<PAGE> 1
As filed with the Securities and Exchange Commission on DECEMBER 15, 1998
Registration No. 33-77878
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 6
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 Copy to:
Vice President, Secretary and J. Sumner Jones, Esq.
General Counsel Jones & Blouch, L.L.P.
The Manufacturers Life Insurance Company 1025 Thomas Jefferson Street, N.W.
of North America Washington, DC 20007
73 Tremont Street
Boston, Massachusetts 02108
(Name and Address of Agent for Service)
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)(i) of Rule 485
___ 60 days after filing pursuant to paragraph (a) of Rule 485
_X_ on MARCH 4, 1999 pursuant to paragraph (a) of Rule 485
The Prospectus contained in this registration statement also relates to variable
annuity contracts covered by earlier registration statements under file no.
33-55712
<PAGE> 2
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 Item
Part A Caption in Prospectus
- ------ ---------------------
<S> <C>
1................. Cover Page
2................. APPENDIX A: Special Terms
3................. Summary
4................. Performance Data
5................. General Information about US, THE VARIABLE ACCOUNT, AND
THE Trust
6................. Charges and Deductions; Withdrawal Charge; Reduction
or Elimination of Withdrawal CHARGES;
Administration Fees; Distribution Fee; Mortality and
Expense Risk Charge; Taxes; Appendix C: EXAMPLES OF
CALCULATION OF WITHDRAWAL CHARGE; APPENDIX D: STATE PREMIUM
TAXES
7................. ACCUMULATION PERIOD PROVISIONS; OUR Approval; Purchase
Payments; Accumulation Units; Net Investment Factor;
Transfers Among Investment Options; Telephone Transactions;
Special Transfer Services - Dollar Cost Averaging; Asset
Rebalancing Program; Withdrawals; Special Withdrawal
Services - the Income Plan; Contract Owner Inquiries; Other
Contract Provisions; Ownership; Beneficiary; Modification
8................. PAY-OUT PERIOD Provisions; General; Annuity
Options; Determination of Amount of the First Variable
Annuity Payment; Annuity Units and the Determination of
Subsequent Variable Annuity Payments; Transfers DURING
PAY-OUT PERIOD
9................. Accumulation PERIOD Provisions; Death Benefit DURING
ACCUMULATION PERIOD; PAY-OUT PERIOD Provisions; Death
Benefit DURING PAY-OUT PERIOD
10................ Accumulation PERIOD 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 PERIOD Provisions;
Purchase Payments; Other Contract Provisions; Ten Day
Right to Review
12................ Federal Tax Matters; INTRODUCTION; OUR Tax
Status; Taxation of Annuities in General;
Diversification Requirements; Qualified Retirement
Plans
13................ Legal Proceedings
14................ Statement of Additional Information - Table of Contents
</TABLE>
<TABLE>
<CAPTION>
[N-4 ITEM
PART B] Caption in Statement of Additional Information
- ------- -----------------------------------------------
<S> <C>
15................ Cover Page
16................ Table of Contents
17................ General History and Information.
18................ Services-Accountants; Services-Servicing Agent
19................ Not Applicable
20................ Services - Principal Underwriter
21................ Performance Data
22................ Not Applicable
23................ Financial Statements
</TABLE>
<PAGE> 3
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
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 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 Prospectus describes an annuity contract (the "CONTRACT") issued by
The Manufacturers Life Insurance Company of North America ("WE" or "US"). The
contract is a flexible purchase payment, individual, deferred,
non-participating, combination fixed and variable annuity contract. Parts of
this Prospectus also describe other variable annuity contracts that we no longer
offer and ones that we offer only in the states of Washington and Maryland.
- - Contract values and annuity benefit payments are based upon
thirty-seven investment options. Thirty-five options are variable and
two are fixed account options.
- - Contract values (other than those allocated to one of the fixed
accounts) and variable annuity benefit payments will vary according to
the investment performance of the sub-accounts of one of our separate
accounts, The Manufacturers Life Insurance Company of North America
Separate Account A (the "VARIABLE ACCOUNT"). Your contract values may
be allocated to, and transferred among, one or more of those
sub-accounts.
- - Each sub-account's assets are invested in a corresponding portfolio of
a mutual fund, Manufacturers Investment Trust (the "TRUST"). We will
provide you a prospectus for the Trust with 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, FEDERAL RESERVE BOARD, OR
ANY OTHER AGENCY.
- - Except as specifically noted here and under the caption "FIXED ACCOUNT
INVESTMENT OPTION" below, this Prospectus describes only the variable
portion of the contract.
- - Special terms appear in bold and are explained when first used in this
Prospectus and also are defined in a glossary in APPENDIX A.
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 YOU SHOULD KNOW BEFORE INVESTING.
THE CONTRACTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC. NEITHER THE SEC
NOR ANY STATE HAS DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is______________, 1999
<PAGE> 5
TABLE OF CONTENTS
SUMMARY .............................................................. 3
GENERAL INFORMATION ABOUT US, THE VARIABLE ACCOUNT AND THE TRUST ..... 8
The Manufacturers Life Insurance Company of North America ........ 8
The Variable Account .............................................. 8
The Trust ......................................................... 8
DESCRIPTION OF THE CONTRACT .......................................... 10
ACCUMULATION PERIOD PROVISIONS ....................................... 10
Purchase Payments ................................................. 10
Accumulation Units ................................................ 10
Value of Accumulation Units ....................................... 11
Net Investment Factor ............................................. 11
Transfers Among Investment Options ................................ 11
Maximum Number of Investment Options .............................. 11
Telephone Transactions ............................................ 12
Special Transfer Services - Dollar Cost Averaging ................. 12
Asset Rebalancing Program ......................................... 12
Withdrawals ....................................................... 13
Special Withdrawal Services - the Income Plan ..................... 13
Loans ............................................................. 14
Death Benefit During Accumulation Period .......................... 15
PAY-OUT PERIOD PROVISIONS ............................................ 17
General ........................................................... 17
Annuity Options ................................................... 17
Determination of Amount of the First Variable
Annuity Payment ................................................... 18
Annuity Units and the Determination of
Subsequent Variable Annuity Payments ............................ 18
Transfers During Pay-out period ................................... 19
Death Benefit During Pay-out Period ............................... 19
OTHER CONTRACT PROVISIONS ............................................ 19
Ten Day Right to Review ........................................... 19
Ownership ......................................................... 19
Annuitant ......................................................... 20
Beneficiary ....................................................... 20
Modification ...................................................... 20
Our Approval 20
Misstatement and Proof of Age, Sex or Survival .................... 20
FIXED ACCOUNT INVESTMENT OPTIONS ..................................... 20
CHARGES AND DEDUCTIONS ............................................... 22
Withdrawal Charges ................................................ 22
Reduction or Elimination of Withdrawal Charges .................... 23
Administration Fees ............................................... 24
Distribution Fee .................................................. 24
Mortality and Expense Risk Charge ................................. 24
Taxes ............................................................. 24
FEDERAL TAX MATTERS .................................................. 25
INTRODUCTION ......................................................... 25
OUR TAX STATUS ....................................................... 25
TAXATION OF ANNUITIES IN GENERAL ..................................... 26
Tax Deferral During Accumulation Period ........................... 26
Taxation of Partial and Full Withdrawals .......................... 27
Taxation of Annuity Benefit Payments .............................. 28
Taxation of Death Benefit Proceeds ................................ 28
Penalty Tax on Premature Distributions ............................ 28
Aggregation of Contracts .......................................... 29
QUALIFIED RETIREMENT PLANS ........................................... 29
Direct Rollovers .................................................. 30
FEDERAL INCOME TAX WITHHOLDING ....................................... 30
GENERAL MATTERS ...................................................... 31
Performance Data .................................................. 31
Asset Allocation and Timing Services .............................. 31
Restrictions under the Texas Optional
Retirement Program .............................................. 31
Distribution of Contracts ......................................... 31
Contract Owner Inquiries .......................................... 32
Confirmation Statements ........................................... 32
Legal Proceedings ................................................. 32
Year 2000 Issues .................................................. 32
APPENDIX A: SPECIAL TERMS ........................................... A-1
APPENDIX B:
TABLE OF ACCUMULATION UNIT VALUES
RELATING TO THE CONTRACT ....................................... B-1
TABLE OF ACCUMULATION UNIT VALUES
RELATING TO PRIOR CONTRACTS .................................... B-4
APPENDIX C: EXAMPLES OF CALCULATION OF
WITHDRAWAL CHARGE ................................................. C-1
APPENDIX D: STATE PREMIUM TAXES ...................................... D-1
APPENDIX E: PENNSYLVANIA MAXIMUM MATURITY AGE
APPENDIX F: PRIOR CONTRACTS (VV CONTRACTS) ........................... F-1
APPENDIX G: QUALIFIED PLAN TYPES ..................................... G-1
2
<PAGE> 6
SUMMARY
OVERVIEW OF THE CONTRACT. Under the contract, you make one or more payments to
us for a period of time (the "ACCUMULATION PERIOD") and then later, we make one
or more annuity benefit payments to you (the "PAY-OUT PERIOD"). Contract values
during the accumulation period and the amounts of annuity benefit payments
during the pay-out period may either be variable or fixed, depending upon the
investment option(s) you select. You may use the contract to fund either a
non-qualified or tax-qualified retirement plan.
PURCHASE PAYMENT LIMITS. The minimum initial purchase payment is $25,000.
Subsequent purchase payments must be at least $1,000 (except for qualified plans
where the minimum is $30). Purchase payments normally may be made at any time.
If a purchase payment would cause your contract value to exceed $1,000,000, or
your contract value already exceeds $1,000,000, however, you must obtain our
approval in order to make the payment. If permitted by state law, we may cancel
your contract if you have made no payments for two years, your contract value is
less than $2,000 and your payments over the life of your contract, minus your
withdrawals over the life of the contract is less than $2,000.
INVESTMENT OPTIONS. During the accumulation period, contract values may be
allocated among up to seventeen of the available investment options. Currently,
thirty-five Variable Account investment options and two fixed account investment
options are available under the contract. Each of the thirty-five Variable
Account investment options is a sub-account of the Variable Account that invests
in a corresponding portfolio of the Trust. A full description of each Trust
portfolio is in the accompanying Prospectus of the Trust. Your contract value
during the accumulation period and the amounts of annuity benefit payments will
depend upon the investment performance of the Trust portfolio underlying each
sub-account of the Variable Account you select and/or upon the interest we
credit on each fixed account option you select. Subject to certain regulatory
limitations, we may elect to add, subtract or substitute investment options.
TRANSFERS. During the accumulation period, you may transfer your contract values
among any of the investment options. During the pay-out period, you may transfer
your allocations among the Variable Account investment options, but transfers
from Variable Account options to fixed account options or from fixed account
options to Variable Account options are not permitted.
WITHDRAWALS. During the accumulation period, you may withdraw all or a portion
of your contract value. The amount you withdraw from any investment account must
be at least $300 or, if less, your entire balance in that investment account. If
a partial withdrawal plus any applicable withdrawal charge would reduce your
contract value to less than $300, we will treat your withdrawal request as a
request to withdraw all of your contract value. A withdrawal charge and an
administration fee may apply to your withdrawal. A withdrawal may be subject to
income tax and a 10% penalty tax. A systematic withdrawal plan service is
available under the contract.
LOANS. If your contract is issued in connection with a Section 403(b) qualified
plan that is not subject to Title I of ERISA, you may borrow money from us,
using your contract as the only security for the loan. The effective cost of a
contract loan is 2% per year of the amount borrowed.
CONFIRMATION STATEMENTS. We will send you confirmation statements for certain
transactions in your account. You should carefully review these statements to
verify their accuracy. You should immediately report any mistakes to our Annuity
Service Office (at the address or phone number shown on the cover of this
Prospectus). If you fail to notify our Annuity Service Office of any mistake
within 60 days of the mailing of the confirmation statement, you will be deemed
to have ratified the transaction.
DEATH BENEFITS. We will pay the death benefit described below to your
BENEFICIARY if you die during the accumulation period. If a contract is owned by
more than one person, then the surviving contract owner will be deemed the
beneficiary of the deceased contract owner. No death benefit is payable on the
death of any ANNUITANT (a natural person or persons whose life is used to
determine the duration of annuity benefit payments involving life
contingencies), 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 amount of
the death benefit will be calculated as of the date on which our Annuity Service
Office receives written notice and proof of death and all required claim forms.
The formula used to calculate the death benefit may vary according to the
3
<PAGE> 7
age(s) of the contract owner(s) at the time the contract is issued and the age
of the contract own who dies. If there are any UNPAID LOANS (including unpaid
interest) under the contract, the death benefit equals the death benefit
calculated according to the applicable formula, minus the amount of the unpaid
loans. If the annuitant dies during the pay-out period and annuity payment
method selected called for payments for a guaranteed period, we will make the
remaining guaranteed payments to the beneficiary. See APPENDIX F for information
on death benefit provisions applicable to certain contracts no longer being
issued and contracts issued in the States of Washington and Maryland.
ANNUITY BENEFIT PAYMENTS. We offer a variety of fixed and variable annuity
payment options. Periodic annuity benefit payments will begin on the "MATURITY
DATE" (the first day of the pay-out period). You select the maturity date, the
frequency of payment and the type of annuity benefit payment option.
TEN DAY REVIEW. You may cancel your contract by returning it to us within 10
days of receiving it.
TAXATION. 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 benefit payments begin. Normally, a portion of each annuity benefit
payment is taxable as ordinary income. Partial and total withdrawals are taxable
as ordinary income to the extent contract value prior to the withdrawal exceeds
the purchase payments you have made, minus your prior withdrawals. A penalty tax
may apply to withdrawals prior to age 59-1/2.
CHARGES AND DEDUCTIONS. The following table and Example are designed to assist
you in understanding the various costs and expenses related to the contract. The
table reflects expenses of the Variable Account and the underlying portfolio of
the Trust. In addition to the items listed in the following table, premium taxes
may be applicable to certain contracts and we reserve the right to impose an
annual $30 per contract administration fee on contracts where the contract value
is less than $10,000 as a result of a partial withdrawal. The items listed under
"Contract Owner Transaction Expenses" and "Separate Account Annual Expenses" are
more completely described in this Prospectus beginning at page . The items
listed under "Trust Annual Expenses" are described in detail in the accompanying
Trust Prospectus.
CONTRACT OWNER TRANSACTION EXPENSES
Deferred sales load (withdrawal charge as percentage of purchase payments) None*
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS
PURCHASE PAYMENT IN CONTRACT WITHDRAWAL CHARGE PERCENTAGE
<S> <C>
0 3%
1 3%
2 3%
3+ 0%
</TABLE>
* For contracts issued prior to November 1, 1996, a withdrawal charge is imposed
on withdrawals from contracts.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and expense risk fees................................ 1.25%
Administration fee .............................................0.25%
Distribution fee................................................0.15%
Total Separate Account Annual Expenses..........................1.65%
</TABLE>
4
<PAGE> 8
TRUST ANNUAL EXPENSES [TO BE UPDATED]
(as a percentage of Trust average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT) 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 Small Company.. 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% 0.100% 0.950%
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%
Lifestyle Conservative 280# 0% 0.708%* 0.708%
</TABLE>
* 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 ended December 31, 1998) 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>
5
<PAGE> 9
# Each Lifestyle Trust will bear its pro rata share of the fees and expenses
incurred by the Underlying Portfolios in which it invests and the investment
return of each Lifestyle Trust will be net of the Underlying Portfolio expenses.
Each Lifestyle Portfolio must bear its own expenses. However, MSS is currently
paying these expenses as described in footnote (*) above.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets, if you surrendered your contract at the end of the applicable
time period: (For contracts issued on or after November 1, 1996, no withdrawal
charges will be imposed upon surrender, therefore, for such contracts please
refer to the second table for expenses if you selected an annuity benefit
payment option or did not surrender at the end of the applicable time period.)
[DATA TO BE UPDATED]
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets $59 $124 $161 $338
Science & Technology.... 57 119 153 323
International Small Cap. 58 120 156 328
Emerging Small Company.. 56 115 146 309
Pilgrim Baxter Growth... 56 117 149 316
Small/Mid Cap........... 55 113 143 303
International Stock..... 58 122 159 335
Worldwide Growth........ 58 121 156 329
Global Equity........... 55 112 141 299
Small Company Value..... 56 116
Equity.................. 53 106 131 279
Growth.................. 54 110 138 293
Quantitative Equity..... 52 105 129 276
Blue Chip Growth........ 54 111 139 296
Real Estate Securities.. 52 105 129 276
Value................... 54 110 139 294
Int'l Growth and Income. 56 115 146 310
Growth and Income....... 52 105 130 278
Equity-Income........... 53 107 133 284
Balanced................ 53 108 135 287
Aggressive Asset Allocation 54 109 136 289
High Yield.............. 53 108 135 287
Moderate Asset Allocation 53 107 133 284
Conservative Asset Allocation 53 108 135 288
Strategic Bond.......... 53 108 134 286
Global Government Bond.. 54 109 137 291
Capital Growth Bond..... 52 104 127 272
Investment Quality Bond. 52 104 128 273
U.S. Government Securities 52 103 127 271
Money Market............ 50 98 117 252
Lifestyle Aggressive 1000 56 115 146 310
Lifestyle Growth 820.... 55 113 143 303
Lifestyle Balanced 640.. 54 110 138 293
Lifestyle Moderate 460.. 53 107 133 284
Lifestyle Conservative 280 52 103 126 269
</TABLE>
6
<PAGE> 10
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets, if you selected an annuity benefit payment option 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 $31 $95 $161 $338
Science & Technology.... 29 90 153 323
International Small Cap. 30 92 156 328
Emerging Small Company.. 28 86 146 309
Pilgrim Baxter Growth... 29 88 149 316
Small/Mid Cap........... 27 84 143 303
International Stock..... 31 94 159 335
Worldwide Growth........ 30 92 156 329
Global Equity........... 27 83 141 299
Small Company Value..... 28 87
Equity.................. 25 76 131 279
Growth.................. 26 81 138 293
Quantitative Equity..... 25 75 129 276
Blue Chip Growth........ 27 82 139 296
Real Estate Securities.. 25 75 129 276
Value................... 26 81 139 294
Int'l Growth and Income. 28 86 146 310
Growth and Income....... 25 76 130 278
Equity-Income........... 25 78 133 284
Balanced................ 26 79 135 287
Aggressive Asset Allocation 26 79 136 289
High Yield.............. 26 79 135 287
Moderate Asset Allocation 25 78 133 284
Conservative Asset Allocation 26 79 135 288
Strategic Bond.......... 26 79 134 286
Global Government Bond.. 26 80 137 291
Capital Growth Bond..... 24 74 127 272
Investment Quality Bond. 24 75 128 273
U.S. Government Securities 24 74 127 271
Money Market............ 22 69 117 252
Lifestyle Aggressive 1000 28 86 146 310
Lifestyle Growth 820.... 27 84 143 303
Lifestyle Balanced 640.. 26 81 138 293
Lifestyle Moderate 460.. 25 78 133 284
Lifestyle Conservative 280 24 74 126 269
</TABLE>
For purposes of presenting the foregoing Examples, we have made certain
assumptions. We have 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. Those
assumptions, (each of which is 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
Examples 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.
A TABLE OF ACCUMULATION UNIT VALUES RELATING TO THE CONTRACT IS INCLUDED IN
APPENDIX B TO THIS PROSPECTUS.
7
<PAGE> 11
GENERAL INFORMATION ABOUT US, THE VARIABLE ACCOUNT AND THE TRUST
WE ARE AN INDIRECT SUBSIDIARY OF MANULIFE.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
We are a stock life insurance company organized under the laws of Delaware
in 1979. Our principal office is located at 116 Huntington Avenue, Boston,
Massachusetts 02116. Our ultimate parent is The Manufacturers Life Insurance
Company ("Manulife"), a Canadian mutual life insurance company based in Toronto,
Canada. Prior to January 1, 1996, we were 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 20, 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.
The Manufacturers Life Insurance Company of North America's financial
ratings are as follows:
A++ A.M. Best
Superior in financial strength; 1st category of 15
AAA Duff & Phelps
Highest in claims paying ability; 1st category of 18
AA+ Standard & Poor's
Excellent in claims paying ability; 2nd category of 21
Aa2 Moody's
Excellent in financial strength; 3rd category of 21
These ratings, which are current as of _________________, 19__ and are subject
to change, are assigned as a measure of The Manufacturers Life Insurance Company
of North America's ability to honor the death benefit and life annuitization
guarantees but not specifically to its products, the performance (return) of
these products, the value of any investment in these products upon withdrawal or
to individual securities held in any portfolio.
THE VARIABLE ACCOUNT IS ONE OF OUR SEPARATE ACCOUNTS THAT INVESTS THE
CONTRACT VALUES YOU ALLOCATE TO IT IN THE TRUST PORTFOLIO(S) YOU SELECT.
THE VARIABLE ACCOUNT
We established the Variable Account on August 24,1984. The income, gains
and losses, whether or not realized, from assets of the Variable Account are
credited to or charged against the Variable Account without regard to our other
income, gains or losses. Nevertheless, all obligations arising under the
contracts are our general corporate obligations. Assets of the Variable Account
may not be charged with liabilities arising out of any of our other business.
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 we
determine that it would 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 if 1940 Act registration
were no longer required.
The Variable Account currently has thirty-five sub-accounts. We reserve
the right, subject to compliance with applicable law, to add other sub-accounts,
eliminate existing sub-accounts, combine sub-accounts or transfer assets in one
sub-account to another sub-account that we, or an affiliated company, may
establish. We will not eliminate existing sub-accounts or combine sub-accounts
without the prior approval of the appropriate state or federal regulatory
authorities.
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THE TRUST IS A MUTUAL FUND IN WHICH THE VARIABLE ACCOUNT INVESTS THAT HAS 35
INVESTMENT PORTFOLIOS MANAGED BY 15 SUBADVISERS.
THE TRUST
The assets of each sub-account of the Variable Account are invested in
shares of a corresponding investment portfolio of the Trust. 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 Small Company 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 TRUST PORTFOLIOS MANAGED
- ---------- ------------------------
<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
Oechsle International Advisors, LLC Global Government Bond Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Capital Growth Bond Trust
Money Market Trust
Lifestyle Aggressive 1000 Trust*
Lifestyle Growth 820 Trust*
Lifestyle Growth 640 Trust*
Lifestyle Moderate 460 Trust*
Lifestyle Conservative 280 Trust*
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
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
Wellington Management Company LLP Growth and Income Trust
Investment Quality Bond Trust
Warburg Pincus Asset Management, Inc. Emerging Small Company Trust
</TABLE>
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<PAGE> 13
*Each Lifestyle Trust invests in other Trusts. The Lifestyle Trusts vary in the
portion of their assets that are invested in Trusts that invest primarily in
fixed income securities and those that invest in equity securities.
If the shares of a Trust portfolio are no longer available for investment
or in our judgment investment in a Trust portfolio becomes inappropriate, we 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, we will make no such substitution without first
notifying you and obtaining approval of the SEC (to the extent required by the
1940 Act).
YOU INSTRUCT US HOW TO VOTE TRUST SHARES.
We will vote shares of the Trust portfolios held in the Variable Account
at the Trust's shareholder meetings according to voting instructions received
from the persons having the voting interest under the contracts. We will
determine the number of portfolio shares for which voting instructions may be
given not more than 90 days prior to the meeting. Trust proxy material will be
distributed to each person having the voting interest under the contract
together with appropriate forms for giving voting instructions. We will vote all
portfolio shares that we hold (including our own shares and those we hold in the
Variable Account for contract owners) in proportion to the instructions so
received.
During the accumulation period, the contract owner has the voting interest
under a contract. During the pay-out period, the annuitant has the voting
interest under a contract. We reserve the right to make any changes in the
voting rights described above that may be permitted by the federal securities
laws, regulations or interpretations thereof.
A full description of the Trust, including the investment objectives,
policies and restrictions of, and the risks relating to investment in, each
portfolio is contained in the Trust's Prospectus which we provided you along
with this Prospectus.
DESCRIPTION OF THE CONTRACT
ACCUMULATION PERIOD PROVISIONS
INITIAL PURCHASE PAYMENTS USUALLY MUST BE AT LEAST $25,000, SUBSEQUENT ONES
AT LEAST $1,000, AND TOTAL PAYMENTS NO MORE THAN $1 MILLION (WITHOUT OUR
APPROVAL).
PURCHASE PAYMENTS
Your purchase payments are made to us at our Annuity Service Office. The
minimum initial purchase payment is $25,000. Subsequent purchase payments must
be at least $1,000 (except for qualified plans where the minimum is $30).
Purchase payments may be made at any time. We may provide for purchase payments
to be automatically withdrawn from your bank account on a periodic basis. If a
purchase payment would cause your contract value to exceed $1,000,000 or your
contract value already exceeds $1,000,000, you must obtain our approval in order
to make the payment.
If permitted by state law, we may cancel a contract at the end of any two
consecutive contract years in which no purchase payments have been made, if
both:
- the total purchase payments made over the life of the contract, less
any withdrawals, are less than $2,000; and
- the contract value at the end of such two year period is less than
$2,000.
We may vary the cancellation of contract privileges in certain states in order
to comply with state insurance laws and regulations. If we cancel your contract,
we will pay you the contract value computed as of the valuation period during
which the cancellation occurs, minus the amount of any outstanding loan and
minus 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").
You designate how your purchase payments are to be allocated among the
investment options. You may change the allocation of subsequent purchase
payments at any time by notifying us in writing (or by telephone if you
comply with our telephone transfer procedures described below).
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THE VALUE OF AN INVESTMENT ACCOUNT IS MEASURED IN "ACCUMULATION UNITS," WHICH
VARY IN VALUE WITH THE PERFORMANCE OF THE UNDERLYING TRUST PORTFOLIO.
ACCUMULATION UNITS
During the accumulation period, we will establish an "INVESTMENT account"
for you for each Variable Account investment option to which you allocate a
portion of your contract value. Amounts are credited to those investment
accounts in the form of "ACCUMULATION UNITS" (units of measure used to calculate
the value of the variable portion of your contract during the accumulation
period). The number of accumulation units to be credited to each investment
account is determined by dividing the amount allocated to that investment
account by the value of an accumulation unit for that investment account next
computed after the purchase payment is received at our 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 on the
business day (any date on which the New York Stock Exchange is open and the net
asset value of a Trust portfolio is determined) on which received at our Annuity
Service Office, and in any event not later than two business days after our
receipt of all information necessary for issuing the contract. You will be
informed of any deficiencies preventing processing if your contract cannot be
issued. If the deficiencies are not remedied within five business days after
receipt, your purchase payment will be returned promptly, unless you
specifically consent to our retaining your purchase payment until all necessary
information is received. Initial purchase payments received by wire transfer
from broker-dealers will be credited on the business day received if the
broker-dealers have made special arrangements with us.
VALUE OF ACCUMULATION UNITS
The value of your accumulation units will vary from one business day to
the next depending upon the investment results of the investment options you
select. The value of an accumulation unit for each sub-account was arbitrarily
set at $10 or $12.50 for the first business day under other contracts we have
issued. The value of an accumulation unit for any subsequent business day is
determined by multiplying the value of an accumulation unit for the immediately
preceding business day by the net investment factor for that sub-account
(described below) for the business day 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 business day to the next (the "valuation
period"). 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. 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:
- 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
- the per share amount of any dividend or capital gain
distributions made by the portfolio on shares held in the
sub-account if the "ex-dividend" date occurs during the current
valuation period.
- Where (b) is the net asset value per share of a portfolio share held in
the sub-account determined as of the end of the immediately preceding
valuation period.
- Where (c) is a factor representing the charges deducted from the
sub-account on a daily basis for administrative expenses, a portion of
the distribution expenses, and mortality and expense risks. That factor
is equal on an annual basis to 1.65% (0.25% for administrative
expenses, 0.15% for distribution expenses and 1.25% for mortality and
expense risks).
CASH VALUES MAY BE TRANSFERRED AMONG INVESTMENT OPTIONS.
TRANSFERS AMONG INVESTMENT OPTIONS
During the accumulation period, you may transfer amounts among the
investment options at any time and without charge upon written notice to us or
by telephone if you authorize us in writing to accept
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<PAGE> 15
your telephone transfer requests. Accumulation units will be canceled from the
investment account from which you transfer amounts transferred and credited to
the investment account to which you transfer amounts. Your contract value on the
date of the transfer will not be affected by a transfer. You 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
we will transfer the entire amount instead of the requested amount. We reserve
the right to limit, upon notice, the maximum number of transfers you may make to
one per month or six at any time within a contract year. In addition, we reserve
the right to defer a transfer at any time we are unable to purchase or redeem
shares of the Trust portfolios. We also reserve the right to modify or terminate
the transfer privilege at any time (to the extent permitted by applicable law).
NO MORE THAN 17 INVESTMENT OPTIONS.
MAXIMUM NUMBER OF INVESTMENT OPTIONS
You currently are limited to a maximum of seventeen investment options
(including the one year fixed account investment option) during the accumulation
period. In calculating this limit, investment options to which you have
allocated purchase payments at any time during the accumulation period will be
counted toward the seventeen maximum even if you no longer have contract value
allocated to the investment option.
TELEPHONE TRANSFERS AND WITHDRAWALS ARE PERMITTED.
TELEPHONE TRANSACTIONS
You are permitted to request transfers and withdrawals by telephone. We
will not be liable for following instructions communicated by telephone that we
reasonably believe to be genuine. To be permitted to request a transfer or
withdrawal by telephone, you must elect the option on the Application. (If you
do not initially elect an option in the Application form, you may request
authorization by executing an appropriate authorization form that we will
provide you upon request.) We 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 we fail to
employ our procedures properly. Such procedures include the following. Upon
telephoning a request, you will be asked to provide information that verifies
that it is you calling. For both your and our protection, we will tape record
all conversations with you. All telephone transactions will be followed by a
confirmation statement of the transaction. We reserve the right to impose
maximum withdrawal amounts and other new procedural requirements regarding
transfer privileges.
DOLLAR COST AVERAGING AND ASSET REBALANCING PROGRAMS ARE AVAILABLE.
SPECIAL TRANSFER SERVICES - DOLLAR COST AVERAGING
We administer a Dollar Cost Averaging ("DCA") program. If you enter into a
DCA agreement, you may instruct us 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. In states
where approved by the state insurance department, a DCA fixed account investment
option may be established under the DCA program to make automatic transfers.
Only purchase payments (and not existing contract values) may be allocated to
the DCA fixed account investment option. The DCA program is generally suitable
if you are making a substantial deposit and desire to control the risk of
investing at the top of a market cycle. The DCA program allows investments to be
made in equal installments over time in an effort to reduce that risk. If you
are interested in the DCA program, you may elect to participate in the program
on the application or by separate application. You may obtain a separate
application and full information concerning the program and its restrictions
from your securities dealer or our Annuity Service Office. There is no charge
for participation in the DCA program.
ASSET REBALANCING PROGRAM
We administer an Asset Rebalancing Program which enables you to specify
the percentage levels you would like to maintain in particular portfolios. Your
contract value will be automatically rebalanced pursuant to the schedule
described below to maintain the indicated percentages by transfers among the
portfolios. (The 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, you should monitor your use of these other programs and any other
transfers or withdrawals while the Asset
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Rebalancing Program is being used. If you are interested in the Asset
Rebalancing Program, you may obtain a separate application and full information
concerning the program and its restrictions from your securities dealer or our
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:
- 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);
- semi-annually on June 25th or December 26th (or the next business day
if these dates are not business days); or
- 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.
YOU MAY WITHDRAW ALL OR A PORTION OF YOUR CASH VALUE, BUT MAY INCUR TAX
LIABILITY AS A RESULT.
WITHDRAWALS
During the accumulation period, you may withdraw all or a portion of your
contract value upon written request (complete with all necessary information) to
our Annuity Service Office. You may make withdrawals by telephone if you have
authorized telephone withdrawals, as described above under "Telephone
Transactions." For certain qualified contracts, exercise of the withdrawal right
may require the consent of the qualified plan participant's spouse under the
Internal Revenue Code of 1986, as amended (the "CODE") and related Treasury
Department regulations. In the case of a total withdrawal, we will pay the
contract value as of the date of receipt of the request at our Annuity Service
Office, minus the annual $30 administration fee (if applicable), any unpaid
loans and any applicable withdrawal charge. The contract then will be canceled.
In the case of a partial withdrawal, we will pay the amount requested and cancel
accumulation units credited to each investment account equal in value to the
amount withdrawn from that investment account plus any applicable withdrawal
charge deducted from that investment account.
When making a partial withdrawal, you 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 minus any
applicable withdrawal charge. If you do not specify the investment options from
which a partial withdrawal is to be taken, the withdrawal will be taken from the
variable account investment options until exhausted and then from the fixed
account investment options. If the partial withdrawal is less than the total
value in the variable account investment options, the withdrawal will be taken
proportionately from all of your variable account investment options. For 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 the investment option is less than $100, we 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, we 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 our Annuity Service Office,
except that we reserve the right to defer the right of withdrawal or postpone
payments for any period when:
- the New York Stock Exchange is closed (other than customary weekend and
holiday closings),
- trading on the New York Stock Exchange is restricted,
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- 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
- 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 trading is restricted or an emergency exists.
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.
SYSTEMATIC "INCOME PLAN" WITHDRAWALS ARE AVAILABLE.
SPECIAL WITHDRAWAL SERVICES - THE INCOME PLAN
We administer an Income Plan ("IP") which permits you to pre-authorize a
periodic exercise of the contractual withdrawal rights described above. After
entering into an IP agreement, you may instruct us to withdraw a level dollar
amount from specified investment options on a periodic basis. The total of IP
withdrawals in a contract year is limited to not more than 10% of the purchase
payments made (to ensure that no withdrawal charge will ever apply to an IP
withdrawal). If an additional withdrawal is made from a contract participating
in an IP, the IP will terminate automatically and may be reinstated only on or
after the next contract anniversary pursuant to a new application. The IP is not
available to contracts participating in the dollar cost averaging program or for
which purchase payments are being automatically deducted from a bank account on
a periodic basis. IP withdrawals will be free of withdrawal charges. IP
withdrawals, like other withdrawals, may be subject to income tax and a 10%
penalty tax. If you are interested in an IP, you may obtain a separate
application and full information concerning the program and its restrictions
from your securities dealer or our Annuity Service Office. The IP program is
free.
SOME QUALIFIED CONTRACTS HAVE A LOAN FEATURE.
LOANS
We offer 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. If
you are not an owner of such a contract, none of this discussion about loans
applies to your contract. If you are an owner of such a contract, you may borrow
from us, using your contract as the only security for the loan. Loans are
subject to certain tax law restrictions and to applicable retirement program
rules (collectively, "loan rules"). You should consult your tax advisor and
retirement plan fiduciary prior to taking a loan under the contract.
The maximum loan value of a contract is normally 80% of the contract
value, although loan rules based on tax laws may serve to reduce that maximum in
some cases. The amount available for a loan at any given time is the loan value
less any unpaid prior loans. Unpaid prior loans equal the amount of any prior
loans plus interest accrued on those loans. Loans will be made only upon written
request from the owner. We will make loans within seven days of receiving a
properly completed loan application (applications are available from our Annuity
Service Office), subject to postponement under the same circumstances that
payment of withdrawals may be postponed (see "WITHDRAWALS").
When you request a loan, we will reduce your investment in the investment
accounts and transfer the amount of the loan to the "LOAN account," a part of
our general account. You 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 you
may repay unpaid loans 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. You may designate the investment accounts to which a
repayment is to be allocated. Otherwise, the repayment will be allocated in the
same manner as your most recent purchase payment. On each anniversary of the
date your contract was issued, we will transfer from the investment accounts to
the loan account the amount by which unpaid loans exceed the balance in the loan
account.
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We charge 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. We credit 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
unpaid loans under your contract exceed your contract value, your contract will
be in default. In such case you will receive a notice indicating the payment
needed to bring your 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, your contract may be terminated without value.
The amount of any unpaid loans will be deducted from the death benefit
otherwise payable under the contract. In addition, loans, whether or not repaid,
will have a permanent effect on contract value because the investment results of
the investment accounts will apply only to the unborrowed portion of the
contract value. The longer a loan is unpaid, 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 your loan account while
your loan is unpaid, your contract value will not increase as rapidly as it
would have if no loan were unpaid. If investment results are below that rate,
contract value will be greater than it would have been had no loan been
outstanding.
IF YOU DIE DURING THE ACCUMULATION PERIOD, YOUR BENEFICIARY WILL RECEIVE A
DEATH BENEFIT THAT MIGHT EXCEED YOUR CONTRACT VALUE.
DEATH BENEFIT DURING ACCUMULATION PERIOD
IN GENERAL. The following discussion applies principally to contracts that
are not issued in connection with qualified plans, i.e., "non-qualified
contracts." Tax law requirements applicable to qualified plans, and the tax
treatment of amounts held and distributed under such plans, are quite complex.
Accordingly, if your contract is to be used in connection with a qualified plan,
you 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, if you intend to use the contract in connection with a
qualified plan, you 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"). See
APPENDIX F for information on different death benefit provisions applicable to
certain prior contracts and to contracts sold in Washington and Maryland.
AMOUNT OF DEATH BENEFIT. 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 date as of which the contract was issued, the death benefit will be the
greater of:
- the contract value or
- the excess of (i) over (ii), where
- (i) equals the sum of all purchase payments made, accumulated daily
at the equivalent of 5% per year starting on the date each purchase
payment is allocated to the contract, subject to a maximum
accumulation of two times each purchase payment, and
- (ii) equals the sum of any amounts deducted in connection with
partial withdrawals, accumulated daily at the equivalent of 5% per
year starting on the date each such deduction occurs, subject to a
maximum accumulation of two times each amount deducted.
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 date as of which the
contract was issued, the death benefit will be the greater of:
- the contract value or
- the excess of the sum of all purchase payments over the sum of:
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- any amounts deducted in connection with partial withdrawals
(including amounts deducted in connection with partial withdrawals
other than annual administration fees and amounts applied under an
annuity option under the contract) and
- any amounts applied under an annuity benefit option.
If any contract owner dies and the oldest owner had an attained age
greater than 80 on the date as of which the contract was issued, the death
benefit will be the contract value less any applicable withdrawal charges at the
time of payment of benefits.
The determination of the death benefit will be made on the date we receive
written notice and "proof of death" as well as all required claims forms, at our
Annuity Service Office. No one is entitled to the death benefit until this time.
Death benefits will be paid within 7 days of that determination. Proof of death
occurs when we receive one of the following at our Annuity Service Office within
one year of the date of death:
- a certified copy of a death certificate;
- a certified copy of a decree of a court of competent jurisdiction as to
the finding of death; or
- any other proof satisfactory to us.
If there are any unpaid loans, the death benefit equals the death benefit, as
described above, minus the amount of unpaid loans (including unpaid interest).
PAYMENT OF DEATH BENEFIT. We will pay the death benefit 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:
- The beneficiary will become the contract owner.
- 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 receipt at our Annuity Service Office of
due proof of the owner's death.
- No additional purchase payments may be made.
- 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 and must be distributed immediately in a single sum.
- If the owner's spouse is the beneficiary, the spouse continues the
contract as the new owner. In such a case, the distribution rules
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, all payments made and all amounts deducted in
connection with partial withdrawals prior to the date of the first
owner's death will not be considered in the determination of the
spouse's death benefit.
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- If any contract owner dies and the oldest owner had an attained age of
less than 81 on the date as of which the contract is issued,
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 date as of which
the contract was issued, any applicable withdrawal charges will be
assessed only upon payment of the death benefit (so that if the
death benefit is paid in a subsequent year, a lower withdrawal
charge will be applicable).
If any annuitant is changed and any contract owner is not a natural
person, the entire interest in the contract must be distributed to the contract
owner within five years.
A substitution or addition of any contract owner may result in resetting
the death benefit to an amount equal to the contract value as of the date of the
change. For purposes of subsequent calculations of the death benefit prior to
the maturity date, the contract value on the date of the change 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 date of the change
will not be considered in the determination of the death benefit. No such change
in death benefit will be made if the person 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").
PAY-OUT PERIOD PROVISIONS
YOU HAVE A CHOICE OF SEVERAL DIFFERENT WAYS OF RECEIVING ANNUITY BENEFIT
PAYMENTS FROM US.
GENERAL
You or your beneficiary may elect to have any amounts that we are
obligated to pay you or your beneficiary on withdrawal or death, or as of the
maturity date, paid by means of periodic annuity benefit payments rather than in
one lump sum (subject to the distribution of death benefit provisions described
below).
Generally, we will begin paying annuity benefits under the contract on the
contract's maturity date (the first day of the pay-out period). The maturity
date is the date specified on your contract's specifications page, unless you
change that date. If no date is specified, the maturity date is the maximum
maturity date described below. The maximum maturity date is the first day of the
month following the later of the 85th birthday of the annuitant or the tenth
contract anniversary. (See APPENDIX E for contracts issued in Pennsylvania.) You
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 we
consent. 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.
You 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, we may pay the contract value, minus any unpaid loans, in one lump sum to
the annuitant on the maturity date.
ANNUITY OPTIONS
Annuity benefit payments are available under the contract on a fixed,
variable, or combination fixed and variable basis. Upon purchase of the
contract, and at any time during the accumulation period, you 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 payment acceptable to us. If an annuity option is not
selected, we will provide as a default option variable annuity payments in
proportion to the Investment Account Value of each investment option at the
maturity date, with payments to be made for a period certain of 10 years and
continuing thereafter during the lifetime of the annuitant.
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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. Because 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. Because 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. Because 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. Because 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 we are contractually
obligated to offer at all times, we currently offer the following annuity
options. We may cease offering the following annuity options at any time and may
offer other annuity options in the future.
OPTION 3: LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5, 15 OR 20 YEARS - An
Annuity with payments guaranteed for 5, 15 or 20 years and continuing
thereafter during the lifetime of the annuitant. Because 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. Because 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 the annuity tables vary with the annuitant's sex and age
and the annuity option selected (except for contracts issued in connection with
certain employer-sponsored retirement 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. See APPENDIX F for information on assumed interest
rates applicable to certain contracts no longer being issued and contracts
issued in the states of Washington and Maryland.
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ANNUITY UNITS AND THE DETERMINATION OF SUBSEQUENT VARIABLE ANNUITY PAYMENTS
Variable annuity payments after the first one will be based on the
investment performance of the sub-accounts selected during the pay-out period.
The amount of a subsequent payment is determined by dividing the amount of the
first annuity payment from each sub-account by the annuity unit value of that
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 annuity benefit payment to be made. The number of annuity units remains
constant throughout the pay-out period (assuming no transfer is made).
The value of an annuity unit for each sub-account for any business day is
determined by multiplying the annuity unit value for the immediately preceding
business day 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. If the actual net
investment performance:
- - is exactly 3% annually, annuity payments will be level;
- - exceeds 3% annually, annuity payments will increase; or
- - is less than 3% annually, annuity payments will decrease.
SOME TRANSFERS ARE PERMITTED DURING THE PAY-OUT PERIOD, BUT SUBJECT TO A FEW
MORE LIMITATIONS THAN DURING THE ACCUMULATION PERIOD.
TRANSFERS DURING THE PAY-OUT PERIOD
Once variable annuity payments have begun, you may transfer all or part of
the investment upon which those payments are based from one sub-account to
another. You must submit your transfer request to our Annuity Service Office at
least 30 days before the due date of the first annuity payment to which your
transfer 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 annuity units for the new sub-account selected. We
reserve 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, 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. We also
reserve the right to modify or terminate the transfer privilege at any time in
accordance with applicable law.
SOME ANNUITY OPTIONS HAVE A DEATH BENEFIT FEATURE.
DEATH BENEFIT DURING THE PAY-OUT PERIOD
If an annuity option providing for payments for a guaranteed period has
been selected, and the annuitant dies during the pay-out period, 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.
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OTHER CONTRACT PROVISIONS
YOU HAVE A TEN-DAY RIGHT TO CANCEL YOUR CONTRACT.
TEN DAY RIGHT TO REVIEW
You may cancel the contract by returning it to our Annuity Service Office
or agent at any time within 10 days after receiving it. Within 7 days of
receiving a returned contract, we will pay you the contract value (minus any
unpaid loans), computed at the end of the business day on which we receive your
returned contract.
No withdrawal charge is imposed upon return of a 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 state insurance laws and
regulations. 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, we will return all purchase payments if this is greater than the amount
otherwise payable.
YOU, THE "CONTRACT OWNER," ARE ENTITLED TO EXERCISE ALL RIGHTS UNDER YOUR
CONTRACT.
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
(potentially taxable) distribution of the contract value for federal tax
purposes. 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 that value as a purchase payment made on that date for purposes of
computing the amount of the death benefit.
Any change of ownership or assignment must be made in writing. We must
approve any change. Any assignment and any change, if approved, will be
effective as of the date we receive the request at our Annuity Service Office.
We assume 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 us.
THE "ANNUITANT" IS EITHER YOU OR SOMEONE YOU DESIGNATE.
ANNUITANT
The annuitant is any natural person or persons whose life is used to
determine the duration of annuity payments involving life contingencies. If the
contract owner names more than one person as an "annuitant," the second person
named shall be referred to as "co-annuitant." The annuitant is as designated on
the contract specifications page or in the application, unless changed.
On the death of the annuitant, the co-annuitant, if living, becomes the
annuitant. If there is no living co-annuitant, the owner becomes the annuitant.
In the case of certain qualified contracts, there are limitations on the ability
to designate and change the annuitant and the co-annuitant.
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THE "BENEFICIARY" IS THE PERSON YOU DESIGNATE TO RECEIVE THE DEATH BENEFIT IF
YOU DIE.
BENEFICIARY
The beneficiary is the person, persons or entity designated in the
contract specifications page (or as subsequently changed). 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 us, and (if approved) will be
effective as of the date on which written. We assume 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, Treasury Department
regulations may limit designations of beneficiaries.
MODIFICATION
We may not modify your contract without your consent, except to the extent
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.
OUR APPROVAL
We reserve the right to accept or reject any contract application at our
sole discretion.
MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL
We 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 we have 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
THE FIXED ACCOUNT INVESTMENT OPTIONS ARE NOT SECURITIES.
SECURITIES REGISTRATION. Interests in the fixed account investment
options are not registered under the Securities Act of 1933, as amended, (the
"1933 Act") and our general account is not registered as an investment company
under the 1940 Act. 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. Disclosures relating to interests in the fixed account
investment options and the general account nonetheless may be required by the
federal securities laws to be accurate.
GUARANTEE. Pursuant to a Guarantee Agreement dated March 31, 1996,
Manulife, our ultimate parent, unconditionally guarantees to us, on behalf of
and for the benefit of us and owners of fixed annuity contracts we issue, that
it will, on demand, make funds available to us for the timely payment of
contractual claims under certain of our fixed annuity contracts. This guarantee
covers the fixed portion of the contracts described in this Prospectus. The
guarantee may be terminated by Manulife, on notice to us. 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:
- the liability to pay contractual claims under the contracts is assumed
by another insurer, or
- we are sold and the buyer's guarantee is substituted for the Manulife
guarantee.
REINSURANCE. Effective June 30, 1995, we 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, we remain liable for the contractual obligations of the contracts'
fixed accounts and Peoples agrees to reimburse us for certain amounts and
obligations in connection with the fixed accounts. Peoples' contractual
liability runs solely to us, and no contract owner will have any right of action
against Peoples.
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FIXED ACCOUNT INVESTMENT OPTIONS GUARANTEE INTEREST OF AT LEAST 3%
INVESTMENT OPTIONS. A one-year fixed account investment option is
available under the contract. In addition, in states where approved by the state
insurance department, a DCA fixed investment account may be established under
the DCA program to make automatic transfers to one or more variable investment
option. Under the fixed account investment options, we guarantee 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 a fixed account investment option and any fixed annuity benefit payments will
reflect those interest and principal guarantees. We determine the guaranteed
interest rates on new amounts allocated or transferred to a fixed investment
account from time to time, according to 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 we may not change it.
INVESTMENT ACCOUNTS. You may allocate purchase payments, or make transfers
from the variable investment options, to the one-year fixed account investment
option at any time prior to the maturity date. We establish a separate
investment account each time you allocate or transfer amounts to the one-year
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, you may establish a new
investment account with a one-year guarantee period at the then current interest
rate or transfer the amounts to a variable account investment option, all
without the imposition of any charge. In the case of renewals in the last year
of the accumulation period, the only fixed account investment option available
is to have interest accrued for the remainder of the accumulation period at the
then current interest rate for one-year guarantee periods. If you do not specify
a renewal option, we will select the one-year fixed account investment option.
In the case of a renewal in the last year of the accumulation period, we will
credit interest for the remainder of the accumulation period at the then current
interest rate for one-year guarantee periods.
WITHDRAWALS AND SOME TRANSFERS FROM FIXED ACCOUNT INVESTMENT OPTIONS ARE
PERMITTED DURING THE ACCUMULATION PERIOD.
TRANSFERS. During the accumulation period, you normally may transfer
amounts from the fixed account investment option to the variable account
investment options only at the end of a guaranteed period. You may, however,
transfer amounts from fixed to variable account investment options prior to the
end of the guarantee period pursuant to the DCA program. Where there are
multiple investment accounts within the one-year fixed account investment
option, amounts must be transferred from the one-year fixed account investment
option on a first-in-first-out basis.
WITHDRAWALS. You may make total and partial withdrawals of amounts held in
the fixed account investment options at any time during the accumulation period.
Withdrawals from the 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 the fixed account
investment options:
- We reserve the right to defer payment of amounts withdrawn from the
fixed account investment options for up to six months from the date we
receive the written withdrawal request. If a withdrawal is deferred for
more than 30 days pursuant to this right, we will pay interest on the
amount deferred at a rate not less than 3% per year (or a higher rate
if required by applicable law).
- If there are multiple investment accounts under the fixed account
investment options, amounts must be withdrawn from those accounts on a
first-in-first-out basis.
If you do not specify the investment options from which a partial
withdrawal is to be taken, the partial withdrawal will be taken from the
variable account investment options until exhausted and then from the fixed
account investment options. Such withdrawals will be made from the investment
options beginning with the shortest guarantee period. Within such a 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 DCA fixed account investment option is considered to have a shorter
guarantee period than the one-year fixed account investment option.
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Withdrawals from the contract may be subject to income tax and a 10%
penalty tax. Withdrawals are permitted from contracts issued in connection with
Section 403(b) qualified plans only under limited circumstances (see "FEDERAL
TAX MATTERS" below).
LOANS. We offer 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. If you own such a contract, you may borrow from us, using your
contract as the only security for the loan, in the same manner and subject to
the same limitations as described under "LOANS" above.
FIXED ANNUITY OPTIONS. Subject to the distribution of death benefits
provisions (see "DEATH BENEFIT DURING ACCUMULATION PERIOD" above), on death,
withdrawal or the maturity date of the contract, the proceeds may be applied to
a fixed annuity option (see "ANNUITY OPTIONS" above). The amount of each fixed
annuity payment is determined by applying the portion of the proceeds (minus any
applicable premium taxes) applied to purchase the fixed annuity to the
appropriate table in the contract. If the table we are then using is more
favorable to you, we will substitute that table. We guarantee the dollar amount
of fixed annuity payments.
CHARGES. No administrative, distribution, or mortality and expense
risk charges are deducted from fixed account investment options.
CHARGES AND DEDUCTIONS
Charges and deductions under the contracts are assessed against purchase
payments, contract values or annuity payments. Currently, there are no
deductions made from purchase payments, except for premium taxes in certain
states. In addition, there are deductions from and expenses paid out of the
assets of the Trust portfolios that are described in the accompanying Prospectus
of the Trust.
SOME OLD CONTRACTS HAVE WITHDRAWAL CHARGES - NEW ONES DO NOT.
WITHDRAWAL CHARGES
If you make a withdrawal from your contract during the accumulation
period, 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 three complete contract years. No withdrawal charge will
be imposed on withdrawals from contracts issued on or after November 1, 1996.
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 three complete contract years.
In no event may the total withdrawal charges exceed 3% of the amount invested.
The amount of the withdrawal charge and when it is assessed are discussed below.
Each withdrawal from the contract is allocated first to the "free
withdrawal amount" and second to "unliquidated purchase payments." The free
withdrawal amount for any contract year is the greater of:
- the excess of the contract value on the date of withdrawal over the
unliquidated purchase payments (i.e., the accumulated earnings on
the contract), or
- the excess of (i) over (ii), where
- (i) is 10% of total purchase payments and
- (ii) is the sum of all prior partial withdrawals in that contract
year.
Withdrawals allocated to the free withdrawal amount may be withdrawn
without the imposition of a withdrawal charge. The free withdrawal amount will
be applied to a requested withdrawal, first, to withdrawals from variable
account investment options and then to withdrawals from the one-year fixed
account investment option.
If the amount of a withdrawal exceeds 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, we will liquidate purchase
payments equal to the amount of the withdrawal request which exceeds the free
withdrawal amount in the order the purchase payments were made: the oldest
unliquidated purchase payment first, the next purchase payment second, etc.,
until all purchase payments have been liquidated.
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Each purchase payment or portion thereof liquidated in connection with a
withdrawal request that has been in the contract for less than three years is
subject to a withdrawal charge of 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. In
the case of a partial withdrawal, the amount requested from an investment
account may not exceed the value of that investment account minus any applicable
withdrawal charge.
There is generally no withdrawal charge on distributions made as a result
of the death of the contract owner or, if applicable, the annuitant. In
addition, no withdrawal charges are imposed on annuity benefit payments.
The amount collected from the withdrawal charge will be used to reimburse
us for the compensation we pay to broker-dealers for selling the contracts,
preparation of sales literature and other sales-related expenses.
For examples of calculation of the withdrawal charge, see APPENDIX C.
REDUCTION OR ELIMINATION OF WITHDRAWAL CHARGES
The amount of the withdrawal charge on a contract may be reduced or
eliminated when sales of the contracts are made to individuals or to a group of
individuals in such a manner that results in savings of sales expenses. We will
determine entitlement to such a reduction in the withdrawal charge in the
following manner:
- - 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.
- - 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.
- - Any prior or existing relationship with us 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.
- - 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 our sales expenses.
- - There may be other circumstances of which we are not presently aware, which
could result in reduced sales expenses.
If, after consideration of the foregoing factors, we determine that there
will be a reduction in sales expenses, we will provide a reduction in the
withdrawal charge. The withdrawal charge will be eliminated when a contract is
issued to officers, directors or employees (or a relative thereof), of us or of
Manulife, the Trust or any of their affiliates. In no event will reduction or
elimination of the withdrawal charge be permitted where that 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. We reserve
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
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withdrawal charge as provided above. This waiver does not affect your right to
cancel your contract within the ten day right to review period. 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").
WE DEDUCT ASSET-BASED CHARGES TOTALING 1.65% ON AN ANNUAL BASIS FOR
ADMINISTRATION, DISTRIBUTION AND MORTALITY AND EXPENSE RISKS.
ADMINISTRATION FEES
A daily fee in an amount equal to 0.25% of the value of each variable
investment account on an annual basis is deducted from each sub-account as an
administration fee. The fee is designed to compensate us for administering the
contracts and operating the Variable Account. Even though administrative
expenses may increase, we guarantee that we will not increase the amount of the
administration fees.
If your contract value falls below $10,000 as a result of a partial
withdrawal, we may deduct an annual administration fee of $30 as partial
compensation for administrative expenses. The fee will be deducted on the last
day of each contract year. It will be 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 value is withdrawn on other than the last
day of any contract year, the fee will be deducted from the amount paid.
DISTRIBUTION FEE
A daily fee in an amount equal to 0.15% of the value of each variable
investment account on an annual basis is deducted from each sub-account as a
distribution fee. The fee is designed to compensate us for a portion of the
expenses we incur in selling the contracts.
MORTALITY AND EXPENSE RISK CHARGE
The mortality risk we assume is the risk that annuitants may live for a
longer period of time than we estimate. We assume this mortality risk by virtue
of annuity benefit payment rates incorporated into the contract which cannot be
changed. This assures each annuitant that his or her longevity will not have an
adverse effect on the amount of annuity benefit payments. We also assume
mortality risks in connection with our guarantee that, if the contract owner
dies during the accumulation period, we will pay a death benefit. The expense
risk we assume is the risk that the administration charges, distribution charge,
or withdrawal charge may be insufficient to cover actual expenses.
To compensate us for assuming these risks, we deduct 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. 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 assumed, we will bear the
loss. Conversely, if the charge proves more than sufficient, the excess will be
profit to us and will be available for any proper corporate purpose including,
among other things, payment of distribution expenses.
WE WILL CHARGE YOU FOR STATE PREMIUM TAXES TO THE EXTENT WE INCUR THEM AND
RESERVE THE RIGHT TO CHARGE YOU FOR NEW TAXES WE MAY INCUR.
TAXES
We reserve 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 we
determine to have resulted from our:
- establishment or maintenance of the Variable Account,
- receipt of purchase payments,
- issuance of the contacts, or
- commencement or continuance of annuity payments under the contracts.
In addition, we 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
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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 D).
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. You should consult a qualified tax advisor with regard
to the application of law to your 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 dated February 2, 1998 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 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").
This discussion does not address state or local tax consequences
associated with the purchase of a contract. In addition, WE MAKE NO GUARANTEE
REGARDING ANY TAX TREATMENT -- FEDERAL, STATE, OR LOCAL -- OF ANY CONTRACT OR OF
ANY TRANSACTION INVOLVING A CONTRACT.
OUR TAX STATUS
We are taxed as a life insurance company. Because the operations of the
Variable Account are a part of, and are taxed with, our operations, the Variable
Account is not separately taxed as a "regulated investment company" under the
Code. Under existing federal income tax laws, we are not taxed on the investment
income and capital gains of the Variable Account. We do not anticipate that we
will incur any federal income tax liability attributable to income and gains of
the Variable Account, but if we do, then we may impose a corresponding charge
against the Variable Account.
TAXATION OF ANNUITIES IN GENERAL
GAINS INSIDE THE CONTRACT ARE USUALLY TAX-DEFERRED UNTIL YOU MAKE A
WITHDRAWAL, START RECEIVING ANNUITY BENEFIT PAYMENTS, OR RECEIVE A DEATH
BENEFIT PAYMENT.
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, or in some
other form of distribution. Certain requirements must be satisfied in order for
this general rule to apply, however including:
- the contract must be owned by an individual (or treated as owned by an
individual),
- the investments of the Variable Account must be "adequately
diversified" in accordance with Treasury Department regulations,
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- we, rather than the contract owner, must be considered the owner of the
assets of our Variable Account for federal tax purposes, and
- the contract must provide for appropriate amortization, through annuity
benefit payments, of the contract's purchase payments and earnings,
e.g., the pay-out period must not commence 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) 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. This special exception will not apply, however, 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.
Exceptions to the general rule for non-natural contract owners also will
apply with respect to:
- contracts acquired by an estate of a decedent by reason of the death of
the decedent,
- certain qualified contracts,
- certain contracts purchased by employers upon the termination of
certain qualified plans,
- certain contracts used in connection with structured settlement
agreements, and
- 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 is used to purchase or carry
the contract. However, this interest deduction disallowance does not affect a
contract if the income on the contract 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 we do not control the investments of the Trust, we expect 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 insurance company 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
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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 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, we do not know what standards
will be set forth in the regulations or rulings which the Treasury Department
has stated it expects to issue. We therefore reserve the right to modify the
contract as necessary to attempt to prevent contract owners from being
considered the owners of the assets of the Variable Account.
DELAYED PAY-OUT PERIODS. If the contract's pay-out period commences (or is
scheduled to commence) 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 we 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 a 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, we impose 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.
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TAXATION OF ANNUITY BENEFIT PAYMENTS
Normally, a portion of each annuity benefit payment is taxable as ordinary
income. The taxable portion of an annuity benefit payment 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 the payment by the ratio of (a) to (b),
where:
(a)is the investment in the contract allocated to the fixed annuity
option (adjusted for any period certain or refund feature) and
(b)is 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
Amounts may be distributed from a contract because of the death of an
owner or the annuitant. During the accumulation period, death benefit proceeds
are includible in income as follows:
- if distributed in a lump sum, they are taxed in the same manner as a
full withdrawal, as described above, or
- if distributed under an annuity option, they are taxed in the same
manner as annuity payments, as described above.
During the pay-out period, 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:
- 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
- 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.
WITHDRAWALS PRIOR TO AGE 59-1/2 MAY INCUR A 10% PENALTY TAX.
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:
- received on or after the contract owner reaches age 59-1/2;
- attributable to the contract owner becoming disabled (as defined in the
tax law);
- 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);
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- 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);
- 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
- 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.
SPECIAL TAX PROVISIONS APPLY TO QUALIFIED PLANS. CONSULT YOUR TAX ADVISOR AND
PLAN FIDUCIARY PRIOR TO TAKING A LOAN.
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 ("QUALIFIED
PLANS"). Numerous special tax rules apply to the participants in qualified plans
and to the contracts used in connection with 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. Brief
descriptions of various types of qualified plans in connection with which we may
issue a contract are contained in APPENDIX G to this Prospectus.
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. (You
should always consult your tax advisor and retirement plan fiduciary prior to
exercising your loan privileges.) Both the amount of the contribution that may
be made, and the tax deduction or exclusion that you may claim for that
contribution, are limited under qualified plans. If you are considering the
purchase of a contract in connection with a qualified plan, you should consider,
in evaluating the suitability of the contract, that the contract requires a
minimum initial purchase payment of $25,000. 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
federal tax laws.
In addition, special rules apply to the time at which distributions must
commence and the form in which the distributions must be paid. For example,
failure to comply with minimum distribution requirements applicable to qualified
plans will result in the imposition of an excise tax. This excise tax generally
equals 50% of the amount by which a minimum required distribution exceeds the
actual distribution from the qualified plan. In the case of IRAs, distributions
of minimum amounts (as specified in the tax law) must generally commence by
April 1 of the calendar year following the calendar year in which the owner
attains age 70-1/2. In the case of certain other qualified plans, distributions
of such
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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:
- received on or after the contract owner reaches age 59-1/2,
- received on or after the owner's death or because of the owner's
disability (as defined in the tax law), or
- 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, the exception 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
quality for these two exceptions to the penalty tax. If you wish to take a
distribution from an IRA for these purposes, you should consult your 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, 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, we will not be bound by terms
and conditions of qualified plans to the extent those terms and conditions
contradict the contract, unless we consent.
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 person receiving
the distribution 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.
WE MAY BE REQUIRED TO WITHHOLD AMOUNTS FROM SOME PAYMENTS FOR FEDERAL INCOME TAX
PAYMENTS.
FEDERAL INCOME TAX WITHHOLDING
We will withhold and remit to the U.S. Government a part of the taxable
portion of each distribution made under a contract unless the person receiving
the distribution notifies us at or before the time of the distribution that he
or she elects not to have any amounts withheld. In certain circumstances, we 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
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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
WE MAY ADVERTISE OUR INVESTMENT PERFORMANCE.
PERFORMANCE DATA
Each of the sub-accounts may quote total return figures in its advertising
and sales materials. PAST PERFORMANCE FIGURES ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE OF ANY SUB-ACCOUNT. The sub-accounts may advertise both
"standardized" and "non-standardized" total return figures. Standardized figures
will include average annual total return figures for one, five and ten years, or
from the inception date of the relevant sub-account of the Variable Account (if
that period since inception is shorter than one of those periods).
Non-standardized total return figures also may be quoted, including figures that
do not assume redemption at the end of the time period. Non-standardized figures
may also include total return numbers from the inception date of the portfolio
or ten years, whichever period is shorter. Where the period since inception is
less than one year, the total return quoted will be the aggregate return for the
period.
Average annual total return is the average annual compounded rate of
return that equates a purchase payment to the market value of that purchase
payment on the last day of the period for which the 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 the 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 that we offer, 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.
ASSET ALLOCATION AND TIMING SERVICES
We are aware that certain third parties are offering asset allocation and
timing services in connection with the contracts. In certain cases we have
agreed to honor transfer instructions from such asset allocation and timing
services where we have received powers of attorney, in a form acceptable to us,
from the contract owners participating in the service. WE DO NOT ENDORSE,
APPROVE OR RECOMMEND SUCH SERVICES IN ANY WAY AND YOU SHOULD BE AWARE THAT FEES
PAID FOR SUCH SERVICES ARE SEPARATE AND IN ADDITION TO FEES PAID UNDER THE
CONTRACTS.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 830.105 of the Texas Government Code permits participants in the
Texas Optional Retirement Program ("ORP") to withdraw their interest in a
variable annuity contract issued under the ORP only upon:
- termination of employment in the Texas public institutions of higher
education,
- retirement,
- death, or
- the participant's attainment of age 70-1/2.
Accordingly, before any amounts may be distributed from the contract, proof must
be furnished to us that one of these four events has occurred. The foregoing
restrictions on withdrawal do not apply in the event a participant in the ORP
transfers the contract value to another contract or another qualified custodian
during the period of participation in the ORP. Loans are not available under
contracts subject to the ORP.
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WE PAY BROKERS TO SELL THE CONTRACTS.
DISTRIBUTION OF CONTRACTS
MSS is a Delaware limited liability company that we control, is the
principal underwriter of the contracts. MSS also is the investment adviser 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. (the "NASD") and is located at 73 Tremont Street, Boston,
Massachusetts 02108. 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 approximately 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. Those registered representatives will
also be our licensed insurance agents. Under the promotional agent agreement,
Wood Logan will recruit and provide sales training and licensing assistance to
those registered representatives. In addition, Wood Logan will prepare sales and
promotional materials for our approval. MSS will pay distribution compensation
to selling brokers in varying amounts which under normal circumstances are not
expected to exceed 1.25% of purchase payments plus 1% of the contract value per
year commencing one year after each purchase payment. 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
Your inquiries should be directed to our Annuity Service Office mailing
address at P.O. Box 9230, Boston, Massachusetts 02205-9230.
CONFIRMATION STATEMENTS
You will be sent confirmation statements for certain transactions in your
account. You should carefully review these statements to verify their accuracy.
Any mistakes should immediately be reported to our Annuity Service Office. If
you fail to notify our Annuity Service Office of any mistake within 60 days of
the mailing of the confirmation statement, you will be deemed to have ratified
the transaction.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or
to which the assets of the Variable Account are subject. Neither we nor MSS are
involved in any litigation that is of material importance to either, or that
relates to the Variable Account.
YEAR 2000 ISSUES
Like other business organizations and individuals, we would be adversely
affected if our computer systems and those of our service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. We are completing an assessment of the Year 2000 impact on our
systems and business processes. We believe that we will complete our Year 2000
project for all critical systems and processes by September 30, 1998, prior to
any anticipated impact on the critical systems and processes.
The date on which we believe we will complete our Year 2000 project is
based on our best estimates, based on numerous assumptions of future events.
However, there can be no guarantee that our estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer code, and other similar uncertainties.
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<PAGE> 37
APPENDIX A
SPECIAL TERMS
The following terms as used in this Prospectus have the indicated
meanings:
ACCUMULATION PERIOD - The accumulation period is the period during which
you make purchase payments to us.
ACCUMULATION UNIT - A unit of measure that is used to calculate the value
of the variable portion of the contract before the maturity date.
ANNUITANT - Any natural person or persons whose life is used to determine
the duration of annuity payments involving life contingencies. If the contract
owner names more than one person as an "annuitant," the second person named
shall be referred to as "co-annuitant." The "annuitant" and "co-annuitant" will
be referred to collectively as "annuitant." The "annuitant" is as designated on
the contract specification page or in the application, unless changed.
ANNUITY 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 the
beneficiary.
BUSINESS DAY - Any day on which the New York Stock Exchange is open for
business and the net asset value of a Trust portfolio is determined.
THE CODE - The Internal Revenue Code of 1986, as amended.
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 YEAR - The period of twelve consecutive months beginning on the
date as of which the contract is issued, or any anniversary of that date.
FIXED ANNUITY - An annuity option with payments the amount of which we
guarantee.
GENERAL ACCOUNT - All of our assets other than assets in separate accounts
such as the Variable Account.
INVESTMENT ACCOUNT - An account we establish for you which represents your
interest in an investment option during the pay-in period.
LOAN ACCOUNT - The portion of our general account that is used for
collateral for a loan.
MATURITY DATE - The date on which the pay-out period commences and we
begin to make annuity benefit payments to the annuitant. 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.
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. References in this
Prospectus to contract owners are typically by use of "you." 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.
PAY-OUT PERIOD - The pay-out period is the period when we make annuity
benefit payments to you.
A-1
<PAGE> 38
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.
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 Code.
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.
UNPAID LOANS - The unpaid amounts (including any accrued interest) of
loans some contract owners may have taken from us, using certain qualified
contracts as collateral.
VALUATION PERIOD - Any period from one business day to the next, measured
from the time on each business day that the net asset value of each portfolio is
determined.
A-2
<PAGE> 39
APPENDIX B
TABLE OF ACCUMULATION UNIT VALUES
RELATING TO THE CONTRACT
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END OF
START OF YEAR* END OF YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997 $12.500000 $8.160547 92,489.680
1998 8.160547
- ----------------------------------------------------------------------------------------------------------------------
Science & Technology
1997 $12.500000 $13.613317 355,255.526
1998 13.613317
- ----------------------------------------------------------------------------------------------------------------------
International Small Cap
1996 $12.500000 $13.465203 224,018.261
1997 13.465203 13.348864 193,834.190
1998 13.348864
- ----------------------------------------------------------------------------------------------------------------------
Emerging Small Company
1997 $12.500000 $14.537900 161,450.115
1998 14.537900
- ----------------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth
1997 $12.500000 $12.296448 270,398.951
1998 12.296448
- ----------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
1996 $12.500000 $13.188627 587,704.824
1997 13.188627 14.952186 550,309.278
1998 14.952186
- ----------------------------------------------------------------------------------------------------------------------
International Stock
1997 $12.500000 $12.620816 240,538.835
1998 12.620816
- ----------------------------------------------------------------------------------------------------------------------
Worldwide Growth
1997 $12.500000 $13.931008 163,891.807
1998 13.931008
- ----------------------------------------------------------------------------------------------------------------------
Global Equity
1994 $13.117996 $12.153179 49,050.593
1995 12.153179 12.872711 361,285.266
1996 12.872711 14.257610 622,699.384
1997 14.257610 16.941296 452,078.125
1998 16.941296
- ----------------------------------------------------------------------------------------------------------------------
Small Company Value
1997 $12.500000 $11.890948 121,356.238
1998 11.890948
- ----------------------------------------------------------------------------------------------------------------------
Equity
1994 $10.675585 $10.965867 36,324.491
1995 10.965867 15.402974 663,652.478
1996 15.402974 18.199588 1,024,727.992
1997 18.199588 21.347335 710,225.513
1998 21.347335
- ----------------------------------------------------------------------------------------------------------------------
Growth
1996 $12.500000 $13.711434 136,813.299
1997 13.711434 16.906185 432,054.497
1998 16.906185
- ----------------------------------------------------------------------------------------------------------------------
Quantitative Equity
1997 $12.500000 $16.067235 192,717.960
1998 16.067235
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE> 40
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END OF
START OF YEAR* END OF YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Blue Chip Growth
1994 $ 9.145044 $ 9.280989 18,796.455
1995 9.280989 11.551552 274,368.201
1996 11.551552 14.303631 673,370.337
1997 14.303631 17.859518 1,129,154.033
1998 17.859518
- ----------------------------------------------------------------------------------------------------------------------
Real Estate Securities
1997 $12.500000 $14.912035 194,806.572
1998 14.912035
- ----------------------------------------------------------------------------------------------------------------------
Value
1997 $12.500000 $15.019763 532,115.531
1998 15.019763
- ----------------------------------------------------------------------------------------------------------------------
International Growth & Income
1995 $10.000000 $10.528678 178,852.062
1996 10.528678 11.660474 351,591.394
1997 11.660474 11.460078 374,473.198
1998 11.460078
- ----------------------------------------------------------------------------------------------------------------------
Growth and Income
1994 $10.576574 $10.436393 24,644.881
1995 10.436393 13.263871 448,739.926
1996 13.263871 16.024067 1,043,469.657
1997 16.024067 20.936844 1,453,214.116
1998 20.936844
- ----------------------------------------------------------------------------------------------------------------------
Equity-Income
1994 $10.844086 $10.578121 31,102.019
1995 10.578121 12.870851 375,815.524
1996 12.870851 15.172018 833,362.583
1997 15.172018 19.357272 973,290.243
1998 19.357272
- ----------------------------------------------------------------------------------------------------------------------
Balanced
1997 $12.500000 $14.573591 209,560.113
1998 14.573591
- ----------------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation
1994 $10.444531 $10.303433 7,523.248
1995 10.303433 12.443644 67,382.620
1996 12.443644 13.829135 119,961.606
1997 13.829135 16.200363 57,970.102
1998 16.200363
- ----------------------------------------------------------------------------------------------------------------------
High Yield
1997 $12.500000 $13.856003 531,676.796
1998 13.856003
- ----------------------------------------------------------------------------------------------------------------------
Moderate Asset Allocation
1994 $10.269505 $10.156264 19,952.394
1995 10.156264 12.056663 205,665.149
1996 12.056663 13.039212 340,400.940
1997 13.039212 14.861563 176,904.939
1998 14.861563
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
B-2
<PAGE> 41
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END OF
START OF YEAR* END OF YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conservative Asset Allocation
1994 $10.124972 $10.050011 2,989.757
1995 10.050011 11.672867 123,692.494
1996 11.672867 12.287873 193,254.830
1997 12.287873 13.469181 98,739.766
1998 13.469181
- ----------------------------------------------------------------------------------------------------------------------
Strategic Bond
1994 $10.132498 $ 9.897404 9,621.542
1995 9.897404 11.607403 146,877.133
1996 11.607403 13.093621 470,296.507
1997 13.093621 14.293477 681,451.817
1998 14.293477
- ----------------------------------------------------------------------------------------------------------------------
Global Government Bond
1994 $10.345362 $10.262238 6,324.370
1995 10.262238 12.434811 108,887.995
1996 12.434811 13.821405 236,432.653
1997 13.821405 13.995892 542,434.525
1998 13.995892
- ----------------------------------------------------------------------------------------------------------------------
Capital Growth Bond
1997 $12.500000 $13.442339 53,588.322
1998 13.442339
- ----------------------------------------------------------------------------------------------------------------------
Investment Quality Bond
1994 $ 9.785855 $ 9.713969 5,980.272
1995 9.713969 11.417606 143,843.254
1996 11.417606 11.519237 359,256.707
1997 11.519237 12.435620 262,883.942
1998 12.435620
- ----------------------------------------------------------------------------------------------------------------------
U.S. Government Securities
1994 $10.033365 $ 9.968713 17,964.448
1995 9.968713 11.333420 218,996.714
1996 11.333420 11.522857 283,607.608
1997 11.522857 12.294922 291,264.608
1998 12.294922
- ----------------------------------------------------------------------------------------------------------------------
Money Market
1994 $10.172129 $10.290731 46,595.747
1995 10.290731 10.692803 282,116.623
1996 10.692803 11.048244 516,160.781
1997 11.048244 11.427217 1,222,689.467
1998 11.427217
- ----------------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000
1997 $12.500000 $13.635694 206,171.846
1998 13.635694
- ----------------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820
1997 $12.500000 $13.998474 223,792.942
1998 13.998474
- ----------------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640
1997 $12.500000 $14.031517 1,456,423.208
1998 14.031517
- ----------------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460
1997 $12.500000 $13.981923 486,907.289
1998 13.981923
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
B-3
<PAGE> 42
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END OF
START OF YEAR* END OF YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Conservative 280
1997 $12.500000 $13.790807 202,270.252
1998 13.790807
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 Small Company, Pilgrim Baxter Growth,
International Stock, Worldwide Growth, Quantitative Equity, Real Estate
Securities, Value, Balanced, High Yield, Capital Growth Bond where units were
first credited on January 1, 1997; Lifestyle Aggressive 1000, Lifestyle Growth
820, Lifestyle Balanced 640, Lifestyle Moderate 460, Lifestyle Conservative 280
where units were first credited on January 7, 1997 and Small Company Value where
units were first credited on October 1, 1997.
B-4
<PAGE> 43
TABLE OF ACCUMULATION UNIT VALUES
RELATING TO PRIOR CONTRACTS
(SEE APPENDIX F)
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END OF
START OF YEAR* END OF YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997 $12.500000 $ 8.160547 34,627.016
1998 8.160547
- ----------------------------------------------------------------------------------------------------------------------
Science & Technology
1997 $12.500000 $13.613317 135,733.204
1998 13.613317
- ----------------------------------------------------------------------------------------------------------------------
International Small Cap
1996 $12.500000 $13.465203 233,342.969
1997 13.465203 13.348864 450,429.209
1998 13.348864
- ----------------------------------------------------------------------------------------------------------------------
Emerging Small Company
1997 $12.500000 $14.537900 102,965.388
1998 14.537900
- ----------------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth
1997 $12.500000 $12.296448 90,240.319
1998 12.296448
- ----------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
1996 $12.500000 $13.188627 283,880.941
1997 13.188627 14.952186 958,265.084
1998 14.952186
- ----------------------------------------------------------------------------------------------------------------------
International Stock
1997 $12.500000 $12.620816 152,757.810
1998 12.620816
- ----------------------------------------------------------------------------------------------------------------------
Worldwide Growth
1997 $12.500000 $13.931008 58,673.211
1998 13.931008
- ----------------------------------------------------------------------------------------------------------------------
Global Equity
1994 $13.117996 $12.153179 49,050.593
1995 12.153179 12.872711 361,285.266
1996 12.872711 14.257610 2,854,082.412
1997 14.257610 16.941296 3,095,669.746
1998 16.941296
- ----------------------------------------------------------------------------------------------------------------------
Small Company Value
1997 $12.500000 $11.890948 64,896.994
1998 11.890948
- ----------------------------------------------------------------------------------------------------------------------
Equity
1994 $10.675585 $10.965867 36,324.491
1995 10.965867 15.402974 663,652.478
1996 15.402974 18.199588 2,871,862.671
1997 18.199588 21.347335 3,250,746.116
1998 21.347335
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
B-5
<PAGE> 44
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END OF
START OF YEAR* END OF YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth
1996 $12.500000 $13.711434 59,459.482
1997 13.711434 16.906185 241,081.231
1998 16.906185
- ----------------------------------------------------------------------------------------------------------------------
Quantitative Equity
1997 $12.500000 $16.067235 37,093.601
1998 16.067235
- ----------------------------------------------------------------------------------------------------------------------
Blue Chip Growth
1994 $ 9.145044 $ 9.280989 18,796.455
1995 9.280989 11.551552 274,368.201
1996 11.551552 14.303631 1,496,909.237
1997 14.303631 17.859518 2,019,046.153
1998 17.859518
- ----------------------------------------------------------------------------------------------------------------------
Real Estate Securities
1997 $12.500000 $14.912035 136,253.215
1998 14.912035
- ----------------------------------------------------------------------------------------------------------------------
Value
1997 $12.500000 $15.019763 189,688.364
1998 15.019763
- ----------------------------------------------------------------------------------------------------------------------
International Growth & Income
1995 $10.000000 $10.528678 178,852.062
1996 10.528678 11.660474 687,006.606
1997 11.660474 11.460078 955,856.892
1998 11.460078
- ----------------------------------------------------------------------------------------------------------------------
Growth and Income
1994 $10.576574 $10.436393 24,644.881
1995 10.436393 13.263871 448,739.926
1996 13.263871 16.024067 2,888,470.321
1997 16.024067 20.936844 3,683,351.338
1998 20.936844
- ----------------------------------------------------------------------------------------------------------------------
Equity-Income
1994 $10.844086 $10.578121 31,102.019
1995 10.578121 12.870851 375,815.524
1996 12.870851 15.172018 2,075,876.729
1997 15.172018 19.357272 2,755,727.059
1998 19.357272
- ----------------------------------------------------------------------------------------------------------------------
Balanced
1997 $12.500000 $14.573591 43,507.584
1998 14.573591
- ----------------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation
1994 $10.444531 $10.303433 7,523.248
1995 10.303433 12.443644 67,382.620
1996 12.443644 13.829135 407,378.669
1997 13.829135 16.200363 420,740.164
1998 16.200363
- ----------------------------------------------------------------------------------------------------------------------
High Yield
1997 $12.500000 $13.856003 159,593.993
1998 13.856003
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
B-6
<PAGE> 45
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END OF
START OF YEAR* END OF YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Moderate Asset Allocation
1994 $10.269505 $10.156264 19,952.394
1995 10.156264 12.056663 205,665.149
1996 12.056663 13.039212 1,358,995.894
1997 13.039212 14.861563 1,405,589.059
1998 14.861563
- ----------------------------------------------------------------------------------------------------------------------
Conservative Asset Allocation
1994 $10.124972 $10.050011 2,989.757
1995 10.050011 11.672867 123,692.494
1996 11.672867 12.287873 661,002.839
1997 12.287873 13.469181 759,271.964
1998 13.469181
- ----------------------------------------------------------------------------------------------------------------------
Strategic Bond
1994 $10.132498 $ 9.897404 9,621.542
1995 9.897404 11.607403 146,877.133
1996 11.607403 13.093621 687,006.604
1997 13.093621 14.293477 1,309,575.793
1998 14.293477
- ----------------------------------------------------------------------------------------------------------------------
Global Government Bond
1994 $10.345362 $10.262238 6,324.370
1995 10.262238 12.434811 108,887.995
1996 12.434811 13.821405 1,152,443.822
1997 13.821405 13.995892 1,043,390.432
1998 13.995892
- ----------------------------------------------------------------------------------------------------------------------
Capital Growth Bond
1997 $12.500000 $13.442339 2,797.110
1998 13.442339
- ----------------------------------------------------------------------------------------------------------------------
Investment Quality Bond
1994 $ 9.785855 $ 9.713969 5,980.272
1995 9.713969 11.417606 143,843.254
1996 11.417606 11.519237 727,979.095
1997 11.519237 12.435620 880,259.981
1998 12.435620
- ----------------------------------------------------------------------------------------------------------------------
U.S. Government Securities
1994 $10.033365 $ 9.968713 17,964.448
1995 9.968713 11.333420 218,996.714
1996 11.333420 11.522857 909,658.556
1997 11.522857 12.294922 963,718.317
1998 12.294922
- ----------------------------------------------------------------------------------------------------------------------
Money Market
1994 $10.172129 $10.290731 46,595.747
1995 10.290731 10.692803 282,116.623
1996 10.692803 11.048244 1,414,861.094
1997 11.048244 11.427217 1,688,484.012
1998 11.427217
- ----------------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000
1997 $12.500000 $13.635694 16,912.665
1998 13.635694
- ----------------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820
1997 $12.500000 $13.998474 296,965.327
1998 13.998474
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
B-7
<PAGE> 46
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END OF
START OF YEAR* END OF YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Balanced 640
1997 $12.500000 $14.031517 217,585.010
1998 14.031517
- ----------------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460
1997 $12.500000 $13.981923 143,237.634
1998 13.981923
- ----------------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280
1997 $12.500000 $13.790807 17,023.204
1998 13.790807
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Units under this series of contracts were first credited under the sub-accounts
on April 1, 1993, 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 Small Company, Pilgrim Baxter Growth, International Stock,
Worldwide Growth, Quantitative Equity, Real Estate Securities, Value, Balanced,
High Yield, Capital Growth Bond where units were first credited on January 1,
1997, Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced 640,
Lifestyle Moderate 460, Lifestyle Conservative 280 where units were first
credited on January 7, 1997 and Small Company Value where units were first
credited on October 1, 1997.
B-8
<PAGE> 47
APPENDIX C
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>
HYPOTHETICAL FREE PURCHASE
CONTRACT CONTRACT WITHDRAWAL PAYMENTS WITHDRAWAL
YEAR VALUE AMOUNT LIQUIDATED CHARGE
------------------------------------------------------------------------------------------------------------
PERCENT AMOUNT
------- ------
<S> <C> <C> <C> <C> <C>
1 55,000 5,000(a) 50,000 3% 1,500
2 50,500 5,000(b) 45,500 3% 1,365
3 60,000 10,000(c) 50,000 3% 1,500
4 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 purchase payments made under
the contract less any prior partial withdrawals in that contract year.
In the first contract year the earnings under the contract and 10% of
purchase payments both equal $5,000. Consequently, on total withdrawal
$5,000 is withdrawn free of the withdrawal charge, the entire $50,000
purchase payment is liquidated and the withdrawal charge is assessed
against such liquidated purchase payment (contract value less free
withdrawal amount).
(b) In the example for the second contract year, the accumulated earnings
of $500 is less than 10% of purchase payments, therefore the free
withdrawal amount is equal to 10% of purchase payments ($50,000 X 10% =
$5,000) and the withdrawal charge is only applied to purchase payments
liquidated (contract value less free withdrawal amount).
(c) In the example for the third contract year, the accumulated earnings of
$10,000 is greater than 10% of purchase 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 purchase payments
liquidated (contract value less free withdrawal amount).
(d) There is no withdrawal charge on any purchase payments liquidated that
have been in the contract for at least 3 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 PURCHASE
CONTRACT REQUESTED WITHDRAWAL PAYMENTS WITHDRAWAL
VALUE AMOUNT LIQUIDATED CHARGE
------------------------------------------------------------------------------------------------------------
PERCENT AMOUNT
------- ------
<S> <C> <C> <C> <C> <C>
65,000 2,000 15,000(a) 0 3% 0
49,000 5,000 3,000(b) 2,000 3% 60
52,000 7,000 4,000(c) 3,000 3% 90
44,000 8,000 0(d) 8,000 3% 240
</TABLE>
(a) The free withdrawal amount during any contract year is the greater of
the contract value less the unliquidated purchase payments (accumulated
earnings), or 10% of purchase 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 purchase payments less prior withdrawals ($5,000-0). The
amount requested ($2,000) is less than the free withdrawal amount so no
purchase payments are liquidated and no withdrawal charge applies.
(b) The contract has negative accumulated earnings ($49,000-$50,000), so
the free withdrawal amount is limited to 10% of purchase payments less
all prior withdrawals. Since $2,000 has already been withdrawn earlier
in the current contract year, the
C-1
<PAGE> 48
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 purchase payments being liquidated. The
remaining unliquidated purchase payments are $48,000.
(c) The contract has increased in value to $52,000. The unliquidated
purchase payments are $48,000 so the accumulated earnings are $4,000,
which is greater than 10% of purchase 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 purchase payments being liquidated. The
remaining unliquidated purchase 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 purchase
payments ($5,000) has already been utilized. The full amount of $8,000
will result in purchase payments being liquidated subject to a
withdrawal charge. At the beginning of the next contract year the full
10% of purchase payments would be available again for withdrawal
requests during that year.
* Effective November 1, 1996, no withdrawal charge will be imposed on
withdrawals from contracts issued on or after November 1, 1996.
C-2
<PAGE> 49
APPENDIX D
STATE PREMIUM TAXES
Premium taxes vary according to the state and are subject to change. In many
jurisdictions there is no tax at all. For current information, a tax adviser
should be consulted.
<TABLE>
<CAPTION>
TAX RATE
QUALIFIED NON-QUALIFIED
STATE CONTRACTS CONTRACTS
- ----- --------- ---------
<S> <C> <C>
CALIFORNIA........................................... .50% 2.35%
DISTRICT OF COLUMBIA................................. 2.25% 2.25%
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).
D-1
<PAGE> 50
APPENDIX E
PENNSYLVANIA MAXIMUM MATURITY AGE
For all contracts issued in Pennsylvania the maximum maturity age based upon the
issue age of the annuitant is as follows:
<TABLE>
<CAPTION>
ISSUE AGE MAXIMUM MATURITY AGE
--------- --------------------
<S> <C>
70 or less 85
71-75 86
76-80 88
81-85 90
86-90 93
91-93 96
94-95 98
96-97 99
98-99 101
100-101 102
102 103
103 104
104 105
105 106
</TABLE>
It is required that the annuitant exercise a settlement annuity
option no later than the maximum maturity age stated above. For example an
annuitant age 60 at issue must exercise a settlement option prior to the
attainment of age 86. We will use the issue age of the youngest named annuitant
in the determination of the required settlement option date.
If contracts are issued with annuitants over age 96, a withdrawal
charge could be imposed if they terminate the contract rather than elect a
settlement option upon attainment of the maximum maturity age. This is a result
of the restrictions by Pennsylvania in combination with the 3-year withdrawal
charge schedule of the contract.
E-1
<PAGE> 51
APPENDIX F
PRIOR CONTRACTS (VV CONTRACTS)
PRIOR CONTRACTS
This APPENDIX D sets forth the principal differences between the
contract offered by this Prospectus and a class of variable annuity contract
that we offer in the states of Washington and Maryland ("prior contracts" or "VV
contracts") and which were previously sold in other states during the period
April, 1993 to August, 1994. The principal differences between the contract
offered by this Prospectus and the VV contract relate to the death benefit
provisions.
DEATH BENEFIT PROVISIONS UNDER PRIOR CONTRACTS
Death of Last Surviving Annuitant (Where the Annuitant Was Not an Owner)
We will pay the minimum death benefit (minus any unpaid loans) to the
beneficiary if :
- the annuitant dies before the maturity date,
- the annuitant is not an owner,
- there is no surviving co-annuitant, and
- no owner of the contract is a non-natural person.
If any owner of the contract is a non-natural person, the death or change of any
annuitant is treated as the death of an owner. The beneficiary may elect to:
- receive payment (either as a lump sum or in
accordance with any annuity option described in the
contract) or
- continue the contract, as its owner, with the
contract value on the date due proof of death and all
required claim forms are received, equal to the
minimum death benefit.
An election to receive the minimum death benefit under an annuity option must be
made within 60 days after the date on which the death benefit first becomes
payable. In general, a beneficiary who continues the contract will nonetheless
be treated for federal income tax purposes as if he or she had received the
minimum death benefit.
Death of Owner
Deceased Owner (Who was the Last-Surviving Annuitant): We will pay the
minimum death benefit, less any unpaid loans, to the beneficiary if:
- an owner dies before the maturity date,
- the deceased owner is an annuitant, and
- there is no surviving co-annuitant.
If the contract is a non-qualified contract, after the owner's death, the
beneficiary's entire interest must be distributed within five years unless:
- the beneficiary elects to receive his or her interest as an
annuity which begins within one year of the owner's death and
is paid over the beneficiary's life or over a period not
extending beyond the beneficiary's life expectancy or
- the beneficiary is the deceased owner's surviving spouse and
elects to continue the contract, as its owner, with the
contract value on the date due proof of death and all required
claim forms are received, equal to the minimum death benefit.
An election to receive the minimum death benefit as an annuity must be made
within 60 days after the date on which the death benefit first becomes payable
If the spouse continues the contract, the distribution rules applicable when a
contract owner dies generally will apply when that spouse, as the owner, dies.
For purposes of this paragraph, in determining the minimum death benefit,
withdrawal charges (applicable when an annuitant either dies after the first of
the month following his or her 85th birthday or when the annuitant had attained
age 81 or greater on the contract date -- see "Minimum Death Benefit") will be
taken into account, but only when the minimum death benefit is paid and only if
such charges would have applied if the payment had been made to the deceased
owner at that time.
F-1
<PAGE> 52
Deceased Owner (Who was Not the Last-Surviving Annuitant and There Are
No Surviving Owners):
If:
- an owner dies before the maturity date,
- any annuitant survives, and
- there are no surviving owners,
we will transfer the interest in the contract to the successor owner. If the
contract is a non-qualified contract, after the owner's death, the successor
owner's entire interest in the contract must be distributed within five years
unless:
- the successor owner elects to receive payment of the interest
in the contract as an annuity which begins within one year of
the owner's death and is paid over the successor owner's life
or over a period not extending beyond the successor owner's
life expectancy or
- the successor owner is the deceased owner's surviving spouse
and elects to continue the contract, as its owner, with the
contract value on the date due proof of death and all required
claim forms are received, equal to the interest in the
contract.
An election to receive the interest in the contract as an annuity must be made
within 60 days after the date on which the death benefit first becomes payable.
If the spouse continues the contract, the distribution rules applicable when a
contract owner dies generally will apply when that spouse, as the owner, dies.
If the deceased contract owner had not attained age 81 on the contract date, the
interest in the contract equals the contract value. If the deceased contract
owner had attained age 81 on the contract date, the interest in the contract
also equals the contract value, but such interest may be subject to applicable
withdrawal charges when any amounts are actually paid. The successor owner's
right to the interest in the contract does not affect the annuitant designations
in the contract, although the successor owner may change such designations after
acquiring the interest in the contract.
Deceased Owner (Who was Not the Last-Surviving Annuitant and There Are
Surviving Owners):
If :
- an owner dies before the maturity date,
- any annuitant survives, and
- there is a surviving owner,
we will transfer the interest in the contract to the surviving owner. The amount
of this interest and the rights and restrictions attendant to this transfer are
the same as those described in the immediately preceding paragraph, except that
"surviving owner" should be substituted for "successor owner," wherever these
terms appear.
Non-Natural Owners: If any owner of a non-qualified contract is not an
individual, the death or change of any annuitant will be treated as the death of
an owner (who was not the last-surviving annuitant), unless the last-surviving
annuitant has actually died in which case the death will be treated as the death
of an owner (who is the last-surviving annuitant).
Application of Distributed Amounts Towards the Purchase of a New
Contract: A beneficiary, successor owner, or surviving owner, as the case may
be, may apply amounts required to be distributed towards the purchase of a new
contract. In general, if such distributed amounts are so applied, the
beneficiary, successor owner, or surviving owner will be treated for federal
income tax purposes as if he or she had received these distributed amounts.
Minimum Death Benefit
If the last surviving annuitant dies on or before the first of the
month following his or her 85th birthday and had an attained age of less than 81
years on the contract date, the minimum death benefit will be equal to the
greater of:
- the contract value on the date due proof of death and all
required claim forms are received at our Annuity Service
Office, or
- the excess of
- the sum of each purchase payment accumulated daily,
at the equivalent of 5% per year, starting on the
date each purchase
F-2
<PAGE> 53
payment is allocated to the contract, with a maximum
accumulation of two times each purchase payment, over
- the sum of each withdrawal or annuitized amount,
including any applicable withdrawal charges,
accumulated daily at a rate equivalent to 5% per
year, starting as of the date of each such withdrawal
or annuitization, with a maximum accumulation of two
times each such withdrawal or annuitization amount.
If the last surviving annuitant dies after the -first of the month
following his or her 85th birthday and had an attained age of less than 81 years
on the contract date, the minimum death benefit will be equal to the greater of:
- the contract value on the date due proof of death and all
required claim forms are received at our Annuity Service
Office, or
- the excess of:
- the sum of all purchase payments over
- the sum of any amounts deducted in connection with
partial withdrawals.
If the last surviving annuitant dies and the Annuitant had an attained
age of 81 or greater on the contract date, the minimum death benefit payable on
due proof of death and receipt of all required claim forms will equal the amount
payable on total withdrawal.
OTHER CONTRACT PROVISIONS
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.
Fixed accounts are not available in Washington state.
F-3
<PAGE> 54
APPENDIX G
QUALIFIED PLAN TYPES
Individual Retirement Annuities. Section 408 of the Code permits
eligible individuals to contribute to an individual retirement program known as
an "Individual Retirement Annuity" or "IRA." IRAs are subject to limits on the
amounts that may be contributed, the persons who may be eligible and on the time
when distributions may commence. Also, distributions from certain other types of
qualified retirement plans may be "rolled over" on a tax-deferred basis into an
IRA. 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 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 a death benefit could
be characterized as an "incidental death benefit." If so, the contract owner
could be deemed to receive currently taxable income. 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:
- contributions made pursuant to a salary reduction agreement in
years beginning after December 31, 1988,
- earnings on those contributions, and
G-1
<PAGE> 55
- 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 we are 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
contract in connection with such a plan 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:
- made after the owner attains age 59-1/2,
- made after the owner's death,
- attributable to the owner being disabled, or
- a qualified first-time 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:
- the first taxable year for which a contribution was made to
any Roth IRA established for the owner, or
- 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.
G-2
<PAGE> 56
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).
The state income tax treatment of a Roth IRA may differ from the federal income
tax treatment of a Roth IRA. If you intend to use the contract in connection
with a Roth IRA, you should seek competent federal and state tax advice.
G-3
<PAGE> 57
(Back Cover Page)
- - ADDITIONAL INFORMATION about the contract and the Variable Account is
contained in a Statement of Additional Information, dated the same date
as this Prospectus, which has been filed with the SEC. The Statement of
Additional Information is available without charge upon request by
writing us at the address on the front cover or by telephoning (800)
344-1029.
- - The SEC maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information and other information about us, the
contracts and the Variable Account.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information and History......................................... 3
Performance Data........................................................ 3
Service
Independent Auditors............................................. 15
Servicing Agent.................................................. 16
Principal Underwriter............................................ 16
Voting Interest......................................................... 16
Cancellation of Contract................................................ 17
Financial Statements.................................................... 18
</TABLE>
<PAGE> 58
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 59
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 mailing address of
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, 1999.
The Manufacturers Life Insurance Company of North America
116 Huntington Avenue
Boston, Massachusetts 02116
(617) 266-6008
(800) 344-1029
<PAGE> 60
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
General Information and History......................................... 3
Performance Data........................................................ 3
Services
Independent Auditors............................................. 15
Servicing Agent.................................................. 16
Principal Underwriter............................................ 16
Voting Interest......................................................... 16
Cancellation of Contract................................................ 17
Financial Statements.................................................... 18
2
<PAGE> 61
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 ("WE" or "US"). We are a
stock life insurance company organized under the laws of Delaware in 1979. Our
principal office is located at 116 Huntington Avenue, Boston, Massachusetts
02116. Our ultimate parent is The Manufacturers Life Insurance Company
("Manulife"), a Canadian mutual life insurance Company based in Toronto, Canada.
Prior to January 1, 1996, we were 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 20, 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.
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:
- redemption at the end of the time period, and
- not assuming redemption at the end of the time period.
Standardized figures include total return figures from:
- the inception date of the sub-account of the Variable Account
which invests in the portfolio, or
- ten years, whichever period is shorter.
Non-standardized figures include total return numbers from:
- inception date of the portfolio, or
- 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, and
distribution fees)) are reflected, and the asset charges are reflected in
changes in unit values. Standardized total return figures will be quoted
assuming redemption at the end of the period. 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. We
3
<PAGE> 62
believe 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 us, 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.)
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1998
FOR CONTACTS ISSUED PRIOR TO NOVEMBER 1, 1996
[TO BE UPDATED]
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets N/A N/A -36.37% 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Science & Technology N/A N/A 5.94 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Small Cap -3.54% N/A 2.11 3/04/96
- ----------------------------------------------------------------------------------------------------------------
Emerging Small Company N/A N/A 13.30 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -4.28 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Small/Mid Cap 10.37 N/A 8.78 3/04/96
- ----------------------------------------------------------------------------------------------------------------
International Stock N/A N/A -1.76 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 8.45 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Global Equity 15.82 12.77% 7.96 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Small Company Value N/A N/A -7.43 10/1/97
- ----------------------------------------------------------------------------------------------------------------
Equity 14.30 16.86 13.26+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Growth 20.30 N/A 21.05 7/15/96
- ----------------------------------------------------------------------------------------------------------------
Quantitative Equity N/A N/A 25.54 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Blue Chip Growth 21.86 11.26 10.96 12/11/92
- ----------------------------------------------------------------------------------------------------------------
Real Estate Securities N/A N/A 16.30 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Value N/A N/A 17.16 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Growth & Income -4.37 N/A 3.75 1/09/95
- ----------------------------------------------------------------------------------------------------------------
Growth and Income 27.66 16.96 15.33 4/23/91
- ----------------------------------------------------------------------------------------------------------------
Equity-Income 24.59 N/A 15.58 2/19/93
- ----------------------------------------------------------------------------------------------------------------
Balanced N/A N/A 13.59 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation 14.15 10.75 8.30 8/03/89
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 63
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Yield N/A N/A 7.85 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Moderate Asset Allocation 10.98 8.92 7.29 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Conservative Asset Allocation 6.63 6.77 6.00 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Strategic Bond 6.19 N/A 7.62 2/19/93
- ----------------------------------------------------------------------------------------------------------------
Global Government Bond -1.48 8.16 7.09 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Capital Growth Bond N/A N/A 4.61 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Investment Quality Bond 5.02 5.38 4.02+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
U.S. Government Securities 3.80 4.87 5.49 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Money Market 0.63 2.76 3.72+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 6.14 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 9.01 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 9.28 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 8.88 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 7.35 1/07/97
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Inception date of the sub-account of the Variable Account which invests
in the portfolio.
+ 10 year average annual return.
5
<PAGE> 64
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1998
FOR CONTACTS ISSUED PRIOR TO NOVEMBER 1, 1996
[TO BE UPDATED]
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* -36.84% N/A -9.51% 10/4/94
- ----------------------------------------------------------------------------------------------------------------
Science & Technology N/A N/A 5.94 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Small Cap -3.54 N/A 2.11 3/04/96
- ----------------------------------------------------------------------------------------------------------------
Emerging Small Company N/A N/A 13.30 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -4.28 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Small/Mid Cap 10.37 N/A 8.78 3/04/96
- ----------------------------------------------------------------------------------------------------------------
International Stock N/A N/A -1.76 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 8.45 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Global Equity 15.82 12.77% 7.96 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Small Company Value N/A N/A -7.43 10/1/97
- ----------------------------------------------------------------------------------------------------------------
Equity 14.30 16.86 13.26+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Growth 20.30 N/A 21.05 7/15/96
- ----------------------------------------------------------------------------------------------------------------
Quantitative Equity* 24.71 14.63 13.23+ 4/30/87
- ----------------------------------------------------------------------------------------------------------------
Blue Chip Growth 21.86 11.26 10.96 12/11/92
- ----------------------------------------------------------------------------------------------------------------
Real Estate Securities* 13.47 15.05 13.98+ 4/30/87
- ----------------------------------------------------------------------------------------------------------------
Value N/A N/A 17.16 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Growth & Income -4.37 N/A 3.75 1/09/95
- ----------------------------------------------------------------------------------------------------------------
Growth and Income 27.66 16.96 15.33 4/23/91
- ----------------------------------------------------------------------------------------------------------------
Equity-Income 24.59 N/A 15.58 2/19/93
- ----------------------------------------------------------------------------------------------------------------
Balanced N/A N/A 13.59 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation 14.15 10.75 8.30 8/03/89
- ----------------------------------------------------------------------------------------------------------------
High Yield N/A N/A 7.85 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Moderate Asset Allocation 10.98 8.92 7.29 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Conservative Asset Allocation 6.63 6.77 6.00 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Strategic Bond 6.19 N/A 7.62 2/19/93
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 65
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Government Bond -1.48 8.16 7.09 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Capital Growth Bond* 4.03 5.43 6.75+ 6/26/84
- ----------------------------------------------------------------------------------------------------------------
Investment Quality Bond 5.02 5.38 4.02+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
U.S. Government Securities 3.80 4.87 5.49 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Money Market 0.63 2.76 3.72+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 6.14 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 9.01 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 9.28 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 8.88 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 7.35 1/07/97
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based upon the historical
performance of the portfolio, adjusted to reflect current contract
charges. On December 31, 1996, Manulife Series Fund, Inc. merged with
the Trust. Performance for each of these sub-accounts is based on the
historical performance of the respective predecessor Manulife Series
Fund, Inc. portfolio, for periods prior to December 31, 1996.
7
<PAGE> 66
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1998
FOR CONTACTS ISSUED PRIOR TO NOVEMBER 1, 1996
[TO BE UPDATED]
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* -35.20% N/A -9.51% 10/4/94
- ----------------------------------------------------------------------------------------------------------------
Science & Technology N/A N/A 8.91 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Small Cap -0.86 N/A 3.66 3/04/96
- ----------------------------------------------------------------------------------------------------------------
Emerging Small Company N/A N/A 16.30 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -1.63 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Small/Mid Cap 13.37 N/A 10.30 3/04/96
- ----------------------------------------------------------------------------------------------------------------
International Stock N/A N/A 0.97 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 11.45 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Global Equity 18.82 12.77% 7.96 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Small Company Value N/A N/A -4.87 10/1/97
- ----------------------------------------------------------------------------------------------------------------
Equity 17.30 16.86 13.26+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Growth 23.30 N/A 22.92 7/15/96
- ----------------------------------------------------------------------------------------------------------------
Quantitative Equity* 27.71 14.63 13.23+ 4/30/87
- ----------------------------------------------------------------------------------------------------------------
Blue Chip Growth 24.86 11.26 10.96 12/11/92
- ----------------------------------------------------------------------------------------------------------------
Real Estate Securities* 16.47 15.05 13.98+ 4/30/87
- ----------------------------------------------------------------------------------------------------------------
Value N/A N/A 20.16 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Growth & Income -1.72 N/A 4.68 1/09/95
- ----------------------------------------------------------------------------------------------------------------
Growth and Income 30.66 16.96 15.33 4/23/91
- ----------------------------------------------------------------------------------------------------------------
Equity-Income 27.59 N/A 15.58 2/19/93
- ----------------------------------------------------------------------------------------------------------------
Balanced N/A N/A 16.59 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation 17.15 10.75 8.30 8/03/89
- ----------------------------------------------------------------------------------------------------------------
High Yield N/A N/A 10.85 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Moderate Asset Allocation 13.98 8.92 7.29 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Conservative Asset Allocation 9.61 6.77 6.00 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Strategic Bond 9.16 N/A 7.62 2/19/93
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 67
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Government Bond 1.26 8.16 7.09 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Capital Growth Bond* 6.94 5.43 6.75+ 6/26/84
- ----------------------------------------------------------------------------------------------------------------
Investment Quality Bond 7.96 5.38 4.02+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
U.S. Government Securities 6.70 4.87 5.49 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Money Market 3.43 2.76 3.72+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 9.11 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 12.01 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 12.28 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 11.88 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 10.35 1/07/97
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based upon the historical
performance of the portfolio, adjusted to reflect current contract
charges. On December 31, 1996, Manulife Series Fund, Inc. merged with
the Trust. Performance for each of these sub-accounts is based on the
historical performance of the respective predecessor Manulife Series
Fund, Inc. portfolio, for periods prior to December 31, 1996.
9
<PAGE> 68
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1998
FOR CONTACTS ISSUED ON OR AFTER NOVEMBER 1, 1996
[TO BE UPDATED]
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets N/A N/A -34.72% 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Science & Technology N/A N/A 8.91 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Small Cap -0.86% N/A 3.66 3/04/96
- ----------------------------------------------------------------------------------------------------------------
Emerging Small Company N/A N/A 16.30 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -1.63 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Small/Mid Cap 13.37 N/A 10.30 3/04/96
- ----------------------------------------------------------------------------------------------------------------
International Stock N/A N/A 0.97 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 11.45 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Global Equity 18.82 12.77% 7.96 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Small Company Value N/A N/A -4.87 10/1/97
- ----------------------------------------------------------------------------------------------------------------
Equity 17.30 16.86 13.26+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Growth 23.30 N/A 22.92 7/15/96
- ----------------------------------------------------------------------------------------------------------------
Quantitative Equity N/A N/A 28.54 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Blue Chip Growth 24.86 11.26 10.96 12/11/92
- ----------------------------------------------------------------------------------------------------------------
Real Estate Securities N/A N/A 19.30 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Value N/A N/A 20.16 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Growth & Income -1.72 N/A 4.68 1/09/95
- ----------------------------------------------------------------------------------------------------------------
Growth and Income 30.66 16.96 15.33 4/23/91
- ----------------------------------------------------------------------------------------------------------------
Equity-Income 27.59 N/A 15.58 2/19/93
- ----------------------------------------------------------------------------------------------------------------
Balanced N/A N/A 16.59 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation 17.15 10.75 8.30 8/03/89
- ----------------------------------------------------------------------------------------------------------------
High Yield N/A N/A 10.85 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Moderate Asset Allocation 13.98 8.92 7.29 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Conservative Asset Allocation 9.61 6.77 6.00 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Strategic Bond 9.16 N/A 7.62 2/19/93
- ----------------------------------------------------------------------------------------------------------------
Global Government Bond 1.26 8.16 7.09 3/18/88
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 69
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth Bond N/A N/A 7.54 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Investment Quality Bond 7.96 5.38 4.02+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
U.S. Government Securities 6.70 4.87 5.49 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Money Market 3.43 2.76 3.72+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 9.11 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 12.01 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 12.28 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 11.88 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 10.35 1/07/97
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Inception date of the sub-account of the Variable Account
which invests in the portfolio.
+ 10 year average annual return.
11
<PAGE> 70
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1998
FOR CONTACTS ISSUED ON OR AFTER NOVEMBER 1, 1996
[TO BE UPDATED]
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* -35.20% N/A -9.51% 10/4/94
- ----------------------------------------------------------------------------------------------------------------
Science & Technology N/A N/A 8.91 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Small Cap -0.86 N/A 3.66 3/04/96
- ----------------------------------------------------------------------------------------------------------------
Emerging Small Company N/A N/A 16.30 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -1.63 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Small/Mid Cap 13.37 N/A 10.30 3/04/96
- ----------------------------------------------------------------------------------------------------------------
International Stock N/A N/A 0.97 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 11.45 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Global Equity 18.82 12.77% 7.96 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Small Company Value N/A N/A -4.87 10/1/97
- ----------------------------------------------------------------------------------------------------------------
Equity 17.30 16.86 13.26+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Growth 23.30 N/A 22.92 7/15/96
- ----------------------------------------------------------------------------------------------------------------
Quantitative Equity* 27.71 14.63 13.23+ 4/30/87
- ----------------------------------------------------------------------------------------------------------------
Blue Chip Growth 24.86 11.26 10.96 12/11/92
- ----------------------------------------------------------------------------------------------------------------
Real Estate Securities* 16.47 15.05 13.98+ 4/30/87
- ----------------------------------------------------------------------------------------------------------------
Value N/A N/A 20.16 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Growth & Income -1.72 N/A 4.68 1/09/95
- ----------------------------------------------------------------------------------------------------------------
Growth and Income 30.66 16.96 15.33 4/23/91
- ----------------------------------------------------------------------------------------------------------------
Equity-Income 27.59 N/A 15.58 2/19/93
- ----------------------------------------------------------------------------------------------------------------
Balanced N/A N/A 16.59 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation 17.15 10.75 8.30 8/03/89
- ----------------------------------------------------------------------------------------------------------------
High Yield N/A N/A 10.85 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Moderate Asset Allocation 13.98 8.92 7.29 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Conservative Asset Allocation 9.61 6.77 6.00 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Strategic Bond 9.16 N/A 7.62 2/19/93
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 71
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Government Bond 1.26 8.16 7.09 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Capital Growth Bond* 6.94 5.43 6.75+ 6/26/84
- ----------------------------------------------------------------------------------------------------------------
Investment Quality Bond 7.96 5.38 4.02+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
U.S. Government Securities 6.70 4.87 5.49 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Money Market 3.43 2.76 3.72+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 9.11 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 12.01 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 12.28 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 11.88 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 10.35 1/07/97
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based upon the historical
performance of the portfolio, adjusted to reflect current contract
charges. On December 31, 1996, Manulife Series Fund, Inc. merged with
the Trust. Performance for each of these sub-accounts is based on the
historical performance of the respective predecessor Manulife Series
Fund, Inc. portfolio, for periods prior to December 31, 1996.
13
<PAGE> 72
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1998
FOR CONTACTS ISSUED ON OR AFTER NOVEMBER 1, 1996
[TO BE UPDATED]
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* -35.20% N/A -9.51% 10/4/94
- ----------------------------------------------------------------------------------------------------------------
Science & Technology N/A N/A 8.91 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Small Cap -0.86 N/A 3.66 3/04/96
- ----------------------------------------------------------------------------------------------------------------
Emerging Small Company N/A N/A 16.30 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -1.63 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Small/Mid Cap 13.37 N/A 10.30 3/04/96
- ----------------------------------------------------------------------------------------------------------------
International Stock N/A N/A 0.97 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 11.45 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Global Equity 18.82 12.77% 7.96 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Small Company Value N/A N/A -4.87 10/1/97
- ----------------------------------------------------------------------------------------------------------------
Equity 17.30 16.86 13.26+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Growth 23.30 N/A 22.92 7/15/96
- ----------------------------------------------------------------------------------------------------------------
Quantitative Equity* 27.71 14.63 13.23+ 4/30/87
- ----------------------------------------------------------------------------------------------------------------
Blue Chip Growth 24.86 11.26 10.96 12/11/92
- ----------------------------------------------------------------------------------------------------------------
Real Estate Securities* 16.47 15.05 13.98+ 4/30/87
- ----------------------------------------------------------------------------------------------------------------
Value N/A N/A 20.16 1/01/97
- ----------------------------------------------------------------------------------------------------------------
International Growth & Income -1.72 N/A 4.68 1/09/95
- ----------------------------------------------------------------------------------------------------------------
Growth and Income 30.66 16.96 15.33 4/23/91
- ----------------------------------------------------------------------------------------------------------------
Equity-Income 27.59 N/A 15.58 2/19/93
- ----------------------------------------------------------------------------------------------------------------
Balanced N/A N/A 16.59 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation 17.15 10.75 8.30 8/03/89
- ----------------------------------------------------------------------------------------------------------------
High Yield N/A N/A 10.85 1/01/97
- ----------------------------------------------------------------------------------------------------------------
Moderate Asset Allocation 13.98 8.92 7.29 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Conservative Asset Allocation 9.61 6.77 6.00 8/03/89
- ----------------------------------------------------------------------------------------------------------------
Strategic Bond 9.16 N/A 7.62 2/19/93
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 73
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Government Bond 1.26 8.16 7.09 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Capital Growth Bond* 6.94 5.43 6.75+ 6/26/84
- ----------------------------------------------------------------------------------------------------------------
Investment Quality Bond 7.96 5.38 4.02+ 6/18/85
- ----------------------------------------------------------------------------------------------------------------
U.S. Government Securities 6.70 4.87 5.49+ 3/18/88
- ----------------------------------------------------------------------------------------------------------------
Money Market 3.43 2.76 3.72 6/18/85
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 9.11 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 12.01 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 12.28 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 11.88 1/07/97
- ----------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 10.35 1/07/97
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based upon the historical
performance of the portfolio, adjusted to reflect current contract
charges. On December 31, 1996, Manulife Series Fund, Inc. merged with
the Trust. Performance for each of these sub-accounts is based on the
historical performance of the respective predecessor Manulife Series
Fund, Inc. portfolio, for periods prior to December 31, 1996.
* * * * *
In addition to the non-standardized returns quoted above, each of the
sub-accounts may from time to time quote aggregate non-standardized total
returns calculated in the same manner as set forth above for other time periods.
From time to time the Trust may include in its advertising and sales literature
general discussions of economic theories, including but not limited to,
discussions on how demographic and political trends can affect the financial
markets. Further, the Trust may also include in its advertising and sales
literature specific information on each of the Trust's subadvisers, including
but not limited to, research capabilities of a subadviser, assets under
management, information relating to other clients of a subadviser, and other
generalized information.
SERVICES
INDEPENDENT AUDITORS
The financial statements of the Company and the Variable Account at
December 31, 1998 and 1997 and for the years then 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 reports given upon the authority
of such firm as experts in accounting and auditing.
Our financial statements which are included in this Statement of
Additional Information should be considered only as bearing on our ability to
meet our obligations under the contracts. They should not be considered as
bearing on the investment performance of the assets held in the Variable
Account.
15
<PAGE> 74
SERVICING AGENT
Computer Sciences Corporation Financial Services Group ("CSC FSG")
provides to us 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 transaction
- 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.
We pay CSC FSG approximately $[7.80] per policy per year, plus certain other
fees for the services provided.
PRINCIPAL UNDERWRITER
Manufacturers Securities Services, LLC ("MSS"), the successor to NASL
Financial Services, Inc., a Delaware limited liability partnership controlled by
us, 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 1998 and 1997 was $[ ] and $29,615,342 respectively. The aggregate
dollar amount of underwriting commissions paid to NASL Financial Services, Inc.
in 1997 and 1996 were $75,864,399 and $83,031,288, respectively. MSS did not
retain any of these amounts during such periods.
VOTING INTEREST
As stated in the prospectus, we will vote shares of the Trust portfolios
held in the Variable Account at the Trust's shareholder meetings according to
voting instructions received from the persons having the voting interest under
the contracts.
Accumulation Period. During the accumulation period, the contract owner
has the voting interest under a contract. The number of votes for 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.
Pay-out Period. During the pay-out period, the annuitant has the voting
interest under a contract. 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. We will determine the number of
portfolio shares for which voting instructions may be given not more than 90
days prior to the meeting.
16
<PAGE> 75
CANCELLATION OF CONTRACT
We may, at our option, cancel a contract at the end of any two
consecutive contract years in which no purchase payments by or on behalf of you,
have been made, if both:
- the total purchase payments made for the contract, less any
withdrawals, are less than $2,000; and
- the contract value at the end of such two year period is less
than $2,000.
We, as a matter of administrative practice, will attempt to notify you prior to
such cancellation in order to allow you 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.
17
<PAGE> 76
FINANCIAL STATEMENTS
[ To by provided by amendment ]
18
<PAGE> 77
PART C
OTHER INFORMATION
<PAGE> 78
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 - Incorporated by reference to
Exhibit (b)(1)(i) to Form N-4, file number
33-76162, filed February 25, 1998.
(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)(i)(iii) to post-effective
amendment no. 3 to Form N-4 filed February
28, 1997.
(iv) Resolution of the Board of Directors of
North American Security Life Insurance
Company redesignating existing sub-accounts
and dividing the NASL Variable Account to
create additional sub-accounts, dated
September 30, 1996 --Previously filed as
Exhibit (b)(1)(iv) to post-effective
amendment no. 3 to Form N-4 filed February
28, 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 --Incorporated by
reference to Exhibit (b)(1)(v) to Form N-4,
file number 33-76162, February 25, 1998.
(2) Agreements for custody of securities and similar
investments - Not Applicable.
(3) (i) Underwriting Agreement between North
American Security Life Insurance Company
(Depositor) and NASL Financial Services,
Inc. (Underwriter) -- Incorporated by
reference to Exhibit (b)(3)(i) to Form N-4,
file number 33-76162, February 25, 1998.
<PAGE> 79
(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 February 28, 1997.
(iii) Amendment to Promotional Agent Agreement -
Incorporated by reference to Exhibit
(b)(3)(iii) to Form N-4, file number
33-76162, February 25, 1998.
(iv) Form of Selling Agreement between The
Manufacturers Life Insurance Company of
North America, Manufacturers Securities
Services, LLC, Selling Broker-Dealer and
General Agent -- Incorporated by reference
to Exhibit (b)(3)(iv) to Form N-4, file
number 33-76162, filed February 25, 1998.
(4) (i)(A) Specimen Flexible Purchase Payment
Individual Deferred Variable Annuity
Contract, Non-Participating (VIS25) -
Previously filed as Exhibit (b)(4)(i)(A) to
post-effective amendment no. 4 to Form N-4
filed February 26, 1998.
(i)(B) Specimen Flexible Purchase Payment
Individual Deferred Variable Annuity
Contract, Non-Participating (VV) -
Previously filed as Exhibit (b)(4)(i)(B) to
post-effective amendment no. 4 to Form N-4
filed February 26, 1998.
(ii) Specimen Fixed Account Endorsement to
Flexible Purchase Payment Individual
Deferred Variable Annuity Contract,
Non-Participating (END.007.98) Previously
filed as Exhibit (b)(4)(ii) to
post-effective amendment no. 4 to Form N-4
filed February 26, 1998.
(iii) Specimen Individual Retirement Annuity
Endorsement to Flexible Purchase Payment
Individual Deferred Variable Annuity
Contract, Non-Participating
(ENDORSEMENT.001) - Previously filed as
Exhibit (b)(4)(iii) to post-effective
amendment no. 4 to Form N-4 filed February
26, 1998.
(iv) Specimen ERISA Tax-Sheltered Annuity
Endorsement to Flexible Purchase Payment
Individual Deferred Variable Annuity
Contract, Non-Participating (END.002.97) -
Previously filed as Exhibit (b)(4)(iv) to
post-effective amendment no. 4 to Form N-4
filed February 26, 1998.
(v) Specimen Tax-Sheltered Annuity Endorsement
to Flexible Purchase Payment Individual
Deferred Variable Annuity Contract,
Non-Participating (END.003.97) - Previously
filed as Exhibit (b)(4)(v) to post-effective
amendment no. 4 to Form N-4 filed February
26, 1998.
(vi) Specimen Qualified Plan Endorsement Section
401 Plans to Flexible Purchase Payment
Individual Deferred Variable Annuity
Contract, Non-Participating (END.004.97) -
Previously filed as Exhibit (b)(4)(vi) to
post-effective amendment no. 4 to Form N-4
filed February 26, 1998.
<PAGE> 80
(5) (i) Specimen Application for Flexible Purchase
Payment Individual Deferred Combination
Fixed and Variable Annuity Contract,
Non-Participating (VIS25) - Previously filed
as Exhibit (b)(5)(i) to post-effective
amendment no. 4 to Form N-4 filed February
26, 1998.
(ii) Specimen Application for Flexible Purchase
Payment Individual Deferred Variable Annuity
Contract, Non-Participating (VV) -
Previously filed as Exhibit (b)(5)(ii) to
post-effective amendment no. 4 to Form N-4
filed February 26, 1998.
(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.
(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.
(vii) Amended and Restated By-laws 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 - Reinsurance and Accounts
Receivable Agreements between North American
Security Life Insurance Company and ITT
Lyndon Life, effective December 31, 1993,
and Amendments thereto effective January 1,
1994 and December 31, 1994 -- Incorporated
by reference to Exhibit (b)(7)(i) to Form
N-4, file number 33-76162, filed February
25, 1998.
<PAGE> 81
(ii)(A) Contract of reinsurance in connection with
the variable annuity contracts being offered
- Variable Annuity Guaranteed Death Benefit
Reinsurance Contract between North American
Security Life Insurance Company and
Connecticut General Life Insurance Company,
effective July 1, 1995 (VIS25) - Previously
filed as Exhibit (b)(7)(ii) to
post-effective amendment no. 2 to Form N-4
filed March
1, 1996.
(ii)(B) Contract of reinsurance in connection with
the variable annuity contracts being offered
- Variable Annuity Guaranteed Death Benefit
Reinsurance Contract between North American
Security Life Insurance Company and
Connecticut General Life Insurance Company,
effective July 1, 1995 (VV) - Previously
filed as Exhibit (b)(7)(ii) to
post-effective amendment no. 2 to Form N-4
filed March
1, 1996.
(iii) Contract of reinsurance in connection with
the variable annuity contracts being offered
- Contract between North American Security
Life Insurance Company and Swiss Re America,
effective August 1, 1995 - Previously filed
as Exhibit (b)(7)(iii) to post-effective
amendment no. 2 to Form N-4 filed March
1, 1996.
(iv) CONTRACT OF REINSURANCE IN CONNECTION WITH
THE VARIABLE ANNUITY CONTRACTS BEING OFFERED
- CONTRACT BETWEEN THE MANUFACTURERS LIFE
INSURANCE COMPANY OF NORTH AMERICA AND
MANULIFE REINSURANCE CORPORATION (USA),
EFFECTIVE JULY 1, 1998 - 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. 3 to Form N-4 filed February
28, 1997.
(9) (i) Opinion of Counsel and consent to its
use as to the legality of the securities
being registered (VIS25) -- Previously filed
as Exhibit (b)(9)(i) to post-effective
amendment no. 4 to Form N-4 filed February
26, 1998.
(ii) Opinion of Counsel and consent to its use as
to the legality of the securities being
registered (VV) - Previously filed as
Exhibit (b)(9)(ii) to post-effective
amendment no. 4 to Form N-4 filed February
26, 1998.
(10) Written consent of Ernst & Young LLP, independent
auditors - TO BE FILED BY AMENDMENT.
(11) All financial statements omitted from Item 23,
Financial Statements - Not Applicable
(12) Agreements in consideration for providing initial
capital between or among Registrant, Depositor,
Underwriter or initial contract owners -- Not
Applicable.
<PAGE> 82
(13) Schedule for computation of each performance
quotation provided in the Registration Statement in
response to Item 21 -- Incorporated by reference to
Exhibit (b)(13) to Form N-4, 33-76162 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) --
Incorporated by reference to Exhibit
(b)(15)(ii) to Form N-4, file number
33-76162, filed April 29, 1997.
(ii) Power of Attorney - David W. Libbey
(Principal Financial Officer of 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) -- Incorporated by
reference to Exhibit (b)(15)(iii) to Form
N-4, file number 33-76162, filed February
25, 1998.
Item 25. Directors and Officers of the Depositor.
OFFICERS AND DIRECTORS OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH
AMERICA
<TABLE>
<CAPTION>
Name and Principal
Business Address Position with Manulife North America
<S> <C>
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
ROBERT BOYDA VICE PRESIDENT, INVESTMENT MANAGEMENT SERVICES
73 Tremont Street
Boston, MA 02108
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION WITH MANULIFE NORTH AMERICA
<S> <C>
James Boyle Vice President, Institutional Markets
73 Tremont Street
Boston, Ma 02108
James D. Gallagher Vice President, Secretary and General Counsel
73 Tremont Street
Boston, Ma 02108
Cindy Granata Vice President, Information Systems
116 Huntington Avenue
Boston, Ma 02116
Bill Hayward Vice President, Administration
116 Huntington Avenue
Boston, Ma 02116
David W. Libbey Vice President, Treasurer & Chief
73 Tremont Street Financial Officer
Boston, Ma 02108
Hugh McHaffie Vice President, U.s. Annuities and Product
73 Tremont Street Development
Boston, Ma 02108
Janet Sweeney Vice President, Corporate Services
73 Tremont Street
Boston, Ma 02108
John G. Vrysen Vice President & Chief Actuary
73 Tremont Street
Boston, Ma 02108
</TABLE>
Item 26. Persons Controlled by or Under Common Control with Depositor or
Registrant.
THE MANUFACTURERS LIFE INSURANCE COMPANY
Manulife Corporate Organization as at December 31, 1997
The Manufacturers Life Insurance Company (Canada)
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%)
<PAGE> 84
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%)
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%)
<PAGE> 85
(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%)
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%)
Item 27. Number of Contract Owners.
As of November 30, 1998, there were __________ qualified and _________
non-qualified contracts for VIS25 and _______ qualified and ____________
non-qualified contracts for VV of the series offered hereby outstanding.
Item 28. Indemnification.
Article 9 of the Articles of Incorporation of the Company provides as follows:
NINTH: A director of this corporation shall not be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
except to the extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended. Any repeal or modification of the foregoing
sentence shall not adversely affect any right or protection of a director of the
corporation existing hereunder with respect to any act or omission occurring
prior to such repeal or modification.
Article XIV of the By-laws of the Company provides as follows:
<PAGE> 86
Each Director or officer, whether or not then in office, shall be
indemnified by the Company against all costs and expenses reasonably incurred by
or imposed upon him or her, including legal fees, in connection with or
resulting from any claim, action, suit or proceeding, whether civil, criminal or
administrative, in which he or she may become involved as a party or otherwise,
by reason of his or her being or having been a Director or officer of the
Company.
(1) Indemnity will not be granted to any Director or officer with
respect to any claim, action, suit or proceeding which shall be brought against
such Director or officer by or in the right of the Company, and
(2) Indemnification for amounts paid and expenses incurred in settling
such action, claim, suit or proceeding, will not be granted, until it shall be
determined by a disinterested majority of the Board of Directors or by a
majority of any disinterested committee or group of persons to whom the question
may be referred by the Board, that said Director or officer did indeed act in
good faith and in a manner he or she reasonably believed to be in, or not
adverse, to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonably cause to believe that his or her
conduct was legal, and that the payment of such costs, expenses, penalties or
fines is in the interest of the Company, and not contrary to public policy or
other provisions of law.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendre or its equivalent, shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he or she reasonably believed to be in, or not adverse, to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Indemnification shall be made by the corporation upon determination by a
disinterested majority of the Board of Directors or of a majority of any
disinterested committee or group or persons to 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
<PAGE> 87
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:
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
a. 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
The Manufacturers Life Insurance Principal Underwriter
Company of New York Separate
Account B
<PAGE> 88
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> 89
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 14th day of December, 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 and the
Investment Company Act of 1940, the Depositor has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned on the
14th day of December, 1998 in the City of Boston, and Commonwealth of
Massachusetts.
The Manufacturers Life Insurance
Company of North America
(Depositor)
By: JOHN D. DESPREZ III
John D. DesPrez III, President
Attest:
/s/JAMES D. GALLAGHER
James D. Gallagher, Secretary
<PAGE> 90
As required by the Securities Act of 1933, this amended Registration
Statement has been signed by the following persons in the capacities with the
Depositor as indicated on this 14th day of December, 1998.
SIGNATURE TITLE
/s/ JOHN D. DESPREZ III Director and President
------------------------ (Principal Executive
John D. DesPrez III Officer)
* Director
------------------------
Peter S. Hutchison
* Director and Chairman
------------------------ of the Board
John D. Richardson
/s/ DAVID W. LIBBEY Vice President, Treasurer
------------------------ and Chief Financial Officer
David W. Libbey (Principal Financial
Officer)
*By: /s/ JAMES D. GALLAGHER
----------------------
James D. Gallagher
Attorney-in-Fact
Pursuant to Powers
of Attorney
<PAGE> 91
EXHIBIT INDEX
Exhibit No. Description
b(7)(iv) Contract of reinsurance in connection with the
variable annuity contracts being offered - Contract
between The Manufacturers Life Insurance Company of
North America and Manulife Reinsurance Corporation
(USA), effective July 1, 1998
<PAGE> 1
VARIABLE ANNUITY REINSURANCE AGREEMENT
Effective Date of July 1, 1998
Between
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
(Boston, Massachusetts)
and
MANULIFE REINSURANCE CORPORATION (U.S.A)
(Bloomfield Hills, Michigan)
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
- 1 -
<PAGE> 2
VARIABLE ANNUITY REINSURANCE AGREEMENT
between
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
and
MANULIFE REINSURANCE CORPORATION (U.S.A)
INDEX
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<S> <C> <C>
Access to Records XII 8
Amounts at Risk II 3
Arbitration XVII 11
Automatic Excess Reinsurance III 4
Claims VII 6
Currency XIV 9
DAC Tax Regulation Election XVIII 12
Delays, Errors, or Omissions XIII 9
Effective Date; Term and Termination XIX 12
Extra Contractual Obligations IX 7
Hold Harmless XV 10
Insolvency XVI 10
Liability of Manulife Reinsurance IV 4
Litigation X 8
Notices XX 14
Offset XI 8
Parties to the Agreement I 3
Premium Accounting VI 5
Reinsurance Premiums V 5
Reserves VIII 7
</TABLE>
SCHEDULES
A Maximum Limits of Reinsurance in Manulife Reinsurance
B Contracts and Funds Subject to this Reinsurance Agreement
C Limits and Rules of MNA
D Reinsurance Premium Rates and Calculation Criteria
E Quarterly Reporting Format
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
-2-
<PAGE> 3
VARIABLE ANNUITY REINSURANCE AGREEMENT
(hereinafter called Agreement)
between
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
(hereinafter called MNA)
and
MANULIFE REINSURANCE CORPORATION (U.S.A.)
(hereinafter called Manulife Reinsurance)
It is agreed by the two companies as follows:
ARTICLE I - PARTIES TO THE AGREEMENT
This Agreement shall be binding upon and shall inure solely to the benefit of
MNA and Manulife Reinsurance. This Agreement shall not and is not intended to
create any right or interest in any third party and shall not and is not
intended to create any legal relationship between either party and any third
party, including, without limitation, annuitants, insureds, certificate or
contract holders, employees, dependents, beneficiaries, policy owners,
applicants or assignees under any policy or contract issued by MNA.
ARTICLE II - AMOUNTS AT RISK
A. The Guaranteed Minimum Death Benefit (GMDB) reinsurance benefit, on the
Contract Forms identified in Schedule B, is the excess of the guaranteed
minimum death benefit over the account value, as defined in Schedule A.
B. At issue, MNA will cede to Manulife Reinsurance and Manulife Reinsurance
will reinsure and fully indemnify MNA for 100% of all new issues of the
Guaranteed Minimum Death Benefit, as defined in (A) above, subject to the
following conditions:
- MNA will cede and Manulife Reinsurance will accept 50% of the
Guaranteed Minimum Death Benefit on Venture Vantage and Venture
Vision issued on or after July 1, 1998 and prior to August 1, 1998.
- MNA will cede and Manulife Reinsurance will accept 100% of the
Guaranteed Minimum Death Benefit on Venture Vantage and Venture
Vision issued on or after August 1, 1998.
- MNA will cede and Manulife Reinsurance will accept 100% of the
Guaranteed Minimum Death Benefit on Manulife Rollover issued on or
after July 1, 1998.
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
-3-
<PAGE> 4
C. The Contract Value represents the owner's invested assets in the funds in
Schedule B as it appears in the records of MNA before application of any
surrender charges, on any given date.
ARTICLE III - AUTOMATIC EXCESS REINSURANCE
A. On and after the Effective Date of this Agreement, subject to the limits
of Manulife Reinsurance's liability set forth in Schedule A and all other
terms, conditions and limitations set forth in this Agreement and the
Schedules attached to and made a part hereof, MNA shall cede and Manulife
Reinsurance shall accept the percentage liability on the GMDB of MNA under
the Variable Annuity Contracts, as described in Article II.
B. This Agreement covers only MNA'S liability for claims paid under Variable
Annuity Contracts written on forms and investment in funds which were
reviewed by Manulife Reinsurance prior to their issuance. Forms, as
supplemented by additional materials, and funds available as of the date
of this Agreement are listed on Schedule B. If MNA intends to cede to
Manulife Reinsurance liability with respect to a new form or fund, or a
revised version of an approved form or fund, it must provide to Manulife
Reinsurance written notice of such intention together with a copy of the
proposed form, fund or revision, and a revised Schedule B. Upon receipt of
such notification, Manulife Reinsurance then has the obligation to notify
MNA within 10 days of its decision to accept or not accept the reinsurance
risk for such a revision. Should Manulife Reinsurance not respond within
10 days, it shall be deemed that Manulife Reinsurance agrees to accept
such revision.
C. MNA shall provide written notice to Manulife Reinsurance of any changes in
its published limits and rules identified on Schedule C, and Manulife
Reinsurance shall have no liability pursuant to revised limits and rules
unless and until Manulife Reinsurance provides written notice to MNA that
such revised limits and rules are acceptable.
ARTICLE IV - LIABILITY OF MANULIFE REINSURANCE
Manulife Reinsurance's liability for reinsurance under this Agreement shall
follow that of MNA in every case, and be subject in all respects to the general
stipulations, terms, clauses, conditions, waivers and modifications of the
Variable Annuity Contracts.
In no event shall Manulife Reinsurance have any reinsurance liability unless the
Variable Annuity Contract issued by MNA is in force and the underwriting and
issuance of coverage by MNA constitutes the doing of business in a state of the
United States of America in which MNA is properly licensed and authorized to do
business.
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ARTICLE V - REINSURANCE PREMIUMS
Premiums rates for reinsurance on new issues of the GMDB through June 30, 2001,
subject to the terms and conditions of this Agreement, are guaranteed while the
reinsurance coverage is in effect per Article XIX. Premiums for reinsurance
shall be paid in advance on a quarterly basis and shall be determined by the
application of the rates set forth in Schedule D to the amount of reinsurance
coverage provided for each annuity insured by MNA as calculated based on the
criteria defined in Schedule D.
ARTICLE VI - PREMIUM ACCOUNTING
A. On or before the Due Date (as defined in Paragraph B), MNA shall forward
to Manulife Reinsurance its statement of account as set forth in Schedule
E together with its remittance for the net amount due as shown therein as
well as any premium adjustments from the prior quarter. If the statement
shows a balance due MNA, Manulife Reinsurance shall remit that amount to
MNA on or before the Remittance Date (the date occurring thirty days after
the Due Date). If the amounts described in Article VI cannot be determined
by the Due Dates set forth in Article VI, on an exact basis, such payments
will be made with a generally agreed upon formula which will approximate
the actual payments. Adjustments will then be made to reflect actual
amounts when they become available.
B. For the purposes of this Agreement the Due Date for Manulife Reinsurance's
receipt of the statement of account and premium due is the thirtieth day
following the close of any reporting period. The payment of reinsurance
premiums in accordance with the provisions herein shall be a condition
precedent to the liability of Manulife Reinsurance for reinsurance covered
by this Agreement. In the event that reinsurance premiums are not received
by Manulife Reinsurance as of the Due Date following the close of the
reporting period in which they fall due, Manulife Reinsurance will notify
MNA that such premiums are due and unpaid, and MNA will remit the premium
on or before the Remittance Date. In the event that the premiums are not
paid by the Remittance Date, Manulife Reinsurance shall have the right to
give MNA notice of termination of such reinsurance immediately.
C. If reinsurance is terminated as provided in paragraph B, and if all
reinsurance premiums in default and any additional charges due in
accordance with this Agreement, including such premiums and charges which
may become in default are not paid by the Remittance Date, Manulife
Reinsurance shall thereupon be relieved automatically of future liability
under all reinsurance for which premiums and other charges remain unpaid.
New and existing Reinsurance for which premiums subsequently fall due will
terminate automatically if reinsurance premiums are not paid when due as
provided in paragraph B of this Article. The reinsurance so terminated may
be reinstated at any time within sixty days of the date of termination
upon payment of all reinsurance premiums and other charges in arrears; but
in the
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event of such reinstatement, Manulife Reinsurance shall have no liability
in connection with any claims incurred between the date of termination and
the date of reinstatement of the reinsurance without prior written consent
of Manulife Reinsurance.
D. Not withstanding termination of reinsurance as provided herein, MNA shall
continue to be liable to Manulife Reinsurance for all unpaid reinsurance
premiums earned by Manulife Reinsurance under this Agreement. Such
premiums are subject to an annual interest charge as specified in Article
XIX.
ARTICLE VII - CLAIMS
MNA is solely responsible for payment of its claims under the Policies
identified on Schedule B.
MNA shall provide Manulife Reinsurance with proof of claim, proof of claim
payment and any other claim documentation requested by Manulife Reinsurance in
accordance with Schedule E. Payment of reinsurance shall be made by Manulife
Reinsurance in one sum regardless of the method of payment by MNA and within
thirty (30) calendar days following receipt of required claim documentation.
MNA shall notify Manulife Reinsurance of its intention to contest or deny a
claim which may involve the reinsurance coverage under this Agreement before any
notice of contest or denial is provided to the claimant. Manulife Reinsurance
shall then have thirty (30) calendar days within which to advise MNA whether it
agrees that the claim should be contested or denied. If Manulife Reinsurance
does not agree that the claim should be contested or denied, then it shall pay
to MNA the full amount of the reinsurance on the risk reinsured, as set forth in
this Agreement, and Manulife Reinsurance shall have no further obligation in
respect to such claim. If Manulife Reinsurance agrees that the claim should be
contested or denied, then Manulife Reinsurance shall pay its share of the
following in accordance with its share of liability as set forth in this
Agreement:
- Expenses incurred by MNA in investigating, contesting litigating or
otherwise resisting the Claim, excluding salaries and expenses of
employees, officers and agents of MNA and ordinary expenses of MNA,
and costs of third party administrators acting on behalf of MNA; and
- Interest which is paid by MNA in respect of the Claim.
If the denial of a Claim results in an award verdict or judgment against MNA,
where Manulife Reinsurance has agreed with the claim denial and MNA intends to
appeal the verdict or judgment, written notice of the intention to appeal shall
be provided to Manulife Reinsurance. Manulife Reinsurance shall be entitled at
that time to pay its share of the judgment, together with any expenses and
interest as set forth above, and to have no further obligation in connection
with such
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Claim. If Manulife Reinsurance does not pay its share of the judgment and any
expenses and interest due at that time, Manulife Reinsurance shall pay its share
of the expenses associated with the appeal of the judgment or verdict, together
with its share of any additional interest charges that may accrue during the
appeal.
ARTICLE VIII - RESERVES
The reserve held by Manulife Reinsurance for reinsurance of the variable annuity
death benefit will be determined in accordance with the NAIC Actuarial Guideline
XXXIV, but in no event less than the recognized statutory required reserve.
ARTICLE IX - EXTRA CONTRACTUAL OBLIGATIONS
A. In no event shall Manulife Reinsurance be liable for extra contractual
damages (whether they constitute Compensatory damages, Statutory
penalties, Exemplary or Punitive damages) which are awarded against MNA as
a result of an act, omission or course of conduct by MNA in connection
with policies subject to this Agreement, unless Manulife Reinsurance shall
have received notice in writing of and concurred with the actions taken or
not taken by MNA which led to its liability, in which case Manulife
Reinsurance shall pay its share of such liability. For this purpose,
Manulife Reinsurance's share shall be proportionate with its risk under
the business reinsured hereunder.
B. The following definitions shall apply:
(1) Punitive damages and Exemplary damages are those damages awarded as
a penalty, the amount of which is not governed nor fixed by statute.
(2) Statutory penalties are those amounts which are awarded as a penalty
but fixed in amount by statute.
(3) Compensatory damages are those amounts awarded to compensate for the
actual damages sustained and are not awarded as a penalty nor fixed
in amount by statute.
ARTICLE X - LITIGATION
In the event of any action brought against MNA under any Underlying Annuity
Contract that is subject to the terms and conditions of this Agreement, MNA
shall provide a copy of such action and written notice of such action within ten
(10) business days to Manulife Reinsurance. If
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Manulife Reinsurance is a party to action brought against MNA, MNA shall seek
agreement by Manulife Reinsurance on the selection and appointment of local
counsel to represent MNA in such action.
ARTICLE XI - OFFSET
Either party shall have, and may exercise at any time and from time to time, the
right to offset any balance or amounts whether on account of premiums or on
account of losses or otherwise, due from one party to the other under the terms
of this Agreement. However, in the event of insolvency of MNA subject to the
provisions of Article XVI, offset shall only be allowed in accordance with the
statutes and/or regulations of the state having jurisdiction over the
insolvency.
ARTICLE XII - ACCESS TO RECORDS
MNA and Manulife Reinsurance, or its duly authorized representative, shall have
access at any reasonable time during regular business hours, to all records of
the other, including the right to photocopy and retain copies of such documents,
which reasonably pertain in any way to this Agreement. Books and records shall
be maintained in accordance with prudent standards of insurance company record
keeping and must be retained for a period of at least seven (7) years from the
date of creation. Within one hundred and fifty (150) days following the end of
each calendar year, MNA and Manulife Reinsurance will provide each office with
copies of their respective audited financial statements.
MNA and Manulife Reinsurance may come into the possession or knowledge of
Confidential Information of the other in fulfilling obligations under this
Agreement. Each party agrees to hold such confidential information in the
strictest confidence and to take all reasonable steps to ensure that such
Confidential Information is not disclosed in any form by any means by each of
them or by any of its employees to third parties of any kind, other than
attorneys, accountants, other consultants or retrocessionairs having an interest
in such information, except by advance written authorization by an officer of
the authorizing party; provided, however, that either party will be deemed to
have satisfied its obligations as to the Confidential Information by protecting
its confidentiality in the same manner that such party protects its own
proprietary or confidential information of like kind which shall be at least a
reasonable manner. "Confidential Information" means any information which (1) is
not generally available to or known by the public, or (2) has not been lawfully
obtained or developed by either party independently and not in violation of this
Agreement or from any source other than the other party, provided that such
source is not bound by a duty of confidentiality to such other party, and which
consists of:
A. Information or knowledge about each party's products, processes, services,
finances,
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customers, research, computer programs, marketing and business plans, claims
management practices; and
B. Any medical or other personal, individually identifiable information about
people or business entities with whom the parties do business, including
customers, prospective customers, vendors, suppliers, individuals covered
by insurance plan, and each party's producers and employees.
ARTICLE XIII - DELAYS, ERRORS OR OMISSIONS
No accidental delay, errors or omissions on the part of MNA shall relieve
Manulife Reinsurance of liability provided immediate notice of such delay,
errors or omissions is provided to Manulife Reinsurance and are rectified as
soon as possible after discovery. However, Manulife Reinsurance shall not be
liable with respect to any reinsurance which may have been inadvertently
included in the premium computation but which ought not to have been included by
reason of the terms and conditions of this Agreement. Such inadvertent premium
payments shall be returned. Adjustment(s) of premiums payable and claims
incurred as a result of delay, errors or omissions shall be limited to the year
in which they are discovered and the calendar year prior to such discovery.
It is expressly understood and agreed that if failure to comply with any terms
of this Agreement is shown to be unintentional or the result of a
misunderstanding or oversight on the part of either party, both parties shall be
restored to the position they would have occupied had no such error or oversight
occurred, subject always to the correction of the error or oversight.
ARTICLE XIV - CURRENCY
All retentions and limits hereunder are expressed in United States dollars and
all premium and loss payments shall be made in United States currency. For the
purposes of this Agreement, amounts paid or received by Manulife Reinsurance in
any other currency shall be converted into United States dollars at the rates of
exchange on the date such transactions are entered on the books of Manulife
Reinsurance.
ARTICLE XV - HOLD HARMLESS
A. Manulife Reinsurance shall indemnify and hold MNA harmless from any and
all liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence
or willful misconduct of Manulife Reinsurance in fulfilling its duties and
obligations under this Agreement or which results from any action which
exceeds its authority under this Agreement.
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B. MNA shall indemnify and hold Manulife Reinsurance harmless from any and
all liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence
or willful misconduct of MNA in fulfilling its duties and obligations
under this Agreement or which results from any action which exceeds its
authority under this Agreement.
ARTICLE XVI - INSOLVENCY
In the event of insolvency of MNA, the reinsurance under this Agreement shall be
payable directly by Manulife Reinsurance to MNA or to its liquidator, receiver,
conservator or statutory successor on the basis of Manulife Reinsurance's
liability to MNA without diminution because of the insolvency of MNA or because
the liquidator, receiver, conservator or statutory successor of MNA has failed
to pay all or a portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of MNA shall give
prompt written notice to Manulife Reinsurance of the pendency of a claim against
MNA within a reasonable time after such claim is filed in the receivership,
conservation, insolvency or liquidation proceeding and that during the pendency
of such claim, Manulife Reinsurance may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses that it may deem available to MNA or its liquidator,
receiver, conservator or statutory successor. The expense thus incurred by
Manulife Reinsurance shall be chargeable, subject to the approval of the Court,
against MNA as part of the expense of conservation or liquidation to the extent
of a pro-rata share of the benefit which may accrue to MNA solely as a result of
the defense undertaken by Manulife Reinsurance.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by MNA.
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ARTICLE XVII - ARBITRATION
A. As a condition precedent to any right of action hereunder, any dispute
between the parties with respect to the interpretation of this Agreement
or any right, obligation or liability of either party, whether such
dispute arises before or after termination of this Agreement, shall be
submitted to arbitration upon the written request of either party. Each
party shall select an arbitrator within thirty (30) days of the written
request for arbitration. If either party refuses or neglects to appoint an
arbitrator within thirty (30) days of the written request for arbitration,
the other party may appoint the second arbitrator. The two arbitrators
shall select an umpire within thirty (30) days of the appointment of the
second arbitrator. If the two arbitrators fail to agree on the selection
of the umpire within thirty (30) days of the appointment of the second
arbitrator, each arbitrator shall submit to the other a list of three
umpire candidates, each arbitrator shall select one name from the list
submitted by the other and the umpire shall be selected from the two names
chosen by a lot drawing procedure to be agreed upon by the arbitrators.
B. The arbitrators and the umpire all shall be active or retired,
disinterested executive officers of insurance or reinsurance companies.
C. The arbitration panel shall interpret this Agreement as an honorable
engagement rather than merely as a legal obligation and shall make its
decision considering the custom and practice of the applicable insurance
and reinsurance business. The arbitration panel is released from judicial
formalities and shall not be bound by strict rules of procedure and
evidence.
D. The decision of the arbitration panel shall be final and binding on both
parties. The arbitration panel may, at its discretion, award costs and
expenses as it deems appropriate, including, but not limited to,
attorneys' fees, interest and punitive damages. Judgment may be entered
upon the final decision of the arbitration panel in any court of competent
jurisdiction.
E. All meetings and hearings before the arbitration panel shall take place in
Boston, Massachusetts unless some other place is mutually agreed upon by
both parties or ordered by the panel.
F. In the absence of a decision to the contrary by the arbitration panel,
each party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other party the expense of the umpire and of the
arbitration.
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ARTICLE XVIII - DAC TAX REGULATION ELECTION
Manulife Reinsurance and MNA hereby agree to make an election pursuant to
Internal Revenue Code Regulation Section 1.848-2(g)(8). This election shall be
effective for all taxable years for which the Reinsurance Agreement remains in
effect.
The terms used in this article are defined by reference to Regulation Section
1.848-2 promulgated on December 28, 1992.
Manulife Reinsurance and MNA agree that the entity with net positive
consideration for the reinsurance agreement for each taxable year will
capitalize specified policy acquisition expenses with respect to the reinsurance
agreement without regard to the general deductions limitation of Section
848(c)(1) of the Internal Revenue Code of 1986, as amended.
Manulife Reinsurance and MNA agree to exchange information pertaining to the
amount of net consideration under the reinsurance agreement each year to ensure
consistency. To achieve this, MNA shall provide Manulife Reinsurance with a
schedule of its calculation of the net consideration for all reinsurance
agreements in force between them for a taxable year by no later than April 30 of
the succeeding year. Manulife Reinsurance shall advise MNA if it disagrees with
the amounts provided by no later than May 31, otherwise the amounts will be
presumed correct and shall be reported by both parties in their respective tax
returns for such tax year. If Manulife Reinsurance contests MNA'S calculation of
the net consideration, the Parties agree to act in good faith to resolve any
differences within thirty (30) days of the date Manulife Reinsurance submits its
alternative calculation and report the amounts agreed upon in their respective
tax returns for such tax year.
Manulife Reinsurance represents and warrants that it is subject to U.S. taxation
under either Subchapter L or Subpart F of Part III of Subchapter N of the
Internal Revenue Code of 1986, as amended.
ARTICLE XIX EFFECTIVE DATE; TERM AND TERMINATION
A. The effective date of this Agreement is July 1, 1998. This Agreement
remains effective for all annuity contracts subject to this Agreement
written by MNA through June 30, 2001, unless terminated pursuant to the
paragraphs listed below:
B. Either Manulife Reinsurance or MNA shall have the option of terminating
this agreement with ninety (90) days written notice to the other party for
new business anytime on or after June 30, 2001, or after the occurrence of
any of the following exceptions:
- Within the three years, Manulife Reinsurance retains the right to
adjust the rates if the average issue age of the new business
exceeds the average age indicated by the age
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distributions provided by MNA. This adjustment threshold works out
to average ages of 64 for Venture Vantage and Venture Vision, and 51
for Manulife Rollover. The rate adjustments will be limited to 10%
for each year in excess of the initial average age.
- If the average age on the new business decreases to less than 58 for
Venture Vantage and Venture Vision, and 45 for Manulife Rollover,
then the reinsurance rates may be similarly adjusted downwards.
- Manulife Reinsurance also retains the right to adjust the rates, for
new business only, once the new business volumes exceed $3.0 billion
in deposits in total for all three variable annuities.
C. Manulife Reinsurance shall have the option of terminating this Agreement
for new and existing business should MNA fail to pay premium in accordance
with Article V and VI. If, during the sixty (60) days notice period,
Manulife Reinsurance receives all premiums in arrears and all premiums
which may become due within the sixty (60) days notice period, the notice
of termination shall be deemed withdrawn. In the event of termination
under this paragraph, this Agreement may be reinstated upon the written
consent of Manulife Reinsurance if, at any time within sixty (60) days of
termination, MNA pays and Manulife Reinsurance receives all premiums due
with interest thereon and payable up to the date of reinstatement. (Please
refer to paragraph I below for the interest calculation description)
D. Failure by Manulife Reinsurance to pay reinsurance death benefits in
accordance with Article II. If, during the sixty (60) days notice period,
MNA receives all reinsurance death benefits in arrears, the notice of
termination shall be deemed withdrawn. In the event of termination under
this paragraph, this Agreement may be reinstated upon the written consent
of MNA if, at any time within sixty (60) days of termination, Manulife
Reinsurance pays and MNA receives all reinsurance death benefits due with
interest thereon and payable up to the date of reinstatement. (Please
refer to paragraph I below for the interest calculation description)
E. If this Agreement is terminated for new and existing business, Manulife
Reinsurance shall be relieved of all liability to MNA for claims incurred
following the termination date of this Agreement under such Underlying
Annuity Contracts issued by MNA.
F. If this Agreement is terminated for new business only, Manulife
Reinsurance will remain liable, after termination, in accordance with the
terms and conditions of this Agreement, with respect to all reinsurance
effective prior to termination of the Agreement.
G. Both parties shall continue to be entitled to all offset credits provided
by Article XI up to the effective date of termination.
H. MNA shall not have the right to assign or transfer any portion of the
rights, duties and obligations of MNA under the terms and conditions of
this Agreement without the written approval of Manulife Reinsurance.
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I. In the event of reinstatement as described in paragraph E and F above,
there will be an interest charge at the three (3) month LIBOR Rate (as
published in the Wall Street Journal), plus .01, determined on the first
business day following the end of the 60 day notice period. The settlement
is considered overdue at the end of the 60 day notice period and interest
shall commence from the overdue date.
ARTICLE XX - NOTICES
All notices required to be given hereunder shall be in writing and shall be
deemed delivered if personally delivered, sent via facsimile, or dispatched by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the parties as follows:
David W. Libbey, FSA, MAAA
Vice President, Treasurer and CFO
The Manufacturers Life Insurance Company Of North America
73 Tremont Street, Suite 1300
Boston, MA 02108
Phone No. (617) 854.8676 Fax No. (617) 854.8604
Steven Finch, FSA, MAAA
Assistant Vice President Marketing and Pricing
Manulife Reinsurance Corporation (U.S.A)
200 Bloor Street East, NT-8
Toronto ON M4W 1E5
Phone No. (416) 926.6197 Fax No. (416) 926.5793
Notice shall be deemed given on the date it is received in the mail or sent via
facsimile in accordance with the foregoing. Any party may change the address to
which to send notices by notifying the other party of such change of address in
writing in accordance with the foregoing.
The text of this Agreement and all Exhibits, Schedules and Amendments are
considered to be the entire contract between the parties. There are no other
understandings or agreements between the parties regarding the policies
reinsured other than as expressed in this Agreement. Either party may make
changes or additions to this Agreement, but they will not be considered to be in
effect unless they are made by means of a written amendment which has been
signed by both parties.
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In witness whereof, the parties hereto have caused this Agreement to be signed
in duplicate on the dates indicated to be effective as of the date specified
above.
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
By:_______________________________________
Date:_______________________________, 19__
MANULIFE REINSURANCE CORPORATION (U.S.A.)
By:_______________________________________
Date:_______________________________, 19__
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SCHEDULE A
Maximum Limits of Reinsurance in Manulife Reinsurance
Manulife Reinsurance requires prior notification of any annuity purchase in
excess of $5,000,000.00 per annuitant/owner. Upon receipt of such notification,
Manulife Reinsurance then has the obligation to notify MNA within 10 days of its
decision to accept or not accept the reinsurance risk for such an annuity
purchase. Should Manulife Reinsurance not respond within 10 days, it shall be
deemed that Manulife Reinsurance agrees to accept such risk.
The purchase amount is the sum of all premium contributions less withdrawals in
the contract. For purchase amounts in excess of the maximum, Manulife
Reinsurance's death benefit liability will be reduced by the ratio of purchase
amounts in excess of the maximum to the total purchase amounts.
Guaranteed Minimum Benefits
The GMDB reinsured hereunder are provided by MNA under the Venture Vantage,
Venture Vision and Manulife Rollover Combination Fixed and Variable Annuity
Contract as described in its prospectus including state availability
supplements, effective May 1, 1998.
Vantage Guaranteed Minimum Death Benefit (GMDB)
Form Venture.015 and Venture.015.98
The death benefit will be paid if the contract owner dies during the first nine
contract years and shall be the greater of :
(A) the contract value less any payment enhancements applied in the 12 month
period prior to the date of death, or
(B) the excess of (i) the sum of all purchase payments less any payment
enhancements applied in the 12 month period prior to the date of death
over (ii) the sum of any amounts deducted in connection with partial
withdrawals
The death benefit will be paid if the contract owner dies after the ninth
contract year and shall be the greater of
(A) the contract value less any payment enhancements applied in the 12 month
period prior to the date of death, or
(B) the excess of (i) the sum of all purchase payments less any payment
enhancements applied in the 12 month period prior to the date of death
over (ii) the sum of any amounts deducted for partial withdrawals, or
(C) the death benefit on the last day of the ninth contract year, plus the sum
of all purchase payments made and any amount deducted in connection with
partial withdrawals since then and less any payment enhancements applied
in the 12 month period prior to the date of death.
SCHEDULE A (Continued)
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Vision Guaranteed Minimum Death Benefit (GMDB)
Form Vision.001, Vision.002, Vision.001.94
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 the greater of:
(a) the Contract Value, or
(b) the excess of (i) over (ii) where:
(i) equals the sum of each Payment accumulated daily, at the
equivalent of 5% per year, starting on the date each Payment
is allocated to the Contract, with a maximum accumulation of 2
times each Payment.
(ii) equals the sum of any amounts deducted in connection with
partial withdrawals, accumulated daily at the equivalent of 5%
per year, starting on the date each such deduction occurs,
with a maximum accumulation of 2 times each amount deducted.
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.
Manulife Rollover Guaranteed Minimum Death Benefit (GMDB)
Form Venture.025 and Venture.026
If any Owner dies the Death Benefit will be the greater of the Contract Value or
Purchase Payments less withdrawals at the time of payment of benefits.
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
<PAGE> 18
SCHEDULE B
Contracts and Funds Subject to this Reinsurance Agreement
<TABLE>
<CAPTION>
Form
Number* Policy Description Date
- ------- ------------------ ----
<S> <C> <C>
Venture .015 Vantage 7/1/98
Venture .015.98 Vantage
Vision.001 Vision 7/1/98
Vision.002 Vision
Vision.001.94 Vision
Venture.025 Manulife Rollover 7/1/98
Venture.026 Manulife Rollover
</TABLE>
* Includes all state variations of VTG 20, 21, 25 and VIS 5, 6, 25, 26, and
MRPG01
Fund/Portfolio Description
Pacific Rim Emerging Markets Trust Balanced Trust
Science & Technology Trust Aggressive Asset Allocation Trust
International Small Cap Trust High Yield Trust
Emerging Growth Trust Moderate Asset Allocation Trust
Pilgrim Baxter Growth Trust Conservative Asset Allocation Trust
Small/Mid Cap Trust Strategic Bond Trust
International Stock Trust Global Government Bond Trust
Worldwide Growth Trust Capital Growth Bond Trust
Global Equity Trust Investment Quality Bond Trust
Small Company Value U.S. Government Securities Trust
Growth Trust Money Market Trust
Equity Trust Lifestyle Aggressive 1000 Trust
Quantitative Equity Trust Lifestyle Growth 820 Trust
Blue Chip Growth Trust Lifestyle Balanced 640 Trust
Real Estate Securities Trust Lifestyle Moderate 460 Trust
Value Trust Lifestyle Conservative 280 Trust
International Growth and Income Special Value Trust
Growth and Income Trust Basic Value Trust
Equity-Income Trust Developing Markets Trust
Guaranteed Funds
One Year
Three Year
Five Year
Seven Year
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
<PAGE> 19
SCHEDULE C
Limits and Rules of MNA
1) MNA will determine the Guaranteed Minimum Benefit for each deceased within
seven (7) working days of receipt of due proof of death and all required
claim forms.
2) The maximum purchase payment without company approval is $1,000,000.
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
<PAGE> 20
SCHEDULE D
Reinsurance Premiums
1. The reinsurance premiums shall be based on the Average Aggregate Contract
Value at the end of each quarter.
2. The amount at risk each quarter will be calculated as the reinsurance benefit
for each variable annuity contract covered under this agreement. For
determining the amount at risk, the guaranteed minimum death benefit and the
contract value are calculated as the average of the values at the end of the
current quarter and the end of the prior quarter. The amount at risk cannot
fall below zero.
3. There will be no premium for funds identified as guaranteed in Schedule B.
4. The quarterly premium is determined as basis points of Contract Value. Fund
based charges, in basis points, are as follows:
-------------------------------------------------------
REINSURANCE PREMIUM ANNUAL PREMIUM
COVERAGE QUARTERLY
-------------------------------------------------------
Vantage 6.4 1.60
-------------------------------------------------------
Vision 22.9 5.73
-------------------------------------------------------
Manulife Rollover 3.0 0.75
-------------------------------------------------------
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
<PAGE> 21
SCHEDULE E
Quarterly Reporting Format
1. Policy Exhibits (Quarterly)
Sample Policy Exhibit (for Administrative purposes to "book" the business):
a) Summary of Cashflows:
- Reinsurance Premiums
- Death Claims
- Net Check Amount
b) Policy Exhibit:
- ------------------------------------------------------
ITEM CASE COUNT ACCOUNT VALUE
- ------------------------------------------------------
Opening Balance
New Issues
Surrenders/Lapses
Death Claims
Closing Balance
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
<PAGE> 22
SCHEDULE E (Continued)
2. Seriatim Reporting (Quarterly)
- ------------------------------------------------------------------
FIELD NAME RECORD A RECORD B RECORD C RECORD D
- ------------------------------------------------------------------
Policy No. 0001234 0042332 0067354 0084231
Coverage No. 01 01 01 01
Plan Code ABC QWE SDF DFG
Sex M F F M
DOB 19370310 19620520 19500731 19511106
Tax Code N N Q N
Issue Date 19900613 19960420 19930830 19890215
Ratchet Period 07 05 05
Rollup Rate 0.00000 0.05375 0.03500 0.00000
Surrender Value 00174600 00019600 00084000 00105000
GMDB Ratchet Value 0180000 0000000 0080000 0110000
GMDB Rollup Value 0000000 0021075 0087000 0000000
Current GMDB 0180000 0021075 0087000 0110000
Max GMDB 0200000 0040000 0120000 0160000
Total AV 0180000 0021075 0087000 0110000
Fund #1 - ID AAA DDD JJJ BBB
Fund AV 0050000 0005000 0025000 0065000
- -- -- -- -- --
Fund #20 - ID KKK LLL MMM NNN
Fund AV 0005000 0000000 0000000 0000000
- ------------------------------------------------------------------
Notes on Examples:
Record A This contract has a seven year ratchet. The ratchet period is
set to 7 and the Ratchet Value has been calculated. The Current
GMDB is based only on the Ratchet Value.
Record B This contract has an annual rollup of 5.375%. The rollup rate is
set to 5.375% and the Rollup Value has been calculated. The Current
GMDB is based only on the Rollup Value.
Record C This contract has a combination ratchet/rollup. The ratchet period
is 5 years and rollup rate is 3.5%. The Current GMDB is based on the
maximum of the Ratchet/Rollup Values.
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
<PAGE> 23
SCHEDULE E (Continued)
FIELD NAME DESCRIPTION
- ---------- -----------
Policy No. Policy or contract number used to uniquely identify a policy
or contract.
Coverage No. Coverage or record number (only required if policies can have
two or more records)
Plan Code Product code or kind code that is used to determine the
policy's characteristics.
Sex Sex of insured
DOB Date of Birth of insured
Tax Code Indicates whether the Policy is a qualified Policy under
Federal Tax Regulations, if available
Issue Date Issue date of policy
Maturity Date Maturity date of policy
Ratchet Period Period of possible ratchet increases in the GMDB ( blank if
no ratcheting)
Rollup Rate Rate of rollup increases in the GMDB (zeroes if no rollups)
Surrender Value Surrender value (total account value minus surrender charge)
Ratchet Value The greater of the ratchet value and the total account value
at the last ratchet point (zero if no ratchet increases).
Rollup Value The accumulated value of premiums (net of withdrawals) at the
rollup rate (zero if no rollup increases).
Current GMDB Current GMDB based on policy or contract characteristics
(either ratchet, rollup, or combination)
Maximum GMDB Maximum GMDB based on some multiple of premium deposits net
of withdrawals (zero if no maximum)
The following fields repeat for the maximum number of funds permitted per
contract or coverage/record.
- -----------------------------------------------------------
FIELD DESCRIPTION
- -----------------------------------------------------------
Fund ID Fund name or code
Account Value Account value (current value invested in
this fund)
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
<PAGE> 24
SCHEDULE E (Continued)
3. Initial Set Up
For each Plan Code, please provide the following items of information, if they
are applicable.
Plan Code
1. plan name and basic description
2. surrender charges by duration and base (total premiums, account
value)
3. ratchet method (period and limitations)
4. rollup method (rates and limitations)
5. guaranteed interest rates
6. minimum and maximum benefits
7. minimum and maximum rates
8. guaranteed benefits basis (account value, surrender value, etc.)
9. a classification of this plan according to the Standard Valuation
Law and NAIC Actuarial Guideline 33, if available (Plan Type,
Guarantee Duration etc.)
10. tax qualification eligibility and limitations (if available)
For each Fund Code, please provide the following items of information, if
they are applicable
Fund Code
- - fund name and basic description
- - Asset Class for this fund using the definitions in NAIC Actuarial
Guideline 34 (Appendix III)
- - appropriate asset charges for this fund (may be the same as management
fees)
- - tax qualification eligibility and limitations (if available)
- --------------------------------------------------------------------------------
The Manufacturers Life Insurance
Company of North America
Vantage, Vision and Manulife Rollover - Variable Annuity
Effective July 1, 1998
