quality Bond**
1985.............................. $10.000000 $10.455832 157.237
1986.............................. 10.455832 11.689643 2,426.738
1987.............................. 11.689643 11.841366 164,289.054
1988.............................. 11.841366 12.518584 157,248.809
1989.............................. 12.518585 13.759270 113,311.078
1990.............................. 13.759270 13.210721 100,560.220
1991.............................. 13.210721 15.137617 75,660.271
1992.............................. 15.137617 16.019604 38,307.149
1993.............................. 16.019604 17.397685 25,428.550
1994.............................. 17.397685 16.377174 17,796.020
1995.............................. 16.377174 19.318272 13,340.073
1996.............................. 19.318272 19.560775 11,512.775
1997.............................. 19.560775
</TABLE>
69
<PAGE> 76
<TABLE>
<CAPTION>
UNIT VALUE UNIT VALUE NUMBER OF UNITS
SUB-ACCOUNT AT START OF YEAR AT END OF YEAR AT END OF YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market***
1985.............................. $10.000000 $10.199136 108.287
1986.............................. 10.199136 10.647679 116.902
1987.............................. 10.647679 11.156548 69,537.264
1988.............................. 11.156548 11.761294 40,025.230
1989.............................. 11.761294 12.607783 43,520.107
1990.............................. 12.607783 13.413682 41,671.105
1991.............................. 13.413682 13.999175 35,261.861
1992.............................. 13.999175 14.282708 9,873.140
1993.............................. 14.282708 14.478685 5,683.780
1994.............................. 14.478685 14.843213 4,598.398
1995.............................. 14.843213 15.478376 7,968.626
1996.............................. 15.478376 16.050779 5,920.354
1997.............................. 16.050779
</TABLE>
* Commencement of operations July 1, 1985
** Commencement of operations August 6, 1985
*** Commencement of operations August 23, 1985
70
<PAGE> 77
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 78
STATEMENT OF ADDITIONAL INFORMATION
THE MANUFACTURERS LIFE INSURANCE COMPANY OF
NORTH AMERICA SEPARATE ACCOUNT A
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL DEFERRED
COMBINATION FIXED AND 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 The
Manufacturers Life Insurance Company of North America at the Annuity Service
Office, P.O. Box 9230, Boston, Massachusetts 02205-9230 or telephoning (800)
344-1029.
The date of this Statement of Additional Information is May 1, 1998
The Manufacturers Life Insurance Company of North America
116 Huntington Avenue
Boston, Massachusetts 02116
(617) 266-6004
V20/21.SAI598
<PAGE> 79
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
General Information and History....................................... 3
Performance Data...................................................... 3
Services
Independent Auditors........................................... 18
Servicing Agent................................................ 18
Principal Underwriter.......................................... 18
Cancellation of Contract....................................... 18
Financial Statements.................................................. 19
<PAGE> 80
GENERAL INFORMATION AND HISTORY
The Manufacturers Life Insurance Company of North America Separate
Account A (the "Variable Account") is a separate investment account of The
Manufacturers Life Insurance Company of North America (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 name Manulife.
PERFORMANCE DATA
Each of the sub-accounts may in its advertising and sales materials
quote total return figures. The sub-accounts may advertise both "standardized"
and "non-standardized" total return figures, although standardized figures will
always accompany non-standardized figures. Non-standardized total return figures
may be quoted assuming both (i) redemption at the end of the time period and
(ii) not assuming redemption at the end of the time period. Standardized figures
include total return figures from: (i) the inception date of the sub-account of
the Variable Account which invests in the portfolio or (ii) ten years, whichever
period is shorter. Non-standardized figures include total return numbers from:
(i) inception date of the portfolio or (ii) ten years, whichever period is
shorter. 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 inception date of the sub-account, in the case of
standardized returns, and the inception date of the portfolio, in the case of
non-standardized returns. 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)) 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. Non-standardized total return figures reflecting redemption at
the end of the time period are calculated on the same basis as the standardized
returns. Non-standardized total return figures not reflecting redemption at the
end of the time period are calculated on the same basis as the standardized
returns except that the calculations assume no redemption at the end of the
period and do not reflect deduction of the annual contract fee. The Company
believes such non-standardized figures not reflecting redemptions at the end of
the time period 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.
For total return figures quoted for periods prior to the commencement
of the offering of the contract standardized performance data will be the
historical performance of the Trust portfolio from the date the applicable
sub-account of the Variable Account first became available for investment under
other contracts offered by the Company; adjusted to reflect current contract
charges. In the case of non-standardized performance, performance figures will
be the historical performance of the Trust portfolio from the inception date of
the portfolio (or in the case of the Trust portfolios created in connection with
the merger of Manulife Series Fund, Inc. into the Trust, the inception date of
the applicable predecessor Manulife Series Fund, Inc. portfolio), adjusted to
reflect current contract charges.
3
<PAGE> 81
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1997#
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE*
YEARS, WHICHEVER IS
SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets N/A N/A -37.94% 01/01/97
Science & Technology N/A N/A 3.17% 01/01/97
International Small Cap -6.04% N/A 0.72% 03/04/96
Emerging Growth N/A N/A 10.53% 01/01/97
Pilgrim Baxter Growth N/A N/A -6.76% 01/01/97
Small/Mid Cap 7.59% N/A 7.45% 03/04/96
International Stock N/A N/A -4.31% 01/01/97
Worldwide Growth N/A N/A 5.66% 01/01/97
Global Equity 13.06% 12.51% 8.18% 03/18/88
Small Company Value N/A N/A -9.98% 10/01/97
Equity 11.53% 16.67% 13.50%+ 06/18/85
Growth 17.55% N/A 19.40% 07/15/96
Quantitative Equity N/A N/A 22.79% 01/01/97
Blue Chip Growth 19.11% 10.96% 10.78% 12/11/92
Real Estate Securities N/A N/A 13.53% 01/01/97
Value N/A N/A 14.39% 01/01/97
International Growth & -6.84%% N/A 3.33% 01/09/95
Income
Growth and Income 24.92% 16.77% 15.44% 04/23/91
Equity-Income 21.84% N/A 15.35% 02/19/93
Balanced N/A N/A 10.82% 01/01/97
Aggressive Asset Allocation 11.38% 10.44% 8.51% 08/03/89
High Yield N/A N/A 5.06% 01/01/97
Moderate Asset Allocation 8.20% 8.57% 7.51% 08/03/89
Conservative Asset 3.84% 6.36% 6.21% 08/03/89
Allocation
Strategic Bond 3.41% N/A 7.26% 02/19/93
Global Government Bond -4.03% 7.79% 7.31% 03/18/88
</TABLE>
4
<PAGE> 82
<TABLE>
<S> <C> <C> <C> <C>
Capital Growth Bond N/A N/A 1.88% 01/01/97
</TABLE>
5
<PAGE> 83
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE*
YEARS, WHICHEVER IS
SHORTER
<S> <C> <C> <C> <C>
Investment Quality Bond 2.27% 4.93% 5.42%+ 06/18/85
U.S. Government Securities -1.09% 4.41% 5.82% 03/18/88
Money Market -1.99% 2.23% 3.93%+ 06/18/85
Lifestyle Aggressive 1000 N/A N/A 4.80% 01/01/97
Lifestyle Growth 820 N/A N/A 7.29% 01/01/97
Lifestyle Balanced 640 N/A N/A 7.38% 01/01/97
Lifestyle Moderate 460 N/A N/A 6.79% 01/01/97
Lifestyle Conservative 280 N/A N/A 5.07% 01/01/97
Merrill Lynch Special Value 10/01/97
Focus
Merrill Lynch Basic Value 10/01/97
Focus
Merrill Lynch Developing 10/01/97
Capital Markets
</TABLE>
*Inception date of the sub-account of the Variable Account which invests in the
portfolio.
+ 10 year average annual return.
#See charts below for Ven 7 total return figures.
6
<PAGE> 84
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES#
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE OF
YEARS, WHICHEVER IS PORTFOLIO
SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging -38.40% N/A -10.58% 10/04/94
Markets*
Science & Technology N/A N/A 3.17% 01/01/97
International Small Cap -6.04% N/A 0.72% 03/04/96
Emerging Growth N/A N/A 10.53% 01/01/97
Pilgrim Baxter Growth N/A N/A -6.76% 01/01/97
Small/Mid Cap 7.59% N/A 7.45% 03/04/96
International Stock N/A N/A -4.31% 01/01/97
Worldwide Growth N/A N/A 5.66% 01/01/97
Global Equity 13.06% 12.51% 8.18% 03/18/88
Small Company Value N/A N/A -9.98% 10/01/97
Equity 11.53% 16.67% 13.50%+ 06/18/85
Growth 17.55% N/A 19.40% 07/15/96
Quantitative Equity* 21.97% 14.40% 13.48%+ 04/30/87
Blue Chip Growth 19.11% 10.96% 10.78% 12/11/92
Real Estate Securities* 10.70% 14.83% 14.22%+ 04/30/87
Value N/A N/A 14.39% 01/01/97
International Growth & -6.84% N/A 3.33% 01/09/95
Income
Growth and Income 24.92% 16.77% 15.44% 04/23/91
Equity-Income 21.84% N/A 15.35% 02/19/93
Balanced N/A N/A 10.82% 01/01/97
Aggressive Asset Allocation 11.38% 10.44% 8.51% 08/03/89
High Yield N/A N/A 5.06% 01/01/97
Moderate Asset Allocation 8.20% 8.57% 7.51% 08/03/89
Conservative Asset 3.84% 6.36% 6.21% 08/03/89
Allocation
Strategic Bond 3.41% N/A 7.26% 02/19/93
Global Government Bond -4.03% 7.79% 7.31% 03/18/88
</TABLE>
7
<PAGE> 85
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE OF
YEARS, WHICHEVER IS PORTFOLIO
SHORTER
<S> <C> <C> <C> <C>
Capital Growth Bond* 1.31% 4.99% 6.97%+ 06/26/84
Investment Quality Bond 2.27% 4.93% 5.42%+ 06/18/85
U.S. Government Securities 1.09% 4.41% 5.82% 03/18/88
Money Market -1.99% 2.23% 3.93%+ 06/18/85
Lifestyle Aggressive 1000 N/A N/A 4.80% 01/01/97
Lifestyle Growth 820 N/A N/A 7.29% 01/01/97
Lifestyle Balanced 640 N/A N/A 7.38% 01/01/97
Lifestyle Moderate 460 N/A N/A 6.79% 01/01/97
Lifestyle Conservative 280 N/A N/A 5.07% 01/01/97
Merrill Lynch Special Value [start date of
Focus portfolio]
Merrill Lynch Basic Value [start date of
Focus portfolio]
Merrill Lynch Developing [start date of
Capital Markets portfolio]
</TABLE>
*On December 31, 1996, Manulife Series Fund, Inc. merged with the Trust.
Performance presented for these sub-accounts is based upon the performance of
the respective predecessor Manulife Series Fund, Inc. portfolio for periods
prior 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, Inc. portfolio, adjusted to reflect current contract charges, and,
therefore, does not reflect for periods prior to December 31, 1996 the current
Trust portfolio expenses that an investor would incur as a holder of units of
the sub-account.
+ 10 year average annual return.
#See charts below for Ven 7 total return figures.
8
<PAGE> 86
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES#
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE OF
YEARS, WHICHEVER IS PORTFOLIO
SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging -35.04% N/A -9.28% 10/04/94
Markets*
Science & Technology N/A N/A 9.18% 01/01/97
International Small Cap -0.62% N/A 3.92% 03/04/96
Emerging Growth N/A N/A 16.59% 01/01/97
Pilgrim Baxter Growth N/A N/A -1.38% 01/01/97
Small/Mid Cap 13.66% N/A 10.58% 03/04/96
International Stock N/A N/A 1.22% 01/01/97
Worldwide Growth N/A N/A 11.73% 01/01/97
Global Equity 19.12% 13.05% 8.23% 03/18/88
Small Company Value N/A N/A -4.81% 01/01/97
Equity 17.59% 17.15% 13.54%+ 06/18/85
Growth 23.61% N/A 23.23% 07/15/96
Quantitative Equity* 28.03% 14.92% 13.52%+ 04/30/87
Blue Chip Growth 25.17% 11.54% 11.23% 12/11/92
Real Estate Securities* 16.76% 15.34% 14.27%+ 04/30/87
Value N/A N/A 20.46% 01/01/97
International Growth & -1.47% N/A 4.94% 01/09/95
Income
Growth and Income 30.99% 17.25% 15.62% 04/23/91
Equity-Income 27.90% N/A 15.87% 02/19/93
Balanced N/A N/A 16.88% 01/01/97
Aggressive Asset Allocation 17.44% 11.03% 8.57% 08/03/89
High Yield N/A N/A 11.12% 01/01/97
Moderate Asset Allocation 14.26% 9.20% 7.56% 08/03/89
Conservative Asset 9.89% 7.04% 6.26% 08/03/89
Allocation
Strategic Bond 9.44% N/A 7.94% 02/19/93
</TABLE>
9
<PAGE> 87
<TABLE>
<S> <C> <C> <C> <C> <C>
Global Government Bond 1.52% 8.43% 7.36% 03/18/88
</TABLE>
10
<PAGE> 88
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE OF
YEARS, WHICHEVER IS PORTFOLIO
SHORTER
<S> <C> <C> <C> <C>
Capital Growth Bond* 7.20% 5.70% 7.02%+ 06/26/84
Investment Quality Bond 8.23% 5.64% 5.47%+ 06/18/85
U.S. Government Securities 6.97% 5.14% 5.87% 03/18/88
Money Market 3.69% 3.02% 3.98%+ 06/18/85
Lifestyle Aggressive 1000 N/A N/A 10.86% 01/01/97
Lifestyle Growth 820 N/A N/A 13.35% 01/01/97
Lifestyle Balanced 640 N/A N/A 13.44% 01/01/97
Lifestyle Moderate 460 N/A N/A 12.86% 01/01/97
Lifestyle Conservative 280 N/A N/A 11.13% 01/01/97
Merrill Lynch Special Value [start date of
portfolio]
Merrill Lynch Basic Value [start date of
Focus portfolio]
Merrill Lynch Developing [start date of
Capital Markets portfolio]
</TABLE>
*On December 31, 1996, Manulife Series Fund, Inc. merged with the Trust.
Performance presented for these sub-accounts is based upon the performance of
the respective predecessor Manulife Series Fund portfolio for periods prior 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, adjusted to reflect current contract charges, and, therefore, does
not reflect for periods prior to December 31, 1996 the current Trust portfolio
expenses that an investor would incur as a holder of units of the sub-account.
+ 10 year average annual return.
#See charts below for Ven 7 total return figures.
11
<PAGE> 89
VEN 7 STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE*
YEARS, WHICHEVER IS
SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets N/A N/A -37.94 01/01/97
Science & Technology N/A N/A 3.17% 01/01/97
International Small Cap -6.04% N/A 0.72% 03/04/96
Emerging Growth N/A N/A 10.53% 01/01/97
Pilgrim Baxter Growth N/A N/A -6.76% 01/01/97
Small/Mid Cap 7.59% N/A 7.45% 03/04/96
International Stock N/A N/A -4.31% 01/01/97
Worldwide Growth N/A N/A 5.66% 01/01/97
Global Equity 13.06% 12.63% 8.18% 03/18/88
Small Company Value N/A N/A -9.98% 10/01/97
Equity 11.53% 16.78% 13.50%+ 06/18/85
Growth 17.55% N/A 19.40% 07/15/96
Quantitative Equity N/A N/A 22.79% 01/01/97
Blue Chip Growth 19.11% 11.09% 10.91% 12/11/92
Real Estate Securities N/A N/A 13.53% 01/01/97
Value N/A N/A 14.39% 01/01/97
International Growth & -6.84% N/A 3.33% 01/09/95
Income
Growth and Income 24.92% 16.88% 15.57% 04/23/91
Equity-Income 21.84% N/A 15.47% 02/19/93
Balanced N/A N/A 10.82% 01/01/97
Aggressive Asset Allocation 11.38% 10.58% 8.51% 08/03/89
High Yield N/A N/A 5.06% 01/01/97
Moderate Asset Allocation 8.20% 8.71% 7.51% 08/03/89
Conservative Asset 3.84% 6.52% 6.21% 08/03/89
Allocation
Strategic Bond 3.41% N/A 7.41% 02/19/93
Global Government -4.03% 7.93% 7.31% 03/18/88
</TABLE>
12
<PAGE> 90
<TABLE>
<S> <C> <C> <C> <C>
Bond
Capital Growth Bond N/A N/A 1.88% 01/01/97
</TABLE>
13
<PAGE> 91
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE*
YEARS, WHICHEVER IS
SHORTER
<S> <C> <C> <C> <C>
Investment Quality Bond 2.27% 5.10% 5.42%+ 06/18/85
U.S. Government Securities 1.09% 4.58% 5.82% 03/18/88
Money Market -1.99% 2.42% 3.93%+ 06/18/85
Lifestyle Aggressive 1000 N/A N/A 4.80% 01/01/97
Lifestyle Growth 820 N/A N/A 7.29% 01/01/97
Lifestyle Balanced 640 N/A N/A 7.38% 01/01/97
Lifestyle Moderate 460 N/A N/A 6.79% 01/01/97
Lifestyle Conservative 280 N/A N/A 5.07% 01/01/97
Merrill Lynch Special Value 10/01/97
Focus
Merrill Lynch Basic Value 10/01/97
Focus
Merrill Lynch Developing 10/01/97
Capital Markets
</TABLE>
*INCEPTION DATE OF THE SUB-ACCOUNT OF THE VARIABLE ACCOUNT WHICH INVESTS IN THE
PORTFOLIO.
+ 10 YEAR AVERAGE ANNUAL RETURN.
14
<PAGE> 92
VEN 7 NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE OF
YEARS, WHICHEVER IS PORTFOLIO
SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging -38.40% N/A -10.33% 10/04/94
Markets*
Science & Technology N/A N/A 3.17% 01/01/97
International Small Cap -6.04% N/A 0.72% 03/04/96
Emerging Growth N/A N/A 10.53% 01/01/97
Pilgrim Baxter Growth N/A N/A -6.76% 01/01/97
Small/Mid Cap 7.59% N/A 7.45% 03/04/96
International Stock N/A N/A -4.31% 01/01/97
Worldwide Growth N/A N/A 5.66% 01/01/97
Global Equity 13.06% 12.63%% 8.18% 03/18/88
Small Company Value N/A N/A -9.98% 10/01/97
Equity 11.53% 16.78% 13.50%+ 06/18/85
Growth 17.55% N/A 19.40% 07/15/96
Quantitative Equity* 21.97% 14.52% 13.48%+ 04/30/87
Blue Chip Growth 19.11% 11.09% 10.91% 12/11/92
Real Estate Securities* 10.70% 14.95% 14.22%+ 04/30/87
Value N/A N/A 14.39% 01/01/97
International Growth & -6.84% N/A 3.33% 01/09/95
Income
Growth and Income 24.92% 16.88% 15.57% 04/23/91
Equity-Income 21.84% N/A 15.47% 02/19/93
Balanced N/A N/A 10.82% 01/01/97
Aggressive Asset Allocation 11.38% 10.58% 8.51% 08/03/89
High Yield N/A N/A 5.06% 01/01/97
Moderate Asset Allocation 8.20% 8.71% 7.51% 08/03/89
Conservative Asset 3.84% 6.52% 6.21% 08/03/89
Allocation
Strategic Bond 3.41% N/A 7.41% 02/19/93
</TABLE>
15
<PAGE> 93
<TABLE>
<S> <C> <C> <C> <C>
Global Government Bond -4.03% 7.93% 7.31% 03/18/88
</TABLE>
16
<PAGE> 94
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE OF
YEARS, WHICHEVER IS PORTFOLIO
SHORTER
<S> <C> <C> <C> <C>
Capital Growth Bond* 1.31% 5.15% 6.97%+ 06/26/84
Investment Quality Bond 2.27% 5.10% 5.42%+ 06/18/85
U.S. Government Securities 1.09% 4.58% 5.82% 03/18/88
Money Market -1.99% 2.42% 3.93%+ 06/18/85
Lifestyle Aggressive 1000 N/A N/A 4.80% 01/01/97
Lifestyle Growth 820 N/A N/A 7.29% 01/01/97
Lifestyle Balanced 640 N/A N/A 7.38% 01/01/97
Lifestyle Moderate 460 N/A N/A 6.79% 01/01/97
Lifestyle Conservative 280 N/A N/A 5.07% 01/01/97
Merrill Lynch Special Value [start date of
Focus portfolio]
Merrill Lynch Basic Value [start date of
Focus portfolio]
Merrill Lynch Developing [start date of
Capital Markets portfolio)]
</TABLE>
*ON DECEMBER 31, 1996, MANULIFE SERIES FUND, INC. MERGED WITH THE TRUST.
PERFORMANCE PRESENTED FOR THESE SUB-ACCOUNTS IS BASED UPON THE PERFORMANCE OF
THE RESPECTIVE PREDECESSOR MANULIFE SERIES FUND, INC. PORTFOLIO FOR PERIODS
PRIOR 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, INC. PORTFOLIO, ADJUSTED TO REFLECT CURRENT CONTRACT CHARGES, AND,
THEREFORE, DOES NOT REFLECT FOR PERIODS PRIOR TO DECEMBER 31, 1996 THE CURRENT
TRUST PORTFOLIO EXPENSES THAT AN INVESTOR WOULD INCUR AS A HOLDER OF UNITS OF
THE SUB-ACCOUNT.
+ 10 YEAR AVERAGE ANNUAL RETURN.
17
<PAGE> 95
VEN 7 NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE OF
YEARS, WHICHEVER IS PORTFOLIO
SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging -35.04% N/A -9.28% 10/04/94
Markets*
Science & Technology N/A N/A 9.18% 01/01/97
International Small Cap -0.62% N/A 3.92% 03/04/96
Emerging Growth N/A N/A 16.59% 01/01/97
Pilgrim Baxter Growth N/A N/A -1.38% 01/01/97
Small/Mid Cap 13.66% N/A 10.58% 03/04/96
International Stock N/A N/A 1.22% 01/01/97
Worldwide Growth N/A N/A 11.73% 01/01/97
Global Equity 19.12% 13.05% 8.23% 03/18/88
Small Company Value N/A N/A -4.81% 10/01/97
Equity 17.59% 17.15% 13.54%+ 06/18/85
Growth 23.61 N/A 23.23% 07/15/96
Quantitative Equity* 28.03% 14.92% 13.52%+ 04/30/87
Blue Chip Growth 25.17% 11.54% 11.23% 12/11/92
Real Estate Securities* 16.76% 15.34% 14.27%+ 04/30/87
Value N/A N/A 20.46% 01/01/97
International Growth & -1.47% N/A 4.94% 01/09/95
Income
Growth and Income 30.99% 17.25% 15.62% 04/23/91
Equity-Income 27.90% N/A 15.87% 02/19/93
Balanced N/A N/A 16.88% 01/01/97
Aggressive Asset Allocation 17.44% 11.03% 8.57% 08/03/89
High Yield N/A N/A 11.12% 01/01/97
Moderate Asset Allocation 14.26% 9.20% 7.56% 08/03/89
Conservative Asset 9.89% 7.04% 6.26% 08/03/89
Allocation
Strategic Bond 9.44% N/A 7.94% 02/19/93
</TABLE>
18
<PAGE> 96
<TABLE>
<S> <C> <C> <C> <C>
Global Government Bond 1.52% 8.43% 7.36% 03/18/88
</TABLE>
19
<PAGE> 97
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION OR 10 INCEPTION DATE OF
YEARS, WHICHEVER IS PORTFOLIO
SHORTER
<S> <C> <C> <C> <C>
Capital Growth Bond* 7.20% 5.70% 7.02%+ 06/26/84
Investment Quality Bond 8.23% 5.64% 5.47%+ 06/18/85
U.S. Government Securities 6.97% 5.14% 5.87% 03/18/88
Money Market 3.69% 3.02% 3.98%+ 06/18/85
Lifestyle Aggressive 1000 N/A N/A 10.86% 01/01/97
Lifestyle Growth 820 N/A N/A 13.35% 01/01/97
Lifestyle Balanced 640 N/A N/A 13.44% 01/01/97
Lifestyle Moderate 460 N/A N/A 12.86% 01/01/97
Lifestyle Conservative 280 N/A N/A 11.13% 01/01/97
Merrill Lynch Special Value [start date of
portfolio]
Merrill Lynch Basic Value [start date of
Focus portfolio]
Merrill Lynch Developing [start date of
Capital Markets portfolio]
</TABLE>
*ON DECEMBER 31, 1996, MANULIFE SERIES FUND, INC. MERGED WITH THE TRUST.
PERFORMANCE PRESENTED FOR THESE SUB-ACCOUNTS IS BASED UPON THE PERFORMANCE OF
THE RESPECTIVE PREDECESSOR MANULIFE SERIES FUND, INC. PORTFOLIO FOR PERIODS
PRIOR 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, INC. PORTFOLIO, ADJUSTED TO REFLECT CURRENT CONTRACT CHARGES, AND,
THEREFORE, DOES NOT REFLECT FOR PERIODS PRIOR TO DECEMBER 31, 1996 THE CURRENT
TRUST PORTFOLIO EXPENSES THAT AN INVESTOR WOULD INCUR AS A HOLDER OF UNITS OF
THE SUB-ACCOUNT.
+ 10 YEAR AVERAGE ANNUAL RETURN.
* * * * *
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.
20
<PAGE> 98
SERVICES
INDEPENDENT AUDITORS
The financial statements of the Company and the Variable Account at
December 31, 1997 and 1996 and for the years 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
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The consolidated statements of income, changes in shareholder's equity
and cash flows for the year ended December 31, 1994, appearing in this Statement
of Additional Information have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The statement of operations and changes in net assets of the Variable
Account for the year ended December 31, 1995, appearing in this Statement of
Additional Information has been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that 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
Computer Sciences Corporation Financial Services Group ("CSC FSG")
provides to the Company a computerized data processing recordkeeping system for
variable annuity administration. CSC FSG 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; semiannual statements for contract
owners; and annual contract owner tax reports. CSC FSG receives approximately
$7.80 per policy per year, plus certain other fees paid by the Company for the
services provided.
PRINCIPAL UNDERWRITER
Manufacturers Securities Services, LLC ("MSS"), a Delaware limited
liability company controlled by 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 MSS in 1997, 1996 and 1995 were
$_______, $83,031,288 and $68,782,161, respectively. MSS did not retain any of
these amounts during such periods.
CANCELLATION OF CONTRACT
The Company may, at its option, cancel a contract at the end of any two
consecutive contract years in which no purchase payments by or on behalf of the
contract owner have been made, if both (i) the total purchase payments made for
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 Company, as a
matter of administrative practice, will attempt to notify a contract owner prior
to such cancellation in order to allow the contract owner to make the necessary
purchase payment to keep the contract in force. The cancellation of contract
provisions may vary in certain states in order to comply with the requirements
of insurance laws and regulations in such states.
21
<PAGE> 99
PART C
OTHER INFORMATION
<PAGE> 100
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements of the Registrant, The
Manufacturers Life Insurance Company of North America
Separate Account A (formerly NASL Variable Account)
(Part B of the registration statement) --To be filed
by amendment.
(2) Financial Statements of the Depositor, The
Manufacturers Life Insurance Company of North America
(formerly 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 -- Filed herewith.
(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 -- Previously filed as Exhibit
(b)(1)(ii) to post-effective amendment no. 2
to Form N-4 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
September 30, 1996 -- Previously filed as
Exhibit (b)(1)(iii) to post-effective
amendment no. 3 to Form N-4 filed April 29,
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 -- Previously filed as
Exhibit (b)(1)(iv) to post-effective
amendment no. 3 to Form N-4 filed April 29,
1997.
(v) 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 four additional sub-accounts dated
September 26, 1997 -- Filed herewith.
(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) -- Filed herewith.
(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. -- Previously filed as Exhibit
(b)(3)(ii) to post-effective amendment no. 3
to Form N-4 filed April 29, 1997.
(iii) Amendment to Promotional Agent Agreement -
Filed herewith.
<PAGE> 101
(iv) Form of Selling Agreement between The
Manufacturers Life Insurance Company of
North America, Manufacturers Securities
Services, LLC, Selling Broker-Dealer and
General Agent-- Filed herewith.
(4) (i) (A) Specimen Flexible Purchase Payment
Individual Deferred Combination Fixed
and Variable Annuity Contract, Non-
Participating (v20/21) -- Filed
herewith.
(B) Specimen Flexible Purchase Payment
Individual Deferred Combination Fixed
and Variable Annuity Contract,
Non-Participating (v7) -- Filed
herewith.
(ii) (A) (1) Specimen Endorsements
to Contract (v20/21): (i)
Individual Retirement Annuity
Endorsement; (ii) ERISA Tax
Sheltered Annuity Endorsement;
(iii) Tax-sheltered Annuity
Endorsement; (iv) Qualified
Plan Endorsement Section 401
Plans -- Filed herewith.
(2) Specimen Endorsements to
Contract (v20/21): (i) ERISA
Tax Sheltered Annuity
Endorsement; (ii) Tax-sheltered
Annuity Endorsement; (iii)
Qualified Plan Endorsement
Section 401 Plans, (iv) Simple
Individual Retirement Annuity
Endorsement; (v) Fixed Account
Endorsement; (vi) Death Benefit
Endorsement -- Filed herewith.
(B) (1) Specimen Death Benefit
Endorsement to Flexible
Purchase Payment Individual
Deferred Variable Annuity
Contract, Non-Participating
(v7) -- Filed herewith.
(2) Specimen Endorsements to
Contract (v7): (i) Individual
Retirement Annuity Endorsement;
(ii) Retirement Equity Act
Endorsement; (iii)Tax-sheltered
Annuity Endorsement; (iv)
Qualified Plan Endorsement
Section 401 Plans -- Filed
herewith
(C) Specimen Death Benefit Endorsement to
Venture 3 Contract, Non-Participating
-- Filed herewith.
(D) Change of Name Endorsement --
Incorporated by reference to Exhibit
(4)(v) to post-effective amendment no
1 to Form S-1, file number 333-6011,
filed October 9, 1997.
(iii) Guaranteed Income Rider (v20/21) -- Filed
herewith.
(5) (A) Specimen Application for Flexible Purchase
Payment Individual Deferred Combination
Fixed and Variable Annuity Contract,
Non-Participating (v20/21) -- Filed
herewith.
(B) Specimen Application for Flexible Purchase
Payment Individual Deferred Combination
Fixed and Variable Annuity Contract,
Non-Participating (v7) -- Filed herewith.
(6) (i) Certificate of Incorporation of North
American Security Life Insurance Company
--Incorporated by reference to Exhibit
(3)(i) to Form 10Q of The Manufacturers Life
Insurance Company of North America, filed
November 14, 1997.
<PAGE> 102
(ii) Certificate of Amendment of Certificate of
Incorporation of the Company, Name Change
July 1984 -- Incorporated by reference to
Exhibit (3)(i)(a) to Form 10Q of The
Manufacturers Life Insurance Company of
North America, filed November 14, 1997.
(iii) Certificate of Amendment of Certificate of
Incorporation of the Company, Authorization
of Capital December 1994 -- Incorporated by
reference to Exhibit (3)(i)(b) to Form 10Q
of The Manufacturers Life Insurance Company
of North America, filed November 14, 1997.
(iv) Certificate of Amendment of Certificate of
Incorporation, Name change March 1997
--Incorporated by reference to Exhibit
(3)(i)(a) to post effective amendment no. 1
to Form S-1 on behalf of The Manufacturers
Life Insurance Company of North America,
file number 333-6011, filed October 9, 1997.
(v) Certificate of Amendment of Certificate of
Incorporation of the Company, Registered
Agent July 1997 -- Incorporated by reference
to Exhibit (3)(i)(c) to Form 10Q of The
Manufacturers Life Insurance Company of
North America filed November 14, 1997.
(vi) Amended and Restated By-laws of The
Manufacturers Life Insurance Company of
North America -- Incorporated by reference
to Exhibit (3)(ii) to Form 10Q of The
Manufacturers Life Insurance Company of
North America filed November 14, 1997.
(7) (i) Contract of reinsurance in connection
with the variable annuity contracts being
offered - Form of 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 -- Filed herewith.
(ii) (A) Contract of reinsurance in
connection with variable annuity
contracts being offered - Reinsurance
and Guaranteed Death Benefits
Agreement between North American
Security Life Insurance Company and
Connecticut General Life Insurance
Company, effective July 1, 1995
(v20/21) -- Previously filed as
Exhibit (b)(7)(ii) to post-effective
amendment no. 2 to Form N-4, file
number 33-76162
filed March 1, 1996.
(B) Contract of reinsurance in connection
with 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 (v7) --
Previously filed as Exhibit (b)(7)(i)
to post-effective amendment no. 9 to
Form N-4, file number 33-28455
filed March 1, 1996.
(C) Contract of reinsurance in connection
with variable annuity contracts being
offered - Variable Annuity Guaranteed
Death Benefit Reinsurance Contract Ven
3 between North American Security Life
Insurance Company and Connecticut
General Life Insurance Company,
effective July 1, 1995 -- Previously
filed as Exhibit (b)(7)(ii) to
post-effective amendment no. 9 to Form
N-4, file number 33-28455 filed March
1, 1996.
<PAGE> 103
(iii) Contract of reinsurance in connection with
the variable annuity contracts being offered
- Automatic Reinsurance Agreement between
North American Security Life Insurance
Company and Swiss Re America, effective
August 1, 1995 -- Previously filed as
Exhibit (b)(7)(iii) to post-effective
amendment no. 2 to Form N-4, file number
33-76162 filed March 1, 1996.
(iv) Contract of reinsurance in connection with
the variable annuity contracts being offered
- Reinsurance Agreement between North
American Security Life Insurance Company and
PaineWebber Life Insurance Company,
effective December 31, 1994 -- Previously
filed as Exhibit (b)(7)(iv) to
post-effective amendment no. 2 to Form N-4,
file number 33-76162 filed March 1, 1996.
(v) Contract of reinsurance in connection with
the variable annuity contracts being offered
- Form of Reinsurance Agreement between
North American Security Life Insurance
Company and Merrill Lynch Life Insurance
Company effective January 1, 1997 -- Filed
herewith.
(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 between North American
Security Life Insurance Company and CSC
Continuum Inc. -- Previously filed as
Exhibit (b)(8)(i) to post-effective
amendment no. 2 to Form N-4, file number
33-76162 filed April 29, 1997.
(9) (A) Opinion of Counsel and consent to its
use as to the legality of the securities
being registered (v20/21) (June 28, 1994) --
Filed herewith.
(B) Opinion of Counsel and consent to its use as
to the legality of the securities being
registered (v7) (April 24, 1989) -- Filed
herewith.
(10) (i) Written consent of Ernst & Young LLP,
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.
(13) (A) Schedules of computations (v20/21) --
Previously filed as Exhibit (b)(13) to
post-effective amendment no. 2 to Form N-4,
file number 33-76162 filed March 1, 1996.
(B) Schedules of computations (v7) -- Previously
filed as Exhibit (b)(13) to post-effective
amendment no. 9 to Form N-4, file number
33-28455 filed March 1, 1996.
(14) Financial Data Schedule -- Not Applicable.
(15) (i) Power of Attorney - John D. Richardson
(Chairman of the Board of Directors, North
American Security Life Insurance Company) --
Previously filed as Exhibit (15)(iii) to
<PAGE> 104
post-effective amendment no. 2 to Form N-4,
file number 33-76162 filed April 29, 1997.
(ii) Power of Attorney - David W. Libbey,
Principal Financial Officer, North American
Security Life Insurance Company --
Incorporated by reference to Exhibit
(24)(ii) to Form 10Q of The Manufacturers
Life Insurance Company of North America
filed November 14, 1997.
(iii) Power of Attorney - Peter Hutchison
(Director, The Manufacturers Life Insurance
Company of North America) -- Filed herewith.
Item 25. Directors and Officers of the Depositor.
OFFICERS AND DIRECTORS OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH
AMERICA
Name and Principal
Business Address Position with Manulife North America
John D. Richardson Director and Chairman of the Board of
200 Bloor Street East Directors
North Tower, 11th Floor
Toronto, Ontario
Canada M4W-1E5
Peter S. Hutchison Director
200 Bloor Street East
North Tower, 7th Floor
Toronto, Ontario
Canada M4W-1E5
John D. DesPrez III President & Director
73 Tremont Street
Boston, MA 02108
James Boyle Vice President, Administration and Chief
116 Huntington Avenue Administrative Officer
Boston, MA 02116
John G. Vrysen Vice President & Chief Actuary
73 Tremont Street
Boston, MA 02108
Hugh McHaffie Vice President, U.S. Annuities and Product
73 Tremont Street Development
Boston, MA 02108
Richard C. Hirtle Vice President, Strategic Development and
116 Huntington Avenue Accumulation Life Products
Boston, MA 02116
<PAGE> 105
James D. Gallagher Vice President, Secretary and General Counsel
73 Tremont Street
Boston, MA 02108
Janet Sweeney Vice President, Corporate Services
73 Tremont Street
Boston, MA 02108
Robert Boyda Vice President, Investment Management
73 Tremont Street Services
Boston, MA 01208
Name and Principal
Business Address Position with Manulife North America
David W. Libbey Vice President, Treasurer & Chief
73 Tremont Street Financial Officer
Boston, MA 02108
Item 26. Persons Controlled by or Under Common Control with Depositor or
Registrant.
THE MANUFACTURERS LIFE INSURANCE COMPANY
Manulife Corporate Organization as at December 31, 1997
The Manufacturers Life Insurance Company (Canada)
<TABLE>
<S> <C>
1. Cantay Holdings Inc. - Ontario (100%)
2. 484551 Ontario Limited - Ontario (100%)
a. 911164 Ontario Inc. - Ontario (100%)
3. Churchill Lifestyles Corp. (100%)
4. 495603 Ontario Limited - Ontario (100%)
5. 1198183 Ontario Limited - Ontario (100%)
6. 1198184 Ontario Limited - Ontario (100%)
7. 1235434 Ontario Limited - Ontario (100%)
8. 576986 Ontario Inc. - Ontario (100%)
9. Balmoral Developments Inc. - Ontario (100%)
10. Manulife Bank of Canada - Canada (100%)
11. Manulife Securities International Ltd. - Canada (100%)
12. Family Realty First Corp. - Ontario (100%)
13. NAL Resources Limited - Alberta (100%)
14. Manulife International Capital Corporation Limited - Ontario (100%)
a. Regional Power Inc. - Ontario (100%)
i. La Regionale Power (Port Cartier) Inc. - Ontario (100%)
ii. La Regionale Power Angliers Inc. - Ontario (100%)
iii. Addalam Power Corporation - Philippines (100%)
15. Peel-de Maisonneuve Investments Ltd. - Canada (100%)
a. 2932121 Canada Inc. - Canada (100%)
16. FNA Financial Inc. - Canada (100%)
a. NAL Trustco Inc. - Ontario (100%)
b. First North American Insurance Company - Canada (100%)
c. Elliott & Page Limited - Ontario (100%)
d. Seamark Asset Management Ltd. - Canada (67.86%)
e. NAL Resources Management Limited - Canada (100%)
</TABLE>
<PAGE> 106
<TABLE>
<S> <C>
i. NAL Energy Inc. - Alberta (100%)
17. ManuCab Ltd. - Canada (100%)
a. Plazcab Service Limited - Newfoundland (100%)
18. Manufacturers Life Capital Corporation Inc. - Canada (100%)
19. The North American Group Inc. - Ontario (100%)
20. 994744 Ontario Inc. - Ontario (100%)
21. 1268337 Ontario Inc. - Ontario (100%)
22. 3426505 Canada Inc. - Canada (100%)
23. The Manufacturers Investment Corporation - Michigan (100%)
a. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
i. The Manufacturers Life Insurance Company (U.S.A.) -
Michigan (100%)
(1) Dover Leasing Investments, LLC - Delaware
(99%)
(2) The Manufacturers Life Insurance Company of
America - Michigan (100%)
(a) Manulife Holding Corporation -
Delaware (100%)
(i) Manufacturers Adviser
Corporation - Colorado
(100%)
(ii) Succession Plainning
International, Inc. -
Wisconsin (100%)
(iii) ManEquity, Inc. - Colorado
(100%)
(iv) Manulife Property
Management of Washington,
D.C. Inc. - Washington,
D.C. (100%)
(v) ManuLife Service
Corporation - Colorado
(100%)
(vi) Manulife Leasing Company,
LLC - Delaware (80%)
(3) Capitol Bankers Life Insurance Company -
Michigan (100%)
(4) Ennal, Inc. - Ohio (100%)
(5) Manulife-Wood Logan Holding Co. Inc. -
Delaware (62.5%)
(a) Wood Logan Associates, Inc. -
Connecticut (100%)
(i) Wood Logan Distributors,
Inc. - Connecticut (100%)
(b) The Manufacturers Life Insurance
Company of North America - Delaware
(100%)
(i) Manufacturers Securities
Services, LLC -
Massachusetts (100%)
(ii) The Manufacturers Life
Insurance Company of New
York - New York (100%)
ii. Manulife Reinsurance Limited - Bermuda (100%)
(1) MRL Holding, LLC - Delaware (99%)
(a) Manulife-Wood Logan Holding Co. Inc.
- Delaware (22.5%)
iii. MRL Holding, LLC - Delaware (1%)
24. Manulife International Investment Management Limited - U.K. (100%)
a. Manulife International Fund Management Limited - U.K. (100%)
25. WT(SW) Properties Ltd. - U.K. (100%)
26. Manulife Europe Ruckversicherungs-Aktiengesellschaft - Germany (100%)
27. Manulife International Holdings Limited - Bermuda (100%)
a. Manulife (International) Limited - Bermuda (100%)
i. Zhong Hong Life Insurance Co., Ltd. - China (51%)
ii. The Manufacturers (Pacific Asia) Insurance Company
Limited - H.K. (100%)
iii. Newtime Consultants Limited - H.K. (100%)
28. Manulife (International) Reinsurance Limited - Bermuda (100%)
a. Manulife (International) P & C Limited - Bermuda (100%)
b. Manufacturers P & C Limited - Barbados (100%)
c. Manufacturers Life Reinsurance Limited - Barbados (100%)
29. Chinfon-Manulife Insurance Company Limited - Bermuda (100%)
30. Manulife (Malaysia) SDN. BHD. - Malaysia (100%)
</TABLE>
<PAGE> 107
<TABLE>
<S> <C>
31. Manulife (Thailand) Ltd. - Thailand (100%)
32. Young Poong Manulife Insurance Company - Korea (100%)
33. Manulife Data Services Inc. - Barbados (100%)
a. Manulife Funds Direct (Barbados) Limited - Barbados (100%)
i. Manulife Funds Direct (Hong Kong) Limited - H.K.
(100%)
34. OUB Manulife Pte. Ltd. - Singapore (100%)
35. Manulife Holdings (Hong Kong) Limited - H.K. (100%)
36. ManuLife Financial Systems (Hong Kong) Limited - H.K. (100%)
37. P.T. Asuransi Jiwa Dhamala ManuLife - Indonesia (51%)
a. P.T. AMP Panin Life - Indonesia (100%)
</TABLE>
Item 27. Number of Contract Owners.
As of December 31, 1997, the follow table lists the number of qualified and
non-qualified contracts of the series offered hereby outstanding.
<TABLE>
<CAPTION>
Contract Qualified Non-Qualified
-------- --------- -------------
<S> <C> <C>
Ven 1 18 15
Ven 3 3,360 4,980
Ven 7 32,342 41,193
Ven 20/21 22,689 27,506
</TABLE>
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
<PAGE> 108
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 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> 109
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.
<TABLE>
<S> <C> <C>
a. Name of Investment Company Capacity in which acting
Manufacturers Investment Trust Investment Adviser
The Manufacturers Life Insurance Principal Underwriter
Company of North America Separate
Account A
The Manufacturers Life Insurance Principal Underwriter
Company of North America Separate
Account B
The Manufacturers Life Insurance Principal Underwriter
Company of New York Separate
Account A
</TABLE>
b. The Manufacturers Life Insurance Company of North America is the
managing member of Manufacturers Securities Services, LLC and has sole power to
act on behalf of Manufacturers Securities Services, LLC. The officers and
directors of The Manufacturers Life Insurance Company of North America are set
forth under Item 25.
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
The Manufacturers Life Insurance Company of North America (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> 110
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, The Manufacturers Life Insurance Company of North
America Separate Account A, has caused this Amendment to the Registration
Statement to be signed on its behalf, in the City of Boston, and Commonwealth of
Massachusetts on this 24th day of February, 1998.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF
NORTH AMERICA SEPARATE ACCOUNT A
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
(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, the
Depositor has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned on the 24th day of February, 1998 in the
City of Boston, and Commonwealth of Massachusetts.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF
NORTH AMERICA
(Depositor)
By: /s/ JOHN D. DESPREZ III
-------------------------------------
John D. DesPrez III, President
Attest:
/s/ JAMES D. GALLAGHER
- ---------------------------------
James D. Gallagher, Secretary
<PAGE> 111
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities with the
Depositor and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ JOHN D. DESPREZ III Director and President February 24, 1998
- --------------------------------- (Principal Executive ---------------------
John D. DesPrez III Officer) (Date)
* Director February 24, 1998
- --------------------------------- ---------------------
Peter S. Hutchison (Date)
* Director and Chairman February 24, 1998
- --------------------------------- of the Board ---------------------
John D. Richardson (Date)
/s/ DAVID W. LIBBEY Vice President and February 24, 1998
- --------------------------------- Treasurer (Principal ---------------------
David W. Libbey Financial and Accounting (Date)
Officer)
*By: /s/ JAMES D. GALLAGHER February 24, 1998
--------------------- ---------------------
James D. Gallagher (Date)
Attorney-in-Fact
Pursuant to Powers
of Attorney
</TABLE>
<PAGE> 112
EXHIBIT INDEX
Exhibit No. Description
(b)(1)(i) Resolution of the Board of Directors of North American
Security Life Insurance Company establishing the NASL Variable
Account
(b)(1)(v) 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
four additional sub-accounts dated September 26, 1997
(b)(3)(i) Underwriting Agreement between North American Security Life
Insurance Company (Depositor) and NASL Financial Services,
Inc. (Underwriter)
(b)(3)(iii) Amendment to Promotional Agent Agreement
(b)(3)(iv) Form of Selling Agreement between The Manufacturers Life
Insurance Company of North America, Manufacturers Securities
Services, LLC, Selling Broker-Dealer and General Agent
(b)(4)(i)(A) Specimen Flexible Purchase Payment Individual Deferred
Combination Fixed and Variable Annuity Contract,
Non-Participating (v20/21)
(b)(4)(i)(B) Specimen Flexible Purchase Payment Individual Deferred
Combination Fixed and Variable Annuity Contract,
Non-Participating (v7)
(b)(4)(ii)(A)(1) Specimen Endorsements to Contract (v20/21): (i) Individual
Retirement Annuity Endorsement; (ii) ERISA Tax Sheltered
Annuity Endorsement; (iii) Tax-sheltered Annuity Endorsement;
(iv) Qualified Plan Endorsement Section 401 Plans
(b)(4)(ii)(A)(2) Specimen Endorsements to Contract (v20/21): (i) ERISA Tax
Sheltered Annuity Endorsement; (ii) Tax-sheltered Annuity
Endorsement; (iii) Qualified Plan Endorsement Section 401
Plans, (iv) Simple Individual Retirement Annuity Endorsement;
(v) Fixed Account Endorsement; (vi) Death Benefit Endorsement
(b)(4)(ii)(B)(1) Specimen Death Benefit Endorsement to Flexible Purchase
Payment Individual Deferred Variable Annuity Contract,
Non-Participating (v7)
(b)(4)(ii)(B)(2) Specimen Endorsements to Contract (v7): (i) Individual
Retirement Annuity Endorsement; (ii) Retirement Equity Act
Endorsement; (iii) Tax-sheltered Annuity Endorsement; (iv)
Qualified Plan Endorsement Section 401 Plans
(b)(4)(ii)(C) Specimen Death Benefit Endorsement to Venture 3 Contract,
Non-Participating
(b)(4)(iii) Guaranteeed Income Rider
(b)(5)(A) Specimen Application for Flexible Purchase Payment Individual
Deferred Combination Fixed and Variable Annuity Contract,
Non-Participating (v20/21)
(b)(5)(B) Specimen Application for Flexible Purchase Payment Individual
Deferred Combination Fixed and Variable Annuity Contract,
Non-Participating (v7)
<PAGE> 113
(b)(7)(i) Contract of reinsurance in connection with the variable
annuity contracts being offered - Form of 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
(b)(7)(v) Contract of reinsurance in connection with the variable
annuity contracts being offered - Form of Reinsurance
Agreement between North American Security Life Insurance
Company and Merrill Lynch Life Insurance Company effective
January 1, 1997
(b)(9)(A) Opinion of Counsel and consent to its use as to the legality
of the securities being registered (v20/21) (June 28, 1994)
(b)(9)(B) Opinion of Counsel and consent to its use as to the legality
of the securities being registered (v7) (April 24, 1989)
(b)(15)(iii) Power of Attorney - Peter Hutchison (Director, The
Manufacturers Life Insurance Company of North America)
<PAGE> 1
EXHIBIT (b)(1)(i)
ACTION BY UNANIMOUS CONSENT OF THE
BOARD OF DIRECTORS OF
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
Pursuant to the authority of Section 141 (f) of the General Corporation
Law of the State of Delaware, the undersigned, being all of the directors of the
Corporation, do take and adopt the following action by their written consent:
RESOLVED, That pursuant to Title 18, Section 2932(a) of the
Delaware Code Annotated, as amended, the Corporation does hereby
establish a separate account which is divided into three sub-accounts
for use in connection with the offer and sale of variable annuity
contracts, the issuance of which is hereby authorized. Such separate
account is hereby designated as the "NASL Variable Account" and such
sub-accounts are designated as "Equity," "Bond" and "Money Market,"
respectively;
FURTHER RESOLVED, That each variable annuity contract issued
by the Corporation shall provide that the portion of the assets of the
separate account equal to the reserves and other contract liabilities
with respect to such account shall not be chargeable with liabilities
arising out of any other business the Company may conduct and,
consistent with the provisions of Title 18, Section 2932 (a) (1) of the
Delaware Code Annotated, as amended, that the income, gains and losses,
realized or unrealized, from assets allocated to the separate account
shall be credited to or charged against such account without regard to
other income, gains or losses of the Corporation;
FURTHER RESOLVED, That the officers of the Corporation are
hereby authorized and directed to take all such action as may be
necessary or appropriate to cause the separate account to be registered
as a unit investment trust under the Investment Company Act of 1940, as
amended, and one or more applications to be made for such exemptive or
other orders under that Act as may be necessary or desirable;
FURTHER RESOLVED, That the officers of the Corporation are
hereby authorized and directed to take all such action as may be
necessary or appropriate to cause to be filed with the Securities and
Exchange Commission in accordance with the provisions of the Securities
Act of 1933, as amended, one or more registration statements and any
amendments thereto, relating to such variable annuity contracts;
FURTHER RESOLVED, That the officers of the Corporation are
hereby authorized and directed to perform all such acts and do all such
things as may, in their judgment and discretion, be necessary or
desirable to give full effect to these resolutions so as to enable the
Corporation to establish the separate account and issue the variable
annuity contracts, including, without limitation: (a) the preparation
and execution of custodian agreements, underwriting agreements, service
agreements, and such other agreements and documents respecting such
separate account or contracts as they may deem necessary or desirable;
(b) the determination of the terms and conditions of the
<PAGE> 2
variable annuity contracts herein authorized; and (c) the determination
of the jurisdiction or jurisdictions in which action shall be taken to
obtain the requisite qualification, registration or authorization for
the sale of such variable annuity contracts.
FURTHER RESOLVED, That the officers of the Corporation are
hereby authorized and directed to proceed with the organization and
sponsorship of a series investment company and to purchase shares of
such company for its general account and/or one or more separate
accounts in an initial amount of up to THREE MILLION DOLLARS
($3,000,000.00).
DATED at Toronto as of the 24th day of August, 1984.
/s/ J. J. DESCHENES /s/ E. T. HILL
- --------------------- ---------------------
J. J. Deschenes E. T. Hill
/s/ W. J. ATHERTON
- ---------------------
W. J. Atherton
<PAGE> 1
EXHIBIT (b)(1)(v)
ACTION BY UNANIMOUS CONSENT OF THE
BOARD OF DIRECTORS OF
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
Pursuant to the authority of Section 141(f) of the General Corporation Law of
the State of Delaware, the undersigned, being all of the directors of North
American Security Life Insurance Company ("the Company"), do take and adopt the
following action by their written consent:
Authorization for Additional Sub-Accounts of Variable Separate Accounts
VARIABLE ACCOUNT
WHEREAS, pursuant to Title 18, Section 2932(a) of the Delaware Code Annotated,
as amended, the Company, pursuant to a resolution dated August 24, 1984,
established a separate account, designated the NASL Variable Account, and
WHEREAS, the separate account is currently separated into seventeen sub-accounts
designated "International Small Cap Trust," the "Small/Mid Cap Trust," the
"Growth Trust," the "Equity Trust," the "Investment Quality Bond Trust," the
"Money Market Trust," the "Global Equity Trust," the "Pasadena Growth Trust,"
the "Value Equity Trust," the "Growth and Income Trust," the "Strategic Bond
Trust," the "Global Government Bond Trust," the "International Growth and Income
Trust," the "U.S. Government Securities Trust," the "Aggressive Asset Allocation
Trust," the "Moderate Asset Allocation Trust," the "Conservative Asset
Allocation Trust," the "Pacific Rim Emerging Markets Trust," the "Science &
Technology Trust," the "Emerging Growth Trust," the "Pilgrim Baxter Growth
Trust," the "International Stock Trust," the "Worldwide Growth Trust," the
"Quantitative Equity Trust," the "Equity Index Trust," the "Real Estate
Securities Trust," the "Value Trust," the "Balanced Trust," the "High Yield
Trust," the "Capital Growth Bond 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"; be it
RESOLVED, that the Company does hereby divide the separate account to create
four additional sub-accounts designated the "Small Company Value Trust," the
"Merrill Lynch Special Value Focus Fund," the "Merrill Lynch Basic Value Focus
Fund" and the "Merrill Lynch Developing Capital Markets Focus Fund," and it is
FURTHER RESOLVED, that, from time to time, the sub-accounts may be redesignated
and the separate account divided to create additional sub-accounts without
further action by the Board of Directors of the Company.
<PAGE> 2
DATED as of the 26th day of September, 1997.
/s/ JOHN D. RICHARDSON
------------------------------
John D. Richardson
/s/ PETER S. HUTCHISON
------------------------------
Peter S. Hutchison
/s/ JOHN DESPREZ III
------------------------------
John DesPrez III
<PAGE> 1
EXHIBIT (b)(3)(i)
UNDERWRITING AGREEMENT
AGREEMENT made this___10th___ day of ____August_____, 1995, by and between North
American Security Life Insurance Company ("Security Life"), a Delaware
corporation, and NASL Financial Services, Inc. ("NASL Financial"), a
Massachusetts corporation.
WITNESSETH:
WHEREAS, Security Life has established a separate account
entitles NASL Variable Life Account for the purpose of issuing certain
variable life insurance contracts ("Contracts");
WHEREAS, Security Life wishes to arrange for the underwriting
of the Contracts through NASL Financial in conformity with the
requirements of the Securities and Exchange Act of 1934 ("1934 Act");
and
WHEREAS, NASL Financial is registered with the Securities and
Exchange Commission ("SEC") as a broker-dealer under the 1934 Act and
is a member of the National Association of Securities Dealers, Inc.
("NASD");
Now, THEREFORE, the parties hereto agree as follows:
1. Security Life hereby appoints NASL Financial as the principal underwriter
of, and its exclusive representative for the distribution of, the
Contracts, and NASL Financial hereby agrees to use its best efforts to
arrange for the sale of Contracts by other broker-dealers registered under
the 1934 Act. NASL Financial agrees to assist such broker-dealers and their
associated persons to the extent that and in such manner as NASL Financial
shall deem appropriate in order to enhance the sale of Contracts and the
payment of purchase payments thereunder.
2. With the consent of Security Life, NASL Financial may execute agreements
with other broker-dealers duly qualified under applicable Federal and State
laws to offer and sell the contracts, which agreements shall contain such
terms and conditions as NASL Financial shall deem appropriate. Such
agreements may provide that any confirmation required to be sent in
connection with the issuance of Contracts or the receipt of purchase
payments thereunder will be sent by Security Life or its designee.
3. Security Life (or its designee) will prepare and maintain all books and
records relating to the Contracts including such books and records as NASL
Financial is required to maintain under the 1934 Act to the extent such
requirements are applicable to variable life insurance contracts. For
purposes of the Agreement, books and records maintained for NASL Financial
shall be deemed to be the property of NASL Financial and shall be subject
at all times to examination by the SEC in accordance with Section 17 (a) of
the 1934 Act.
<PAGE> 2
4. NASL Financial will not accept or receive on behalf of Security Life any
Contract purchase Payment. NASL Financial will not permit any other
broker-dealer to participate in the distribution of the Contracts unless
such broker-dealer agrees that (i) it will not accept any Contract purchase
payment other than the first and (ii) it will not accept any first purchase
payment unless made payable to Security Life or its designee. Such
broker-dealer must also agree to forward promptly to Security Life at the
service office designated by it any first purchase payment received by such
broker-dealer together with a completed Contract application. Security Life
reserves the right to reject any application for any lawful reason provided
similarly situated risks are treated in a consistent manner and unfair
discrimination is avoided.
5. Security Life will furnish to NASL Financial currently effective
prospectuses relating to Contracts in such numbers as NASL Financial may
reasonably require from time to time, the cost of printing such
prospectuses to be borne by NASL Financial. NASL Financial shall be
responsible for the preparation at its own expense of sales materials
relative to the Contracts and agrees to use its best efforts to obtain any
approvals or clearances required from NASD or other regulatory authorities
with respect to such sales materials. Any sales materials prepared by NASL
Financial must be approved by Security Life prior to their use.
6. All commissions payable to authorized persons in connection with Contract
sales shall be paid by or on behalf of NASL Financial in accordance with
the terms of the applicable agreement with such persons then in effect.
7. As compensation for the expenses incurred and services performed by NASL
Financial hereunder, Security Life will pay to NASL Financial such amounts
as shall be from time to time agreed to in writing by the parties hereto.
8. This Agreement may be terminated at anytime by either party hereto on sixty
(60) days' written notice.
In WITNESS WHEREOF, the parties hereto have caused the Agreement to be executed
on the day and year first above written.
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
By:/s/ WILLIAM J. ATHERTON
-------------------------------------------
William J. Atherton, President
NASL FINANCIAL SERVICES, INC.
By:/s/WILLIAM J. ATHERTON
-------------------------------------------
William J. Atherton
<PAGE> 1
EXHIBIT (b)(3)(iii)
AMENDMENT TO PROMOTIONAL AGENT
AGREEMENT DATED JANUARY 1, 1996
AMENDMENT dated as of January 1, 1997 to the Promotional Agent
Agreement dated January 1, 1996 by and among NASL Financial Services, Inc.,
North American Security Life Insurance Company, Wood Logan Associates, Inc.,
Wood Logan Distributors, Inc. and NAWL Holding Company, Inc.
SCHEDULE B (Statement of Expenses and Compensation) is hereby amended
and restated as described in the attached revised Schedule B.
WOOD LOGAN ASSOCIATES, INC.
Date: 31 May 1997
----------------------------------------------------
By: /s/ A. SCOT LOGAN, President
----------------------------------------------------
Name and Title
WOOD LOGAN DISTRIBUTORS, INC.
Date: 31 May 1997
----------------------------------------------------
By: /s/ A. SCOTT LOGAN, President
----------------------------------------------------
Name and Title
NASL FINANCIAL SERVICES, INC.
Date: May 29, 1997
----------------------------------------------------
By: /s/ RICHARD HIRTLE Richard C. Hirtle, President
----------------------------------------------------
Name and Title
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
(with respect to Insurance Products only)
Date: May 29, 1997
----------------------------------------------------
By: /s/ JOHN DESPREZ III John D. DesPrez III, President
----------------------------------------------------
Name and Title
NAWL HOLDING COMPANY, INC.
Date: June 6, 1997
----------------------------------------------------
By: /s/ H. DOUGLAS WOOD, Chairman
----------------------------------------------------
Name and Title
<PAGE> 2
SCHEDULE B
Statement of Expenses and Compensation
1. FINANCIAL SERVICE PRODUCTS
Subject to the terms and conditions of this Agreement, NASL Financial
will pay to Promotional Agent compensation of 1% of the premiums, purchase
payments and sales proceeds received and accepted under all Financial Services
Products distributed through Broker-Dealers having a Selling Agreement with NASL
Financial as a direct result of Promotional Agent's efforts (the "Promotional
Agent Fee"). NASL Financial shall pay Promotional Agent said compensation on a
monthly basis. In addition, for the period January 1, 1997 through June 30,
1997, NASL Financial will pay to Promotional Agent a monthly fee of $1.6 million
and for the period July 1, 1997 through December 31, 1997, NASL Financial will
pay to Promotional Agent a monthly fee of $1.35 million.. The monthly fee is
payable on the first of each month and the amount of such fee may be changed by
mutual agreement of the parties thereto.
2. EXCHANGES
No commission will be paid to Promotional Agent upon exchanges among
Financial Service Products.
3. COMMISSION CHARGE BACKS
Contract owner's exercise of "FREE LOOK":
In the event a contract is returned to Security Life pursuant to such
provision, the full Promotional Agent Fee paid thereon shall be charged
back to Promotional Agent.
Refund of premium, purchase payment or Sales Proceeds:
Should any premium or purchase payment on any contract issued by
Security Life or any sales proceeds invested in the North American
Funds be refunded, for any reason, Promotional Agent shall repay or
return Promotional Agent Fees received by, it with respect to
such-premium, purchase payment or sales proceeds.
4. INVESTMENT PRODUCTS
1. NASL Financial Distribution Expenses - NASL Financial shall be entitled
to bill to Promotional Agent, and Promotional Agent agrees to reimburse NASL
Financial, for NASL Financial's expenses for the distribution of the North
American Funds ("NAF") as follows:
(a) the expense of maintaining the NAF wire order desk, including
personnel and associated overhead costs;
(b) costs of printing additional NAF Prospectuses and Statements
of Additional Information for use in marketing activities;
(c) costs of printing additional NAF annual and semiannual reports
for use in marketing activities; and
(d) any other distribution expenses incurred with the prior
consent of Promotional Agent.
2. Promotional Agent Distribution Expenses - Promotional Agent shall
present a report at each regular meeting of the Trustees of NAF setting forth
its distribution expenses incurred during NAF's most recently completed fiscal
quarter. Such expenses may include the distribution expenses reimbursed to NASL
Financial pursuant to paragraph 1 hereof.
<PAGE> 1
EXHIBIT (b)(3)(iv)
[MANULIFE FINANCIAL LOGO]
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF
NORTH AMERICA
- --------------------------------------------------------------------------------
EXECUTIVE OFFICE: HOME OFFICE: ANNUITY SERVICE OFFICE:
116 Huntington Avenue Wilmington, Delaware 116 Huntington Avenue
Boston, MA 02116 Boston, MA 02116
SELLING AGREEMENT
AGREEMENT by and between The Manufacturers Life Insurance Company of
North America ("Manulife North America"), a Delaware Corporation; Manufacturers
Securities Services, LLC ("MSS"), a registered broker-dealer with the Securities
and Exchange Commission under the Securities Act of 1934 (the 1934 Act), and a
member of the National Association of Securities Dealers, Inc. (NASD);
________________________________________________________________________________
(Selling Broker-Dealer), also a registered broker-dealer and member of the NASD;
and
________________________________________________________________________________
(General Agent).
I. INTRODUCTION
WHEREAS, Manulife North America has issued certain insurance and
annuity contracts, and some of these Contracts are registered under the
Securities Act of 1933 (the 1933 Act) (Contracts or Contracts collectively); and
WHEREAS, Manulife North America has authorized MSS to act as principal
underwriter and as promotional agent to enter into agreements, subject to the
consent of Manulife North America, with Selling Broker-Dealers and General
Agents for the distribution of the Contracts; and
WHEREAS, Manulife North America has entered into a Promotional Agent
Agreement with MSS whereby MSS shall secure duly qualified Selling
Broker-Dealers and General Agents to contract with Manulife North America and
MSS for the distribution of the Contracts, assist these Selling Broker-Dealers
and General Agents in obtaining licenses, registrations and appointments to
enable the registered representatives and Sub-agents of these Selling
Broker-Dealers and General Agents to sell the Contracts, and provide educational
meetings to familiarize these Selling
<PAGE> 2
Broker-Dealers and General Agents and their registered representatives and
Sub-agents with the provisions and features of the Contracts; and
WHEREAS, Selling Broker-Dealer and General Agent wish to participate in
the distribution of the Contracts;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
II. APPOINTMENT
Subject to the terms and conditions of this Agreement, Manulife North America
and MSS hereby appoint __________________________ as Selling Broker-Dealer and
_______________________ as General Agent for the solicitation of applications
for the purchase of the Contracts, and Selling Broker-Dealer and General Agent
accept such appointment.
III. AUTHORITY AND DUTIES OF GENERAL AGENT
A. LICENSING AND APPOINTMENT OF SUB-AGENTS
General Agent is authorized to appoint Sub-agents to solicit sales of
the Contracts. General Agent warrants that all Sub-agents appointed by General
Agent pursuant to this Agreement shall not solicit nor aid, directly or
indirectly, in the solicitation of any application for any Contract until that
Sub-agent is fully licensed under the applicable insurance laws and, in
connection with securities regulated Contracts, is a fully registered
representative of Selling Broker-Dealer. General Agent shall prepare and
transmit the appropriate licensing and appointment forms to Manulife North
America. General Agent shall pay all fees to state insurance regulatory
authorities in connection with obtaining necessary licenses and appointments for
Sub-agents. All fees payable to such regulatory authorities in connection with
the initial Manulife North America appointment of Sub-agents who already possess
necessary licenses shall be paid by Manulife North America. Any renewal license
fees due after the initial appointment shall be paid by General Agent. General
Agent shall periodically provide Manulife North America with a list of all
Sub-agents appointed by General Agent and the jurisdictions where such
Sub-agents are licensed to solicit sales of the Contracts. Manulife North
America shall periodically provide General Agent with a list which shows: 1) the
jurisdictions where Manulife North America is authorized to do business; and 2)
any limitations on the availability of the Contracts in any of such
jurisdictions. General Agent agrees to fulfill all requirements set forth in the
General Letter of Recommendation attached as Exhibit A in conjunction with the
submission of licensing and appointment papers for all applicants as Sub-agents
submitted by General Agent.
<PAGE> 3
B. REJECTION OF SUB-AGENT
MSS or Manulife North America may, by written notice to General Agent,
refuse to permit any Sub-agent the right to solicit applications for the sale of
any of the Contracts, require General Agent to cause any Sub-agent to cease such
solicitations or sales and cancel the appointment of any Sub-agent.
C. SUPERVISION OF SUB-AGENTS
General Agent shall supervise any Sub-agents appointed pursuant to this
Agreement to solicit sales of the Contracts and bear responsibility for all acts
and omissions of each Sub-agent. General Agent shall comply with and exercise
all responsibilities required by applicable federal and state law and
regulations. General Agent shall not be responsible for those supervisory
responsibilities belonging to Selling Broker-Dealer under applicable securities
laws which include, but are not limited to, supervising and training Sub-agents
in their capacity as registered representatives. Nothing contained in this
Agreement or otherwise shall be deemed to make any Sub-agent appointed by
General Agent an employee or agent of Manulife North America or MSS. Manulife
North America and MSS shall not have any responsibility for the training and
supervision of any Sub-agent or any other employee of General Agent. If the act
or omission of a Sub-agent or any other employee of General Agent is the
proximate cause of any claim, damage or liability (including reasonable
attorneys' fees) to Manulife North America or MSS, General Agent shall be
responsible and liable therefore.
Before a Sub-agent is permitted to sell the Contracts, General Agent,
Selling Broker-Dealer, and Sub-agent shall have entered into a written agreement
pursuant to which: 1) Sub-agent is appointed a Sub-agent of General Agent and a
registered representative of Selling Broker-Dealer; 2) Sub-agent agrees that his
or her selling activities relating to securities regulated contracts shall be
under the supervision and control of Selling Broker-Dealer and his or her
selling activities relating to insurance regulated Contracts shall be under the
supervision and control of General Agent; and 3) that Sub-agent's right to
continue to sell such contracts is subject to his or her continued compliance
with such agreement and any procedures, rule or regulations implemented by
Selling Broker-Dealer or General Agent.
IV. AUTHORITY AND DUTIES OF SELLING BROKER-DEALER
A. SUPERVISION OF REGISTERED REPRESENTATIVES
Selling Broker-Dealer agrees that it has full responsibility for the
training and supervision of all persons, including Sub-agents of General Agent,
associated with Selling Broker-Dealer who are engaged directly or indirectly in
the offer or sale of securities regulated Contracts. All such persons shall be
subject to the control of Selling Broker-Dealer with respect to their securities
regulated activities. Broker-Dealer shall: 1) train and supervise Sub-agents, in
their
<PAGE> 4
capacity as registered representatives, in the sale of securities regulated
Contracts, 2) use its best efforts to cause such Sub-agents to qualify under
applicable federal and state laws to engage in the sale of securities regulated
Contracts; 3) provide Manulife North America and MSS, to their satisfaction,
with evidence of Sub-agents' qualifications to sell securities regulated
Contracts; and 4) notify Manulife North America if any of such Sub-agents ceases
to be a registered representative of Selling Broker-Dealer. Selling
Broker-Dealer agrees that a Sub-agent must be a registered representative of
Selling Broker-Dealer before engaging in the solicitation of any securities
regulated Contracts and have entered into the written agreement more fully
described in Section III, Paragraph C. Manulife North America and MSS shall not
have any responsibility for the supervision of any registered representative or
any other employee or affiliate of Selling Broker-Dealer. If the act or omission
of a registered representative or any other employee or affiliate of Selling
Broker-Dealer is the proximate cause of any claim, damage, or liability
(including reasonable attorneys' fees) to Manulife North America and MSS,
Selling Broker-Dealer shall be responsible and liable therefore.
Selling Broker-Dealer shall fully comply with the requirements of the
NASD and of the Securities Exchange Act of 1934 and all other applicable federal
or state laws. Selling Broker-Dealer shall establish such rules and procedures
as may be necessary to cause diligent supervision of the securities activities
of the Sub-agents. Upon request by MSS or Manulife North America, Broker-Dealer
shall furnish such records as may be necessary to establish diligent
supervision.
V. AUTHORITY AND DUTIES OF GENERAL AGENT
AND SELLING BROKER-DEALER
A. CONTRACTS
The securities and insurance regulated Contracts issued by Manulife
North America to which this Agreement applies are listed in Schedule I, which
may be amended from time to time by Manulife North America. Manulife North
America, in its sole discretion, with prior or concurrent written notice to
Selling Broker-Dealer and General Agent, may suspend distribution of any
Contracts. Manulife North America also has the right to amend any Contracts at
any time.
B. SECURING APPLICATIONS
Each application for a Contract shall be made on an application form
provided by Manulife North America, and all payments collected by Selling
Broker-Dealer, General Agent or any registered representative and Sub-agent
shall be remitted promptly in full, together with such application form and any
other required documentation, directly to Manulife North America at the address
indicated on such application or to such other address as may be designated.
Selling Broker-Dealer and General Agent shall review all such applications for
completeness. Check or
<PAGE> 5
money order in payment of such Contracts should be made Payable to the order of
"The Manufacturers Life Insurance Company of North America." All applications
are subject to acceptance or rejection by Manulife North America in its sole
discretion.
C. RECEIPT OF MONEY
All money payable in connection with any of the Contracts, whether as
premium, purchase payment or otherwise and whether paid by or on behalf of any
contract owner or anyone else having an interest in the Contracts, is the
property of Manulife North America and shall be transmitted immediately in
accordance with the administrative procedures of Manulife North America without
any deduction or offset for any reason including, but not limited to, any
deduction or offset for compensation claimed by Selling Broker-Dealer or General
Agent, unless there has been a prior arrangement for net wire transmissions
between Manulife North America and Selling Broker-Dealer or General Agent.
D. NOTICE OF SUB-AGENT'S NONCOMPLIANCE
Selling Broker-Dealer shall notify MSS and General Agent in the event a
Sub-agent fails or refuses to submit to the supervision of Selling Broker-Dealer
or General Agent in accordance with this Agreement, the agreement between
Selling Broker-Dealer, General Agent and Sub-agent referred to in Section III,
Paragraph C and Section IV, Paragraph A, or otherwise fails to meet the rules
and standards imposed by Selling Broker-Dealer or its registered representatives
or General Agent or its Sub-agents. Selling Broker-Dealer or General Agent shall
also immediately notify such Sub-agent that he or she is no longer authorized to
sell the Contracts, and both Selling Broker-Dealer and General Agent shall take
whatever additional action may be necessary to terminate the sales activities of
such Sub-agent relating to the Contracts.
E. SALES PROMOTION, ADVERTISING AND PROSPECTUSES
No sales promotion materials, circulars, documents or any advertising
relating to any of the Contracts shall be used by Selling Broker-Dealer, General
Agent or any Sub-agents unless the specific item has been approved in writing by
Manulife North America and MSS prior to use. Selling Broker-Dealer shall be
provided, without any expense to Selling Broker-Dealer, with prospectuses
relating to securities regulated Contracts. Selling Broker-Dealer and General
Agent shall be provided with such other materials as Manulife North America and
MSS determines necessary or desirable for use in connection with sales of the
Contracts. Nothing in these provisions shall prohibit Selling Broker-Dealer or
General Agent from advertising life insurance and annuities on a generic basis.
<PAGE> 6
VI. COMPENSATION
A. COMMISSIONS AND FEES
Commissions and fees payable to Selling Broker-Dealer or General Agent
in connection with the securities regulated Contracts shall be paid by MSS to
Selling Broker-Dealer or General Agent, or as otherwise required by law.
Commissions and fees payable to Selling Broker-Dealer, General Agent, or
Sub-agent in connection with the insurance regulated Contracts shall be paid on
behalf of Manulife North America by MSS to Selling Broker-Dealer or General
Agent, or as otherwise required by law. Selling Broker-Dealer or General Agent,
as applicable, shall pay Sub-agent. MSS will provide Selling Broker-Dealer and
General Agent with a copy of its current Contracts, Commissions, and Fees
Schedule. Unless otherwise provided in the Contracts, Commissions, and Fees
Schedule, commissions will be paid as a percentage of premiums or purchase
payments (collectively, Payments) received in cash or other legal tender and
accepted by Manulife North America on applications obtained by the various
Sub-agents appointed by General Agent hereunder. Upon termination of this
Agreement, all compensation to the Selling Broker-Dealer and General Agent
hereunder shall cease. However, Selling Broker-Dealer and General Agent shall be
entitled to receive compensation for all new and additional premium payments
which are in process at the time of termination, and shall continue to be liable
for any chargebacks pursuant to the provisions of said Contracts, Commissions,
and Fees Schedule, or for any other amounts advanced by or otherwise due MSS or
Manulife North America hereunder.
B. TIME OF PAYMENT
MSS will pay any commissions due General Agent hereunder within fifteen
(15) days after the end of the calendar month in which Payments upon which such
commission is based are accepted by Manulife North America. Payments of
commissions and fees to Selling Broker-Dealer or General Agent in connection
with the securities regulated contracts shall be paid by Manulife North America,
on behalf of MSS, within fifteen days (15) after the end of the calendar month
in which Payments, upon which such commissions are based, are accepted by
Manulife North America. Selling Broker-Dealer and General Agent understand that
MSS and Manulife North America have an agreement for payment of commissions by
Manulife North America on behalf of MSS, and hereby agree that payment of
commissions will occur only at such times as MSS has received the necessary
concessions from Manulife North America.
C. AMENDMENT OF SCHEDULES
Manulife North America and MSS may, upon at least ten (10) days prior
written notice to Selling Broker-Dealer and General Agent, change the Contracts,
Commissions, and Fees Schedule by written amendment of such Schedule. Any such
change shall apply to compensation due on applications received by Manulife
North America after the effective date.
<PAGE> 7
D. PROHIBITION AGAINST REBATES
Manulife North America or MSS may terminate this Agreement if Selling
Broker-Dealer, General Agent, or any Sub-agent of General Agent rebates, offers
to rebate or withholds any part of any Payments on the Contracts. If Selling
Broker-Dealer, General Agent, or any Sub-agent of General Agent shall at any
time induce or endeavor to induce any owner of any Contract issued hereunder to
discontinue payments or to relinquish any such Contract, except under
circumstances where there is reasonable grounds for believing the Contract is
not suitable for such person, any and all compensation due Selling Broker-Dealer
or General Agent hereunder shall cease and terminate.
E. INDEBTEDNESS AND RIGHT OF SET OFF
Nothing contained in this Agreement shall be construed as giving
Selling Broker-Dealer or General Agent the right to incur any indebtedness on
behalf of Manulife North America or MSS. Selling Broker-Dealer and General Agent
hereby authorize MSS to set off liabilities of Selling Broker-Dealer and General
Agent to Manulife North America, and MSS, against any and all amounts otherwise
payable to Selling Broker-Dealer or General Agent.
VII. GENERAL PROVISIONS
A. WAIVER
Failure of any party to insist upon strict compliance with any of the
conditions of this Agreement shall not be construed as a waiver of any of the
conditions, but the same shall remain in full force and effect. No waiver of any
of the provisions of this Agreement shall be deemed to be, or shall constitute,
a waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.
B. LIMITATIONS
No party other than Manulife North America shall have the authority to:
1) make, alter, or discharge any Contract issued by Manulife North America; 2)
waive any forfeiture or extend the time of making any Payments; or 3) enter into
any proceeding in a court of law or before a regulatory agency in the name of or
on behalf of Manulife North America. No party other than Manulife North America
and MSS, respectively, shall have the authority to: 1) alter the forms which MSS
prescribe, or substitute other forms in place of those prescribed by MSS; or 2)
enter into any proceeding in a court of law or before a regulatory agency in the
name of or on behalf of MSS.
C. FIDELITY BOND AND OTHER LIABILITY COVERAGE
Selling Broker-Dealer and General Agent hereby assign any proceeds
received from a fidelity bonding company, error and omissions or other liability
coverage, to Manulife North America and MSS, as their interest may appear, to
the extent of their loss due to activities covered by the bond, policy or other
liability coverage. If there is any deficiency amount, whether due to a
deductible or otherwise, Selling Broker-Dealer or General Agent shall promptly
pay such amounts on demand. Selling Broker-Dealer and General Agent hereby
indemnify and
<PAGE> 8
hold harmless Manulife North America and MSS, from any such deficiency and from
the costs of collection thereof (including reasonable attorneys' fees).
D. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of
the parties to it and their respective successors and assigns provided that
neither Selling Broker-Dealer nor General Agent may assign this Agreement or any
rights or obligations hereunder without the prior written consent of Manulife
North America.
E. REGULATIONS
All parties agree to observe and comply with the existing laws and
rules or regulations of applicable local, state, or federal regulatory
authorities and with those which may be enacted or adopted during the term of
this Agreement regulating the business contemplated hereby in any jurisdiction
in which the business described herein is to be transacted.
F. INDEMNIFICATION
1) MSS agrees to indemnify and hold harmless Selling Broker-Dealer and
General Agent, 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
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 the registration
statement for the Contracts or for the shares of Manufacturers Investment Trust
(Fund) filed pursuant to the 1933 Act, or any prospectus included as a part
thereof, as from time to time amended and supplemented. MSS agrees to indemnify
and hold harmless Selling Broker-Dealer and General Agent, 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 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 advertisement or sales literature approved
in writing by Manulife North America and MSS pursuant to Section V, Paragraph E
of this Agreement. 2) Selling Broker-Dealer and General Agent agree to indemnify
and hold harmless Manulife North America and MSS, 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: a) any oral or written misrepresentation by Selling
Broker-Dealer or General Agent, or their officers, directors, employees, or
agents unless such misrepresentation is contained in the registration statement
of
<PAGE> 9
the Contracts or Funds 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 Manulife North America and MSS pursuant to
Section V, Paragraph E, of this Agreement, or b) the failure of Selling
Broker-Dealer or General Agent or their officers, directors, employees, or
agents to comply with any applicable provisions of this Agreement.
G. NOTICES
All notices or communications shall be sent to the address shown in
this Agreement, or to such other address as the party may request, by giving
written notice to the other parties.
H. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Massachusetts.
I. AMENDMENT OF AGREEMENT
Manulife North America reserves the right to amend this Agreement in
writing at any time. The submission of an application for the Contracts by
Selling Broker-Dealer or General Agent five (5) or more business days after
notice of any such amendment has been sent to the other parties shall constitute
agreement to such amendment.
J. GENERAL AGENT AS BROKER-DEALER
If Selling Broker-Dealer and General Agent are the same person or legal
entity, such person or legal entity shall have the rights and obligations
hereunder of both Selling Broker-Dealer and General Agent and this Agreement
shall be binding and enforceable by and against such person or legal entity in
both capacities.
K. COMPLAINTS AND INVESTIGATIONS
General Agent, Selling Broker-Dealer, Manulife North America and MSS
agree to cooperate fully in the event of any regulatory investigation, inquiry
or proceeding, judicial proceeding, or customer complaint involving the
Contracts. In furtherance of the foregoing: 1) each party will notify all other
parties of any such investigation, inquiry, proceeding, or complaint involving
the Contracts or affecting the ability of a party to perform pursuant to this
Agreement within ten (10) days of obtaining knowledge of the same and 2) in the
case of a customer complaint, the involved parties will consult with each other
prior to sending any written response with respect to such complaint.
L. TERMINATION
This Agreement may be terminated, without cause, by any party upon
thirty (30) days prior written notice; and may be terminated, for cause, by any
party immediately; and shall be terminated if MSS or Selling Broker-Dealer shall
cease to be a registered broker-dealer under the Securities Exchange Act of 1934
and a member of the NASD.
<PAGE> 10
M. ADDRESS OF NOTICES
The Manufacturers Life Insurance Company Selling Broker Dealer:
of North America ______________________________
and ______________________________
Manufacturers Securities Services, LLC ______________________________
______________________________
116 Huntington Avenue
Boston, MA 02116 General Agent:
______________________________
______________________________
______________________________
______________________________
This Agreement shall be effective upon execution by General Agent and Selling
Broker-Dealer, and delivery of the Agreement to Manulife North America and MSS.
The Manufacturers Life Insurance Company
of North America Dated:________________________
By:_______________________, President ______________________________
(Name and Title)
______________________________
Manufacturers Securities Services, LLC (General Agent)
By The Manufacturers Life Insurance Company
of North America, Managing Member By:___________________________
(Name and Title)
By:________________________, President ______________________________
(Name and Title) ______________________________
(Selling Broker-Dealer)
By:___________________________
(Name and Title)
______________________________
<PAGE> 11
EXHIBIT A
GENERAL LETTER OF RECOMMENDATION
General Agent hereby certifies to Manulife North America that all of
the following requirements will be fulfilled in conjunction with the submission
of licensing/appointment papers for all applicants as Sub-agents submitted by
General Agent. General Agent will, upon request, forward proof of compliance
with same to Manulife North America in a timely manner.
1. We have made a thorough and diligent inquiry and investigation
relative to each applicant's identity, residence, and business reputation and
declare that each applicant is personally known to us, has been examined by us,
is known to be of good moral character, has a good business reputation, is
reliable, is financially responsible, and is worthy of a license. Each
individual is trustworthy, competent, and qualified to act as an agent for
Manulife North America to hold himself out in good faith to the general public.
We vouch for each applicant.
2. We have on file a B-300, B-301 or U-4 form which was completed by
each applicant. We have fulfilled all the necessary investigative requirements
for the registration of each applicant as a registered representative through
our NASD member firm, and each applicant is presently registered as an NASD
registered representative. The above information in our files indicates no fact
or condition which would disqualify the applicant from receiving a license and
all the findings of all investigative information is favorable.
3. We certify that all educational requirements have been met for the
specific state in which each applicant is requesting a license, and that all
such persons have fulfilled the appropriate examination, education and training
requirements.
4. If the applicant is required to submit his or her picture,
signature, and securities registration in the state in which he or she is
applying for a license, we certify that those items forwarded to Manulife North
America are those of the applicant and the securities registration is a true
copy of the original.
5. We hereby warrant that the applicant is not applying for a license
with Manulife North America in order to place insurance chiefly and solely on
his or her life or property, lives or property of his or her relatives, or
property or liability of his or her associates.
6. We certify that each applicant will receive close and adequate
supervision, and that we will make inspection when needed of any or all risks
written by these applicants to the end that the insurance interest of the public
will be properly protected.
7. We will not permit any applicant to transact insurance as an agent
until duly licensed therefore. No applicants have been given a contract or
furnished supplies, nor have any applicants been permitted to write, solicit
business, or act as an agent in any capacity, and they will not be so permitted
until the certificate of authority or license applied for is received.
8. We certify that General Agent, Selling Broker-Dealer, and applicant
shall have entered into a written agreement pursuant to which: a) applicant is
appointed a Sub-agent of General Agent and a registered representative of
Selling Broker-Dealer; b) applicant agrees that his or her selling activities
relating to securities regulated Contracts shall be under the supervision and
control of Selling Broker-Dealer and his or her selling activities relating to
insurance regulated Contracts shall be under the supervision and control of
General Agent; and c) that applicant's right to continue to sell such Contracts
is subject to his or her continued compliance with such agreement and any
procedures, rules or regulations implemented by Selling Broker-Dealer or General
Agent.
<PAGE> 1
EXHIBIT (b)(4)(i)(A)
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
- --------------------------------------------------------------------------------
Executive Office: Annuity Service Office: Home Office
116 Huntington Avenue P.O. Box 9230 Wilmington, Delaware
Boston, MA 02116 Boston, MA 02205-9230
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.
TWENTY 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 20 days after receipt of the
Contract. Within 7 days of receipt of the Contract by us, we will pay the
Contract Value, computed at the end of the Valuation Period during which the
Contract is received by us, to the Contract Owner.
When the Contract is issued as an individual retirement annuity, during the
first 7 days of this 20 day period, we will return the greater of (i) Contract
Value computed at the end of the Valuation Period during which the Contract is
received by us or (ii) sum of all Payments.
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
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.001
<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 ......................................... 15
PART 12 - LOAN PROVISION .............................................. 15
PART 13 - PAYMENT OF CONTRACT BENEFITS ................................ 15
<PAGE> 3
SPECIFICATIONS PAGE
TYPE OF CONTRACT: NON-QUALIFIED
CONTRACT DATE: 10/21/1997 MATURITY DATE: 10/21/2027
INITIAL PURCHASE PAYMENT: $10,000.00 CONTRACT NUMBER: 000000020
INITIAL ALLOCATION OF NET PURCHASE PAYMENT:
(SEE REVERSE FOR ALL AVAILABLE OPTIONS)
<TABLE>
<CAPTION>
FIXED INVESTMENT OPTIONS INITIAL INTEREST RATE INITIAL GUARANTEE
PERIOD EXPIRES
<S> <C> <C> <C>
1 YEAR FIXED 50.00% 4.10% 10/21/1998
VARIABLE INVESTMENT OPTIONS:
EQUITY 50.00%
-------
TOTAL 100.00%
</TABLE>
OWNER: JOHN DOE CO-OWNER:
ANNUITANT: JOHN DOE AGE: 55
CO-ANNUITANT: BENEFICIARY: SEE ATTACHED LIST
<PAGE> 4
AVAILABLE INVESTMENT OPTIONS
FIXED INVESTMENT OPTIONS
1 Year Fixed
3 Year Fixed
5 Year Fixed
7 Year Fixed
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.
Small Company Value Rosenberg Institutional Equity Management
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
<PAGE> 5
BENEFICIARY INFORMATION
Please find below the Beneficiary Information for contract number, 000000020,
currently on file at The Manufacturers Life Insurance Company of North America:
Jane Doe
<PAGE> 6
PART 1 DEFINITIONS
- --------------------------------------------------------------------------------
WE AND YOU "We", "us" and "our" means The Manufacturers Life
Insurance Company of North America. "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 The Manufacturers Life Insurance
Company of North America 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.
1
<PAGE> 7
MARKET VALUE CHARGE A charge that may be assessed if amounts are
withdrawn or transferred from the fixed Investment
Options prior to the end of the interest rate
guarantee period.
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.
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 Manufacturers Investment
PORTFOLIO Trust, a mutual fund in which the Variable Account
invests, or any successor mutual fund.
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 The Manufacturers Life
Insurance Company of North America 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 The Manufacturers Life Insurance Company of North
America Separate Account A, which is a separate
account of The Manufacturers Life Insurance Company
of North America.
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 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.
2
<PAGE> 8
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 from, or substitutions for the Portfolio shares
OPTIONS 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
3
<PAGE> 9
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.
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.
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
4
<PAGE> 10
made on that date. 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 as follows:
1. If any Owner dies on or prior to their 85th
birthday 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:
(a) During the first Contract Year, the Death
Benefit will be the greater of:
(i) the Contract Value, or
(ii) the sum of all Payments made, less any
amount deducted in connection with
partial withdrawals.
(b) During any subsequent Contract Year, the Death
Benefit will be the
5
<PAGE> 11
greater of:
(i) the Contract Value, or
(ii) the Death Benefit on the last day of the
previous Contract Year plus any Payments
made and less any amounts deducted in
connection with partial withdrawals,
since then.
2. If any Owner dies after their 85th birthday and
the oldest Owner had an attained age of less
than 81 years on the Contract Date, the Death
Benefit will be determined as the greater of:
(a) the Contract Value, or
(b) the excess of (i) over (ii) where:
(i) equals the sum of all Payments.
(ii) equals the sum of any amounts deducted
in connection with partial withdrawals.
3. 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 at
the time of payment of benefits.
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.
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.
6
<PAGE> 12
(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 3., 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 minimum Payment will be $30. However, at least
$300 must be paid during the first Contract Year.
Payments may be made at any time. 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.
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;
7
<PAGE> 13
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.
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.
8
<PAGE> 14
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:
(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
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.
9
<PAGE> 15
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. Any amounts you allocate to the
same fixed Investment Option on the same day will
establish a new Investment Account. 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 the guaranteed rate from time to
time for new allocations, but in no event will the
minimum guaranteed rate under a fixed Investment
Account be less than 3%.
GUARANTEE PERIODS For any amounts allocated to the fixed Investment
Options, you have the choice of the guarantee
periods available. The amount can be allocated into
any combination of the fixed Investment Options
offered under this Contract.
Separate Investment Accounts will be established
for each guarantee period. 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 such that the guarantee period
does not extend beyond the Maturity Date.
INVESTMENT ACCOUNT VALUE The amount in the Investment Accounts 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.
MARKET VALUE CHARGE Any amounts withdrawn from a fixed Investment
Account, prior to the end of the guarantee period,
may be subject to a Market Value Charge. The Market
Value Charge will only apply to amounts withdrawn
from a fixed Investment Account pursuant to a
partial withdrawal, total withdrawal, transfer or a
loan. A Market Value Charge will not be assessed on
amounts withdrawn from the 1-year fixed Investment
Account.
MARKET VALUE CHARGE A Market Value Charge will be calculated separately
FACTOR for each fixed Investment Account affected. The
Market Value Charge for a particular Investment
Account will be calculated by multiplying the
amount withdrawn, loaned or transferred from the
Investment Account by the adjustment factor
described below.
The adjustment factor for a particular Investment
Account is determined by the following formula:
0.75 x (B-A) x C/12
Where A, B and C are defined as follows:
10
<PAGE> 16
A - The guaranteed interest rate on the Investment
Account.
B - The guaranteed interest rate available, on the
date the request is processed, for amounts
allocated to a new Investment Account with the
same length of guarantee period as the
Investment Account from which amounts are
being withdrawn.
C - The number of complete months remaining to the
end of the guarantee period.
For purposes of this calculation, the maximum
difference between "B" and "A" will be 3%.
Furthermore, the Market Value Charge Factor will
never be less than zero. The amount of Market Value
Charge, if any, upon transfer or loan is specified
in Part 9, Transfer Provisions, and upon withdrawal
as specified in Part 10, Withdrawal Provisions.
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.
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.
11
<PAGE> 17
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, however,
amounts transferred from a fixed Investment Account
prior to the end of the guarantee period may be
subject to a Market Value Charge. 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, except for the Market
Value Charge, if applicable. 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 of the
Contract 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. The Market Value Charge, if applicable, will
be deducted from the amount transferred.
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.
TRANSFER MARKET VALUE Amounts transferred from a fixed Investment Account
CHARGE may be subject to a Market Value Charge. For
Transfers, including transfers to the Loan Account
pursuant to a loan request, the Market Value
Charge, if applicable, will be calculated by
multiplying the amount transferred from each fixed
Investment Account by the Market Value Charge
Factor and deducted from the amount transferred.
If there are multiple Investment Accounts under a
fixed Investment Option,
12
<PAGE> 18
the requested amount from that Investment Option
must be transferred from those Investment Accounts
on a first-in-first-out basis.
The Market Value Charge may not exceed the earnings
in excess of 3% per annum attributable to the
amount transferred.
In no event will the Market Value Charge be greater
than 10% of the amount transferred.
In no event will the Market Value Charge reduce the
amount transferred below the amount required under
the non-forfeiture laws of the state that has
jurisdiction over this contract.
PART 10 WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
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.
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, Market Value 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.
13
<PAGE> 19
We will deduct the Withdrawal Charge and the Market
Value Charge, if applicable, 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 that have been in your Contract for less
than 7 years. No Withdrawal Charge will apply to
Payments being withdrawn that have been in the
Contract for 7 or more years. 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
(b) the excess of (i) over (ii), where:
(i) equals 10% of total Payments,
(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. A Withdrawal Charge will be assessed against
Payments liquidated that have been in the
Contract for less than 7 years.
4. 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 below.
<TABLE>
<CAPTION>
Number of Complete Years Withdrawal Charge
Payment has been in Percentage
Contract ----------
--------
<S> <C> <C>
0 6%
1 6
2 5
3 5
4 4
5 3
6 2
7+ 0
</TABLE>
14
<PAGE> 20
The total Withdrawal Charge will be the sum of the
Withdrawal Charges for the Payments being
liquidated.
5. 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 and/or Market Value Charge, if
applicable.
6. In no event will the aggregate Withdrawal Charge
be greater than 6% of the total Payments made.
WITHDRAWAL MARKET VALUE Amounts withdrawn from a fixed Investment Account
CHARGE may be subject to a Market Value Charge. The total
Market Value Charge will be the sum of the Market
Value Charges for each Investment Account being
withdrawn. For full withdrawals, the Market Value
Charge will be calculated on the total amount of
each Investment Account, and the total Market Value
Charge will be deducted from the amount otherwise
payable. For partial withdrawals, the Market Value
Charge will be calculated based on the withdrawal
amount requested from each Investment Account and
the Market Value Charge, if applicable, will be
deducted from the remaining Investment Account
Value.
There will be no Market Value Charge on withdrawals
from the fixed Investment Accounts in the following
situations: (a) withdrawal from a 1-year fixed
Investment Account, (b) death of the Owner, (c)
amounts withdrawn to pay any fees or charges, (d)
amounts applied at the Maturity Date to purchase an
annuity at the guaranteed rates in the Annuity
Option tables, and (e) amounts withdrawn from fixed
Investment Accounts within one month prior to the
end of the guarantee period.
An amount equal to 10% of total Payments less all
prior withdrawals in that Contract Year may be
withdrawn without the imposition of a Market Value
Charge.
The Market Value Charge may not exceed the earnings
in excess of 3% per annum attributable to the
amount withdrawn.
In no event will the Market Value Charge plus any
Withdrawal Charges for an Investment Account be
greater than 10% of the amount withdrawn.
In no event will the Market Value Charge reduce the
amount payable on withdrawal below the amount
required under the non-forfeiture laws of the state
that has jurisdiction over this Contract.
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.
15
<PAGE> 21
PART 11 FEES AND DEDUCTIONS
- --------------------------------------------------------------------------------
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 an annual rate of 1.40%. 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.
ANNUAL ADMINISTRATION FEE To compensate us for assuming certain
administrative expenses, we charge an Annual
Administration Fee equal to $30 per year. Prior to
the Maturity Date, the $30 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
$30 Annual Administration Fee from the amount paid.
During the annuity period, the $30 Annual
Administration Fee is deducted on a pro rata basis
from each annuity payment.
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
$30 Annual Administration Fee will be waived.
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)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
16
<PAGE> 22
(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.
(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:
<TABLE>
<CAPTION>
Calendar Year of Birth Adjustment to Actual Age
---------------------- ------------------------
<S> <C>
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+ -7
</TABLE>
17
<PAGE> 23
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.
AMOUNT OF FIRST MONTHLY PAYMENT
PER $1000 OF CONTRACT VALUE
OPTION 1: LIFE ANNUITY
<TABLE>
<CAPTION>
Option 1(A): Non-Refund Option 1(B): 10-Year Certain
--------------------------------- ----------------------------------
Adjusted Age of Adjusted Age of
Annuitant Male Female Annuitant Male Female
--------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
55 4.23 3.83 55 4.19 3.82
60 4.64 4.15 60 4.57 4.12
65 5.20 4.57 65 5.05 4.51
70 5.94 5.13 70 5.65 5.02
75 6.91 5.91 75 6.35 5.67
80 8.21 6.98 80 7.13 6.45
85 9.94 8.47 85 7.90 7.29
</TABLE>
OPTION 2: JOINT AND SURVIVOR LIFE ANNUITY
Option 2(A): Non-Refund
<TABLE>
<CAPTION>
Age of Co-Annuitant
--------------------------------------------------------------------
Adjusted Age
of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.24 3.38 3.53 3.69 3.83
60 3.40 3.58 3.78 3.98 4.16
65 3.61 3.85 4.10 4.36 4.61
70 3.88 4.19 4.53 4.88 5.20
75 4.23 4.64 5.10 5.57 6.00
80 4.70 5.26 5.88 6.51 7.06
85 5.34 6.09 6.94 7.76 8.43
</TABLE>
18
<PAGE> 24
Option 2(B): 10 Year Certain
<TABLE>
<CAPTION>
Age of Co-Annuitant
-----------------------------------------------------------------
Adjusted Age
of Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.24 3.38 3.53 3.69 3.83
60 3.40 3.58 3.78 3.98 4.16
65 3.61 3.85 4.10 4.36 4.59
70 3.88 4.18 4.52 4.86 5.16
75 4.23 4.63 5.07 5.50 5.86
80 4.68 5.21 5.78 6.30 6.69
85 5.27 5.95 6.62 7.18 7.56
-----------------------------------------------------------------
</TABLE>
Monthly installments for ages not shown will be furnished on request.
19
<PAGE> 25
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<PAGE> 26
- --------------------------------------------------------------------------------
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
- --------------------------------------------------------------------------------
Manulife Financial and the block design are registered service marks of The
Manufacturers Life Insurance Company and are used by it and its subsidiaries.
<PAGE> 1
EXHIBIT (b)(4)(i)(B)
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
- --------------------------------------------------------------------------------
EXECUTIVE OFFICE: ANNUITY SERVICE OFFICE: HOME OFFICE
116 Huntington Avenue P.O. Box 9230 Wilmington, Delaware
Boston, MA 02116 Boston, MA 02205-9230
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 Application and the Purchase
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, 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 PROVISION ON PAGE 9
Vice President President
Flexible Purchase 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.
207-VFA
<PAGE> 2
INTRODUCTION
This is a flexible purchase 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 Purchase Payments among one or more Investment Options. The
Investment Options are identified in the Application and on the Contract
Specifications Page.
TABLE OF CONTENTS
Contract Specifications Page Page
PART 1 - DEFINITIONS 1
PART 2 - GENERAL PROVISIONS 3
PART 3 - OWNERSHIP 5
PART 4 - BENEFITS 5
PART 5 - PURCHASE PAYMENTS 7
PART 6 - VARIABLE ACCOUNT PROVISIONS 8
PART 7 - FIXED ACCOUNT PROVISIONS 9
PART 8 - ANNUITY PROVISIONS 11
PART 9 - TRANSFERS 12
PART 10 - WITHDRAWAL PROVISIONS 13
PART 11 - CHARGES AND DEDUCTIONS 15
PART 12 - LOAN PROVISION 16
PART 13 - PAYMENT OF CONTRACT BENEFITS 17
<PAGE> 3
SPECIFICATIONS PAGE
TYPE OF CONTRACT: NON-QUALIFIED
CONTRACT DATE: 10/21/1997 MATURITY DATE: 10/21/2027
INITIAL PURCHASE PAYMENT: $10,000.00 CONTRACT NUMBER: 000000007
INITIAL ALLOCATION OF NET PURCHASE PAYMENT: (SEE REVERSE FOR ALL AVAILABLE
OPTIONS)
<TABLE>
<CAPTION>
FIXED INVESTMENT OPTIONS INITIAL INTEREST INITIAL GUARANTEE
RATE PERIOD EXPIRES
<S> <C> <C> <C>
1 YEAR FIXED 50.00% 4.10% 10/21/1998
VARIABLE INVESTMENT OPTIONS:
EQUITY 50.00%
------
TOTAL 100.00%
</TABLE>
OWNER: JOHN DOE CO-OWNER:
ANNUITANT: JOHN DOE AGE: 55
CO-ANNUITANT: BENEFICIARY: SEE ATTACHED LIST
<PAGE> 4
AVAILABLE INVESTMENT OPTIONS
<TABLE>
<S> <C>
FIXED INVESTMENT OPTIONS
1 Year Fixed
3 Year Fixed
6 Year Fixed
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.
Small Company Value Rosenberg Institutional Equity
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
</TABLE>
<PAGE> 5
BENEFICIARY INFORMATION
Please find below the Beneficiary Information for contract number, 000000007,
currently on file at The Manufacturers Life Insurance Company of North America:
Jane Doe
<PAGE> 6
CONTRACT SPECIFICATIONS (CONTINUED)
Administrative Charge $30.00 deducted on each Contract Anniversary
<TABLE>
<CAPTION>
Withdrawal Charge Number of Complete Years
Purchase Payment Has Withdrawal Charge
Been in Contract Percentage
------------------------ -----------------
<S> <C>
0 6%
1 6%
2 5%
3 4%
4 3%
5 2%
6+ 0%
</TABLE>
WITHIN 15 YEARS OF THE MATURITY DATE, NO PURCHASE PAYMENT MAY BE APPLIED TO THE
3-YEAR OR 6-YEAR INVESTMENT OPTIONS. WITHIN 6 YEARS OF THE MATURITY DATE, NO
PURCHASE PAYMENT MAY BE APPLIED TO THE 1-YEAR INVESTMENT OPTION.
<PAGE> 7
DEATH BENEFIT ENDORSEMENT
PART 4, BENEFITS, DEATH BENEFIT BEFORE MATURITY DATE of the Flexible Purchase
Payment Deferred Combination Fixed and Variable Annuity to which this
Endorsement is attached is replaced as follows:
DEATH BENEFIT BEFORE DEATH OF ANNUITANT WHERE YOU ARE NOT THE
MATURITY DATE ANNUITANT. We will pay the death benefit to the
Beneficiary if you are not the Annuitant and the
Annuitant dies before the Maturity Date. Payment
will be made either as a lump sum or in accordance
with any Annuity Option described in this
Contract. If there is more than one Annuitant, the
death benefit will be paid on the death of the
last surviving Co-Annuitant. Upon the death of the
Annuitant, the Beneficiary becomes the Owner of
the Contract and may elect to continue the
Contract rather than to receive payment of the
death benefit.
DEATH OF ANNUITANT WHERE YOU ARE THE ANNUITANT. We
will pay the death benefit to the Beneficiary if
you are the Annuitant, there is no surviving
Co-Annuitant, and you die before the Maturity
Date. The Beneficiary becomes entitled to exercise
ownership rights in the Contract and may continue
the Contract. If this is a Non-Qualified Contract,
the following special distribution rules apply.
Distribution of the Beneficiary's interest in the
Contract must be made within 5 years after your
death or as an annuity which begins within one
year of death and is payable over the life of the
Beneficiary (or over a period not in excess of the
Beneficiary's life expectancy). If your spouse is
the Beneficiary, your spouse may elect to be
treated as Owner and distribution will be made no
later than the date on which distribution would be
required after the death of your spouse. If you
are the Annuitant, there is a surviving
Co-Annuitant, and you die before the Maturity
Date, payment of your interest in the Contract
will be made in accordance with the Death of Owner
provision of this Contract.
DEATH BENEFIT. A 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 as
follows:
1. If the Annuitant dies on or prior to the first
of the month following his or her 85th
birthday, the death benefit will be determined
as follows:
a) During the first Contract Year, the death
benefit will be the greater of:
i) the Contract Value, or
ii) the sum of all Purchase Payments
made, less any amount deducted in
connection with partial withdrawals.
b) During any subsequent Contract Year, the
death benefit will be the greater of:
i) the Contract Value, or
ii) the death benefit on the last day of
the previous Contract Year plus any
Purchase Payments made and less any
amounts deducted in connection with
partial withdrawals since then.
2. If the Annuitant dies after the first of the
month following his or her 85th birthday, the
death benefit will be determined as the
greater of:
a) the Contract Value, or
b) the excess of (i) over (ii) where:
i) the sum of all Purchase Payments.
<PAGE> 8
ii) the sum of all withdrawals,
including any applicable withdrawal
charges.
DEATH OF OWNER. If you die before the Annuitant
and before the Maturity Date, the Successor Owner
will become the Owner of the Contract and will be
entitled to your interest in the Contract. If this
is a Non-Qualified Contract, the following special
distribution rules apply. Distribution of such
interest must be made within 5 years after your
death or as an annuity which begins within one
year of death and is payable over the life of the
Successor Owner (or over a period not in excess of
the Successor Owner's life expectancy). If your
spouse is the Successor Owner, your spouse will be
treated as Owner and distribution will be made no
later than the date distribution would be required
after the death of your spouse. If you are not an
individual, the death of the Annuitant or
Co-Annuitant, or any change in the Annuitant or
Co-Annuitant will be treated as the death of the
Owner.
If there is more than one Owner, distributions
will occur upon the death of any Owner. If both
Owners are individuals, the distributions will be
made to the remaining Owner rather than the
Successor Owner or the Beneficiary.
If there is any Debt, the death benefit equals the
amount described above less the Debt under the
Contract.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
<PAGE> 9
PART 1 DEFINITIONS
- --------------------------------------------------------------------------------
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 you name more
than one person as an "Annuitant", the second
person named shall be referred to as
"Co-Annuitant." All provisions based on the date
of death of the "Annuitant" will be based on the
last to survive of the "Annuitant" or
"Co-Annuitant." The "Annuitant" and "Co-Annuitant"
will be collectively referred to as "Annuitant" in
this Contract. The Annuitant is as specified in
the Application, unless changed.
ANNUITY OPTION The method selected by you for annuity payments
made by us. At the Maturity Date, we will provide
a Fixed Annuity with payments guaranteed for 10
years and for the lifetime of the Annuitant, if
later, unless a different Annuity Option is
selected by you.
ANNUITY SERVICE OFFICE Any office designated by us for the receipt of
Purchase 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 or persons entitled to the death
benefit under this Contract upon the death of the
Annuitant. The Beneficiary is as specified in the
Application, unless changed.
CONTINGENT BENEFICIARY The person or persons 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
thereafter.
DEBT Any amounts in the Loan Account attributable to
the Contract plus any accrued loan interest. The
loan provision is applicable to Qualified
Contracts only.
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<PAGE> 10
FIXED ANNUITY An Annuity Option with payments which are
predetermined and guaranteed as to dollar amount.
GENERAL ACCOUNT All the assets of The Manufacturers Life Insurance
Company of North America other than assets in
separate accounts.
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.
LOAN ACCOUNT The portion of the General Account that is used
for collateral when a loan is taken.
MARKET VALUE CHARGE A charge that may be assessed if amounts are
withdrawn or transferred from the 3-year or 6-year
Investment Options prior to the end of the
interest rate guarantee period.
MATURITY DATE The date on which annuity benefits commence. It is
the date specified on the Contract Specifications
Page, unless changed.
NET PURCHASE PAYMENT The Purchase Payment less the amount of premium
tax, if any, deducted from the Purchase Payment.
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 specified in the Application, unless changed.
PORTFOLIO OR TRUST A separate portfolio of Manufacturers Investment
PORTFOLIO Trust, a mutual fund in which the Variable Account
invests, or any successor mutual fund.
PURCHASE PAYMENT An amount paid to us by you 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 Manufacturers Life
Insurance Company of North America 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.
SUCCESSOR OWNER The person, persons or entity to become the Owner
if the Owner dies prior
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<PAGE> 11
to the Maturity Date. The Successor Owner is as
specified in the Application, unless changed. If
no Successor Owner is designated, or the Successor
Owner dies before the Owner, the Owner's estate is
the Successor Owner.
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 Manufacturers Life Insurance Company of North
America Separate Account A, which is a separate
account of The Manufacturers Life Insurance
Company of North America.
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 variable
Sub-Accounts.
WE AND YOU "We", "us" and "our" means The Manufacturers Life
Insurance Company of North America. "You" or
"your" means the Owner of this Contract.
PART 2 GENERAL PROVISIONS
- --------------------------------------------------------------------------------
ENTIRE CONTRACT This Contract and any Contract endorsements and
attached copy of the Application are the entire
Contract. Only our President, Vice-President or
Secretary may agree to change or waive any
provisions of the 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.
The benefits and values available under this
Contract are not less than the minimum required by
any statute of the state in which the Contract is
delivered. 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 the Contract is issued, if required
by law.
BENEFICIARY The Beneficiary is the person or persons to whom
benefits will be paid upon death of the Annuitant.
Unless otherwise indicated, the Beneficiary will
be revocable. A revocable Beneficiary may be
changed by you. If changed, the Beneficiary is as
shown in the latest change. Prior to the Maturity
Date, if no Beneficiary survives the Annuitant,
you or your estate will be the Beneficiary. The
interest of any revocable Beneficiary is subject
to that of any assignee.
If more than one Beneficiary is designated, the
interest of a Beneficiary who dies before any
other Beneficiary will pass to the surviving
Beneficiaries in proportion to their share in the
benefits unless otherwise provided.
CHANGE IN MATURITY DATE Prior to the Maturity Date, you may change the
Maturity Date by written request at least one
month before both the previously specified
Maturity
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<PAGE> 12
Date and the new Maturity Date. After the
election, the new Maturity Date will become the
Maturity Date. The maximum Maturity Date will be
the first of the month following the Annuitant's
eighty-fifth birthday. A change in the Maturity
Date may restrict the availability of the fixed
Investment Options.
ASSIGNMENT You may assign this Contract at any time during
the lifetime of the Annuitant and 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 our 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.
A Qualified Contract may not be assigned to any
person other than the employer.
CLAIMS OF CREDITORS To the extent permitted by law, no payments 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 Purchase 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 INVESTMENT applicable law, to make additions to, deletions
from, or substitutions for the Portfolio shares
that are held by the Variable OPTIONS 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 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.
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<PAGE> 13
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.
OWNERSHIP OF ASSETS We shall have exclusive and absolute ownership and
control of our assets, including the assets of the
Variable Account.
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.
Payments to us or by us shall be made 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 our Annuity
Service Office. Unless otherwise provided, all
notices, requests and elections will be effective
when received by us, complete with all necessary
information and your signature, at our Annuity
Service Office.
GOVERNING LAW This Contract will be governed by the laws of the
jurisdiction where your Application is signed.
PART 3 OWNERSHIP
- --------------------------------------------------------------------------------
GENERAL During the Annuitant's lifetime and prior to the
Maturity Date, the Owner of this Contract shall be
the person so named in the Application or the
latest change filed with us. On and after the
Maturity Date, the Annuitant is the Owner of the
Contract. After the Annuitant's death, the
beneficiary is 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 during the Annuitant's lifetime by
written request in a form acceptable to us and
which is received at our 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, it will take effect on the
date you signed the request. We will not be liable
for any payments or actions we take before the
change is approved.
In the case of the 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.
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
employer.
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<PAGE> 14
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. We will provide a Fixed Annuity with
payments guaranteed for 10 years and for the
lifetime of the Annuitant, if later, unless you
elect a different settlement option.
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.
DEATH BENEFIT BEFORE DEATH OF ANNUITANT WHERE YOU ARE NOT THE
MATURITY DATE ANNUITANT. We will pay the minimum death benefit,
less any Debt, to the Beneficiary if you are not
the Annuitant and the Annuitant dies before the
Maturity Date. Payment will be made either as a
lump sum or in accordance with any Annuity Option
described in this Contract. If there is more than
one Annuitant, the minimum death benefit will be
paid on the death of the last surviving
Co-Annuitant. Upon the death of the Annuitant, the
Beneficiary becomes the Owner of the Contract and
may elect to continue the Contract rather than to
receive payment of the minimum death benefit.
DEATH OF ANNUITANT WHERE YOU ARE THE ANNUITANT. We
will pay the minimum death benefit, less any debt,
to the Beneficiary if you are the Annuitant, there
is no surviving Co-Annuitant and you die before
the Maturity Date. The Beneficiary becomes
entitled to exercise ownership rights in the
Contract and may continue the Contract. If this is
a Non-Qualified Contract, the following special
distribution rules apply. Distribution of the
Beneficiary's interest in the Contract must be
made within 5 years after your death or as an
annuity which begins within one year of death and
is payable over the life of the Beneficiary (or
over a period not in excess of the Beneficiary's
life expectancy). If your spouse is the
Beneficiary, your spouse may elect to be treated
as Owner and distribution will be made no later
than the date on which distribution would be
required after the death of your spouse. If you
are the Annuitant, there is a surviving
Co-Annuitant, and you die before the Maturity
Date, payment of your interest in the Contract
will be made in accordance with the Death of Owner
provision of this Contract.
MINIMUM DEATH BENEFIT. If the Annuitant dies on or
prior to the first of the month following his or
her 85th birthday, the minimum death benefit will
be
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<PAGE> 15
determined as follows:
(1.) During the first 6 Contract Years, the
minimum death benefit will be the greater
of:
a) the Contract Value on the date that due
proof of death is received at the
Annuity Service Office, or
b) the sum of all Purchase Payments made,
less any amount deducted in connection
with partial withdrawals.
(2.) During any subsequent 6 Contract Year
period, the minimum death benefit will be
the greater of:
a) the Contract Value on the date that due
proof of death is received at the
Annuity Service Office, or
b) the minimum death benefit on the last
day of the previous 6 Contract Year
period plus any Purchase Payments made
and less any amount deducted in
connection with partial withdrawals
since then.
If the Annuitant dies after the first of the month
following his or her 85th birthday, the minimum
death benefit will be the Contract Value on the
date that due proof of death is received at the
Annuity Service Office.
Death of Owner. If you die before the Annuitant
and before the Maturity Date, the Successor Owner
will become the Owner of the Contract and will be
entitled to your interest in the Contract (the
amount payable on total withdrawal). If this is a
Non-Qualified Contract, the following special
distribution rules apply. Distribution of such
interest must be made within 5 years after your
death or as an annuity which begins within one
year of death and is payable over the life of the
Successor Owner (or over a period not in excess of
the Successor Owner's life expectancy). If your
spouse is the Successor Owner, your spouse will be
treated as Owner and distribution will be made no
later than the date distribution would be required
after the death of your spouse. If you are not an
individual, the death of the Annuitant or
Co-Annuitant, or any change in the Annuitant or
Co-Annuitant will be treated as the death of the
Owner.
If there is more than one Owner, distributions
will occur upon the death of any Owner. If both
Owners are individuals, the distributions will be
made to the remaining Owner rather than the
Successor Owner or the 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.
Such 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
7
<PAGE> 16
Annuitant and the Beneficiary.
PROOF OF DEATH Due proof of death is required upon the death of
the Annuitant or the Owner. Due proof of death is
one of the following received at the Annuity
Service Office within 1 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.
(c) Any other proof satisfactory to us.
PART 5 PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
GENERAL All Purchase Payments under this Contract are
payable at our Annuity Service Office or such
other place as we may designate.
The minimum Purchase Payment will be $30. However,
at least $300 must be paid during the first
Contract Year. Purchase Payments may be made at
any time, except for any Purchase Payment received
by us within 15 years of the Maturity Date, no
Purchase Payment may be applied to the 1-year
Investment Option.
If a Purchase Payment would cause the Contract
Value to exceed $1,000,000, or the Contract Value
already exceeds $1,000,000, no additional Purchase
Payments will be accepted without our prior
approval.
NONPAYMENT OF PURCHASE If, prior to the Maturity Date, no Purchase
PAYMENTS FOR TWO YEARS Payments are made for two consecutive Contract
Years, and if both:
(a) the total Purchase 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 administration fee.
ALLOCATION OF NET When we receive Purchase Payments, the Net
PURCHASE PAYMENTS Purchase Payments will be allocated among
Investment Options in accordance with the
allocation percentages shown in the Application.
You may change the allocation of subsequent
Purchase Payments at any time, without charge, by
giving us written notice. Within 15 years of the
Maturity Date, no Purchase Payments may be applied
to the 3-year or 6-year Investment Options. Within
6 years of the Maturity Date, no Purchase Payment
may be applied to the 1-year fixed Investment
Option.
8
<PAGE> 17
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:
(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 Purchase 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
Purchase 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
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 a factor representing the charges deducted
from the Sub-Account on a daily basis. Such
factor is equal on an annual basis to 1.40%
(1.25% for mortality and expense risks; and
0.15% for administrative expenses).
The net investment factor may be greater or less
than, or equal to, one.
9
<PAGE> 18
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. Any amounts you allocate to the
same fixed Investment Option on the same day will
establish a new Investment Account. 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 the guaranteed rate from time to
time for new allocations, but in no event will the
minimum guaranteed rate under a fixed Investment
Account be less than 4%.
Guarantee Periods For any amounts allocated to the
fixed options, you have the choice of the length
of the guarantee period. The amount can be
allocated into any combination of the 1-year,
3-year or 6-year guarantee periods, however,
within 15 years of the Maturity Date, no Purchase
Payment may be applied to the 3-year or 6-year
Investment Options. Within 6 years of the Maturity
Date, no Purchase Payments may be applied to the
1-year Investment Option.
Separate Investment Accounts will be established
for each guarantee period. The guarantee period
will be the 1-year, 3-year or 6-year period
measured from the date the amount is allocated to
the Investment Account. Amounts cannot be
allocated to a fixed 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 Investment Option at the end of the
guarantee period, unless you specify otherwise. If
renewal in a particular Investment Option would
result in the guarantee period for that Investment
Account being beyond the Maturity Date, the
renewal amount may not be renewed in that
Investment Option. The renewal amount will be
applied to the longest guarantee period of an
Investment Option such that the guarantee period
does not extend beyond the Maturity Date. Renewals
within 3 years of the Maturity Date will be
applied to the 1 Year Investment Option.
INVESTMENT ACCOUNT VALUE The amount in the Investment Accounts 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.
MARKET VALUE CHARGE Any amounts withdrawn from a 3-year or a 6-year
fixed Investment Account, prior to the end of the
guarantee period, may be subject to a Market Value
Charge. The Market Value Charge will only apply to
amounts withdrawn from a 3-year or 6-year
Investment Account pursuant to a partial
10
<PAGE> 19
withdrawal, total withdrawal, transfer or a loan.
A Market Value Charge will be calculated
separately for each 3-year or 6-year Investment
Account affected. The Market Value Charge for a
particular Investment Account will be calculated
by multiplying the amount withdrawn or transferred
from the Investment Account by the adjustment
factor described below.
The adjustment factor for a particular Investment
Account is determined by the following formula:
0.75 x (B-A) x C/12
Where A, B and C are defined as follows:
A -The guaranteed interest rate on the Investment
Account.
B -The guaranteed interest rate available, on the
date the request is processed, for amounts
allocated to a new Investment Account with the
same length of guarantee period as the Investment
Account from which amounts are being withdrawn.
C -The number of complete months remaining to the
end of the guarantee period.
For purposes of this calculation, the maximum
difference between "B" and "A" will be 3%.
Furthermore, the adjustment factor will never be
greater than 2 x (A - 4%) and never less than
zero.
The total Market Value Charge will be the sum of
the Market Value Charges for each Investment
Account being withdrawn. For full withdrawals, the
Market Value Charge will be calculated on the
total amount of each Investment Account, and the
total Market Value Charge will be deducted from
the amount otherwise payable. For partial
withdrawals, the Market Value Charge will be
calculated based on the withdrawal amount
requested from each Investment Account and the
Market Value Charge, if applicable, will be
deducted from the remaining Investment Account
Value.
For transfers (including transfers to the Loan
Account pursuant to a loan request) the Market
Value Charge, if applicable, will be deducted from
the amount transferred.
There will be no Market Value Charge on
withdrawals from the fixed Investment Accounts in
the following situations: (a) death of the
Annuitant, (b) amounts withdrawn to pay any fees
or charges, (c) amounts applied at the Maturity
Date to purchase an annuity at the guaranteed
rates in the Annuity Option tables, and (d)
amounts withdrawn from 3-year or 6-year Investment
Accounts within one month prior to the end of the
guarantee period.
In no event will the Market Value Charge exceed
the earnings attributable to the amount withdrawn
from an Investment Account.
In no event will the Market Value Charge plus any
withdrawal charges for an Investment Account be
greater than 10% of the amount transferred or
withdrawn.
In no event will the Market Value Charge reduce
the amount payable on withdrawal or transfer below
the amount required under the non-forfeiture laws
of the state that has jurisdiction over this
Contract.
11
<PAGE> 20
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. The annuity
payment rates are based on the 1983 Table A
projected at Scale G with interest at the rate of
4% per annum and assume births in year 1942.
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.
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.
12
<PAGE> 21
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, however,
amounts transferred from a 3-year or 6-year fixed
Investment Account prior to the end of the
guarantee period may be subject to a Market Value
Charge. 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, except for the Market Value Charge, if
applicable. 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 of the
Contract 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, modify or terminate the transfer
privilege at any time that we are unable to
purchase or redeem shares of the Trust Portfolios.
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. Amounts transferred from a 3-year or 6-year
fixed Investment Account may be subject to a
Market Value Charge. The Market Value Charge, if
applicable, will be deducted from the amount
transferred.
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.
Amount may not be transferred to the 3-year or
6-year Investment Options with 15 years of the
Maturity Date.
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.
PART 10 WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
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.
13
<PAGE> 22
PAYMENTS OF WITHDRAWALS You may withdraw part or all of the Contract
Value, less any Debt, at any time before the
earlier of the death of the Annuitant 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 4% per year.
TOTAL WITHDRAWAL If you are withdrawing all of the Contract Value,
we will deduct, if applicable, the Debt, the
withdrawal charge, the Market Value Charge and the
administration fee from the amount otherwise
payable.
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) from the variable Investment Accounts, on a
pro rata basis,
b) 1-year Investment Accounts,
c) 3-year Investment Accounts, and
d) 6-year Investment Accounts.
We will deduct the withdrawal charge and the
Market Value Charge, if applicable, 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
Purchase Payments that have been in your Contract
for less than 6 years. No withdrawal charge will
apply to Purchase Payments being withdrawn that
have been in the Contract for 6 or more years. 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
Purchase Payments, or
b) after the first Contract Year, 10% of
total Purchase Payments minus 100% of all
prior partial withdrawals, in that
contract year.
14
<PAGE> 23
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 your 1-year Investment
Accounts,
c) withdrawals from your 3-year Investment
Accounts, and
d) withdrawals from your 6-year Investment
Accounts.
2. If a withdrawal is made for an amount
greater than the free withdrawal amount,
Purchase Payments will be liquidated on a
first-in-first-out basis. We will
liquidate Purchase Payments 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. A withdrawal charge will be assessed
against Purchase Payments liquidated that
have been in the Contract for less than 6
years.
4. Any Purchase Payments liquidated are
subject to a withdrawal charge based on
the length of time the Purchase Payment
has been in this Contract. The withdrawal
charge is determined by multiplying the
amount of the Purchase Payment being
liquidated by the applicable withdrawal
charge percentage obtained from the table
below.
15
<PAGE> 24
<TABLE>
<CAPTION>
Number of Complete Years
Purchase Payment has been in Withdrawal Charge
Contract Percentage
---------------------------- -----------------
<S> <C>
0 6%
1 6
2 5
3 4
4 3
5 2
6+ 0
</TABLE>
The total withdrawal charge will be the sum of the
withdrawal charges for the Purchase Payments being
liquidated.
5. 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 and/or Market Value Charge, if
applicable.
6. In no event will the aggregate withdrawal
charge be greater than 6% of the total Purchase
Payments made.
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 CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE Amounts invested in a variable Investment Option
RISK CHARGE are subject to a mortality and expense risk charge
to compensate us for assuming the mortality and
expense risks. We deduct from each Sub-Account a
charge each Valuation Period at an annual rate of
1.25% (0.8% for mortality risk an 0.45% for
expense risk). There are no mortality and expense
risk charges associated with fixed investment
options.
ADMINISTRATION FEES To compensate us for assuming certain
administrative expenses we charge administration
fees equal to $30 per year plus we deduct from
each Sub-Account a charge each Valuation Period at
an annual rate of 0.15%. The 0.15% administration
fee does not apply to the fixed Investment Option.
16
<PAGE> 25
Prior to the Maturity Date, the $30 administrative
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 $30 administration fee from the amount paid.
During the annuity period, the $30 administration
fee is deducted on a pro rata basis from each
annuity payment.
The 0.15% administration fee is added to the
mortality and expense risk charge of 1.25% and is
reflected in the net investment factor used to
determine the value of Accumulation Units and
Annuity Units for the variable portion of the
Contract.
TAXES We reserve the right to charge certain taxes
against your Purchase Payments, Contract Value, 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 Purchase
Payments, or from the issuance of this Contract,
or from the commencement or continuance of annuity
payments under this Contract.
PART 12 LOAN PROVISION (QUALIFIED CONTRACTS ONLY)
- --------------------------------------------------------------------------------
GENERAL This loan provision applies only to certain
Qualified Contracts and is available commencing on
January 1, 1990. While this Contract is in force,
you may borrow using the Contract as the sole
security for the loan. We will usually make a loan
within seven days after we receive your request,
subject to suspension of payments as set forth in
Part 10.
LOAN VALUE The maximum loan value is 80% of the Contract
Value. You may borrow an amount up to the maximum
loan value less any existing Debt.
EFFECT OF THE LOAN Your investment in each Investment Account will be
reduced by the amount withdrawn from that
Investment Account in connection with the loan and
such amount will be transferred to the Loan
Account. Unless you request otherwise, we will
withdraw the amount of the loan from each
Investment Option in the same manner as partial
withdrawals. If we withdraw part of the loan from
your fixed Investment Account, a Market Value
Charge may be applied. On each Contract
Anniversary the excess of the Debt over the amount
in the Loan Account attributable to your Contract
will be transferred from the Investment Accounts
to the Loan Account. Any amounts in the Loan
Account will earn interest at 4% per annum.
Since the amount of a loan is removed from the
Investment Accounts, a loan will have a permanent
effect on the Contract Value of this Contract. The
longer the loan is outstanding, the greater the
effect is likely to be.
LOAN INTEREST The loan interest rate will be 6% per annum.
Interest will be payable in arrears on each
Contract Anniversary. Any interest not paid when
due will be added to the Debt and bear interest in
the same manner.
17
<PAGE> 26
REPAYMENT You may repay any Debt in whole or in part while
this Contract is in force. An amount equal to the
amount of loan repayment will be transferred from
the Loan Account to the Investment Options in the
same proportion as Purchase Payments are currently
allocated, unless you request otherwise. Loans
must be repaid within 5 years, except for loans to
acquire a principal residence for you or your
family. Repayments must be made at least
quarterly.
GRACE PERIOD If, on any date, the Debt exceeds the Contract
Value, then the Contract will be in default. In
this case we will send you a notice of default and
tell you what payment is needed to bring the
Contract out of default. You will have a 31-day
grace period from the date of mailing of such
notice during which to pay the default amount. If
the required payment is not paid within the grace
period, the Contract will foreclose (terminate
without value).
PART 13 PAYMENT OF CONTRACT BENEFITS
- --------------------------------------------------------------------------------
GENERAL Benefits payable under this Contract may be
applied in accordance with one or more of the
Annuity Options described below.
ALTERNATE Instead of settlement in accordance with the
ANNUITY OPTIONS 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
(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.
(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 4% and (b) the monthly fixed annuity payment,
when this payment is based on the minimum
guaranteed interest rate of 4% 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 4% per annum and assume births in year
18
<PAGE> 27
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:
<TABLE>
<CAPTION>
Calendar Year of Birth Adjustment to Actual Age
---------------------- ------------------------
<S> <C>
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 + -6
</TABLE>
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.
19
<PAGE> 28
AMOUNT OF FIRST MONTHLY ANNUITY PAYMENT
PER $1000 OF CONTRACT VALUE
OPTION 1: LIFE ANNUITY
<TABLE>
<CAPTION>
Option 1(A): Non-Refund Option 1 (B): 10-Year Certain
- ----------------------- -----------------------------
Adjusted Adjusted
Age of Age of
Annuitant Male Female Annuitant Male Female
--------- ---- ------ --------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
55 4.83 4.44 55 4.78 4.41
60 5.24 4.74 60 5.15 4.70
65 5.79 5.15 65 5.62 5.08
70 6.35 5.70 70 6.21 5.58
75 7.51 6.49 75 6.89 6.21
80 8.81 7.56 80 7.65 6.98
85 10.57 9.06 85 8.40 7.80
</TABLE>
OPTION 2: JOINT AND SURVIVOR LIFE ANNUITY
Option 2(A): Non-Refund
<TABLE>
<CAPTION>
Age of Co-Annuitant
- --------------------------------------------------------------------------------------------------
Adjusted
Age of 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.87 3.99 4.13 4.27 4.41
60 4.02 4.18 4.36 4.55 4.73
65 4.21 4.43 4.67 4.92 5.16
70 4.47 4.76 5.08 5.43 5.75
75 4.80 5.20 5.65 6.11 6.54
80 5.26 5.80 6.41 7.04 7.60
85 5.89 6.63 7.47 8.29 8.97
Option 2(B): 10 Year Certain
Age of Co-Annuitant
- --------------------------------------------------------------------------------------------------
Adjusted
Age of 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
- --------------------------------------------------------------------------------------------------
55 3.87 3.99 4.13 4.27 4.41
60 4.02 4.18 4.36 4.55 4.73
65 4.21 4.43 4.66 4.91 5.15
70 4.46 4.75 5.07 5.40 5.70
75 4.80 5.18 5.61 6.03 6.39
80 5.24 5.75 6.30 6.81 7.20
85 5.82 6.47 7.13 7.68 8.06
- --------------------------------------------------------------------------------------------------
</TABLE>
Monthly installments for ages not shown will be furnished on request.
20
<PAGE> 29
TABLE OF GUARANTEED MINIMUM VALUES
FOR FIXED INVESTMENT OPTIONS
Shown below are the guaranteed minimum values of the fixed Investment Options of
this Contract based on Purchase Payments of $1,000 at the beginning of Contract
Years 1 through 14 inclusive.
The withdrawal value is equal to the Contract Value less the Withdrawal Charges,
where the Contract Value equals the accumulated Purchase Payments less the
accumulated Annual Administration Fee. If Purchase Payments are more than $1,000
annually, the withdrawal value is calculated as follows: (A - B - C), where
A = (Purchase Payment / 1000) x accumulated Purchase Payments
B = Accumulated Annual Administration Fee
C = (Purchase Payment / 1000) x Withdrawal Charge
These values apply, prior to the annuity commencement, at the end of the
Contract Years shown. These values are based on the minimum guaranteed rate of
4% applied to all years. This table assumes there have been no partial
withdrawals, and that all Payments are made at the beginning of the Contract
Year. All values are equal to or greater than those required by the State in
which this Contract is delivered. During any Contract Year, the values will be
determined with due allowance for the lapse of time and or payments made during
the Contract Year.
If a fixed Investment Option, other than the 1-year fixed Investment Option,
earns interest at a rate of more than the contractual minimum of 4%, a Market
Value Charge may apply.
The effective rate of return represents the annual interest rate at which the
accumulation of 100% of all Purchase Payments would be equal to the withdrawal
value at the end of each year as specified.
<TABLE>
<CAPTION>
End of Accumulated Accumulated
Contract Purchase Annual Withdrawal Withdrawal Effective rate
Year Payments Admin. Fee Charge Value of return
<S> <C> <C> <C> <C> <C>
1 $1,040.00 $30.00 $60.00 $950.00 -5.0%
2 $2,121.60 $61.20 $111.62 $1,948.78 -1.7%
3 $3,246.46 $93.65 $161.17 $2,991.64 -0.1%
4 $4,416.31 $127.40 $203.33 $4,085.58 0.9%
5 $5,632.95 $162.50 $238.23 $5,232.22 1.6%
6 $6,898.26 $199.00 $260.00 $6,439.26 2.1%
7 $8,214.18 $236.96 $260.00 $7,717.22 2.5%
8 $9,582.74 $276.44 $260.00 $9,046.30 2.8%
9 $11,006.04 $317.50 $260.00 $10,428.54 3.0%
10 $12,486.27 $360.20 $260.00 $11,866.07 3.1%
11 $14,025.71 $404.61 $260.00 $13,361.10 3.3%
12 $15,626.73 $450.79 $260.00 $14,915.94 3.4%
13 $17,291.79 $498.82 $260.00 $16,532.97 3.4%
14 $19,023.45 $548.77 $260.00 $18,214.68 3.5%
15 $19,784.38 $600.72 $200.00 $18,983.66 3.6%
16 $20,575.75 $654.75 $140.00 $19,781.00 3.6%
17 $21,398.78 $710.94 $90.00 $20,597.84 3.7%
18 $22,254.74 $769.38 $50.00 $21,435.36 3.7%
19 $23,144.94 $830.16 $20.00 $22,294.78 3.8%
20 $24,070.74 $893.37 $0.00 $23,177.37 3.8%
</TABLE>
21
<PAGE> 30
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<PAGE> 31
- --------------------------------------------------------------------------------
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
- --------------------------------------------------------------------------------
Manulife Financial and the block design are registered marks of The
Manufacturers Life Insurance Company and are used by it and its subsidiaries.
<PAGE> 1
Exhibit (b)(4)(ii)(A)(1)
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be one individual and the Annuitant. Neither the Owner
nor the Annuitant can be changed.
NONFORFEITABLE
2. The Contract is established for the exclusive benefit of the Owner or
his or her Beneficiaries and the interest of the Owner is
nonforfeitable.
NONTRANSFERABLE
3. The Owner may not assign, sell, transfer, discount or pledge this
Contract as collateral for a loan or as security for the performance of
any obligation or for any other purpose (other than a transfer incident
to a divorce or separation instrument in accordance with IRC Section
408(d)(6)) to any person other than us.
MAXIMUM PAYMENTS
4. The maximum annual Payments shall not exceed the lesser of $2,000 or
100% of compensation unless (a) such Payment qualifies as a rollover
contribution described in IRC Sections 408(d)(3), 402(c), 403(a)(4) or
403(b)(8); or (b) such Payment qualifies as a contribution made in
accordance with a Simplified Employee Pension Program as described in
IRC Section 408(k).
To the extent necessary to preserve qualification under the Internal
Revenue Code, We may refund Payments. Any refund of Payments (other
than those attributable to excess contributions) will be applied,
before the close of the calendar year following the refund, toward
future Payments or the purchase of additional benefits.
DISTRIBUTIONS DURING OWNER'S LIFE
5. The Owner's entire interest in the Contract shall be distributed as
required under IRC Section 408(b)(3) and applicable regulations. Unless
deferral is otherwise permitted under applicable regulations, the
Owner's entire interest shall be distributed no later than the
"required beginning date," or shall be distributed beginning no later
than the "required beginning date" over (a) the life of the Owner or
the joint lives of the Owner and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the Owner,
or joint life and last survivor expectancy of the Owner and the
designated beneficiary.
The "required beginning date" shall mean April 1 of the calendar year
following the calendar year in which the Owner attains age 70 1/2.
If the Owner's interest is to be distributed over a period greater than
one year, then the amount to be distributed by December 31 of each year
(including the year in which the required beginning date occurs) shall
be determined in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
ANNUITY OPTIONS
ENDORSEMENT.001
<PAGE> 2
6. Only Annuity Options 1 and 2 shall be offered unless We consent to the
use of an additional option. Annuity Option 1(b) is not available for
an Owner whose life expectancy is less than 10 years. Under Annuity
Options 2(a) and 2(b) the designated Co-Annuitant must be the Owner's
spouse. Annuity Option 2(b) is not available for an Owner and his or
her spouse where the life expectancy of the Owner and such spouse is
less than 10 years.
2
<PAGE> 3
DISTRIBUTIONS AFTER OWNER'S DEATH
7. If an Owner dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of such interest
(if any) shall be distributed at least as rapidly as under the method
of distribution in effect as of the Owner's death.
If the Owner dies before the required beginning date and an irrevocable
annuity distribution has not begun, the entire interest shall be
distributed by December 31 of the calendar year containing the fifth
anniversary of the Owner's death, except that
(a) if the interest is payable to an individual who is
the Owner's designated beneficiary, the designated
beneficiary may elect to receive the entire interest
over the life of the designated beneficiary or over a
period not extending beyond the life expectancy of
the designated beneficiary, commencing on or before
December 31 of the calendar year immediately
following the calendar year in which the Owner died;
or
(b) if the designated beneficiary is the Owner's
surviving spouse, the surviving spouse may elect to
receive the entire interest over the life of the
surviving spouse or over a period not extending
beyond the life expectancy of the surviving spouse,
commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the
Owner died, and
(ii) December 31 of the calendar year in which
the Owner would have attained age 70 1/2.
If the surviving spouse dies before distributions begin, the
limitations of this section shall be applied as if the surviving spouse
were the Owner.
An irrevocable election of the method of distribution by a designated
beneficiary who is the surviving spouse must be made no later than the
earlier of December 31 of the calendar year containing the fifth
anniversary of the Owner's death or the date distributions are required
to begin pursuant to this provision (b).
If the designated beneficiary is the Owner's surviving spouse, the
spouse may irrevocably elect to treat the Contract as his or her own
individual retirement arrangement (IRA). This election will be deemed
to have been made if such surviving spouse (i) fails to elect that his
or her interest will be distributed in accordance with one of the
preceding provisions, or (ii) makes a rollover from the Contract.
An irrevocable election of the method of distribution by a designated
beneficiary who is not the surviving spouse must be made within one
year of the Owner's death, and if no election is made, the entire
interest will be distributed by December 31 of the calendar year
containing the fifth anniversary of the Owner's death.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, (a) the provision entitled "Death of Annuitant" is deleted;
and (b) in the "Death of Owner" provision, the distribution
requirements of provisions "(d)" and "(e)" are deleted. If, after the
Owner's death, the designated beneficiary dies before the Maturity
Date, no Death Benefit is payable.
LIFE EXPECTANCY CALCULATIONS
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the
3
<PAGE> 4
time distributions are required to begin (a) by the Owner, or (b) for
purposes of distributions beginning after the Owner's death, by the
surviving spouse. Such an election shall be irrevocable as to the Owner
or the surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
CANCELLATION FOR NONPAYMENT
9. We may cancel the Contract for nonpayment of Payments and pay you the
Contract Value (measured as of the Valuation Period during which the
cancellation occurs), less the Administration Fee (if applicable), if
(a) prior to the Maturity Date, no Payments are made for two
consecutive Contract Years; (b) the total Payments made, less any
partial withdrawals, are less than $2,000; (c) the Contract Value at
the end of such two-year period is less than $2,000; and (d) the
paid-up annuity benefit at the Maturity Date at the end of such
two-year period would be less than $20 per month.
IRC SECTION 72(S)
10. All references in the Contract to IRC Section 72(s) are deleted.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
4
<PAGE> 5
ERISA TAX-SHELTERED ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) or an employee of such an organization. If the Owner is an
organization described in IRC Section 403(b)(1)(A), the term "Employee"
as used in this Endorsement shall mean the individual employee for
whose benefit the organization has established an annuity plan under
IRC Section 403(b). Such employee shall be the Annuitant. If the Owner
is an employee of an organization described in IRC Section
403(b)(1)(A), the Annuitant must be the same employee.
If this Contract is used as a funding mechanism for a rollover under
IRC Sections 403(b) or 408(d)(3), the Owner must be one individual,
that same individual must be the Annuitant, and the term "Employee"
shall mean that individual.
The Annuitant cannot be changed. Prior to the Maturity Date, the
Co-Annuitant can be changed, but such change shall not require any
distributions to be made under the Contract.
NONTRANSFERABLE
2. The interest of the Employee in this Contract is non-transferable
within the meaning of IRC Section 401(g) and applicable regulations and
is nonforfeitable. In particular, the Contract may not be sold,
assigned, discounted, or pledged as collateral for a loan or as
security for the performance of any obligation or for any other
purpose, to any person other than us.
PAYMENTS
3. Payments must be made by an organization described in IRC Section
403(b)(1)(A), except in the case of rollover contributions under IRC
Sections 403(b)(8) and 408(d)(3). The Employee must be an employee of
such organization.
Payments made pursuant to a salary reduction agreement shall be limited
to the extent provided in IRC Section 402(g). Payments shall not exceed
the amount allowed by IRC Section 415.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in this Contract shall be distributed as
required under IRC Section 403(b)(10) and applicable regulations.
As used in this Endorsement, the term "required beginning date" shall
mean April 1 of the calendar year following the calendar year in which
the Employee attains age 70 1/2. For an Employee who attains age 70 1/2
before January 1, 1988, or for an Employee in a governmental plan or a
church plan (as defined in IRC Section 401(a)(9)(C)), the required
beginning date shall mean April 1 of the calendar year following the
later of (i) the calendar year in which the Employee attains age 70
1/2, or (ii) the calendar year in which the Employee retires.
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
5. The Employee's entire interest shall be distributed no later than the
required beginning date, or shall be distributed, beginning no later
than the required beginning date, over (a) the life of the Employee or
the joint lives of the Employee and an individual who is his or her
designated beneficiary (within the meaning of IRC
ENDORSEMENT.002
<PAGE> 6
Section 401(a)(9), or (b) a period not extending beyond the life
expectancy of the Employee, or the joint life and last survivor
expectancy of the Employee and the designated beneficiary.
If the Employee's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be made in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DEATH BENEFIT
6. If, in the event of the Employee's death prior to the Maturity Date,
the Death Benefit is not paid to the employer plan, it shall be paid to
(1) the surviving spouse of the Employee in the form required by
section 205 of the Employee Retirement Income Security Act of 1974
(ERISA), unless the spouse elects otherwise in accordance with the
requirements of such section 205 or applicable regulations; or (2) if
there is no surviving spouse, or if the surviving spouse has consented
in the manner required by section 205 of ERISA, or if the applicable
regulations otherwise permit, to the Beneficiary under the Contract.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, the first sentence of the paragraph "Death of Annuitant" is
deleted, and the second sentence is modified to read as follows: "If
any Owner is not an individual, the death of the Annuitant (but not of
the Co-Annuitant) is treated as the death of an Owner."
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
7. If an Employee dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Employee's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Employee's death.
If the Employee dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Employee's death, except that
(a) if the interest is payable to an individual who is the
Employee's designated beneficiary, the designated beneficiary
may elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the Employee
died, and
(ii) December 31 of the calendar year in which the
Employee would have attained age 70 1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Employee.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
2
<PAGE> 7
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Employee's death. If no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Employee's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Contract, the distribution requirements of provisions
"(d)" and "(e)" are deleted. If, after the Employee's death, the
designated beneficiary dies before the Maturity Date, no Death Benefit
is payable.
LIFE EXPECTANCY CALCULATIONS
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Employee, or (b) for purposes of
distributions beginning after the Employee's death, by the surviving
spouse. Such an election shall be irrevocable as to the Employee or the
surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
9. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us, only Annuity Options 1 and 2
shall be available to an Employee. All Annuity Options must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than Employees are incidental.
Annuity Option 1(b) is not available for an Employee whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b),
the designated Co-Annuitant must be the Employee's spouse. Annuity
Option 2(b) is not available for an employee and his or her spouse
where the life expectancy of the employee and such spouse is less than
10 years.
Except as hereinafter provided, only Annuity Option 2(a) is available
to a married Employee. A married Employee may elect another Annuity
Option, provided his or her spouse consents in accordance with the
requirements of section 205 of ERISA (and applicable regulations), or
provided such election is otherwise permitted under such applicable
regulations. An unmarried Employee will be deemed to have elected
annuity Option 1(a) unless he or she makes a different election in the
manner required under section 205 of ERISA (and applicable
regulations).
ELECTIONS AND CONSENTS
10. Elections and consents required by ERISA may be revoked in the form,
time, and manner prescribed in section 205 of ERISA (and applicable
regulations). All elections and consents required by ERISA shall adhere
to the requirements of the applicable regulations interpreting section
205 of ERISA (or any other applicable law), including the requirements
as to the timing of any elections or consents.
If a withdrawal is permitted by the employer's plan, no withdrawal,
partial or total, may be made without consent of the Employee and the
Employee's spouse in the manner required by section 205 of ERISA (and
applicable regulations), except to the extent that such consent is not
required under such applicable regulations. Any withdrawal made must be
made in the form required under section 205 of ERISA (and
3
<PAGE> 8
applicable regulations), unless the employee (and spouse, if
applicable) makes an election in the form and manner permitted under
such regulations, to receive the benefit in another form.
WITHDRAWAL OF SALARY REDUCTION CONTRIBUTIONS
11. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and
the earnings on such contributions and on amounts held as of December
31, 1988, shall not be paid unless the Employee has reached age 59 1/2,
separated from service, died, become disabled (within the meaning of
IRC Section 72(m)(7)) or incurred a hardship as determined by the
organization described in Section 3 of this Endorsement; provided, that
amounts permitted to be distributed in the event of hardship shall be
limited to actual salary deferral contributions (excluding earnings
thereon); and provided further that amounts may be distributed pursuant
to a qualified domestic relations order to the extent permitted by IRC
Section 414(p).
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
12. Payments made by a nontaxable transfer from a custodial account
qualifying under IRC Section 403(b)(7), and earnings of such amounts,
shall not be paid or made available before the Employee dies, attains
age 59 1/2, separates from service, becomes disabled (within the
meaning of IRC Section 72(m)(7)) or in the case of such amounts attrib-
utable to contributions made under the custodial account pursuant to a
salary reduction agreement, encounters financial hardship; provided,
that such amounts permitted to be paid or made available in the event
of financial hardship shall be limited to amounts attributable to
actual salary deferral contributions made under the custodial account
(excluding earnings thereon); and provided further that amounts may be
distributed pursuant to a qualified domestic relations order to the
extent permitted by IRC Section 414(p).
MATURITY VALUE
13. If the Employee's Contract Value is greater than $3,500, as determined
on the first day of the month preceding the Maturity Date, in
accordance with section 205 of ERISA (and applicable regulations), We
will not exercise our right to pay the Contract Value of an employee on
the Maturity Date in one lump sum in lieu of annuity benefits.
DIRECT ROLLOVERS
14. This Section 14 applies to distributions made on or after January 1,
1993. A distributee may elect, at the time and in the manner prescribed
by us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution
does not include (1) any distribution that is one of a series
of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; (2) any
distribution to the extent such distribution is required under
IRC Section 401(a)(9); and (3) the portion of any distribution
that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with
respect to employer securities).
An eligible retirement plan is an annuity described in IRC
Section 403(b), an individual retirement account described in
IRC Section 408(a), or an individual retirement annuity
described in IRC Section 408(b), that accepts the
distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former
spouse who is the alternative payee under a qualified domestic
relations order, as defined in IRC Section 414(p), are
distributees with regard to the interest of the spouse or
former spouse. A direct
4
<PAGE> 9
rollover is a payment by the plan administrator or us to the
eligible retirement plan specified by the distributee.
IRC SECTION 72(S)
15. All references in the Contract to IRC Section 72(s) are deleted.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
5
<PAGE> 10
TAX-SHELTERED ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) or an employee of such an organization. If the Owner is an
organization described in IRC Section 403(b)(1)(A), the term "Employee"
as used in this Endorsement shall mean the individual employee for
whose benefit the organization has established an annuity plan under
IRC Section 403(b). Such employee shall be the Annuitant. If the Owner
is an employee of an organization described in IRC Section
403(b)(1)(A), the Annuitant must be the same employee.
If this Contract is used as a funding mechanism for a rollover under
IRC Sections 403(b) or 408(d)(3), the Owner must be one individual,
that same individual must be the Annuitant, and the term "Employee"
shall mean that individual.
The Annuitant cannot be changed. Prior to the Maturity Date, the
Co-Annuitant can be changed, but such change shall not require any
distributions to be made under the Contract. In the "Death Benefit
Before Maturity Date" section of part 4 of the Contract, the first
sentence of the paragraph "Death of Annuitant" is deleted, and the
second sentence is modified to read as follows: "If any Owner is not an
individual, the death of the Annuitant (but not of the Co-Annuitant) is
treated as the death of an Owner."
NONTRANSFERABLE
2. The interest of the Employee in this Contract is non-transferable
within the meaning of IRC Section 401(g) and applicable regulations and
is nonforfeitable. In particular, the Contract may not be sold,
assigned, discounted, or pledged as collateral for a loan or as
security for the performance of any obligation or for any other
purpose, to any person other than us.
PAYMENTS
3. Payments must be made by an organization described in IRC Section
403(b)(1)(A), except in the case of rollover contributions under IRC
Sections 403(b)(8) and 408(d)(3). The Employee must be an employee of
such organization.
Payments made pursuant to a salary reduction agreement shall be limited
to the extent provided in IRC Section 402(g). Payments shall not exceed
the amount allowed by IRC Section 415.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in this Contract shall be distributed as
required under IRC Section 403(b)(10) and applicable regulations.
As used in this Endorsement, the term "required beginning date" shall
mean April 1 of the calendar year following the calendar year in which
the Employee attains age 70 1/2. For an Employee who attains age 70 1/2
before January 1, 1988, or for an Employee in a governmental plan or a
church plan (as defined in IRC Section 401(a)(9)(C)), the required
beginning date shall mean April 1 of the calendar year following the
later of (i) the calendar year in which the Employee attains age 70
1/2, or (ii) the calendar year in which the Employee retires.
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
ENDORSEMENT.003
<PAGE> 11
5. The Employee's entire interest shall be distributed no later than the
required beginning date, or shall be distributed, beginning no later
than the required beginning date, over (a) the life of the Employee or
the joint lives of the Employee and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9), or
(b) a period not extending beyond the life expectancy of the Employee,
or the joint life and last survivor expectancy of the Employee and the
designated beneficiary.
If the Employee's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be made in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
6. If an Employee dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Employee's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Employee's death.
If the Employee dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Employee's death, except that
(a) if the interest is payable to an individual who is the
Employee's designated beneficiary, the designated beneficiary
may elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the Employee
died, and
(ii) December 31 of the calendar year in which the
Employee would have attained age 70 1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Employee.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Employee's death. If no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Employee's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Contract, the distribution requirements of provisions
"(d)" and "(e)" are deleted. If, after the Employee's death, the
designated beneficiary dies before the Maturity Date, no Death Benefit
is payable.
LIFE EXPECTANCY CALCULATIONS
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<PAGE> 12
7. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Employee, or (b) for purposes of
distributions beginning after the Employee's death, by the surviving
spouse. Such an election shall be irrevocable as to the Employee or the
surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us, only Annuity Options 1 and 2
shall be available to an Employee. All Annuity Options must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than Employees are incidental.
Annuity Option 1(b) is not available for an Employee whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b),
the designated Co-Annuitant must be the Employee's spouse. Annuity
Option 2(b) is not available for an employee and his or her spouse
where the life expectancy of the employee and such spouse is less than
10 years.
WITHDRAWAL OF SALARY REDUCTION CONTRIBUTIONS
9. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and
the earnings on such contributions and on amounts held as of December
31, 1988, shall not be paid unless the Employee has reached age 59 1/2,
separated from service, died, become disabled (within the meaning of
IRC Section 72(m)(7)) or incurred a hardship as determined by the
organization described in Section 3 of this Endorsement; provided, that
amounts permitted to be distributed in the event of hardship shall be
limited to actual salary deferral contributions (excluding earnings
thereon); and provided further that amounts may be distributed pursuant
to a qualified domestic relations order to the extent permitted by IRC
Section 414(p).
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
10. Payments made by a nontaxable transfer from a custodial account
qualifying under IRC Section 403(b)(7), and earnings of such amounts,
shall not be paid or made available before the Employee dies, attains
age 59 1/2, separates from service, becomes disabled (within the
meaning of IRC Section 72(m)(7)) or in the case of such amounts attrib-
utable to contributions made under the custodial account pursuant to a
salary reduction agreement, encounters financial hardship; provided,
that such amounts permitted to be paid or made available in the event
of financial hardship shall be limited to amounts attributable to
actual salary deferral contributions made under the custodial account
(excluding earnings thereon); and provided further that amounts may be
distributed pursuant to a qualified domestic relations order to the
extent permitted by IRC Section 414(p).
LOANS
11. While this Contract is in force, an Employee may borrow using his or
her interest in this Contract as the sole security for the loan. We
will usually make a loan within seven days after We receive the
request, subject to suspension of payment as set forth in part 10 of
the Contract.
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<PAGE> 13
The maximum loan value is 80% of the Contract Value for an Employee. An
Employee may borrow an amount up to the lessor of:
a. the maximum loan value less any existing Debt, or
b. An amount which, when added to any existing Debt, does not
exceed the lesser of:
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<PAGE> 14
i. $50,000 (reduced by any excess of the highest
outstanding Debt during the one year period ending on
the day before the date on which the current loan is
made, over the outstanding Debt on the date the
current loan is made), or
ii. $10,000 or, if greater, one-half of the Contract
Value.
An Employee's investment in each Investment Account will be reduced by
the amount withdrawn from that Investment Account in connection with
the loan and such amount will be transferred to the Loan Account.
Unless requested otherwise, We will withdraw the amount of the loan
from each Investment Account in the same manner as partial withdrawals.
If We withdraw part of the loan from an Employee's fixed Investment
Account, a Market Value Charge may be applied. On each Contract
Anniversary, the excess of the Debt over the amount in the Loan Account
will be transferred from the Investments Accounts to the Loan Account.
Any amounts in the Loan Account will earn interest at 4% per annum.
Since the amount of a loan is removed from the Investments Accounts, a
loan will have a permanent effect on the Contract Value. The longer the
loan is outstanding, the greater the effect is likely to be.
The loan interest rate will be 6% per annum. Interest will be payable
in arrears on each Contract Anniversary. Any interest not paid when due
will be added to the Debt and bear Interest in the same manner.
An Employee may repay any Debt in whole or in part while the Contract
is in force. An amount equal to the amount of the loan repayment will
be transferred from the Loan Account to the Investment Accounts in the
same proportion as Purchase Payments are currently allocated, unless
the Employee requests otherwise. Loans must be repaid within 5 years,
except for loans to acquire a principal residence for the Employee.
Repayment must be in level amounts made at least quarterly.
If, on any date, the Debt exceeds the Contract Value, then the Contract
will be in default. In such case We will send the Employee a notice of
default and tell him what payment is needed to cure the default. The
Employee will have a 31-day grace period from the date of mailing of
such notice during which to pay the default amount. If the required
payment is not paid within the grace period, the Contract may be
foreclosed (terminate without value).
DIRECT ROLLOVERS
12. This Section 12 applies to distributions made on or after January 1,
1993. A distributee may elect, at the time and in the manner prescribed
by us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (1) any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; (2) any distribution to the
extent such distribution is required under IRC Section 401(a)(9); and
(3) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an annuity described in IRC Section
403(b), an individual retirement account described in IRC Section
408(a), or an individual retirement annuity described in IRC Section
408(b), that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
A distributee includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternative
5
<PAGE> 15
payee under a qualified domestic relations order, as defined in IRC
Section 414(p), are distributees with regard to the interest of the
spouse or former spouse.
A direct rollover is a payment by the plan administrator or us to the
eligible retirement plan specified by the distributee.
IRC SECTION 72(S)
13. All references in the Contract to IRC Section 72(s) are deleted.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
6
<PAGE> 16
QUALIFIED PLAN ENDORSEMENT SECTION 401 PLANS
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner of the Contract must be either a trustee of a qualified
retirement plan under IRC Sections 401(a) or 403(a) or an employee
covered by such a plan. If the Owner is a trustee, the term
"Participant" as used in this Endorsement shall mean the individual
employee for whose benefit the employer has established the plan. If
the Owner is an employee, the term "Participant" shall mean the
employee.
In all cases, the Annuitant shall be the Participant and the Annuitant
cannot be changed. Prior to the Maturity Date, the Co-Annuitant can be
changed, but such change shall not require any distributions under the
Contract.
NONTRANSFERABLE
2. Ownership of this Contract may not be transferred except: (1) to the
Participant; (2) to a trustee or successor trustee of a retirement plan
qualified under IRC Sections 401(a) or 403(a); or (3) as otherwise
permitted by applicable regulations of the Internal Revenue Service.
If the Contract is transferred to the Participant, the Participant
becomes the Owner of the Contract and thereafter may not assign, sell,
transfer, or discount the Contract, or pledge it as collateral for a
loan or as security for the performance of an obligation or for any
other purpose, other than to us.
REQUIRED BEGINNING DATE
3. The Participant's entire interest in the Contract shall be distributed
as required by IRC Section 401(a)(9), and the regulations thereunder,
including the minimum distribution incidental benefit requirement of
Prop. Treas. Reg. Section 1.401(a)(9)-2.
As used in this Endorsement, the term "required beginning date" shall
mean April 1 of the calendar year following the calendar year in which
(1) the Participant reaches age 70 1/2, or (2) the Participant retires
from the employment of the employer sponsoring the retirement plan with
respect to which this Contract was purchased, whichever is later.
Clause (2) shall only apply to a Participant who has attained age 70
1/2 before January 1, 1988, and is not a "5-percent owner" (within the
meaning of IRC Section 416(i)) at any time during the plan year ending
with or within the calendar year in which such owner attained age 66
1/2, and any subsequent plan year. If the Participant becomes a
"5-percent owner" in a year after the year in which he or she attains
age 70 1/2, the required beginning date shall be April 1 of the
calendar year following the calendar year in which such subsequent plan
year ends.
For a Participant in a governmental plan or a church plan (as defined
in IRC Section 401(a)(9)(C)), the required beginning date shall be
April 1 of the calendar year following the later of (1) the calendar
year in which the Participant attains age 70 1/2, or (2) the calendar
year in which the Participant retires.
The requirements of Sections 3,4, and 6 of this Endorsement do not
apply with respect to a benefit to which a proper designation is in
effect under section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982.
ENDORSEMENT.004
<PAGE> 17
DISTRIBUTIONS DURING PARTICIPANT'S LIFE
4. The Participant's entire interest shall be distributed no later than
the required beginning date, or shall be distributed, beginning no
later than the required beginning date over (a) the life of the
Participant or the joint lives of the Participant and an individual who
is his or her designated beneficiary (within the meaning of IRC Section
401(a)(9)), or (b) a period not extending beyond the life expectancy of
the Participant, or the joint life and last survivor expectancy of the
Participant and the designated beneficiary.
If the Participant's interest is to be distributed over a period
greater than one year, then the amount to be distributed by December 31
of each year (including the year in which the required beginning date
occurs) shall be determined in accordance with the requirements of IRC
Section 401(a)(9), including the incidental death benefit requirements
of IRC Section 401(a)(9)(G), and the regulations thereunder, including
the minimum distribution incidental benefit requirements of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DEATH BENEFIT
5. If, in the event of the Participant's death prior to the Maturity Date,
the Death Benefit is not paid to the trustee of a retirement plan
qualified under IRC Sections 401(a) or 403(a), it shall be paid to (1)
the surviving spouse of the Participant in the form required by IRC
Section 417(c), unless the spouse elects otherwise in accordance with
the requirements of IRC Section 417 or regulations promulgated
thereunder, or (2) if there is no surviving spouse, or if the surviving
spouse has consented in the manner required by IRC Section 417, or if
regulations promulgated by the Treasury Department under IRC Section
417 otherwise permit, to the Beneficiary under the Contract.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, the first sentence of the paragraph "Death of Annuitant" is
deleted, and the second sentence is modified to read as follows: "If
any Owner is not an individual, the death of the Annuitant (but not of
the Co-Annuitant) is treated as the death of an Owner."
DISTRIBUTIONS AFTER PARTICIPANT'S DEATH
6. If the Participant dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the
Participant's interest (if any) shall be distributed at least as
rapidly as under the method of distribution in effect as of the
Participant's death.
If the Participant dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Participant's death, except that
(a) if the interest is payable to an individual who is the
Participant's designated beneficiary, the designated
beneficiary may elect to receive the entire interest over the
life of the designated beneficiary or over a period not
extending beyond the life expectancy of the designated
beneficiary, commencing on or before December 31 of the
calendar year immediately following the calendar year in which
the Participant died; or
(b) if the designated beneficiary is the Participant's
surviving spouse, the surviving spouse may elect to receive
the entire interest over the life of the surviving spouse or
over a period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the Participant
died, and
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<PAGE> 18
(ii) December 31 of the calendar year in which the
Participant would have attained age 70 1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the
Participant.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Participant's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Participant's death. If no
election is made, the entire interest will be distributed by
December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Contract, the distribution requirements of provisions
"(d)" and "(e)" are deleted. If, after the Participant's death, the
designated beneficiary dies before the Maturity Date, no Death Benefit
is payable.
LIFE EXPECTANCY CALCULATIONS
7. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Participant, or (b) for purposes of
distributions beginning after the Participant's death, by the surviving
spouse. Such an election shall be irrevocable as to the Participant or
the surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us and are stated in the
employer's plan, only Annuity Options 1 and 2 shall be available to the
Participant. All Annuity Options must meet the requirements of IRC
Section 401(a)(9), including the requirement of IRC Section
401(a)(9)(G) that payments to persons other than Participants are
incidental.
Annuity Option 1(b) is not available for a Participant whose life
expectancy is less than 10 years. Under Annuity Option 2(a) and 2(b)
the designated Co-Annuitant must be the Participant's spouse. Annuity
Option 2(b) is not available for a Participant and his or her spouse
where the joint life expectancy of the Participant and such spouse is
less than 10 years.
Except as hereinafter provided, only Annuity Option 2(a) is available
to a married Participant. A married Participant may elect another
Annuity Option, provided his or her spouse consents in accordance with
the requirements of IRC Section 417 or provided such election is
otherwise permitted under Treasury Regulations. An unmarried
Participant will be deemed to have elected Annuity Option 1(a) unless
he or she makes a different election in the manner required under IRC
Section 417 (and applicable regulations).
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<PAGE> 19
ELECTIONS AND CONSENTS
9. Elections and consents made pursuant to this Contract may be revoked in
the form, time, and manner prescribed in IRC Section 417 (and
applicable regulations). All elections and consents required by this
Contract shall adhere to the requirements of the applicable regulations
interpreting IRC Section 417 (or any other applicable law), including
the requirements as to the timing of any elections or consents. No
amount may be paid from the Contract in a lump sum unless such payment
is allowed under both the retirement plan with regard to which the
Contract is purchased and the Internal Revenue Code and related
regulations. A Participant who is married must have the consent of his
or her spouse to withdraw all or part of the Contract Value.
MATURITY VALUE
10. If the Contract Value is greater than $3,500, as determined on the
first day of the month preceding the Maturity Date, in accordance with
the requirements of IRC Sections 411(a)(11) and 417 (and applicable
regulations), We will not exercise our right to pay the Contract Value
on the Maturity Date in one lump sum in lieu of annuity benefits.
DIRECT ROLLOVERS
11. This Section 11 applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Contract to the contrary
that would otherwise limit a distributee's election under this Section
11, a distributee may elect, at the time and in the manner prescribed
by us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under IRC Section 401(a)(9); and the
portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an individual retirement account
described in IRC Section 408(a), an individual retirement annuity
described in IRC Section 408(b), an annuity plan described in IRC
Section 403(a), or a qualified trust described in IRC Section 401(a),
that accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement account
or individual retirement annuity.
A distributee includes a Participant. In addition, the Participant's
surviving spouse and the Participants's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in IRC Section 414(p), are distributees with regard to the
interest of the spouse or former spouse.
A direct rollover is a payment by us to the eligible retirement plan
specified by the distributee.
IRC SECTION 72(S)
12. All references in the Contract to IRC Section 72(s) are deleted from
the Contract.
Endorsed on the Date of issue of this Contract.
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<PAGE> 20
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice President
5
<PAGE> 1
EXHIBIT (4)(ii)(a)(2)
ERISA TAX-SHELTERED ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) or an employee of such an organization. If the Owner is an
organization described in IRC Section 403(b)(1)(A), the term "Employee"
as used in this Endorsement shall mean the individual employee for
whose benefit the organization has established an annuity plan under
IRC Section 403(b). Such employee shall be the Annuitant. If the Owner
is an employee of an organization described in IRC Section
403(b)(1)(A), the Annuitant must be the same employee.
If this Contract is used as a funding mechanism for a rollover under
IRC Sections 403(b) or 408(d)(3), the Owner must be one individual,
that same individual must be the Annuitant, and the term "Employee"
shall mean that individual.
The Annuitant cannot be changed. Prior to the Maturity Date, the
Co-Annuitant can be changed, but such change shall not require any
distributions to be made under the Contract.
NONTRANSFERABLE
2. The interest of the Employee in this Contract is non-transferable
within the meaning of IRC Section 401(g) and applicable regulations and
is nonforfeitable. In particular, the Contract may not be sold,
assigned, discounted, or pledged as collateral for a loan or as
security for the performance of any obligation or for any other
purpose, to any person other than us.
PAYMENTS
3. Payments must be made by an organization described in IRC Section
403(b)(1)(A), except in the case of rollover contributions under IRC
Sections 403(b)(8) and 408(d)(3). The Employee must be an employee of
such organization.
Payments made pursuant to a salary reduction agreement shall be limited
to the extent provided in IRC Section 402(g). Payments shall not exceed
the amount allowed by IRC Section 415.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in this Contract shall be distributed as
required under IRC Section 403(b)(10) and applicable regulations.
Except as otherwise provided by law, for years beginning after December
31, 1996, the term "required beginning date" means April 1 of the
calendar year following the later of (1) the calendar year in which the
Employee attains age 70 1/2, or (2) the calendar year in which the
Employee retires. However, to the extent required by law, the required
beginning date means April 1 of the calendar year following the
calendar year in which the Employee attains age 70 1/2 for an Employee
who:
END.002.97
<PAGE> 2
(a) is a 5-percent owner (as defined in IRC Section 416) of the
organization described in Section 1 of this Endorsement with respect to
the plan year ending in the calendar year in which the Employee attains
age 70 1/2; and
(b) is not in a governmental plan or a church plan (as defined in IRC
Section 401(a)(9)(C)).
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
5. The Employee's entire interest shall be distributed no later than the
required beginning date, or shall be distributed, beginning no later
than the required beginning date, over (a) the life of the Employee or
the joint lives of the Employee and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9), or
(b) a period not extending beyond the life expectancy of the Employee,
or the joint life and last survivor expectancy of the Employee and the
designated beneficiary.
If the Employee's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be made in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DEATH BENEFIT
6. If, in the event of the Employee's death prior to the Maturity Date,
the Death Benefit is not paid to the employer plan, it shall be paid to
(1) the surviving spouse of the Employee in the form required by
section 205 of the Employee Retirement Income Security Act of 1974
(ERISA), unless the spouse elects otherwise in accordance with the
requirements of such section 205 or applicable regulations; or (2) if
there is no surviving spouse, or if the surviving spouse has consented
in the manner required by section 205 of ERISA, or if the applicable
regulations otherwise permit, to the Beneficiary under the Contract.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, the first sentence of the paragraph "Death of Annuitant" is
deleted, and the second sentence is modified to read as follows: "If
any Owner is not an individual, the death of the Annuitant (but not of
the Co-Annuitant) is treated as the death of an Owner."
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
7. If an Employee dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Employee's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Employee's death.
If the Employee dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Employee's death, except that
(a) if the interest is payable to an individual who is the
Employee's designated beneficiary, the designated beneficiary
may elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
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<PAGE> 3
(i) December 31 of the calendar year immediately
following the calendar year in which the Employee
died, and
(ii) December 31 of the calendar year in which the
Employee would have attained age 70 1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Employee.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Employee's death. If no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Employee's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Contract, the distribution requirements of provisions
"(d)" and "(e)" are deleted. If, after the Employee's death, the
designated beneficiary dies before the Maturity Date, no Death Benefit
is payable.
LIFE EXPECTANCY CALCULATIONS
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Employee, or (b) for purposes of
distributions beginning after the Employee's death, by the surviving
spouse. Such an election shall be irrevocable as to the Employee or the
surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
9. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us, only Annuity Options 1 and 2
shall be available to an Employee. All Annuity Options must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than Employees are incidental.
Annuity Option 1(b) is not available for an Employee whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b),
the designated Co-Annuitant must be the Employee's spouse. Annuity
Option 2(b) is not available for an employee and his or her spouse
where the life expectancy of the employee and such spouse is less than
10 years.
Except as hereinafter provided, only Annuity Option 2(a) is available
to a married Employee. A married Employee may elect another Annuity
Option, provided his or her spouse consents in accordance with the
requirements of section 205 of ERISA (and applicable regulations), or
provided such election is otherwise
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<PAGE> 4
permitted under such applicable regulations. An unmarried Employee will
be deemed to have elected annuity Option 1(a) unless he or she makes a
different election in the manner required under section 205 of ERISA
(and applicable regulations).
ELECTIONS AND CONSENTS
10. Elections and consents required by ERISA may be revoked in the form,
time, and manner prescribed in section 205 of ERISA (and applicable
regulations). All elections and consents required by ERISA shall adhere
to the requirements of the applicable regulations interpreting section
205 of ERISA (or any other applicable law), including the requirements
as to the timing of any elections or consents.
If a withdrawal is permitted by the employer's plan, no withdrawal,
partial or total, may be made without consent of the Employee and the
Employee's spouse in the manner required by section 205 of ERISA (and
applicable regulations), except to the extent that such consent is not
required under such applicable regulations. Any withdrawal made must be
made in the form required under section 205 of ERISA (and applicable
regulations), unless the employee (and spouse, if applicable) makes an
election in the form and manner permitted under such regulations, to
receive the benefit in another form.
WITHDRAWAL OF SALARY REDUCTION CONTRIBUTIONS
11. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and
the earnings on such contributions and on amounts held as of December
31, 1988, shall not be paid unless the Employee has reached age 59 1/2,
separated from service, died, become disabled (within the meaning of
IRC Section 72(m)(7)) or incurred a hardship as determined by the
organization described in Section 3 of this Endorsement; provided, that
amounts permitted to be distributed in the event of hardship shall be
limited to actual salary deferral contributions (excluding earnings
thereon); and provided further that amounts may be distributed pursuant
to a qualified domestic relations order to the extent permitted by IRC
Section 414(p).
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
12. Payments made by a nontaxable transfer from a custodial account
qualifying under IRC Section 403(b)(7), and earnings of such amounts,
shall not be paid or made available before the Employee dies, attains
age 59 1/2, separates from service, becomes disabled (within the
meaning of IRC Section 72(m)(7)) or in the case of such amounts attrib-
utable to contributions made under the custodial account pursuant to a
salary reduction agreement, encounters financial hardship; provided,
that such amounts permitted to be paid or made available in the event
of financial hardship shall be limited to amounts attributable to
actual salary deferral contributions made under the custodial account
(excluding earnings thereon); and provided further that amounts may be
distributed pursuant to a qualified domestic relations order to the
extent permitted by IRC Section 414(p).
MATURITY VALUE
13. If the Employee's Contract Value is greater than $3,500, as determined
on the first day of the month preceding the Maturity Date, in
accordance with section 205 of ERISA (and applicable regulations), We
will not exercise our right to pay the Contract Value of an employee on
the Maturity Date in one lump sum in lieu of annuity benefits.
DIRECT ROLLOVERS
14. This Section 14 applies to distributions made on or after January 1,
1993. A distributee may elect, at the time and in the manner prescribed
by us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
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<PAGE> 5
An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution
does not include (1) any distribution that is one of a series
of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; (2) any
distribution to the extent such distribution is required under
IRC Section 401(a)(9); and (3) the portion of any distribution
that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with
respect to employer securities).
An eligible retirement plan is an annuity described in IRC
Section 403(b), an individual retirement account described in
IRC Section 408(a), or an individual retirement annuity
described in IRC Section 408(b), that accepts the
distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former
spouse who is the alternative payee under a qualified domestic
relations order, as defined in IRC Section 414(p), are
distributees with regard to the interest of the spouse or
former spouse. A direct rollover is a payment by the plan
administrator or us to the eligible retirement plan specified
by the distributee.
IRC SECTION 72(S)
15. All references in the Contract to IRC Section 72(s) are deleted.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
5
<PAGE> 6
TAX-SHELTERED ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) or an employee of such an organization. If the Owner is an
organization described in IRC Section 403(b)(1)(A), the term "Employee"
as used in this Endorsement shall mean the individual employee for
whose benefit the organization has established an annuity plan under
IRC Section 403(b). Such employee shall be the Annuitant. If the Owner
is an employee of an organization described in IRC Section
403(b)(1)(A), the Annuitant must be the same employee.
If this Contract is used as a funding mechanism for a rollover under
IRC Sections 403(b) or 408(d)(3), the Owner must be one individual,
that same individual must be the Annuitant, and the term "Employee"
shall mean that individual.
The Annuitant cannot be changed. Prior to the Maturity Date, the
Co-Annuitant can be changed, but such change shall not require any
distributions to be made under the Contract. In the "Death Benefit
Before Maturity Date" section of part 4 of the Contract, the first
sentence of the paragraph "Death of Annuitant" is deleted, and the
second sentence is modified to read as follows: "If any Owner is not an
individual, the death of the Annuitant (but not of the Co-Annuitant) is
treated as the death of an Owner."
NONTRANSFERABLE
2. The interest of the Employee in this Contract is non-transferable
within the meaning of IRC Section 401(g) and applicable regulations and
is nonforfeitable. In particular, the Contract may not be sold,
assigned, discounted, or pledged as collateral for a loan or as
security for the performance of any obligation or for any other
purpose, to any person other than us.
PAYMENTS
3. Payments must be made by an organization described in IRC Section
403(b)(1)(A), except in the case of rollover contributions under IRC
Sections 403(b)(8) and 408(d)(3). The Employee must be an employee of
such organization.
Payments made pursuant to a salary reduction agreement shall be limited
to the extent provided in IRC Section 402(g). Payments shall not exceed
the amount allowed by IRC Section 415.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in this Contract shall be distributed as
required under IRC Section 403(b)(10) and applicable regulations.
Except as otherwise provided by law, for years beginning after December
31, 1996, the term "required beginning date" means April 1 of the
calendar year following the later of (1) the calendar year in which the
Employee attains age 70 1/2, or (2) the calendar year in which the
Employee retires. However, to the extent required by law, the required
beginning date means April 1 of the calendar year following the
calendar year in which the Employee attains age 70 1/2 for an Employee
who:
END.003.97
<PAGE> 7
(a) is a 5-percent owner (as defined in IRC Section 416) of the
organization described in Section 1 of this Endorsement with
respect to the plan year ending in the calendar year in which
the Employee attains age 70 1/2; and
(b) is not in a governmental plan or a church plan (as defined in
IRC Section 401(a)(9)(C)).
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
5. The Employee's entire interest shall be distributed no later than the
required beginning date, or shall be distributed, beginning no later
than the required beginning date, over (a) the life of the Employee or
the joint lives of the Employee and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9), or
(b) a period not extending beyond the life expectancy of the Employee,
or the joint life and last survivor expectancy of the Employee and the
designated beneficiary.
If the Employee's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be made in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
6. If an Employee dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Employee's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Employee's death.
If the Employee dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Employee's death, except that
(a) if the interest is payable to an individual who is the
Employee's designated beneficiary, the designated beneficiary
may elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the
Employee died, and
(ii) December 31 of the calendar year in which
the Employee would have attained age 70 1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Employee.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
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<PAGE> 8
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Employee's death. If no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Employee's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Contract, the distribution requirements of provisions
"(d)" and "(e)" are deleted. If, after the Employee's death, the
designated beneficiary dies before the Maturity Date, no Death Benefit
is payable.
LIFE EXPECTANCY CALCULATIONS
7. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Employee, or (b) for purposes of
distributions beginning after the Employee's death, by the surviving
spouse. Such an election shall be irrevocable as to the Employee or the
surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us, only Annuity Options 1 and 2
shall be available to an Employee. All Annuity Options must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than Employees are incidental.
Annuity Option 1(b) is not available for an Employee whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b),
the designated Co-Annuitant must be the Employee's spouse. Annuity
Option 2(b) is not available for an employee and his or her spouse
where the life expectancy of the employee and such spouse is less than
10 years.
WITHDRAWAL OF SALARY REDUCTION CONTRIBUTIONS
9. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and
the earnings on such contributions and on amounts held as of December
31, 1988, shall not be paid unless the Employee has reached age 59 1/2,
separated from service, died, become disabled (within the meaning of
IRC Section 72(m)(7)) or incurred a hardship as determined by the
organization described in Section 3 of this Endorsement; provided, that
amounts permitted to be distributed in the event of hardship shall be
limited to actual salary deferral contributions (excluding earnings
thereon); and provided further that amounts may be distributed pursuant
to a qualified domestic relations order to the extent permitted by IRC
Section 414(p).
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
10. Payments made by a nontaxable transfer from a custodial account
qualifying under IRC Section 403(b)(7), and earnings of such amounts,
shall not be paid or made available before the Employee dies, attains
age
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<PAGE> 9
59 1/2, separates from service, becomes disabled (within the meaning of
IRC Section 72(m)(7)) or in the case of such amounts attributable to
contributions made under the custodial account pursuant to a salary
reduction agreement, encounters financial hardship; provided, that such
amounts permitted to be paid or made available in the event of
financial hardship shall be limited to amounts attributable to actual
salary deferral contributions made under the custodial account
(excluding earnings thereon); and provided further that amounts may be
distributed pursuant to a qualified domestic relations order to the
extent permitted by IRC Section 414(p).
LOANS
11. While this Contract is in force, an Employee may borrow using his or
her interest in this Contract as the sole security for the loan. We
will usually make a loan within seven days after We receive the
request, subject to suspension of payment as set forth in part 10 of
the Contract.
The maximum loan value is 80% of the Contract Value for an Employee. An
Employee may borrow an amount up to the lessor of:
(a) the maximum loan value less any existing Debt, or
(b) An amount which, when added to any existing Debt, does not
exceed the lesser of:
(i) $50,000 (reduced by any excess of the highest
outstanding Debt during the one year period ending on
the day before the date on which the current loan is
made, over the outstanding Debt on the date the
current loan is made), or
(ii) $10,000 or, if greater, one-half of the Contract
Value.
An Employee's investment in each Investment Account will be reduced by
the amount withdrawn from that Investment Account in connection with
the loan and such amount will be transferred to the Loan Account.
Unless requested otherwise, We will withdraw the amount of the loan
from each Investment Account in the same manner as partial withdrawals.
If We withdraw part of the loan from an Employee's fixed Investment
Account, a Market Value Charge may be applied. On each Contract
Anniversary, the excess of the Debt over the amount in the Loan Account
will be transferred from the Investments Accounts to the Loan Account.
Any amounts in the Loan Account will earn interest at 4% per annum.
Since the amount of a loan is removed from the Investments Accounts, a
loan will have a permanent effect on the Contract Value. The longer the
loan is outstanding, the greater the effect is likely to be.
The loan interest rate will be 6% per annum. Interest will be payable
in arrears on each Contract Anniversary. Any interest not paid when due
will be added to the Debt and bear Interest in the same manner.
An Employee may repay any Debt in whole or in part while the Contract
is in force. An amount equal to the amount of the loan repayment will
be transferred from the Loan Account to the Investment Accounts in the
same proportion as Purchase Payments are currently allocated, unless
the Employee requests otherwise. Loans must be repaid within 5 years,
except for loans to acquire a principal residence for the Employee.
Repayment must be in level amounts made at least quarterly.
If, on any date, the Debt exceeds the Contract Value, then the Contract
will be in default. In such case We will send the Employee a notice of
default and tell him what payment is needed to cure the default. The
Employee will have a 31-day grace period from the date of mailing of
such notice during which to pay the default amount. If the required
payment is not paid within the grace period, the Contract may be
foreclosed (terminate without value).
DIRECT ROLLOVERS
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<PAGE> 10
12. This Section 12 applies to distributions made on or after January 1,
1993. A distributee may elect, at the time and in the manner prescribed
by us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (1) any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; (2) any distribution to the
extent such distribution is required under IRC Section 401(a)(9); and
(3) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an annuity described in IRC Section
403(b), an individual retirement account described in IRC Section
408(a), or an individual retirement annuity described in IRC Section
408(b), that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
A distributee includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternative payee
under a qualified domestic relations order, as defined in IRC Section
414(p), are distributees with regard to the interest of the spouse or
former spouse.
A direct rollover is a payment by the plan administrator or us to the
eligible retirement plan specified by the distributee.
IRC SECTION 72(S)
13. All references in the Contract to IRC Section 72(s) are deleted.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
5
<PAGE> 11
QUALIFIED PLAN ENDORSEMENT SECTION 401 PLANS
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner of the Contract must be either a trustee of a qualified
retirement plan under IRC Sections 401(a) or 403(a) or an employee
covered by such a plan. If the Owner is a trustee, the term
"Participant" as used in this Endorsement shall mean the individual
employee for whose benefit the employer has established the plan. If
the Owner is an employee, the term "Participant" shall mean the
employee.
In all cases, the Annuitant shall be the Participant and the Annuitant
cannot be changed. Prior to the Maturity Date, the Co-Annuitant can be
changed, but such change shall not require any distributions under the
Contract.
NONTRANSFERABLE
2. Ownership of this Contract may not be transferred except: (1) to the
Participant; (2) to a trustee or successor trustee of a retirement plan
qualified under IRC Sections 401(a) or 403(a); or (3) as otherwise
permitted by applicable regulations of the Internal Revenue Service.
If the Contract is transferred to the Participant, the Participant
becomes the Owner of the Contract and thereafter may not assign, sell,
transfer, or discount the Contract, or pledge it as collateral for a
loan or as security for the performance of an obligation or for any
other purpose, other than to us.
REQUIRED BEGINNING DATE
3. The Participant's entire interest in the Contract shall be distributed
as required by IRC Section 401(a)(9), and the regulations thereunder,
including the minimum distribution incidental benefit requirement of
Prop. Treas. Reg. Section 1.401(a)(9)-2.
Except as otherwise provided by law, for years beginning after December
31, 1996, the term "required beginning date" means April 1 of the
calendar year following the later of (1) the calendar year in which the
Employee attains age 70 1/2, or (2) the calendar year in which the
Employee retires. However, to the extent required by law, the required
beginning date means April 1 of the calendar year following the
calendar year in which the Employee attains age 70 1/2 for an Employee
who:
(a) is a 5-percent owner (as defined in IRC Section 416) of the
organization described in Section 1 of this Endorsement with
respect to the plan year ending in the calendar year in which
the Employee attains age 70 1/2; and
(b) is not in a governmental plan or a church plan (as defined in
IRC Section 401(a)(9)(C)).
The requirements of Sections 3,4, and 6 of this Endorsement do not
apply with respect to a benefit to which a proper designation is in
effect under section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982.
DISTRIBUTIONS DURING PARTICIPANT'S LIFE
END.004.97
<PAGE> 12
4. The Participant's entire interest shall be distributed no later than
the required beginning date, or shall be distributed, beginning no
later than the required beginning date over (a) the life of the
Participant or the joint lives of the Participant and an individual who
is his or her designated beneficiary (within the meaning of IRC Section
401(a)(9)), or (b) a period not extending beyond the life expectancy of
the Participant, or the joint life and last survivor expectancy of the
Participant and the designated beneficiary. If the Participant's
interest is to be distributed over a period greater than one year, then
the amount to be distributed by December 31 of each year (including the
year in which the required beginning date occurs) shall be determined
in accordance with the requirements of IRC Section 401(a)(9), including
the incidental death benefit requirements of IRC Section 401(a)(9)(G),
and the regulations thereunder, including the minimum distribution
incidental benefit requirements of Proposed Treasury Regulation Section
1.401(a)(9)-2.
DEATH BENEFIT
5. If, in the event of the Participant's death prior to the Maturity Date,
the Death Benefit is not paid to the trustee of a retirement plan
qualified under IRC Sections 401(a) or 403(a), it shall be paid to (1)
the surviving spouse of the Participant in the form required by IRC
Section 417(c), unless the spouse elects otherwise in accordance with
the requirements of IRC Section 417 or regulations promulgated
thereunder, or (2) if there is no surviving spouse, or if the surviving
spouse has consented in the manner required by IRC Section 417, or if
regulations promulgated by the Treasury Department under IRC Section
417 otherwise permit, to the Beneficiary under the Contract.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, the first sentence of the paragraph "Death of Annuitant" is
deleted, and the second sentence is modified to read as follows: "If
any Owner is not an individual, the death of the Annuitant (but not of
the Co-Annuitant) is treated as the death of an Owner."
DISTRIBUTIONS AFTER PARTICIPANT'S DEATH
6. If the Participant dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the
Participant's interest (if any) shall be distributed at least as
rapidly as under the method of distribution in effect as of the
Participant's death.
If the Participant dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Participant's death, except that
(a) if the interest is payable to an individual who is the
Participant's designated beneficiary, the designated
beneficiary may elect to receive the entire interest over the
life of the designated beneficiary or over a period not
extending beyond the life expectancy of the designated
beneficiary, commencing on or before December 31 of the
calendar year immediately following the calendar year in which
the Participant died; or
(b) if the designated beneficiary is the Participant's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the
Participant died, and
(ii) December 31 of the calendar year in which
the Participant would have attained age 70
1/2.
If the surviving spouse dies before distributions begin, the
limitations of this section shall be applied as if the
surviving spouse were the Participant.
2
<PAGE> 13
An irrevocable election of the method of distribution by a
designated beneficiary who is the surviving spouse must be
made no later than the earlier of December 31 of the calendar
year containing the fifth anniversary of the Participant's
death or the date distributions are required to begin pursuant
to this provision (b). If no election is made, the entire
interest will be distributed in accordance with the method of
distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Participant's death. If no
election is made, the entire interest will be distributed by
December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
In the "Death of Owner" section of the "Death Benefit Before
Maturity Date" part of the Contract, the distribution
requirements of provisions "(d)" and "(e)" are deleted. If,
after the Participant's death, the designated beneficiary dies
before the Maturity Date, no Death Benefit is payable.
LIFE EXPECTANCY CALCULATIONS
7. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Participant, or (b) for purposes of
distributions beginning after the Participant's death, by the surviving
spouse. Such an election shall be irrevocable as to the Participant or
the surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us and are stated in the
employer's plan, only Annuity Options 1 and 2 shall be available to the
Participant. All Annuity Options must meet the requirements of IRC
Section 401(a)(9), including the requirement of IRC Section
401(a)(9)(G) that payments to persons other than Participants are
incidental.
Annuity Option 1(b) is not available for a Participant whose life
expectancy is less than 10 years. Under Annuity Option 2(a) and 2(b)
the designated Co-Annuitant must be the Participant's spouse. Annuity
Option 2(b) is not available for a Participant and his or her spouse
where the joint life expectancy of the Participant and such spouse is
less than 10 years.
Except as hereinafter provided, only Annuity Option 2(a) is available
to a married Participant. A married Participant may elect another
Annuity Option, provided his or her spouse consents in accordance with
the requirements of IRC Section 417 or provided such election is
otherwise permitted under Treasury Regulations. An unmarried
Participant will be deemed to have elected Annuity Option 1(a) unless
he or she makes a different election in the manner required under IRC
Section 417 (and applicable regulations).
ELECTIONS AND CONSENTS
3
<PAGE> 14
9. Elections and consents made pursuant to this Contract may be revoked in
the form, time, and manner prescribed in IRC Section 417 (and
applicable regulations). All elections and consents required by this
Contract shall adhere to the requirements of the applicable regulations
interpreting IRC Section 417 (or any other applicable law), including
the requirements as to the timing of any elections or consents.
No amount may be paid from the Contract in a lump sum unless such
payment is allowed under both the retirement plan with regard to which
the Contract is purchased and the Internal Revenue Code and related
regulations. A Participant who is married must have the consent of his
or her spouse to withdraw all or part of the Contract Value.
MATURITY VALUE
10. If the Contract Value is greater than $3,500, as determined on the
first day of the month preceding the Maturity Date, in accordance with
the requirements of IRC Sections 411(a)(11) and 417 (and applicable
regulations), We will not exercise our right to pay the Contract Value
on the Maturity Date in one lump sum in lieu of annuity benefits.
DIRECT ROLLOVERS
11. This Section 11 applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Contract to the contrary
that would otherwise limit a distributee's election under this Section
11, a distributee may elect, at the time and in the manner prescribed
by us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under IRC Section 401(a)(9); and the
portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an individual retirement account
described in IRC Section 408(a), an individual retirement annuity
described in IRC Section 408(b), an annuity plan described in IRC
Section 403(a), or a qualified trust described in IRC Section 401(a),
that accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement account
or individual retirement annuity.
A distributee includes a Participant. In addition, the Participant's
surviving spouse and the Participants's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in IRC Section 414(p), are distributees with regard to the
interest of the spouse or former spouse.
A direct rollover is a payment by us to the eligible retirement plan
specified by the distributee.
IRC SECTION 72(S)
12. All references in the Contract to IRC Section 72(s) are deleted from
the Contract.
Endorsed on the Date of issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
4
<PAGE> 15
Vice-President
5
<PAGE> 16
SIMPLE INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
The Contract to which this Endorsement is attached is issued to fund a savings
incentive match plan for employees individual retirement annuity ("SIMPLE IRA")
under Sections 408(b) and 408(p) of the Internal Revenue Code ("IRC").
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be one individual and the Annuitant. Neither the Owner
nor the Annuitant can be changed.
NONFORFEITABLE
2. The Contract is established for the exclusive benefit of the Owner or
his or her Beneficiaries and the interest of the Owner is
nonforfeitable.
NONTRANSFERABLE
3. The Owner may not assign, sell, transfer, discount or pledge this
Contract as collateral for a loan or as security for the performance of
any obligation or for any other purpose (other than a transfer incident
to a divorce or separation instrument in accordance with IRC Section
408(d)(6)) to any person other than us.
CONTRIBUTIONS
4. No contributions may be made to this Contract other than (1) cash
contributions under a qualified salary reduction arrangement (within
the meaning of IRC Sections 408(p)(1) and (2)), including matching or
nonelective employer contributions; and (2) transfers or rollovers from
other SIMPLE retirement accounts (within the meaning of IRC Section
408(p)(1)) of the Owner.
In all events, the maximum annual Payments shall not exceed amounts
permitted by IRC Section 408(p)(2).
To the extent necessary to preserve qualification under the Internal
Revenue Code, We may refund Payments. Any refund of Payments (other
than those attributable to excess contributions) will be applied,
before the close of the calendar year following the refund, toward
future Payments or the purchase of additional benefits.
DISTRIBUTIONS DURING OWNER'S LIFE
5. The Owner's entire interest in the Contract shall be distributed as
required under IRC Section 408(b)(3) and applicable regulations. Unless
deferral is otherwise permitted under applicable regulations, the
Owner's entire interest shall be distributed no later than the
"required beginning date," or shall be distributed beginning no later
than the "required beginning date" over (a) the life of the Owner or
the joint lives of the Owner and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the Owner,
or joint life and last survivor expectancy of the Owner and the
designated beneficiary.
The "required beginning date" shall mean April 1 of the calendar year
following the calendar year in which the Owner attains age 70 1/2.
If the Owner's interest is to be distributed over a period greater than
one year, then the amount to be distributed by December 31 of each year
(including the year in which the required beginning date occurs) shall
be determined in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
END.SIRA.97
<PAGE> 17
ANNUITY OPTIONS
6. Only Annuity Options 1 and 2 shall be offered unless We consent to the
use of an additional option. Annuity Option 1(b) is not available for
an Owner whose life expectancy is less than 10 years. Under Annuity
Options 2(a) and 2(b) the designated Co-Annuitant must be the Owner's
spouse. Annuity Option 2(b) is not available for an Owner and his or
her spouse where the life expectancy of the Owner and such spouse is
less than 10 years.
DISTRIBUTIONS AFTER OWNER'S DEATH
7. If an Owner dies on or after the required beginning date after
distribution of the Owner's interest has begun (or if distributions
have begun before the required beginning date as irrevocable annuity
payments), the remaining portion of such interest (if any) shall be
distributed at least as rapidly as under the method of distribution in
effect as of the Owner's death.
If the Owner dies before the required beginning date and an irrevocable
annuity distribution has not begun, the entire interest shall be
distributed by December 31 of the calendar year containing the fifth
anniversary of the Owner's death, except that
(a) if the interest is payable to an individual who is
the Owner's designated beneficiary, the designated
beneficiary may elect to receive the entire interest
over the life of the designated beneficiary or over a
period not extending beyond the life expectancy of
the designated beneficiary, commencing on or before
December 31 of the calendar year immediately
following the calendar year in which the Owner died;
or
(b) if the designated beneficiary is the Owner's
surviving spouse, the surviving spouse may elect to
receive the entire interest over the life of the
surviving spouse or over a period not extending
beyond the life expectancy of the surviving spouse,
commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the
Owner died, and
(ii) December 31 of the calendar year in which
the Owner would have attained age 70 1/2.
If the surviving spouse dies before distributions begin, the
limitations of this section shall be applied as if the surviving spouse
were the Owner.
An irrevocable election of the method of distribution by a designated
beneficiary who is the surviving spouse must be made no later than the
earlier of December 31 of the calendar year containing the fifth
anniversary of the Owner's death or the date distributions are required
to begin pursuant to this provision (b).
If the designated beneficiary is the Owner's surviving spouse, the
spouse may irrevocably elect to treat the Contract as his or her own
individual retirement arrangement (IRA). This election will be deemed
to have been made if such surviving spouse (i) fails to elect that his
or her interest will be distributed in accordance with one of the
preceding provisions, or (ii) makes a rollover from the Contract.
An irrevocable election of the method of distribution by a designated
beneficiary who is not the surviving spouse must be made within one
year of the Owner's death, and if no election is made, the entire
interest will be distributed by December 31 of the calendar year
containing the fifth anniversary of the Owner's death.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, (a) the provision entitled "Death of Annuitant" is deleted;
and (b) in the "Death of Owner" provision, the distribution
requirements of provisions "(d)" and "(e)" are deleted. If, after the
Owner's death, the designated beneficiary dies before the Maturity
Date, no Death Benefit is payable.
LIFE EXPECTANCY CALCULATIONS
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<PAGE> 18
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Owner, or (b) for purposes of
distributions beginning after the Owner's death, by the surviving
spouse. Such an election shall be irrevocable as to the Owner or the
surviving spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
CANCELLATION FOR NONPAYMENT
9. We may cancel the Contract for nonpayment of Payments and pay you the
Contract Value (measured as of the Valuation Period during which the
cancellation occurs), less the Administration Fee (if applicable), if
(a) prior to the Maturity Date, no Payments are made for two
consecutive Contract Years; (b) the total Payments made, less any
partial withdrawals, are less than $2,000; (c) the Contract Value at
the end of such two-year period is less than $2,000; and (d) the
paid-up annuity benefit at the Maturity Date at the end of such
two-year period would be less than $20 per month.
IRC SECTION 72(S)
10. All references in the Contract to IRC Section 72(s) are deleted.
SUMMARY DESCRIPTION
11. We agree to provide the Owner's employer the summary description
described in IRC Section 408(I)(2) unless this SIMPLE IRA is a transfer
SIMPLE IRA.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
3
<PAGE> 19
FIXED ACCOUNT ENDORSEMENT
PART 7, FIXED ACCOUNT PROVISIONS, INVESTMENT ACCOUNT of all contracts to which
this Endorsement is attached is replaced as follows:
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 the guaranteed rate
from time to time for Net Payments,
renewal amounts and amounts transferred
to a fixed Investment Option. In no
event will the minimum guaranteed rate
under a fixed Investment Account be
less than 3%.
PART 7, FIXED ACCOUNT PROVISIONS, 1-YEAR DOLLAR COST AVERAGING OPTION is added
to all contracts to which this Endorsement is attached as follows:
1-YEAR DOLLAR COST The 1-Year DCA Investment Option may be
AVERAGING (DCA) elected by the Owner to make automatic
INVESTMENT OPTION monthly transfers from a 1-Year fixed
Investment Account to one or more
variable Investment Options. Only
initial and subsequent Net Payments may
be allocated to the 1-Year DCA
Investment Option. Amounts may not be
transferred from other Investment
Options to the 1-Year DCA Investment
Option.
The automatic monthly transfer amount,
"DCA amount", is determined as follows:
(a) In the first 11 months, the DCA
amount will be equal to 1/11 of
the amount allocated to the
1-Year DCA Investment Option.
(b) At the end of the 12th month,
the DCA amount will be equal to
the remaining balance in the
Investment Account.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
END.007.98
<PAGE> 20
DEATH BENEFIT ENDORSEMENT
PART 4, BENEFITS, DEATH BENEFIT BEFORE MATURITY DATE of all contracts to which
this Endorsement is attached is replaced as follows:
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 as follows:
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 will be determined as
follows:
(a) During the first Contract Year, the Death
Benefit will be the greater of:
(i) the Contract Value, or
(ii) the sum of all Payments made,
less any amount deducted in connection with partial
withdrawals.
(b) During any subsequent Contract Year, the
Death Benefit will be the greater of:
(i) the Contract Value, or
(ii) the Death Benefit on the last day
of the previous Contract Year, plus any Payments
made and less any amounts deducted in connection
with partial withdrawals, since then.
If any Owner dies after their 81st birthday, (b)(ii)
is the Death Benefit on the last day of the Contract
Year just prior to the Owner's 81st birthday, plus
any Payments made and less any amounts 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 determined as the greater
of:
(a) the Contract Value, or
(b) the excess of (i) over (ii) where:
(i) equals the sum of all Payments.
(ii) equals the sum of any amounts
deducted in connection with partial withdrawals.
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.
END.006.98
<PAGE> 21
(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.
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,
a second Death Benefit will be paid 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. For purposes of
calculating the Death Benefit payable upon the death
of the surviving spouse, the Death Benefit paid upon
the first Owner's death will be treated as a Payment
to the Contract. In addition, the Death Benefit on
the last day of the previous Contract Year (or the
last day of the Contract Year just prior to the
Owner's 81st birthday, if applicable) shall be set to
zero as of the date of the first Owner's death.
(f) Withdrawal Charges will be waived on any
withdrawals.
If there is more than one Beneficiary, the foregoing
provisions will independently apply to each
Beneficiary.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
<PAGE> 1
Exhibit (b)(4)(ii)(B)(i)
DEATH BENEFIT ENDORSEMENT
PART 4, BENEFITS, DEATH BENEFIT BEFORE MATURITY DATE OF THE FLEXIBLE PURCHASE
PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY TO WHICH THIS
ENDORSEMENT IS ATTACHED IS REPLACED AS FOLLOWS:
DEATH BENEFIT BEFORE DEATH OF ANNUITANT WHERE YOU ARE NOT THE
MATURITY DATE ANNUITANT. We will pay the death benefit to the
Beneficiary if you are not the Annuitant and the
Annuitant dies before the Maturity Date. Payment
will be made either as a lump sum or in accordance
with any Annuity Option described in this
Contract. If there is more than one Annuitant, the
death benefit will be paid on the death of the
last surviving Co-Annuitant. Upon the death of the
Annuitant, the Beneficiary becomes the Owner of
the Contract and may elect to continue the
Contract rather than to receive payment of the
death
DEATH OF ANNUITANT WHERE YOU ARE THE ANNUITANT. We
will pay the death benefit. benefit to the
Beneficiary if you are the Annuitant, there is no
surviving Co-Annuitant, and you die before the
Maturity Date. The Beneficiary becomes entitled to
exercise ownership rights in the Contract and may
continue the Contract. If this is a Non-Qualified
Contract, the following special distribution rules
apply. Distribution of the Beneficiary's interest
in the Contract must be made within 5 years after
your death or as an annuity which begins within
one year of death and is payable over the life of
the Beneficiary (or over a period not in excess of
the Beneficiary's life expectancy). If your spouse
is the Beneficiary, your spouse may elect to be
treated as Owner and distribution will be made no
later than the date on which distribution would be
required after the death of your spouse. If you
are the Annuitant, there is a surviving
Co-Annuitant, and you die before the Maturity
Date, payment of your interest in the Contract
will be made in accordance with the Death of Owner
provision of this Contract.
DEATH BENEFIT. A 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 as
follows:
1. If the Annuitant dies on or prior to the
first of the month following his or her
85th birthday, the death benefit will be
determined as follows:
a) During the first Contract Year, the
death benefit will be the greater
of:
i) the Contract Value, or
ii) the sum of all Purchase
Payments made, less any
amount deducted in
connection with partial
withdrawals.
b) During any subsequent Contract
Year, the death benefit will be the
greater of:
i) the Contract Value, or
ii) the death benefit on the
last day of the previous
Contract Year plus any
Purchase Payments made and
less any amounts deducted in
connection with partial
withdrawals since then.
ENDORSEMENT.005
<PAGE> 2
2. If the Annuitant dies after the first of
the month following his or her 85th
birthday, the death benefit will be
determined as the greater of:
a) the Contract Value, or
b) the excess of (i) over (ii) where:
i) the sum of all Purchase
Payments.
ii) the sum of all withdrawals,
including any applicable
withdrawal charges.
DEATH OF OWNER. If you die before the
Annuitant and before the Maturity Date,
the Successor Owner will become the Owner
of the Contract and will be entitled to
your interest in the Contract. If this is
a Non-Qualified Contract, the following
special distribution rules apply.
Distribution of such interest must be
made within 5 years after your death or
as an annuity which begins within one
year of death and is payable over the
life of the Successor Owner (or over a
period not in excess of the Successor
Owner's life expectancy). If your spouse
is the Successor Owner, your spouse will
be treated as Owner and distribution will
be made no later than the date
distribution would be required after the
death of your spouse. If you are not an
individual, the death of the Annuitant or
Co-Annuitant, or any change in the
Annuitant or Co-Annuitant will be treated
as the death of the Owner.
If there is more than one Owner,
distributions will occur upon the death
of any Owner. If both Owners are
individuals, the distributions will be
made to the remaining Owner rather than
the Successor Owner or the Beneficiary.
If there is any Debt, the death benefit
equals the amount described above less
the Debt under the Contract.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
- ---------------
Vice-President
<PAGE> 1
EXHIBIT (b)(4)(ii)(B)(2)
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the
Contract to which this Endorsement is attached is hereby amended as
follows:
1. The Annuitant must be one individual and the Contract Owner. A
Co-Annuitant may be designated but such term shall refer only to an
individual entitled to receive a benefit upon the death of the
Annuitant under one of the Annuity Options specified in the Contract.
2. The Contract is established for the exclusive benefit of the Contract
Owner or his or her Beneficiaries and the interest of the Contract
Owner is nonforfeitable.
3. The loan provision of the Contract is deleted. The Contract Owner may
not assign, sell, transfer, discount or pledge this Contract as
collateral for a loan.
4. The maximum annual Purchase Payments shall not exceed the lesser of
$2,000 or 100% of compensation unless such payment qualifies as a
rollover contribution described in sections 408(d)(3), 402(a)(5),
402(a)(7), 403(a)(4) or 403(b)(8) of the Internal Revenue Code or such
payment qualifies as a contribution made in accordance with a
Simplified Employee Pension Program as described in section 408(k) of
the Internal Revenue Code. To the extent necessary to preserve
qualification under the Code, refunds of Purchase Payments may be made
by the Company. Any refund of payments (other than those attributable
to excess contributions) will be applied, before the close of the
calendar year following the refund, toward future Purchase Payments or
the purchase of additional benefits.
5. Notwithstanding any other provision of the Contract, the Annuitant's
entire interest in the Contract shall be distributed as required under
section 408(b)(3) of the Internal Revenue Code and applicable
regulations. Unless deferral is otherwise permitted under applicable
regulations, the Annuitant's entire interest shall be distributed no
later than the "required beginning date," or shall be distributed
beginning no later than the "required beginning date", in equal or
substantially equal amounts, over the life of the Annuitant or the
joint lives of the Annuitant and an individual who is his or her
designated Beneficiary (or over a period not extending beyond the life
expectancy of the Annuitant, or joint life expectancy of the Annuitant
and the designated Beneficiary). For purposes of this paragraph, the
"required beginning date" shall mean April 1 of the calendar year
following the calendar year in which the Annuitant attains age 70 1/2.
If the Annuitant's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be no less than the amount prescribed in regulations issued under
section 401(a)(9) of the Internal Revenue Code, including the
requirement of Proposed Treasury Regulation section 1.401(a)(9)-2.
In particular, only Annuity Options (1) and (2) shall be offered unless
we consent to the use of an additional option.
6. Notwithstanding any provision of the Contract to the contrary, if an
Annuitant dies on or after the required beginning date in Paragraph 5
(or if a distribution has begun before the required beginning date as
irrevocable annuity payments), the remaining portion of such interest
(if any) shall be distributed at least as rapidly as under the method
of distribution in effect as of the Annuitant's death.
If the Annuitant dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Annuitant's death, except that (i) the
interest may be distributed to an individual who is his or her
designated Beneficiary, provided that payments begin on or before
December 31 of the calendar year immediately following the calendar
year in which the Annuitant died and are made over the life of the
designated Beneficiary or over a period not extending beyond the life
expectancy of the designated Beneficiary; or (ii) if the designated
Beneficiary is the Annuitant's surviving spouse, the surviving spouse
may elect to receive equal or substantially equal payments over the
life or life expectancy of the surviving spouse, commencing at any date
prior to the later of (1) December 31 of the
401-VER3
<PAGE> 2
calendar year immediately following the calendar year in which the
Annuitant died, and (2) December 31 of the calendar year in which the
Annuitant would have attained age 70 1/2. Such election by the
surviving spouse must be made no later than the earlier of December 31
of the calendar year containing the fifth anniversary of the
Annuitant's death or the date distributions are required to begin
pursuant to the preceding sentence.
If the designated Beneficiary is the owner's surviving spouse, the
spouse may treat the Contract as his or her own individual retirement
arrangement (IRA). This election will be deemed to have been made if
such surviving spouse makes a regular IRA contribution to the Contract,
makes a rollover to or from the Contract, or fails to elect that his or
her interest will be distributed in accordance with one of the
provisions in the preceding paragraph.
If the surviving spouse dies before distributions begin, the
limitations of this paragraph shall be applied as if the surviving
spouse were the Annuitant. The determination of the required period of
distribution (including applicable life expectancy) shall be made in
accordance with the regulations issued under section 401(a)(9),
including the requirement of Proposed Treasury Regulation section
1.401(a)(9)-2).
For purposes of Paragraph 5 and 6, life expectancy is computed by use
of the expected return multiples in Tables V and VI of section 1.72-9
of the Income Tax Regulations. If Benefits under the (Contract) are
payable in accordance with an Annuity Option provided under the
Contract, life expectancy shall not be recalculated. If Benefits are
payable under an alternate form acceptable to the Company, life
expectancies shall be recalculated annually unless elected otherwise at
the time distributions are required to begin (1) by the Annuitant, or
(2) for purposes of distributions beginning after the Annuitant's
death, by the surviving spouse. Such election shall be irrevocable as
to the Annuitant or the surviving spouse, and shall apply to all
subsequent years. However, the life expectancy of a non-spouse
Beneficiary may not be recalculated, and shall be calculated using the
attained age of such Beneficiary during the calendar year in which
distributions are required to begin pursuant to Paragraph 5 or 6,
whichever is applicable, and payments for any subsequent calendar year
shall be calculated based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
7. Annuity Option 1(b) is not available for an Annuitant whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b)
the designated Co-Annuitant must be the Annuitant's spouse. Annuity
Option 2(b) is not available for an Annuitant and his or her spouse
where the life expectancy of the Annuitant and such spouse is less than
10 years.
8. We may cancel the Contract for nonpayment of Purchase Payments and pay
you the Contract Value (measured as of the Valuation Period during
which the cancellation occurs), less the administration fee, if
applicable, if, prior to the Maturity Date, no Purchase Payments are
made for two consecutive Contract Years and if (i) the total Purchase
Payments made, less any partial withdrawals, are less than $2,000; (ii)
the Contract Value at the end of such two-year period is less than
$2,000; and (iii) the paid-up annuity benefit at the Maturity Date at
the end of such two-year period would be less than $20 per month.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
continued...
<PAGE> 3
RETIREMENT EQUITY ACT
ENDORSEMENT
The Contract and Tax-Sheltered Annuity Endorsement to which this
Retirement Equity Act Endorsement is attached is amended as follows:
1. In the event of the participant's death prior to the Maturity Date, the
death benefit shall be paid to (1) the surviving spouse of the
participant in the form required by section 205 of the Employee
Retirement Income Security Act of 1974 (ERISA), unless the spouse
elects otherwise in accordance with the requirements of such section
205 or the applicable regulations issued by the Secretary of the
Treasury; or (2) if there is no surviving spouse, or if the surviving
spouse has consented in the manner required by section 205 of ERISA or
if the applicable regulations promulgated by the Secretary of the
Treasury otherwise permit, to the designated Beneficiary in the form
provided for in the Contract.
2. Except to the extent applicable Treasury regulations allow us to offer
different Annuity Options that are agreed to by us and are stated in
the employer's plan, and except as limited below, only Annuity Options
1(a) and 1(b) and 2(a) and 2(b) are available to the participant.
Except as herein after provided, only Annuity Option 2(a) is available
to a married participant. A married participant may elect another
Annuity Option, provided his or her spouse consents in accordance with
the requirements of section 205 of the ERISA (and applicable
regulations), or provided such election is otherwise permitted under
such applicable regulations. An unmarried participant will be deemed to
have elected Annuity Option 1(a) unless he or she makes a different
election in the manner required under section 205 of ERISA (and
applicable regulations).
3. Elections made pursuant to paragraphs 1 and 2 of this Endorsement may
be revoked in the form, time, and manner prescribed in section 205 of
ERISA (and applicable regulations). All elections required by this
Endorsement shall adhere to the requirements of the applicable
regulations interpreting section 205 of ERISA (or any other applicable
law), including the requirements as to the timing of any elections.
4. If a withdrawal is permitted by the plan or if the plan permits use of
a participant's accrued benefit as security for a loan, no withdrawal,
partial or total, or loan, may be made without consent of the
participant and the participant's spouse in the manner required by
section 205 of ERISA (and applicable regulations), except to the extent
that such consent is not required under such applicable regulations. If
this Endorsement relates to a plan subject to section 205 of ERISA or
section 411(a)(11) of the Internal Revenue Code, any withdrawal or loan
made pursuant to this Contract must be made in the form required under
Section 205 of ERISA (and applicable regulations), unless the
participant (and spouse, if applicable) makes an election in the form
and manner permitted under such regulations, to receive the benefit in
another form.
5. We will not exercise our right to pay the Contract Value on the
Maturity Date in one lump sum in lieu of annuity benefits if the
Contract Value is greater than $3,500, as determined on the first day
of the month preceding the Maturity Date, in accordance with section
205 of ERISA (and applicable regulations).
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
<PAGE> 4
TAX-SHELTERED ANNUITY
ENDORSEMENT
The Contract to which this Endorsement is attached is amended as
follows:
1. The Contract Owner must be either an organization described in section
403(b)(1)(A) of the Internal Revenue Code or an employee of such an
organization. If the Contract Owner is an organization described in
section 403(b)(1)(A), the term "participant" as used in this
Endorsement shall mean each individual employee for whose benefit the
organization has established an annuity plan under section 403(b) of
the Internal Revenue Code. If the Contract Owner is an employee of an
organization described in section 403(b)(1)(A), the Annuitant must be
that same employee and the term "participant" shall mean the employee.
If the Contract is issued as a rollover under section 403(b), the
Annuitant must be one individual and the Contract Owner and the term
"participant" shall mean the Annuitant/Contract Owner.
2. The interest of the participant is non-transferable within the meaning
of section 401(g) of the Internal Revenue Code and applicable
regulations and is nonforfeitable.
3. Purchase Payments must be made by an organization described in section
403(b)(1)(A) of the Internal Revenue Code. The participant must be an
employee of such organization.
4. Notwithstanding any other provision of this Contract, the participant's
entire interest in the Contract shall be distributed as required under
section 403(b)(10) of the Internal Revenue Code and applicable
regulations. Unless a deferral is otherwise permitted under applicable
regulations, the participant's entire interest shall be distributed no
later than the "required beginning date," or shall be distributed,
beginning no later than the "required beginning date," over the life of
the participant or the joint lives of the participant and an individual
who is his or her designated Beneficiary (or over a period not
extending beyond the life expectancy of the participant, or joint life
expectancy of the participant and the designated Beneficiary). For
purposes of this paragraph, the "required beginning date" shall mean
April 1 of the calendar year following the calendar year in which the
participant attains age 70 1/2; except that for a participant who
attains age 70 1/2 before January 1, 1988, or for a participant in a
governmental or a church plan (as defined in section 89(i)(4) of the
Internal Revenue Code), the term "required beginning date" shall mean
April 1 of the calendar year following the later of (1) the calendar
year in which the participant attains age 70 1/2 or (2) the calendar
year in which the participant retires. If the participant's interest is
to be distributed over a period greater than one year, then the amount
to be distributed by December 31 of each year (including the year in
which the required beginning date occurs) shall be no less than the
amount prescribed in regulations issued under section 401(a)(9) of the
Internal Revenue Code, including the requirements of Proposed Treasury
Regulation section 1.401(a)(9)-2.
In particular, only Annuity Options (1) and (2) shall be offered unless
we consent to the use of an additional option. All such options must
meet the requirements of section 403(b)(10) of the Internal Revenue
Code, including the requirement that payments to persons other than
participants are incidental.
5. Notwithstanding any provision of the Contract to the contrary, if a
participant dies on or after the required beginning date as stated in
Paragraph 4 (or if a distribution has begun before the required
beginning date as irrevocable annuity payments), the remaining portion
of such interest (if any) shall be distributed at least as rapidly as
under the method of distribution in effect as of the participant's
death. If the participant dies before the required beginning date and
if an irrevocable annuity distribution of his or her interest has not
begun, the entire interest shall be distributed within five years of
his or her death, (or such later date as permitted under applicable
regulations) except that (i) the interest may be distributed to an
individual who is his or her designated Beneficiary, provided that
payments begin within one year of the participant's death (or such
later date as permitted under applicable regulations) and are made (in
accordance with the regulations
<PAGE> 5
issued under section 401(a)(9) of the Internal Revenue Code) over the
life of the designated Beneficiary or over a period not extending
beyond the life expectancy of the designated Beneficiary; or (ii) the
participant's interest may be distributed to his or her surviving
spouse, provided that the payments begin no later than the date on
which the participant would have attained age 70 1/2 and are made (in
accordance with the regulations issued under section 401(a)(9) if the
Internal Revenue Code) over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the surviving
spouse. If the surviving spouse dies before the distribution commences,
the limitations of this paragraph shall be applied as if the spouse had
been the participant.
The determination of the required period of distribution (including
applicable life expectancy) shall be made in accordance with the
regulations issued under section 401(a)(9), including the requirement
of Proposed Treasury Regulation section 1.401(a)(9)-2. For purposes of
Paragraphs 4 and 5, if payments begin as an annuity payment, there will
be no recalculation of life expectancy. In all other circumstances,
there will be no recalculations unless the participant elects and
recalculation is permitted under applicable regulations.
The election of the method of distribution must be made by the
Beneficiary within one year of the participant's death. If no election
is made, the entire interest will be distributed within five years of
the participant's death (or such later date as permitted under
applicable regulations).
6. Annuity Option 1(b) is not available for a participant whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b)
the designated Co-Annuitant must be the participant's spouse. Annuity
Option 2(b) is not available for a participant and his or her spouse
where the life expectancy of the participant and such spouse is less
than 10 years.
7. Notwithstanding any other provision of this Contract, withdrawals and
other distributions attributable to contributions made pursuant to a
salary reduction agreement after December 31, 1988, and the earnings on
such contributions and on amounts held as of December 31, 1988, shall
not be paid unless the participant has reached age 59 1/2, separated
from service, died, become disabled (within the meaning of section
72(m)(7) of the Internal Revenue Code) or incurred a hardship as
determined by the organization described in Paragraph 3; provided, that
amounts permitted to be distributed in the event of hardship shall be
limited to actual salary deferral contributions (excluding earnings
thereon); and provided further that amounts may be distributed pursuant
to a qualified domestic relations order to the extent permitted by
section 414(p) of the Internal Revenue Code.
8. Contributions made pursuant to a salary reduction agreement shall be
limited to the extent provided in section 402(g) of the Internal
Revenue Code.
9. If any Contract is issued in connection with a tax-sheltered annuity as
defined in section 403(b) of the Internal Revenue Code and is also part
of an employee pension benefit plan as defined in section 3(2) of the
Employee Retirement Income Security Act of 1974 (ERISA), the attached
Retirement Equity Act Endorsement shall also apply.
10. Notwithstanding any other provision of this Contract, amounts under the
Contract received in a nontaxable transfer from a custodial account
qualifying under section 403(b)(7) of the Internal Revenue Code, and
earnings on such amounts, shall not be paid or made available before
the participant dies, attains age 59 1/2, separates from service,
becomes disabled (within the meaning of section 72(m)(7) of the
Internal Revenue Code), or in the case of such amounts attributable to
contributions made under the custodial account pursuant to a salary
reduction agreement, encounters financial hardship; provided, that such
amounts permitted to be paid or made available in the event of
financial hardship shall be limited to amounts attributable to actual
salary deferral contributions made under the custodial account
(excluding earnings thereon); and provided further that amounts may be
distributed pursuant to a qualified domestic relations order to the
extent permitted by section 414(p) of the Internal Revenue Code.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
continued...
409-VER
<PAGE> 6
QUALIFIED PLAN ENDORSEMENT
SECTION 401 PLANS
The Contract to which this Endorsement is attached is amended as
follows:
1. The Contract Owner must be either an employer which has established a
pension plan under Section 401(a) or 403(a) of the Internal Revenue
Code or an employee of such an employer. If the Contract Owner is an
employer, the term "participant" as used in this Endorsement shall mean
each individual employee for whose benefit the employer has established
a pension plan. If the Contract Owner is the employee, the term
"participant" shall mean the employee.
2. Ownership of this Contract may not be transferred except: (i) to the
participant; (ii) to a trustee or successor trustee of a pension or
profit-sharing trust qualified under section 401 of the Internal
Revenue Code; (iii) to the employer of the participant provided that
the Contract after transfer is maintained under the terms of a plan
qualified under section 401 or 403(a) of the Internal Revenue Code for
the benefit of the participant; or (iv) as otherwise permitted by
applicable regulations of the Internal Revenue Service. If transferred
to the participant, the participant becomes the Contract Owner and the
Contract Owner thereafter may not assign, sell, transfer, or discount
the Contract, or pledge it as collateral for a loan or as security for
the performance of an obligation, other than to North American Security
Life Insurance Company, nor may the Contract Owner designate a
successor Contract Owner.
3. Annuity payments under the Contract may not be commuted, assigned,
encumbered or anticipated in any way, except to the extent required by
a qualified domestic relations order as defined in section 414(p) of
the Internal Revenue Code.
4. If, in the event of the participant's death prior to the Maturity Date,
the death benefit is not paid to the trustee of a pension or
profit-sharing trust qualified under section 401 of the Internal
Revenue Code, it shall be paid to (1) the surviving spouse of the
participant in the form required by section 417(c) of the Internal
Revenue Code unless the spouse elects otherwise in accordance with the
requirements of section 417 or regulations promulgated thereunder, or
(2) if there is no surviving spouse, or if the surviving spouse has
consented in the manner required by section 417 of the Internal Revenue
Code, or if regulations promulgated by the Treasury Department under
section 417 of the Internal Revenue Code otherwise permit, to the
designated Beneficiary in the form provided for in the Contract.
5. Unless a deferral is otherwise permitted under applicable regulations,
distributions must commence no later than April 1 of the calendar year
following the calendar year in which (1) the participant reaches age 70
1/2 or (2) the participant retires from the employment of the employer
sponsoring the retirement plan with respect to which the Contract is
purchased, whichever is later. Part (2) shall only apply to a
participant who has attained age 70 1/2 before January 1, 1988, and is
not a "5-percent owner" at any time during the plan year ending with or
within the calendar year in which such owner attained age 66 1/2, and
any subsequent plan year. Furthermore, if the participant becomes a
"5-percent owner" in a year after the year in which he or she attains
age 70 1/2, the distributions must commence no later than April 1 of
the calendar year following the calendar year in which such subsequent
plan year ends. For a participant in a governmental plan or a church
plan (as defined in section 89(i)(4) of the Internal Revenue Code), the
required beginning date shall be April 1 of the calendar year following
the later of (1) the calendar year in which the participant attains age
70 1/2 or (2) the calendar year in which the participant retires. The
requirements of this Paragraph 5 do not apply with respect to a benefit
to which a proper designation is in effect under section 242(b)(2) of
the Tax Equity and Fiscal Responsibility Act of 1982.
6. Notwithstanding any other provision of this Contract, the participant's
entire interest in the Contract shall be distributed as required under
section 401(a)(9) of the Internal Revenue Code and applicable
regulations. The participant's entire interest shall be distributed no
later than the required beginning date set forth in Paragraph 5, or
shall be distributed, beginning no later than such required beginning
date, over the life of the participant or the joint lives of the
participant and an individual who is his or her designated Beneficiary
431-VER
<PAGE> 7
(or over a period not extending beyond the life expectancy of the
participant, or joint life expectancy of the participant and the
designated Beneficiary). If the participant's interest is to be
distributed over a period greater than one year, then the amount to be
distributed by December 31 of each year (including the year in which
the required beginning date occurs) shall be no less than the amount
prescribed in regulations issued under section 401(a)(9) of the
Internal Revenue Code, including the requirements of Proposed Treasury
Regulation section 1.401(a)(9)-2.
In particular, only Annuity Options (1) and (2) shall be offered unless
we consent to the use of an additional option. All such options must
meet the requirements of section 401(a)(9) of the Internal Revenue
Code, including the requirement that payments to persons other than
participants are incidental.
The election of the method of distribution must be made by the
Beneficiary within one year of the participant's death. If no election
is made, the entire interest will be distributed within five years of
the participant's death.
7. Notwithstanding any provision of the Contract to the contrary, if a
participant dies on or after the required beginning date stated in
Paragraph 5 (or if a distribution has begun before the required
beginning date as irrevocable annuity payments), the remaining portion
of such interest (if any) shall be distributed at least as rapidly as
under the method of distribution in effect as of the participant's
death. If the participant dies before the required beginning date and
an irrevocable annuity distribution has not begun, the entire interest
shall be distributed within five years of his or her death (or such
later date as permitted under applicable regulations); except that (i)
the interest may be distributed to an individual who is his or her
designated Beneficiary, provided that payments begin within one year of
the participant's death (or such later date as permitted under
applicable regulations) and are made (in accordance with the
regulations issued under section 401(a)(9) of the Internal Revenue
Code) over the life of the designated Beneficiary or over a period not
extending beyond the life expectancy of the designated Beneficiary; or
(ii) the participant's interest may be distributed to his or her
surviving spouse, provided that the payments begin no later than the
date on which the participant would have attained age 70 1/2 and are
made (in accordance with the regulations issued under section 401(a)(9)
of the Internal Revenue Code) over the life of the surviving spouse or
over a period not extending beyond the life expectancy of the surviving
spouse.
If the surviving spouse dies before distributions begin, the
limitations of this paragraph shall be applied as if the surviving
spouse were the participant. The determination of the required period
of distribution (including applicable life expectancy) shall be made in
accordance with the regulations issued under section 401(a)(9),
including the requirements of Proposed Treasury Regulation section
1.401(a)(9)-2. For purposes of Paragraphs 6 and 7, if payments begin as
an annuity payment, there will be no recalculation of life expectancy.
In all other circumstances, there will be no recalculation unless the
participant elects and recalculation is permitted under applicable
regulations.
The election of the method of distribution must be made by the
Beneficiary within one year of the participant's death, and if no
election is made, the entire interest will be distributed within five
years of the participant's death (or such later date as permitted under
applicable regulations).
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by us and are stated in the
employer's plan, and except as limited below, only Annuity Options 1(a)
and 1(b) and 2(a) and 2(b) shall be available to the participant.
Annuity Option 1(b) is not available for a participant whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b)
the designated Co-Annuitant must be the participant's spouse. Annuity
Option 2(b) is not available for a participant and his or her spouse
where the life expectancy of the participant and such spouse is less
than 10 years.
9. Except as hereinafter provided, only Annuity Option 2(a) is available
to a married participant. A married participant may elect another
Annuity Option, provided his or her spouse consents in accordance with
the requirements of section 417 of the Internal Revenue Code or
provided such election is otherwise permitted under regulations
promulgated by the Treasury Department. An unmarried participant will
be deemed to have elected Annuity Option 1(a) (life annuity) unless he
or she makes a different election in the manner required under section
417 of the Internal Revenue Code (and applicable regulations).
10. Elections made pursuant to this Endorsement may be revoked in the form,
time, and manner prescribed in section 417 of the Internal Revenue Code
(and applicable regulations). All elections required by this
continued...
<PAGE> 8
Endorsement shall adhere to the requirements of the applicable
regulations interpreting section 417 (or any other applicable law),
including the requirements as to the timing of any elections.
11. We will not exercise our right to pay the Contract Value on the
Maturity date in one lump sum in lieu of annuity benefits if the
Contract Value is greater than $3,500, as determined on the first day
of the month preceding the Maturity date, in accordance with the
requirements of section 411(a)(11) and section 417 of the Internal
Revenue Code (and applicable regulations).
continued...
<PAGE> 9
12. A married participant may not obtain a loan from North American
Security Life Insurance Company using this Contract as security, nor a
renegotiation, extension, renewal, or other revisions of such a loan,
unless his or her spouse consents thereto in accordance with the
requirements of section 417 of the Internal Revenue Code and applicable
regulations.
13. In the paragraph entitled "Death of Owner" on page 7 of the contract,
the following sentence is deleted: "If you are not an individual, the
death of the Annuitant or Co-Annuitant, or any change in the Annuitant
or Co-Annuitant will be treated as the death of the Owner.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
<PAGE> 1
EXHIBIT (b)(4)(ii)(c)
DEATH BENEFIT ENDORSEMENT
ENHANCED DEATH BENEFIT ENDORSEMENT FORM NUMBER 301-VER 9/89 IS REPLACED
BY THIS ENDORSEMENT. PART 4, BENEFITS, DEATH BENEFIT BEFORE MATURITY
DATE, GENERAL PROVISIONS OF THE FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE ANNUITY CONTRACT, ALL CONTRACT FORM NUMBERS BEGINNING WITH
203, TO WHICH THIS ENDORSEMENT IS ATTACHED IS ALSO REPLACED AS FOLLOWS:
Death benefits will be paid as provided in this contract upon the death
of any Owner.
If there is both an individual and a non-individual Owner of the
contract, death benefits must be paid as provided in this contract upon
the death of the Annuitant or any individual Owner, whichever occurs
earlier.
Upon the death of the Annuitant, 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 as follows:
1) During the first Contract Year, the death benefit will be the
greater of:
a) the Contract Value, or
b) the sum of all Purchase Payments made, less any
amount deducted in connection with partial
withdrawals.
2) During any subsequent Contract Year, the death benefit will be
the greater of:
a) the Contract Value, or
b) the death benefit on the last day of the previous
Contract Year plus any Purchase Payments made and
less any amounts deducted in connection with partial
withdrawals since then.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
- --------------------
Vice-President
ENDORSEMENT.008
<PAGE> 1
Exhibit (b)(4)(iii)
GUARANTEED INCOME RIDER
This Rider is effective on the Rider Date. Election of this Rider is irrevocable
and may only be terminated as provided in the Termination provisions below. It
is a part of, and subject to, the other terms and conditions of the Contract.
DEFINITIONS
ANNUITANT For the purposes of this Rider, the
first Annuitant named will be
referred to as Annuitant and the
second Annuitant named, if any, will
be referred to as Co-Annuitant. The
Annuitant and Co-Annuitant are as
designated on the Specifications
Page, unless changed.
ELECTION DATE A date that you may elect to
begin guaranteed income payments. An
Election Date is the seventh or
later Contract Anniversary following
the Rider Date. Following the
Step-Up Date, an Election Date is
the seventh or later Contract
Anniversary following the Step-Up
Date.
INCOME BASE The amount we will utilize to
determine the Guaranteed Income
Benefit.
MATURITY DATE The earliest of the date on which
annuity benefits commence, or the
date that the Guaranteed Income
Benefit is exercised. It is the date
specified on the Contract
Specifications Page, unless changed.
RIDER DATE The date of issue of this
Rider as specified on the
Specifications Page.
STEP-UP DATE The date of the Contract Anniversary
that you most recently elected to
step-up your Income Base to the
Contract Value.
CHANGE OF ANNUITANT
The Annuitant may only be changed to an individual that is the same age or
younger than the current Annuitant.
GUARANTEED INCOME BENEFIT
This Rider provides for a guaranteed minimum lifetime fixed income benefit. On
the date that you exercise the Guaranteed Income Benefit, monthly income is
determined by applying the Income Base to the Monthly Income Factors listed in
this Rider. If more favorable to the Annuitant(s), monthly income will be
determined by applying your Contract Value to the current fixed annuity payment
rates in use by the Company on the date the Guaranteed Income Benefit is
exercised.
CONDITIONS OF GUARANTEED INCOME BENEFIT
You may exercise the Guaranteed Income Benefit subject to both of the following
conditions:
1. Must be exercised within 30 days immediately following an Election
Date.
2. Must be exercised no later than the Contract Anniversary immediately
prior to the Annuitant's 85th birthday, or the tenth Contract
Anniversary if later.
INCOME BASE
The Income Base is equal to (a) less (b), where (a) is the sum of all Payments
made, accumulated at the Growth Factor starting on the date each Payment is
allocated to the Contract, and (b) is the sum of Income Base reductions on a pro
rata basis in connection with partial withdrawals taken, accumulated at the
Growth Factor starting on the date each deduction occurs. The Growth Factor is
specified on the Specifications Page. The Growth Factor is reduced to 0% once
the Annuitant has attained age 85.
An Income Base reduction on a pro rata basis is equal to the Income Base
immediately prior to a partial withdrawal multiplied by the percentage reduction
in Contract Value resulting from a partial withdrawal.
Following a step-up of the Income Base, the Income Base is equal to the Contract
Value on the Step-Up Date. For purposes of subsequent calculation of the Income
Base, the Contract Value on the Step-Up Date will be treated as a
<PAGE> 2
Payment made on that date. In addition, all Payments made and all amounts
deducted in connection with partial withdrawals prior to the Step-Up Date will
not be considered in determination of the Income Base.
If this Rider is added after the Contract Date, the Income Base is equal to the
Contract Value on the Rider Date. For purposes of subsequent calculation of the
Income Base, the Contract Value on the Rider Date will be treated as a Payment
made on that date. In addition, all Payments made and all amounts deducted in
connection with partial withdrawals prior to the Rider Date will not be
considered in determination of the Income Base.
The Income Base is also reduced for any Withdrawal Charge remaining on the date
that you exercise the Guaranteed Income Benefit. We also reserve the right to
reduce the Income Base for any premium taxes that may apply.
The Income Base is used solely for the purposes of calculating the Guaranteed
Income Benefit and does not affect your Contract Value.
STEP-UP OF INCOME BASE
Within the 30 days immediately following any Contract Anniversary, you may elect
to step-up the Income Base to the Contract Value on that Contract Anniversary by
sending us a written request. Electing to step-up the Income Base will affect
your Election Date.
MONTHLY INCOME FACTORS
The Income Base may be applied to Monthly Income Factors to purchase a
guaranteed lifetime income under the following Options:
Option 1: Life Annuity with a 10-Year Period 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 with 20-Year Period Certain. We will
make payments for 20 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
20-year period certain.
The Monthly Income Factors on the attached tables show, for each $1,000 of
Income Base applied, the dollar amount of the monthly income payment for select
ages. Monthly Income Factors for ages not shown will be furnished upon request.
The Monthly Income Factor used will depend upon the sex and age nearest birthday
of the Annuitant and Co-Annuitant, if any. The Monthly Income Factors are based
on the 1983 Individual Annuity Mortality Table "a" projected at Scale G with
interest at the rate of 3% per annum.
INCOME RIDER FEE
To compensate us for assuming risks associated with the Guaranteed Income
Benefit, we charge an annual Income Rider Fee. On or before the Maturity Date,
the Income Rider Fee is deducted on each Contract Anniversary. The amount of the
Income Rider Fee is equal to the Rider Fee Percentage shown on the
Specifications Page multiplied by the Income Base in effect on that 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 Income Rider Fee from the amount paid. In the
case of a total withdrawal, the Income Rider Fee is equal to the Rider Fee
Percentage shown on the Contract Specifications Page multiplied by the Income
Base immediately prior to total withdrawal. The Income Rider Fee will not be
deducted during the annuity period. For purposes of determining the Income Rider
Fee, the commencement of annuity payments shall be treated as a total
withdrawal.
TERMINATION
This Rider will only terminate upon the earliest of (a) the Contract Anniversary
immediately prior to the Annuitant's 85th birthday, or the tenth Contract
Anniversary if later, (b) the total withdrawal of Contract Value, or (c) the
benefit under this Rider is exercised.
<PAGE> 3
MISCELLANEOUS
Except as modified by this Rider, the Definitions, General Provisions and
Ownership sections of the Contract also apply to this Rider. If this Rider is
added after the Contract Date, its effective date will be the Rider Date stated
in the Specifications Page. If this Rider is added at the time the Contract is
issued, it will be effective on the Contract Date.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Vice-President
<PAGE> 4
TABLE OF MONTHLY INCOME FACTORS
Amount of monthly payment per $1000 of Income Base
Option 1: Life Annuity with a 10-Year Period Certain
<TABLE>
<CAPTION>
------------------------------------------- -------------------------------------------
Age of Age of
Annuitant Male Female Annuitant Male Female
------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
55 4.21 3.87 68 5.57 4.99
56 4.29 3.94 69 5.71 5.12
57 4.37 4.00 70 5.86 5.25
58 4.45 4.07 71 6.01 5.39
59 4.54 4.14 72 6.16 5.53
60 4.63 4.21 73 6.32 5.68
61 4.73 4.29 74 6.49 5.84
62 4.84 4.38 75 6.65 6.01
63 4.94 4.47 80 7.52 6.93
64 5.06 4.56 85 8.34 7.88
65 5.18 4.66 90 8.98 8.66
66 5.30 4.76 95 9.38 9.19
67 5.43 4.88
</TABLE>
Option 2: Joint and Survivor Life Annuity with a 20-Year Period Certain
<TABLE>
<CAPTION>
Age of Female Co-Annuitant
----------------------------------------------------------------------------------
Age of
Male 10 Years 5 Years Same 5 Years 10 Years
Annuitant Younger Younger Age Older Older
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 3.32 3.46 3.60 3.74 3.86
56 3.35 3.50 3.65 3.79 3.92
57 3.39 3.54 3.70 3.85 3.99
58 3.42 3.58 3.75 3.91 4.05
59 3.46 3.63 3.81 3.97 4.12
60 3.51 3.68 3.86 4.04 4.19
61 3.55 3.73 3.92 4.11 4.26
62 3.59 3.79 3.99 4.18 4.34
63 3.64 3.84 4.05 4.25 4.41
64 3.69 3.90 4.12 4.33 4.49
65 3.74 3.96 4.19 4.40 4.57
66 3.80 4.03 4.27 4.48 4.64
67 3.85 4.10 4.34 4.56 4.72
68 3.91 4.17 4.42 4.64 4.79
69 3.97 4.24 4.50 4.72 4.87
70 4.04 4.31 4.58 4.80 4.94
71 4.10 4.39 4.66 4.88 5.01
72 4.17 4.47 4.74 4.95 5.07
73 4.24 4.54 4.82 5.02 5.13
74 4.31 4.62 4.90 5.08 5.19
75 4.39 4.70 4.97 5.15 5.24
80 4.77 5.07 5.27 5.38 5.41
85 5.11 5.32 5.44 5.48 5.49
90 5.34 5.46 5.50 5.51 5.51
95 5.46 5.50 5.51 5.51 5.51
</TABLE>
Monthly Income Factors for ages not shown will be furnished upon request.
<PAGE> 1
<TABLE>
<S> <C> <C> <C>
====================================================================================================================================
Flexible Payment Deferred Combination Fixed and Variable Annuity Application. Payment (or original of exchange/transfer request)
must accompany Application. Please make check payable to THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA (the "Company")
and address to: P.O. BOX 9230 GMF, Boston, MA 02205-9230.
- ---------------------------------------------------------------- ----------------------------------------------------------------
1. ACCOUNT REGISTRATION (Please Print) 3. INVESTMENT ALLOCATION
- ---------------------------------------------------------------- ----------------------------------------------------------------
Owners (Applicants)
Allocate payment with application of $____________ as indicated
Name* below (must total 100%) (Minimum initial investment of $5,000
- ---------------------------------------------------------------- for non-qualified plans and $2,000 for qualified plans):
First Middle Last
Address ____ % Manufacturers Adviser Pac Rim Emerging Mkts (008)
- ----------------------------------------------------------------
Street ____ % T. Rowe Price Science & Technology (016)
- ---------------------------------------------------------------- ____ % Founders Int'l Small Cap (006)
City State Zip
_____ _____ _____ ____ % Warburg Pincus Emerging Growth (020)
Sex [ ] M [ ] F Date of Birth | | | |
|_____|_____|_____| ____ % Pilgrim Baxter Growth (022)
Month Day Year
Daytime Phone Number: ( ) _____________________________ ____ % Fred Alger Small/Mid Cap (011)
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
| | | | | | | | | | | | | | | | | | | | ____ % Rowe Price-Fleming Int'l Stock (024)
|__|__|__|__|__|__|__|__|__| or |__|__|__|__|__|__|__|__|__|
Social Security Number Tax ID Number ____ % Founders Worldwide Growth (026)
Client Brokerage Acct. # (If applicable):__________________ ____ % Morgan Stanley Global Equity (009)
================================================================
CO-OWNER (Optional) ____ % Rosenberg Small Company Value (119)
Name* ____ % Fidelity Equity (001)
- ----------------------------------------------------------------
First Middle Last ____ % Founders Growth (005)
_____ _____ _____
Sex [ ] M [ ] F Date of Birth | | | | ____ % Manufacturers Adviser Quant Equity (065)
|_____|_____|_____|
Month Day Year ____ % T. Rowe Price Blue Chip Growth (012)
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
| | | | | | | | | | | | | | | | | | | | ____ % Manufacturers Adviser Real Estate Securities (068)
|__|__|__|__|__|__|__|__|__| or |__|__|__|__|__|__|__|__|__|
Social Security Number Tax ID Number ____ % Miller Anderson Value (066)
================================================================
ANNUITANTS (If different from Owner) ____ % J.P. Morgan Int'l Growth & Income (013)
Name* ____ % Wellington Management Growth & Income (017)
- ----------------------------------------------------------------
First Middle Last ____ % T. Rowe Price Equity-Income (007)
Address
- ---------------------------------------------------------------- ____ % Founders Balanced (071)
Street
____ % Fidelity Aggr Asset Alloc (004)
- ----------------------------------------------------------------
City State Zip ____ % Miller Anderson High Yield (076)
_____ _____ _____
Sex [ ] M [ ] F Date of Birth | | | | ____ % Fidelity Mod Asset Alloc (003)
|_____|_____|_____|
Month Day Year ____ % Fidelity Cons Asset Alloc (002)
__ __ __ __ __ __ __ __ __
| | | | | | | | | | ____ % Salomon Brothers Strategic Bond (015)
|__|__|__|__|__|__|__|__|__|
Social Security Number ____ % Oechsle Global Gov't Bond (010)
================================================================
CO-ANNUITANT (Optional) ____ % Manufacturers Adviser Capital Growth Bond (080)
Name* ____ % Wellington Management Inv Quality Bond (018)
- ----------------------------------------------------------------
First Middle Last ____ % Salomon Brothers U.S. Gov't Securities (014)
_____ _____ _____
Sex [ ] M [ ] F Date of Birth | | | | ____ % Manufacturers Adviser Money Market (019)
|_____|_____|_____|
Month Day Year
__ __ __ __ __ __ __ __ __ FIXED ACCOUNTS
| | | | | | | | | |
|__|__|__|__|__|__|__|__|__| ____ % 1 Yr (021) ____ % 3 Yr (023)
Social Security Number
____ % 5 Yr (025) ____ % 7 Yr (027)
- ----------------------------------------------------------------
2. BENEFICIARIES LIFESTYLE PORTFOLIOS
- ----------------------------------------------------------------
(Enclose signed letter if more information is required.) ____ % Cons 280 (179) ____ % Mod 460 (180)
Name* ____ % Bal 640 (181) ____ % Growth 820 (182)
- ---------------------------------------------------------------
First Middle Last Relationship ____ % Aggr 1000 (183)
_____ _____ _____ __ __ __ __ __ __ __ __ __
Date of Birth | | | | | | | | | | | | | | ================================================================
|_____|_____|_____| |__|__|__|__|__|__|__|__|__|
Month Day Year Social Security Number Remarks
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.005 *Unless subsequently changed in accordance with terms of Contract issued. 9/97
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
4. PLAN SPECIFICS
- -----------------------------------------------------------------------------------------------------
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) Check if ERISA [ ]
[ ] Defined Benefit [ ] 457 [ ] Other Qualified _________
===================================================================================================
Will the purchase of this Annuity replace or change any other insurance or annuity? [ ] No [ ] Yes
(If "Yes," state company and contract number in Remarks, and attach replacement forms.) If 1035
exchange, or any other transfer of assets, attach original of exchange form or letter.
===================================================================================================
Has Annuitant or applicant(s) any other annuities or insurance with the Company? [ ] No [ ] Yes
(If "Yes," list contract number in Remarks.)
- -----------------------------------------------------------------------------------------------------
5. 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 herein 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. 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.
___________________________________________________________________________________________________
Signed in (State) Date Signed Signature of Owner/Applicant Signature of Co-Owner
___________________________________________________________________________________________________
Signature of Annuitant Signature of Co-Annuitant Signature of Irrevocable Beneficiary
(if different from Owner) (if different from Owner) (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.
___________________________________________________________________________________________________
Signature of Agent Print Full Name Name of Firm
___________________________________________________________________________________________________
Agent Number Agent Phone Number State License ID Number
===================================================================================================
Broker/Dealer Use Only (Optional)
Plan T [ ] Plan NT [ ] (If left blank, Plan T will be selected.)
- -----------------------------------------------------------------------------------------------------
6. OTHER
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
VENTURE.APP.005 9/97
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Initial below each VENTURE service option you wish to elect.
- ---------------------------------------------------------------------------------------------------
GUARANTEE PLUS PROGRAM (MINIMUM PAYMENT $5,000)
- ---------------------------------------------------------------------------------------------------
Owner please initial here __________ .
The Company will allocate a portion of the payment with this application to the 7-year Fixed
Account, such that, at the end of the 7-year period, the account will have grown to an amount at
least equal to the total payment. The remaining balance will be allocated proportionately
according to the investment selections on the application, which should total 100% excluding the
amount allocated to the 7-year Fixed Account.
- ---------------------------------------------------------------------------------------------------
CHECK PLUS-AUTOMATIC PURCHASE*
- ---------------------------------------------------------------------------------------------------
Owner please initial here __________ .
I authorize the Company to collect $______ (minimum $30) starting the month of ______ by
initiating electronic debit entries to my bank account with the following frequency: [ ] Monthly:
[ ] 5th or [ ] 20th [ ] Quarterly (20th of January, April, July and October). When utilizing Check
Plus, I 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. (PLEASE ATTACH A VOIDED CHECK/WITHDRAWAL SLIP.)
- ---------------------------------------------------------------------------------------------------
DOLLAR COST AVERAGING* (MINIMUM PAYMENT $6,000)
- ---------------------------------------------------------------------------------------------------
Owner please initial here __________ .
I authorize the Company to transfer an amount (minimum $100) each month as indicated below.
Transfers are available from all variable and the one-year fixed investment options. A maximum of
10% from the one-year fixed investment option may be transferred monthly. Please make first
transfer on ____/____/____ (mm/dd/yy).
</TABLE>
<TABLE>
<CAPTION>
SOURCE FUND DESTINATION FUND AMOUNT
<S> <C> <C>
_______________________________ _______________________________ $____________________________
_______________________________ _______________________________ $____________________________
_______________________________ _______________________________ $____________________________
_______________________________ _______________________________ $____________________________
_______________________________ _______________________________ $____________________________
- ---------------------------------------------------------------------------------------------------
INCOME PLAN* (MINIMUM PAYMENT $12,000)
- ---------------------------------------------------------------------------------------------------
Owner please initial here __________ .
I authorize withdrawals (minimum $100) from my Contract Value to commence as indicated below. A
maximum of 10% of payments may be withdrawn annually. When utilizing the Income Plan, I 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.
</TABLE>
<TABLE>
<S> <C>
From: ____________________________________ $__________________________
From: ____________________________________ $__________________________
From: ____________________________________ $__________________________
From: ____________________________________ $__________________________
From: ____________________________________ $__________________________
Please indicate frequency: [ ] Monthly or [ ] Quarterly (January, April, July and October)
Day of Withdrawal: [ ] 1st [ ] 7th [ ] 16th or [ ] 26th
Please [ ] Withhold [ ] Do not withhold Federal Income Taxes
[ ] I wish to utilize Electronic Funds Transfer in the processing of my Income Plan.
PLEASE ATTACH A VOIDED CHECK.
Or, if different from owner, make check payable to:
___________________________________________________________________________________________________
First Middle Last
___________________________________________________________________________________________________
Street City State Zip
(Please allow 7 business days for receipt of check.)
- ---------------------------------------------------------------------------------------------------
VENTURE.APP.005 *Unless subsequently changed in accordance with terms of Contract issued. 9/97
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
Initial below each VENTURE service option you wish to elect.
- --------------------------------------------------------------------------------------------------------------------
TELEPHONE TRANSFER AUTHORIZATION
- --------------------------------------------------------------------------------------------------------------------
Owner please initial here __________ .
I authorize the Company to act on transfer instructions given by telephone from any person who can furnish proper
identification. Neither the Company nor any person authorized by the Company will be responsible for any claim,
loss, liability or expense in connection with a telephone transfer if the Company or such other person acted on
telephone transfer instructions in good faith in reliance on this authorization.
- --------------------------------------------------------------------------------------------------------------------
TELEPHONE WITHDRAWAL AUTHORIZATION
- --------------------------------------------------------------------------------------------------------------------
Owner please initial here __________ .
I authorize the Company to act on withdrawal instructions given from any person who can furnish proper
identification by telephone. Neither the Company nor any person authorized by the Company will be responsible for
any claim, loss, liability or expense in connection with a telephone withdrawal if the Company or such other person
acted on telephone withdrawal instructions in good faith in reliance on this authorization. The minimum withdrawal
amount is $1,000.
Withdrawal instructions may authorize Partial Withdrawals of up to $50,000.00 per account. (Full withdrawals are not
permitted by telephone.) The check may only be payable to the owner of record (who must be individual) and may be
mailed only to the address of record. The Company will not allow telephone withdrawals for the following
accounts: a) An account on which the address has been changed in the last 30 days, b) Accounts over which a person
has Power of Attorney, c) 403(b) accounts for which the owner is under 59 1/2, d) Custodial accounts, and e) Accounts
with Market Timers as owners.
- --------------------------------------------------------------------------------------------------------------------
AUTOMATIC REBALANCING
- --------------------------------------------------------------------------------------------------------------------
Owner please initial here __________ .
If marked, the policyholder's contract value, excluding amounts in the fixed account investment options, will be
automatically rebalanced to maintain the rebalancing percentage levels in the variable portfolios as selected
below, based on the current total value of the eligible portfolios on the day of rebalancing.
You may change the rebalancing percentages or terminate your participation in the program by providing the Company
with a completed Automatic Rebalancing Authorization form or by providing instructions via telephone to an
authorized Company representative prior to the day the rebalancing will occur.
If a policyholder elects to participate in Automatic Rebalancing, the total value of the variable portfolios must
be included in the program. Therefore, subsequent payments received and applied to portfolios in percentages
different from the current rebalancing allocation will be rebalanced at the next date of rebalancing unless the
subsequent payments are allocated to the fixed account investment options.
Rebalancing will occur on the 25th of the month (or next business day), please indicate frequency:
[ ] Quarterly [ ] Semi-Annually (June & December) [ ] Annually (December)
ASSET ALLOCATIONS (must total 100%):
____ % Manufacturers Adviser Pac Rim Emerging Mkts (008) ____ % Wellington Management Growth & Income (017)
____ % T. Rowe Price Science & Technology (016) ____ % T. Rowe Price Equity-Income (007)
____ % Founders Int'l Small Cap (006) ____ % Founders Balanced (071)
____ % Warburg Pincus Emerging Growth (020) ____ % Fidelity Aggr Asset Alloc (004)
____ % Pilgrim Baxter Growth (022) ____ % Miller Anderson High Yield (076)
____ % Fred Alger Small/Mid Cap (011) ____ % Fidelity Mod Asset Alloc (003)
____ % Rowe Price-Fleming Int'l Stock (024) ____ % Fidelity Cons Asset Alloc (002)
____ % Founders Worldwide Growth (026) ____ % Salomon Brothers Strategic Bond (015)
____ % Morgan Stanley Global Equity (009) ____ % Oechsle Global Gov't Bond (010)
____ % Rosenberg Small Company Value (119) ____ % Manufacturers Adviser Capital Growth Bond (080)
____ % Fidelity Equity (001) ____ % Wellington Management Inv Quality Bond (018)
____ % Founders Growth (005) ____ % Salomon Brothers U.S. Gov't Securities (014)
____ % Manufacturers Adviser Quant Equity (065) ____ % Manufacturers Adviser Money Market (019)
____ % T. Rowe Price Blue Chip Growth (012)
____ % Manufacturers Adviser Real Estate Securities (068) LIFESTYLE PORTFOLIOS
____ % Miller Anderson Value (066) ____ % Cons 280 (179) ____ % Mod 460 (180)
____ % J.P. Morgan Int'l Growth & Income (013) ____ % Bal 640 (181) ____ % Growth 820 (182)
____ % Aggr 1000 (183)
- --------------------------------------------------------------------------------------------------------------------
VENTURE.APP.005 *Unless subsequently changed in accordance with terms of Contract issued. 9/97
</TABLE>
<PAGE> 1
<TABLE>
<S> <C> <C> <C>
====================================================================================================================================
Flexible Payment Deferred Combination Fixed and Variable Annuity Application. Payment (or original of exchange/transfer request)
must accompany Application. Please make check payable to THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA (the "Company")
and address to: P.O. BOX 9230 GMF, Boston, MA 02205-9230.
- ---------------------------------------------------------------- ----------------------------------------------------------------
1. OWNER* (Applicants) (Please Print) 2. CO-OWNER* (OPTIONAL)
Name Name
- ---------------------------------------------------------------- ----------------------------------------------------------------
First Middle Last First Middle Last
Address _____ _____ _____
- ---------------------------------------------------------------- Date of Birth | | | |
Street |_____|_____|_____|
Month Day Year
- ---------------------------------------------------------------- __ __ __ __ __ __ __ __ __
City State Zip | | | | | | | | | |
_____ _____ _____ |__|__|__|__|__|__|__|__|__|
Sex [ ] M [ ] F Date of Birth | | | | Tax ID or Social Security Number
|_____|_____|_____|
Month Day Year ----------------------------------------------------------------
3. SUCCESSER OWNER* (Optional)
__ __ __ __ __ __ __ __ __ ----------------------------------------------------------------
| | | | | | | | | |
|__|__|__|__|__|__|__|__|__| Name
Tax ID or Social Security Number ----------------------------------------------------------------
First Middle Last
- ---------------------------------------------------------------- _____ _____ _____
4. ANNUITANT* (If different from Owner) Date of Birth | | | |
- ---------------------------------------------------------------- |_____|_____|_____|
Month Day Year
Name
- ---------------------------------------------------------------- __ __ __ __ __ __ __ __ __
First Middle Last | | | | | | | | |
Address __|__|__|__|__|__|__|__|__|
- ---------------------------------------------------------------- Tax ID or Social Security Number
Street
- ---------------------------------------------------------------- ----------------------------------------------------------------
City State Zip 5. CO-ANNUITANT* (Optional)
_____ _____ _____ ----------------------------------------------------------------
Sex [ ] M [ ] F Date of Birth | | | |
|_____|_____|_____| Name
Month Day Year ----------------------------------------------------------------
First Middle Last
__ __ __ __ __ __ __ __ __ Address
| | | | | | | | | | ----------------------------------------------------------------
|__|__|__|__|__|__|__|__|__| Street
Social Security Number
----------------------------------------------------------------
City State Zip
_____ _____ _____
Sex [ ] M [ ] F Date of Birth | | | |
|_____|_____|_____|
Month Day Year
__ __ __ __ __ __ __ __ __
| | | | | | | | | |
|__|__|__|__|__|__|__|__|__|
Social Security Number
- ------------------------------------------------------------------------------------------------------------------------------------
6. BENEFICIARY (Enclose signed letter if more information is required.)
Name
- ------------------------------------------------------------------------------------------------------------------------------------
First Middle Last Date of Birth (mm/dd/yy) Soc. Sec. # Relationship
Name
- ------------------------------------------------------------------------------------------------------------------------------------
First Middle Last Date of Birth (mm/dd/yy) Soc. Sec. # Relationship
- ------------------------------------------------------------------------------------------------------------------------------------
7. CONTINGENT BENEFICIARY
Name
- ------------------------------------------------------------------------------------------------------------------------------------
First Middle Last Date of Birth (mm/dd/yy) Soc. Sec. # Relationship
====================================================================================================================================
8. INVESTMENT OPTIONS Allocate payment with application of $____________ as indicated below (Must total 100%) (Minimum initial
investment of $5,000 for non-qualified plans and $2,000 for qualified plans):
____ % Manufacturers Adviser Pac Rim Emerging Mkts (008) ____ % Founders Balanced (071)
____ % T. Rowe Price Science & Technology (016) ____ % Fidelity Aggr Asset Alloc (004)
____ % Founders Int'l Small Cap (006) ____ % Miller Anderson High Yield (076)
____ % Warburg Pincus Emerging Growth (020) ____ % Fidelity Mod Asset Alloc (003)
____ % Pilgrim Baxter Growth (022) ____ % Fidelity Cons Asset Alloc (002)
____ % Fred Alger Small/Mid Cap (011) ____ % Salomon Brothers Strategic Bond (015)
____ % Rowe Price-Fleming Int'l Stock (024) ____ % Oechsle Global Gov't Bond (010)
____ % Founders Worldwide Growth (026) ____ % Manufacturers Adviser Capital Growth Bond (080)
____ % Morgan Stanley Global Equity (009) ____ % Wellington Management Inv Quality Bond (018)
____ % Rosenberg Small Company Value (119) ____ % Salomon Brothers U.S. Gov't Securities (014)
____ % Fidelity Equity (001) ____ % Manufacturers Adviser Money Market (019)
____ % Founders Growth (005)
FIXED ACCOUNTS
____ % Manufacturers Adviser Quant Equity (065)
____ % 1 Yr (028) ____ % 3 Yr (029) ____ % 6 Yr (030)
____ % T. Rowe Price Blue Chip Growth (012)
LIFESTYLE PORTFOLIOS
____ % Manufacturers Adviser Real Estate Securities (068)
____ % Cons 280 (179) ____ % Mod 460 (180)
____ % Miller Anderson Value (066)
____ % Bal 640 (181) ____ % Growth 820 (182)
____ % J.P. Morgan Int'l Growth & Income (013)
____ % Aggr 1000 (183)
____ % Wellington Management Growth & Income (017)
____ % T. Rowe Price Equity-Income (007) ================================================================
9. REMARKS
====================================================================================================================================
APP-VEN7-8 *Unless subsequently changed in accordance with terms of Contract issued. 9/97
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
10. PLAN SPECIFICS
- -----------------------------------------------------------------------------------------------------
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) Check if ERISA [ ]
[ ] Defined Benefit [ ] 457 [ ] Other Qualified _________
===================================================================================================
Will the purchase of this Annuity replace or change any other insurance or annuity? [ ] No [ ] Yes
(If "Yes," state company and contract number in Remarks, and attach replacement forms.) If 1035
exchange, or any other transfer of assets, attach original of exchange form or letter.
===================================================================================================
Has Annuitant or applicant(s) any other annuities or insurance with the Company? [ ] No [ ] Yes
(If "Yes," list contract number in Remarks.)
- -----------------------------------------------------------------------------------------------------
11. 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 herein 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. 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.
___________________________________________________________________________________________________
Signed in (State) Date Signed Signature of Owner/Applicant Signature of Co-Owner
___________________________________________________________________________________________________
Signature of Annuitant Signature of Co-Annuitant Signature of Irrevocable Beneficiary
(if different from Owner) (if different from Owner) (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.
___________________________________________________________________________________________________
Signature of Agent Print Full Name Name of Firm
___________________________________________________________________________________________________
Agent Number Agent Phone Number State License ID Number
___________________________________________________________________________________________________
Broker/Dealer Use Only (Optional)
Plan T [ ] Plan NT [ ] (If left blank, Plan T will be selected.)
===================================================================================================
- -----------------------------------------------------------------------------------------------------
12. OTHER
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
APP-VEN7-8 9/97
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
=====================================================================================================
Initial below each VENTURE service option you wish to elect.
- -----------------------------------------------------------------------------------------------------
GUARANTEE PLUS PROGRAM (Minimum Payment $5,000)
- -----------------------------------------------------------------------------------------------------
Owner please initial here ________.
The Company will allocate a portion of the payment with this applicable to the 6-year Fixed Account,
such that, at the end of the 6-year period, the account will have grown to an amount aaaat least
equal to the total payment. The remaining balance will be allocated proportionally according to the
investment selections on the application, which should total 100% excluding the amount allocated to
the 6-year Fixed Account.
- -----------------------------------------------------------------------------------------------------
CHECK PLUS - AUTOMATIC PURCHASE*
- -----------------------------------------------------------------------------------------------------
Owner please initial here __________ .
I authorize the Company to collect $________ (minimum $30) starting the month of _____________ by
initiating electronic debit entries to my bank account with the following frequency:
[ ] Monthly: [ ] 5th or [ ] 20th [ ] Quarterly (20th of January, April, July and October) When
utilizing Chech Plus I 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. (PLEASE ATTACH A VOIDED CHECK/WITHDRAWAL SLIP.)
- -----------------------------------------------------------------------------------------------------
DOLLAR COST AVERAGING* (MINIMUM PAYMENT $6,000)
- -----------------------------------------------------------------------------------------------------
Owner please initial here __________ .
I authorize the Company to transfer an amount (minimum $100) each month as indicated below.
Transfers are available from all variable and the one-year fixed investment options. A maximum of
10% from the one-year fixed investment option may be transferred monthly.
Please make first transfer on _____/_____/_____.
Month Day Year
</TABLE>
<TABLE>
<CAPTION>
Source Fund Destination Fund Amount
<S> <C> <C>
_______________________________ _______________________________ $_____________________________
_______________________________ _______________________________ $_____________________________
_______________________________ _______________________________ $_____________________________
_______________________________ _______________________________ $_____________________________
_______________________________ _______________________________ $_____________________________
- -----------------------------------------------------------------------------------------------------
INCOME PLAN* (MINIMUM PAYMENT $12,000)
- -----------------------------------------------------------------------------------------------------
Owner please initial here __________ .
I authorize withdrawals (minimum $100) from my Contract Value to commence as indicated below. A
maximum of 10% of payments may be withdrawn annually. When utilizing the Income Plan, I 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.
</TABLE>
<TABLE>
<S> <C>
From: ___________________________________________ $__________________________
From: ___________________________________________ $__________________________
From: ___________________________________________ $__________________________
From: ___________________________________________ $__________________________
From: ___________________________________________ $__________________________
Please indicate frequency: [ ] Monthly or [ ] Quarterly (January, April, July and October)
Day of Withdrawal: [ ] 1st [ ] 7th [ ] 16th or [ ] 26th.
Please [ ] Withhold [ ] Do not withhold Federal Income Taxes
[ ] I wish to utilize Electronic Funds Transfer in the processing of my Income Plan.
Please attach a voided check. Or, if different from owner, make check payable to:
___________________________________________________________________________________________________
First Middle Last
___________________________________________________________________________________________________
Street City State Zip
(Please allow 7 business days for receipt of check.)
- -----------------------------------------------------------------------------------------------------
APP-VEN7-8 *Unless subsequently changed in accordance with terms of Contract issued. 9/97
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
Initial below each VENTURE service option you wish to elect.
- --------------------------------------------------------------------------------------------------------------------
TELEPHONE TRANSFER AUTHORIZATION
- --------------------------------------------------------------------------------------------------------------------
OWNER PLEASE INITIAL HERE __________ .
I authorize the Company to act on transfer instructions given by telephone from any person who can furnish proper
identification. Neither the Company nor any person authorized by the Company will be responsible for any claim,
loss, liability or expense in connection with a telephone transfer if the Company or such other person acted on
telephone transfer instructions in good faith in reliance on this authorization.
- --------------------------------------------------------------------------------------------------------------------
TELEPHONE WITHDRAWAL AUTHORIZATION
- --------------------------------------------------------------------------------------------------------------------
OWNER PLEASE INITIAL HERE __________ .
I authorize the Company to act on withdrawal instructions given from any person who can furnish proper
identification by telephone. Neither the Company nor any person authorized by the Company will be responsible for
any claim, loss, liability or expense in connection with a telephone withdrawal if the Company or such other person
acted on telephone withdrawal instructions in good faith in reliance on this authorization. The minimum withdrawal
amount is $1,000.
Withdrawal instructions may authorize Partial Withdrawals of up to $50,000.00 per account. (Full withdrawals are
not permitted by telephone.) The check may only be payable to the owner of record (who must be individual) and may
be mailed only to the address of record. The Company will not allow telephone withdrawals for the following
accounts: a) An account on which the address has been changed in the last 30 days, b) Accounts over which a person
has Power of Attorney, c) 403(b) accounts for which the owner is under 59 1/2, d) Custodial accounts, and e) Accounts
with Market Timers as owners.
- --------------------------------------------------------------------------------------------------------------------
AUTOMATIC REBALANCING
- --------------------------------------------------------------------------------------------------------------------
OWNER PLEASE INITIAL HERE __________ .
If marked, the policyholder's contract value, excluding amounts in the fixed account investment options, will be
automatically rebalanced to maintain the rebalancing percentage levels in the variable portfolios as selected
below, based on the current total value of the eligible portfolios on the day of rebalancing.
You may change the rebalancing percentages or terminate your participation in the program by providing the Company
with a completed Automatic Rebalancing Authorization form or by providing instructions via telephone to an
authorized Company representative prior to the day the rebalancing will occur.
If a policyholder elects to participate in Automatic Rebalancing, the total value of the variable portfolios must
be included in the program. Therefore, subsequent payments received and applied to portfolios in percentages
different from the current rebalancing allocation will be rebalanced at the next date of rebalancing unless the
subsequent payments are allocated to the fixed account investment options.
Rebalancing will occur on the 25th of the month (or next business day), please indicate frequency:
[ ] Quarterly [ ] Semi-Annually (June & December) [ ] Annually (December)
ASSET ALLOCATIONS (must total 100%):
____ % Manufacturers Adviser Pac Rim Emerging Mkts (008) ____ % Founders Balanced (071)
____ % T. Rowe Price Science & Technology (016) ____ % Fidelity Aggr Asset Alloc (004)
____ % Founders Int'l Small Cap (006) ____ % Miller Anderson High Yield (076)
____ % Warburg Pincus Emerging Growth (020) ____ % Fidelity Mod Asset Alloc (003)
____ % Pilgrim Baxter Growth (022) ____ % Fidelity Cons Asset Alloc (002)
____ % Fred Alger Small/Mid Cap (011) ____ % Salomon Brothers Strategic Bond (015)
____ % Rowe Price-Fleming Int'l Stock (024) ____ % Oechsle Global Gov't Bond (010)
____ % Founders Worldwide Growth (026) ____ % Manufacturers Adviser Capital Growth Bond (080)
____ % Morgan Stanley Global Equity (009) ____ % Wellington Management Inv Quality Bond (018)
____ % Rosenberg Small Company Value (119) ____ % Salomon Brothers U.S. Gov't Securities (014)
____ % Fidelity Equity (001) ____ % Manufacturers Adviser Money Market (019)
____ % Founders Growth (005)
____ % Manufacturers Adviser Quant Equity (065) LIFESTYLE PORTFOLIOS
____ % T. Rowe Price Blue Chip Growth (012) ____ % Cons 280 (179)
____ % Manufacturers Adviser Real Estate Securities (068) ____ % Mod 460 (180)
____ % Miller Anderson Value (066) ____ % Bal 640 (181)
____ % J.P. Morgan Int'l Growth & Income (013) ____ % Growth 820 (182)
____ % Wellington Management Growth & Income (017) ____ % Aggr 1000 (183)
____ % T. Rowe Price Equity-Income (007)
- --------------------------------------------------------------------------------------------------------------------
APP-VEN7-8 *Unless subsequently changed in accordance with terms of Contract issued. 9/97
</TABLE>
<PAGE> 1
Exhibit (b)(7)(i)
REINSURANCE AGREEMENT
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
DOVER, DELAWARE
REFERRED TO AS THE "CEDING COMPANY"
AND
ITT LYNDON LIFE INSURANCE COMPANY
ST. LOUIS, MISSOURI
REFERRED TO AS THE "REINSURER"
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I GENERAL PROVISIONS 2
ARTICLE II INITIAL CONSIDERATION AND REINSURANCE PREMIUMS 8
ARTICLE III COMMISSIONS AND ALLOWANCES 11
ARTICLE IV BENEFIT PAYMENTS 17
ARTICLE V RESERVE ADJUSTMENTS 20
ARTICLE VI EXPENSE AND RISK CHARGES 22
ARTICLE VII REINSURANCE GAINS AND LOSSES 24
ARTICLE VIII LOSS CARRYFORWARD 25
ARTICLE IX EXPERIENCE REFUND 27
ARTICLE X ACCOUNTING AND SETTLEMENTS 29
ARTICLE XI DURATION AND RECAPTURE 33
ARTICLE XII TERMINAL ACCOUNTING AND SETTLEMENT 35
ARTICLE XIII REPRESENTATIONS 37
ARTICLE XIV ARBITRATION 38
ARTICLE XV INSOLVENCY 40
ARTICLE XVI EXECUTION AND EFFECTIVE DATE 41
SCHEDULE A ANNUITIES AND RISKS REINSURED 42
SCHEDULE B QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS 43
SCHEDULE C MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT 46
SCHEDULE D CEDING COMPANY DATA 47
EXHIBIT A ACCOUNTS RECEIVABLE AGREEMENT
<PAGE> 3
REINSURANCE AGREEMENT
This Agreement is made and entered into by and between North American Security
Life Insurance Company (hereinafter referred to as the "Ceding Company") and ITT
Lyndon Life Insurance Company (hereinafter referred to as the "Reinsurer").
The Ceding Company and the Reinsurer mutually agree to reinsure on the terms and
conditions stated herein. This Agreement is an indemnity reinsurance agreement
solely between the Ceding Company and the Reinsurer, and performance of the
obligations of each party under this Agreement will be rendered solely to the
other party. In no instance will anyone other than the Ceding Company or the
Reinsurer have any rights under this Agreement, and the Ceding Company will be
and remain the only party hereunder that is liable to any insured, policyowner
or beneficiary under any annuity reinsured hereunder.
- 1 -
<PAGE> 4
ARTICLE I
GENERAL PROVISIONS
1. Annuities and Risks Reinsured. The Reinsurer agrees to indemnify the
Ceding Company for, and the Ceding Company agrees to reinsure with the
Reinsurer, according to the terms and conditions hereof, the portion of
the risks under the annuities described in Schedule A attached hereto.
2. Coverages and Exclusions.
A. Only the variable annuities described in Schedule A are reinsured
under this Agreement.
B. The Reinsurer will not participate in any loans on annuities
reinsured hereunder.
3. Plan of Reinsurance. This indemnity reinsurance will be on a modified-
coinsurance basis. The Ceding Company will retain, control and own all
assets held in relation to the Modified Coinsurance Reserve.
4. Dividends to Policyowners. The Reinsurer will have no liability to the
Ceding Company for reimbursement of, and will not reimburse the Ceding
Company for, dividends to policyowners.
5. Expenses. The Reinsurer will bear no part of the expenses incurred in
connection with the annuities reinsured hereunder, except as otherwise
provided herein.
- 2 -
<PAGE> 5
6. Annuity Changes. The Ceding Company must provide written notification to
the Reinsurer of any change which affects the original terms or conditions
of any annuity reinsured hereunder within fifteen (15) days after the
change takes effect. The Reinsurer will provide written notification to
the Ceding Company as to the Reinsurer's acceptance or rejection of the
change within fifteen (15) days after receipt of notice of the change. If
the Reinsurer accepts any such change, the Reinsurer will share in any
increase or decrease in the Ceding Company's liability that results from
such change in the same proportion as the portion of the annuities
reinsured hereunder. If the Reinsurer rejects any such change, the
Reinsurer's liability under this Agreement will be determined as if no
such change had occurred.
7. No Extracontractual Damages. The Reinsurer does not indemnify the Ceding
Company for, and will not be liable for, any extracontractual damages or
extracontractual liability of any kind whatsoever resulting from fraud,
oppression, bad faith, strict liability, or negligent, reckless or
intentional wrongs on the part of the Ceding Company or its directors,
officers, employees and agents. The following types of damages are
examples of damages that would be excluded from this Agreement for the
conduct described above: actual damages, damages for emotional distress,
and punitive or exemplary damages.
8. Annuity Administration. The Ceding Company will administer the annuities
reinsured hereunder and will perform all accounting for such annuities;
provided, however, that the Reinsurer reserves the right to participate in
claims administration.
- 3 -
<PAGE> 6
9. Inspection. At any reasonable time, the Reinsurer may inspect, during
normal business hours, at the principal office of the Ceding Company, the
original papers and any and all other books or documents relating to or
affecting reinsurance under this Agreement. The Reinsurer will not use any
information obtained through any inspection pursuant to this Paragraph for
any purpose not relating to reinsurance hereunder.
10. Taxes. The allowance for any premium taxes paid in connection with the
annuities reinsured hereunder is included in the Commissions and
Allowances as described in Article III. The Reinsurer will not reimburse
the Ceding Company for any other taxes paid by the Ceding Company in
connection with the annuities reinsured hereunder.
11. Proxy Tax Reimbursement. Pursuant to IRC Section 848, insurance companies
are required to capitalize and amortize specified policy acquisition
expenses. The amount capitalized is determined by proxy based on a
percentage of "reinsurance premiums" as defined in the IRS regulations
relating to IRC Section 848. At the Reinsurer's request, the Ceding
Company will reimburse the Reinsurer for any positive timing cost to the
Reinsurer which results from the application of IRC Section 848 to the
annuities reinsured hereunder and which the Reinsurer considers material.
At the Ceding Company's request, the Reinsurer will reimburse the Ceding
Company for the absolute value of any negative timing cost to the Ceding
Company which results from the application of IRC Section 848 to the
annuities reinsured hereunder and which the Ceding Company considers
material.
- 4 -
<PAGE> 7
12. Election to Determine Specified Policy Acquisition Expenses. The Ceding
Company and the Reinsurer agree that the party with net positive
consideration under this Agreement will capitalize specified policy
acquisition expenses with respect to annuities reinsured under this
Agreement without regard to the general deductions limitation of Section
848(c)(1) of the Internal Revenue Code of 1986, as amended. The Ceding
Company and the Reinsurer will exchange information pertaining to the
amount of net consideration under this Agreement each year to ensure
consistency. The Ceding Company will submit a schedule to the Reinsurer by
May 1 of each year showing its calculation of the net consideration for
the preceding taxable year. The Reinsurer may contest the calculation in
writing within thirty (30) days of receipt of the Ceding Company's
schedule. Any differences will be resolved between the parties so that
consistent amounts are reported on the respective tax returns for the
preceding taxable year. This election to capitalize specified policy
acquisition expenses without regard to the general deductions limitation
is effective for all taxable years during which this Agreement remains in
effect.
13. Condition. The reinsurance hereunder is subject to the same limitations
and conditions as the annuities issued by the Ceding Company which are
reinsured hereunder, except as otherwise provided in this Agreement.
14. Misunderstandings and Oversights. If any failure to pay amounts due or to
perform any other act required by this Agreement is unintentional and
caused by misunderstanding or oversight, the Ceding Company and the
- 5 -
<PAGE> 8
Reinsurer will adjust the situation to what it would have been had the
misunderstanding or oversight not occurred.
15. Adjustments. If the Ceding Company's liability under any of the annuities
reinsured hereunder is changed because of a misstatement of age, sex or
any other material fact, the Reinsurer will share in the change
proportionately to the amount reinsured hereunder, and will make any and
all proportional adjustments with the Ceding Company.
16. Reinstatements. If an annuity reinsured hereunder is surrendered or
annuitized, and is subsequently reinstated while this Agreement is in
force, the reinsurance for such annuity will be reinstated automatically.
The Ceding Company will pay the Reinsurer the Reinsurer's proportionate
share of all amounts received by the Ceding Company in connection with the
reinstatement of the annuity plus any amounts previously refunded to the
Ceding Company by the Reinsurer in connection with the lapse of the
annuity.
17. Assignment. The Ceding Company may not assign any of its rights, duties or
obligations under this Agreement without prior written consent of the
Reinsurer.
18. Amendments. This Agreement may be amended only by written agreement of the
parties.
19. Entire Agreement. The terms expressed herein constitute the entire
agreement between the parties with respect to the annuities reinsured
- 6 -
<PAGE> 9
hereunder. There are no understandings between the parties with respect to
the annuities reinsured hereunder other than as expressed in this
Agreement.
- 7 -
<PAGE> 10
ARTICLE II
INITIAL CONSIDERATION AND REINSURANCE PREMIUMS
1. Initial Consideration. The Ceding Company will pay the Reinsurer an
Initial Consideration equal to 100 percent of the Modified Coinsurance
Reserve, as defined in Article V, Paragraph 3, calculated as of the
Effective Date of this Agreement. Simultaneously with the payment of the
Initial Consideration, the Ceding Company will withhold on behalf of the
Reinsurer 3.2 percent of the Initial Consideration, calculated as of the
Effective Date of this Agreement, in accordance with Paragraph 3 below,
but not to exceed $15 million.
2. Reinsurance Premiums. The Ceding Company will pay the Reinsurer
Reinsurance Premiums on all annuities in effect under this Agreement in an
amount equal to that portion of the gross premiums collected by the Ceding
Company during the current Accounting Period which corresponds to the
portion of the annuities reinsured hereunder. The Reinsurance Premiums
paid to the Reinsurer by the Ceding Company will be remitted to the
Reinsurer at the end of the Accounting Period during which the gross
premiums were collected by the Ceding Company and the Reinsurer will treat
any such Reinsurance Premiums as paid premium for annual statement
purposes, regardless of the mode of collection by the Ceding Company on
the annuities reinsured hereunder.
3. Funds Withheld. The Ceding Company and the Reinsurer have entered into the
"Accounts Receivable Agreement" attached to this Agreement as Exhibit A.
Pursuant to the terms of the Accounts Receivable Agreement,
- 8 -
<PAGE> 11
the Ceding Company will withhold on behalf of the Reinsurer the amount
described in Paragraph 1 above. The amount withheld by the Ceding Company
will be credited to the Reinsurer and will be considered as an amount held
on behalf of the Reinsurer. The Reinsurer will consider such amount as a
receivable and the Ceding Company will consider such amount as a payable.
Such amount withheld will be subject to repayment in accordance with the
terms of the Accounts Receivable Agreement. The Funds Withheld at the end
of each Accounting Period will be equal to (i) minus (ii), where:
(i) equals the Funds Withheld at the end of the preceding
Accounting Period; and
(ii) equals any payment by the Ceding Company to the Reinsurer of
any amount withheld, as described in item (i) above, during
the Accounting Period in accordance with the Accounts
Receivable Agreement.
With respect, however, to the Accounting Period during which the Effective
Date of this Agreement occurs, the reference in (i) above to "the end of
the preceding Accounting Period" means 3.2 percent of the Initial
Consideration, but not to exceed $15 million, determined in accordance
with Paragraph 1 above.
In no event will the Funds Withheld at the end of any Accounting Period
exceed 50 percent of the Ceding Company's total statutory capital and
surplus as of the end of the preceding calendar year.
4. Interest Expense Charge. The Ceding Company will pay the Reinsurer an
Interest Expense Charge at the end of each Accounting Period equal to [(i)
x (ii)] + [(iii) x (iv)], where:
- 9 -
<PAGE> 12
(i) equals any amounts withheld in accordance with item (i) of
Paragraph 3 above, which have not been paid by the Ceding
Company to the Reinsurer at the end of the preceding
Accounting Period and for which payment is not due to the
Reinsurer as described in the Accounts Receivable Agreement;
(ii) equals the Interest Expense Rate as described in Paragraph 5
below;
(iii) equals any amounts withheld in accordance with item (i) of
Paragraph 3 above, which have not been paid by the Ceding
Company to the Reinsurer at the end of the preceding
Accounting Period and for which payment is due to the
Reinsurer as described in the Accounts Receivable Agreement;
and
(iv) equals the Loss Carryforward Rate described in Article VIII,
Paragraph 2.
5. Interest Expense Rate. For the Accounting Periods beginning January 1,
1994 through December 31, 1998, the Interest Expense Rate at the end of
each Accounting Period will be equal to 1.7715 percent. For Accounting
Periods beginning January 1, 1999 and thereafter, the Interest Expense
Rate at the end of each Accounting Period will be equal to the Loss
Carryforward Rate as described in Article VIII, Paragraph 2.
- 10 -
<PAGE> 13
ARTICLE III
COMMISSIONS AND ALLOWANCES
1. Ceding Commission. Simultaneously with the payment of the Initial
Consideration, the Reinsurer will pay a Ceding Commission to the Ceding
Company of 2.2 percent of the Initial Consideration as described in
Article II, Paragraph 1, but not to exceed $10 million.
2. Unamortized Ceding Commission. The Unamortized Ceding Commission at the
end of each Accounting Period equals (i) minus (ii), where:
(i) equals the Unamortized Ceding Commission at the end of the
preceding Accounting Period; and
(ii) equals the Unamortized Ceding Commission Adjustment determined
in accordance with Paragraph 3 below.
With respect, however, to the Accounting Period during which the Effective
Date of this Agreement occurs, the reference in (i) to the "end of the
preceding Accounting Period" refers to the Effective Date of this
Agreement immediately after the Ceding Commission, as described in
Paragraph 1, has been paid. The Unamortized Ceding Commission may never be
less than zero. In the Accounting Period during which (i) minus (ii) as
described above, first becomes zero or negative, then, for that and all
subsequent Accounting Periods, the Unamortized Ceding Commission will be
set equal to zero.
3. Unamortized Ceding Commission Adjustment. The Unamortized Ceding
Commission Adjustment at the end of each Accounting Period equals (i)
minus (ii) minus (iii) minus (iv) minus (v), where:
- 11 -
<PAGE> 14
(i) equals the Reinsurance Gain or Reinsurance Loss determined in
accordance with Article VII;
(ii) equals the Loss Carryforward at the end of the preceding
Accounting Period with accrued interest thereon, determined in
accordance with Article VIII, Paragraph 1, item (i);
(iii) equals the Interest Expense Charge determined in accordance
with Article II, Paragraph 4;
(iv) equals the Interest on the Unamortized Ceding Commission
determined in accordance with Paragraph 9 below; and
(v) equals the Expense and Risk Charge determined in accordance
with Article VI, Paragraph 2.
However, in no event will the Unamortized Ceding Commission Adjustment be
less than zero or exceed the lesser of:
(1) the Unamortized Ceding Commission at the end of the preceding
Accounting Period determined in accordance with Paragraph 2
above, or
(2) the Maximum Unamortized Ceding Commission Adjustment as
described in Paragraph 4 below.
Notwithstanding anything to the contrary in this Agreement, if the
Unamortized Ceding Commission at the end of any Accounting Period is still
positive, but has been reduced during any Accounting Period by an amount
less than the Maximum Unamortized Ceding Commission Adjustment described
in Paragraph 4 below, then such shortfall can be recovered from future
positive Unamortized Ceding Commission Adjustments.
4. Maximum Unamortized Ceding Commission Adjustment. The Maximum Unamortized
Ceding Commission Adjustment for each Accounting Period is as follows:
- 12 -
<PAGE> 15
<TABLE>
<CAPTION>
For Accounting Maximum Unamortized
Periods Ending During Ceding Commission Adjustment
- ------------------------------------ -----------------------------
<S> <C>
1994 through 1998 $ 500,000
1999 and thereafter $2,000,000
</TABLE>
However, if in any Accounting Period (a) the Termination Rate as described
in Paragraph 5 below, is greater than 0.30, and/or (b) the Investment
Credit Accumulation Rate as described in Paragraph 6 below, is less than
zero, then the Reinsurer may elect to define the Maximum Withheld Ceding
Commission Adjustment as any amount up to $10 million for the first
Accounting Period in the current calendar year and for all Accounting
Periods thereafter.
5. Termination Rate. The Termination Rate in any Accounting Period equals 1 -
[(i) divided by (ii)], where:
(i) equals the total number of annuities reinsured hereunder and
described in Schedule A, as of the date the current Accounting
Period ends; and
(ii) equals the total number of annuities reinsured hereunder and
described in Schedule A, as of the date one year prior to the
date the current Accounting Period ends.
6. Investment Credit Accumulation Rate. The Investment Credit Accumulation
Rate in any Accounting Period equals (i) / [.5 x {(ii) + (iii)}], where:
(i) equals the Modified Coinsurance Reserve Investment Credit as
described in Schedule C, for the current Accounting Period;
(ii) equals the portion of the account value for the annuities
reinsured hereunder which corresponds to the portion of the
- 13 -
<PAGE> 16
annuities reinsured hereunder at the beginning of the current
Accounting Period; and
(iii) equals the portion of the account value for the annuities
reinsured hereunder which corresponds to the portion of the
annuities reinsured hereunder at the end of the current
Accounting Period.
7. Allowances for Commissions and Expenses. The Reinsurer will pay the Ceding
Company Allowances for Commissions and Expenses for each Accounting
Period, subsequent to the initial Accounting Period, equal to (i) plus
(ii) plus (iii) plus (iv), where:
(i) equals (a) times (b), where:
(a) equals $7.50 times the quota share percentage of the
annuities reinsured hereunder as described in Schedule
A; and
(b) equals the number of annuities reinsured hereunder and
described in Schedule A, and enforce at the end of the
current Accounting Period;
(ii) equals .0125 percent times that portion of the account value
of the annuities reinsured hereunder which corresponds to the
portion of the annuities reinsured hereunder as of the end of
the current Accounting Period;
(iii) equals the Trailer Commission, as defined below, times that
portion of the account value of the Venture Variable Annuity 3
annuities reinsured hereunder which corresponds to the portion
of the Venture Variable Annuity 3 annuities reinsured
- 14 -
<PAGE> 17
hereunder and described in Schedule A, as of the end of the
current Accounting Period; and
(iv) equals .25 percent times that portion of the account value,
attributable to purchase payments received by the Ceding
Company thirteen months or more prior to their trailer
commission payment dates, of the Venture Vision annuities
reinsured hereunder which corresponds to the portion of the
Venture Vision annuities reinsured hereunder and described in
Schedule A, as of the end of the current Accounting Period.
The Trailer Commission for Venture Variable Annuity 3 annuities for each
Accounting Period is defined below:
<TABLE>
<CAPTION>
For Accounting
Periods Ending During Trailer Commission
<S> <C>
1994 .04%
1995 .05%
1996 .055%
1997 and thereafter .0625%
</TABLE>
8. Allowances for Death Benefit Guarantee. The Reinsurer will pay the Ceding
Company Allowances for Death Benefit Guarantee for each Accounting Period,
subsequent to the initial Accounting Period, as an allowance for costs of
the minimum death benefit guarantee on the annuities reinsured hereunder,
equal to the sum of:
(i) .0375 percent times that portion of the account value of the
Venture Vision annuities reinsured hereunder which corresponds
to the portion of the Venture Vision annuities reinsured
hereunder and described in Schedule A, as of the end of the
current Accounting Period, plus
- 15 -
<PAGE> 18
(ii) .0125 percent times that portion of the account value of the
Venture Variable Annuity 3 annuities reinsured hereunder which
corresponds to the portion of the Venture Variable Annuity 3
annuities reinsured hereunder and described in Schedule A, as
of the end of the current Accounting Period.
9. Interest on the Unamortized Ceding Commission. The Ceding Company will pay
the Reinsurer Interest on the Unamortized Ceding Commission at the end of
each Accounting Period, subsequent to the initial Accounting Period, equal
to the Unamortized Ceding Commission at the end of the preceding
Accounting Period determined in accordance with Paragraph 2 above, times
the Interest Expense Rate described in Article II, Paragraph 5.
- 16 -
<PAGE> 19
ARTICLE IV
BENEFIT PAYMENTS
1. Benefit Payments. Benefit Payments, as referred to in this Agreement,
means the Reinsurer's quota share of (i) Claims as described in Paragraph
2 below, (ii) Cash Surrender Values as described in Paragraph 3 below, and
(iii) Annuity Benefits as described in Paragraph 7 below.
2. Claims. The Reinsurer will pay the Ceding Company Claims. The term
"Claims," whenever used for purposes of this Agreement, means that portion
of death benefits paid by the Ceding Company on annuities reinsured
hereunder which is equal to the Reinsurer's quota share of the account
value of those annuities.
3. Cash Surrender Values. The Reinsurer will pay the Ceding Company that
portion of the Cash Surrender Values paid by the Ceding Company on
annuities reinsured hereunder which corresponds to the portion of the
annuities reinsured hereunder.
4. Notice. The Ceding Company will notify the Reinsurer promptly after
receipt of any information regarding Claims on annuities reinsured
hereunder. The reinsurance claim and copies of notification, claim papers,
and proofs will be furnished the Reinsurer upon request.
5. Liability and Payment. The Reinsurer will accept the decision of the
Ceding Company with respect to payment of Claims on annuities reinsured
hereunder. The Reinsurer will pay its proportionate share of Claims in a
- 17 -
<PAGE> 20
lump sum to the Ceding Company without regard to the form of settlement by
the Ceding Company.
6. Contested Claims. The Ceding Company will advise the Reinsurer of its
intention to contest, compromise or litigate Claims involving annuities
reinsured hereunder. The Reinsurer will pay its share of the expenses of
such contests, in addition to its share of Claims, or it may choose not to
participate. If the Reinsurer chooses not to participate, it will
discharge its liability by payment to the Ceding Company of the full
amount of its liability on the annuity reinsured.
7. Annuity Benefits.
A. The Reinsurer will be liable, on a coinsurance basis, for its
portion of annuity payments made on any annuity reinsured hereunder
if the annuity payments are based on the fixed settlement options at
terms guaranteed in the annuity at the time of issue of the annuity.
B. The Reinsurer will be liable, on a modified coinsurance basis, for
its portion of annuity payments made on any annuity reinsured
hereunder if the annuity payments are based on variable settlement
options at terms guaranteed in the annuity at the time of issue of
the annuity.
C. The Reinsurer will not be liable for the reinsurance of any annuity
annuitizing at terms more favorable than those guaranteed at the
time of issue of such annuity. In the event that the Ceding Company
allows annuitization at terms more favorable than those guaranteed
in the annuity at the time of issue of such annuity, such annuity
will be considered surrendered and the Reinsurer will pay the Ceding
- 18 -
<PAGE> 21
Company that portion of the annuity account value applied to the
annuitization which corresponds to the portion of the annuities
reinsured hereunder. No further obligation or liability will exist
for the Reinsurer for such annuitized annuities.
- 19 -
<PAGE> 22
ARTICLE V
RESERVE ADJUSTMENTS
1. Initial Reserve Adjustment. Simultaneously with the payment of the Initial
Consideration described in Article II, Paragraph 1, by the Ceding Company
to the Reinsurer, the Reinsurer will pay the Ceding Company an Initial
Reserve Adjustment in an amount that is equal to the Modified Coinsurance
Reserve determined in accordance with Paragraph 3 below, on the Effective
Date of this Agreement.
2. Modified Coinsurance Reserve Adjustment.
A. The Modified Coinsurance Reserve Adjustment will be computed each
Accounting Period equal to (i) minus (ii) minus (iii), where:
(i) equals the Modified Coinsurance Reserve at the end of the
current Accounting Period on the annuities reinsured
hereunder;
(ii) equals the Modified Coinsurance Reserve at the end of the
preceding Accounting Period on the annuities reinsured
hereunder; and
(iii) equals the Modified Coinsurance Reserve Investment Credit
described in Schedule C.
With respect, however, to the Accounting Period during which the
Effective Date of this Agreement occurs, the reference in (ii) above
to "the end of the preceding Accounting Period" refers to the
Effective Date of this Agreement immediately after the Initial
Reserve Adjustment, as described in Paragraph 1 above, has occurred.
In the Accounting Period in which termination of this Agreement
- 20 -
<PAGE> 23
occurs, the reference in (i) above to "the end of the current
Accounting Period" refers to the terminal accounting date as
described in Article XII, Paragraph 2.
B. For any Accounting Period in which the amount computed in A. above
is positive, the Reinsurer will pay the Ceding Company such amount.
For any Accounting Period in which the amount computed in A. above
is negative, the Ceding Company will pay the Reinsurer the absolute
value of such amount.
3. Modified Coinsurance Reserve. The term "Modified Coinsurance Reserve," as
used in this Agreement, means the statutory reserve held by the Ceding
Company with respect to the annuities reinsured hereunder.
4. Reserve Strengthening. Any increase in reserves resulting from a reserve
strengthening with respect to the annuities reinsured hereunder will be
paid by the Ceding Company to the Reinsurer at the end of the Accounting
Period during which the reserve strengthening occurs.
- 21 -
<PAGE> 24
ARTICLE VI
EXPENSE AND RISK CHARGES
1. Initial Expense and Risk Charge. The Initial Expense and Risk Charge for
the initial Accounting Period, payable to the Reinsurer by the Ceding
Company will be 1 percent times the Ceding Commission determined in
accordance with Article III, Paragraph 1.
2. Expense and Risk Charge. The Expense and Risk Charge for each Accounting
Period subsequent to the initial Accounting Period, payable to the
Reinsurer by the Ceding Company, will be equal to the sum of (i) and (ii),
where:
(i) equals the Expense and Risk Charge Rate, as defined below,
times the Loss Carryforward for the preceding Accounting
Period, with accrued interest thereon, determined in
accordance with Article VIII, Paragraph 1, item (i); and
(ii) equals the Expense and Risk Charge Rate, as defined below,
times the Expense and Risk Charge Base, as defined below.
The Expense and Risk Charge Rate for each Accounting Period is defined as
follows:
<TABLE>
<CAPTION>
For Accounting Expense and
Periods Ending During Risk Charge Rate
- -------------------------------- ----------------
<S> <C>
1994 through 1998 .4125%
1999 and thereafter .4142%
</TABLE>
The Expense and Risk Charge Base for each Accounting Period is defined as
follows:
- 22 -
<PAGE> 25
<TABLE>
<CAPTION>
For Accounting
Periods Ending During Expense and Risk Charge Base
------------------------- --------------------------------------
<S> <C>
1994 through 1998 greater of either (a) the Unamortized
Ceding Commission at the end of the
preceding Accounting Period
determined in accordance with
Article III, Paragraph 2, minus the
Maximum Unamortized Ceding
Commission Adjustment determined in
accordance with Article III,
Paragraph 4, or (b) quantity (iii)
as defined below, but never less
than zero
1999 and thereafter (iii) below, but never less than
zero, where:
</TABLE>
(iii) equals (a) plus (b) minus (c) minus (d) minus (e), where:
(a) equals the Unamortized Ceding Commission at the end of
the preceding Accounting Period determined in accordance
with Article III, Paragraph 2;
(b) equals the absolute value of any Reinsurance Loss
determined in accordance with Article VII;
(c) equals any Reinsurance Gain determined in accordance
with Article VII;
(d) equals the Interest Expense Charge determined in
accordance with Article II, Paragraph 4; and
(e) equals the Interest on the Unamortized Ceding Commission
determined in accordance with Article III, Paragraph 9.
In no event will the Expense and Risk Charge payable be less than $20,000 for
any Accounting Period after December 31, 1998.
- 23 -
<PAGE> 26
ARTICLE VII
REINSURANCE GAINS AND LOSSES
Formula. A Reinsurance Gain or Reinsurance Loss will be calculated for each
Accounting Period and will be equal to the excess of (i) over (ii), where:
(i) equals the Reinsurance Premiums determined in accordance with
Article II, Paragraph 2; and
(ii) equals the sum of:
(a) Benefit Payments, as described in Article IV, plus
(b) the Modified Coinsurance Reserve Adjustment, determined in
accordance with Article V, Paragraph 2, plus
(c) Allowances for Commissions and Expenses determined in
accordance with Article III, Paragraph 7, plus
(d) Allowances for Death Benefit Guarantee determined in
accordance with Article III, Paragraph 8.
A Reinsurance Gain results if the excess of (i) over (ii) is positive. A
Reinsurance Loss results if the excess of (i) over (ii) is negative.
- 24 -
<PAGE> 27
ARTICLE VIII
LOSS CARRYFORWARD
1. Formula. The Loss Carryforward at the end of each Accounting Period will
be equal to (i) minus (ii) plus (iii) plus (iv) plus (v) plus (vi), where:
(i) equals the Loss Carryforward at the end of the preceding
Accounting Period (except that, for the initial Accounting
Period, the preceding Accounting Period Loss Carryforward will
be zero) accumulated to the end of the current Accounting
Period at an interest rate equal to the Loss Carryforward Rate
described in Paragraph 2 below;
(ii) equals any Reinsurance Gain determined in accordance with
Article VII;
(iii) equals the absolute value of any Reinsurance Loss determined
in accordance with Article VII;
(iv) equals the Interest Expense Charge determined in accordance
with Article II, Paragraph 4;
(v) equals the Interest on the Unamortized Ceding Commission
determined in accordance with Article III, Paragraph 9; and
(vi) equals the Expense and Risk Charge determined in accordance
with Article VI, Paragraph 2.
If the above calculation yields a negative amount, then the Loss
Carryforward will be set equal to zero.
2. Loss Carryforward Rate. The Loss Carryforward Rate at the end of each
Accounting Period will be equal to 43.75 basis points plus (i) divided by
(ii), where:
- 25 -
<PAGE> 28
(i) equals the ninety day (90) transfer pricing rate as determined
by ITT Financial Corporations's Treasury Department for ITT
Financial Corporation debt as of the date the current
Accounting Period begins; and
(ii) equals four.
- 26 -
<PAGE> 29
ARTICLE IX
EXPERIENCE REFUND
1. General. An Experience Refund will be paid by the Reinsurer to the Ceding
Company at the end of each Accounting Period with respect to the
reinsurance hereunder, if the operation of the Experience Refund formula
detailed in Paragraph 2 below produces a positive amount for that
Accounting Period. If the operation of the Experience Refund formula
produces a negative amount for that Accounting Period, then the Experience
Refund will be zero and the Loss Carryforward provisions of Article VIII
will apply. No Experience Refund will be paid by the Reinsurer to the
Ceding Company after the earliest of: (a) the Unamortized Ceding
Commission as described in Article III, Paragraph 2, becomes zero, or (b)
the Ceding Company withholds amounts in accordance with Article II,
Paragraph 3, item (i) for which payment is due to the Reinsurer as
described in the Accounts Receivable Agreement.
2. Formula. The Experience Refund at the end of each Accounting Period will
be equal to (i) minus (ii), where:
(i) equals the Reinsurance Gain or Reinsurance Loss determined in
accordance with Article VII; and
(ii) equals the sum of:
(a) the Loss Carryforward for the preceding Accounting
Period, with accrued interest thereon, determined in
accordance with Article VIII, item (i), plus
(b) the Interest Expense Charge determined in accordance
with Article II, Paragraph 4, plus
- 27 -
<PAGE> 30
(c) the Interest on the Unamortized Ceding Commission
determined in accordance with Article III, Paragraph 9,
plus
(d) the Expense and Risk Charge determined in accordance
with Article VI, Paragraph 2, plus
(c) the Unamortized Ceding Commission Adjustment determined
in accordance with Article III, Paragraph 3.
- 28 -
<PAGE> 31
ARTICLE X
ACCOUNTING AND SETTLEMENTS
1. Quarterly Accounting Period. Each Accounting Period under this Agreement
will be a calendar quarter, except that: (a) the initial Accounting Period
runs from the Effective Date of this Agreement through the last day of the
calendar quarter during which the Effective Date of this Agreement falls,
and (b) the final Accounting Period runs from the end of the preceding
Accounting Period until the terminal accounting date of this Agreement as
described in Article XII, Paragraph 2. However, the Reinsurer reserves the
right to adjust all accounting and settlements to a calendar year-to-date
basis.
2. Quarterly Accounting Reports. Quarterly accounting reports in the form of
Schedule B will be submitted to the Reinsurer by the Ceding Company for
each Accounting Period not later than fifteen (15) days after the end of
each Accounting Period. Such reports will include information on the
amount of Initial Consideration, Reinsurance Premiums, Ceding Commission,
Allowances for Commissions and Expenses, Allowances for Death Benefit
Guarantee, Benefit Payments, Reinsurance Gains and Losses, Experience
Refund, Loss Carryforward, Funds Withheld, Interest Expense Charge,
Unamortized Ceding Commission, Unamortized Ceding Commission Adjustment,
Interest on the Unamortized Ceding Commission, Expense and Risk Charges
and Modified Coinsurance Reserve.
- 29 -
<PAGE> 32
3. Initial Quarterly Settlement.
A. Within fifteen (15) days after the initial Accounting Period, the
Ceding Company will pay the Reinsurer the sum of: (i) the Initial
Consideration determined in accordance with Article II, Paragraph 1,
plus (ii) the Initial Expense and Risk Charge determined in
accordance with Article VI, Paragraph 1.
B. Simultaneously, the Reinsurer will pay the Ceding Company the sum
of: (i) the Initial Reserve Adjustment determined in accordance with
Article V, Paragraph 1, plus (ii) the Ceding Commission determined
in accordance with Article III, Paragraph 1.
4. Quarterly Settlements.
A. Within fifteen (15) days after the end of each Accounting Period,
the Ceding Company will pay the Reinsurer the sum of: (i) the
Reinsurance Premiums determined in accordance with Article II,
Paragraph 2, plus (ii) any Modified Coinsurance Reserve Adjustment
payable to the Reinsurer determined in accordance with Article V,
Paragraph 2, plus (iii) any Funds Withheld payable to the Reinsurer
during the current Accounting Period in accordance with the terms of
the Accounts Receivable Agreement determined in accordance with
Article II, Paragraph 3, item (ii).
B. Simultaneously, the Reinsurer will pay the Ceding Company the sum
of: (i) the amount of Benefit Payments paid during the Accounting
Period as described in Article IV, plus (ii) Allowances for
Commissions and Expenses determined in accordance with Article III,
Paragraph 7, plus (iii) Allowances for Death Benefit Guarantee
determined in accordance with Article III, Paragraph 8, plus (iv)
- 30 -
<PAGE> 33
any Modified Coinsurance Reserve Adjustment payable to the Ceding
Company determined in accordance with Article V, Paragraph 2, plus
(v) any Experience Refund determined in accordance with Article IX.
5. Amounts Due Quarterly. Except as otherwise specifically provided in this
Agreement, all amounts due to be paid to either the Ceding Company or the
Reinsurer under this Agreement will be determined on a net basis as of the
last day of each Accounting Period and will be due as of such date and
payable within fifteen (15) days after the end of the Accounting Period.
6. Annual Accounting Reports. The Ceding Company will provide the Reinsurer
with annual accounting reports within thirty (30) days after the end of
the calendar year for which such reports are prepared. These reports will
contain sufficient information about the annuities reinsured hereunder to
enable the Reinsurer to prepare its annual financial reports and to verify
the information reported in Schedule B, and will include Exhibit 8 by
reserve basis, Page 7, Page 23 and Schedule S of the Annual Statement.
7. Estimations. If the amounts, as described in Paragraphs 3 and 4 above,
cannot be determined by the dates described in Paragraph 5 above, on an
exact basis, such payments will be paid in accordance with a mutually
agreed upon formula which will approximate the actual payments.
Adjustments will then be made to reflect actual amounts when they become
available.
8. Delayed Payments. For purposes of Paragraph 5 above, if there is a delayed
settlement of a payment due, there will be an interest penalty, at
- 31 -
<PAGE> 34
the Interest Expense Rate described in Article II, Paragraph 5, for the
period that the amount is overdue. For purposes of this Paragraph, a
payment will be considered overdue thirty (30) days after the date such
payment is due.
9. Offset of Payments. All monies due either the Ceding Company or the
Reinsurer under this Agreement or any other agreements will be offset
against each other, dollar for dollar, regardless of any insolvency of
either party.
- 32 -
<PAGE> 35
ARTICLE XI
DURATION AND RECAPTURE
1. Duration. Except as otherwise provided herein, this Agreement is unlimited
in duration.
2. Reinsurer's Liability. The liability of the Reinsurer with respect to any
annuity reinsured hereunder will begin simultaneously with that of the
Ceding Company, but not prior to the Effective Date of this Agreement. The
Reinsurer's liability with respect to any annuity reinsured hereunder will
terminate on the earliest of: (i) the date such annuity is recaptured;
(ii) the date the Ceding Company's liability on such annuity is
terminated; or (iii) the date this Agreement is terminated. Termination of
the Reinsurer's liability is subject to payments in respect of such
liability in accordance with the provisions of Article XII of this
Agreement. In no event should the interpretation of this Paragraph imply a
unilateral right of the Reinsurer to terminate this Agreement.
3. Termination for Nonpayment of Reinsurance Premiums or Other Amounts Due.
If the Ceding Company fails to pay the Reinsurance Premiums or any other
amounts due to the Reinsurer pursuant to this Agreement, within sixty (60)
days after the end of any Accounting Period, the Reinsurer may terminate
this Agreement, subject to thirty (30) days prior written notice to the
Ceding Company.
4. Recapture. Annuities reinsured hereunder will be eligible for recapture,
at the option of the Ceding Company, on any January 1, following the fifth
- 33 -
<PAGE> 36
anniversary of the Effective Date of this Agreement, subject to ninety
(90) days prior written notice, or on any other date which is mutually
agreed to in writing. If the Ceding Company opts to recapture, then the
Ceding Company must recapture all of the annuities reinsured hereunder. In
no event may the Ceding Company recapture anything other than 100 percent
of all annuities reinsured hereunder.
5. Internal Replacements. Should the Ceding Company, its affiliates,
successors or assigns, initiate a program of Internal Replacement that
would include any of the annuities reinsured hereunder, the Ceding Company
will immediately notify the Reinsurer. The Reinsurer may elect to treat
such annuities as recaptured rather than surrendered, and such recapture
will apply to all annuities reinsured hereunder. For purposes of this
Agreement, the term "Internal Replacement" means any instance in which a
policy or any portion of the cash value of an annuity is exchanged for
another policy or annuity, not covered under this Agreement, which is
written by the Ceding Company, its affiliates, successors or assigns.
- 34 -
<PAGE> 37
ARTICLE XII
TERMINAL ACCOUNTING AND SETTLEMENT
1. Terminal Accounting. In the event that this Agreement is terminated in
accordance with Article XI, Paragraph 3, or all reinsurance under this
Agreement is recaptured in accordance with Article XI, Paragraph 4, a
Terminal Accounting and Settlement will take place.
2. Date. The terminal accounting date will be the earliest of: (1) the
effective date of recapture pursuant to any notice of recapture given
under this Agreement, (2) the effective date of termination pursuant to
any notice of termination given under this Agreement, or (3) any other
date mutually agreed to in writing.
3. Settlement. The Terminal Accounting and Settlement will consist of:
(a) The quarterly settlement as provided in Article X, Paragraph
4, computed as of the terminal accounting date; and
(b) payment by the Ceding Company to the Reinsurer of a Terminal
Reserve equal to the Modified Coinsurance Reserve on the
annuities reinsured hereunder as of the terminal accounting
date;
(c) payment by the Reinsurer to the Ceding Company of a Terminal
Reserve Adjustment equal to the Modified Coinsurance Reserve
on the annuities reinsured hereunder as of the terminal
accounting date;
(d) payment by the Ceding Company to the Reinsurer of a Terminal
Ceding Commission Adjustment equal to any Unamortized Ceding
- 35 -
<PAGE> 38
Commission as described in Article III, Paragraph 2, as of the
terminal accounting date;
(e) payment by the Ceding Company to the Reinsurer of any Funds
Withheld determined in accordance with Article II, Paragraph
3, as of the terminal accounting date; and
(f) payment by the Ceding Company to the Reinsurer of any Loss
Carryforward as described in Article VIII, calculated as of
the terminal accounting date.
If the calculation of the Terminal Accounting and Settlement produces an
amount owing to the Ceding Company, such amount will be paid by the
Reinsurer to the Ceding Company. If the calculation of the Terminal
Accounting and Settlement produces an amount owing to the Reinsurer, such
amount will be paid by the Ceding Company to the Reinsurer.
4. Supplementary Accounting and Settlement. In the event that, subsequent to
the Terminal Accounting and Settlement as provided above, a change is made
with respect to any amounts due, a supplementary accounting will take
place pursuant to Paragraph 3 above. Any amount owed to the Ceding Company
or to the Reinsurer by reason of such supplementary accounting will be
paid promptly upon the completion thereof.
- 36 -
<PAGE> 39
ARTICLE XIII
REPRESENTATIONS
Representations. The Ceding Company acknowledges that, at the Reinsurer's
request, it has provided the Reinsurer with the Ceding Company Data described in
Schedule D prior to the execution of this Agreement by the Reinsurer. The Ceding
Company represents that all factual information contained in the Ceding Company
Data is complete and accurate as of the date the document containing the
information was prepared. The Ceding Company further represents that any
assumptions made in preparing the Ceding Company Data were based upon informed
judgment and are consistent with sound actuarial principles. The Ceding Company
further represents that it is not aware of any omissions, errors, changes or
discrepancies which would materially affect the Ceding Company Data. The
Reinsurer has relied on such data and the foregoing representations in entering
into this Agreement.
- 37 -
<PAGE> 40
ARTICLE XIV
ARBITRATION
1. General. All disputes and differences between the Ceding Company and the
Reinsurer on which an agreement cannot be reached will be decided by
arbitration. The arbitrators will construe this Agreement from the
standpoint of practical business and equitable principles and the customs
and practices of the insurance and reinsurance business, rather than from
the standpoint of strict law. The parties intend that the arbitrators will
make their decision with a view to effecting the intent of this Agreement.
2. Method. Three arbitrators will decide any differences. They must be
impartial and present or former officers of life insurance companies other
than the parties to this Agreement or any company owned by, or affiliated
with, either party. One of the arbitrators will be appointed by the
Reinsurer, another by the Ceding Company, and the two arbitrators thus
selected will select a third arbitrator before arbitration begins. Should
one of the parties decline to select an arbitrator within thirty (30) days
after the date of a written request to do so, or should the two
arbitrators selected by the parties not be able to agree upon the choice
of a third, the appointment(s) will be left to the President of the
American Arbitration Association or its successor. The arbitrators will
decide by a majority of votes and their decision will be final and binding
upon the parties. The costs of arbitration, including the fees of the
arbitrators, will be shared equally by the parties unless the arbitrators
- 38 -
<PAGE> 41
decide otherwise. Any counsel fees incurred by a party in the conduct of
arbitration will be paid by the party incurring the fees.
- 39 -
<PAGE> 42
ARTICLE XV
INSOLVENCY
Insolvency. In the event of the Ceding Company's insolvency, any payments due
the Ceding Company from the Reinsurer pursuant to the terms of this Agreement
will be made directly to the Ceding Company or its liquidator, receiver or
statutory successor. The reinsurance will be payable by the Reinsurer on the
basis of the liability of the Ceding Company under the annuities reinsured
without diminution because of the insolvency of the Ceding Company. The
liquidator, receiver or statutory successor of the Ceding Company will give the
Reinsurer written notice of the pendency of a claim against the Ceding Company
on any annuity reinsured within a reasonable time after such claim is filed in
the insolvency proceeding. During the pendency of any such claim, the Reinsurer
may investigate such claim and interpose in the Ceding Company's name (or in the
name of the Ceding Company's liquidator, receiver or statutory successor), in
the proceeding where such claim is to be adjudicated, any defense or defenses
which the Reinsurer may deem available to the Ceding Company or its liquidator,
receiver or statutory successor. The expense thus incurred by the Reinsurer will
be chargeable, subject to court approval, against the Ceding Company as a part
of the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Ceding Company solely as a result of the defense
undertaken by the Reinsurer.
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<PAGE> 43
ARTICLE XVI
EXECUTION AND EFFECTIVE DATE
In witness of the above, this Agreement is executed in duplicate on the dates
indicated below with an Effective Date of December 31, 1993.
NORTH AMERICAN SECURITY LIFE
ATTEST: INSURANCE COMPANY ("Ceding Company")
By: By:
--------------------------------- -------------------------------
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Reinsurer")
By: By:
--------------------------------- -------------------------------
Title: Title:
--------------------------------- -------------------------------
Date: Date:
--------------------------------- -------------------------------
- 41 -
<PAGE> 44
SCHEDULE A
ANNUITIES AND RISKS REINSURED
Annuities and Risks Reinsured. The amount of reinsurance under this Agreement
will be a quota share of the Ceding Company's net liability on those variable
annuities issued by the Ceding Company and described below:
<TABLE>
<CAPTION>
Quota Contract and
Plan Issue Years Share Certificate Numbers
- -------------------- ------------- ------- ---------------------
<S> <C> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 64% 203-VA
Venture Vision 1993 95% VEN 10
</TABLE>
"Net liability," as used in this Agreement, means the Ceding Company's liability
on annuities reinsured hereunder.
- 42 -
<PAGE> 45
SCHEDULE B
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
Accounting Period: ______________
Calendar Year: __________________
Date Report Completed:___________
1. Initial Consideration (Article II, Paragraph 1)*
a. Amount of Initial Consideration paid
to Reinsurer ____
b. Amount of Initial Consideration withheld by
Ceding Company ____
Initial Consideration = a + b ____
2. Reinsurance Premiums (Article II, Paragraph 2) ____
3. Benefit Payments (Article IV)
a. Death Benefits ____
b. Cash Surrender Values ____
c. Annuity Benefits ____
Benefit Payments = a + b + c ____
4. Initial Reserve Adjustment (Article V, Paragraph 1)* ____
5. Modified Coinsurance Reserve Adjustment (Article V, Paragraph 2)
a. Modified Coinsurance Reserve end of
preceding Accounting Period ____
b. Modified Coinsurance Reserve end of
current Accounting Period ____
c. Equals b - a ____
d. Modified Coinsurance Reserve Investment
Credit (Schedule C) ____
Modified Coinsurance Reserve Adjustment = c - d ____
6. Reinsurance Gain = 2 - 3 - 5 - 14 - 15
(If negative, see Article VII) ____
7. Reinsurance Loss = 2 - 3 - 5 - 14 - 15
(If positive, see Article VII) ____
8. Loss Carryforward [Article VIII, Paragraph 1, item (i)] ____
9. Initial Expense and Risk Charge (Article VI, Paragraph 1)* ____
10. Expense and Risk Charge (Article VI, Paragraph 2) ____
11. Ceding Commission (Article III, Paragraph 1)* ____
- 43 -
<PAGE> 46
12. Unamortized Ceding Commission (Article III, Paragraph 2)
----------
13. Unamortized Ceding Commission Adjustment
(Article III, Paragraph 3)
----------
14. Allowances for Commissions and Expenses
(Article III, Paragraph 7)
----------
15. Allowances for Death Benefit Guarantee
(Article III, Paragraph 8)
----------
16. Experience Refund = 6 + 7 - 8 - 10 - 13 - 19 - 20
(If negative, see Article IX)
----------
17. Funds Withheld payment [Article II, Paragraph 3, item (ii)]
----------
18. Funds Withheld = 1a - 16 (Article II, Paragraph 3)
----------
19. Interest Expense Charge (Article II, Paragraph 4)
----------
20. Interest on the Unamortized Ceding Commission
(Article III, Paragraph 9)
----------
21. Cash Settlement =
1a + 2 - 3 - 4 - 5 + 9 - 11 - 14 - 15 - 16 + 17 ==========
*Initial Accounting Period, only.
Supplemental Information
<TABLE>
<CAPTION>
Venture
Total Variable Venture
Number Annuity 3 Vision Total
of Account Account Account Loss
Annuities Value Value Value Carryforward
<S> <C> <C> <C> <C> <C>
Beginning of Period
---------- ---------- ---------- -------- ------------
+ Additions
---------- ---------- ---------- -------- ------------
- - Terminations ---------- ---------- ---------- -------- ------------
End of Period ========== ========== ========== ======== ============
</TABLE>
<TABLE>
<CAPTION>
Venture Venture
Variable Vision
Annuity 3 Number
Number of of
Annuities Annuities
<S> <C> <C>
Beginning of Period
---------- ----------
+ Additions
---------- ----------
- - Terminations
---------- ----------
End of Period
========== ==========
</TABLE>
- 44 -
<PAGE> 47
Termination Rate (Article III, Paragraph 5)
a. Total number of annuities reinsured hereunder
as of date current Accounting Period ends
----
b. Total number of annuities reinsured hereunder
as of the date one year prior to the date
the current Accounting Period ends
----
c. Termination Rate 1 - (a / b)
====
Investment Credit Accumulation Rate (Article III, Paragraph 6)
a. Modified Coinsurance Reserve Investment Credit
----
b. Account value at beginning of current Accounting Period
----
c. Account value at end of current Accounting Period
----
d. Investment Credit Accumulation Rate
a / [.5 x (b + c)]
====
- 45 -
<PAGE> 48
SCHEDULE C
MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT
Modified Coinsurance Reserve Investment Credit. The Modified Coinsurance Reserve
Investment Credit is equal to the portion of the sum of all accrued investment
income and capital gains and losses, realized and unrealized, on the Ceding
Company's Separate Account for the current Accounting Period which corresponds
to the portion of the annuities reinsured hereunder. The Modified Coinsurance
Reserve Investment Credit will not be adjusted for income taxes or changes in
any provision for taxes, investment management fees, or charges for mortality or
expense risks.
- 46 -
<PAGE> 49
SCHEDULE D
CEDING COMPANY DATA
- - Package from John Vrysen of the Ceding Company to John Laughlin of the
Reinsurer containing:
- 1993 Reinsurance Proposal
- Section 1 of 1994 Ceding Company Business Plan
- Ceding Company Annuity Sales Summary as of September 30, 1993
- Ceding Company 1992 IRIS Ratios and Company Response
- North American Life Insurance Company/Ceding Company Guarantee
Agreement
- VENTURE VARIABLE ANNUITY 3 Product Kit
- VENTURE VISION Product Kit
- Ceding Company March 1993 Quarterly Statement
- Ceding Company June 1993 Quarterly Statement
- Ceding Company 1992 NAIC Annual Statement
- Ceding Company 1992 NAIC Separate Account Statement
- - Package from John Vrysen of the Ceding Company to John Laughlin of the
Reinsurer containing:
- Supplement No. 1 to the 1993 Reinsurance Proposal Dated November 12,
1993
- Policy Forms for VENTURE VISION and VENTURE VARIABLE ANNUITY 3
- Projected Runoff of the Existing Closed Block of VENTURE VARIABLE
ANNUITY 3
- Pricing Runs using Chalke PTS for VENTURE VISION and VENTURE
VARIABLE ANNUITY 3
- - Telephone conversations with John Vrysen of the Ceding Company on December
27, 1993 regarding:
- Expense allowances: Except for the trail commissions and the
allowance for the minimum death benefit guarantee, direct variable
expenses are approximately 45% - 50% of total pricing expenses.
Death Benefit guarantee costs 5 basis points annually for VENTURE
VARIABLE ANNUITY 3; 15 basis points annually for VENTURE VISION
- Revised projection of 1993 VENTURE VISION premiums: $110 million
- December 23, 1993 Account Values are $606 million for VENTURE
VARIABLE ANNUITY 3 and $107 million for VENTURE VISION
- 47 -
<PAGE> 50
EXHIBIT A
ACCOUNTS RECEIVABLE AGREEMENT
THIS AGREEMENT, effective as of December 31, 1993, is made and entered into by
and between North American Security Life Insurance Company, a corporation
organized and existing under the laws of the State of Delaware (hereinafter
referred to as the "Borrower") and ITT Lyndon Life Insurance Company, a
corporation organized and existing under the laws of the state of Missouri
(hereinafter referred to as the "Lender").
WITNESSETH
WHEREAS the Borrower and the Lender have entered into Reinsurance Agreement
Number 1293-104 with an effective date of December 31, 1993 (hereinafter
referred to as the "Reinsurance Agreement"), a copy of which is attached to
this Agreement and incorporated herein by reference; and
WHEREAS the Borrower desires to withhold on behalf of the Lender a specified
percentage of the Initial Consideration, but not to exceed $15 million, as
described in Article II, Paragraph 1, of the Reinsurance Agreement, such amount
withheld to be paid by the Borrower to the Lender at a later date.
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, the Borrower and the Lender agree as follows:
- 1 -
<PAGE> 51
ARTICLE I
PROVISIONS RELATING TO THE ACCOUNTS RECEIVABLE
1. Accounts Receivable. The term "Accounts Receivable," as used in this
Agreement, means the Funds Withheld, determined in accordance with Article
II, Paragraph 3 of the Reinsurance Agreement, and represents funds
withheld by the Borrower from the Lender in accordance with the terms of
Article II, Paragraphs 1, 2 and 4 of the Reinsurance Agreement. The Funds
Withheld under the Reinsurance Agreement are considered to be amounts held
on behalf of the Lender. The Lender will record such amounts as a
receivable and the Borrower will record such amounts as a payable. The
Accounts Receivable will be subject to the Repayment provisions specified
in Paragraphs 2 and 3 below.
2. Scheduled Repayment. The Borrower will repay a portion of the Accounts
Receivable at the end of each calendar year in an amount equal to the
Scheduled Repayment Amount. The Scheduled Repayment Amount will be equal
to the Repayment Schedule Percentage, as defined below, times the Accounts
Receivable, as described in Paragraph 1 above, as of the Effective Date of
this Agreement. The Repayment Schedule Percentage at the end of each
calendar year is defined below:
<TABLE>
<CAPTION>
Calendar Year Repayment Schedule Percentage
------------- -----------------------------
<S> <C>
1994 20%
1995 20%
1996 20%
1997 20%
1998 20%
</TABLE>
- 2 -
<PAGE> 52
3. Non-Scheduled Repayment. The Accounts Receivable, as described in
Paragraph 1 above, will be paid by the Borrower to the Lender within
fifteen (15) days after the earlier of:
(a) the date the Lender elects to receive payment from the Borrower of
any portion of the Accounts Receivable are described in Paragraph 4
below; or
(b) the terminal accounting date, as described in Article XII, Paragraph
2 of the Reinsurance Agreement, as part of the Terminal Accounting
and Settlement as described in Article XII, Paragraph 3, item (e) of
the Reinsurance Agreement.
4. Events of Default and Remedies Therefor. Any one or more of the following
in any calendar year will constitute an Event of Default as used in this
Agreement:
(a) the insurance claims paying ability rating assigned to the Borrower
by Standard and Poor's Corporation falls below A;
(b) default for a period in excess of sixty (60) days with respect to the
repayment of the portion of the Accounts Receivable payable by the
Borrower to the Lender at the end of the calendar year, as described
in Paragraph 2 above;
(c) any material representation, warranty or other statement made by the
Borrower herein or in any statement or certificate furnished in
connection with, or pursuant to, the transactions contemplated
hereunder, or in compliance with the terms hereof, proves untrue in
any material respect as of the date of the issuance of making thereof;
- 3 -
<PAGE> 53
(d) violation of any of the Borrower Covenants contained in Article II,
Paragraph 3;
(e) the Borrower files for bankruptcy or admits in writing its inability to
pay its debts as they mature or makes an assignment for the benefit of
creditors;
(f) the Borrower applies for or consents to the appointment of a trustee,
custodian, receiver or liquidator for the Borrower or for the major
part of the property of the Borrower;
(g) bankruptcy, reorganization, insolvency or other proceedings for relief
under any bankruptcy, reorganization, insolvency or similar law or laws
for the relief of debtors, are instituted against the Borrower and are
consented to or are not dismissed within sixty (60) days after such
institution; and/or
(h) the non-observance or non-performance of any other provision of this
Agreement which is not remedied within thirty (30) days after written
notice thereof to the Borrower by the Lender;
When any Event of Default described above occurs, then the Lender may elect to
receive payment from the Borrower of any portion of the Accounts Receivable, as
described in Paragraph 1 above, as of the end of the calendar year.
-4-
<PAGE> 54
ARTICLE II
MISCELLANEOUS PROVISIONS
1. Duration of Agreement. This Agreement will remain in effect while the
Reinsurance Agreement is in effect.
2. Borrower's Representation and Warranties. The Borrower represents and
warrants as follows:
(a) Corporate Existence and Power. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of
Delaware, and has all corporate powers and all material government
licenses, authorizations, consents and approvals required to carry on
its business as now conducted.
(b) Corporate and Governmental Authorization. The execution, delivery and
performance of this Agreement by the Borrower and the transactions
contemplated hereby are within the Borrower's corporate power, have
been duly authorized by all necessary corporate actions, require no
action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the
Certificate of Incorporation of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon
the Borrower.
(c) Binding Effect. This Agreement and the Reinsurance Agreement constitute
valid and binding obligations of the Borrower, and are enforceable
against the Borrower in accordance with their
-5-
<PAGE> 55
terms, except as: (1) the enforceability thereof may be affected by
bankruptcy, reorganization, insolvency or similar laws affecting the
enforcement of creditor's rights generally and (2) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(d) Litigation. There is no action, suit or proceeding pending, or to the
knowledge of the Borrower threatened, against or affecting the Borrower
before any court or arbitrator or any governmental body, agency or
official which could reasonably be expected to have a material adverse
effect on the business of the Borrower, or which in any manner
questions the validity of this Agreement or the Reinsurance Agreement.
3. Borrower Covenants. The Borrower agrees that so long as this Agreement is in
effect:
(a) the Borrower will do all things necessary to preserve and keep in full
force and effect its corporate existence, rights and franchises granted
by law or otherwise; provided, however, that nothing in this Paragraph
will prevent the abandonment or termination of the existence and
franchises of any subsidiary or any rights of the Borrower if such
abandonment or termination is in the best interest of the Borrower and
not disadvantageous in any material respect to the Lender;
(b) the Borrower will duly pay and discharge all taxes, assessments and
other governmental charges upon or against the Borrower or its
properties, as well as all other liabilities
-6-
<PAGE> 56
of the Borrower, before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings;
(c) the Borrower will maintain a minimum of $25 million of statutory capital
and surplus as reflected in its Annual Statement filed with the Delaware
Insurance Department;
(d) the Borrower will maintain a minimum risk-based capital ratio of 225
percent of the NAIC authorized control level, as defined for 1993, as of
December 31 of each calendar year; and
(e) the Borrower will maintain sufficient statutory capital and surplus
such that the ratio of total debt to total statutory capital and
surplus, plus transfers to separate accounts (as described on Page 3,
Line 13A of the 1993 Annual Statement, adjusted for the final business
day's activities of the reporting period), does not exceed 75 percent at
the end of any calendar year; provided that this covenant may be waived
or modified if the Borrower and the Lender mutually agree to do so, and
provided, further, that if such ratio does exceed 75 percent at the end
of any calendar year, the Borrower may repay a portion of the Accounts
Receivable, as described in Article I, Paragraph 1, in order to reduce
the ratio below 75 percent.
4. Amendments and Waivers. This Agreement may be amended only by written
agreement of the parties. Any provision of this Agreement may be waived
only by the written agreement of the parties.
- 7 -
<PAGE> 57
5. Arbitration. The Lender and the Borrower agree to arbitrate all disputes
hereunder. Any arbitration under this Agreement will be conducted in
accordance with Article XIV of the Reinsurance Agreement.
6. Assignment. Neither party may assign any of its rights, duties or
obligations under this Agreement without the prior written consent of the
other party.
- 8 -
<PAGE> 58
In witness of the above, this Accounts Receivable Agreement is executed in
duplicate on the dates indicated below.
NORTH AMERICAN SECURITY LIFE INSURANCE
ATTEST: COMPANY ("Ceding Company")
By: By:
----------------------------- -----------------------------------
Title: Title:
-------------------------- -------------------------------
Date: Date:
-------------------------- -------------------------------
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Reinsurer")
By: By:
----------------------------- ----------------------------------
Title: Title:
-------------------------- -------------------------------
Date: Date:
-------------------------- -------------------------------
-9-
<PAGE> 59
AMENDMENT ONE
ATTACHED TO AND MADE A PART OF THE
REINSURANCE AGREEMENT NUMBER 1293-104
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
"CEDING COMPANY"
AND
ITT LYNDON LIFE INSURANCE COMPANY
"REINSURER"
<PAGE> 60
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. ARTICLE II, INITIAL CONSIDERATION AND REINSURANCE PREMIUMS, Paragraphs 2,
3 and 4, are replaced in their entirety by the following:
2. Reinsurance Premiums. At the end of each Accounting Period, the
Ceding Company will pay the Reinsurer Reinsurance Premiums on all
annuities in effect under this Agreement in an amount equal to that
portion of the gross premiums collected by the Ceding Company during
the Accounting Period which corresponds to the portion of the
annuities reinsured hereunder. The Reinsurer will treat any such
Reinsurance Premiums as paid premium for annual statement purposes,
regardless of the mode of collection by the Ceding Company on the
annuities reinsured hereunder.
The Ceding Company will withhold on behalf of the Reinsurer, in
accordance with Paragraph 3 below, an amount equal to (i) times
(ii), but not to exceed $6 million for the current calendar year,
where:
(i) equals the Funds Withheld Rate, as described in Schedule
E, Paragraph 1; and
(ii) equals Reinsurance Premiums, determined in accordance
with this Paragraph 2.
3. Funds Withheld. The Ceding Company and the Reinsurer have entered
into the "Accounts Receivable Agreement" attached to this Agreement
as Exhibit A. Pursuant to the terms of the Accounts Receivable
Agreement, the Ceding Company will withhold on behalf of the
Reinsurer the amounts described in Paragraphs 1 and 2 above. The
-1-
<PAGE> 61
amount withheld by the Ceding Company will be credited to the
Reinsurer and will be considered as an amount held on behalf of the
Reinsurer. The Reinsurer will consider such amount as a receivable
and the Ceding Company will consider such amount as a payable. Such
amount withheld will be subject to repayment in accordance with the
terms of the Accounts Receivable Agreement. The Funds Withheld at
the end of each Accounting Period will be equal to (i) plus (ii)
minus (iii), where:
(i) equals the Funds Withheld at the end of the preceding
Accounting Period;
(ii) equals the Funds Withheld Rate, as described in Schedule
E, Paragraph 1, times the Reinsurance Premiums,
determined in accordance with Paragraph 2 above, but not
to exceed $6 million for the current calendar year; and
(iii) equals any payment by the Ceding Company to the
Reinsurer of any amount withheld, as described in items
(i) and (ii) above, during the Accounting Period in
accordance with the Accounts Receivable Agreement.
With respect, however, to the Accounting Period during which the
Effective Date of this Agreement occurs, the reference in (i) above
to "the Funds Withheld at the end of the preceding Accounting
Period" means 3.2 percent of the Initial Consideration, determined
in accordance with Paragraph 1 above, but not to exceed $15 million.
In no event will the Funds Withheld at the end of any Accounting
Period exceed 50 percent of the Ceding Company's total statutory
capital and surplus as of the end of the preceding calendar year.
-2-
<PAGE> 62
4. Interest Expense Charge. The Ceding Company will pay the Reinsurer
an Interest Expense Charge at the end of each Accounting Period
equal to [(i) x (ii)] + [(iii) x (iv)] + [(v) x (vi)] + [(vii) x
(viii)] + [(ix) x (x)] + [(xi) x (xii)], where:
(i) equals any amounts withheld in accordance with Paragraph
1 above, as of the end of the preceding Accounting
Period and for which payment is not yet due to the
Reinsurer, as described in the Accounts Receivable
Agreement;
(ii) equals the Interest Expense Rate, as described in
Paragraph 5 below;
(iii) equals, for the Accounting Periods beginning April 1,
1994 and thereafter, any amounts withheld, in accordance
with Paragraph 2 above, during the first Accounting
Period in the 1994 calendar year and for which payment
is not yet due to the Reinsurer, as described in the
Accounts Receivable Agreement;
(iv) equals,
- for the Accounting Periods beginning April 1, 1994
through December 31, 1994, 43.75 basis points,
plus [(a) / (b)] x (c), where:
(a) equals the funds transfer pricing rate
as determined by ITT Financial
Corporation's Treasury Department for
ITT Financial Corporation debt for the
number of days remaining in the current
calendar year measured from the
quarterly settlement
-3-
<PAGE> 63
date, as described in Article X, for the first
Accounting Period in the 1994 calendar year;
(b) equals the number of days remaining in the current
calendar year measured from the quarterly settlement
date, as described in Article X, for the first
Accounting Period in the 1994 calendar year; and
(c) equals,
- for the Accounting Period beginning April 1, 1994,
the number of days remaining in the Accounting
Period measured from the quarterly settlement
date, as described in Article X, for the first
Accounting Period in the 1994 calendar year; and
- for the Accounting Periods beginning July 1, 1994
and October 1, 1994, the number of days in the
current Accounting Period;
- for the Accounting Periods beginning January 1, 1995 and
thereafter, the Loss Carryforward Rate, described in Article
VIII, Paragraph 2;
(v) equals, for the Accounting Periods beginning July 1, 1994 and
thereafter, any amounts withheld, in accordance with Paragraph
2 above, during the second Accounting Period in the 1994
calendar year and for
-4-
<PAGE> 64
which payment is not yet due to the Reinsurer, as described in
the Accounts Receivable Agreement;
(vi) equals,
- for the Accounting Periods beginning July 1, 1994 and
October 1, 1994, 43.75 basis points, plus [(a) / (b)] x
(c), where:
(a) equals the funds transfer pricing rate as
determined by ITT Financial Corporation's Treasury
Department for ITT Financial Corporation debt for
the number of days remaining in the current
calendar year measured from the quarterly
settlement date, as described in Article X, for
the second Accounting Period in the 1994 calendar
year;
(b) equals the number of days remaining in the current
calendar year measured from the quarterly
settlement date, as described in Article X, for
the second Accounting Period in the 1994 calendar
year; and
(c) equals,
- for the Accounting Period beginning July
1, 1994, the number of days remaining in
the Accounting Period measured from the
quarterly settlement date, as described
in
-5-
<PAGE> 65
Article X, for the second Accounting Period in the 1994
calendar year; and
- for the Accounting Periods beginning October 1, 1994,
the number of days in the current Accounting Period;
(vii) equals, for the Accounting Periods beginning October 1, 1994
and thereafter, any amounts withheld, in accordance with
Paragraph 2 above, during the third Accounting Period in the
1994 calendar year and for which payment is not yet due to the
Reinsurer, as described in the Accounts Receivable Agreement;
(viii) equals,
- for the Accounting Periods beginning October 1, 1994,
43.75 basis points, plus [(a) / (b)] x (c), where:
(a) equals the funds transfer pricing rate as
determined by ITT Financial Corporation's Treasury
Department for ITT Financial Corporation debt for
the number of days remaining in the current
calendar year measured from the quarterly
settlement date, as described in Article X, for
the third Accounting Period in the 1994 calendar
year;
(b) equals the number of days remaining in the current
calendar year measured from the quarterly
settlement date, as described in
-6-
<PAGE> 66
Article X, for the third Accounting Period in the
1994 calendar year; and
(c) equals the number of days remaining in the
Accounting Period measured from the quarterly
settlement date, as described in Article X, for
the third Accounting Period in the 1994 calendar
year; and
- for the Accounting Periods beginning January 1, 1995 and
thereafter, the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2;
(ix) equals, for the Accounting Periods beginning January 1, 1995
and thereafter, any amounts withheld, in accordance with
Paragraph 2 above, during the fourth Accounting Period in the
1994 calendar year and for which payment is not yet due to the
Reinsurer, as described in the Accounts Receivable Agreement;
(x) equals,
- for the Accounting Period beginning January 1, 1995,
[(a) / (b)] x (c), where:
(a) equals the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2;
(b) equals the number of days in the current
Accounting Period; and
(c) equals the number of days remaining in the
Accounting Period measured from the quarterly
settlement date, as described in
-7-
<PAGE> 67
Article X, for the fourth Accounting Period in the
1994 calendar year; and
- for the Accounting Periods beginning April 1, 1995 and
thereafter, the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2;
(xi) equals any amounts withheld in accordance with items (i) and
(ii) of Paragraph 3 above, which have not been paid by the
Ceding Company to the Reinsurer at the end of the preceding
Accounting Period and for which payment is due to the
Reinsurer, as described in the Accounts Receivable Agreement;
and
(xii) equals the Loss Carryforward Rate, as described in Article
VIII, Paragraph 2.
II. ARTICLE III, COMMISSIONS AND ALLOWANCES, Paragraphs 1, 2, 3, 4, 6, 7 and
9, are replaced in their entirety by the following:
1. Ceding Commission. Simultaneously with the payment of the Initial
Consideration, the Reinsurer will pay a Ceding Commission to the
Ceding Company of 2.2 percent of the Initial Consideration, as
described in Article II, Paragraph 1, but not to exceed $10 million.
For Accounting Periods beginning January 1, 1994 and thereafter, the
Reinsurer will pay a Ceding Commission to the Ceding Company equal
to the Ceding Commission Rate, as described in Schedule E, Paragraph
2, times the Reinsurance Premiums, determined in accordance with
Article II, Paragraph 2, but not to exceed $4 million for the
current calendar year.
-8-
<PAGE> 68
2. Unamortized Ceding Commission. The Unamortized Ceding Commission at
the end of each Accounting Period equals (i) plus (ii) minus (iii),
where:
(i) equals the Unamortized Ceding Commission at the end of
the preceding Accounting Period;
(ii) equals the Ceding Commission Rate, as described in
Schedule E, Paragraph 2, times the Reinsurance Premiums,
determined in accordance with Article II, Paragraph 2,
but not to exceed $4 million for the current calendar
year; and
(iii) equals the Unamortized Ceding Commission Adjustment,
determined in accordance with Paragraph 3 below.
With respect, however, to the Accounting Period during which the
Effective Date of this Agreement occurs, the reference in (i) to the
"end of the preceding Accounting Period" refers to the Effective
Date of this Agreement immediately after the Ceding Commission, as
described in Paragraph 1 above, has been paid. The Unamortized
Ceding Commission may never be less than zero. In the Accounting
Period during which (i) plus (ii) minus (iii) as described above,
first becomes zero or negative, then, for that and all subsequent
Accounting Periods, the Unamortized Ceding Commission will be set
equal to zero.
3. Unamortized Ceding Commission Adjustment. The Unamortized Ceding
Commission Adjustment at the end of each Accounting Period equals
(i) minus (ii) minus (iii) minus (iv) minus (v), where:
(i) equals the Reinsurance Gain or Reinsurance Loss,
determined in accordance with Article VII;
-9-
<PAGE> 69
(ii) equals the Loss Carryforward, determined in accordance
with Article VIII, Paragraph 1, item (i), at the end of
the preceding Accounting Period with accrued interest
thereon;
(iii) equals the Interest Expense Charge, determined in
accordance with Article II, Paragraph 4;
(iv) equals the Interest on the Unamortized Ceding
Commission, determined in accordance with Paragraph 9
below; and
(v) equals the Expense and Risk Charge, determined in
accordance with Article VI, Paragraph 2.
However, in no event will the Unamortized Ceding Commission
Adjustment be less than zero or exceed the lesser of:
(1) the sum of (A) plus (B), where:
(A) equals the Unamortized Ceding Commission,
determined in accordance with Paragraph 2 above,
at the end of the preceding Accounting Period; and
(B) equals the Ceding Commission Rate, as described in
Article III, Paragraph 1, times the Reinsurance
Premiums, determined in accordance with Article
II, Paragraph 2, but not to exceed $4 million for
the current calendar year, or
(2) the Maximum Unamortized Ceding Commission Adjustment, as
described in Paragraph 4 below.
Notwithstanding anything to the contrary in this Agreement, if the
Unamortized Ceding Commission at the end of any Accounting Period is
-10-
<PAGE> 70
still positive, but has been reduced during any Accounting Period by
an amount less than the Maximum Unamortized Ceding Commission
Adjustment, as described in Paragraph 4 below, then such shortfall
can be recovered from future positive Unamortized Ceding Commission
Adjustments.
4. Maximum Unamortized Ceding Commission Adjustment. The Maximum
Unamortized Ceding Commission Adjustment for each Accounting Period
is as follows:
<TABLE>
<CAPTION>
Maximum Maximum
Unamortized Unamortized
Ceding Ceding
Commission Commission
For Adjustment Adjustment Maximum
Account- (For Amounts (For Amounts Unamortized
ing Paid During Paid During Ceding
Periods Initial 1994 Commission
Ending Accounting Calendar Adjustment
During Period) Year) (Total)
---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
1994 $500,000 $ 0 $500,000
1995 through
1998 $500,000 $200,000 $700,000
1999 $ 0 $200,000 $200,000
2000 and there-
after $ 0 $ 0 $ 0
</TABLE>
However, if in any Accounting Period (a) the Termination Rate, as
described in Paragraph 5 below, is greater than 0.30, and/or (b) the
Investment Credit Accumulation Rate, as described in Paragraph 6
below, is less than zero, then the Reinsurer may elect to define the
Maximum Withheld Ceding Commission Adjustment as any amount up to
$14 million for the first Accounting Period in the current calendar
year and for all Accounting Periods thereafter.
6. Investment Credit Accumulation Rate. For Accounting Periods
beginning January 1, 1995 and thereafter, the Investment Credit
-11-
<PAGE> 71
Accumulation Rate in any Accounting Period equals (i) / [.5 x {(ii)
+ (iii)}], where:
(i) equals the Modified Coinsurance Reserve Investment
Credit, as described in Schedule C, for the current
Accounting Period and the three Accounting Periods
immediately preceding the current Accounting Period;
(ii) equals the portion of the account value for the
annuities reinsured hereunder which corresponds to the
portion of the annuities reinsured hereunder as of the
date one year prior to the date the current Accounting
Period ends; and
(iii) equals the portion of the account value for the
annuities reinsured hereunder which corresponds to the
portion of the annuities reinsured hereunder as of the
date the current Accounting Period ends.
7. Allowances for Commissions and Expenses. The Reinsurer will pay the
Ceding Company Allowances for Commissions and Expenses for each
Accounting Period, equal to (i) plus (ii) plus (iii) plus (iv) plus
(v) plus (vi), where:
(i) equals (a) times (b), where:
(a) equals $7.50 times the quota share percentage of
the annuities reinsured hereunder, as described in
Schedule A; and
(b) equals the number of annuities reinsured hereunder
and described in Schedule A, and inforce at the
end of the current Accounting Period;
-12-
<PAGE> 72
(ii) equals .0125 percent times that portion of the account
value of the annuities reinsured hereunder which
corresponds to the portion of the annuities reinsured
hereunder as of the end of the current Accounting
Period;
(iii) equals the Trailer Commission, as defined below, times
that portion of the account value of the Venture
Variable Annuity 3 annuities reinsured hereunder which
corresponds to the portion of the Venture Variable
Annuity 3 annuities reinsured hereunder and described in
Schedule A, as of the end of the current Accounting
Period;
(iv) equals (a) times (b), where:
(a) equals the Reinsurance Premiums, determined in
accordance with Article II, Paragraph 2, with
respect to the Venture Variable Annuity 3
annuities reinsured hereunder which corresponds to
the portion of the Venture Variable Annuity 3
annuities reinsured hereunder and described in
Schedule A; and
(b) equals,
- for the Accounting Periods beginning
January 1, 1994 through October 1, 1994,
5.33 percent, and
- for the Accounting Periods beginning
January 1, 1995 and thereafter, 7
percent;
-13-
<PAGE> 73
(v) equals .25 percent times that portion of the account
value, attributable to purchase payments received by the
Ceding Company thirteen (13) months or more prior to
their trailer commission payment dates, of the Venture
Vision annuities reinsured hereunder which corresponds
to the portion of the Venture Vision annuities reinsured
hereunder and described in Schedule A, as of the end of
the current Accounting Period; and
(vi) equals (a) times (b), where:
(a) equals the portion of Reinsurance Premiums,
determined in accordance with Article II,
Paragraph 2, received by the Ceding Company
thirteen (13) months or more after the issue date
of each Venture Vision annuity reinsured hereunder
which corresponds to the portion of the Venture
Vision annuities reinsured hereunder and described
in Schedule A; and
(b) equals,
- for the Accounting Periods beginning
January 1, 1994 through October 1, 1994,
1.83 percent, and
- for the Accounting Periods beginning
January 1, 1995 and thereafter, 3.5
percent.
The Trailer Commission for Venture Variable Annuity 3
annuities for each Accounting Period is defined below:
-14-
<PAGE> 74
<TABLE>
<CAPTION>
For Accounting
Periods Ending During Trailer Commission
<S> <C>
1994 .04%
1995 .05%
1996 .055%
1997 and thereafter .0625%
</TABLE>
9. Interest on the Unamortized Ceding Commission. The Ceding Company
will pay the Reinsurer Interest on the Unamortized Ceding Commission
at the end of each Accounting Period, subsequent to the initial
Accounting Period, equal to [(i) x (ii)] + [(iii) x (iv)] + [(v) x
(vi)] + [(vii) x (viii)] + [(ix) x (x)], where:
(i) equals the portion of the Unamortized Ceding Commission,
determined in accordance with Paragraph 2 above, paid by
the Reinsurer to the Ceding Company as Ceding Commission
during the initial Accounting Period in accordance with
Paragraph 1 above, calculated as of the end of the
preceding Accounting Period;
(ii) equals the Interest Expense Rate, as described in
Article II, Paragraph 5;
(iii) equals, for the Accounting Periods beginning April 1,
1994 and thereafter, the portion of the Unamortized
Ceding Commission, determined in accordance with
Paragraph 2 above, paid by the Reinsurer to the Ceding
Company as Ceding Commission, in accordance with
Paragraph 1 above, for the first Accounting Period in
the 1994 calendar year;
-15-
<PAGE> 75
(iv) equals,
- for the Accounting Periods beginning April 1, 1994
through December 31, 1994, 43.75 basis points,
plus [(a) / (b)] x (c), where:
(a) equals the funds transfer pricing rate
as determined by ITT Financial
Corporation's Treasury Department for
ITT Financial Corporation debt for the
number of days remaining in the current
calendar year measured from the
quarterly settlement date, as described
in Article X, for the first Accounting
Period in the 1994 calendar year;
(b) equals the number of days remaining in
the current calendar year measured from
the quarterly settlement date, as
described in Article X, for the first
Accounting Period in the 1994 calendar
year; and
(c) equals,
- for the Accounting Period
beginning April 1, 1994, the
number of days remaining in
the Accounting Period measured
from the quarterly settlement
date, as described in Article
X, for the first Accounting
Period in the 1994 calendar
year; and
-16-
<PAGE> 76
- for the Accounting Periods beginning July 1, 1994
and October 1, 1994, the number of days in the
current Accounting Period; and
- for the Accounting Periods beginning January 1, 1995 and
thereafter, the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2;
(v) equals, for the Accounting Periods beginning July 1, 1994 and
thereafter, the portion of the Unamortized Ceding Commission,
determined in accordance with Paragraph 2 above, paid by the
Reinsurer to the Ceding Company as Ceding Commission, in
accordance with Paragraph 1 above, for the second Accounting
Period in the 1994 calendar year; and
(vi) equals,
- for the Accounting Periods beginning July 1, 1994 and
October 1, 1994, 43.75 basis points, plus [(a) / (b)] x
(c), where:
(a) equals the funds transfer pricing rate as
determined by ITT Financial Corporation's Treasury
Department for ITT Financial Corporation debt for
the number of days remaining in the current
calendar year measured from the quarterly
settlement date, as described in Article X, for
the second Accounting Period in the 1994 calendar
year;
-17-
<PAGE> 77
(b) equals the number of days remaining in the current
calendar year measured from the quarterly
settlement date, as described in Article X, for
the second Accounting Period in the 1994 calendar
year; and
(c) equals,
- for the Accounting Period beginning July
1, 1994, the number of days remaining in
the Accounting Period measured from the
quarterly settlement date, as described
in Article X, for the second Accounting
Period in the 1994 calendar year; and
- for the Accounting Period beginning
October 1, 1994, the number of days in
the current Accounting Period;
(vii) equals, for the Accounting Periods beginning October 1,
1994 and thereafter, the portion of the Unamortized
Ceding Commission, determined in accordance with
Paragraph 2 above, paid by the Reinsurer to the Ceding
Company as Ceding Commission, in accordance with
Paragraph 1 above, for the third Accounting Period in
the 1994 calendar year;
(viii) equals,
- for the Accounting Period beginning October 1,
1994, 43.75 basis points, plus [(a) / (b)] x (c),
where:
-18-
<PAGE> 78
(a) equals the funds transfer pricing rate as
determined by ITT Financial Corporation's Treasury
Department for ITT Financial Corporation debt for
the number of days remaining in the current
calendar year measured from the quarterly
settlement date, as described in Article X, for
the third Accounting Period in the 1994 calendar
year;
(b) equals the number of days remaining in the current
calendar year measured from the quarterly
settlement date, as described in Article X, for
the third Accounting Period in the 1994 calendar
year;
(c) equals the number of days remaining in the
Accounting Period measured from the quarterly
settlement date, as described in Article X, for
the third Accounting Period in the 1994 calendar
year; and
- for the Accounting Periods beginning January 1, 1995 and
thereafter, the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2;
(ix) equals, for the Accounting Periods beginning January 1, 1995
and thereafter, the portion of the Unamortized Ceding
Commission, determined in accordance with Paragraph 2 above,
paid by the Reinsurer to the Ceding Company as Ceding
Commission, in accordance with
-19-
<PAGE> 79
Paragraph 1 above, for the fourth Accounting Period in the
1994 calendar year; and
(x) equals,
- for the Accounting Period beginning January 1, 1995,
[(a) / (b)] x (c), where:
(a) equals the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2;
(b) equals the number of days in the current
Accounting Period; and
(c) equals the number of days remaining in the
Accounting Period measured from the quarterly
settlement date, as described in Article X, for
the fourth Accounting Period in the 1994 calendar
year; and
- for the Accounting Periods beginning April 1, 1995 and
thereafter, the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2.
III. ARTICLE XI, DURATION AND RECAPTURE, Paragraph 5, is replaced in its
entirety by the following:
5. Internal Replacements. Should the Ceding Company, its affiliates,
successors or assigns, initiate a program of Internal Replacement
that would include any of the annuities reinsured hereunder, the
Ceding Company will immediately notify the Reinsurer. The Reinsurer
may elect to treat such annuities as recaptured rather than
surrendered, and such recapture will apply to all annuities
reinsured hereunder. For purposes of this Agreement, the term
-20-
<PAGE> 80
"Internal Replacement" means any instance in which an annuity or any
portion of the cash value of an annuity is exchanged for another
policy or annuity, not covered under this Agreement, which is
written by the Ceding Company, its affiliates, successors or
assigns. Internal Replacements initiated by policyholders and
allowed by the Ceding Company will not be considered Internal
Replacements for purposes of this Paragraph unless the total cash
value rolled over by such Internal Replacements in any four
consecutive Accounting Periods exceeds 10 percent of the account
values as of the date one year prior to the date the current
Accounting Period ends.
IV. ARTICLE VI, EXPENSE AND RISK CHARGES, Paragraph 2, is replaced in its
entirety by the following:
2. Expense and Risk Charge. The Expense and Risk Charge for each
Accounting Period subsequent to the initial Accounting Period,
payable to the Reinsurer by the Ceding Company, will be equal to the
sum of (i) and (ii), where:
(i) equals the Expense and Risk Charge Rate, as defined
below, times the Loss Carryforward, determined in
accordance with Article VIII, Paragraph 1, item (i), at
the end of the preceding Accounting Period, with accrued
interest thereon; and
(ii) equals the Expense and Risk Charge Rate, as defined
below, times the Expense and Risk Charge Base, as
defined below.
-21-
<PAGE> 81
The Expense and Risk Charge Rate for each Accounting Period is
defined as follows:
<TABLE>
<CAPTION>
For Accounting Expense and
Periods Ending During Risk Charge Rate
<S> <C>
1994 through 1999 .4125%
2000 and thereafter .4142%
</TABLE>
The Expense and Risk Charge Base for each Accounting Period is
defined as follows:
<TABLE>
<CAPTION>
For Accounting
Periods Ending During Expense and Risk Charge Base
----------------------- --------------------------------------
<S> <C>
1994 through 1999 greater of either (a) the Unamortized
Ceding Commission, determined in
accordance with Article III,
Paragraph 2, at the end of the
preceding Accounting Period, plus
the Ceding Commission Rate, as
described in Article III, Paragraph
1, times the Reinsurance Premiums,
determined in accordance with
Article II, Paragraph 2, but not to
exceed $4 million for the current
calendar year, minus the Maximum
Unamortized Ceding Commission
Adjustment, determined in accordance
with Article III, Paragraph 4, or
(b) quantity (iii) as defined below,
but never less than zero
2000 and thereafter (iii) below, but never less than
zero, where:
</TABLE>
(iii) equals (a) plus (b) plus (c) minus (d) minus (e) minus (f),
where:
(a) equals the Unamortized Ceding Commission, determined in
accordance with Article III, Paragraph 2, at the end of
the preceding Accounting Period;
-22-
<PAGE> 82
(b) equals the Ceding Commission Rate, as described in
Article III, Paragraph 1, times the Reinsurance
Premiums, determined in accordance with Article II,
Paragraph 2, but not to exceed $4 million for the
current calendar year;
(c) equals the absolute value of any Reinsurance Loss,
determined in accordance with Article VII;
(d) equals any Reinsurance Gain, determined in accordance
with Article VII;
(e) equals the Interest Expense Charge, determined in
accordance with Article II, Paragraph 4; and
(f) equals the Interest on the Unamortized Ceding
Commission, determined in accordance with Article III,
Paragraph 9.
In no event will the Expense and Risk Charge payable be less than
$20,000 for any Accounting Period after December 31, 1999.
V. ARTICLE X, ACCOUNTING AND SETTLEMENTS, Paragraph 4, is replaced in its
entirety by the following:
4. Quarterly Settlements.
A. Within fifteen (15) days after the end of each Accounting
Period, the Ceding Company will pay the Reinsurer the sum of:
(i) the Reinsurance Premiums paid by the Ceding Company to the
Reinsurer during the current Accounting Period, determined in
accordance with Article II, Paragraph 2, plus (ii) any
Modified Coinsurance Reserve Adjustment payable to the
Reinsurer, determined in accordance with Article V,
-23-
<PAGE> 83
Paragraph 2, plus (iii) any Funds Withheld payable to the
Reinsurer during the current Accounting Period in accordance
with the terms of the Accounts Receivable Agreement,
determined in accordance with Article II, Paragraph 3, item
(ii).
B. Simultaneously, the Reinsurer will pay the Ceding Company the
sum of: (i) the amount of Benefit Payments, as described in
Article IV, plus (ii) Allowances for Commissions and Expenses,
determined in accordance with Article III, Paragraph 7, plus
(iii) Allowances for Death Benefit Guarantee, determined in
accordance with Article III, Paragraph 8, plus (iv) any
Modified Coinsurance Reserve Adjustment payable to the Ceding
Company, determined in accordance with Article V, Paragraph 2,
plus (v) any Experience Refund, determined in accordance with
Article IX.
VI. SCHEDULE A, ANNUITIES AND RISKS REINSURED, is replaced in its entirety by
the following:
Annuities and Risks Reinsured. The amount of reinsurance under this
Agreement will be a quota share of the Ceding Company's net
liability on those variable annuities issued by the Ceding Company
and described below:
<TABLE>
<CAPTION>
Quota Contract and
Plan Issue Years Share Certificate Numbers
- ----------------------- ----------- ----- -------------------
<S> <C> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 64% 203-VA
Venture Vision 1993 - 1994 95% VEN 10
</TABLE>
-24-
<PAGE> 84
"Net liability," as used in this Agreement, means the Ceding
Company's liability on annuities reinsured hereunder.
VII. SCHEDULE B, QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS, is replaced in
its entirety by Exhibit A.
VIII. The following SCHEDULE E, RATES, is added to this Agreement:
SCHEDULE E
RATES
1. Funds Withheld Rate. The Funds Withheld Rate for each Accounting
Period is defined as follows:
<TABLE>
<CAPTION>
For Accounting Funds
Period Ending During Withheld Rate
-------------------- -------------
<S> <C>
1993 0%
1994 2.5%
1995 and thereafter 0%
</TABLE>
2. Ceding Commission Rate. The Ceding Commission Rate for each
Accounting Period, subsequent to the initial Accounting Period, is
defined as follows:
<TABLE>
<CAPTION>
For Accounting Ceding
Periods Ending During Commission Rate
----------------------- ---------------
<S> <C>
1994 1.67%
1995 and thereafter 0%
</TABLE>
-25-
<PAGE> 85
In witness of the above, this Amendment One is executed in duplicate on the
dates indicated below, with an Effective Date of January 1, 1994.
NORTH AMERICAN SECURITY LIFE INSURANCE
ATTEST: COMPANY ("Ceding Company")
<TABLE>
<S> <C>
By: By:
----------------------------------------------- ------------------------------------------------
Title: Title:
----------------------------------------------- ------------------------------------------------
Date: Date:
----------------------------------------------- ------------------------------------------------
</TABLE>
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Reinsurer")
<TABLE>
<S> <C>
By: By:
----------------------------------------------- ------------------------------------------------
Title: Title:
----------------------------------------------- ------------------------------------------------
Date: Date:
----------------------------------------------- ------------------------------------------------
</TABLE>
-25-
<PAGE> 86
EXHIBIT A
SCHEDULE B
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
Accounting Period: __________________
Calendar Year: ______________________
Date Report Completed: ______________
1. Initial Consideration (Article II, Paragraph 1)*
a. Initial Consideration ________
b. Amount of Initial Consideration withheld by
Ceding Company ________
Portion of Initial Consideration paid in cash
= a - b ________
2. Reinsurance Premiums (Article II, Paragraph 2)
a. Reinsurance Premiums
A. Venture Variable Annuity 3 Reinsurance
Premiums ________
B. Venture Vision Reinsurance Premiums -
first policy year ________
C. Venture Vision Reinsurance Premiums -
renewal ________
Total Reinsurance Premiums = A + B + C ________
b. Amount of Reinsurance Premiums withheld by
Ceding Company ________
Portion of Reinsurance Premiums paid in cash
= a - b ________
3. Benefit Payments (Article IV)
a. Death Benefits ________
b. Cash Surrender Values ________
c. Annuity Benefits ________
Benefit Payments = a + b + c ________
4. Initial Reserve Adjustment (Article V, Paragraph 1)* ________
5. Modified Coinsurance Reserve Adjustment (Article V, Paragraph 2)
a. Modified Coinsurance Reserve end of
preceding Accounting Period ________
b. Modified Coinsurance Reserve end of
current Accounting Period ________
c. Equals b - a ________
d. Modified Coinsurance Reserve Investment
Credit (Schedule C) ________
Modified Coinsurance Reserve Adjustment = c - d ________
6. Reinsurance Gain = 2a - 3 - 5 - 14 - 15
(If negative, see Article VII) ________
<PAGE> 87
EXHIBIT A CONTINUED
7. Reinsurance Loss = 2a - 3 - 5 - 14 - 15
(If positive, see Article VII)
--------
8. Loss Carryforward [Article VIII, Paragraph 1, item (i)]
--------
9. Initial Expense and Risk Charge (Article VI, Paragraph 1)*
--------
10. Expense and Risk Charge (Article VI, Paragraph 2)
--------
11. Ceding Commission (Article III, Paragraph 1)
--------
12. Unamortized Ceding Commission (Article III, Paragraph 2)
--------
13. Unamortized Ceding Commission Adjustment
(Article III, Paragraph 3)
--------
14. Allowances for Commissions and Expenses
(Article III, Paragraph 7)
--------
15. Allowances for Death Benefit Guarantee
(Article III, Paragraph 8)
--------
16. Experience Refund = 6 + 7 - 8 - 10 - 13 - 19 - 20
(If negative, see Article IX)
--------
17. Funds Withheld payment [Article II, Paragraph 3, item (ii)]
--------
18. Funds Withheld = Prior 18 + 1b + 2b - 17
(Article II, Paragraph 3)
--------
19. Interest Expense Charge (Article II, Paragraph 4)
--------
20. Interest on the Unamortized Ceding Commission
(Article III, Paragraph 9)
--------
21. Cash Settlement =
1 + 2 - 3 - 4 - 5 + 9 - 11 - 14 - 15 - 16 + 17
========
*Initial Accounting Period, only.
Supplemental Information
<TABLE>
<CAPTION>
Venture
Total Variable Venture
Number Annuity 3 Vision Total
of Account Account Account Loss
Annuities Value Value Value Carryforward
--------- --------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Beginning of Period
-------- -------- -------- -------- -------------
+ Additions
-------- -------- -------- -------- -------------
- - Terminations
-------- -------- -------- -------- -------------
End of Period
======== ======== ======== ======== =============
</TABLE>
<PAGE> 88
EXHIBIT A CONTINUED
<TABLE>
<CAPTION>
Venture Venture
Variable Vision
Annuity 3 Number
Number of of
Annuities Annuities
--------- ---------
<S> <C> <C>
Beginning of Period
--------- ---------
+ Additions
--------- ---------
- - Terminations
--------- ---------
End of Period
========= =========
</TABLE>
Termination Rate (Article III, Paragraph 5)
a. Total number of annuities reinsured hereunder as of
date current Accounting Period ends
----------
b. Total number of annuities reinsured hereunder as of
the date one year prior to the date the current
Accounting Period ends
----------
c. Termination Rate 1 - (a / b)
==========
Investment Credit Accumulation Rate (Article III, Paragraph 6)
a. Modified Coinsurance Reserve Investment Credit
Current Accounting Period
----------
First most recent Accounting Period
----------
Second most recent Accounting Period
----------
Third most recent Accounting Period
---------- ----------
b. Account value as of date one year prior to date
current Accounting Period ends
----------
c. Account value as of date current Accounting Period ends
----------
d. Investment Credit Accumulation Rate
a / [.5 x (b + c)]
==========
Allowances for Commissions and Expenses (Article III, Paragraph 7)
a. $7.50 x quota share reinsured hereunder x number of annuities
reinsured hereunder and inforce at end of current Accounting
Period
----------
b. .0125 x portion of account value of annuities reinsured
hereunder at end of current Accounting Period
----------
<PAGE> 89
EXHIBIT A CONTINUED
c. Trailer Commission x portion of account value of Venture
Variable Annuity 3 annuities reinsured hereunder and inforce
at end of current Accounting Period
----------
d. % x Reinsurance Premiums with respect to Venture Variable
---
Annuity 3 annuities reinsured hereunder
----------
e. .25% x portion of account value, attributable to purchase
payments received by Ceding Company thirteen months or more
prior to their trailer commission dates, of Venture Vision
annuities reinsured hereunder and inforce at end of current
Accounting Period
----------
f. % x renewal Reinsurance Premiums with respect to Venture
---
Vision annuities reinsured hereunder
----------
g. Allowances for Commissions and Expenses =
a + b + c + d + e + f
==========
<PAGE> 90
AMENDMENT ONE
ATTACHED TO AND MADE A PART OF THE
ACCOUNTS RECEIVABLE AGREEMENT
EFFECTIVE DECEMBER 31, 1993
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
("Borrower")
AND
ITT LYNDON LIFE INSURANCE COMPANY
("Lender")
---------------------------------------------------------------------
The Borrower and the Lender agree to amend this Accounts Receivable Agreement as
follows:
ARTICLE I, PROVISIONS RELATING TO THE ACCOUNTS RECEIVABLE, Paragraph 2, is
replaced in its entirety by the following:
2. Scheduled Repayment. The Borrower will repay a portion of the Accounts
Receivable at the end of each calendar year in an amount equal to the
Scheduled Repayment Amount as defined below:
Calendar Year Scheduled Repayment Amount
------------- --------------------------
1994 $3,000,000
-1-
<PAGE> 91
Calendar Year Scheduled Repayment Amount
------------- --------------------------
1995 through 1998 $3,000,000, plus 20 percent times the
lesser of (a) 2.5 percent times the
total Reinsurance Premiums,
determined in accordance with Article
II, Paragraph 2, of the Reinsurance
Agreement, for the calendar year
1994, or (b) $6,000,000
1999 20 percent times the lesser of (a)
2.5 percent times the total
Reinsurance Premiums, determined in
accordance with Article II,
Paragraph 2, of the Reinsurance
Agreement, for the calendar year
1994, or (b) $6,000,000
In witness of the above, this Amendment One is executed in duplicate on the
dates indicated below, with an Effective Date of January 1, 1994.
NORTH AMERICAN SECURITY LIFE INSURANCE
ATTEST: COMPANY ("Borrower")
By: By:
------------------------------ ----------------------------------
Title: Title:
--------------------------- -------------------------------
Date: Date:
--------------------------- -------------------------------
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Lender")
By: By:
------------------------------ ----------------------------------
Title: Title:
--------------------------- -------------------------------
Date: Date:
--------------------------- -------------------------------
-2-
<PAGE> 92
AMENDMENT TWO
ATTACHED TO AND MADE A PART OF THE
REINSURANCE AGREEMENT NUMBER 1293-104
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
"CEDING COMPANY"
AND
ITT LYNDON LIFE INSURANCE COMPANY
"REINSURER"
<PAGE> 93
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. SCHEDULE A, ANNUITIES AND RISKS REINSURED, is replaced in its entirety
by the following:
Annuities and Risks Reinsured. The amount of reinsurance under
this agreement will be a quota share of the Ceding Company's
net liability on those variable annuities issued by the Ceding
Company and described below:
<TABLE>
<CAPTION>
Quota Contract and
Plan Issue Years Share Certificate Numbers
---- ----------- ----- -------------------
<S> <C> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 64% 203-VA
Venture Vision 1993 - 1994 95% VEN 10
Venture Vision 1994 95% VISION.001
</TABLE>
"Net liability," as used in this Agreement, means the Ceding
Company's liability on annuities reinsured hereunder.
II. The following is added to SCHEDULE D, CEDING COMPANY DATA:
- Letter dated September 14, 1994 from Larry Seller of the
Ceding Company to Jeffrey Stevenson of the Reinsurer
containing the Venture Vision 25 policy form and a chart
showing a comparison of Vision 25 and Vision 5
-1-
<PAGE> 94
In witness of the above, this Amendment Three is executed in duplicate on the
dates indicated below, with an Effective Date of December 31, 1994.
NORTH AMERICAN SECURITY LIFE INSURANCE
ATTEST: COMPANY ("Ceding Company")
By: By:
-------------------------- ----------------------------
Title: Title:
------------------------- ----------------------------
Date: Date:
------------------------- ----------------------------
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Reinsurer")
By: By:
------------------------- ---------------------------
Title: Title:
------------------------- ---------------------------
Date: Date:
------------------------- ---------------------------
-2-
<PAGE> 95
AMENDMENT THREE
ATTACHED TO AND MADE A PART OF THE
REINSURANCE AGREEMENT NUMBER 1293-104
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
"CEDING COMPANY"
AND
ITT LYNDON LIFE INSURANCE COMPANY
"REINSURER"
<PAGE> 96
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. ARTICLE II, INITIAL CONSIDERATION AND REINSURANCE PREMIUMS, Paragraphs
1, 3 and 4, are replaced in their entirety by the following:
1. Initial Consideration. On the Effective Date of this
Agreement, the Ceding Company will pay the Reinsurer an
Initial Consideration equal to 100 percent of the Modified
Coinsurance Reserve, as defined in Article V, Paragraph 3,
calculated as of the Effective Date of this Agreement with
respect to the annuities assumed as of such date and described
in Schedule A. Simultaneously with the payment of the Initial
Consideration, the Ceding Company will withhold on behalf of
the Reinsurer 3.2 percent of the Initial Consideration,
calculated as of the Effective Date of this Agreement, in
accordance with Paragraph 3 below, but not to exceed $15
million. On December 31, 1994, the Ceding Company will pay the
Reinsurer a Supplemental Consideration equal to 100 percent of
the Modified Coinsurance Reserve, as defined in Article V,
Paragraph 3, calculated as of December 31, 1994 with respect
to the annuities assumed as of December 31, 1994 and described
in Schedule A.
3. Funds Withheld. The Ceding Company and the Reinsurer have
entered into the "Accounts Receivable Agreement" attached to
this Agreement as Exhibit A. Pursuant to the terms of the
Accounts Receivable Agreement, the Ceding Company will
withhold on behalf of the Reinsurer the amounts described in
Paragraphs 1 and 2 above. The amount withheld by the Ceding
Company will be credited to the Reinsurer and will be
considered as an amount held on behalf of the
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<PAGE> 97
Reinsurer. The Reinsurer will consider such amount as a
receivable and the Ceding Company will consider such amount as
a payable. Such amount withheld will be subject to repayment
in accordance with the terms of the Accounts Receivable
Agreement. The Funds Withheld at the end of each Accounting
Period will be equal to (i) plus (ii) minus (iii), where:
(i) equals the Funds Withheld at the end of the
preceding Accounting Period;
(ii) for the Accounting Period ending March 31,
1994 through September 30, 1994 only, equals
the Funds Withheld Rate, as described in
Schedule E, Paragraph 1, times the
Reinsurance Premiums, determined in
accordance with Paragraph 2 above, but not
to exceed $6 million for the current
calendar year; and
(iii) equals any payment by the Ceding Company to
the Reinsurer of any amount withheld, as
described in items (i) and (ii) above,
during the Accounting Period in accordance
with the Accounts Receivable Agreement.
With respect, however, to the Accounting Period during which
the Effective Date of this Agreement occurs, the reference in
(i) above to "the Funds Withheld at the end of the preceding
Accounting Period" means 3.2 percent of the Initial
Consideration, determined in accordance with Paragraph 1
above, but not to exceed $15 million. In no event will the
Funds Withheld at the end of any Accounting Period exceed 50
percent of the Ceding Company's total statutory capital and
surplus as of the end of the preceding calendar year.
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<PAGE> 98
4. Interest Expense Charge. The Ceding Company will pay the
Reinsurer an Interest Expense Charge at the end of each
Accounting Period equal to [(i) x (ii)] + [(iii) x (iv)] +
[(v) x (vi)] + [(vii) x (viii)] + [(ix) x (x)], where:
(i) equals any amounts withheld in accordance
with Paragraph 1 above, as of the end of
the preceding Accounting Period and for
which payment is not yet due to the
Reinsurer, as described in the Accounts
Receivable Agreement;
(ii) equals the Interest Expense Rate, as
described in Paragraph 5 below;
(iii) equals, for the Accounting Periods
beginning April 1, 1994 and thereafter, any
amounts withheld, in accordance with
Paragraph 2 above, during the first
Accounting Period in the 1994 calendar year
and for which payment is not yet due to the
Reinsurer, as described in the Accounts
Receivable Agreement;
(iv) equals,
- for the Accounting Periods
beginning April 1, 1994 through
December 31, 1994, 43.75 basis
points, plus [(a) / (b)] x (c),
where:
(a) equals the funds transfer
pricing rate as determined
by ITT Financial
Corporation's Treasury
Department for ITT
Financial Corporation debt
for the number of days
remaining in the current
calendar year measured
from the quarterly
settlement
-3-
<PAGE> 99
date, as described in
Article X, for the first
Accounting Period in the
1994 calendar year;
(b) equals the number of days
remaining in the current
calendar year measured from
the quarterly settlement
date, as described in
Article X, for the first
Accounting Period in the
1994 calendar year; and
(c) equals,
- for the Accounting
Period beginning
April 1, 1994, the
number of days
remaining in the
Accounting Period
measured from the
quarterly
settlement date,
as described in
Article X, for the
first Accounting
Period in the 1994
calendar year;
and
- for the Accounting
Periods beginning
July 1, 1994 and
October 1, 1994,
the number of days
in the current
Accounting Period;
- for the Accounting Periods beginning
January 1, 1995 and thereafter, the
Loss Carryforward Rate, described in
Article VIII, Paragraph 2;
(v) equals, for the Accounting Periods
beginning July 1, 1994 and thereafter, any
amounts withheld, in accordance with
Paragraph 2 above, during the second
Accounting Period in the 1994 calendar year
and for
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<PAGE> 100
which payment is not yet due to the
Reinsurer, as described in the Accounts
Receivable Agreement;
(vi) equals,
- for the Accounting Periods beginning
July 1, 1994 and October 1, 1994,
43.75 basis points, plus [(a) / (b)]
x (c), where:
(a) equals the funds transfer
pricing rate as
determined by ITT Financial
Corporation's Treasury
Department for ITT
Financial Corporation debt
for the number of days
remaining in the current
calendar year measured from
the quarterly settlement
date, as described in
Article X, for the second
Accounting Period in the
1994 calendar year;
(b) equals the number of days
remaining in the current
calendar year measured from
the quarterly settlement
date, as described in
Article X, for the second
Accounting Period in the
1994 calendar year; and
(c) equals,
- for the Accounting
Period beginning
July 1, 1994, the
number of days
remaining in the
Accounting Period
measured from the
quarterly
settlement date,
as described in
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<PAGE> 101
Article X, for the
second Accounting
Period in the 1994
calendar year;
and
- for the Accounting
Periods beginning
October 1, 1994,
the number of days
in the current
Accounting Period;
(vii) equals, for the Accounting Periods beginning
October 1, 1994 and thereafter, any amounts
withheld, in accordance with Paragraph 2
above, during the third Accounting Period in
the 1994 calendar year and for which payment
is not yet due to the Reinsurer, as
described in the Accounts Receivable
Agreement;
(viii) equals,
- for the Accounting Periods beginning
October 1, 1994, 43.75 basis points,
plus [(a) / (b)] x (c), where:
(a) equals the funds transfer
pricing rate as
determined by ITT Financial
Corporation's Treasury
Department for ITT
Financial Corporation debt
for the number of days
remaining in the current
calendar year measured from
the quarterly settlement
date, as described in
Article X, for the third
Accounting Period in the
1994 calendar year;
(b) equals the number of days
remaining in the current
calendar year measured from
the quarterly settlement
date, as described in
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<PAGE> 102
Article X, for the third
Accounting Period in the
1994 calendar year; and
(c) equals the number of days
remaining in the Accounting
Period measured from the
quarterly settlement date,
as described in Article X,
for the third Accounting
Period in the 1994 calendar
year; and
- for the Accounting Periods
beginning January 1, 1995 and
thereafter, the Loss Carryforward
Rate, as described in Article VIII,
Paragraph 2;
(ix) equals any amounts withheld in accordance
with items (i) and (ii) of Paragraph 3
above, which have not been paid by the
Ceding Company to the Reinsurer at the end
of the preceding Accounting Period and for
which payment is due to the Reinsurer, as
described in the Accounts Receivable
Agreement; and
(x) equals the Loss Carryforward Rate, as
described in Article VIII, Paragraph 2.
II. ARTICLE III, COMMISSIONS AND ALLOWANCES, Paragraphs 1, 2, 4, 5 and 6,
are replaced in their entirety by the following:
1. Ceding Commission. Simultaneously with the payment of the
Initial Consideration, the Reinsurer will pay a Ceding
Commission to the Ceding Company equal to 2.2 percent times
the Initial Consideration, determined in accordance with
Article II, Paragraph 1, but not to exceed $10 million.
Simultaneously with the payment of the Supplemental
Consideration, the Reinsurer will pay a Ceding
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<PAGE> 103
Commission to the Ceding Company equal to 3.58 percent times
the Supplemental Consideration, determined in accordance with
Article II, Paragraph 1, but not to exceed $5.2 million. For
Accounting Periods beginning January 1, 1994 and thereafter,
the Reinsurer will pay a Ceding Commission to the Ceding
Company equal to the Ceding Commission Rate, as described in
Schedule E, Paragraph 2, times the Reinsurance Premiums,
determined in accordance with Article II, Paragraph 2, but not
to exceed $4 million for the current calendar year.
2. Unamortized Ceding Commission. The Unamortized Ceding
Commission at the end of each Accounting Period equals (i)
plus (ii) plus (iii) minus (iv), where:
(i) equals the Unamortized Ceding Commission at the end
of the preceding Accounting Period;
(ii) equals the Ceding Commission Rate, as described in
Schedule E, Paragraph 2, times the Reinsurance
Premiums, determined in accordance with Article II,
Paragraph 2, but not to exceed $4 million for the
current calendar year;
(iii) for the Accounting Period ending December 31, 1994
only, equals 3.58 percent times the Supplemental
Consideration, determined in accordance with Article
II, Paragraph 1, but not to exceed $5.2 million; and
(iv) equals the Unamortized Ceding Commission Adjustment,
determined in accordance with Paragraph 3 below.
With respect, however, to the Accounting Period during which the
Effective Date of this Agreement occurs, the reference in (i) to the
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<PAGE> 104
"end of the preceding Accounting Period" refers to the Effective Date
of this Agreement immediately after the Ceding Commission, as described
in Paragraph 1 above, has been paid. The Unamortized Ceding Commission
may never be less than zero. In the Accounting Period during which (i)
plus (ii) plus (iii) minus (iv) as described above, first becomes zero
or negative, then, for that and all subsequent Accounting Periods, the
Unamortized Ceding Commission will be set equal to zero.
4. Maximum Unamortized Ceding Commission Adjustment. The Maximum
Unamortized Ceding Commission Adjustment for each Accounting Period is
as follows:
<TABLE>
<CAPTION>
Maximum Unamortized
Ceding Commission Maximum Unamortized
Adjustment Ceding Commission
For Accounting (For Amounts Paid Adjustment (For
Periods Ending During Initial Amounts Paid During
During Accounting Period) 1994 Calendar Year)
------ ------------------ -------------------
<S> <C> <C>
1994 $500,000 $0
1995 through 1998 $500,000 5 percent of the
cumalative Ceding
Commission paid by the
Reinsurer to the Ceding
Company during the 1994
calendar year in
accordance with Article
III, Paragraph 1
1999 $ 0 5 percent of the
cumalative Ceding
Commissionpaid by the
Reinsurer to the Ceding
Company during the 1994
calendar year in
accordance with Article
III, Paragraph 1
2000 and thereafter $ 0 $0
</TABLE>
However, if in any Accounting Period (a) the Termination Rate,
as described in Paragraph 5 below, is greater than 0.30,
and/or (b) the Investment Credit Accumulation Rate, as
described in Paragraph 6
-9-
<PAGE> 105
below, is less than zero, then the Reinsurer may elect to
define the Maximum Withheld Ceding Commission Adjustment as
any amount up to $14 million for the first Accounting Period
in the current calendar year and for all Accounting Periods
thereafter.
5. Termination Rate. For Accounting Periods beginning January 1,
1995 and thereafter, the Termination Rate in any Accounting
Period equals 1 - [(i) / (ii)], where:
(i) equals the total number of annuities
reinsured hereunder and described in
Schedule A, as of the date the current
Accounting Period ends; and
(ii) equals the total number of annuities
reinsured hereunder and described in
Schedule A, as of the date one year prior to
the date the current Accounting Period ends.
6. Investment Credit Accumulation Rate. For Accounting Periods
beginning January 1, 1996 and thereafter, the Investment
Credit Accumulation Rate in any Accounting Period equals (i) /
[.5 x {(ii) + (iii)}], where:
(i) equals the Modified Coinsurance Reserve
Investment Credit, as described in Schedule
C, for the current Accounting Period and the
three Accounting Periods immediately
preceding the current Accounting Period;
(ii) equals the portion of the account value for
the annuities reinsured hereunder which
corresponds to the portion of the annuities
reinsured hereunder as of the date one year
prior to the date the current Accounting
Period ends; and
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<PAGE> 106
(iii) equals the portion of the account value for
the annuities reinsured hereunder which
corresponds to the portion of the annuities
reinsured hereunder as of the date the
current Accounting Period ends.
III. ARTICLE VI, EXPENSE AND RISK CHARGES, Paragraph 2, is replaced in its
entirety by the following:
2. Expense and Risk Charge. The Expense and Risk Charge for each
Accounting Period subsequent to the initial Accounting Period,
payable to the Reinsurer by the Ceding Company, will be equal
to (i) plus (ii) plus (iii), where:
(i) equals the Expense and Risk Charge Rate, as
defined below, times the Loss Carryforward,
determined in accordance with Article VIII,
Paragraph 1, item (i), at the end of the
preceding Accounting Period, with accrued
interest thereon;
(ii) equals the Expense and Risk Charge Rate, as
defined below, times the Expense and Risk
Charge Base, as defined below; and
(iii) for the Accounting Period ending December
31, 1994 only, equals 1.0 percent times 3.2
percent of the Supplemental Consideration,
determined in accordance with Article II,
Paragraph 1, but not to exceed 1.65 percent
times $5.2 million.
The Expense and Risk Charge Rate for each Accounting Period is
defined as follows:
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<PAGE> 107
<TABLE>
<CAPTION>
For Accounting Expense and
Periods Ending During Risk Charge Rate
--------------------- ----------------
<S> <C> <C>
1994 through 1999 .4125%
2000 and thereafter .4142%
</TABLE>
The Expense and Risk Charge Base for each Accounting Period is defined
as follows:
For Accounting
Periods Ending During Expense and Risk Charge Base
--------------------- ----------------------------
1994 through 1999 greater of either (a) the
Unamortized Ceding Commission,
determined in accordance with
Article III, Paragraph 2, at the end
of the preceding Accounting Period,
plus the Ceding Commission Rate, as
described in Article III, Paragraph
1, times the Reinsurance Premiums,
determined in accordance with
Article II, Paragraph 2, but not to
exceed $4 million for the current
calendar year, minus the Maximum
Unamortized Ceding Commission
Adjustment, determined in accordance
with Article III, Paragraph 4, or
(b) quantity (iv) as defined below,
but never less than zero
2000 and thereafter (iv) below, but never less than
zero, where:
(iv) equals (a) plus (b) plus (c) minus (d) minus
(e) minus (f), where:
(a) equals the Unamortized Ceding
Commission, determined in
accordance with Article III,
Paragraph 2, at the end of the
preceding Accounting Period;
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<PAGE> 108
(b) equals the Ceding Commission Rate,
as described in Article III,
Paragraph 1, times the Reinsurance
Premiums, determined in accordance
with Article II, Paragraph 2, but
not to exceed $4 million for the
current calendar year;
(c) equals the absolute value of any
Reinsurance Loss, determined in
accordance with Article VII;
(d) equals any Reinsurance Gain,
determined in accordance with
Article VII;
(e) equals the Interest Expense Charge,
determined in accordance with
Article II, Paragraph 4; and
(f) equals the Interest on the
Unamortized Ceding Commission,
determined in accordance with
Article III, Paragraph 9.
In no event will the Expense and Risk Charge payable be less
than $20,000 for any Accounting Period after December 31,
1999.
IV. ARTICLE VII, REINSURANCE GAINS AND LOSSES, is replaced in its entirety
by the following:
Formula. A Reinsurance Gain or Reinsurance Loss will be
calculated for each Accounting Period and will be equal to the
excess of (i) over (ii), where:
(i) equals the sum of:
(a) Reinsurance Premiums, determined in
accordance with Article II,
Paragraph 2, plus
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<PAGE> 109
(b) any Supplemental Consideration
payable during the current
Accounting Period, determined in
accordance with Article II,
Paragraph 1; and
(ii) equals the sum of:
(a) Benefit Payments, as described in
Article IV, plus
(b) the Modified Coinsurance Reserve
Adjustment, determined in
accordance with Article V,
Paragraph 2, plus
(c) Allowances for Commissions and
Expenses, determined in accordance
with Article III, Paragraph 7, plus
(d) Allowances for Death Benefit
Guarantee, determined in accordance
with Article III, Paragraph 8.
A Reinsurance Gain results if the excess of (i) over
(ii) is positive. A Reinsurance Loss results if the
excess of (i) over (ii) is negative.
V. ARTICLE X, ACCOUNTING AND SETTLEMENTS, Paragraphs 2 and 4, are replaced
in their entirety by the following:
2. Quarterly Accounting Reports. Quarterly accounting reports in
the form of Schedule B will be submitted to the Reinsurer by
the Ceding Company for each Accounting Period not later than
fifteen (15) days after the end of each Accounting Period.
Such reports will include information on the amount of Initial
Consideration, Supplemental Consideration, Reinsurance
Premiums, Ceding Commission, Allowances
-14-
<PAGE> 110
for Commissions and Expenses, Allowances for Death Benefit
Guarantee, Benefit Payments, Reinsurance Gains and Losses,
Experience Refund, Loss Carryforward, Funds Withheld, Interest
Expense Charge, Unamortized Ceding Commission, Unamortized
Ceding Commission Adjustment, Interest on the Unamortized
Ceding Commission, Expense and Risk Charges and Modified
Coinsurance Reserve.
4. Quarterly Settlements.
A. Within fifteen (15) days after the end of each
Accounting Period, the Ceding Company will pay the
Reinsurer the sum of: (i) the Reinsurance Premiums
paid by the Ceding Company to the Reinsurer during
the current Accounting Period, determined in
accordance with Article II, Paragraph 2, plus (ii)
any Modified Coinsurance Reserve Adjustment payable
to the Reinsurer, determined in accordance with
Article V, Paragraph 2, plus (iii) any Funds Withheld
payable to the Reinsurer during the current
Accounting Period in accordance with the terms of the
Accounts Receivable Agreement, determined in
accordance with Article II, Paragraph 3, item (iv),
plus (iv) any Supplemental Consideration payable
during the current Accounting Period, determined in
accordance with Article II, Paragraph 1.
B. Simultaneously, the Reinsurer will pay the Ceding
Company the sum of: (i) the amount of Benefit
Payments, as described in Article IV, plus (ii)
Allowances for Commissions and Expenses, determined
in accordance with Article III, Paragraph 7, plus
(iii) Allowances for Death Benefit Guarantee,
determined in
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<PAGE> 111
accordance with Article III, Paragraph 8, plus (iv)
any Modified Coinsurance Reserve Adjustment payable
to the Ceding Company, determined in accordance with
Article V, Paragraph 2, plus (v) any Experience
Refund, determined in accordance with Article IX.
VI. SCHEDULE A, ANNUITIES AND RISKS REINSURED, is replaced in its entirety
by the following:
Annuities and Risks Reinsured. Beginning on the Effective Date
of this Agreement, the Reinsurer reinsures a quota share of
the Ceding Company's net liability on those variable annuities
issued by the Ceding Company and described below:
<TABLE>
<CAPTION>
Quota Contract and
Plan Issue Years Share Certificate Numbers
---- ----------- ----- -------------------
<S> <C> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 64% 203-VA
Venture Vision 1993 - 1994 95% VEN 10
Venture Vision 1994 95% VISION.001
</TABLE>
Beginning on December 31, 1994, under this Agreement the
Reinsurer also reinsures an additional 31 percent quota share
of the Ceding Company's net liability on those variable
annuities issued by the Ceding Company and described below:
<TABLE>
<CAPTION>
Contract and
Plan Issue Years Certificate Numbers
---- ----------- -------------------
<S> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 203-VA
</TABLE>
"Net liability," as used in this Agreement, means the Ceding
Company's liability on annuities reinsured hereunder.
-16-
<PAGE> 112
VII. SCHEDULE B, QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS, is replaced
in its entirety by Exhibit A.
VIII. The following is added to SCHEDULE D, CEDING COMPANY DATA:
- Quarterly settlement reports received under this Agreement
since inception
- The Modified Coinsurance Reserve equals the statutory reserve
with respect to the annuities reinsured hereunder, excluding
mortality reserves
In witness of the above, this Amendment Three is executed in duplicate on the
dates indicated below, with an Effective Date of December 31, 1994.
NORTH AMERICAN SECURITY LIFE INSURANCE
ATTEST: COMPANY ("Ceding Company")
By: By:
------------------------------- ----------------------------
Title: Title:
------------------------------ ----------------------------
Date: Date:
------------------------------ ----------------------------
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Reinsurer")
By: By:
------------------------------ ---------------------------
Title: Title:
------------------------------ ---------------------------
Date: Date:
------------------------------ ---------------------------
-17-
<PAGE> 113
EXHIBIT A
SCHEDULE B
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
Accounting Period: ______________
Calendar Year: __________________
Date Report Completed: __________
1. Initial Consideration (Article II, Paragraph 1)*
a. Initial Consideration _________
b. Amount of Initial Consideration withheld by
Ceding Company _________
Portion of Initial Consideration paid in cash
= a - b _______
2. Supplemental Consideration (Article II, Paragraph 1) _______
3. Reinsurance Premiums (Article II, Paragraph 2)
a. Reinsurance Premiums
A. Venture Variable Annuity 3 Reinsurance
Premiums _________
B. Venture Vision Reinsurance Premiums -
first policy year _________
C. Venture Vision Reinsurance Premiums -
renewal _________
Total Reinsurance Premiums = A + B + C _______
b. Amount of Reinsurance Premiums withheld by
Ceding Company _________
Portion of Reinsurance Premiums paid in cash
= a - b _______
4. Benefit Payments (Article IV)
a. Death Benefits _________
b. Cash Surrender Values _________
c. Annuity Benefits _________
Benefit Payments = a + b + c _______
5. Initial Reserve Adjustment (Article V, Paragraph 1)* _______
6. Modified Coinsurance Reserve Adjustment (Article V, Paragraph 2)
a. Modified Coinsurance Reserve end of
preceding Accounting Period _________
b. Modified Coinsurance Reserve end of
current Accounting Period _________
c. Equals b - a _________
d. Modified Coinsurance Reserve Investment
Credit (Schedule C) _________
Modified Coinsurance Reserve Adjustment = c - d _______
<PAGE> 114
EXHIBIT A CONTINUED
7. Reinsurance Gain = 2a - 3a - 4 - 6 - 15 - 16
(If negative, see Article VII) __________
8. Reinsurance Loss = 2a - 3a - 4 - 6 - 15 - 16
(If positive, see Article VII) __________
9. Loss Carryforward [Article VIII, Paragraph 1, item (i)] __________
10. Initial Expense and Risk Charge (Article VI, Paragraph 1)* __________
11. Expense and Risk Charge (Article VI, Paragraph 2) __________
12. Ceding Commission (Article III, Paragraph 1) __________
13. Unamortized Ceding Commission (Article III, Paragraph 2) __________
14. Unamortized Ceding Commission Adjustment
(Article III, Paragraph 3) __________
15. Allowances for Commissions and Expenses
(Article III, Paragraph 7) __________
16. Allowances for Death Benefit Guarantee
(Article III, Paragraph 8) __________
17. Experience Refund = 7 + 8 - 9 - 11 - 14 - 20 - 21
(If negative, see Article IX) __________
18. Funds Withheld payment [Article II, Paragraph 3, item (ii)] __________
19. Funds Withheld = Prior 19 + 1b + 2b - 18
(Article II, Paragraph 3) __________
20. Interest Expense Charge (Article II, Paragraph 4) __________
21. Interest on the Unamortized Ceding Commission
(Article III, Paragraph 9) __________
22. Cash Settlement =
1 + 2 + 3 - 4 - 5 - 6 + 10 - 12 - 15 - 16 - 17 + 18 __________
*Initial Accounting Period, only.
<PAGE> 115
EXHIBIT A CONTINUED
Supplemental Information
<TABLE>
<CAPTION>
Venture
Total Variable Venture
Number Annuity 3 Vision Total
of Account Account Account Loss
Annuities Value Value Value Carryforward
_________ _________ _________ _________ ____________
<S> <C> <C> <C> <C> <C>
Beginning of Period _________ _________ _________ _________ ____________
+ Additions _________ _________ _________ _________ ____________
- - Terminations _________ _________ _________ _________ ____________
End of Period _________ _________ _________ _________ ____________
</TABLE>
Venture Venture
Variable Vision
Annuity 3 Number
Number of of
Annuities Annuities
_________ _________
Beginning of Period _________ _________
+ Additions _________ _________
- - Terminations _________ _________
End of Period _________ _________
Termination Rate (Article III, Paragraph 5)
a. Total number of annuities reinsured hereunder as of
date current Accounting Period ends __________
b. Total number of annuities reinsured hereunder as of
the date one year prior to the date the current
Accounting Period ends __________
c. Termination Rate 1 - (a / b) __________
Investment Credit Accumulation Rate (Article III, Paragraph 6)
a. Modified Coinsurance Reserve Investment Credit
Current Accounting Period _________
First most recent Accounting Period _________
Second most recent Accounting Period _________
Third most recent Accounting Period _________ __________
b. Account value as of date one year prior to date
current Accounting Period ends __________
c. Account value as of date current Accounting Period ends __________
d. Investment Credit Accumulation Rate
a / [.5 x (b + c)] __________
<PAGE> 116
EXHIBIT A CONTINUED
Allowances for Commissions and Expenses (Article III, Paragraph 7)
a. $7.50 x quota share reinsured hereunder x number of annuities
reinsured hereunder and inforce at end of current Accounting
Period __________
b. .0125 x portion of account value of annuities reinsured
hereunder at end of current Accounting Period __________
c. Trailer Commission x portion of account value of Venture
Variable Annuity 3 annuities reinsured hereunder and inforce
at end of current Accounting Period __________
d. ___% x Reinsurance Premiums with respect to Venture Variable
Annuity 3 annuities reinsured hereunder __________
e. .25% x portion of account value, attributable to purchase
payments received by Ceding Company thirteen months or more
prior to their trailer commission dates, of Venture Vision
annuities reinsured hereunder and inforce at end of current
Accounting Period __________
f. ___% x renewal Reinsurance Premiums with respect to Venture
Vision annuities reinsured hereunder __________
g. Allowances for Commissions and Expenses =
a + b + c + d + e + f __________
<PAGE> 117
<PAGE> 118
AMENDMENT TWO
ATTACHED TO AND MADE A PART OF THE
ACCOUNTS RECEIVABLE AGREEMENT
EFFECTIVE DECEMBER 31, 1993
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
("Borrower")
AND
ITT LYNDON LIFE INSURANCE COMPANY
("Lender")
-------------------------------------------------
The Borrower and the Lender agree to amend this Accounts Receivable Agreement as
follows:
ARTICLE I, PROVISIONS RELATING TO THE ACCOUNTS RECEIVABLE, Paragraph 2, is
replaced in its entirety by the following:
2. Scheduled Repayment. The Borrower will repay a portion of the Accounts
Receivable at the end of each calendar year in an amount equal to the
Scheduled Repayment Amount as defined below:
Calendar Year Scheduled Repayment Amount
------------- --------------------------
1994 $6,064,196
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<PAGE> 119
Calendar Year Scheduled Repayment Amount
------------- --------------------------
1995 through 1998 $3,000,000
In witness of the above, this Amendment Two is executed in duplicate on the
dates indicated below, with an Effective Date of December 31, 1994.
NORTH AMERICAN SECURITY LIFE INSURANCE
ATTEST: COMPANY ("Borrower")
By: James A. Gallagher By: John G. Vrysen
Title: VP Secretary & Title: VP & Actuary
General Counsel
Date: December 30, 1994 Date: December 30, 1994
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Lender")
By: Jeffrey G. Stevenson By: Frank A. Alvarez
Title: VP & Deputy Chief Title: Exec. V.P.
Secretary
Date: 12/22/94 Date: 12/22/94
-2-
<PAGE> 120
AMENDMENT FOUR
ATTACHED TO AND MADE A PART OF THE
REINSURANCE AGREEMENT NUMBER 1293-104
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
"CEDING COMPANY"
AND
ITT LYNDON LIFE INSURANCE COMPANY
"REINSURER"
<PAGE> 121
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. ARTICLE III, COMMISSIONS AND ALLOWANCES, Paragraphs 1, 2 and 4, are
replaced in their entirety by the following:
1. Ceding Commission. Simultaneously with the payment of the
Initial Consideration, the Reinsurer will pay a Ceding
Commission to the Ceding Company equal to 2.2 percent times
the Initial Consideration, determined in accordance with
Article II, Paragraph 1, but not to exceed $10 million.
Simultaneously with the payment of the Supplemental
Consideration, the Reinsurer will pay a Ceding Commission to
the Ceding Company equal to 3.58 percent times the
Supplemental Consideration, determined in accordance with
Article II, Paragraph 1, but not to exceed $5.2 million. For
Accounting Periods beginning January 1, 1994 and thereafter,
the Reinsurer will pay a Ceding Commission to the Ceding
Company equal to the Ceding Commission Rate, as described in
Schedule E, Paragraph 2, times the Reinsurance Premiums,
determined in accordance with Article II, Paragraph 2, but not
to exceed $1 million for the 1995 calendar year.
2. Unamortized Ceding Commission. The Unamortized Ceding
Commission at the end of each Accounting Period equals (i)
plus (ii) plus (iii) minus (iv), where:
(i) equals the Unamortized Ceding Commission at
the end of the preceding Accounting Period;
(ii) equals the Ceding Commission Rate, as
described in Schedule E, Paragraph 2, times
the Reinsurance Premiums,
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<PAGE> 122
determined in accordance with Article II,
Paragraph 2, but not to exceed $1 million
for the 1995 calendar year;
(iii) for the Accounting Period ending December
31, 1994 only, equals 3.58 percent times the
Supplemental Consideration, determined in
accordance with Article II, Paragraph 1, but
not to exceed $5.2 million; and
(iv) equals the Unamortized Ceding Commission
Adjustment, determined in accordance with
Paragraph 3 below.
With respect, however, to the Accounting Period during which
the Effective Date of this Agreement occurs, the reference in
(i) to the "end of the preceding Accounting Period" refers to
the Effective Date of this Agreement immediately after the
Ceding Commission, as described in Paragraph 1 above, has been
paid. The Unamortized Ceding Commission may never be less than
zero. In the Accounting Period during which (i) plus (ii) plus
(iii) minus (iv) as described above, first becomes zero or
negative, then, for that and all subsequent Accounting
Periods, the Unamortized Ceding Commission will be set equal
to zero.
4. Maximum Unamortized Ceding Commission Adjustment. The Maximum
Unamortized Ceding Commission Adjustment for each Accounting
Period is as follows:
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<PAGE> 123
<TABLE>
<CAPTION>
Maximum Unamortized
Ceding Commission Maximum Unamortized
Adjustment Ceding Commission
For Accounting (For Amounts Paid Adjustment (For Amounts
Periods Ending During Initial Paid After Initial
During Accounting Period) Accounting Period)
<S> <C> <C>
1994 $500,000 $0
1995 $500,000 5 percent of the cuma-
lative Ceding Commission
paid by the Reinsurer to
the Ceding Company
during the 1994 calendar
year in accordance with
Article III, Paragraph 1
1996 through 1998 $500,000 5 percent of the cuma-
lative Ceding Commission
paid by the Reinsurer to
the Ceding Company
during the 1994 and 1995
calendar years in
accordance with Article
III, Paragraph 1
1999 $ 0 5 percent of the cuma-
lative Ceding Commission
paid by the Reinsurer to
the Ceding Company
during the 1994 and 1995
calendar years in
accordance with Article
III, Paragraph 1
2000 $ 0 5 percent of the cuma-
lative Ceding Commission
paid by the Reinsurer to
the Ceding Company
during the 1995 calendar
year in accordance with
Article III, Paragraph 1
2001 and thereafter $ 0 $0
</TABLE>
However, if in any Accounting Period (a) the Termination Rate, as described in
Paragraph 5 below, is greater than 0.30, and/or (b) the Investment Credit
Accumulation Rate, as described in Paragraph 6 below, is less than zero, then
the Reinsurer may elect to define the Maximum Withheld Ceding Commission
Adjustment as any amount up to
- 3 -
<PAGE> 124
$14 million for the first Accounting Period in the current
calendar year and for all Accounting Periods thereafter.
II. Effective January 1, 1995, ARTICLE III, COMMISSIONS AND ALLOWANCES,
Paragraph 9, is replaced in its entirety by the following:
9. Interest on the Unamortized Ceding Commission. The Ceding
Company will pay the Reinsurer Interest on the Unamortized
Ceding Commission at the end of each Accounting Period,
subsequent to the initial Accounting Period, equal to [(i) x
(ii)] + [(iii) x (iv)] + [(v) x (vi)] + [(vii) x (viii)] +
[(ix) x (x)], where:
(i) equals the portion of the Unamortized Ceding
Commission, determined in accordance with
Paragraph 2 above, paid by the Reinsurer to
the Ceding Company as Ceding Commission
during the initial Accounting Period in
accordance with Paragraph 1 above,
calculated as of the end of the preceding
Accounting Period;
(ii) equals the Interest Expense Rate, as
described in Article II, Paragraph 5;
(iii) equals the portion of the Unamortized Ceding
Commission, determined in accordance with
Paragraph 2 above, paid by the Reinsurer to
the Ceding Company as Ceding Commission, in
accordance with Paragraph 1 above, for the
1994 calendar year:
(iv) equals the Loss Carryforward Rate, as
described in Article VIII, Paragraph 2;
(v) equals, for the Accounting Periods beginning
July 1, 1995 and thereafter, the portion of
the Unamortized
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<PAGE> 125
Ceding Commission, determined in accordance
with Paragraph 2 above, paid by the
Reinsurer to the Ceding Company as Ceding
Commission, in accordance with Paragraph 1
above, for the first and second Accounting
Period in the 1995 calendar year; and
(vi) equals,
- for the Accounting Period
beginning July 1, 1995,
[(a) / (b)] x (c), where:
(a) equals the Loss Carryforward
Rate, as described in Article
VIII, Paragraph 2;
(b) equals the number of days in
the current Accounting Period;
and
(c) equals the number of days
remaining in the current
Accounting Period measured from
the quarterly settlement date,
as described in Article X, for
the second Accounting Period in
the 1995 calendar year; and
- for the Accounting Periods beginning
October 1, 1995 and thereafter, equals
the Loss Carryforward Rate, as
described in Article VIII, Paragraph 2;
(vii) equals, for the Accounting Periods
beginning October 1, 1995 and thereafter,
the portion of the Unamortized Ceding
Commission, determined in accordance with
Paragraph 2 above, paid by the Reinsurer to
the Ceding Company as Ceding Commission, in
accordance with Paragraph 1 above, for the
third Accounting Period in the 1995 calendar
year;
- 5 -
<PAGE> 126
(viii) equals,
- for the Accounting Period beginning October 1,
1995, [(a) / (b)] x (c), where:
(a) equals the Loss Carryforward Rate, as
described in Article VIII, Paragraph 2;
(b) equals the number of days in the current
Accounting Period; and
(c) equals the number of days remaining in the
current Accounting Period measured from the
quarterly settlement date, as described in
Article X, for the third Accounting Period
in the 1995 calendar year; and
- for the Accounting Periods beginning January 1,
1996 and thereafter, the Loss Carryforward Rate,
as described in Article VIII, Paragraph 2;
(ix) equals, for the Accounting Periods beginning
January 1, 1996 and thereafter, the portion of the
Unamortized Ceding Commission, determined in
accordance with Paragraph 2 above, paid by the
Reinsurer to the Ceding Company as Ceding Commission,
in accordance with Paragraph 1 above, for the fourth
Accounting Period in the 1995 calendar year; and
(x) equals,
- for the Accounting Period beginning January 1,
1996, [(a) / (b)] x (c), where:
(a) equals the Loss Carryforward Rate, as
described in Article VIII, Paragraph 2;
- 6 -
<PAGE> 127
(b) equals the number of days in the
current Accounting Period; and
(c) equals the number of days remaining
in the current Accounting Period
measured from the quarterly
settlement date, as described in
Article X, for the fourth
Accounting Period in the 1995
calendar year; and
- for the Accounting Periods beginning April
1, 1996 and thereafter, the Loss
Carryforward Rate, as described in Article
VIII, Paragraph 2.
III. ARTICLE VI, EXPENSE AND RISK CHARGES, Paragraph 2, is replaced in its
entirety by the following:
2. Expense and Risk Charge. The Expense and Risk Charge for each
Accounting Period subsequent to the initial Accounting Period,
payable to the Reinsurer by the Ceding Company, will be equal
to (i) plus (ii) plus (iii), where:
(i) equals the Expense and Risk Charge Rate, as
defined below, times the Loss Carryforward,
determined in accordance with Article VIII,
Paragraph 1, item (i), at the end of the
preceding Accounting Period, with accrued
interest thereon;
(ii) equals the Expense and Risk Charge Rate, as
defined below, times the Expense and Risk
Charge Base, as defined below; and
(iii) for the Accounting Period ending December
31, 1994 only, equals 1.0 percent times 3.2
percent of the
- 7 -
<PAGE> 128
Supplemental Consideration, determined in
accordance with Article II, Paragraph 1, but
not to exceed 1.65 percent times $5.2
million.
The Expense and Risk Charge Rate for each Accounting Period is
defined as follows:
For Accounting Expense and
Periods Ending During Risk Charge Rate
1994 through 2000 .4125%
2001 and thereafter .4142%
The Expense and Risk Charge Base for each Accounting Period is
defined as follows:
For Accounting
Periods Ending During Expense and Risk Charge Base
1994 through 2000 greater of either (a) the Unamortized
Ceding Commission, determined in
accordance with Article III,
Paragraph 2, at the end of the
preceding Accounting Period, plus
the Ceding Commission Rate, as
described in Article III, Paragraph
1, times the Reinsurance Premiums,
determined in accordance with
Article II, Paragraph 2, but not to
exceed $1 million for the 1995
calendar year, minus the Maximum
Unamortized Ceding Commission
Adjustment, determined in accordance
with Article III, Paragraph 4, or
(b) quantity (iv) as defined below,
but never less than zero
2001 and thereafter (iv) below, but never less than zero,
where:
(iv) equals (a) plus (b) plus (c) minus (d) minus (e) minus
(f), where:
(a) equals the Unamortized Ceding Commission, determined
in accordance with Article III,
- 8 -
<PAGE> 129
Paragraph 2, at the end of the preceding
Accounting Period;
(b) equals the Ceding Commission Rate, as
described in Article III, Paragraph 1, times
the Reinsurance Premiums, determined in
accordance with Article II, Paragraph 2, but
not to exceed $1 million for the 1995
calendar year;
(c) equals the absolute value of any Reinsurance
Loss, determined in accordance with Article
VII;
(d) equals any Reinsurance Gain, determined in
accordance with Article VII;
(e) equals the Interest Expense Charge,
determined in accordance with Article II,
Paragraph 4; and
(f) equals the Interest on the Unamortized
Ceding Commission, determined in accordance
with Article III, Paragraph 9.
In no event will the Expense and Risk Charge payable be less
than $20,000 for any Accounting Period after December 31,
2000.
IV. Effective July 1, 1995, ARTICLE VIII, LOSS CARRYFORWARD, Paragraph 2,
is replaced in its entirety by the following:
2. Loss Carryforward Rate. The Loss Carryforward Rate at the end
of each Accounting Period will be equal to 51.25 basis points,
plus the quantity (i) divided by (ii), where:
(i) equals the H.15 annualized rate for three
month Commercial Paper as published by the
Federal Reserve
- 9 -
<PAGE> 130
as of the date the current Accounting
Period begins; and
(ii) equals four.
V. SCHEDULE A, ANNUITIES AND RISKS REINSURED, is replaced in its entirety
by the following:
Annuities and Risks Reinsured. Beginning on the Effective Date
of this Agreement, the Reinsurer reinsures a quota share of
the Ceding Company's net liability on those variable annuities
issued by the Ceding Company and described below:
<TABLE>
<CAPTION>
Quota Contract and
Plan Issue Years Share Certificate Numbers
<S> <C> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 64% 203-VA
Venture Vision 1993 - 1995 95% VEN 10
Venture Vision 1994 - 1995 95% VISION.001
</TABLE>
Beginning on December 31, 1994, under this Agreement the
Reinsurer also reinsures an additional 31 percent quota share
of the Ceding Company's net liability on those variable
annuities issued by the Ceding Company and described below:
<TABLE>
<CAPTION>
Contract and
Plan Issue Years Certificate Numbers
<S> <C> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 203-VA
</TABLE>
"Net liability," as used in this Agreement, means the Ceding
Company's liability on annuities reinsured hereunder.
VI. The following is added to SCHEDULE D, CEDING COMPANY DATA:
- Quarterly settlement reports received under this Agreement since
inception
- 10 -
<PAGE> 131
VII. SCHEDULE E, RATES, Paragraph 2, is replaced in its entirety by the
following:
2. Ceding Commission Rate. The Ceding Commission Rate for each
Accounting Period, subsequent to the initial Accounting
Period, is defined as follows:
For Accounting Ceding
Periods Ending During Commission Rate
1994 and 1995 1.67%
1996 and thereafter 0%
- 11 -
<PAGE> 132
In witness of the above, this Amendment Four is executed in duplicate on the
dates indicated below, with an Effective Date of January 1, 1995.
NORTH AMERICAN SECURITY LIFE INSURANCE
ATTEST: COMPANY ("Ceding Company")
By: By:
--------------------------- -------------------------------
Title: Title:
------------------------ ----------------------------
Date: Date:
------------------------ ----------------------------
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Reinsurer")
By: By:
--------------------------- -------------------------------
Title: Title:
------------------------ ----------------------------
Date: Date:
------------------------ ----------------------------
- 12 -
<PAGE> 133
AMENDMENT FIVE
ATTACHED TO AND MADE A PART OF THE
REINSURANCE AGREEMENT NUMBER 1293-104
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
"CEDING COMPANY"
AND
ITT LYNDON LIFE INSURANCE COMPANY
"REINSURER"
<PAGE> 134
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. ARTICLE II, INITIAL CONSIDERATION AND REINSURANCE PREMIUMS, Paragraph
2, is replaced in its entirety by the following:
2. Reinsurance Premiums. At the end of each Accounting Period,
the Ceding Company will pay the Reinsurer Reinsurance Premiums
on all annuities in effect under this Agreement in an amount
equal to the sum of: (i) that portion of the gross premiums
collected by the Ceding Company during the Accounting Period
which corresponds to the portion of the annuities reinsured
hereunder, plus (ii) beginning May 1, 1995 and thereafter,
that portion of the statutory reserves on the quota share
reinsured hereunder which are associated with the portion of
the account values transferred from fixed accounts to variable
accounts with respect to the annuities reinsured hereunder.
The Reinsurer will treat any such Reinsurance Premiums as paid
premium for annual statement purposes, regardless of the mode
of collection by the Ceding Company on the annuities reinsured
hereunder. The Ceding Company will withhold on behalf of the
Reinsurer, in accordance with Paragraph 3 below, an amount
equal to (i) times (ii), but not to exceed $6 million for the
current calendar year, where:
(i) equals the Funds Withheld Rate, as described
in Schedule E, Paragraph 1; and
(ii) equals Reinsurance Premiums, determined in
accordance with this Paragraph 2.
-1-
<PAGE> 135
II. ARTICLE III, COMMISSIONS AND ALLOWANCES, Paragraphs 2 and 7, are
replaced in their entirety by the following:
2. Unamortized Ceding Commission. The Unamortized Ceding
Commission at the end of each Accounting Period equals (i)
plus (ii) plus (iii) minus (iv), where:
(i) equals the Unamortized Ceding Commission at
the end of the preceding Accounting Period;
(ii) equals the Ceding Commission Rate, as
described in Schedule E, Paragraph 2, times
the Reinsurance Premiums, determined in
accordance with Article II, Paragraph 2, but
not to exceed $1 million for the 1995
calendar year;
(iii) for the Accounting Period ending December
31, 1994 only, equals 3.58 percent times the
Supplemental Consideration, determined in
accordance with Article II, Paragraph 1, but
not to exceed $5.2 million; and
(iv) equals the Unamortized Ceding Commission
Adjustment, determined in accordance with
Paragraph 3 below.
With respect, however, to the Accounting Period during which
the Effective Date of this Agreement occurs, the reference in
(i) to the "end of the preceding Accounting Period" refers to
the Effective Date of this Agreement immediately after the
Ceding Commission, as described in Paragraph 1 above, has been
paid. The Unamortized Ceding Commission may never be less than
zero. In the Accounting Period during which (i) plus (ii) plus
(iii) minus (iv) as described above, first becomes zero or
negative, then, for that and all subsequent Accounting
Periods, the Unamortized Ceding Commission will be set equal
to zero.
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<PAGE> 136
Notwithstanding the above, any portion of the Unamortized
Ceding Commission which corresponds to the portion of the
annuities recaptured pursuant to the second sentence of
Paragraph 4, Article XI, will be paid by the Ceding Company to
the Reinsurer, in accordance with Article XII, Paragraph 3(d),
in an amount equal to [(v) / (vi)] x (vii), where:
(v) equals the portion of the account value,
with respect to the portion of the annuities
reinsured hereunder transferred from
variable accounts to fixed accounts and
treated as recaptured, in accordance with
Article XI, Paragraph 4;
(vi) equals the portion of the account value, at
the end of the preceding Accounting Period
with respect to the portion of the annuities
reinsured hereunder; and
(vii) equals the Unamortized Ceding Commission,
determined in accordance with item (i)
above, at the end of the preceding
Accounting Period.
7. Allowances for Commissions and Expenses. The Reinsurer will
pay the Ceding Company Allowances for Commissions and Expenses
for each Accounting Period, equal to (i) plus (ii) plus (iii)
plus (iv) plus (v) plus (vi), where:
(i) equals (a) times (b) times (c), where:
(a) equals $7.50 times the quota share
percentage of the annuities
reinsured hereunder, as described
in Schedule A;
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<PAGE> 137
(b) equals the number of annuities
reinsured hereunder and described
in Schedule A, and inforce at the
end of the current Accounting
Period; and
(c) equals the total account value
invested in variable accounts with
respect to the annuities reinsured
hereunder, divided by the total
account value invested in fixed and
variable accounts with respect to
the annuities reinsured hereunder;
and
(ii) equals .0125 percent times that portion of
the account value of the annuities reinsured
hereunder which corresponds to the portion
of the annuities reinsured hereunder as of
the end of the current Accounting Period;
(iii) equals the Trailer Commission, as defined
below, times that portion of the account
value of the Venture Variable Annuity 3
annuities reinsured hereunder which
corresponds to the portion of the Venture
Variable Annuity 3 annuities reinsured
hereunder and described in Schedule A, as of
the end of the current Accounting Period;
(iv) equals (a) times (b), where:
(a) equals the Reinsurance Premiums,
determined in accordance with
Article II, Paragraph 2, with
respect to the Venture Variable
Annuity 3 annuities reinsured
hereunder which corresponds
-4-
<PAGE> 138
to the portion of the Venture
Variable Annuity 3 annuities
reinsured hereunder and described
in Schedule A; and
(b) equals,
- for the Accounting Periods
beginning January 1, 1994
through October 1, 1994,
5.33 percent, and
- for the Accounting Periods
beginning January 1, 1995
and thereafter, 7 percent;
(v) equals .25 percent times that portion of the
account value, attributable to purchase
payments received by the Ceding Company
thirteen (13) months or more prior to their
trailer commission payment dates, of the
Venture Vision annuities reinsured hereunder
which corresponds to the portion of the
Venture Vision annuities reinsured hereunder
and described in Schedule A, as of the end
of the current Accounting Period; and
(vi) equals (a) times (b), where:
(a) equals the portion of Reinsurance
Premiums, determined in accordance
with Article II, Paragraph 2,
received by the Ceding Company
thirteen (13) months or more after
the issue date of each Venture
Vision annuity reinsured hereunder
which corresponds to the portion of
the Venture Vision annuities
reinsured hereunder and described
in Schedule A; and
-5-
<PAGE> 139
(b) equals,
- for the Accounting Periods
beginning January 1, 1994
through October 1, 1994,
1.83 percent, and
- for the Accounting Periods
beginning January 1, 1995
and thereafter, 3.5
percent.
The Trailer Commission for Venture Variable Annuity 3
annuities for each Accounting Period is defined below:
<TABLE>
<CAPTION>
For Accounting
Periods Ending During Trailer Commission
--------------------- ------------------
<S> <C>
1994 .04%
1995 .05%
1996 .055%
1997 and thereafter .0625%
</TABLE>
III. The following Paragraph 10 is added to ARTICLE X, ACCOUNTING AND
SETTLEMENTS:
10. Partial Recapture. If a portion of the annuities reinsured
hereunder is recaptured, as described in Article XI, Paragraph
4, then the quarterly settlements described above will
thereafter be made with respect to the portion of the policies
not recaptured. Adjustments in the amounts due from either the
Ceding Company or the Reinsurer will be made accordingly.
IV. ARTICLE XI, DURATION AND RECAPTURE, Paragraphs 4 and 5, are replaced in
their entirety by the following:
-6-
<PAGE> 140
4. Recapture. Annuities reinsured hereunder will be eligible for
recapture, at the option of the Ceding Company, on any January
1, following the fifth anniversary of the Effective Date of
this Agreement, subject to ninety (90) days prior written
notice, or on any other date which is mutually agreed to in
writing. However, in the event that any portion of the account
values related to any annuity reinsured hereunder is
transferred from variable accounts to fixed accounts, then the
corresponding portion of such annuity will be treated as
recaptured. Except for the fixed account transfers described
above, if the Ceding Company opts to recapture, then the
Ceding Company must recapture all of the annuities reinsured
hereunder. In no event may the Ceding Company recapture
anything other than 100 percent of all annuities reinsured
hereunder.
5. Internal Replacements. Should the Ceding Company, its
affiliates, successors or assigns, initiate a program of
Internal Replacement that would include any of the annuities
reinsured hereunder, the Ceding Company will immediately
notify the Reinsurer. The Reinsurer may elect to treat such
annuities as recaptured rather than surrendered and such
recapture will apply to all annuities reinsured hereunder,
except that the transfer of any portion of the annuities
reinsured hereunder from variable accounts to fixed accounts
will be treated as a partial recapture, as described in
Article XI, Paragraph 4. For purposes of this Agreement, the
term "Internal Replacement" means any instance in which an
annuity or any portion of the cash value of an annuity is
exchanged for another policy or annuity, not covered under
this Agreement, which is written by the Ceding Company, its
affiliates, successors or assigns.
-7-
<PAGE> 141
V. ARTICLE XII, TERMINAL ACCOUNTING AND SETTLEMENT, Paragraphs 1 and 3,
are replaced in their entirety by the following:
1. Terminal Accounting. In the event that all or a portion of the
reinsurance under this Agreement is terminated in accordance
with Article XI, Paragraph 3, or recaptured in accordance with
Article XI, Paragraph 4, a Terminal Accounting and Settlement
will take place.
3. Settlement. The Terminal Accounting and Settlement will
consist of:
(a) the quarterly settlement as provided in Article X,
Paragraph 4, computed as of the terminal accounting
date; and
(b) payment by the Ceding Company to the Reinsurer of an
amount equal to the Modified Coinsurance Reserve on
the annuities reinsured hereunder as of the terminal
accounting date; and
(c) payment by the Reinsurer to the Ceding Company of a
Terminal Reserve Adjustment equal to the Modified
Coinsurance Reserve on the annuities reinsured
hereunder as of the terminal accounting date;
(d) payment by the Ceding Company to the Reinsurer of a
Terminal Ceding Commission Adjustment equal to any
Unamortized Ceding Commission, as described in
Article III, Paragraph 2, as of the terminal
accounting date;
(e) payment by the Ceding Company to the Reinsurer of any
Funds Withheld, determined in accordance with Article
II, Paragraph 3, as of the terminal accounting date;
and
(f) payment by the Ceding Company to the Reinsurer of any
Loss Carryforward, as described in Article VIII,
calculated as of the terminal accounting date.
-8-
<PAGE> 142
If only a portion of the annuities is recaptured, as
described in Article XI, Paragraph 4, then the
Terminal Accounting and Settlement described above,
will be made with respect to only the portion of such
annuities recaptured, excluding item (e) above. If
the calculation of the Terminal Accounting and
Settlement produces an amount owing to the Ceding
Company, such amount will be paid by the Reinsurer to
the Ceding Company. If the calculation of the
Terminal Accounting and Settlement produces an amount
owing to the Reinsurer, such amount will be paid by
the Ceding Company to the Reinsurer.
VI. SCHEDULE A, ANNUITIES AND RISKS REINSURED, is replaced in its entirety
by the following:
Annuities and Risks Reinsured. Beginning on the Effective Date
of this Agreement, the Reinsurer reinsures a quota share of
the Ceding Company's net liability with respect to a portion
of the account values invested in variable accounts under
those variable annuities issued by the Ceding Company and
described below:
<TABLE>
<CAPTION>
Quota Contract and
Plan Issue Years Share Certificate Numbers
---- ----------- ----- -------------------
<S> <C> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 64% 203-VA
Venture Vision 1993 - 1995 95% VEN 10
Venture Vision 1994 - 1995 95% VISION.001
</TABLE>
Beginning on December 31, 1994, under this Agreement the
Reinsurer also reinsures an additional 31 percent quota share
of the Ceding Company's net liability with respect to a
portion of the account values invested in variable accounts
under those variable annuities issued by the Ceding Company
and described below:
-9-
<PAGE> 143
<TABLE>
<CAPTION>
Contract and
Plan Issue Years Certificate Numbers
---- ----------- -------------------
<S> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 203-VA
</TABLE>
"Net liability," as used in this Agreement, means the Ceding
Company's liability on annuities reinsured hereunder, net of
other reinsurance.
VIII. Effective January 1, 1995, SCHEDULE B, QUARTERLY REPORT OF ACTIVITY AND
SETTLEMENTS, is replaced in its entirety by Exhibit A.
IX. The following information is added to SCHEDULE D, CEDING COMPANY DATA:
- Quarterly accounting settlement reports for this Agreement
received by the Reinsurer since inception
- Telephone conversation of September 5, 1995 between Grace
Rokosz of the Ceding Company and Doris Azarcon of the
Reinsurer, which included the representation that the fixed
account portion of the annuities reinsured hereunder are ceded
to other reinsurers.
-10-
<PAGE> 144
In witness of the above, this Amendment Five is executed in duplicate on the
dates indicated below with an Effective Date of May 1, 1995.
NORTH AMERICAN SECURITY LIFE
ATTEST: INSURANCE COMPANY ("Ceding Company")
By: By:
------------------------------ -----------------------------
Title: Title:
------------------------------ -----------------------------
Date: Date:
------------------------------ -----------------------------
ITT LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Reinsurer")
By: By:
----------------------------- -----------------------------
Title: Title:
----------------------------- -----------------------------
Date: Date:
----------------------------- -----------------------------
-11-
<PAGE> 145
EXHIBIT A
SCHEDULE B
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
Accounting Period: ________________
Calendar Year: ____________________
Date Report Completed: ____________
1. Initial Consideration (Article II, Paragraph 1)*
a. Initial Consideration _______
b. Amount of Initial Consideration withheld by
Ceding Company _______
Portion of Initial Consideration paid in cash
= a - b _______
2. Supplemental Consideration (Article II, Paragraph 1) _______
3. Reinsurance Premiums (Article II, Paragraph 2)
a. Reinsurance Premiums
A. Venture Variable Annuity 3 Reinsurance
gross premiums _______
B. Venture Vision Reinsurance Premiums -
first policy year gross premiums _______
C. Venture Vision Reinsurance Premiums -
renewal gross premiums _______
D. Statutory reserves transferred from fixed
accounts to variable accounts [item (ii)] _______
Total Reinsurance Premiums = A + B + C + D _______
b. Amount of Reinsurance Premiums withheld by
Ceding Company _______
Portion of Reinsurance Premiums paid in cash
= a - b _______
4. Benefit Payments (Article IV)
a. Death Benefits _______
b. Cash Surrender Values _______
c. Annuity Benefits _______
Benefit Payments = a + b + c _______
5. Initial Reserve Adjustment (Article V, Paragraph 1)* _______
6. Modified Coinsurance Reserve Adjustment (Article V, Paragraph 2)
a. Modified Coinsurance Reserve end of
preceding Accounting Period _______
b. Modified Coinsurance Reserve end of
current Accounting Period _______
c. Equals b - a _______
d. Modified Coinsurance Reserve Investment
Credit (Schedule C) _______
Modified Coinsurance Reserve Adjustment = c - d _______
<PAGE> 146
EXHIBIT A CONTINUED
7. Reinsurance Gain = 2a - 3a - 4 - 6 - 15 - 16
(If negative, see Article VII) _______
8. Reinsurance Loss = 2a - 3a - 4 - 6 - 15 - 16
(If positive, see Article VII) _______
9. Loss Carryforward [Article VIII, Paragraph 1, item (i)] _______
10. Initial Expense and Risk Charge (Article VI, Paragraph 1)* _______
11. Expense and Risk Charge (Article VI, Paragraph 2) _______
12. Ceding Commission (Article III, Paragraph 1) _______
13. Unamortized Ceding Commission (Article III, Paragraph 2) _______
14. Unamortized Ceding Commission Adjustment
(Article III, Paragraph 3) _______
15. Allowances for Commissions and Expenses
(Article III, Paragraph 7) _______
16. Allowances for Death Benefit Guarantee
(Article III, Paragraph 8) _______
17. Experience Refund = 7 + 8 - 9 - 11 - 14 - 20 - 21
(If negative, see Article IX) _______
18. Funds Withheld payment [Article II, Paragraph 3, item (ii)] _______
19. Funds Withheld = Prior 19 + 1b + 2b - 18
(Article II, Paragraph 3) _______
20. Interest Expense Charge (Article II, Paragraph 4) _______
21. Interest on the Unamortized Ceding
Commission (Article III, Paragraph 9) _______
22. Cash Settlement =
1 + 2 + 3 - 4 - 5 - 6 + 10 - 12 - 15 - 16 - 17 + 18 _______
*Initial Accounting Period, only.
Terminal Accounting and Settlement (Partial recapture)
(Article XII, Paragraph 3)
A. Modified Coinsurance Reserve (Article V, Paragraph 3) _______
B. Terminal Reserve Adjustment (Article V, Paragraph 3) _______
<PAGE> 147
EXHIBIT A CONTINUED
C. Terminal Ceding Commission (Article III, Paragraph 2)
a. Account value at end of preceding Accounting
Period with respect to portion of annuities
reinsured hereunder transferred from variable
accounts to fixed accounts _______
b. Account value at end of preceding Accounting
Period with respect to portion of annuities
reinsured hereunder _______
c. Unamortized Ceding Commission at end of
preceding Accounting Period _______
Terminal Ceding Commission = (a / b) x c _______
D. Portion of Loss Carryforward with respect to portion
of annuities reinsured hereunder transferred from
variable accounts to fixed accounts (Article VIII) _______
Cash Settlement = A - B + C + D _______
Supplemental Information
<TABLE>
<CAPTION>
Venture
Total Variable Venture
Number Annuity 3 Vision Total
of Account Account Account Loss
Annuities Value Value Value Carryforward
<S> <C> <C> <C> <C> <C>
Beginning of Period _________ _________ _______ _______ ____________
+ Additions _________ _________ _______ _______ ____________
- - Terminations _________ _________ _______ _______ ____________
End of Period _________ _________ _______ _______ ____________
</TABLE>
Venture Venture
Variable Vision
Annuity 3 Number
Number of of
Annuities Annuities
Beginning of Period _________ _________
+ Additions _________ _________
- - Terminations _________ _________
End of Period _________ _________
Termination Rate (Article III, Paragraph 5)
a. Total number of annuities reinsured hereunder as of
date current Accounting Period ends _______
b. Total number of annuities reinsured hereunder as of
the date one year prior to the date the current _______
Accounting Period ends
c. Termination Rate 1 - (a / b) _______
<PAGE> 148
EXHIBIT A CONTINUED
Investment Credit Accumulation Rate (Article III, Paragraph 6)
a. Modified Coinsurance Reserve Investment Credit
Current Accounting Period _______
First most recent Accounting Period _______
Second most recent Accounting Period _______
Third most recent Accounting Period _______ _______
b. Account value as of date one year prior to date
current Accounting Period ends _______
c. Account value as of date current Accounting Period ends _______
d. Investment Credit Accumulation Rate
a / [.5 x (b + c)] _______
Allowances for Commissions and Expenses (Article III, Paragraph 7)
a. $7.50 x quota share reinsured hereunder x number of annuities
reinsured hereunder and inforce at end of current Accounting
Period _______
b. Total account value invested in variable accounts on
annuities reinsured hereunder / total account value
invested in fixed and variable accounts on
annuities reinsured hereunder _______
c. .0125 x portion of account value of annuities reinsured
hereunder at end of current Accounting Period _______
d. Trailer Commission x portion of account value of Venture
Variable Annuity 3 annuities reinsured hereunder and
inforce at end of current Accounting Period _______
e. ___% x Reinsurance Premiums with respect to Venture Variable
Annuity 3 annuities reinsured hereunder _______
f. .25% x portion of account value, attributable to purchase
payments received by Ceding Company thirteen months or more
prior to their trailer commission dates, of Venture Vision
annuities reinsured hereunder and inforce at end of
current Accounting Period _______
g. ___% x renewal Reinsurance Premiums with respect to Venture
Vision annuities reinsured hereunder _______
h. Allowances for Commissions and Expenses =
[a x b] + c + d + e + f + g _______
<PAGE> 149
AMENDMENT SIX
ATTACHED TO AND MADE A PART OF THE
REINSURANCE AGREEMENT NUMBER 1293-104
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
"CEDING COMPANY"
AND
RGA REINSURANCE COMPANY
"REINSURER"
<PAGE> 150
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. ARTICLE III, COMMISSIONS AND ALLOWANCES, Paragraphs 1, 2, 4, 7 and 8,
are replaced in their entirety by the following:
1. Ceding Commission. Simultaneously with the payment of the
Initial Consideration, the Reinsurer will pay a Ceding
Commission to the Ceding Company equal to 2.2 percent times
the Initial Consideration, determined in accordance with
Article II, Paragraph 1, but not to exceed $10 million.
Simultaneously with the payment of the Supplemental
Consideration, the Reinsurer will pay a Ceding Commission to
the Ceding Company equal to 3.58 percent times the
Supplemental Consideration, determined in accordance with
Article II, Paragraph 1, but not to exceed $5.2 million. For
Accounting Periods beginning January 1, 1994 and thereafter,
the Reinsurer will pay a Ceding Commission to the Ceding
Company equal to the Ceding Commission Rate, as described in
Schedule E, Paragraph 2, times the Reinsurance Premiums,
determined in accordance with Article II, Paragraph 2, but not
to exceed $1 million for the 1995 calendar year and not to
exceed $2.15 million for the 1996 calendar year.
2. Unamortized Ceding Commission. The Unamortized Ceding
Commission at the end of each Accounting Period equals (i)
plus (ii) plus (iii) minus (iv), where:
(i) equals the Unamortized Ceding Commission at the
end of the preceding Accounting Period;
(ii) equals the Ceding Commission Rate, as described
in Schedule E, Paragraph 2, times the Reinsurance Premiums, determined in
1
<PAGE> 151
accordance with Article II, Paragraph 2, but not to exceed $1 million for the
1995 calendar year and not to exceed $2.15 million for the 1996 calendar year;
(iii) for the Accounting Period ending December 31,
1994 only, equals 3.58 percent times the Supplemental Consideration, determined
in accordance with Article II, Paragraph 1, but not to exceed $5.2 million; and
(iv) equals the Unamortized Ceding Commission
Adjustment, determined in accordance with Paragraph 3 below.
With respect, however, to the Accounting Period during which
the Effective Date of this Agreement occurs, the reference in (i) to the "end of
the preceding Accounting Period" refers to the Effective Date of this Agreement
immediately after the Ceding Commission, as described in Paragraph 1 above, has
been paid. The Unamortized Ceding Commission may never be less than zero. In the
Accounting Period during which (i) plus (ii) plus (iii) minus (iv) as described
above, first becomes zero or negative, then, for that and all subsequent
Accounting Periods, the Unamortized Ceding Commission will be set equal to zero.
Notwithstanding the above, any portion of the Unamortized
Ceding Commission which corresponds to the portion of the annuities recaptured
pursuant to the second sentence of Paragraph 4, Article XI, will be paid by the
Ceding Company to the Reinsurer, in accordance with Article XII, Paragraph 3(d),
in an amount equal to [(v) / (vi)] x (vii), where:
(v) equals the portion of the account value, with
respect to the portion of the annuities reinsured hereunder transferred from
variable accounts to fixed accounts and treated as recaptured, in accordance
with Article XI, Paragraph 4;
2
<PAGE> 152
(vi) equals the portion of the account value, at the
end of the preceding Accounting Period with respect to the portion of the
annuities reinsured hereunder; and
(vii) equals the Unamortized Ceding Commission,
determined in accordance with item (i) above, at the end of the preceding
Accounting Period.
4. Maximum Unamortized Ceding Commission Adjustment. The
Maximum Unamortized Ceding Commission Adjustment for each Accounting Period is
as follows:
<TABLE>
<CAPTION>
Maximum Unamortized
Ceding Commission Maximum Unamortized
Adjustment Ceding Commission
For Accounting (For Amounts Paid Adjustment (For Amounts
Periods Ending During Initial Paid After Initial
During Accounting Period) Accounting Period)
- -------------- ------------------- -----------------------------
<S> <C> <C>
1994 $500,000 $0
1995 $500,000 5 percent of the cumulative
Ceding Commission paid by the
Reinsurer to the Ceding
Company during the 1994
calendar year in accordance
with Article III, Paragraph 1
1996 $500,000 5 percent of the cumulative
Ceding Commission paid by the
Reinsurer to the Ceding
Company during the 1994 and
1995 calendar years in
accordance with Article III,
Paragraph 1
</TABLE>
<TABLE>
<CAPTION>
Maximum Unamortized
Ceding Commission Maximum Unamortized
Adjustment Ceding Commission
For Accounting (For Amounts Paid Adjustment (For Amounts
Periods Ending During Initial Paid After Initial
During Accounting Period) Accounting Period)
- -------------- ------------------- -----------------------------
<S> <C> <C>
1997 through $500,000 5 percent of the cumulative
1998 Ceding Commission paid by the
Reinsurer to the Ceding
Company during the 1994, 1995
and 1996 calendar years in
accordance with Article III,
Paragraph 1
1999 $ 0 5 percent of the cumulative
Ceding Commission paid by the
Reinsurer to the Ceding
Company during the 1994, 1995
and 1996 calendar years in
accordance with Article III,
Paragraph 1
2000 $ 0 5 percent of the cumulative
Ceding Commission paid by the
Reinsurer to the Ceding
Company during the 1995 and
1996 calendar years in
accordance with Article III,
Paragraph 1
</TABLE>
3
<PAGE> 153
<TABLE>
<S> <C> <C>
2001 $ 0 5 percent of the cumulative
Ceding Commission paid by the
Reinsurer to the Ceding
Company during the 1996
calendar year in accordance
with Article III, Paragraph 1
2002 and $ 0 $0
thereafter
</TABLE>
However, if in any Accounting Period (a) the Termination Rate, as
described in Paragraph 5 below, is greater than 0.30, and/or (b) the Investment
Credit Accumulation Rate, as described in Paragraph 6 below, is less than zero,
then the Reinsurer may elect to define the Maximum Withheld Ceding Commission
Adjustment as any amount up to $14 million for the first Accounting Period in
the current calendar year and for all Accounting Periods thereafter.
7. Allowances for Commissions and Expenses. For Accounting Periods
beginning January 1, 1996 and thereafter, the Reinsurer will pay the Ceding
Company Allowances for Commissions and Expenses for each Accounting Period,
equal to (i) plus (ii) plus (iii) plus (iv) plus (v) plus (vi), where:
(i) equals (a) times (b) times (c) times (d), where:
(a) equals:
- for the Accounting Periods beginning January
1, 1996 through December 31, 1996 only, $8.4375; and
- for the Accounting Periods beginning January
1, 1997 and thereafter, ($8.4375 x 1.04 n), where n equals the number of
calendar years which have occurred since January 1, 1996;
(b) equals the quota share percentage of the
annuities reinsured hereunder, as described in Schedule A;
(c) equals the number of annuities reinsured
hereunder and described in Schedule A, and enforce at the end of the current
Accounting Period; and
4
<PAGE> 154
(d) equals the total account value invested in variable
accounts with respect to the annuities reinsured hereunder, divided by the total
account value invested in fixed and variable accounts with respect to the
annuities reinsured hereunder; and
(ii) equals .0125 percent times that portion of the account value
of the annuities reinsured hereunder which corresponds to the portion of the
annuities reinsured hereunder as of the end of the current Accounting Period;
(iii) equals the Trailer Commission, as defined below, times that
portion of the account value of the Venture Variable Annuity 3 annuities
reinsured hereunder which corresponds to the portion of the Venture Variable
Annuity 3 annuities reinsured hereunder and described in Schedule A, as of the
end of the current Accounting Period;
(iv) equals the Renewal Commission Rate, as defined below, times
that portion of the gross renewal premiums collected by the Ceding Company with
respect to the Venture Variable Annuity 3 annuities reinsured hereunder which
corresponds to the portion of the Venture Variable Annuity 3 annuities reinsured
hereunder and described in Schedule A;
(v) equals .25 percent times that portion of the account value,
attributable to purchase payments received by the Ceding Company thirteen (13)
months or more prior to their trailer commission payment dates, of the Venture
Vision annuities reinsured hereunder which corresponds to the portion of the
Venture Vision annuities reinsured hereunder and described in Schedule A, as of
the end of the current Accounting Period; and
(vi) equals the Renewal Commission Rate, as defined below, times
that portion of the gross renewal premiums received by the Ceding Company
5
<PAGE> 155
thirteen (13) months or more after the issue date of each Venture Vision annuity
reinsured hereunder which corresponds to the portion of the Venture Vision
annuities reinsured hereunder and described in Schedule A.
The Trailer Commission for Venture Variable Annuity 3 annuities for
each Accounting Period is defined below:
<TABLE>
<CAPTION>
For Accounting
Periods Ending During Trailer Commission
--------------------- ------------------
<S> <C>
1994 .04%
1995 .05%
1996 .055%
1997 and thereafter .0625%
</TABLE>
The Renewal Commission Rate for each Accounting Period is defined
below:
<TABLE>
<CAPTION>
Venture
For Accounting Variable Venture
Periods Ending During Annuity 3 Vision
--------------------- --------- -------
<S> <C> <C>
1994 5.33% 1.83%
1995 7.00% 3.50%
1996(1) 4.16% .66%
1997 and thereafter 7.00% 3.50%
</TABLE>
(1)Notwithstanding the above, in the event that the total
Reinsurance Premiums, determined in accordance with Article II, Paragraph 2,
reported with respect to calendar year 1996 exceeds $75,704,225, then during
1996 the Renewal Commission Rate, applied to any gross renewal premiums included
in the portion of the total Reinsurance Premiums which exceeds $75,704,225, is
defined below:
<TABLE>
<CAPTION>
Venture Variable
Annuity 3 Venture Vision
---------------- --------------
<S> <C>
7.00% 3.50%
</TABLE>
8. Allowances for Death Benefit Guarantee. For Accounting Periods
beginning January 1, 1996 and thereafter, the Reinsurer will pay the Ceding
Company Allowances for Death Benefit Guarantee for each Accounting Period, as
6
<PAGE> 156
an allowance for costs of the minimum death benefit guarantee on the annuities
reinsured hereunder, equal to the sum of:
(i) .06 percent times that portion of the account value
of the Venture Vision annuities reinsured hereunder which corresponds to the
portion of the Venture Vision annuities reinsured hereunder and described in
Schedule A, as of the end of the current Accounting Period, plus
(ii) .02 percent times that portion of the account value
of the Venture Variable Annuity 3 annuities reinsured hereunder which
corresponds to the portion of the Venture Variable Annuity 3 annuities reinsured
hereunder and described in Schedule A, as of the end of the current Accounting
Period.
II. Effective April 1, 1996, ARTICLE III, COMMISSIONS AND ALLOWANCES, Paragraph
9, is replaced in its entirety by the following:
9. Interest on the Unamortized Ceding Commission. The Ceding
Company will pay the Reinsurer Interest on the Unamortized Ceding Commission at
the end of each Accounting Period, subsequent to the initial Accounting Period,
equal to [(i) x (ii)] + [(iii) x (iv)] + [(v) x (vi)] + [(vii) x (viii)] + [(ix)
x (x)] + [(xi) x (xii)], where:
(i) equals the portion of the Unamortized Ceding
Commission, determined in accordance with Paragraph 2 above, paid by the
Reinsurer to the Ceding Company as Ceding Commission during the initial
Accounting Period in accordance with Paragraph 1 above, calculated as of the end
of the preceding Accounting Period;
(ii) equals the Interest Expense Rate, as described in
Article II, Paragraph 5;
7
<PAGE> 157
(iii) equals the portion of the Unamortized Ceding
Commission, determined in accordance with Paragraph 2 above, paid by the
Reinsurer to the Ceding Company as Ceding Commission, in accordance with
Paragraph 1 above, for the 1994 and 1995 calendar years, calculated as of the
end of the preceding Accounting Period;
(iv) equals the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2;
(v) equals, for the Accounting Periods beginning April
1, 1996 and thereafter, the portion of the Unamortized Ceding Commission,
determined in accordance with Paragraph 2 above, paid by the Reinsurer to the
Ceding Company as Ceding Commission, in accordance with Paragraph 1 above, for
the first Accounting Period in the 1996 calendar year; and
(vi) equals,
- for the Accounting Period beginning April 1,
1996, [(a) / (b)] x (c), where:
(a) equals the Loss Carryforward Rate, as
described in Article VIII, Paragraph 2;
(b) equals the number of days in the current
Accounting Period; and
(c) equals the number of days remaining in
the current Accounting Period measured from the quarterly settlement date, as
described in Article X, for the first Accounting Period in the 1996 calendar
year; and
- for the Accounting Periods beginning July 1,
1996 and thereafter, equals the Loss Carryforward Rate, as described in Article
VIII, Paragraph 2;
8
<PAGE> 158
(vii) equals, for the Accounting Periods beginning July 1,
1996 and thereafter, the portion of the Unamortized Ceding Commission,
determined in accordance with Paragraph 2 above, paid by the Reinsurer to the
Ceding Company as Ceding Commission, in accordance with Paragraph 1 above, for
the second Accounting Period in the 1996 calendar year; and
(viii) equals,
- for the Accounting Period beginning July 1,
1996, [(a) / (b)] x (c), where:
(a) equals the Loss Carryforward Rate,
as described in Article VIII, Paragraph 2;
(b) equals the number of days in the
current Accounting Period; and
(c) equals the number of days remaining
in the current Accounting Period measured from the quarterly settlement date, as
described in Article X, for the second Accounting Period in the 1996 calendar
year; and
- for the Accounting Periods beginning October
1, 1996 and thereafter, equals the Loss Carryforward Rate, as described in
Article VIII, Paragraph 2;
(ix) equals, for the Accounting Periods beginning October
1, 1996 and thereafter, the portion of the Unamortized Ceding Commission,
determined in accordance with Paragraph 2 above, paid by the Reinsurer to the
Ceding Company as Ceding Commission, in accordance with Paragraph 1 above, for
the third Accounting Period in the 1996 calendar year;
(x) equals,
- for the Accounting Period beginning October
1, 1996, [(a) / (b)] x (c), where:
(a) equals the Loss Carryforward Rate,
as described in Article VIII, Paragraph 2;
9
<PAGE> 159
(b) equals the number of days in the
current Accounting Period; and
(c) equals the number of days remaining
in the current Accounting Period measured from the quarterly settlement date, as
described in Article X, for the third Accounting Period in the 1996 calendar
year; and
- for the Accounting Periods beginning January
1, 1997 and thereafter, the Loss Carryforward Rate, as described in Article
VIII, Paragraph 2;
(xi) equals, for the Accounting Periods beginning January
1, 1997 and thereafter, the portion of the Unamortized Ceding Commission,
determined in accordance with Paragraph 2 above, paid by the Reinsurer to the
Ceding Company as Ceding Commission, in accordance with Paragraph 1 above, for
the fourth Accounting Period in the 1996 calendar year; and
(xii) equals,
- for the Accounting Period beginning January
1, 1997, [(a) / (b)] x (c), where:
(a) equals the Loss Carryforward Rate,
as described in Article VIII, Paragraph 2;
(b) equals the number of days in the
current Accounting Period; and
(c) equals the number of days remaining
in the current Accounting Period measured from the quarterly settlement date, as
described in Article X, for the fourth Accounting Period in the 1996 calendar
year; and
- for the Accounting Periods beginning April
1, 1997 and thereafter, the Loss Carryforward Rate, as described in Article
VIII, Paragraph 2.
III. ARTICLE VI, EXPENSE AND RISK CHARGES, Paragraph 2, is replaced in its
entirety by the following:
10
<PAGE> 160
2. Expense and Risk Charge. The Expense and Risk Charge for each
Accounting Period subsequent to the initial Accounting Period, payable to the
Reinsurer by the Ceding Company, will be equal to (i) plus (ii) plus (iii),
where:
(i) equals the Expense and Risk Charge Rate,
as defined below, times the Loss Carryforward, determined in accordance with
Article VIII, Paragraph 1, item (i), at the end of the preceding Accounting
Period, with accrued interest thereon;
(ii) equals the Expense and Risk Charge Rate,
as defined below, times the Expense and Risk Charge Base, as defined below; and
(iii) for the Accounting Period ending December
31, 1994 only, equals 1.0 percent times 3.2 percent of the Supplemental
Consideration, determined in accordance with Article II, Paragraph 1, but not to
exceed 1.65 percent times $5.2 million.
The Expense and Risk Charge Rate for each Accounting Period is
defined as follows:
<TABLE>
<CAPTION>
For Accounting Expense and
Periods Ending During Risk Charge Rate
--------------------- ----------------
<S> <C>
1994 through 2001 .4125%
2002 and thereafter .4142%
</TABLE>
The Expense and Risk Charge Base for each Accounting Period is
defined as follows:
For Accounting
Periods Ending During Expense and Risk Charge Base
--------------------- ----------------------------
1994 through 2001 greater of either (a) the Unamortized
Ceding Commission, determined in accordance with Article III, Paragraph 2, at
the end of the preceding Accounting Period, plus the Ceding Commission Rate, as
described in Article III, Paragraph 1, times the Reinsurance Premiums,
determined in accordance with Article II, Paragraph 2, but not to exceed $1
million for the 1995 calendar year and not to exceed $2.15 million for the 1996
calendar year, minus the Maximum Unamortized Ceding Commission Adjustment,
determined in accordance with Article III, Paragraph 4, or (b) quantity (iv) as
defined below, but never less than zero
2002 and thereafter (iv) below, but never less than zero,
where:
(iv) equals (a) plus (b) plus (c) minus (d) plus (e) plus
(f), where:
11
<PAGE> 161
(a) equals the Unamortized Ceding Commission,
determined in accordance with Article III, Paragraph 2, at the end of the
preceding Accounting Period;
(b) equals the Ceding Commission Rate, as
described in Article III, Paragraph 1, times the Reinsurance Premiums,
determined in accordance with Article II, Paragraph 2, but not to exceed $1
million for the 1995 calendar year and not to exceed $2.15 million for the 1996
calendar year;
(c) equals the absolute value of any Reinsurance
Loss, determined in accordance with Article VII;
(d) equals any Reinsurance Gain, determined in
accordance with Article VII;
(e) equals the Interest Expense Charge,
determined in accordance with Article II, Paragraph 4; and
(f) equals the Interest on the Unamortized
Ceding Commission, determined in accordance with Article III, Paragraph 9.
In no event will the Expense and Risk Charge payable be less
than $20,000 for any Accounting Period after December 31, 2001.
IV. SCHEDULE A, ANNUITIES AND RISKS REINSURED, is replaced in its entirety
by the following:
Annuities and Risks Reinsured. Beginning on the Effective Date
of this Agreement, the Reinsurer reinsures a quota share of the Ceding Company's
net liability with respect to a portion of the account values invested in
variable accounts under those variable annuities issued by the Ceding Company
and described below:
12
<PAGE> 162
<TABLE>
<CAPTION>
Quota Contract and
Plan Issue Years Share Certificate Numbers
---- ----------- ----- -------------------
<S> <C> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 64% 203-VA
Venture Vision 1993 - 1996 95% VEN 10
Venture Vision 1994 - 1996 95% VISION.001
</TABLE>
Beginning on December 31, 1994, under this Agreement the
Reinsurer also reinsures an additional 31 percent quota share of the Ceding
Company's net liability with respect to a portion of the account values invested
in variable accounts under those variable annuities issued by the Ceding Company
and described below:
<TABLE>
<CAPTION>
Contract and
Plan Issue Years Certificate Numbers
---- ----------- -------------------
<S> <C> <C>
Venture Variable
Annuity 3 1987 - 1993 203-VA
</TABLE>
"Net liability," as used in this Agreement, means the Ceding
Company's liability on annuities reinsured hereunder, net of other reinsurance.
V. SCHEDULE B, QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS, is replaced
in its entirety by Exhibit A.
VI. The following information is added to SCHEDULE D, CEDING COMPANY DATA:
- Quarterly accounting settlement reports for this Agreement received
by the Reinsurer since inception
- December 31, 1995 prospectuses for Venture 3, Vision 5 and Vision 25
- Facsimile from Larry Seller of the Ceding Company dated July 25, 1996
which included the reinsurance cost calculation and the update Venture Vision
pricing assumptions
13
<PAGE> 163
VII. SCHEDULE E, RATES, Paragraph 2, is replaced in its entirety by the
following:
2. Ceding Commission Rate. The Ceding Commission Rate for each
Accounting Period, subsequent to the initial Accounting Period, is defined as
follows:
<TABLE>
<CAPTION>
For Accounting Ceding
Periods Ending During Commission Rate
--------------------- ---------------
<S> <C>
1994 and 1995 1.67%
1996 2.84%
1997 and thereafter 0%
</TABLE>
14
<PAGE> 164
In witness of the above, this Amendment Six is executed in duplicate on the
dates indicated below with an Effective Date of January 1, 1996.
NORTH AMERICAN SECURITY LIFE
INSURANCE COMPANY ("Ceding Company")
By:_____________________________
Title:_____________________________
Date:_____________________________
RGA REINSURANCE COMPANY
("Reinsurer")
By:_____________________________
Title:_____________________________
Date:_____________________________
15
<PAGE> 165
EXHIBIT A
SCHEDULE B
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
Accounting Period:______________
Calendar Year:__________________
Date Report Completed:__________
1. Initial Consideration (Article II, Paragraph 1)*
a. Initial Consideration ________
b. Amount of Initial Consideration withheld by
Ceding Company ________
Portion of Initial Consideration paid in cash
= a - b ________
2. Supplemental Consideration (Article II, Paragraph 1) ________
3. Reinsurance Premiums (Article II, Paragraph 2)
a. Reinsurance Premiums
A. Venture Variable Annuity 3 Reinsurance
gross premiums ________
B. Venture Vision Reinsurance Premiums -
first policy year gross premiums ________
C. Venture Vision Reinsurance Premiums -
renewal gross premiums ________
D. Statutory reserves transferred from fixed
accounts to variable accounts [item (ii)] ________
Total Reinsurance Premiums = A + B + C + D ________
b. Amount of Reinsurance Premiums withheld by
Ceding Company ________
Portion of Reinsurance Premiums paid in cash = a - b ________
4. Benefit Payments (Article IV)
a. Death Benefits ________
b. Cash Surrender Values ________
c. Annuity Benefits ________
Benefit Payments = a + b + c ________
5. Initial Reserve Adjustment (Article V, Paragraph 1)* ________
6. Modified Coinsurance Reserve Adjustment (Article V, Paragraph 2)
a. Modified Coinsurance Reserve end of
preceding Accounting Period ________
b. Modified Coinsurance Reserve end of
current Accounting Period ________
c. Equals b - a ________
d. Modified Coinsurance Reserve Investment
Credit (Schedule C) ________
Modified Coinsurance Reserve Adjustment = c - d ________
<PAGE> 166
EXHIBIT A CONTINUED
7. Reinsurance Gain = 2 + 3a - 4 - 6 - 15 - 16
(If negative, see Article VII) ________
8. Reinsurance Loss = 2 + 3a - 4 - 6 - 15 - 16
(If positive, see Article VII) ________
9. Loss Carryforward [Article VIII, Paragraph 1, item (i)] ________
10. Initial Expense and Risk Charge (Article VI, Paragraph 1)* ________
11. Expense and Risk Charge (Article VI, Paragraph 2) ________
12. Ceding Commission (Article III, Paragraph 1) ________
13. Unamortized Ceding Commission (Article III, Paragraph 2) ________
14. Unamortized Ceding Commission Adjustment
(Article III, Paragraph 3) ________
15. Allowances for Commissions and Expenses
(Article III, Paragraph 7) ________
16. Allowances for Death Benefit Guarantee
(Article III, Paragraph 8) ________
17. Experience Refund = 7 + 8 - 9 - 11 - 14 - 20 - 21
(If negative, see Article IX) ________
18. Funds Withheld payment [Article II, Paragraph 3, item (ii)] ________
19. Funds Withheld = Prior 19 + 1b + 2b - 18
(Article II, Paragraph 3) ________
20. Interest Expense Charge (Article II, Paragraph 4) ________
21. Interest on the Unamortized Ceding Commission
(Article III, Paragraph 9) ________
22. Cash Settlement =
1 + 2 + 3 - 4 - 5 - 6 + 10 - 12 - 15 - 16 - 17 + 18 ________
*Initial Accounting Period, only.
Terminal Accounting and Settlement (Partial recapture)
(Article XII, Paragraph 3)
A. Modified Coinsurance Reserve (Article V, Paragraph 3) ________
B. Terminal Reserve Adjustment (Article V, Paragraph 3) ________
<PAGE> 167
EXHIBIT A CONTINUED
C. Terminal Ceding Commission (Article III, Paragraph 2)
a. Account value at end of preceding Accounting
Period with respect to portion of annuities reinsured
hereunder transferred from variable accounts to fixed
accounts ________
b. Account value at end of preceding Accounting
Period with respect to portion of annuities
reinsured hereunder ________
c. Unamortized Ceding Commission at end of
preceding Accounting Period ________
Terminal Ceding Commission = (a / b) x c ________
D. Portion of Loss Carryforward with respect to portion
of annuities reinsured hereunder transferred from
variable accounts to fixed accounts (Article VIII) ________
Cash Settlement = A - B + C + D ________
Supplemental Information
<TABLE>
<CAPTION>
Venture
Total Variable Venture
Number Annuity 3 Vision Total
of Account Account Account Loss
Annuities Value Value Value Carryforward
<S> <C> <C> <C> <C> <C>
Beginning of Period _________ _________ _______ ______ ____________
+ Additions _________ _________ _______ ______ ____________
- - Terminations _________ _________ _______ ______ ____________
End of Period _________ _________ _______ ______ ____________
</TABLE>
<TABLE>
<CAPTION>
Venture Venture Account Account
Variable Vision Value Value
Annuity 3 Number Invested Invested
Number of of in Fixed in Variable
Annuities Annuities Accounts Accounts
<S> <C> <C> <C> <C>
Beginning of Period _________ _________ _______ ______
+ Additions _________ _________ _______ ______
- - Terminations _________ _________ _______ ______
End of Period _________ _________ _______ ______
</TABLE>
Termination Rate (Article III, Paragraph 5)
a. Total number of annuities reinsured hereunder as of
date current Accounting Period ends ________
b. Total number of annuities reinsured hereunder as of
the date one year prior to the date the current
Accounting Period ends ________
<PAGE> 168
c. Termination Rate 1 - (a / b) ________
<PAGE> 169
EXHIBIT A CONTINUED
Investment Credit Accumulation Rate (Article III, Paragraph 6)
a. Modified Coinsurance Reserve Investment Credit
Current Accounting Period ________
First most recent Accounting Period ________
Second most recent Accounting Period ________
Third most recent Accounting Period ________ _______
b. Account value as of date one year prior to date
current Accounting Period ends _______
c. Account value as of date current Accounting Period ends _______
d. Investment Credit Accumulation Rate
a / [.5 x (b + c)] _______
Allowances for Commissions and Expenses (Article III, Paragraph 7)
a. $8.4375 (x 1.04 n) x quota share reinsured hereunder x
number of annuities reinsured hereunder and inforce
at end of current Accounting Period _______
b. Total account value invested in variable accounts on
annuities reinsured hereunder / total account value
invested in fixed and variable accounts on annuities
reinsured hereunder _______
c. .0125% x portion of account value of annuities reinsured
hereunder at end of current Accounting Period _______
d. Trailer Commission x portion of account value of Venture
Variable Annuity 3 annuities reinsured hereunder and inforce
at end of current Accounting Period _______
e. Renewal Commission Rate x portion of gross renewal premiums
with respect to Venture Variable Annuity 3 annuities
reinsured hereunder _______
f. .25% x portion of account value, attributable to purchase
payments received by Ceding Company thirteen months or more
prior to their trailer commission dates, of Venture Vision
annuities reinsured hereunder and inforce at end of current
Accounting Period _______
g. Renewal Commission Rate x portion of gross renewal premiums
with respect to Venture Vision annuities reinsured hereunder
received 13 months after issue date _______
h. Allowances for Commissions and Expenses =
[a x b] + c + d + e + f + g _______
<PAGE> 170
AMENDMENT SEVEN
ATTACHED TO AND MADE A PART OF THE
REINSURANCE AGREEMENT NUMBER 1293-104
BETWEEN
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
(FORMERLY KNOWN AS NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY)
"CEDING COMPANY"
AND
RGA REINSURANCE COMPANY
"REINSURER"
<PAGE> 171
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. Effective October 1, 1997, ARTICLE III, COMMISSIONS AND ALLOWANCES,
Paragraph 9, is replaced in its entirety by the following:
9. Interest on the Unamortized Ceding Commission. The Ceding
Company will pay the Reinsurer Interest on the Unamortized Ceding Commission
at the end of each Accounting Period, subsequent to the initial Accounting
Period, equal to [(i) x (ii)] + [{[(iii) + (iv)] / 90} x (v)], where:
(i) equals the portion of the Unamortized Ceding
Commission, determined in accordance with Paragraph 2 above, paid by the
Reinsurer to the Ceding Company as Ceding Commission during the initial
Accounting Period in accordance with Paragraph 1 above, calculated as of the end
of the preceding Accounting Period;
(ii) equals the Interest Expense Rate, as
described in Article II, Paragraph 5;
(iii) equals the portion of the Unamortized Ceding
Commission, determined in accordance with Paragraph 2 above, paid by the
Reinsurer to the Ceding Company as Ceding Commission, in accordance with
Paragraph 1 above, for the calendar years beginning 1994 and thereafter,
calculated as of the beginning of the preceding Accounting Period times the
number of days from the beginning of the current Accounting Period until the
quarterly settlement date, as described Article X, for the preceding Accounting
Period;
(iv) equals the portion of the Unamortized
Ceding Commission, determined in accordance with Paragraph 2 above, paid by
the Reinsurer to
1
<PAGE> 172
the Ceding Company as Ceding Commission, in accordance with Paragraph 1 above,
for the calendar years beginning 1994 and thereafter, calculated as of the end
of the preceding Accounting Period times the number of days remaining in the
current Accounting Period measured from the quarterly settlement date, as
described Article X, for the preceding Accounting Period; and
(v) equals the Loss Carryforward Rate, as
described in Article VIII, Paragraph 2.
II. ARTICLE VIII, LOSS CARRYFORWARD, Paragraph 2, is replaced in its
entirety by the following:
2. Loss Carryforward Rate. The Loss Carryforward Rate for each
Accounting Period will be equal to 51.25 basis points plus the quantity [(i) /
(ii)], where:
(i) equals the three month London Interbank
Offered Rates (LIBOR) as published by The Wall Street Journal as of the
quarterly settlement date, as described in Article X, for the preceding
Accounting Period; and
(ii) equals four.
2
<PAGE> 173
In witness of the above, this Amendment Seven is executed in duplicate on the
dates indicated below with an Effective Date of October 1, 1997.
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA ("Ceding Company")
By:___________________________
Title:___________________________
Date:___________________________
RGA REINSURANCE COMPANY
("Reinsurer")
By:___________________________
Title:___________________________
Date:___________________________
3
<PAGE> 1
Exhibit (b)(7)(v)
REINSURANCE AGREEMENT
BETWEEN
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
BOSTON, MASSACHUSETTS
REFERRED TO AS THE "CEDING COMPANY"
AND
MERRILL LYNCH LIFE INSURANCE COMPANY
LITTLE ROCK, ARKANSAS
REFERRED TO AS THE "REINSURER"
<PAGE> 2
TABLE OF CONTENTS
REINSURANCE AGREEMENT 1
ARTICLE I GENERAL PROVISIONS 2
ARTICLE II REINSURANCE PREMIUMS 5
ARTICLE III COMMISSIONS AND EXPENSES 6
ARTICLE IV BENEFIT PAYMENTS 8
ARTICLE V RESERVE ADJUSTMENTS 10
ARTICLE VI ADJUSTMENT FOR TRANSFERS INVOLVING THE FIXED 11
ACCOUNT
ARTICLE VII ACCOUNTING AND SETTLEMENTS 12
ARTICLE VIII DURATION AND RECAPTURE 14
ARTICLE IX TERMINAL ACCOUNTING AND SETTLEMENT 16
ARTICLE X REPRESENTATIONS 17
ARTICLE XI ARBITRATION 18
ARTICLE XII INSOLVENCY 19
ARTICLE XIII NOTICES 20
ARTICLE XIV EXECUTION AND EFFECTIVE DATE 21
SCHEDULE A ANNUITIES AND RISKS REINSURED 22
SCHEDULE B QUARTERLY REPORT ACTIVITY AND SETTLEMENTS 23
SCHEDULE C MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT 24
SCHEDULE D COMMISSION SCHEDULES 25
SCHEDULE E EXCHANGE FACTORS 26
SCHEDULE F ASSET FACTOR 27
SCHEDULE G ATTACHMENTS 28
<PAGE> 3
REINSURANCE AGREEMENT
This Agreement is made and entered into by and between North American Security
Life Insurance Company (hereinafter referred to as the "Ceding Company") and
Merrill Lynch Life Insurance Company (hereinafter to as the "Reinsurer").
The Ceding Company and the Reinsurer mutually agree to reinsure on the terms and
conditions stated herein. This Agreement is an indemnity reinsurance agreement
solely between the Ceding Company and the Reinsurer, and performance of the
obligations of each party under this Agreement will be rendered solely to the
other party. In no instance will anyone other than the Ceding Company or the
Reinsurer have any rights under this Agreement, and the Ceding Company will be
and remains the only party hereunder that is liable to any insured, policyowner
or beneficiary or any other person or entity under any annuity reinsured
hereunder.
In the event of a recharacterization of the transactions contemplated by this
Agreement by the Internal Revenue Service pursuant to Section 845 of the
Internal Revenue Code of 1986, as amended, which recharacterization increases
the taxable income of one of the parties hereto, the parties agree that they
will cooperate with one another to effect any required amendments so that the
parties are, to the extent possible, returned to what their positions would have
been absent such recharacterization. The party whose taxable income was not
increased by such recharacterization shall not, however, be required by the
foregoing to take any action which would cost it more than the amount of any tax
benefits generated for it by virtue of such transactions.
1
<PAGE> 4
ARTICLE I
GENERAL PROVISIONS
1. Annuities and Risks Reinsured. The Reinsurer agrees to indemnify the
Ceding Company for, and the Ceding Company agrees to reinsure with the
Reinsurer, according to the terms and conditions hereof, the portion of
the risks under the annuities described in Schedule A attached hereto,
hereinafter, the "Reinsured Annuities."
2. Coverages and Exclusions. Only the variable annuities described in
Schedule A are reinsured under this Agreement.
3. Plan of Reinsurance. This indemnity reinsurance will be on a
modified-coinsurance basis. The Ceding Company will retain, control and
own all assets held in relation to the Modified Coinsurance Reserve.
4. Expenses. The Reinsurer will bear no part of the expenses incurred in
connection with the annuities reinsured hereunder, except as otherwise
provided herein.
5. Annuity Changes. The Ceding Company must provide written notification to
the Reinsurer of any change which affects the original terms or conditions
of any annuity reinsured hereunder not later than (30) days before the
change takes effect. The Reinsurer will provide written notification to
the Ceding Company as to the Reinsurer's acceptance or rejection of the
change within thirty (30) days after receipt of notice of the change. If
the Reinsurer accepts any such change, the Reinsurer will (a) assume that
portion of any increase in the Ceding Company's liability, resulting from
the change, which corresponds to the portion of the annuities reinsured
hereunder, and (b) receive credit for that portion of any decrease in the
Ceding Company's liability, resulting from the change, which corresponds
to the portion of the annuities reinsured hereunder. If the Reinsurer
rejects any such change, the Reinsurer's liability under this Agreement
will be determined as if no such change had occurred.
6. No Extracontractual Damages. The Reinsurer does not indemnify the Ceding
Company for, and will not be liable for, any extracontractual damages or
extracontractual liability of any kind whatsoever resulting from fraud,
oppression, bad faith, strict liability, or negligent, reckless or
intentional wrongs on the part of the Ceding Company or its directors,
officers, employees and agents. The following types of damages are
examples of damages that would be excluded under this Agreement for the
conduct described above: actual damages, damages for emotional distress,
and punitive or exemplary damages.
7. Annuity Administration. The Ceding Company will administer the annuities
reinsured hereunder and will perform all accounting for such annuities;
provided, however, that the Reinsurer reserves the right to participate in
claims administration.
8. Inspection. At any reasonable time, the Reinsurer or its representatives
may inspect, during normal business hours, at the principal office of the
Ceding Company, the original papers and any and all other books or
documents relating to or affecting reinsurance under this
2
<PAGE> 5
Agreement. Copies of the records shall be forwarded upon reasonable
request. The information provided pursuant to this Agreement shall be
limited to that which is necessary for the Reinsurer to perform its
obligations hereunder.
9. Taxes. The allowance for any premium taxes paid in connection with the
annuities reinsured hereunder is included in the Commissions and Expenses,
described in Article III. the Reinsurer will not reimburse the Ceding
Company for any other taxes, administrative assessments or fees based on
premiums, paid by the Ceding Company in connection with the annuities
reinsured hereunder.
10. Proxy Tax Reimbursement. Pursuant to IRC Section 848, insurance companies
are required to capitalize and amortize specified policy acquisition
expenses. The amount capitalized is determined by proxy based on a
percentage of "reinsurance premiums" as defined in the IRS regulations
relating to IRC Section 848. The Reinsurer and the Ceding Company agree
that the costs which result from IRC Section 848, as it exists on the date
of execution of this Agreement, have been priced by the parties so as to
be borne solely by the Ceding Company and are not otherwise subject to
reimbursement hereunder. In the event that the IRC Section 848 is
hereafter amended, the parties shall use best reasonable efforts to amend
the Allowance for Expenses under Article III to reflect such amendment to
said IRC Section 848.
11. Election to Determine Specified Policy Acquisition Expenses. The Ceding
Company and the Reinsurer agree that the party with net positive
consideration under this Agreement will capitalize specified policy
acquisition expenses with respect to annuities reinsured under this
Agreement without regard to the general deductions limitation of Section
848(c)(1) of the Internal Revenue Code of 1986, as amended. The Ceding
Company and the Reinsurer will exchange information pertaining to the
amount of net consideration under this Agreement each year to ensure
consistency. The Ceding Company will submit a schedule to the Reinsurer by
May 1 of each year presenting its calculation of the net consideration for
the preceding taxable year. The Reinsurer may contest the calculation in
writing within thirty (30) days of receipt of the Ceding Company's
schedule. Any differences will be resolved between the parties so that
consistent amounts are reported on the respective tax returns for the
preceding taxable year. This election to capitalize specified policy
acquisition expenses without regard to the general deductions limitation
is effective for all taxable years during which this Agreement remains in
effect.
12. Condition. The reinsurance hereunder is subject to the same limitations
and conditions as the annuities issued by the Ceding Company which are
reinsured hereunder, except as otherwise provided in this Agreement.
13. Misunderstandings and Oversights. If any failure to pay amounts due or to
perform any other act required by this Agreement is unintentional and
caused by misunderstanding or oversight, the Ceding Company and the
Reinsurer will use reasonable best efforts to adjust the situation to what
it would have been had the misunderstanding or oversight not occurred.
3
<PAGE> 6
14. Adjustment. If the Ceding Company's liability under any of the annuities
reinsured hereunder is changed because of misstatement of age or sex , the
Reinsurer will (a) assume a quota share of any increase in the Ceding
Company's liability, resulting from the change, and (b) receive credit for
a quota share of any decrease in the Ceding Company's liability, resulting
from the change.
15. Reinstatements. If an annuity reinsured hereunder is surrendered, reduced,
lapsed or annuitized, and is subsequently reinstated while this Agreement
is in force, the reinsurance for such annuity will be reinstated
automatically. The Ceding Company will pay the Reinsurer the Reinsurer's
proportionate share of all amounts received by the Ceding Company in
connection with the reinstatement of the annuity, plus any amounts
previously paid to the Ceding Company by the Reinsurer in connection with
the surrender, reduction, lapse or annuitization of the annuity.
16. Assignment. The Ceding Company may not assign any of its rights, duties or
obligations under this Agreement without prior written consent of the
Reinsurer. The Reinsurer may not assign any of its rights, duties, or
obligations under this Agreement without prior written consent of the
Ceding Company.
17. Amendments and Waiver. Any change or modification to this Agreement will
be null and void unless made by amendment to the Agreement and signed by
both parties. Any waiver will constitute a waiver only in the
circumstances for which it was expressly given in writing and will not be
a waiver of any future circumstances.
18. Entire Agreement. The terms expressed herein constitute the entire
agreement between the parties with respect to the annuities reinsured
hereunder. There are no understandings between the parties with respect to
the annuities reinsured hereunder other than as expressed in this
Agreement.
19. Current Practices. The Ceding Company will not materially change, alter or
otherwise compromise its underwriting, claims paying or administrative
practices with respect to the annuities reinsured hereunder without prior
written consent of the Reinsurer.
20. Non-qualified Policies. Non-qualified policies shall mean those annuity
policies reinsured under this Agreement which are not classified as a
pension plan contract under Internal Revenue Code Section 818(a).
21. Fixed Account. Part of the General Account of the Ceding Company to which
an annuity policyholder may allocate all or a portion of a premium payment
or contract value.
22. Account Value. On any given day, the value of all units of interest in the
Separate Account held under an annuity contract.
23. LIBOR. Shall mean the three-month London Interbank Offered Rate as
published in the WALL STREET JOURNAL or such other rate as agreed to by
the parties hereof in writing.
4
<PAGE> 7
ARTICLE II
REINSURANCE PREMIUMS
1. Reinsurance Premiums. The Ceding Company will pay the Reinsurer
Reinsurance Premiums on all annuities reinsured under this Agreement in an
amount equal to a quota share, as defined in Schedule A, of the gross
premiums collected and deposited into the Separate Account during the
Accounting Period by the Ceding Company. The Reinsurance Premiums paid to
the Reinsurer by the Ceding Company will be remitted to the Reinsurer at
the end of the Accounting period during which the gross premiums were
collected and deposited by the Ceding Company. For purposes of this
paragraph 1, "Separate Account" shall mean the accounts entitled NASL
Variable Account and NASL Group Variable Account established by the Ceding
Company to fund variable benefits for certain classes of annuity
contracts, including the annuities reinsured under this Agreement.
5
<PAGE> 8
ARTICLE III
COMMISSIONS AND EXPENSES
1. Commissions. The Reinsurer shall reimburse the Ceding Company for all
commissions, wholesaler overrides and costs of special promotions incurred
on the Reinsurance Premiums which corresponds to the portion of the
annuities reinsured hereunder as of the end of the current Accounting
Period. Any commissions or wholesaler overrides paid by the Reinsurer to
the Ceding Company on policies returned during the right to cancel period
shall be returned to the Reinsurer. Commissions will be net of a quota
share of commission chargebacks on policies reinsured hereunder. Schedule
D shows the current commission and wholesaler override schedules for the
annuities reinsured hereunder.
2. Premium Tax. The Reinsurer shall reimburse the Ceding Company for all Net
premium taxes incurred on the Reinsurance Premiums. "Net" for these
purposes will be adjusted for any premium tax credits, collections of
premium tax from policyholders and other such items, all as agreed to by
the parties on a Schedule of premium Tax Conventions attached hereto, and
as may be amended from time to time.
3. Allowance for Expenses. The Reinsurer will pay the Ceding Company an
Allowance for Expenses for each Accounting Period equal to (i) plus (ii)
plus (iii) plus (iv) plus (v), where:
(i) Is for policy maintenance, and equals (a) times (b), where:
(a) equals $16.43 times the quota share percentage of the Venture
annuities reinsured hereunder, as described in Schedule A; and
(b) equals the number of Venture annuities reinsured hereunder and
described in Schedule A, that are in force at the end of the
current Accounting Period;
(ii) Is for policy issuance, and equals (a) times (b) plus (c) times (d) ,
where:
(a) equals $126.55 times the quota share percentage of the Venture
annuities reinsured hereunder, as described in Schedule A; and
(b) equals the number of Venture annuities reinsured hereunder and
described in Schedule A, that were issued during the current
Accounting Period;
(c) equals 0.00005 ; and
(d) equals the quota share percentage of the gross premiums collected
during the Accounting Period on the annuities reinsured
hereunder.
(iii) Is for DAC proxy tax, and equals (a) times (b), where
(a) equals 0.0036; and
6
<PAGE> 9
(b) equals that amount of the Reinsurance Premiums received on
non-qualified policies;
(iv) Is for other costs and risks allowance and equals (c) times the
sum of (a) and (b), where:
(a) equals .0002625 plus;
(b) Asset Factor as determined in Schedule F divided by four; and
(c) equals the quota share of the Account Values at the end of the
Accounting Period on the annuities reinsured hereunder.
(v) Is a Development Allowance equal to (a) minus (b), times (c) where:
(a) equals the quota share of the account value at the end of the
Accounting Period of the annuities reinsured hereunder.
(b) equals the quota share of the account value at the beginning of
the Accounting Period of the annuities reinsured hereunder.
(c) 0.50%.
Amounts in (i)(a) and (ii)(a) above are for 1997. Such amounts will be
adjusted annually on January 1, for each succeeding year for inflation
at the change in the Consumer Price Index (CPU-U) for the prior year
as determined by Department of Labor and published in the Wall Street
Journal).
4. Minimum Death Benefit Guarantee Costs. The Reinsurer will pay the
Ceding Company an allowance for each Accounting Period for the costs
of the minimum death benefit guarantee. The allowance equals (a) times
(b), where:
(a) equals 0.00045; and
(b) equals the quota share of the Account Values at the end of
the Accounting Period on the annuities reinsured hereunder.
7
<PAGE> 10
ARTICLE IV
BENEFIT PAYMENTS
1. Benefit Payments. Benefit Payments, as referred to in this Agreement,
means the Reinsurer's quota share of (i) Claims, as described in
Paragraph 2 below, (ii) Cash Surrenders, as described in Paragraph 3
below, (iii) Partial Withdrawals, as described in Paragraph 4 below,
and (iv) Annuity Benefits, as described in Paragraph 5 below.
2. Claims. The Reinsurer will pay claims to the Ceding Company . The term
"Claims," as used in this Agreement, means that portion of the death
benefits paid by the Ceding Company on annuities reinsured hereunder
which is equal to the Reinsurer's quota share of the cash surrender
value as of the date the death benefit is payable.
3. Cash Surrenders. The Reinsurer will pay the Ceding Company that
portion of the Cash Surrenders paid by the Ceding Company on annuities
reinsured hereunder which corresponds to the portion of the annuities
reinsured hereunder.
4. Partial Withdrawals. The Reinsurer will pay the Ceding Company that
portion of Partial Withdrawals paid by the Ceding Company on annuities
reinsured hereunder which corresponds to the portion of the annuities
reinsured hereunder.
5. Annuity Benefits. The Reinsurer will pay the Ceding Company that
portion of the Annuity Benefits paid by the Ceding Company on
annuities reinsured hereunder which corresponds to the portion of the
annuities reinsured hereunder. The Reinsurer's obligation will be
satisfied in full by the payment to the Ceding Company of that portion
of the Account Value, as of the date of annuitization, which
corresponds to the portion of the annuities reinsured hereunder.
6. Adjustment for Annuity Benefits. For any Accounting Period in which
the calculation of (i) divided by (ii) is greater than 0.0025, the
Ceding Company will pay the Reinsurer an amount equal to (iii) times
(iv) where:
(i) equals the Account Value of annuities reinsured hereunder that
annuitized during the current Accounting Period.
(ii) the average Account Value of annuities reinsured hereunder
during the current Accounting Period. For the purposes of
this calculation, the average Account Value of annuities
reinsured hereunder is calculated as one-half the sum of the
Account Values of annuities reinsured hereunder as of the
beginning of the current Accounting Period and the Account
Value of annuities reinsured hereunder as of the end of the
current Accounting Period.
(iii) equals a quota share of the Account Value at the time of
annuitization, grouped by policy duration and age of issue
at the time of annuitization: for the annuities reinsured
that annuitized during the current Accounting Period;
8
<PAGE> 11
(iv) equals the applicable Exchange Factor defined in Schedule E.
7. Notice. The Ceding Company will notify the Reinsurer at the end of
each Accounting Period regarding Benefit Payments on annuities
reinsured hereunder. The reinsurance claim and copies of notification,
claim papers, and proofs will be furnished to the Reinsurer upon
request.
8. Liability and Payment. The Reinsurer will accept the decision of the
Ceding Company with respect to Benefit Payments on annuities reinsured
hereunder. The Reinsurer will pay its proportionate share of Benefit
Payments in a lump sum to the Ceding Company without regard to the
form of settlement by the Ceding Company.
9. Contested Claims. The Ceding Company will advise the Reinsurer of its
intention to contest, compromise or litigate Benefit Payments
involving annuities reinsured hereunder. The Reinsurer will pay its
share of the expenses of such contests, in addition to its share of
Benefit Payments, or it may choose not to participate. If the
Reinsurer chooses not to participate, it will discharge its liability
by payment to the Ceding Company of the full amount of its liability,
prior to any contests, on the annuities reinsured hereunder.
Thereafter, the Reinsurer shall not be liable for any part of any
expense or damages, compensatory, extra-contractual or otherwise,
thereafter assessed against the Ceding Company in respect of such
claim.
9
<PAGE> 12
ARTICLE V
RESERVE ADJUSTMENTS
1. Modified Coinsurance Reserve Adjustment.
A. The Modified Coinsurance Reserve Adjustment will be computed
each Accounting Period equal to (i) minus (ii) minus (iii), where:
(i) equals the Modified Coinsurance Reserve, determined in accordance
with Paragraph 2 below, at the end of the current Accounting
Period;
(ii) equals the Modified Coinsurance Reserve, determined in accordance
with Paragraph 2 below, at the end of the preceding Accounting
Period; (iii) equals the Modified Coinsurance Reserve Investment
Credit, as described in Schedule C.
B. For any Accounting Period in which the amount computed in A. above is
positive, the Reinsurer will pay the Ceding Company such amount. For
any Accounting Period in which the amount computed in A. above is
negative, the Ceding Company will pay the Reinsurer the absolute value
of such amount.
2. Modified Coinsurance Reserve. The term "Modified Coinsurance Reserve," as
used in this Agreement, means a quota share of the statutory reserve held
by the Ceding Company with respect to that portion of the annuities
reinsured hereunder. The statutory reserve will be determined by the then
applicable Commissioners Annuity Reserve Valuation Method, excluding any
reserve for the minimum guaranteed death benefit.
10
<PAGE> 13
ARTICLE VI
ADJUSTMENT FOR TRANSFERS INVOLVING THE FIXED ACCOUNT
1. The Reinsurer will pay the Ceding Company an amount equal to a quota share
of the amount transferred from the Separate Account to the Fixed Account
for the annuities reinsured hereunder during the current Accounting Period.
2. The Ceding Company will pay the Reinsurer an amount equal to a quota share
of the amount transferred from the Fixed Account to the Separate Account
for the annuities reinsured hereunder during the current Accounting Period.
3. The Reinsurer will pay the Ceding Company an amount equal to (i) times
(ii) where:
(i) equals a quota share of the amount transferred from the Fixed Account
to the Separate Account grouped by policy duration and issue age
breakpoints at the time of transfer; for the annuities reinsured
hereunder during the current Accounting Period;
(ii) equals the applicable Exchange Factor for each policy duration and
issue age breakpoints described in Schedule E.
The Ceding Company will pay the Reinsurer an amount equal to (i) times
(ii) where:
(i) equals a quota share of the amount transferred from the Separate
Account to the Fixed Account, grouped by policy duration at the time
of transfer; for the annuities reinsured hereunder during the current
Accounting Period;
(ii) equals the applicable Exchange Factor for each policy duration
described in Schedule E.
11
<PAGE> 14
ARTICLE VII
ACCOUNTING AND SETTLEMENTS
1. Quarterly Accounting Period. Each Accounting Period under this Agreement
will be a calendar quarter, except that: (a) the initial Accounting Period
runs from the Effective Date of this Agreement through the last day of the
calendar quarter during which the Effective Date of this Agreement falls,
and (b) the final Accounting Period runs from the end of the preceding
Accounting Period until the terminal accounting date of this Agreement as
described in Article IX, Paragraph 2. The amounts in Article III, paragraph
3(i) and (iv), and Article III, paragraph 4, will be adjusted on a pro-rata
basis for time periods less than a calendar quarter.
2. Quarterly Accounting Reports. Quarterly accounting reports in the form of
Schedule B will be submitted to the Reinsurer by the Ceding Company for
each Accounting Period not later than fifteen (15) days after the end of
each Accounting Period. Such reports will include information on the amount
of Reinsurance Premiums, Allowance for Commissions and Expenses, Benefit
Payments, Modified Coinsurance Reserve, and Modified Coinsurance Reserve
Adjustment.
3. Quarterly Settlements.
A. Within twenty-five (25) days after the end of each Accounting Period,
the Ceding Company will pay the Reinsurer the sum of:
(i) Reinsurance Premiums, determined in accordance with Article II,
plus
(ii) any Modified Coinsurance Reserve Adjustment payable to the
Reinsurer, determined in accordance with Article V, Paragraph
1, plus
(iii) any Adjustment for Transfers Involving the Fixed Account
payable to the Reinsurer, determined in accordance with Article
VI, plus (iv)any Adjustments for Annuity Benefits payable to the
Reinsurer, determined in accordance with Article IV,
paragraph 6.
B. Simultaneously, the Reinsurer will pay the Ceding Company the sum of:
(i) the amount of Benefit Payments, as described in Article IV, plus
(ii) the Allowance for Commissions and Expenses, determined in
accordance with Article III, plus
(iii) any Modified Coinsurance Reserve Adjustment payable to the
Ceding Company, determined in accordance with Article V,
Paragraph 1, plus
(iv) any Adjustment for Transfers Involving the Fixed Account payable
to the Ceding Company, determined in accordance with Article VI.
4. Amounts Due Quarterly. Except as otherwise specifically provided in this
Agreement, all amounts due to be paid to either the Ceding Company or the
Reinsurer under this Agreement will be determined on a net basis as of the
last day of each Accounting Period and will be due as of such date and
payable within twenty-five (25) days after the end of the Accounting
Period.
12
<PAGE> 15
5. Annual Accounting Reports. The Ceding Company will provide the Reinsurer
with annual accounting reports within fifteen (15) days after the end of
the calendar year for which such reports are prepared. These reports will
contain sufficient information about the annuities reinsured hereunder to
enable the Reinsurer to prepare its annual financial reports and to verify
the information reported in Schedule B, and will include Page 7, Page 27
and Schedule S of the Ceding Company's Annual Statement.
6. Estimations. If the amounts, as described in Paragraph 3 above, cannot be
determined by the dates described in Paragraph 4 above, on an exact basis,
such payments will be paid in accordance with a mutually agreed upon
formula which will approximate the actual payments. Adjustments will then
be made to reflect actual amounts when they become available.
7. Delayed Payments. For purpose of Paragraph 5 above, if there is a delayed
settlement of a payment due, there will be an interest penalty, at the
LIBOR Rate, as defined in Article I, paragraph 23. For purposes of this
Paragraph, a payment will be considered overdue thirty (30) days after the
date such payment is payable, and interest shall commence from the overdue
date.
8. Offset of Payments. All moneys due either the Ceding Company or the
Reinsurer under this Agreement will be offset against each other, dollar
for dollar, regardless of any insolvency of either party.
13
<PAGE> 16
ARTICLE VIII
DURATION AND RECAPTURE
1. Duration. Except as otherwise provided herein, this Agreement is unlimited
in duration.
2. Reinsurer's Liability. The liability of the Reinsurer with respect to any
annuity reinsured hereunder will begin simultaneously with that of the
Ceding Company, but not prior to the Effective Date of this Agreement. The
Reinsurer's liability with respect to any annuity reinsured hereunder will
terminate on the earliest of: (i) the date such annuity is recaptured in
accordance with paragraph 4 below; (ii) the date the Ceding Company's
liability on such annuity is terminated; or (iii) the date this Agreement
is terminated under paragraph 3 below. Termination of the Reinsurer's
liability is subject to payments in respect of such liability in accordance
with the provisions of Article IX of this Agreement. In no event should the
interpretation of this Paragraph imply a unilateral right of the Reinsurer
to terminate this Agreement. However, the Reinsurer and/or the Ceding
Company may, upon thirty (30) days prior written notice to the other party,
terminate this Agreement as to annuities not yet written by the Ceding
Company as of the effective date of such termination.
3. Termination for Nonpayment of Reinsurance Premiums or Other Amounts Due. If
the Ceding Company fails to pay the Reinsurance Premiums or any other
amounts due to the Reinsurer pursuant to this Agreement within sixty (60)
days after the end of any Accounting Period, the Reinsurer may terminate
this Agreement, subject to thirty (30) days prior written notice to the
Ceding Company. If the Reinsurer fails to pay any amounts due to the Ceding
Company pursuant to this Agreement within sixty (60) days after the end of
any Accounting Period, the Ceding Company may terminate this Agreement,
subject to thirty (30) days prior written notice to the Reinsurer.
4. Recapture. Annuities reinsured hereunder will be eligible for recapture, at
the option of the Ceding Company as described below:
(i) On any January 1, all reinsured annuities where the reinsurance under
this Agreement has been in effect for 20 years or longer, subject to
ninety (90) days prior written notice.
(ii) on any other date which is mutually agreed to in writing.
If the Ceding Company opts to recapture, then the Ceding Company must
recapture all of the annuities reinsured hereunder that are eligible for
recapture. In no event may the Ceding Company recapture anything other than
100 percent of all annuities reinsured hereunder that are eligible for
recapture.
5. Internal Replacements. Should the Ceding Company, its affiliates,
successors or assigns, initiate a formal program of Internal Replacement
that would include any of the annuities reinsured hereunder, the Ceding
Company will immediately notify the Reinsurer who will have thirty (30)
days to accept or reject the Internal Replacement Program. For purposes of
this Agreement, the term "Internal Replacement" means any instance in which
an annuity or any portion of the cash value of an annuity which is written
by the Ceding Company, its
14
<PAGE> 17
affiliates, successors, or assigns and reinsured under this Agreement is
exchanged for another policy or annuity written by the Ceding Company, its
affiliates, successors or assigns.
The Reinsurer will participate on a quota share basis in any expenses associated
with that program provided reinsurance coverage will continue under this
Agreement for the new policy. The quota share percentage for the new policy will
be same as for the replaced policy, except when the new policy is otherwise
covered by this Agreement and the quota share on the old and new policies are
different. In that case, the quota share will be that of the new policy which
would otherwise be applicable under this Agreement, and an amount will be paid
which is equal to (i) minus (ii) where:
(i) equals the account value in the Separate Account of the new policy times
the quota share percentage of the new policy times the Exchange Factor
defined in Schedule E;
(ii) equals the account value in the Separate Account of the old policy times
the quota share percentage of the old policy times the Exchange Factor
defined in Schedule E.
If the amount calculated above is positive, it will be paid to the Ceding
Company by the Reinsurer. If the amount calculated above is negative, it will be
paid to the Reinsurer by the Ceding Company.
If the Reinsurer elects not to participate in an internal replacement program,
the reinsurance coverage for those policies under this Agreement will terminate.
In that case, the ceding Company will pay the Reinsurer an amount equal to (i)
times (ii) where:
(i) equals the account value in the Separate Account recaptured by the Ceding
Company;
(ii) the Exchange Factor defined in Schedule E.
The Reinsurer will not participate nor reinsure Internal Replacements, where the
original policy was not covered by this Agreement.
15
<PAGE> 18
ARTICLE IX
TERMINAL ACCOUNTING AND SETTLEMENT
1. Terminal Accounting. In the event that this Agreement is terminated in
accordance with Article VIII, Paragraphs 3 or 4, or Article XI, a Terminal
Accounting and Settlement will take place.
2. Date. The terminal accounting date will be the earliest of: (1) the
effective date of recapture pursuant to any notice of recapture given under
this Agreement, (2) the effective date of termination pursuant to any
notice of termination given under this Agreement, or (3) any other date
mutually agreed to in writing.
3. Settlement. The Terminal Accounting and Settlement will consist of:
A. The quarterly settlement as provided in Article VII, Paragraph 3,
computed as of the terminal accounting date as if the treaty were
still in effect; and
B. payment by the Ceding Company to the Reinsurer of a Terminal Reserve
equal to the Modified Coinsurance Reserve on the annuities reinsured
hereunder as of the terminal accounting date;
C. payment by the Reinsurer to the Ceding Company of a Terminal Reserve
Adjustment equal to the Modified Coinsurance Reserve Adjustment on the
annuities reinsured hereunder as of the terminal accounting date;
If the calculation of the Terminal Accounting and Settlement produces an amount
owing to the Ceding Company, such amount will be paid by the Reinsurer to the
Ceding Company. If the calculation of the Terminal Accounting and Settlement
produces an amount owing to the Reinsurer, such amount will be paid by the
Ceding Company to the Reinsurer.
4. Supplementary Accounting and Settlement. In the event that, subsequent to
the Terminal Accounting and Settlement as provided above, a change is made
with respect to any amounts due, a supplementary accounting will take place
pursuant to Paragraph 3 above. Any amount owed to the Ceding Company or to
the Reinsurer by reason of such supplementary accounting will be paid
promptly upon the completion thereof.
16
<PAGE> 19
ARTICLE X
REPRESENTATIONS
The Ceding Company acknowledges that, at the Reinsurer's request, it has
provided the Reinsurer with the Ceding Company Data described in Schedule G
prior to the execution of this Agreement by the Reinsurer. The Ceding Company
represents that all factual information contained in the Ceding Company Data is
complete and accurate as of the date the document containing the information was
prepared. The Ceding Company further represents that any assumptions made in
preparing the Ceding Company Data were based upon informed judgment and are
consistent with sound actuarial principles. The Ceding Company further
represents that it is not aware of any omissions, errors, changes or
discrepancies which would materially affect the Ceding Company Data. the
Reinsurer has relied on such data and the foregoing representations in entering
into this Agreement.
17
<PAGE> 20
ARTICLE XI
ARBITRATION
Any dispute or difference between the Ceding Company and the Reinsurer on which
an agreement cannot be reached shall be finally and conclusively determined by
the decision of a board of arbitration consisting of three (3) members
(hereinafter sometimes called the "Board of Arbitration") selected as
hereinafter provided. Each party shall select one (1) member and the third
member shall be selected by mutual agreement of the other members, or if the
other members fail to reach agreement on a third member within twenty (20) days
after their selection, such third member shall thereafter be selected by the
American Arbitration Association upon application made to it for such purpose by
the Indemnified Party. The Board of Arbitration shall meet in New York City or
such other place as a majority of the members of the Board of Arbitration
determines more appropriate, and shall reach and render a decision in writing
(concurred in by a majority of the members of the Board of Arbitration) with
respect to the amount, if any, which either party may be required to pay the
other party. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow such rules and procedures as a majority of
the members of the Board of Arbitration deems necessary or appropriate,
consistent with the Commercial Arbitration Rules of the American Arbitration
Association. To the extent practical, decisions of the Board of Arbitration
shall be rendered no more than thirty (30) calendar days following commencement
of proceedings with respect thereto. The Board of Arbitration shall cause its
written decision to be delivered to both parties. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on both parties and
entitled to be enforced to the fullest extent permitted by law and entered in
any court of competent jurisdiction. Each party to any arbitration shall bear
its own expense in relation thereto, including but not limited to such party's
attorneys' fees, if any, and the expenses and fees of the Board of Arbitration
shall be divided between the parties in the same proportion as the portion of
the related claim determined by the Board of Arbitration to be payable to either
party bears to the portion of such claim determined not to be so payable.
18
<PAGE> 21
ARTICLE XII
INSOLVENCY
In the event of insolvency and the appointment of a conservator, liquidator,
receiver or statutory successor of the Ceding Company, the portion of any risk
or obligation assumed by the Reinsurer shall be payable to the conservator,
liquidator, receiver or statutory successor on the basis of claims allowed
against the Ceding Company by any court of competent jurisdiction or by any
conservator, liquidator, receiver or statutory successor of the Ceding Company
having authority to allow such claims, without diminution because of that
insolvency, or because of the conservator, liquidator, receiver or statutory
successor has failed to pay all or a portion of any claims. Payments by the
Reinsurer as above set forth shall be made directly to the Ceding Company or to
its conservator, liquidator, receiver or statutory successor, except where the
contract of insurance or reinsurance specifically provides another payee of such
reinsurance in the event of the insolvency of the Ceding Company. The
conservator, liquidator, receiver or statutory successor of the Ceding Company
will give the Reinsurer written notice of the pendency of a claim against the
Ceding Company on any annuity reinsured within a reasonable time after such
claim is filed in the insolvency proceeding. During the pendency of any such
claim, the Reinsurer may investigate such claim and interpose in the Ceding
Company's name (or in the name of the Ceding Company's conservator, liquidator,
receiver or statutory successor) in the proceeding where such claim is to be
adjudicated, any defense or defenses which the Reinsurer may deem available to
the Ceding Company or its conservator, liquidator, receiver or statutory
successor. The expense thus incurred by the Reinsurer will be chargeable,
subject to court approval, against the Ceding Company as a part of the expense
of liquidation to the extent of a proportionate share of the benefit which may
accrue to the Ceding Company solely as a result of the defense undertaken by the
Reinsurer.
In the event of the Reinsurer's insolvency, this treaty will terminate, and the
Terminal Accounting and Settlement described in Article IX will occur. Any
payments due the Reinsurer from the Ceding Company pursuant to the terms of this
Agreement will be made directly to the Reinsurer or its conservator, liquidator,
receiver or statutory successor. To the extent permitted by law, any amounts
owed by the Reinsurer to the Ceding Company will be payable without diminution
because of the insolvency of the Reinsurer. When two or more Reinsurers are
involved and a majority in interest elect to defend a claim, the expenses shall
be apportioned in accordance with the terms of the respective reinsurance
agreements, as if the expense had been incurred by the Ceding Company. The
conservator, liquidator, receiver or statutory successor of the Reinsurer will
give the Ceding Company written notice of the pendency of a claim against the
Reinsurer on any annuity reinsured within a reasonable time after such claim is
filed in the insolvency proceeding.
19
<PAGE> 22
ARTICLE XIII
NOTICES
All notices which any party is required or may desire to give to any other party
hereunder shall be given (except as otherwise specifically provided in the
Agreement) in writing and by depositing the same, postage prepaid, in the United
States mail, registered or certified, return receipt requested, or by delivering
the same, toll prepaid, by facsimile, by cable company, or by delivering the
same personally (but only if, in the case of personal delivery, within 48 hours
thereafter a confirmatory, duplicate copy thereof shall be delivered by
registered or certified mail, overnight courier or by facsimile, telegraph or
cable, in accordance with the foregoing provisions of the section; and only if,
in the case of facsimile, receipt shall be confirmed orally within 25 hours of
transmission, or a confirmatory duplicate copy thereof shall be delivered by
United States registered or certified mail, postage prepaid, or by overnight
courier, telegraph or cable, in accordance with the foregoing provisions of this
section), addressed as follows:
<TABLE>
<CAPTION>
IN THE CASE OF THE REINSURER: IN THE CASE OF CEDING COMPANY:
<S> <C>
Merrill Lynch Life Insurance Company North American Security Life Insurance Company
800 Scudders Mill Rd. 73 Tremont Street
Section 2I Boston, MA 02108-3915
Plainsboro, NJ 08536
or
PO Box 9061
Princeton, NJ 08543
Attention: Financial Actuary/ Attention: NASL Financial Actuary
Financial and Actuarial Department North American Security Life Insurance Company
73 Tremont Street
Boston, MA 02108-3915
Fax: (609) 282-3703 Fax: (617) 854-8604
Phone: (609) 282-2700 Phone: (617) 854-8676
copy to General Counsel copy to General Counsel
Merrill Lynch Life Insurance Company North American Security Life Insurance Company
800 Scudders Mill Road 73 Tremont Street
Plainsboro, NJ 08536 Boston, MA 02108-3915
WIRING INSTRUCTIONS: WIRING INSTRUCTIONS:
Chase Manhattan Bank State Street Bank
ABA 021000021 ABA 011000028
Account #9301033719 Account #50814086
Credit: Merrill Lynch Life Insurance Company Credit: North American Security Life Insurance Company
Transfer Account
Reason: Reinsurance Settlement Reason: Reinsurance Settlement
</TABLE>
20
<PAGE> 23
ARTICLE XIV
EXECUTION AND EFFECTIVE DATE
In witness of the above, this Agreement is executed in duplicate on the dates
indicated below with an Effective Date of January 1, 1997.
NORTH AMERICAN SECURITY LIFE MERRILL LYNCH
INSURANCE COMPANY LIFE INSURANCE COMPANY
("Ceding Company") ("Reinsurer")
on on
- -------------------- --------------------------
By: By:
-------------------- -------------------
Title: Title:
------------------
-----------------------
By: By:
-------------------- -------------------
Title: Title:
-----------------------
------------------------
21
<PAGE> 24
SCHEDULE A
Annuities and Risks Reinsured. The amount of reinsurance under this Agreement
will be a fifty percent (50%) quota share of the Ceding Company's net liability,
with respect to the Separate Account, on those variable annuities and the
corresponding state and group variations thereof listed below that are issued by
the Ceding Company on or after January 1, 1997, and sold by licensed insurance
agency affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated. Any
policies covered by this Agreement will continue to be covered even if the
agency of record is changed subsequent to the Effective Date of this Agreement.
Venture Variable Annuity Plans
POLICY FORM NUMBERS ADMINISTRATIVE CODE
1. All contracts beginning with form number VEN27
207 issued excluding form 207-VFA-NY
2. All contracts with form numbers VEN25
VENTURE.001, VENTURE.004,
VENTURE.005
3. All certificates with form number VEN26
VENTURE.003
22
<PAGE> 25
SCHEDULE B
QUARTERLY REPORT ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
ACCOUNTING PERIOD:
CALENDAR YEAR:
DATE REPORT COMPLETED:
<TABLE>
<S> <C> <C>
1. Reinsurance Premium (Article II) _______
2. Benefit Payments (Article IV)
a. Claims _______
b. Cash Surrender Values _______
c. Partial Withdrawals _______
d. Annuity Benefits _______
Benefit Payments = a+b+c+d _______
3. Modified Coinsurance Reserve Adjustment (Article V)
a. Modco Reserve end of current Accounting Period _______
b. Modco Reserve end of preceding Accounting Period _______
c. Equals a-b _______
d. Modco Reserve Investment Credit (Schedule C) _______
Modified Coinsurance Reserve Adjustment = c-d _______
4. Allowance for Expenses and Death Benefit Guarantees (Article III) _______
5. Transfers Involving Fixed Account (Article VI)
a. Quota share of transfers from Fixed Account to Separate
Account during the current Accounting Period (paragraph 1) _______
b. Quota share of transfers from Separate Account to Fixed
Account during the current Accounting Period (paragraph 2) _______
Transfers Involving the Fixed Account = a-b _______
6. Adjustments for Transfers Involving Fixed Account (Article VI)
a. Quota share of transfers from Fixed Account to Separate
Account during the current Accounting Period (paragraph 3) _______
b. Quota share of transfers from Separate Account to Fixed
Account during the current Accounting Period (paragraph 4) _______
Adjustment for Transfers Involving the Fixed Account = a-b _______
7. Adjustment for Annuity Benefits (Article IV, paragraph 6) _______
8. Adjustment for Internal Replacements (Article VIII, paragraph 5)
a. Quota share of replaced policy account value in Separate Account _______
b. Adjustment for replaced reinsured policy _______
c. Quota share of new policy account value in Separate Account _______
d. Adjustment for new reinsured policy _______
Adjustment for Internal Replacements = a-b-c+d _______
9. Cash Settlement = 1-2-3-4+5-6+7-8 _______
</TABLE>
23
<PAGE> 26
SCHEDULE C
MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT
Modified Coinsurance Reserve Investment Credit. The Modified Coinsurance Reserve
Investment Credit is equal to the portion of the sum of all accrued investment
income and capital gains and losses, realized and unrealized, on the mutual
funds underlying the Ceding Company's Separate Account for the current
Accounting Period which corresponds to the portion of the variable annuities
reinsured hereunder.
For Venture Annuities reinsured hereunder, the Modified Coinsurance Reserve
Investment Credit will be adjusted for income taxes net of any income tax
benefits or credits or changes in any provision for taxes. It will be reduced
for investment management fees in excess of 45bp basis points annually and any
other fund level charges. It will not be reduced for mortality and expense risk
charges or administrative charges as defined in the annuity contracts.
The Modified Coinsurance Reserve Investment Credit will be calculated each
Accounting Period as follows:
<TABLE>
<S> <C> <C> <C>
1. Quota Share of Account Value end of current Accounting Period ____
2. Quota Share of Account Value beginning of current Accounting Period ____
3. Quota Share of Account Value released by Death for current Accounting Period ____
4. Quota Share of Terminating Account Values paid for current Accounting Period ____
5. Quota Share of Partial Withdrawal Account Values paid for current Accounting Period ____
6. Quota Share of Account Values released by annuitization for current Accounting Period ____
7. Quota Share of Administration Charges assessed for current Accounting Period ____
8. Quota Share of Gross Premiums received for current Accounting Period ____
9. Quota Share of Transfer of Account Value out of Separate Account to Fixed Account for
current Accounting Period ____
10. Quota Share of Transfer of Account Value to Separate Account from Fixed Account for current
Accounting Period ____
11. Adjustment for Internal Replacements ____
12. Quota Share of Mortality and expense charges
13. Quota Share of Management Fee for the current Accounting Period ____
14. Interest on Allowances (a) minus (b) minus (c), times (d) where:
(a) equals the quota share of the account value at the end of the Accounting Period. ____
(b) equals the Modified Coinsurance Reserve at the end of the Accounting Period. ____
(c) equals the quota share of the account value at the end of the Accounting Period times
0.50%. ____
(d) equals the LIBOR Rate divided by 4, where the LIBOR Rate equals the 3 month LIBOR Rate
(as published in the Wall Street Journal), plus .01, determined on the first business
day of the Accounting Period. ____
Interest on Allowances ____
Investment Credit = 1-2+3+4+5+6+7-8+9-10+11+12+13-14 _____
</TABLE>
24
<PAGE> 27
SCHEDULE D
COMMISSION SCHEDULES
SEE ATTACHMENT 1
25
<PAGE> 28
SCHEDULE E
EXCHANGE FACTORS
The following will be applicable for product administrative codes VEN25, VEN26
and VEN27 for contract owners with an attained age less than 76 at contract
issue:.
EXCHANGE FACTOR AS A PERCENTAGE
POLICY DURATION OF ACCOUNT VALUE TRANSFERRED*
1 7.4
2 6.5
3 5.9
4 5.3
5 4.7
6 4.1
7 3.6
8 3.5
9 3.7
10 3.8
11 3.7
12 3.4
13 3.2
14 2.9
15 2.6
16 2.3
17 + 2.0
The following will be applicable for product administrative codes VEN25, VEN26
and VEN27 for contract owners with an attained age of 76 through 85 at contract
issue:.
EXCHANGE FACTOR AS A PERCENTAGE
POLICY DURATION OF ACCOUNT VALUE TRANSFERRED*
1 6.4
2 5.5
3 4.9
4 4.2
5 3.5
6 2.8
7 2.2
8 1.8
9 1.7
10 1.5
11+ 1.0
* The Exchange Factor will be zero where no compensation is paid.
26
<PAGE> 29
SCHEDULE F
ASSET FACTOR
The Asset Factor will be determined quarterly and is based upon the total assets
reinsured under this agreement. The total assets will be the sum of the calendar
quarter end variable assets for policies defined in Schedule A and then
multiplied by the corresponding quota share as defined in Schedule A.
<TABLE>
<CAPTION>
TOTAL ASSETS ASSET FACTOR
<S> <C>
up to $250 million 0.08%
$250 million to $375 million 0.07%
$375 million to $500 million 0.06%
$500 million to $750 million 0.05%
$750 million to $1,000 million 0.04%
$1,000 million to $1,250 million 0.03%
$1,250 million to $1,500 million 0.02%
$1,500 million to $1,750 million 0.01%
$1,750 million and above 0.00%
</TABLE>
27
<PAGE> 30
SCHEDULE G
1. 1996 Annual Statements for North American Security Life Insurance
Company
2. Summary of Pricing Assumptions as contained in a letter dated November
7. 1996 to Mathew J. Rider from Hugh McHaffie.
3. VENTURE annuity prospectus.
4. Policy forms as listed on Schedule A, hereof.
28
<PAGE> 31
ATTACHMENT 1
SCHEDULE D
COMMISSION AND WHOLESHARE OVERRIDE SCHEDULES
For the portion of the Venture annuities reinsured hereunder the following
commission and wholesaler overrides shall be payable:
ADMINISTRATIVE CODES: VEN27, VEN28 AND VEN29
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1. PREMIUM BASED:
A) ISSUE AGE LESS THAN ATTAINED AGE 76:
Commission as a percentage of premium payable in all policy durations 5.25%
Wholesaler Override as a percent of premium payable in all policy durations 2.00%
B) ATTAINED ISSUE AGE 76 THROUGH ATTAINED ISSUE AGE 90:
Commission as a percentage of premium payable in all policy durations 4.25%
Wholesaler Override as a percent of premium payable in all policy durations 2.00%
2. ASSET BASED:
a) All trail commission paid on calendar quarters based upon actual
account value at calendar quarter end. Accrual commences 15 months
following any payment. Not payable on loaned portion of contract.
b) Administrative Codes VEN25 and VEN26
Annual trail policy contract years 2 - 7 0.35%
Annual trail policy contract year 8 and beyond 0.40%
c) Administrative Code VEN27
Annual trail policy contract years 2 - 6 0.35%
Annual trail policy contract year 7 and beyond 0.40%
</TABLE>
<PAGE> 32
ATTACHMENT 1 (CONT'D)
SCHEDULE D
COMMISSION AND WHOLESHARE OVERRIDE SCHEDULES
(CONT'D)
3. COMMISSION CHARGEBACKS
a) Contract Owner's exercise of "FREE LOOK":
- Full premium based and wholesaler override paid by Reinsurance
shall be returned. (Free Look period commences upon receipt of
contract by owner).
b) Full or partial withdrawal from contract:
- 100% of premium based commissions paid by Reinsurer shall be
returned to Reinsurer on an amount withdrawn within 6 months
of said amount being paid into the annuity contract, unless
amount withdrawn is in accordance with the free withdrawal
provisions of the contract.
- 50% of premium based commissions paid by Reinsurer shall be
returned to Reinsurer on an amount withdrawn during the 7th
through 12th month after said amount being paid into the
annuity contract, unless amount withdrawn is in accordance
with the free withdrawal provisions of the contract.
- No return of commission paid by Reinsurer after payment has
been in the annuity contract for more than 12 months.
c) Refund of premium or purchase payment by the Ceding Company:
For any reason, or as required by law or with concurrence by the
Selling Broker-Dealer any compensation recovered by the Ceding Company
shall be returned to the Reinsurer based upon the quota-share
applicable to that contract.
<PAGE> 1
EXHIBIT (B)(9)(A)
NORTH AMERICAN SECURITY LIFE [LOGO]
INSURANCE COMPANY
June 28, 1994
To whom it may concern,
This opinion is written in reference to the flexible purchase payment individual
deferred variable annuity contracts (the "Contracts") to be issued by North
American Security Life Insurance Company, a Delaware corporation (the
"Company"), with respect to 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 Assistant Counsel to the Company, I have examined such records and documents
and reviewed such questions 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,
/s/ TRACY ANNE KANE
- ----------------------------
Tracy Anne Kane
Assistant Counsel
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Mailing Address
116 Huntington Avenue P.O. Box 818 Toll-free 800-344-1029
Boston, Massachusetts 02116 Boston, MA 02117-0818 617-266-6004
</TABLE>
A wholly-owned subsidiary of North American Life Assurance Company,
established 1881
<PAGE> 1
EXHIBIT (b)(9)(B)
NORTH AMERICAN SECURITY LIFE [LOGO]
INSURANCE COMPANY
April 24, 1989
To whom it may concern,
This opinion is written in reference to the individual variable annuity
contracts (the "Contracts") to be issued by North American Security Life
Insurance Company, a Delaware corporation (the "Company"), with respect to 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 counsel to the Company, I have examined such records and documents and
reviewed such questions 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,
/s/ RUTH ANN FLEMING
- --------------------------------
Ruth Ann Fleming
Vice President & Counsel
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Mailing Address Toll-free 800-344-1029
695 Atlantic Avenue P.O. Box 9064 GMF In MASS. 617-439-6960
Boston, Massachusetts 02111 Boston, MA 02205-9064 Facsimile 617-439-3286
</TABLE>
A wholly-owned subsidiary of North American Life Assurance Company,
established 1881
<PAGE> 1
EXHIBIT (b)(15)(iii)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
POWER OF ATTORNEY
I, Peter S. Hutchison, Director of The Manufacturers Life Insurance
Company of North America (the "Company") do hereby constitute and appoint James
D. Gallagher, Richard C. Hirtle, John G. Vyrsen, Hugh McHaffie, James Boyle, and
David W. Libbey, or any one of them, my true and lawful attorneys to sign or
execute (i) registration statements and reports and other filings to be filed
with the Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended (the "1933 Act") and/or the Investment Company Act of 1940, as
amended (the "1940 Act") and (ii) reports and other filings to be filed with the
SEC (or any other regulatory entity) pursuant to the Securities Exchange Act of
1934 (the "1934 Act") and to do any and all acts and things and to sign or
execute any and all instruments for me, in my name, in the capacities indicated
below, which said attorney, may deem necessary or advisable to enable the
Company to comply with the 1933 Act, the 1940 Act and the 1934 Act, and any
rules, regulations and requirements of the SEC, in connection with such
registration statements, reports and filings made under the 1933 Act, the 1940
Act and the 1934 Act, including specifically, but without limitation, power and
authority to sign or execute for me, in my name, and in the capacities indicated
below, (i) any and all amendments (including post-effective amendments) to such
registration statements and (ii) Form 10-Ks and Form 10-Qs filed under the 1934
Act; and I do hereby ratify and confirm all that the said attorneys, or any of
them, shall do or cause to be done by virtue of this power of attorney.
Dated as of this 12th day of January, 1998.
Signature Title
/s/ PETER S. HUTCHISON Director
- ------------------------------
Peter S. Hutchison
