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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
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THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A
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OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
FLEXIBLE PAYMENT DEFERRED COMBINATION
FIXED AND VARIABLE GROUP ANNUITY CONTRACT
NON-PARTICIPATING
This Prospectus describes a flexible purchase payment deferred
combination fixed and variable group annuity contract (the "contract") issued by
The Manufacturers Life Insurance Company of North America, formerly North
American Security Life Insurance Company (the "Company"), a stock life insurance
company, the ultimate parent of which is The Manufacturers Life Insurance
Company ("Manulife"). The contract is designed for use in connection with
retirement plans which may or may not qualify for special Federal income tax
treatment. Prior to February, 1995, the Company issued a class of variable
annuity contract which is no longer being issued but under which purchase
payments may continue to be made ("prior contract" or "Ven 8 contracts"), which
were sold during the period from September, 1992 until February, 1995. This
Prospectus principally describes the contract but also describes the Ven 8
contracts. The principal differences between the contract offered by this
Prospectus and the Ven 8 contract relate to the investment options available
under the contracts, a minimum interest rate to be credited for any guarantee
period under the fixed portion of the contracts, the charges made by the Company
and the death benefit provisions (see "Appendix D Prior Contracts").
The contract provides for the accumulation of contract values and the
payment of annuity benefits on a variable and/or fixed basis. The contract
offers forty investment options: thirty-five variable and five fixed. The
variable portion of the contract value and annuity payments, if selected on a
variable basis, will vary according to the investment performance of the
sub-accounts of The Manufacturers Life Insurance Company of North America
Separate Account A, formerly NASL Variable Account (the "Variable Account"). The
Variable Account is a separate account established by the Company. Purchase
payments and earnings on those purchase payments may be allocated to and
transferred among one or more of thirty-five sub-accounts of the Variable
Account. The assets of each sub-account are invested in shares of Manufacturers
Investment Trust, formerly NASL Series Trust (the "Trust"), a mutual fund having
an investment portfolio for each sub-account of the Variable Account (see the
accompanying prospectus of the Trust). Fixed contract values may be accumulated
under one, three, five and seven year fixed account investment options and, in
states where approved, a dollar cost averaging fixed investment option. Except
as specifically noted herein and as set forth under the caption "FIXED ACCOUNT
INVESTMENT OPTIONS" below, this Prospectus describes only the variable portion
of the contract.
Additional information about the variable portion of the contract and
Variable Account is contained in a Statement of Additional Information, dated
the same date as this Prospectus, which has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated herein by reference. The
Statement of Additional Information is available without charge upon request by
writing the Company at the above address or telephoning (800) 344-1029. In
addition, the SEC maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding registrants that file electronically with the SEC.
The table of contents for the Statement of Additional Information is included on
page 48 of this Prospectus.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS INFORMATION ABOUT THE VARIABLE ACCOUNT AND THE VARIABLE PORTION OF THE
CONTRACT AND CERTIFICATE THAT A PROSPECTIVE PURCHASER SHOULD KNOW BEFORE
INVESTING. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR
HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1998.
V22/23.PRO598
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SPECIAL TERMS ...................................................................3
SUMMARY .........................................................................5
TABLE OF ACCUMULATION UNIT VALUES ..............................................12
GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA, THE MANUFACTURERS
LIFE INSURANCE COMPANY OF NORTH
AMERICA SEPARATE ACCOUNT A AND MANUFACTURERS INVESTMENT TRUST...................15
The Manufacturers Life Insurance Company of North America..................15
The Manufacturers Life Insurance Company of North America Separate Account
A And
Manufacturers Investment Trust ............................................15
DESCRIPTION OF THE CONTRACT ....................................................20
ELIGIBLE GROUPS .............................................................20
ACCUMULATION PROVISIONS .....................................................20
Purchase Payments .........................................................20
Accumulation Units ........................................................21
Value of Accumulation Units ...............................................21
Net Investment Factor .....................................................21
Transfers Among Investment Options...................... ..................22
Maximum Number of Investment Options ......................................22
Telephone Transactions ....................................................22
Special Transfer Services - Dollar Cost Averaging..........................22
Asset Rebalancing Program .................................................23
Withdrawals ...............................................................23
Special Withdrawal Services - Income Plan .................................24
Loans .....................................................................24
Death Benefit Before Maturity Date ........................................25
ANNUITY PROVISIONS .........................................................27
General ...................................................................27
Annuity Options ...........................................................27
Determination of Amount of the First Variable
Annuity Payment ........................................................28
Annuity Units and the Determination of Subsequent
Variable Annuity Payments ..............................................28
Transfers After Maturity Date .............................................28
Death Benefit On or After Maturity Date....................................29
OTHER CONTRACT PROVISIONS ...................................................29
Ten Day Right to Review ...................................................29
Ownership .................................................................29
Beneficiary ...............................................................30
Annuitant .................................................................30
Modification ..............................................................30
Discontinuance of New Owners ..............................................30
Misstatement and Proof of Age, Sex or Survival ............................30
FIXED ACCOUNT INVESTMENT OPTIONS .............................................31
GUARANTEED RETIREMENT INCOME PROGRAM..........................................33
CHARGES AND DEDUCTIONS .........................................................35
Withdrawal Charges ........................................................35
Reduction or Elimination of Withdrawal Charges ............................36
Administration Fees .......................................................37
Reduction or Elimination of Annual
Administration Fee .....................................................38
Mortality and Expense Risk Charge .........................................38
Taxes .....................................................................38
FEDERAL TAX MATTERS ............................................................39
INTRODUCTION .................................................................39
THE COMPANY'S TAX STATUS .....................................................39
TAXATION OF ANNUITIES IN GENERAL .............................................39
Tax Deferral During Accumulation Period ...................................39
Taxation of Partial and Full Withdrawals ..................................41
</TABLE>
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<TABLE>
<S> <C>
Taxation of Annuity Payments ..............................................41
Taxation of Death Benefit Proceeds ........................................41
Penalty Tax on Premature Distributions ....................................42
Aggregation of Contracts ..................................................42
QUALIFIED RETIREMENT PLANS ...................................................42
Qualified Plan Types ......................................................43
Direct Rollovers ..........................................................45
FEDERAL INCOME TAX WITHHOLDING ................................................45
GENERAL MATTERS ................................................................45
Tax Deferral ..............................................................45
Performance Data ..........................................................46
Financial Statements ......................................................46
Asset Allocation and Timing Services ......................................46
Restrictions Under the Texas Optional
Retirement Program ........................................................46
Distribution of Contracts .................................................46
Owner Inquiries ...........................................................47
Confirmation Statements ...................................................47
Legal Proceedings .........................................................47
Other Information .........................................................47
Year 2000 Issues...........................................................47
STATEMENT OF ADDITIONAL INFORMATION-
TABLE OF CONTENTS ............................................................48
APPENDIX A: EXAMPLES OF CALCULATION OF
WITHDRAWAL CHARGE ............................................................49
APPENDIX B: STATE PREMIUM TAXES ...............................................51
APPENDIX C: PENNSYLVANIA MAXIMUM
MATURITY AGE .................................................................52
APPENDIX D: PRIOR CONTRACTS (VEN 8) ...........................................53
</TABLE>
2
<PAGE> 4
SPECIAL TERMS
The following terms as used in this Prospectus have the indicated
meanings:
Accumulation Unit - A unit of measure that is used to calculate the
value of an owner's variable investment account before the maturity date.
Annuitant - Any natural person or persons whose life is used to
determine the duration of annuity payments involving life contingencies. The
"annuitant" is as designated on the certificate specifications page or in the
application, unless changed.
Annuity Option - The method selected by each owner (or as specified in
the contract if no selection is made) for annuity payments made by the Company.
Annuity Service Office - The service office of the Company is P.O. Box
9230, Boston, Massachusetts 02205-9230.
Annuity Unit - A unit of measure that is used after the maturity date
to calculate variable annuity payments.
Application - The document signed by each owner that serves as his or
her application for participation under the contract.
Beneficiary - The person, persons or entity entitled to the death
benefit under the contract upon the death of an owner or, in certain
circumstances, the annuitant. If there is a surviving owner, that person will be
deemed to be the beneficiary.
Certificate - The document issued to each owner which summarizes the
rights and benefits of the owner under the contract.
Certificate Anniversary - The anniversary of the certificate date.
Certificate Date - The date of issue of a certificate under the
contract.
Certificate Year - The period of twelve consecutive months beginning on
the certificate date or any anniversary thereof.
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 Application - The document signed by the Group Holder that
evidences the Group Holder's application for a Contract.
Contract Value - The total of an owner's investment account values and,
if applicable, any amount in the loan account attributable to that owner.
Debt - Any amounts in an owner's loan account plus any accrued loan
interest. The loan provision is available only under contracts or certificates
issued in connection with Section 403(b) qualified plans that are not subject to
Title I of ERISA.
Due Proof of Death - Due Proof of Death is required upon the death of
the owner or annuitant, as applicable. One of the following must be received at
the Annuity Service Office within one year of the date of death:
(a) A certified copy of a death certificate;
(b) A certified copy of a decree of a court of competent jurisdiction
as to the finding of death; or
(c) Any other proof satisfactory to us.
Death benefits will be paid within 7 days of receipt of due proof of death and
all required claim forms by the Company's Annuity Service Office.
Fixed Annuity - An annuity option with payments which are predetermined
and guaranteed as to dollar amount.
General Account - All the assets of the Company other than assets in
separate accounts.
3
<PAGE> 5
Group Holder - The person, persons or entity to whom the contract is
issued.
Investment Account - An account established by the Company which
represents an owner's interest in an investment option prior to the maturity
date.
Investment Account Value - The value of an owner's investment in an
investment account.
Investment Options - The investment choices available to owners.
Currently, there are thirty-five variable and five fixed investment options
under the contract.
Loan Account - The portion of the general account that is used for
collateral when a loan is taken by an owner.
Market Value Charge - A charge that may be assessed if amounts are
withdrawn or transferred from the three, five or seven year investment options
prior to the end of the interest rate guarantee period.
Maturity Date - The date on which annuity benefits commence. The
maturity date is the date specified on the certificate specifications page and
is generally the first day of the month following the later of the annuitant's
85th birthday or the tenth contract anniversary, unless changed. See Appendix D
for information on the Maturity Date applicable to certain contracts which are
no longer being issued (Ven 8 contracts).
Net Purchase Payment - The purchase payment paid by or on behalf of an
owner less the amount of premium tax, if any.
Non-Qualified Certificates - Certificates issued under non-qualified
Contracts.
Non-Qualified Contracts - Contracts which are not issued under
qualified plans.
Owner - The person, persons or entity named in a certificate and
entitled to all of the ownership rights under the contract not expressly
reserved to the group holder. The owner is specified in the application, unless
changed. The maximum issue age is 85.
Portfolio or Trust Portfolio - A separate investment portfolio of the
Trust, a mutual fund in which the Variable Account invests, or of any successor
mutual fund.
Purchase Payment - An amount paid by or on behalf of an owner to the
Company as consideration for the benefits provided by the contract.
Qualified Certificates - Certificates issued under qualified contracts.
Qualified Contracts - Contracts issued under qualified plans.
Qualified Plans - Retirement plans which receive favorable tax
treatment under Section 401, 403, 408, 408A or 457 of the Internal Revenue Code
of 1986, as amended.
Separate Account - A segregated account of the Company that is not
commingled with the Company's general assets and obligations.
Sub-Account(s) - One or more of the sub-accounts of the Variable
Account. Each sub-account is invested in shares of a different portfolio.
Valuation Date - Any date on which the New York Stock Exchange is open
for business and the net asset value of a Trust portfolio is determined.
Valuation Period - Any period from one valuation date to the next,
measured from the time on each such date that the net asset value of each
portfolio is determined.
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<PAGE> 6
Variable Account - The Variable Account, which is a separate account of
the Company.
Variable Annuity - An annuity option with payments which: (1) are not
predetermined or guaranteed as to dollar amount, and (2) vary in relation to the
investment experience of one or more specified sub-accounts.
SUMMARY
The Contract. The contract offered by this Prospectus is a flexible
purchase payment deferred combination fixed and variable group annuity contract.
Specific accounts are maintained under the contract for each member of the
eligible group participating in the contract as evidenced by the issuance of
certificates. The contract provides for the accumulation of contract values and
the payment of annuity benefits on a variable and/or fixed basis. Except as
specifically noted herein and as set forth under the caption "FIXED ACCOUNT
INVESTMENT OPTIONS" below, this Prospectus describes only the variable portion
of the contract.
Eligible Groups. The contract may be issued to fund either
non-qualified retirement plans or plans qualifying for special income tax
treatment under the Internal Revenue Code of 1986, as amended (the "Code"), such
as individual retirement accounts and annuities, including Roth IRAs, pension
and profit-sharing plans for corporations and sole proprietorships/partnerships
("H.R. 10" and "Keogh" plans), tax-sheltered annuities, and state and local
government deferred compensation plans (see "QUALIFIED RETIREMENT PLANS").
Purchase Payments. Except as noted below, the minimum initial purchase
payment is $5,000 for Non-Qualified Contracts and $2,000 for Qualified
Contracts. The minimum initial purchase payment is $3,500 if the source of such
payment was a direct rollover of an eligible rollover distribution from a
qualified plan under Section 401(a) of the Code or a Tax Sheltered Annuity
described in Section 403(b) of the Code, all or part of which assets are
invested in a group annuity contract issued by The Manufacturers Life Insurance
Company (U.S.A.). Purchase payments may be made at any time, except that if a
purchase payment would cause the owner's contract value to exceed $1,000,000, or
the owner's contract value already exceeds $1,000,000, additional purchase
payments will be accepted only with the prior approval of the Company. The
Company may, at its option, cancel a certificate and an owner's participation
under a contract at the end of any two consecutive certificate years in which no
purchase payments by or on behalf of the owner have been made, if both (i) the
total purchase payments made for the certificate, less any withdrawals, are less
than $2,000; and (ii) the contract value for the owner at the end of such two
year period is less than $2,000. The cancellation of contract privileges may
vary in certain states in order to comply with the requirements of insurance
laws and regulations in such state (see "PURCHASE PAYMENTS").
Investment Options. Purchase payments may be allocated among the forty
investment options currently available under the contract: thirty-five variable
account investment options and five fixed account investment options. Due to
current administrative capabilities, a contract owner is limited to a maximum of
seventeen investment options (including all fixed account investment options)
during the period prior to the maturity date of the contract. The thirty-five
variable account investment options are the thirty-five sub-accounts of the
Variable Account, a separate account established by the Company. The
sub-accounts invest in corresponding portfolios of the Trust: the Pacific Rim
Emerging Markets Trust, the Science & Technology Trust, the International Small
Cap Trust, the Emerging Growth Trust, the Pilgrim Baxter Growth Trust, the
Small/Mid Cap Trust, the International Stock Trust, the Worldwide Growth Trust,
the Global Equity Trust, the Small Company Value Trust, the Equity Trust, the
Growth Trust, the Quantitative Equity Trust, the Blue Chip Growth Trust, the
Real Estate Securities Trust, the Value Trust, the International Growth and
Income Trust, the Growth and Income Trust, the Equity-Income Trust, the Balanced
Trust, the Aggressive Asset Allocation Trust, the High Yield Trust, the Moderate
Asset Allocation Trust, the Conservative Asset Allocation Trust, the Strategic
Bond Trust, the Global Government Bond Trust, the Capital Growth Bond Trust, the
Investment Quality Bond Trust, the U.S. Government Securities Trust, the Money
Market Trust, the Lifestyle Aggressive 1000 Trust, the Lifestyle Growth 820
Trust, the Lifestyle Balanced 640 Trust, the Lifestyle Moderate 460 Trust and
the Lifestyle Conservative 280 Trust (see the accompanying prospectus of the
Trust). The portion of an owner's contract value in the Variable Account and
monthly annuity payments, if selected on a variable basis, will reflect the
investment performance of the sub-accounts selected (see "THE MANUFACTURERS LIFE
INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A"). Purchase payments may
also be allocated to the five fixed account investment options: one, three, five
and seven year guaranteed investment accounts and, in states where approved, a
dollar cost averaging fixed investment account. Under the fixed account
investment options, the Company guarantees the principal value of purchase
payments and the rate of interest credited to the investment account for the
term of the guarantee period. The portion of an owner's contract value in the
fixed account investment options and monthly annuity payments, if selected on a
fixed basis, will reflect such interest and principal guarantees (see "FIXED
ACCOUNT INVESTMENT OPTIONS"). Subject to certain regulatory limitations, the
Company may elect to add, subtract or substitute investment options.
5
<PAGE> 7
Transfers. Prior to the maturity date, amounts may be transferred among
an owner's variable account investment options and from the owner's variable
account investment options to his or her fixed account investment options
without charge. In addition, amounts may be transferred prior to the maturity
date among the owner's fixed account investment options and from the owner's
fixed account investment options to his or her variable account investment
options, subject to a one year holding period requirement and a market value
charge which may apply to such a transfer (see "FIXED ACCOUNT INVESTMENT
OPTIONS"). After the maturity date, transfers are not permitted from variable
annuity options to fixed annuity options or from fixed annuity options to
variable annuity options. Transfers from any investment account must be at least
$300 or, if less, the entire balance in the investment account. If, after the
transfer the amount remaining in the investment account from which the transfer
is made is less than $100, then we will transfer the entire amount instead of
the requested amount. The Company may impose certain additional limitations on
transfers (see "TRANSFERS AMONG INVESTMENT OPTIONS" and "TRANSFERS AFTER
MATURITY DATE"). Transfer privileges may also be used under a special service
offered by the Company to dollar cost average an investment in the contract (see
"SPECIAL TRANSFER SERVICES - DOLLAR COST AVERAGING").
Withdrawals. Prior to the earlier of the maturity date or the death of
an owner, the owner may withdraw all or a portion of his or her contract value.
The amount withdrawn from any investment account must be at least $300 or, if
less, the entire balance of the investment account. If a partial withdrawal plus
any applicable withdrawal charge would reduce the owner's contract value to less
than $300, the withdrawal request will be treated as a request to withdraw the
owner's entire contract value. A withdrawal charge and an administration fee may
be imposed (see "WITHDRAWALS"). A withdrawal may be subject to income tax and a
10% penalty tax (see "FEDERAL TAX MATTERS"). Withdrawal privileges may also be
exercised pursuant to the Company's systematic withdrawal plan service (see
"SPECIAL WITHDRAWAL SERVICES - THE INCOME PLAN").
Loans. The Company offers a loan privilege under contracts or
certificates issued in connection with Section 403(b) qualified plans that are
not subject to Title I of ERISA. Where available, owners may obtain loans using
their contract value as the only security for the loan. The effective cost of a
loan is 2% per year of the amount borrowed (see "LOANS").
Confirmation Statements. Owners will be sent confirmation statements
for certain transactions in their account. Owners should carefully review these
statements to verify their accuracy. Any mistakes should immediately be reported
to the Company's Annuity Service Office. If the owner fails to notify the
Company's Annuity Service Office of any mistake within 60 days of the mailing of
the confirmation statement, the owner will be deemed to have ratified the
transaction.
Death Benefits. The Company will pay the death benefit described below
(which, as defined, is net of any debt) to the beneficiary if any owner dies
before the maturity date. If there is a surviving owner, that owner will be
deemed to be the beneficiary. No death benefit is payable on the death of any
annuitant, except that if any owner is not a natural person, the death of any
annuitant will be treated as the death of an owner. The death benefit will be
determined as of the date on which written notice and proof of death and all
required claim forms are received at the Company's Annuity Service Office.
Certificates Issued Prior to May 1, 1998. If any 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 certificate date, the death benefit will be determined as
follows: During the first certificate year, the death benefit will be the
greater of: (a) the contract value or (b) the sum of all purchase payments made,
less any amounts deducted in connection with partial withdrawals made by or on
behalf of the owner. During any subsequent certificate year, the death benefit
will be the greater of: (a) the contract value or (b) the death benefit on the
last day of the previous certificate year, plus any purchase payments made and
less any amounts deducted in connection with partial WITHDRAWALS made by or on
behalf of the owner since then.
If any owner dies after his or her 85th birthday and the oldest owner
had an attained age of less than 81 years on the certificate date, the death
benefit will be the greater of: (a) the contract value or (b) the excess of (i)
the sum of all purchase payments made by or on behalf of the owner over (ii) the
sum of any amounts deducted in connection with partial withdrawals made by or on
behalf of the owner. If any owner dies and the oldest owner had an attained age
greater than 80 on the certificate date, the death benefit will be the contract
value less any applicable withdrawal charges at the time of payment of benefits
(see "DEATH BENEFIT BEFORE MATURITY DATE"). For certificates issued on or after
October 1, 1997, any withdrawal charges applied against the death benefit shall
be waived by the Company.
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Certificates Issued On or After May 1, 1998. If any owner dies and the
oldest owner had an attained age of less than 81 years on the certificate date,
the death benefit will be determined as follows: During the first certificate
year, the death benefit will be the greater of: (a) the contract value or (b)
the sum of all purchase payments made by or on behalf of the owner, less any
amounts deducted in connection with partial withdrawals made by or on behalf of
the owner. During any subsequent certificate year, the death benefit will be the
greater of: (a) the contract value or (b) the death benefit on the last day of
the previous certificate year, plus any purchase payments made by or on behalf
of the owner and less any amounts deducted in connection with partial
withdrawals made by or on behalf of the owner since then. If any owner dies on
or after his or her 81st birthday, the death benefit will be the greater of (a)
contract value or (b) the death benefit on the last day of the certificate year
ending just prior to the owner's 81st birthday, plus any payments made by or on
behalf of the owner, less amounts deducted in connection with partial
withdrawals.
If any owner dies and the oldest owner had an attained age of 81 years
or greater on the certificate date, the death benefit will be the greater of:
(a) the contract value or (b) the excess of (i) the sum of all purchase payments
made by or on behalf of the owner over (ii) the sum of any amounts deducted in
connection with partial withdrawals made by or on behalf of the owner.
In the states of Texas and Washington, the death benefit described
under "Certificates Issued Prior to May 1, 1998" will continue to apply to
certificates issued on or after May 1, 1998.
If the annuitant dies after the maturity date and annuity payments have
been selected based on an annuity option providing for payments for a guaranteed
period, the Company will make the remaining guaranteed payments to the
beneficiary (see "DEATH BENEFIT ON OR AFTER MATURITY DATE"). See Appendix D for
information on death benefit provisions applicable to certain contracts which
are no longer being issued (Ven 8 contracts).
Annuity Payments. The Company offers a variety of fixed and variable
annuity options. Periodic annuity payments will begin on the maturity date. The
owner selects the maturity date, frequency of payment and annuity option (see
"ANNUITY PROVISIONS").
Guaranteed Retirement Income Program. The Guaranteed Retirement Income
Program (the "Income Benefit") guarantees a minimum lifetime fixed income
benefit in the form of fixed monthly annuity payments. The Income Benefit is
based on the aggregate net purchase payments applied to the certificate,
accumulated at interest, minus an adjustment for any partial withdrawals (the
"Income Base"). The amount of the monthly annuity payment provided by the Income
Benefit is determined by applying the Income Base to the monthly income factors
set forth in the Income Benefit Rider. Because the fixed annuity options
provided for in the contract are based on the contract value at the time of
annuitization, the amount of the monthly payments under such options may exceed
the monthly payments provided by the Income Benefit Rider. If the Income Benefit
is exercised and the annuity payment available under the contract is greater
than the monthly payment provided by the Income Benefit Rider, the Company will
pay the monthly annuity payment available under the contract. The Income Benefit
is available for certificates issued on or after May 1, 1998. The Income Benefit
is not available in all states (see "GUARANTEED RETIREMENT INCOME PROGRAM").
Ten Day Review. Within 10 days of receipt of his or her certificate, an
owner may cancel the certificate by returning it to the Company. The ten day
right to review may vary in certain states in order to comply with the
requirements of insurance laws and regulations in such states (see "TEN DAY
RIGHT TO REVIEW").
Modification. The contract or any certificate may not be modified by
the Company without the consent of the group holder or the owner, as applicable,
except as may be required to make it conform to any law or regulation or ruling
issued by a governmental agency. However, on 60 days' notice to the group
holder, the Company may change the withdrawal charges, administration fees,
mortality and expense risk charges, free withdrawal percentage, annuity purchase
rates and the market value charge as to any certificates issued after the
effective date of the modification (see "MODIFICATION").
Discontinuance of New Owners. On thirty days' notice to the group
holder, the Company may limit or discontinue acceptance of new applications and
the issuance of new certificates under a contract (see "DISCONTINUANCE OF NEW
OWNERS").
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<PAGE> 9
Charges and Deductions. The following table and Example are designed to
assist group holders and owners in understanding the various costs and expenses
to which they are subject directly and indirectly. The table reflects expenses
of the separate account and the underlying portfolio company. In addition to the
items listed in the following table, premium taxes may be applicable to certain
owners. The items listed under "Transaction Expenses" and "Separate Account
Annual Expenses" are more completely described in this Prospectus (see "CHARGES
AND DEDUCTIONS"). The items listed under "Trust Annual Expenses" are described
in detail in the accompanying Trust prospectus to which reference should be
made.
TRANSACTION EXPENSES
Deferred sales load (as percentage of purchase payments)
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS WITHDRAWAL CHARGE
PURCHASE PAYMENT IN PERCENTAGE
CONTRACT
- -------------------------------------------------------------------------------
<S> <C>
0 6%
1 6%
2 5%
3 5%
4 4%
5 3%
6 2%
7+ 0%
</TABLE>
<TABLE>
<S> <C>
ANNUAL ADMINISTRATION FEE ......................................... $ 30 (1)
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and expense risk fees ................................... 1.25%
Administration fee - asset based .................................. 0.15%
Total Separate Account Annual Expenses ............................ 1.40%
OPTIONAL INCOME RIDER FEE ......................................... 0.25%(2)
(as a percentage of the Income Base)
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets)
</TABLE>
<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 Growth..................... 1.050% 0.060% 1.110%
</TABLE>
- -----------------------------------
(1)The $30 annual administration fee will not be assessed prior to the maturity
date if at the time of its assessment the sum of all the owner's investment
accounts is equal to or greater than $100,000. See Appendix D for information on
the administration fee applicable to certain contracts which are no longer being
issued (Ven 8 contracts).
(2)If the Guaranteed Retirement Income Program is elected, this fee is deducted
on each certificate anniversary. The Guaranteed Retirement Income Program is not
available for Ven 8 contracts (see "GUARANTEED RETIREMENT INCOME PROGRAM").
8
<PAGE> 10
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT)*** ANNUAL EXPENSES
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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>
*Based on estimates of payments to be made during the current fiscal year.
** Reflects expenses of the Underlying Portfolios. Manufacturers Securities
Services, LLC has voluntarily agreed to pay the expenses of each Lifestyle Trust
(excluding the expenses of the Underlying Portfolios). This voluntary expense
reimbursement may be terminated at any time. If such expense reimbursement was
not in effect, Total Trust Annual Expenses would be .04% higher (based on
expenses of the Lifestyle Trusts for the fiscal year ended December 31, 1997) as
noted in the chart below:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Aggressive 1000........... 0% 1.156% 1.156%
Lifestyle Growth 820................ 0% 1.088% 1.088%
Lifestyle Balanced 640.............. 0% 0.984% 0.984%
Lifestyle Moderate 460.............. 0% 0.890% 0.890%
Lifestyle Conservative 280.......... 0% 0.748% 0.748%
</TABLE>
***During the one year period ended December 31, 1997, Manufacturers Securities
Services, LLC voluntarily waived fees payable to it and/or reimbursed expenses
to the extent necessary to prevent "Total Trust Annual Expenses" for the
Quantitative Equity, Real Estate and Capital Growth Bond Trusts from exceeding
.50% of the Trust's average net assets. This voluntary fee waiver was terminated
effective January 1, 1998. Expenses shown in the table for these three Trusts do
not reflect the fee waiver.
9
<PAGE> 11
#Each Lifestyle Trust will invest in shares of the Underlying Portfolios.
Therefore, each Lifestyle Trust will bear its pro rata share of the fees and
expenses incurred by the Underlying Portfolios and the investment return of each
Lifestyle Trust will be net of the Underlying Portfolio expenses. Each Lifestyle
Portfolio must also bear its own expenses. However, the Adviser is currently
paying these expenses as described in footnote ** above.
EXAMPLE
A contract owner would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets, if the owner withdrew all of his or her
contract value at the end of the applicable time period:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS+ 5 YEARS* 10 YEARS*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $84 $138 $182 $192 $321
Science & Technology................ 83 133 174 184 305
International Small Cap............. 83 134 177 187 310
Emerging Growth..................... 81 129 167 177 291
Pilgrim Baxter Growth............... 82 131 170 180 298
Small/Mid Cap....................... 81 127 164 174 285
International Stock................. 84 136 180 190 317
Worldwide Growth.................... 83 135 177 187 311
Global Equity....................... 81 126 162 172 281
Small Company Value................. 82 137
Equity.............................. 79 120 151 161 260
Growth.............................. 80 124 159 169 275
Quantitative Equity................. 78 119 150 160 257
Blue Chip Growth.................... 80 125 160 170 277
Real Estate Securities.............. 78 119 150 160 257
Value............................... 80 125 159 169 276
International Growth and Income..... 82 129 167 177 292
Growth and Income................... 78 120 151 161 259
Equity-Income....................... 79 121 154 164 265
Balanced............................ 79 122 155 165 268
Aggressive Asset Allocation......... 80 123 156 166 270
High Yield.......................... 79 122 155 165 268
Moderate Asset Allocation........... 79 121 154 164 265
Conservative Asset Allocation....... 79 123 156 166 269
Strategic Bond...................... 79 122 155 165 267
Global Government Bond.............. 80 124 158 168 273
Capital Growth Bond................. 78 118 148 158 253
Investment Quality Bond............. 78 118 148 158 254
U.S. Government Securities.......... 78 118 147 157 252
Money Market........................ 76 112 138 148 233
Lifestyle Aggressive 1000........... 82 129 167 177 291
Lifestyle Growth 820................ 81 127 164 174 285
Lifestyle Balanced 640.............. 80 124 158 168 274
Lifestyle Moderate 460.............. 79 121 154 164 265
Lifestyle Conservative 280.......... 78 117 146 156 250
</TABLE>
+ For prior contracts no longer issued, Ven 8 contracts, (as described in
Appendix D) only. The difference in numbers is attributable to the different
withdrawal charges. See Appendix D.
* The example of expenses for the Small Company Value Trust contains figures for
only one and three years since it is a newly created portfolio.
10
<PAGE> 12
A contract owner would pay the following expenses on a $1,000
investment, assuming 5% annual return on assets, if the contract owner
annuitized as provided in the contract or did not surrender the contract at the
end of the applicable time period:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS* 10 YEARS*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $29 $89 $152 $321
Science & Technology................ 28 85 144 305
International Small Cap............. 28 86 147 310
Emerging Growth..................... 26 80 137 291
Pilgrim Baxter Growth............... 27 82 140 298
Small/Mid Cap....................... 25 78 134 285
International Stock................. 29 88 150 317
Worldwide Growth.................... 28 86 147 311
Global Equity....................... 25 78 133 283
Small Company Value................. 26 81
Equity.............................. 23 71 121 260
Growth.............................. 24 75 129 275
Quantitative Equity................. 23 70 120 257
Blue Chip Growth.................... 25 76 130 277
Real Estate Securities.............. 23 70 120 257
Value............................... 25 76 129 276
International Growth and Income..... 26 80 137 292
Growth and Income................... 23 70 121 259
Equity-Income....................... 23 72 124 265
Balanced............................ 24 73 125 268
Aggressive Asset Allocation......... 24 74 126 270
High Yield.......................... 24 73 125 268
Moderate Asset Allocation........... 23 72 124 265
Conservative Asset Allocation....... 24 73 126 269
Strategic Bond...................... 24 73 125 267
Global Government Bond.............. 24 75 128 273
Capital Growth Bond................. 22 69 118 253
Investment Quality Bond............. 22 69 118 254
U.S. Government Securities.......... 22 68 117 252
Money Market........................ 20 63 108 233
Lifestyle Aggressive 1000........... 26 80 137 291
Lifestyle Growth 820................ 25 78 134 285
Lifestyle Balanced 640.............. 24 75 128 274
Lifestyle Moderate 460.............. 23 72 124 265
Lifestyle Conservative 280.......... 22 68 116 250
</TABLE>
* The example of expenses for the Small Company Value Trust contains figures for
only one and three years since it is a newly created portfolio.
For purposes of presenting the foregoing Example, the Company has made
certain assumptions mandated by the SEC. The Company has assumed that, where
applicable, the maximum sales load is deducted, that there are no transfers or
other transactions and that the "Other Expenses" line item under "Trust Annual
Expenses" will remain the same. Such assumptions, which are mandated by the SEC
in an attempt to provide prospective investors with standardized data with which
to compare various annuity contracts, do not take into account certain features
of the contract and prospective changes in the size of the Trust which may
operate to change the expenses borne by contract owners. Consequently, the
amounts listed in the Example above should not be considered a representation of
past or future expenses and actual expenses borne by contract owners may be
greater or lesser than those shown.
11
<PAGE> 13
In addition, for purposes of calculating the values in the above
Example, the Company has translated the $30 annual administration charge listed
under "Annual Administration Fee" to a 0.063% annual asset charge based on the
$47,500 approximate average size of certificates of this series. So translated,
such charge would be higher for smaller contract values and lower for larger
contract values.
* * * * * * * *
The above summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and Statement of Additional
Information and the accompanying prospectus and statement of additional
information for the Trust, to which reference should be made. This Prospectus
generally describes only the variable aspects of the contract, except where
fixed aspects are specifically mentioned.
TABLE OF ACCUMULATION UNIT VALUES+
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
START OF YEAR* END OF YEAR AT END OF YEAR
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997 $12.500000 $ 8.180904 74,344.781
-------------------------------------------------------------------------------------------------------------------
Science & Technology
1997 $12.500000 $13.647195 385,384.991
-------------------------------------------------------------------------------------------------------------------
International Small Cap
1996 $12.500000 $13.493094 265,493.981
1997 13.493094 13.410016 411,567.524
-------------------------------------------------------------------------------------------------------------------
Emerging Growth
1997 $12.500000 $14.574077 211,397.254
-------------------------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth
1997 $12.500000 $12.327066 347,682.217
-------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
1996 $12.500000 $13.215952 684,451.580
1997 13.215952 15.020670 1,150,785.107
-------------------------------------------------------------------------------------------------------------------
International Stock
1997 $12.500000 $12.652231 204,655.753
-------------------------------------------------------------------------------------------------------------------
Worldwide Growth
1997 $12.500000 $13.965674 101,148.358
-------------------------------------------------------------------------------------------------------------------
Global Equity
1994 $16.715126 $15.500933 171,668.821
1995 15.500933 16.459655 583,284.547
1996 16.459655 18.276450 923,612.249
1997 18.276450 21.770913 1,299,904.123
-------------------------------------------------------------------------------------------------------------------
Small Company Value
1997 $12.500000 $11.898363 59,637.804
-------------------------------------------------------------------------------------------------------------------
Equity
1994 $14.381312 $14.786831 156,302.930
1995 14.786831 20.821819 761,321.040
1996 20.821819 24.664354 1,637,731.552
1997 24.664354 29.002593 1,935,946.769
-------------------------------------------------------------------------------------------------------------------
Growth
1996 $12.500000 $13.727312 252,538.943
1997 13.727312 16.968111 639,712.776
-------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
START OF YEAR* END OF YEAR AT END OF YEAR
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Quantitative Equity
1997 $ 12.500000 $16.107191 215,077.482
-------------------------------------------------------------------------------------------------------------------
Blue Chip Growth
1994 $ 8.699511 $ 8.837480 67,651.751
1995 8.837480 11.026969 532,417.987
1996 11.026969 13.688523 1,036,815.886
1997 13.688523 17.134232 2,075,335.712
-------------------------------------------------------------------------------------------------------------------
Real Estate Securities
1997 $ 12.500000 $14.949140 145,941.281
-------------------------------------------------------------------------------------------------------------------
Value
1997 $ 12.500000 $15.057118 477,917.950
-------------------------------------------------------------------------------------------------------------------
International Growth and Income
1995 $ 10.000000 $10.554228 403,796.120
1996 10.554228 11.718276 783,705.750
1997 11.718276 11.545714 1,064,531.666
-------------------------------------------------------------------------------------------------------------------
Growth and Income
1994 $ 13.239339 $13.076664 147,028.139
1995 13.076664 16.660889 916,107.230
1996 16.660889 20.178770 2,035,385.742
1997 20.178770 26.431239 3,295,978.088
------------------------------------------------------------------------------------------------------------------
Equity-Income
1994 $ 11.375744 $11.107620 147,434.130
1995 11.107620 13.548849 816,934.091
1996 13.548849 16.011513 1,486,734.204
1997 16.011513 20.479412 2,237,941.970
------------------------------------------------------------------------------------------------------------------
Balanced
1997 $ 12.500000 $14.609853 102,157.738
------------------------------------------------------------------------------------------------------------------
Aggressive Asset Allocation
1994 $ 12.538660 $12.381395 41,051.814
1995 12.381395 14.990551 102,929.895
1996 14.990551 16.701647 162,245.394
1997 16.701647 19.614359 188,134.226
------------------------------------------------------------------------------------------------------------------
High Yield
1997 $ 12.500000 $13.890491 338,419.694
------------------------------------------------------------------------------------------------------------------
Moderate Asset Allocation
1994 $ 12.522239 $12.396295 98,925.767
1995 12.396295 14.752561 312,206.344
1996 14.752561 15.995076 518,913.471
1997 15.995076 18.276161 675,599.424
------------------------------------------------------------------------------------------------------------------
Conservative Asset Allocation
1994 $ 12.378545 $12.298940 33,929.162
1995 12.298940 14.320582 127,957.567
1996 14.320582 15.113142 174,512.432
1997 15.113142 16.607511 214,321.762
------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
START OF YEAR* END OF YEAR AT END OF YEAR
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strategic Bond
1994 $ 10.192707 $ 9.965972 17,448.655
1995 9.965972 11.716972 276,219.578
1996 11.716972 13.250563 696,578.665
1997 13.250563 14.500997 1,080,748.752
-------------------------------------------------------------------------------------------------------------------
Global Government Bond
1994 $ 14.734788 $ 14.630721 46,005.023
1995 14.630721 17.772344 117,694.301
1996 17.772344 19.803954 194,577.024
1997 19.803954 20.104158 242,752.181
-------------------------------------------------------------------------------------------------------------------
Capital Growth Bond
1997 $ 12.500000 $ 13.475788 16,629.109
-------------------------------------------------------------------------------------------------------------------
Investment Quality Bond
1994 $ 14.307698 $ 14.216516 15,254.616
1995 14.216516 16.751499 118,436.044
1996 16.751499 16.943257 276,418.440
1997 16.943257 18.336912 407,957.213
-------------------------------------------------------------------------------------------------------------------
U.S. Government Securities
1994 $ 14.188969 $ 14.111357 14,981.455
1995 14.111357 16.083213 136,450.591
1996 16.083213 16.393307 299,784.238
1997 16.393307 17.535478 377,170.452
-------------------------------------------------------------------------------------------------------------------
Money Market
1994 $ 13.453100 $ 13.623292 57,620.649
1995 13.623292 14.190910 218,876.370
1996 14.190910 14.699636 436,831.126
1997 14.699636 15.241915 751,417.909
-------------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000
1997 $ 12.500000 $ 13.669625 621,262.575
-------------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820
1997 $ 12.500000 $14.033299 1,246,305.915
-------------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640
1997 $ 12.500000 $14.066417 964,581.576
-------------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460
1997 $ 12.500000 $14.016704 245,410.54
-------------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280
1997 $ 12.500000 $13.825120 129,160.895
-------------------------------------------------------------------------------------------------------------------
</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 Growth, Pilgrim Baxter Growth, International
Stock, Worldwide Growth, Quantitative Equity, Real Estate Securities, Value,
Balanced, High Yield, Capital Growth Bond, Lifestyle Aggressive 1000, Lifestyle
Growth 820, Lifestyle Balanced 640, Lifestyle Moderate 460, Lifestyle
Conservative 280 where units were first credited on January 1, 1997 and Small
Company Value where units were first credited on October 1, 1997.
+ See Appendix D for the TABLE of ACCUMULATION UNIT VALUES for certain contracts
which are no longer being issued (Ven 8 contracts).
14
<PAGE> 16
GENERAL INFORMATION ABOUT
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA,
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A
AND MANUFACTURERS INVESTMENT TRUST
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
The Manufacturers Life Insurance Company of North America (the
"Company") is a stock life insurance company organized under the laws of
Delaware in 1979. The Company's principal office is located at 116 Huntington
Avenue, Boston, Massachusetts 02116. The ultimate parent of the Company is The
Manufacturers Life Insurance Company ("Manulife"), a Canadian mutual life
insurance company based in Toronto, Canada. Prior to January 1, 1996, the
Company was a wholly owned subsidiary of North American Life Assurance Company
("NAL"), a Canadian mutual life insurance company.
On January 1, 1996 NAL and Manulife merged with the combined company
retaining the Manulife name. On January 19, 1998, the Board of Directors of
Manulife asked the management of Manulife to prepare a plan for conversion of
Manulife from a mutual life insurance company to an investor-owned,
publicly-traded stock company. Any demutualization plan for Manulife is subject
to the approval of the Manulife Board of Directors and policyholders as well as
regulatory approval.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A
The Company established The Manufacturers Life Insurance Company of
North America Separate Account A (the "Variable Account") on August 24, 1984 as
a separate account under Delaware law. The income, gains and losses, whether or
not realized, from assets of the Variable Account are, in accordance with the
contracts, credited to or charged against the Variable Account without regard to
other income, gains or losses of the Company. Nevertheless, all obligations
arising under the contracts are general corporate obligations of the Company.
Assets of the Variable Account may not be charged with liabilities arising out
of any other business of the Company.
The Variable Account is registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act") as a unit investment trust. A
unit investment trust is a type of investment company which invests its assets
in specified securities, such as the shares of one or more investment companies.
Registration under the 1940 Act does not involve supervision by the SEC of the
management or investment policies or practices of the Variable Account. If
deemed by the Company to be in the best interests of persons having voting
rights under the contracts, the Variable Account may be operated as a management
company under the 1940 Act or it may be deregistered under such Act in the event
such registration is no longer required.
The Company reserves the right to add other sub-accounts, eliminate
existing sub-accounts, combine sub-accounts or transfer assets in one
sub-account to another sub-account established by the Company or an affiliated
company. The Company will not eliminate existing sub-accounts or combine
sub-accounts without obtaining any necessary approval of the appropriate state
or Federal regulatory authorities.
MANUFACTURERS INVESTMENT TRUST
The assets of each available sub-account of the Variable Account are
invested in shares of a corresponding portfolio of Manufacturers Investment
Trust (the "Trust"). A description of each portfolio is set forth below. The
Trust is registered under the 1940 Act as an open-end management investment
company. Each of the portfolios is diversified for purposes of the 1940 Act,
except for the Global Government Bond Trust, Emerging Growth Trust and the five
Lifestyle Trusts which are non-diversified. The Trust receives investment
subadvisory services from Manufacturers Securities Services, LLC ("MSS"), the
successor to NASL Financial Services, Inc.
15
<PAGE> 17
The Trust currently has fifteen subadvisers who manage all of the
portfolios:
<TABLE>
<CAPTION>
SUBADVISER SUBADVISER TO
---------- -------------
<S> <C>
Fidelity Management Trust Company Equity Trust
Conservative Asset Allocation Trust
Moderate Asset Allocation Trust
Aggressive Asset Allocation Trust
Founders Asset Management LLC Growth Trust
Worldwide Growth Trust
Balanced Trust
International Small Cap Trust
Fred Alger Management, Inc. Small/Mid Cap Trust
J.P. Morgan Investment Management Inc. International Growth and Income Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Capital Growth Bond Trust
Money Market Trust
Lifestyle Trusts
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Oechsle International Advisors, L.P. Global Government Bond 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
Warburg Pincus Asset Management, Inc. Emerging Growth Trust
Wellington Management Company, LLP Growth and Income Trust
Investment Quality Bond Trust
</TABLE>
The following is a brief description of each portfolio:
The PACIFIC RIM EMERGING MARKETS TRUST seeks long-term growth of
capital by investing in a diversified portfolio that is comprised primarily of
common stocks and equity-related securities of corporations domiciled in
countries in the Pacific Rim region.
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital.
Current income is incidental to the portfolio's objective.
16
<PAGE> 18
The INTERNATIONAL SMALL CAP TRUST seeks capital appreciation by
investing primarily in securities issued by foreign companies which have total
market capitalization or annual revenues of $1 billion or less. These securities
may represent companies in both established and emerging economies throughout
the world.
The EMERGING GROWTH TRUST seeks maximum capital appreciation by
investing primarily in a portfolio of equity securities of domestic companies.
The Emerging Growth Trust ordinarily will invest at least 65% of its total
assets in common stocks or warrants of emerging growth companies that represent
attractive opportunities for maximum capital appreciation.
The PILGRIM BAXTER GROWTH TRUST seeks capital appreciation by investing
in companies believed by the subadviser to have an outlook for strong earnings
growth and the potential for significant capital appreciation.
The SMALL/MID CAP TRUST seeks long-term capital appreciation by
investing at least 65% of its total assets (except during temporary defensive
periods) in small/mid cap equity securities. As used herein small/mid cap equity
securities are equity securities of companies that, at the time of purchase,
have total market capitalization between $500 million and $5 billion.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by
investing primarily in common stocks of established, non-U.S. companies.
The WORLDWIDE GROWTH TRUST seeks long-term growth of capital by
normally investing at least 65% of its total assets in equity securities of
growth companies in a variety of markets throughout the world.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by
investing primarily in equity securities throughout the world, including U.S.
issuers and emerging markets.
The SMALL COMPANY VALUE TRUST seeks long term growth of capital by
investing in equity securities of smaller companies which are traded principally
in the markets of the United States.
The EQUITY TRUST seeks growth of capital by investing primarily in
common stocks of United States issuers and securities convertible into or
carrying the right to buy common stocks.
The GROWTH TRUST seeks long-term growth of capital by investing at
least 65% of the portfolio's total assets in the common stocks of
well-established, high-quality growth companies that the subadviser believes
have the potential to increase earnings faster than the rest of the market.
The QUANTITATIVE EQUITY TRUST seeks to achieve intermediate and
long-term growth through capital appreciation and current income by investing in
common stocks and other equity securities of well established companies with
promising prospects for providing an above average rate of return.
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of capital
(current income is a secondary objective) and many of the stocks in the
portfolio are expected to pay dividends.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of
long-term capital appreciation and satisfactory current income by investing in
real estate related equity and debt securities.
The VALUE TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in common and preferred stocks, convertible securities,
rights and warrants to purchase common stocks, ADRs and other equity securities
of companies with equity capitalizations usually greater than $300 million.
The INTERNATIONAL GROWTH AND INCOME TRUST seeks long-term growth of
capital and income by investing, under normal circumstances, at least 65% of its
total assets in equity securities of foreign issuers. The portfolio may also
invest in debt securities of corporate or sovereign issuers rated A or higher by
Moody's Investor Services, Inc. or Standard & Poor's Corporation or, if unrated,
of equivalent credit quality as determined by the subadviser.
17
<PAGE> 19
The GROWTH AND INCOME TRUST seeks long-term growth of capital and
income, consistent with prudent investment risk, by investing primarily in a
diversified portfolio of common stocks of United States issuers which the
subadviser believes are of high quality.
The EQUITY-INCOME TRUST seeks to provide substantial dividend income
and also long-term capital appreciation by investing primarily in
dividend-paying common stocks, particularly of established companies with
favorable prospects for both increasing dividends and capital appreciation.
The BALANCED TRUST seeks current income and capital appreciation by
investing in a balanced portfolio of common stocks, U.S. and foreign government
obligations and a variety of corporate fixed-income securities.
The HIGH YIELD TRUST seeks to realize an above-average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing primarily in high yield debt securities, including corporate bonds and
other fixed-income securities.
The AUTOMATIC ASSET ALLOCATION TRUSTS seek the highest potential total
return consistent with a specified level of risk tolerance -- conservative,
moderate or aggressive -- by investing primarily in the kinds of securities in
which the Equity, Investment Quality Bond, U.S. Government Securities and Money
Market Trusts may invest.
- The AGGRESSIVE ASSET ALLOCATION TRUST seeks the highest total
return consistent with an aggressive level of risk tolerance. This
Trust attempts to limit the decline in portfolio value in very
adverse market conditions to 15% over any three year period.
- The MODERATE ASSET ALLOCATION TRUST seeks the highest total return
consistent with a moderate level of risk tolerance. This Trust
attempts to limit the decline in portfolio value in very adverse
market conditions to 10% over any three year period.
- The CONSERVATIVE ASSET ALLOCATION TRUST seeks the highest total
return consistent with a conservative level of risk tolerance.
This Trust attempts to limit the decline in portfolio value in
very adverse market conditions to 5% over any three year period.
The STRATEGIC BOND TRUST seeks a high level of total return consistent
with preservation of capital by giving its subadviser broad discretion to deploy
the portfolio's assets among certain segments of the fixed-income market as the
subadviser believes will best contribute to achievement of the portfolio's
investment objective.
The GLOBAL GOVERNMENT BOND TRUST seeks a high level of total return by
placing primary emphasis on high current income and the preservation of capital
by investing primarily in a global portfolio of high-quality, fixed-income
securities of foreign and United States governmental entities and supranational
issuers.
The CAPITAL GROWTH BOND TRUST seeks to achieve growth of capital by
investing in medium-grade or better debt securities, with income as a secondary
consideration. The Capital Growth Bond Trust differs from most "bond" funds in
that its primary objective is capital appreciation, not income.
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by investing
primarily in a diversified portfolio of investment grade corporate bonds and
U.S. Government bonds with intermediate to longer term maturities. The portfolio
may also invest up to 20% of its assets in non-investment grade fixed income
securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current
income consistent with preservation of capital and maintenance of liquidity, by
investing in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
derivative securities such as collateralized mortgage obligations backed by such
securities.
The MONEY MARKET TRUST seeks maximum current income consistent with
preservation of principal and liquidity by investing in high quality money
market instruments with maturities of 397 days or less issued primarily by
United States entities.
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The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long-term growth
of capital (current income is not a consideration) by investing 100% of the
Lifestyle Trust's assets in other portfolios of the Trust ("Underlying
Portfolios") which invest primarily in equity securities.
The LIFESTYLE GROWTH 820 TRUST seeks to provide long-term growth of
capital with consideration also given to current income by investing
approximately 20% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 80% of its assets
in Underlying Portfolios which invest primarily in equity securities.
The LIFESTYLE BALANCED 640 TRUST seeks to provide a balance between a
high level of current income and growth of capital with a greater emphasis given
to capital growth by investing approximately 40% of the Lifestyle Trust's assets
in Underlying Portfolios which invest primarily in fixed income securities and
approximately 60% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE MODERATE 460 TRUST seeks to provide a balance between a
high level of current income and growth of capital with a greater emphasis given
to high income by investing approximately 60% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 40% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of
current income with some consideration also given to growth of capital by
investing approximately 80% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in fixed income securities and approximately
20% of its assets in Underlying Portfolios which invest primarily in equity
securities.
In pursuing the Strategic Bond, High Yield and Investment Quality Bond
Trusts' investment objective, each portfolio expects to invest a portion of its
assets in high yield securities, commonly known as "junk bonds" which also
present a high degree of risk. The risks of these securities include price
volatility and risk of default in the payment of interest and principal. See
"Risk Factors Relating to High Yield Securities" contained in the Trust
prospectus before investing in any of these Trusts.
In pursuing the Pacific Rim Emerging Markets, International Stock,
Worldwide Growth, International Small Cap, Global Equity, Strategic Bond,
International Growth and Income, High Yield and Global Government Bond Trusts'
investment objective, each portfolio may invest up to 100% of its assets in
foreign securities which may present additional risks. See "Foreign Securities"
in the Trust prospectus before investing in any of these Trusts.
If the shares of a portfolio are no longer available for investment or
in the Company's judgment investment in a portfolio becomes inappropriate in
view of the purposes of the Variable Account, the Company may eliminate the
shares of a portfolio and substitute shares of another portfolio of the Trust or
another open-end registered investment company. Substitution may be made with
respect to both existing investments and the investment of future purchase
payments. However, no such substitution will be made without notice to the
contract owner and prior approval of the SEC to the extent required by the 1940
Act.
The Company will vote shares of the Trust portfolios held in the
Variable Account at meetings of shareholders of the Trust in accordance with
voting instructions received from the persons having the voting interest under
the contracts. The number of portfolio shares for which voting instructions may
be given will be determined by the Company in the manner described below, not
more than 90 days prior to the meeting of the Trust. Trust proxy material will
be distributed to each person having the voting interest under the contract
together with appropriate forms for giving voting instructions. Portfolio shares
held in the Variable Account that are attributable to contract owners and as to
which no timely instructions are received and portfolio shares held in the
Variable Account that are beneficially owned by the Company will be voted by the
Company in proportion to the instructions received.
Prior to the maturity date, the person having the voting interest under
a contract is the owner and the number of votes as to each portfolio for which
voting instructions may be given is determined by dividing the value of the
investment account corresponding to the sub-account in which such portfolio
shares are held by the net asset value per share of that portfolio. After the
maturity date, the person having the voting interest under a contract is the
annuitant and the number of votes as to each portfolio for which voting
instructions may be given is determined by dividing the reserve for the contract
allocated to the sub-account in which such portfolio shares are held by the net
asset value per share of that portfolio. Generally, the number of votes tends to
decrease as annuity payments progress since the amount of reserves attributable
to a contract will usually decrease after commencement of annuity payments. The
Company reserves the
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right to make any changes in the voting rights described above that may be
permitted by the Federal securities laws or regulations or interpretations of
these laws or regulations.
A full description of the Trust, including the investment objectives,
policies and restrictions of each of the portfolios, is contained in the
prospectus for the Trust which accompanies this Prospectus and should be read by
a prospective purchaser before investing.
DESCRIPTION OF THE CONTRACT
ELIGIBLE GROUPS
The contract may be issued to fund plans qualifying for special income
tax treatment under the Code, such as individual retirement accounts and
annuities, pension and profit-sharing plans for corporations and sole
proprietorships/partnerships ("H.R. 10" and "Keogh" plans), tax-sheltered
annuities, and state and local government deferred compensation plans (see
"QUALIFIED RETIREMENT PLANS"). The contract is also designed so that it may be
used with non-qualified retirement plans, such as deferred compensation and
payroll savings plans and such other groups (trusteed or non-trusteed) as may be
eligible under applicable law. Contracts have been issued to Venture Trust, a
trust established with United Missouri Bank, N.A., Kansas City, Missouri, as
group holder for groups comprised of persons who have brokerage accounts with
brokers having selling agreements with MSS, the principal underwriter of the
contracts.
An eligible member of a group to which a contract has been issued may
become an owner under the contract by submitting a completed application, if
required by the Company, and a minimum purchase payment. A certificate
summarizing the rights and benefits of the owner under the contract will be
issued to an applicant acceptable to the Company. The Company reserves the right
to decline to issue a certificate to any person in its sole discretion. All
rights and privileges under the contract may be exercised by each owner as to
his or her interest unless expressly reserved to the group holder. However,
provisions of any plan in connection with which the contract was issued may
restrict an owner's ability to exercise such rights and privileges.
ACCUMULATION PROVISIONS
PURCHASE PAYMENTS
Purchase payments are paid to the Company at its Annuity Service
Office. Except as noted below, the minimum initial purchase payment is $5,000
for Non-Qualified Contracts and $2,000 for Qualified Contracts. The minimum
initial purchase payment is $3,500 if the source of such payment was a direct
rollover of an eligible rollover distribution from a qualified plan under
Section 401(a) of the Code or a Tax Sheltered Annuity described in Section
403(b) of the Code, all or part of which assets are invested in a group annuity
contract issued by The Manufacturers Life Insurance Company (U.S.A.). The
Company may provide by separate agreement for purchase payments to be
automatically withdrawn from an owner's bank account on a periodic basis. If a
purchase payment would cause the contract value for an owner to exceed
$1,000,000 or the owner's contract value already exceeds $1,000,000, additional
purchase payments will be accepted only with the prior approval of the Company.
The Company may, at its option, cancel a certificate and an owner's
participation under a contract at the end of any two consecutive certificate
years in which no purchase payments by or on behalf of the owner have been made,
if both (i) the total purchase payments made for the certificate, less any
withdrawals, are less than $2,000; and (ii) the contract value for the owner at
the end of such two year period is less than $2,000. The cancellation of
contract privileges may vary in certain states in order to comply with the
requirements of insurance laws and regulations in such state. Upon cancellation
the Company will pay the owner his or her contract value computed as of the
valuation period during which the cancellation occurs less any debt and less the
annual $30 administration fee. The amount paid will be treated as a withdrawal
for Federal tax purposes and thus may be subject to income tax and to a 10%
penalty tax (see "FEDERAL TAX MATTERS").
Purchase payments are allocated among the investment options in
accordance with the percentages designated by the owner. In addition, owners
have the option to participate in the Guarantee Plus Program administered by the
Company. Under the Guarantee Plus Program the initial purchase payment is split
between the fixed and variable investment options. A percentage of the initial
purchase payment is allocated to the chosen fixed account, such that at the end
of the guaranteed period the fixed account will have grown to an amount at least
equal to the total initial purchase payment. The percentage depends upon the
current interest rate of the
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fixed investment option. The balance of the initial purchase payment is
allocated among the variable investment options as indicated on the certificate
specifications page. Owners may elect to participate in the Guarantee Plus
Program and may obtain full information concerning the program and its
restrictions from their securities dealers or the Annuity Service Office. An
owner may change the allocation of subsequent purchase payments at any time upon
written notice to the Company or by telephone in accordance with the Company's
telephone transfer procedures.
ACCUMULATION UNITS
The Company will establish an investment account for each owner for
each variable account investment option to which such owner allocates purchase
payments. Purchase payments are credited to such investment accounts in the form
of accumulation units. The following discussion of accumulation units, the value
of accumulation units and the net investment factor formula pertains only to the
accumulations in the variable account investment options. The parallel
discussion regarding accumulations in the fixed account investment options
appears elsewhere in this Prospectus (see "FIXED ACCOUNT INVESTMENT OPTIONS").
The number of accumulation units to be credited to each investment
account is determined by dividing the net purchase payment allocated to that
investment account by the value of an accumulation unit for that investment
account for the valuation period during which the purchase payment is received
at the Company's Annuity Service Office complete with all necessary information
or, in the case of the first purchase payment for a certificate, pursuant to the
procedures described below.
Initial purchase payments for a certificate received by mail will
usually be credited in the valuation period during which received at the Annuity
Service Office, and in any event not later than two business days after receipt
of all information necessary for processing issuance of the certificate. The
applicant will be informed of any deficiencies preventing processing if the
certificate cannot be issued and the purchase payment credited within two
business days after receipt. If the deficiencies are not remedied within five
business days after receipt, the purchase payment will be returned promptly to
the applicant, unless the applicant specifically consents to the Company's
retaining the purchase payment until all necessary information is received.
Initial purchase payments received by wire transfer from broker-dealers will be
credited in the valuation period during which received where such broker-dealers
have made special arrangements with the Company.
VALUE OF ACCUMULATION UNITS
The value of accumulation units will vary from one valuation period to
the next depending upon the investment results of the particular sub-accounts to
which purchase payments are allocated. The value of an accumulation unit for
each sub-account was arbitrarily set at $10 or $12.50 for the first valuation
period under contracts similar to the contracts described in this Prospectus.
The value of an accumulation unit for any subsequent valuation period is
determined by multiplying the value of an accumulation unit for the immediately
preceding valuation period by the net investment factor for such sub-account
(described below) for the valuation period for which the value is being
determined.
NET INVESTMENT FACTOR
The net investment factor is an index used to measure the investment
performance of a sub-account from one valuation period to the next. The net
investment factor for each sub-account for any valuation period is determined by
dividing (a) by (b) and subtracting (c) from the result:
Where (a) is:
(1) the net asset value per share of a portfolio share held in
the sub-account determined at the end of the current valuation period,
plus
(2) the per share amount of any dividend or capital gain
distributions made by the portfolio on shares held in the sub-account
if the "ex-dividend" date occurs during the current valuation period.
Where (b) is:
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.
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Where (c) is:
a factor representing the charges deducted from the
sub-account on a daily basis for administrative expenses and mortality
and expense risks. Currently, such factor is equal on an annual basis
to 1.4% (0.15% for administrative expenses and 1.25% for mortality and
expense risks). The charges deducted from the sub-account reduce the
value of the accumulation units for the sub-account.
The net investment factor may be greater or less than or equal to one;
therefore, the value of an accumulation unit may increase, decrease or remain
the same.
TRANSFERS AMONG INVESTMENT OPTIONS
Before the maturity date an owner may transfer amounts among his or her
variable account investment options and from such investment options to his or
her fixed account investment options at any time and without charge upon written
notice to the Company or by telephone if the owner authorizes the Company in
writing to accept telephone transfer requests. Accumulation units will be
canceled from the investment account from which amounts are transferred and
credited to the investment account to which amounts are transferred. The Company
will effect such transfers so that the contract value for a certificate on the
date of the transfer will not be affected by the transfer. The owner must
transfer at least $300 or, if less, the entire value of the investment account.
If after the transfer the amount remaining in the investment account is less
than $100, then the Company will transfer the entire amount instead of the
requested amount. The Company reserves the right to limit, upon notice, the
maximum number of transfers an owner may make to one per month or six at any
time within a certificate year. In addition, the Company reserves the right to
defer the transfer privilege at any time that the Company is unable to purchase
or redeem shares of the Trust portfolios. The Company also reserves the right to
modify or terminate the transfer privilege at any time in accordance with
applicable law.
MAXIMUM NUMBER OF INVESTMENT OPTIONS
Due to current administrative capabilities, a contract owner is limited
to a maximum of 17 investment options (including all fixed account investment
options) during the period prior to the maturity date of the contract (the
"Contract Period"). In calculating this limit for each contract owner,
investment options to which the contract owner has allocated purchased payments
at any time during the Contract Period will be counted toward the 17 maximum
even if the contract owner no longer has contract value allocated to these
investment options.
TELEPHONE TRANSACTIONS
Owners are permitted to request transfers/redemptions by telephone. The
Company will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. To be permitted to request a
transfer/redemption by telephone, an owner must elect the option. The Company
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and may only be liable for any losses due to unauthorized
or fraudulent instructions where it fails to employ its procedures properly.
Such procedures include the following. Upon telephoning a request, owners will
be asked to provide their account number, and if not available, their social
security number. For the owner's and Company's protection, all conversations
with owners will be tape recorded. All telephone transactions will be followed
by a confirmation statement of the transaction.
SPECIAL TRANSFER SERVICES - DOLLAR COST AVERAGING
The Company administers a Dollar Cost Averaging ("DCA") program which
enables an owner to pre-authorize a periodic exercise of the contractual
transfer rights described above. Owners entering into a DCA agreement instruct
the Company to transfer monthly a predetermined dollar amount from any
sub-account or the one year fixed account investment option to other
sub-accounts until the amount in the sub-account from which the transfer is made
or one year fixed account investment option is exhausted. 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 initial and subsequent net payments may be allocated to the DCA fixed
account investment option. The DCA program is generally suitable for owners
making a substantial deposit and who desire to control the risk of investing at
the top of a market cycle. The DCA program allows such investments to be made in
equal installments over time in an
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effort to reduce such risk. Owners interested in the DCA program may elect to
participate in the program on the application or by separate application. Owners
may obtain a separate application and full information concerning the program
and its restrictions from their securities dealer or the Annuity Service Office.
There is no charge for participation in the DCA program.
ASSET REBALANCING PROGRAM
The Company administers an Asset Rebalancing Program which enables an
owner to indicate to the Company the percentage levels he or she would like to
maintain in particular portfolios. The contract value will be automatically
rebalanced pursuant to the schedule described below to maintain the indicated
percentages by transfers among the portfolios. The entire contract value must be
included in the Asset Rebalancing Program. Other investment programs, such as
the DCA program, or other transfers or withdrawals may not work in concert with
the Asset Rebalancing Program. Therefore, owners should monitor their use of
these other programs and any other transfers or withdrawals while the Asset
Rebalancing Program is being used. Owners interested in the Asset Rebalancing
Program may obtain a separate application and full information concerning the
program and its restrictions from their securities dealer or the Annuity Service
Office. There is no charge for participation in the Asset Rebalancing Program.
For rebalancing programs begun on or after October 1, 1996 asset
rebalancing will only be permitted on the following time schedules:
(i) quarterly on the 25th day of the last month of the quarter (or
the next business day if the 25th is not a business day);
(ii) semi-annually on June 25th or December 26th (or the next business
day if these dates are not business days); or
(iii) annually on December 26th (or the next business day if December
26th is not a business day).
Rebalancing will continue to take place on the last business day of every
calendar quarter for rebalancing programs begun prior to October 1, 1996.
WITHDRAWALS
Prior to the earlier of the maturity date or the death of an owner, an
owner may withdraw all or a portion of his or her contract value upon written
request complete with all necessary information to the Company's Annuity Service
Office. For certain qualified contracts, exercise of the withdrawal right may
require the consent of the qualified plan participant's spouse under the Code
and regulations promulgated by the Treasury Department. In the case of a total
withdrawal, the Company will pay the contract value as of the date of receipt of
the request at its Annuity Service Office, less the annual $30 administration
fee if applicable, any debt and any applicable withdrawal charge, and the
owner's certificate will be canceled. In the case of a partial withdrawal, the
Company will pay the amount requested and cancel that number of accumulation
units credited to each investment account necessary to equal the amount
withdrawn from each investment account plus any applicable withdrawal charge
deducted from such investment account (see "CHARGES AND DEDUCTIONS").
When making a partial withdrawal, the owner should specify the
investment options from which the withdrawal is to be made. The amount requested
from an investment option may not exceed the value of that investment option
less any applicable withdrawal charge. If the owner does not specify the
investment options from which a partial withdrawal is to be taken, a partial
withdrawal will be taken from the variable account investment options until
exhausted and then from the fixed account investment options, beginning with the
shortest guarantee period first and ending with the longest guarantee period
last. If the partial withdrawal is less than the total value in the variable
account investment options, the withdrawal will be taken pro rata from the
variable account investment options: taking from each such variable account
investment option an amount which bears the same relationship to the total
amount withdrawn as the value of such variable account investment option bears
to the total value of all the owner's investments in variable account investment
options.
For the rules governing the order and manner of withdrawals from the
fixed account investment options, see "FIXED ACCOUNT INVESTMENT OPTIONS."
There is no limit on the frequency of partial withdrawals; however, the
amount withdrawn must be at least $300 or, if less, the entire balance in the
investment option. If after the withdrawal (and deduction of any withdrawal
charge) the amount remaining in the investment option is less than $100, the
Company will treat the partial withdrawal as a withdrawal of the entire amount
held in the investment option. If a partial withdrawal plus any applicable
withdrawal charge would reduce the contract value to less than $300, the Company
will treat the partial withdrawal as a total withdrawal of the contract value.
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The amount of any withdrawal from the variable account investment
options will be paid promptly, and in any event within seven days of receipt of
the request, complete with all necessary information at the Company's Annuity
Service Office, except that the Company reserves the right to defer the right of
withdrawal or postpone payments for any period when: (1) the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (2)
trading on the New York Stock Exchange is restricted, (3) an emergency exists as
a result of which disposal of securities held in the Variable Account is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Variable Account's net assets, or (4) the SEC, by order, so permits
for the protection of security holders; provided that applicable rules and
regulations of the SEC shall govern as to whether the conditions described in
(2) and (3) exist.
Withdrawals from the contract may be subject to income tax and a 10%
penalty tax. Withdrawals are permitted from contracts or certificates issued in
connection with Section 403(b) qualified plans only under limited circumstances
(see "FEDERAL TAX MATTERS").
TELEPHONE REDEMPTIONS. The owner may request the option to withdraw a
portion of his or her contract value by telephone by completing a separate
application. The Company reserves the right to impose maximum withdrawal amounts
and procedural requirements regarding this privilege. For additional information
on Telephone Redemptions see "Telephone Transactions" above.
SPECIAL WITHDRAWAL SERVICES - INCOME PLAN
The Company administers an Income Plan ("IP") which enables an owner to
pre-authorize a periodic exercise of the contractual withdrawal rights described
above. Owners entering into an IP agreement instruct the Company to withdraw a
level dollar amount from specified investment options on a periodic basis. The
total of IP withdrawals in a certificate year is limited to not more than 10% of
the purchase payments made by or on behalf of the owner to ensure that no
withdrawal or market value charge will ever apply to an IP withdrawal. If an
additional withdrawal is made by an owner participating in an IP, the IP will
terminate automatically and may be reinstated only on or after the next
certificate anniversary. The IP is not available to owners participating in the
dollar cost averaging program or for which purchase payments are being
automatically deducted from a bank account on a periodic basis. IP withdrawals
will be free of withdrawal and market value charges. IP withdrawals may,
however, be subject to income tax and a 10% penalty tax (see "FEDERAL TAX
MATTERS"). Owners interested in an IP may elect to participate in this program
may obtain a separate application and full information concerning the program
and its restrictions from their securities dealer or the Annuity Service Office.
Currently, there is no fee charged for the IP service.
LOANS
The Company offers a loan privilege only under contracts or
certificates issued in connection with Section 403(b) qualified plans that are
not subject to Title I of ERISA. Where available, owners may obtain loans using
their contract value as the only security for the loan. Loans are subject to
provisions of the Code and to applicable retirement program rules (collectively,
"loan rules"). Tax advisors and retirement plan fiduciaries should be consulted
prior to exercising loan privileges.
Under the terms of the contract, the maximum loan value is equal to 80%
of an owner's contract value, although loan rules may serve to reduce such
maximum loan value in some cases. The amount available for a loan at any given
time is the loan value less any outstanding debt. Debt equals the amount of any
loans taken by the owner plus accrued interest. Loans will be made only upon
written request from the owner. The Company will make loans within seven days of
receiving a properly completed loan application (applications are available from
the Annuity Service Office), subject to postponement under the same
circumstances that payment of withdrawals may be postponed (see "WITHDRAWALS").
When an owner requests a loan, the Company will reduce the owner's
investment in the investment accounts and transfer the amount of the loan to the
owner's loan account, a part of the Company's general account. The owner may
designate the investment accounts from which the loan is to be withdrawn. Absent
such a designation, the amount of the loan will be withdrawn from the owner's
investment accounts in accordance with the rules for making partial withdrawals
(see "WITHDRAWALS"). The contract provides that owners may repay contract debt
at any time. Under applicable loan rules, loans generally must be repaid within
five years, repayments must be made at least quarterly and repayments must be
made in substantially equal amounts. When a loan is repaid, the amount of the
repayment will be transferred from the owner's loan account to the investment
accounts. The owner may designate the investment accounts to which a repayment
is to be allocated. Otherwise, the repayment will be allocated in the same
manner as the owner's most recent purchase payment. On each certificate
anniversary, the Company will transfer from the owner's investment accounts to
his or her loan account the amount by which the owner's debt exceeds the balance
in his or her loan account.
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The Company charges interest of 6% per year on contract loans. Loan
interest is payable in arrears and, unless paid in cash, the accrued loan
interest is added to the amount of the owner's debt and bears interest at 6% as
well. The Company credits interest with respect to amounts held in the owner's
loan account at a rate of 4% per year. Consequently, the net cost of loans under
the contract is 2%. If on any date an owner's debt exceeds his or her contract
value, there will be a default as to the owner. In such case the owner will
receive a notice indicating the payment needed to cure the default and will have
a thirty-one day grace period within which to pay the default amount. If the
required payment is not made within the grace period, the contract may be
foreclosed as to that owner (terminated without value) and the certificate
canceled.
The amount of an owner's debt will be deducted from the death benefit
otherwise payable to the beneficiary (see "DEATH BENEFIT BEFORE MATURITY DATE").
In addition, debt, whether or not repaid, will have a permanent effect on an
owner's contract value because the investment results of the investment accounts
will apply only to the unborrowed portion of the contract value. The longer debt
is outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the investment results are greater than the rate
being credited on amounts held in the loan account while the debt is
outstanding, the owner's contract value will not increase as rapidly as it would
have if no debt were outstanding. If investment results are below that rate, the
contract value will be higher than it would have been had no debt been
outstanding.
DEATH BENEFIT BEFORE MATURITY DATE
In General. The following discussion applies principally to contracts
and certificates that are not issued in connection with qualified plans, i.e., a
"non-qualified" contract or certificate. The requirements of the tax law
applicable to qualified plans, and the tax treatment of amounts held and
distributed under such plans, are quite complex. Accordingly, a prospective
purchaser of a contract or certificate to be used in connection with a qualified
plan should seek competent legal and tax advice regarding the suitability of the
contract or certificate for the situation involved and the requirements
governing the distribution of benefits, including death benefits, from a
contract or certificate used in the plan. In particular, a prospective purchaser
who intends to use the contract or certificate in connection with a qualified
plan should consider that the contract provides a death benefit (described
below) that could be characterized as an incidental death benefit. There are
limits on the amount of incidental benefits that may be provided under certain
qualified plans and the provision of such benefits may result in currently
taxable income to plan participants (see "FEDERAL TAX MATTERS"). See Appendix D
for information on death benefit provisions applicable to certain contracts
which are no longer being issued (Ven 8 contracts).
Amount of Death Benefit.
Certificates Issued Prior to May 1, 1998. If any 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 certificate date, the death benefit will be determined as
follows: During the first certificate year, the death benefit will be the
greater of: (a) the contract value or (b) the sum of all purchase payments made,
less any amounts deducted in connection with partial withdrawals made by or on
behalf of the owner. During any subsequent certificate year, the death benefit
will be the greater of: (a) the contract value or (b) the death benefit on the
last day of the previous certificate year, plus any purchase payments made and
less any amounts deducted in connection with partial withdrawals made by or on
behalf of the owner since then.
If any owner dies after his or her 85th birthday and the oldest owner
had an attained age of less than 81 years on the certificate date, the death
benefit will be the greater of: (a) the contract value or (b) the excess of (i)
the sum of all purchase payments made by or on behalf of the owner over (ii) the
sum of any amounts deducted in connection with partial withdrawals made by or on
behalf of the owner. If any owner dies and the oldest owner had an attained age
greater than 80 on the certificate date, the death benefit will be the contract
value less any applicable withdrawal charges at the time of payment of benefits.
For certificates issued on or after October 1, 1997, any withdrawal charges
applied against the death benefit shall be waived by the Company.
Certificates Issued On or After May 1, 1998. If any owner dies and the
oldest owner had an attained age of less than 81 years on the certificate date,
the death benefit will be determined as follows: During the first certificate
year, the death benefit will be the greater of: (a) the contract value or (b)
the sum of all purchase payments made by or on behalf of the owner, less any
amounts deducted in connection with partial withdrawals made by or on behalf of
the owner. During any subsequent certificate year, the death benefit will be the
greater of: (a)
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the contract value or (b) the death benefit on the last day of the previous
certificate year, plus any purchase payments made by or on behalf of the owner
and less any amounts deducted in connection with partial withdrawals made by or
on behalf of the owner since then. If any owner dies on or after his or her 81st
birthday, the death benefit will be the greater of (a) contract value or (b) the
death benefit on the last day of the certificate year ending just prior to the
owner's 81st birthday, plus any payments made by or on behalf of the owner, less
amounts deducted in connection with partial withdrawals.
If any owner dies and the oldest owner had an attained age of 81 years
or greater on the certificate date, the death benefit will be the greater of:
(a) the contract value or (b) the excess of (i) the sum of all purchase payments
made by or on behalf of the owner over (ii) the sum of any amounts deducted in
connection with partial withdrawals made by or on behalf of the owner.
In the states of Texas and Washington, the death benefit described
under "Certificates Issued Prior to May 1, 1998" will continue to apply to
certificates issued on or after May 1, 1998.
Determination of Death Benefit. The determination of the death benefit
will be made on the date written notice and proof of death, as well as all
required claims forms, are received at the Company's Annuity Service Office. No
person is entitled to the death benefit until this time. In addition, partial
withdrawals include amounts applied under an annuity option under the contract.
Also, amounts deducted in connection with partial withdrawals include charges
imposed on a partial withdrawal, but not amounts charged in payment of the
annual administration fee. If the owner has any debt under the contract, the
death benefit equals the death benefit, as described above, less such debt.
Payment of Death Benefit. The Company will pay the death benefit
(which, as defined above, is net of any debt) to the beneficiary if any owner
dies before the maturity date. If there is a surviving owner, that owner will be
deemed to be the beneficiary. No death benefit is payable on the death of any
annuitant, except that if any 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 owner, if a natural person, will become the annuitant
unless the 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 certificate will continue subject to the
following: (1) The beneficiary will become the owner. (2) Any excess of the
death benefit over the contract value will be allocated to the owner's
investment accounts in proportion to their relative values on the date of the
Company's receipt at its Annuity Service Office of written notice and proof of
death and all required claim forms. (3) No additional purchase payments may be
made. (4) If the beneficiary is not the deceased's owner spouse, distribution of
the owner's entire interest in the certificate must be made within five years of
the owner's death, or alternatively, distribution may be made as an annuity,
under one of the annuity options described below, which begins within one year
of the owner's death and is payable over the life of the beneficiary or over a
period not extending beyond the life expectancy of the beneficiary. Upon the
death of the beneficiary, the death benefit will equal the contract value which
must be distributed immediately in a single sum. (5) If the owner's spouse is
the beneficiary, the certificate will continue with the spouse as the new owner.
In such a case, the distribution rules described in "(4)" applicable when an
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
certificate. In addition, the death benefit on the last day of the previous
certificate year (or the last day of the certificate year ending just prior to
the owner's 81st birthday, if applicable) shall be set to zero as of the date of
the first owner's death. (6) If any owner dies and the oldest owner had an
attained age of less than 81 on the certificate date, withdrawal charges are not
applied on payment of the death benefit (whether taken through a partial or
total withdrawal or applied under an annuity option). If any owner dies and the
oldest owner had an attained age greater than 80 on the certificate date,
withdrawal charges will be assessed only upon payment of the death benefit (if
such charges are otherwise applicable), so that if the death benefit is paid in
a subsequent year, a lower withdrawal charge will be applicable. For
certificates issued after October 1, 1997, any withdrawal charge applied against
the death benefit shall be waived.
If the annuitant is changed and the owner is not a natural person, the
entire interest in the certificate must be distributed to the owner within five
years. The amount distributed will be reduced by charges which would otherwise
apply upon withdrawal.
A substitution or addition of any owner may result in resetting the
death benefit to an amount equal to the contract value as of the date of the
change and treating such value as a payment made on that date for purposes of
computing the amount of the death benefit. In addition, all purchase payments
made and all amounts deducted in connection with partial withdrawals prior to
the date of the change of owner will not be considered in the determination of
the death benefit. Furthermore, the death benefit on the last day of the
previous certificate year shall be set to zero as of the date of the owner
change. No such change in death benefit will be made if the individual whose
death will cause the death benefit to be paid is the same after the change in
ownership or if ownership is transferred to the owner's spouse.
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Death benefits will be paid within seven days of the date the amount of
the death benefit is determined, as described above, subject to postponement
under the same circumstances that payment of withdrawals may be postponed (see
"WITHDRAWALS").
ANNUITY PROVISIONS
GENERAL
Proceeds payable on death, withdrawal or the maturity date may be
applied to the annuity options described below, subject to the distribution of
death benefits provisions (see "DEATH BENEFIT BEFORE MATURITY DATE").
Generally, annuity benefits under the contract will begin on the
maturity date of the certificate. The maturity date is the date specified on the
certificate specifications page, unless changed. If no date is specified, the
maturity date is the maximum maturity date described below. The maximum maturity
date is the first day of the month following the later of the 85th birthday of
the annuitant or the tenth contract anniversary. An owner may specify a
different maturity date at any time by written request at least one month before
both the previously specified and the new maturity date. The new maturity date
may not be later than the maximum maturity date unless the Company consents.
Maturity dates which occur at advanced ages, e.g., past age 85, may in some
circumstances have adverse income tax consequences (see "FEDERAL TAX MATTERS").
Distributions from qualified contracts may be required before the maturity date.
An owner may select the frequency of annuity payments. However, if the
owner's contract value at the maturity date is such that a monthly payment would
be less than $20, the Company may pay the contract value, less any debt, in one
lump sum to the annuitant on the maturity date.
ANNUITY OPTIONS
Annuity benefits are available under the contract on a fixed or
variable basis, or any combination of fixed and variable bases. On or before the
maturity date, an owner may select one or more of the annuity options described
below on a fixed and/or variable basis (except Option 5 which is available on a
fixed basis only) or choose an alternate form of settlement acceptable to the
Company. If an annuity option is not selected, the Company will provide as a
default option annuity payments on a fixed, variable or combined fixed and
variable basis in proportion to the Investment Account Value of each investment
option at the maturity date. Annuity payments will continue for 10 years or the
life of the annuitant, if longer. Treasury Department regulations may preclude
the availability of certain annuity options in connection with certain qualified
contracts.
The following annuity options are guaranteed in the contract:
Option 1(a): Non-Refund Life Annuity - An annuity with payments during
the lifetime of the annuitant. No payments are due after the death of
the annuitant. Since there is no guarantee that any minimum number of
payments will be made, an annuitant may receive only one payment if the
annuitant dies prior to the date the second payment is due.
Option 1(b): Life Annuity with Payments Guaranteed for 10 Years - An
annuity with payments guaranteed for 10 years and continuing thereafter
during the lifetime of the annuitant. Since payments are guaranteed for
10 years, annuity payments will be made to the end of such period if
the annuitant dies prior to the end of the tenth year.
Option 2(a): Joint & Survivor Non-Refund Life Annuity - An annuity with
payments during the lifetimes of the annuitant and a designated
co-annuitant. No payments are due after the death of the last survivor
of the annuitant and co-annuitant. Since there is no guarantee that any
minimum number of payments will be made, an annuitant or co-annuitant
may receive only one payment if the annuitant and co-annuitant die
prior to the date the second payment is due.
Option 2(b): Joint & Survivor Life Annuity with Payments Guaranteed for
10 Years - An annuity with payments guaranteed for 10 years and
continuing thereafter during the lifetimes of the annuitant and a
designated co-annuitant. Since payments are guaranteed for 10 years,
annuity payments will be made to the end of such period if both the
annuitant and the co-annuitant die prior to the end of the tenth year.
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In addition to the foregoing annuity options which the Company is
contractually obligated to offer at all times, the Company currently offers the
following annuity options. The Company may cease offering the following annuity
options at any time and may offer other annuity options in the future.
Option 3: Life annuity with Payments Guaranteed for 5, 15 or 20 Years -
An annuity with payments guaranteed for 5, 15 or 20 years and
continuing thereafter during the lifetime of the annuitant. Since
payments are guaranteed for the specific number of years, annuity
payments will be made to the end of the last year of the 5, 15 or 20
year period.
Option 4: Joint & Two-Thirds Survivor Non-Refund Life Annuity - An
annuity with full payments during the joint lifetime of the annuitant
and a designated co-annuitant and two-thirds payments during the
lifetime of the survivor. Since there is no guarantee that any minimum
number of payments will be made, an annuitant or co-annuitant may
receive only one payment if the annuitant and co-annuitant die prior to
the date the second payment is due.
Option 5: Period Certain Only Annuity for 5, 10, 15 or 20 years - An
annuity with payments for a 5, 10, 15 or 20 year period and no payments
thereafter.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
The first variable annuity payment is determined by applying that
portion of the contract value used to purchase a variable annuity, measured as
of a date not more than ten business days prior to the maturity date (minus any
applicable premium taxes), to the annuity tables contained in the contract and
the certificate. The rates contained in such tables depend upon the annuitant's
sex and age (as adjusted depending on the annuitant's year of birth) and the
annuity option selected, except for contracts issued in connection with certain
employer sponsored plans where sex-based tables may not be used. Under such
tables, the longer the life expectancy of the annuitant under any life annuity
option or the duration of any period for which payments are guaranteed under the
option, the smaller will be the amount of the first monthly variable annuity
payment. The rates are based on the 1983 Table A projected at Scale G, assume
births in year 1942 and reflect an assumed interest rate of 3% per year. See
Appendix D for information on assumed interest rates applicable to certain
contracts which are no longer being issued (Ven 8 contracts).
ANNUITY UNITS AND THE DETERMINATION OF SUBSEQUENT VARIABLE ANNUITY PAYMENTS
Variable annuity payments subsequent to the first will be based on the
investment performance of the sub-accounts selected by the owner. The amount of
such subsequent payments is determined by dividing the amount of the first
annuity payment from each sub-account by the annuity unit value of such
sub-account (as of the same date the contract value used to effect annuity
payments under a certificate 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
selected by the owner are then totaled to arrive at the amount of the payment to
be made. The number of annuity units remains constant during the annuity payment
period. A pro-rata portion of the administration fee will be deducted from each
annuity payment.
The value of an annuity unit for each sub-account for any valuation
period is determined by multiplying the annuity unit value for the immediately
preceding valuation period by the net investment factor for that sub-account
(see "NET INVESTMENT FACTOR") for the valuation period for which the annuity
unit value is being calculated and by a factor to neutralize the assumed
interest rate.
A 3% assumed interest rate is built into the annuity tables in the
contract used to determine the first variable annuity payment. A higher
assumption would mean a larger first annuity payment, but more slowly rising
subsequent payments when actual investment performance exceeds the assumed rate,
and more rapidly falling subsequent payments when actual investment performance
is less than the assumed rate. A lower assumption would have the opposite
effect. If the actual net investment performance is 3% annually, annuity
payments will be level.
TRANSFERS AFTER MATURITY DATE
Once variable annuity payments have begun, an owner may transfer all or
part of the investment upon which such payments are based from one sub-account
to another. Transfers will be made upon notice to the Company at least 30 days
before the due date of the first annuity payment to which the change will apply.
Transfers after the maturity date will be made by converting the number
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of annuity units being transferred by the owner to the number of annuity units
of the sub-account to which the transfer is made, so that the next annuity
payment if it were made at that time would be the same amount that it would have
been without the transfer. Thereafter, annuity payments will reflect changes in
the value of the new annuity units. 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. The Company
reserves the right to limit, upon notice, the maximum number of transfers an
owner may make per certificate year to four. In addition, the Company reserves
the right to defer the transfer privilege at any time that the Company is unable
to purchase or redeem shares of the Trust portfolios. The Company also reserves
the right to modify or terminate the transfer privilege at any time in
accordance with applicable law.
DEATH BENEFIT ON OR AFTER MATURITY DATE
If annuity payments have been selected based on an annuity option
providing for payments for a guaranteed period, and the annuitant dies on or
after the maturity date, the Company will make the remaining guaranteed payments
to the beneficiary. Any remaining payments will be made as rapidly as under the
method of distribution being used as of the date of the annuitant's death. If no
beneficiary is living, the Company will commute any unpaid guaranteed payments
to a single sum (on the basis of the interest rate used in determining the
payments) and pay that single sum to the estate of the last to die of the
annuitant and the beneficiary.
OTHER CONTRACT PROVISIONS
TEN DAY RIGHT TO REVIEW
An owner may return his or her certificate to the Company's Annuity
Service Office or agent at any time within 10 days after receipt of the
certificate. Within 7 days of receipt of the certificate by the Company, the
Company will pay the owner's contract value, less any debt, computed at the end
of the valuation period during which the certificate is received by the Company,
to the owner.
No withdrawal charge is imposed upon return of the certificate within
the ten day right to review period. The ten day right to review may vary in
certain states in order to comply with the requirements of insurance laws and
regulations in such states. When the certificate is issued as an individual
retirement annuity under Sections 408 or 408A of the Code, during the first 7
days of the 10 day period, the Company will return all purchase payments if this
is greater than the amount otherwise payable.
OWNERSHIP
The contract is owned by the group holder. However, all contract rights
and privileges not expressly reserved to the group holder may be exercised by
each owner as to his or her interests as specified in his or her certificate.
Prior to the maturity date, an owner is the person designated on the certificate
specifications page or as subsequently named. On and after a certificate's
maturity date, the annuitant is the owner. If amounts become payable under the
certificate to any beneficiary, the beneficiary is the owner.
In the case of non-qualified contracts, an owner's interest in the
contract may be changed, or the certificate may be collaterally assigned, at any
time prior to the maturity date, subject to the rights of any irrevocable
beneficiary. Ownership of the contract may be assigned at any time by the group
holder. Assigning a contract or interest therein, or changing the ownership of a
contract or certificate, may be treated as a distribution of the contract value
for Federal tax purposes. A change of any owner may result in resetting the
death benefit to an amount equal to the contract value as of the date of the
change and treating such value as a purchase payment made on that date for
purposes of computing the amount of the death benefit (see "DEATH BENEFIT BEFORE
MATURITY DATE").
Any change of ownership or assignment must be made in writing. Any
change must be approved by the Company. Any assignment and any change, if
approved, will be effective as of the date the Company receives the request at
its Annuity Service Office. The Company assumes no liability for any payments
made or actions taken before a change is approved or an assignment is accepted
or responsibility for the validity or sufficiency of any assignment. An absolute
assignment will revoke the interest of any revocable beneficiary.
In the case of qualified contracts, ownership of the contract or an
owner's interest in the contract generally may not be transferred except to 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, an
owner's
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interest in a qualified contract may not be sold, assigned, transferred,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose to any person other than
the Company.
See Appendix D for information on ownership applicable to certain
contracts which are no longer being issued (Ven 8 contracts).
BENEFICIARY
The beneficiary is the person, persons or entity designated on the
certificate specifications page or as subsequently named. However, if there is a
surviving owner, that person will be treated as the beneficiary. The beneficiary
may be changed subject to the rights of any irrevocable beneficiary. Any change
must be made in writing, approved by the Company and if approved, will be
effective as of the date on which written. The Company assumes no liability for
any payments made or actions taken before the change is approved. If no
beneficiary is living, the contingent beneficiary will be the beneficiary. The
interest of any beneficiary is subject to that of any assignee. If no
beneficiary or contingent beneficiary is living, the beneficiary is the estate
of the deceased owner. In the case of certain qualified contracts or
certificates, regulations promulgated by the Treasury Department prescribe
certain limitations on the designation of a beneficiary.
See Appendix D for information on ownership applicable to certain
contracts which are no longer being issued (Ven 8 contracts).
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
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
certificate specifications page unless changed.
On the death of the annuitant, the co-annuitant, if living, becomes the
annuitant. If there is no living co-annuitant, the owner becomes the annuitant.
In the case of certain qualified contracts, there are limitations on the ability
to designate and change the annuitant and the co-annuitant.
MODIFICATION
The contract or any certificate may not be modified by the Company
without the consent of the group holder or the owner, as applicable, except as
may be required to make it conform to any law or regulation or ruling issued by
a governmental agency. However, on 60 days' notice to the group holder, the
Company may change the withdrawal charges, administration fees, mortality and
expense risk charges, free withdrawal percentage, annuity purchase rates and the
market value charge as to any certificates issued after the effective date of
the modification. The provisions of the contract shall be interpreted so as to
comply with the requirements of Section 72(s) of the Code.
See Appendix D for information on ownership applicable to certain
contracts which are no longer being issued (Ven 8 contracts).
DISCONTINUANCE OF NEW OWNERS
On thirty days' notice to the group holder, the Company may limit or
discontinue acceptance of new applications and the issuance of new certificates
under a contract.
MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL
The Company may require proof of age, sex or survival of any person
upon whose age, sex or survival any payment depends. If the age or sex of the
annuitant has been misstated, the benefits will be those that would have been
provided for the annuitant's correct age and sex. If the Company has made
incorrect annuity payments, the amount of any underpayment will be paid
immediately and the amount of any overpayment will be deducted from future
annuity payments.
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FIXED ACCOUNT INVESTMENT OPTIONS
Due to certain exemptive and exclusionary provisions, interests in the
fixed account investment options are not registered under the Securities Act of
1933, as amended (the "1933 Act") and the Company's general account is not
registered as an investment company under the 1940 Act. Accordingly, neither
interests in the fixed account investment options nor the general account are
subject to the provisions or restrictions of the 1933 Act or the 1940 Act and
the staff of the SEC has not reviewed the disclosures in this Prospectus
relating thereto. Disclosures relating to interests in the fixed account
investment options and the general account, however, may be subject to certain
generally applicable provisions of the Federal securities laws relating to the
accuracy of statements made in a registration statement.
Pursuant to a Guarantee Agreement dated March 31, 1996, Manulife, the
ultimate parent of the Company, unconditionally guarantees to the Company on
behalf of and for the benefit of the Company and owners and groupholders of
fixed annuity contracts issued by the Company that it will, on demand, make
funds available to the Company for the timely payment of contractual claims
under fixed annuity contracts issued after June 27,1984. This Guarantee covers
the fixed portion of the contracts described by this Prospectus. This Guarantee
may be terminated by Manulife on notice to the Company. Termination will not
affect Manulife's continuing liability with respect to all fixed annuity
contracts issued prior to the termination of the Guarantee except if: (i) the
liability to pay contractual claims under the contracts is assumed by another
insurer or (ii) the Company is sold and the buyer's guarantee is substituted for
the Manulife guarantee.
Effective June 30, 1995, the Company entered into a Reinsurance
Agreement with Peoples Security Life Insurance Company ("Peoples") pursuant to
which Peoples reinsures certain amounts with respect to the fixed account
portion of the contract described in this Prospectus. Under this Reinsurance
Agreement, the Company remains liable for the contractual obligations of the
contracts' fixed account and Peoples agrees to reimburse the Company for certain
amounts and obligations in connection with the fixed account. Peoples
contractual liability runs solely to the Company, and no contract owner shall
have any right of action against Peoples.
Investment Options. Currently there are five fixed account investment
options under the contract: one, three, five and seven year investment accounts
and, in states where approved, a DCA fixed investment account which may be
established under the DCA program to make automatic transfers to one or more
variable investment options (see "SPECIAL TRANSFER SERVICES - DOLLAR COST
AVERAGING" for details). The Company may offer additional fixed account
investment options for any yearly period from two to ten years. Fixed investment
accounts provide for the accumulation of interest on purchase payments at
guaranteed rates for the duration of the guarantee period. The guaranteed
interest rates on new amounts allocated or transferred to a fixed investment
account are determined from time-to-time by the Company in accordance with
market conditions. In no event will the guaranteed rate of interest be less than
3%. Once an interest rate is guaranteed for a fixed investment account, it is
guaranteed for the duration of the guarantee period and may not be changed by
the Company. See Appendix D for information on fixed account investment options
and the guaranteed rate of interest applicable to certain contracts which are no
longer being issued (Ven 8 contracts).
Investment Accounts. Owners may allocate purchase payments, or make
transfers from their variable investment options, to fixed account investment
options at any time prior to the maturity date. The Company establishes a
separate investment account each time an owner allocates or transfers amounts to
a fixed account investment option. Amounts may not be allocated to a fixed
account investment option that would extend the guarantee period beyond the
maturity date.
Renewals. At the end of a guarantee period, an owner may establish a
new investment account with the same guarantee period at the then current
interest rate, select a different fixed account investment option or transfer
the amounts to a variable account investment option, all without the imposition
of any charge. An owner may not select a guarantee period that would extend
beyond the maturity date. In the case of renewals within one year of the
maturity date, the only fixed account investment option available is to have
interest accrued up to the maturity date at the then current interest rate for
one year guarantee periods.
If an owner does not specify the renewal option desired, the Company
will select the same guarantee period as has just expired, so long as such
period does not extend beyond the maturity date. In the event a renewal would
extend beyond the maturity date, the Company will select the longest period that
will not extend beyond such date, except in the case of a renewal within one
year of the maturity date in which case the Company will credit interest up to
the maturity date at the then current interest rate for one year guarantee
periods.
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Market Value Charge. Any amount withdrawn, transferred or borrowed from
an investment account prior to the end of the guarantee period may be subject to
a market value charge. A market value charge will be calculated separately for
each investment account affected by a transaction to which a market value charge
may apply. The market value charge for an investment account will be calculated
by multiplying the amount withdrawn or transferred from the investment account
by the adjustment factor described below. The Company reserves the right to
modify the market value charge as to any certificates issued after the effective
date of a charge specified in written notice to the group holder.
The adjustment factor is determined by the following formula:
0.75x(B-A)xC/12 where:
A - The guaranteed interest rate on the investment account.
B - The guaranteed interest rate available, on the date the
request is processed, for amounts allocated to a new
investment account with the same length of guarantee period as
the investment account from which the amounts are being
withdrawn.
C - The number of complete months remaining to the end of the guarantee
period.
For purposes of applying this calculation, the maximum difference
between "B" and "A" will be 3%. The adjustment factor may never be less than
zero.
The total market value charge will be the sum of the market value
charges for each investment account being withdrawn. Where the guaranteed rate
available on the date of the request is less than the rate guaranteed on the
investment account from which the amounts are being withdrawn (B-A in the
adjustment factor is negative), there is no market value charge. There is only a
market value charge when interest rates have increased (B-A in the adjustment
factor is positive).
There will be no market value charge on withdrawals from the fixed
account investment options in the following situations: (a) death of the owner;
(b) amounts withdrawn to pay fees or charges; (c) amounts applied at the
maturity date to purchase an annuity at the guaranteed rates provided in the
certificate; (d) amounts withdrawn from investment accounts within one month
prior to the end of the guarantee period; (e) amounts withdrawn from a one-year
fixed investment account; and (f) amounts withdrawn in any certificate year that
do not exceed 10% of total purchase payments less any prior partial withdrawals
in that certificate year.
Notwithstanding application of the foregoing formula, in no event will
the market value charge (i) be greater than the amount by which the earnings
attributable to the amount withdrawn or transferred from an investment account
exceed an annual rate of 3%, (ii) together with any withdrawal charges for an
investment account be greater than 10% of the amount transferred or withdrawn,
or (iii) reduce the amount payable on withdrawal or transfer below the amount
required under the non-forfeiture laws of the state with jurisdiction over the
contract. The cumulative effect of the market value and withdrawal charges (or
the effect of the withdrawal charge itself) could, however, result in an owner
receiving total withdrawal proceeds of less than the owner's investment in the
contract. See Appendix D for information on the market value charge applicable
to certain contracts which are no longer being issued (Ven 8 contracts).
Transfers. Prior to the maturity date, an owner may transfer amounts
among his or her fixed account investment options and from the fixed account
investment options to his or her variable account investment options, subject to
the following conditions. An amount in a fixed investment account may not be
transferred until held in such account for at least one year, except transfers
may be made pursuant to the Dollar Cost Averaging program. Consequently, except
as noted above, amounts in one year investment accounts effectively may not be
transferred prior to the end of the guarantee period. Amounts in any other
investment accounts may be transferred after the one year holding period has
been satisfied, but the market value charge described above may apply to such a
transfer. The market value charge, if applicable, will be deducted from the
amount transferred.
An owner must specify the fixed account investment option from or to
which a transfer is to be made. Where there are multiple investment accounts
within a fixed account investment option, amounts must be withdrawn from the
fixed account investment option on a first-in-first-out basis.
Withdrawals. An owner may make total and partial withdrawals of amounts
held in his or her fixed account investment options at any time prior to the
earlier of the death of an owner or the maturity date. Withdrawals from fixed
account investment options will be made in the same manner and be subject to the
same limitations as set forth under "WITHDRAWALS" plus the following provisions
also apply to withdrawals from fixed account investment options: (1) the Company
reserves the right to defer payment of amounts withdrawn from fixed account
investment options for up to six months from the date it receives the written
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withdrawal request and certificate if required (if a withdrawal is deferred for
more than 30 days pursuant to this right, the Company will pay interest on the
amount deferred at a rate not less than 3% per year); (2) if there are multiple
investment accounts under a fixed account investment option, amounts must be
withdrawn from such accounts on a first-in-first-out basis; and (3) the market
value charge described above may apply to withdrawals from any investment option
except for a one year investment option. In the event a market value charge
applies to a withdrawal from a fixed investment account, it will be calculated
with respect to the full amount in the investment account and deducted from the
amount payable in the case of a total withdrawal. In the case of a partial
withdrawal, the market value charge will be calculated on the amount requested
and deducted, if applicable, from the remaining investment account value.
Where an owner requests a partial withdrawal in excess of his or her
amounts in the variable account investment options and does not specify the
fixed account investment options from which the withdrawal is to be made, such
withdrawal will be made from his or her investment options beginning with the
shortest guarantee period. Within such sequence, where there are multiple
investment accounts within a fixed account investment option, withdrawals will
be made on a first-in-first-out basis. For this purpose, the DCA fixed account
investment option is considered to have a shorter guarantee period than the one
year fixed account investment option.
Withdrawals from the contract may be subject to income tax and a 10%
penalty tax, and withdrawals are permitted from contracts and certificates
issued in connection with Section 403(b) qualified plans only under limited
circumstances (see "FEDERAL TAX MATTERS").
Loans. The Company offers a loan privilege only under contracts or
certificates issued in connection with Section 403(b) qualified plans that are
not subject to Title I of ERISA. Where available, owners may obtain loans using
their contract value as the only security for the loan. Owners may borrow
amounts allocated to their fixed investment accounts in the same manner and
subject to the same limitations as set forth under "LOANS." The market value
charge described above may apply to amounts transferred from the fixed
investment accounts to the loan account in connection with such loans and, if
applicable, will be deducted from the amount so transferred.
Fixed Annuity Options. Subject to the distribution of death benefit
provisions (see "DEATH BENEFIT BEFORE MATURITY DATE"), on death, withdrawal or
the maturity date, the proceeds may be applied to a fixed annuity option (see
"ANNUITY OPTIONS"). The amount of each fixed annuity payment is determined by
applying the portion of the proceeds (less any applicable premium taxes) applied
to purchase the fixed annuity to the appropriate table in the contract. If the
table in use by the Company is more favorable to the owner, the Company will
substitute that table. The Company guarantees the dollar amount of fixed annuity
payments.
GUARANTEED RETIREMENT INCOME PROGRAM
The Guaranteed Retirement Income Program (the "Income Benefit")
guarantees a minimum lifetime fixed income benefit in the form of fixed monthly
annuity payments. The Income Benefit is based on the aggregate net purchase
payments applied to the certificate, accumulated at interest, minus an
adjustment for any partial withdrawals. The amount of the monthly annuity
payment provided by the Income Benefit is determined by applying the Income
Base, described below, to the annuity purchase rates set forth in the Income
Benefit Rider. Because the fixed annuity options provided for in the contract
are based on the contract value at the time of annuitization, the amount of the
monthly payments under such options may exceed the monthly payments provided by
the Income Benefit Rider. If the Income Benefit is exercised and the annuity
payment available under the contract is greater than the monthly payment
provided by the Income Benefit Rider, the Company will pay the monthly annuity
payment available under the contract. The Income Benefit is available for
certificates issued on or after May 1, 1998. The Income Benefit is not available
in all states.
Income Base. The Income Base is equal to (a) less (b), where (a) is the
sum of all payments made, accumulated at the growth factor indicated below
starting on the date each payment is allocated to the certificate, and (b) is
the sum of Income Base reductions on a pro rata basis in connection with partial
withdrawals taken, accumulated at the growth factor indicated below starting on
the date each deduction occurs. The growth factor is 6% per annum for annuitant
issue ages up to age 75, and 4% per annum for annuitant issue ages 76 or older.
The growth factor is reduced to 0% once the annuitant has attained age 85.
Income Base reduction on a pro rata basis is equal to the Income Base
immediately prior to a partial withdrawal multiplied by the percentage reduction
in contract value resulting from a partial withdrawal.
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<PAGE> 35
If the Income Benefit is added to the contract after the certificate
date, the Income Base on the date the rider is issued (the "Rider Date") is the
contract value on the Rider Date. For purposes of subsequent calculation of the
Income Base, the contract value on the Rider Date will be treated as a purchase
payment made on the Rider Date. In addition, all purchase payments made and all
amounts deducted in connection with partial withdrawals prior to the Rider Date
will not be considered in determining the Income Base.
The Income Base is also reduced for any withdrawal charge remaining on
the date the Income Benefit is exercised. The Company reserves the right to
reduce the Income Base by any premium taxes that may apply.
The Income Base is used solely for purposes of calculating the Income
Benefit and does not provide a contract value or guarantee performance of any
investment option.
Step-Up of Income Base. Within 30 days immediately following any
certificate anniversary, the owner may elect to step-up the Income Base to the
contract value on that contract anniversary by sending the Company a written
request. If the owner elects to step-up the Income Base, the earliest date that
the owner may exercise the Income Benefit is extended to the seventh certificate
anniversary following the most recent date the Income Base was stepped-up to
contract value (the "Step-Up Date").
Following a step-up of the Income Base, the Income Base as of the
Step-Up Date is equal to the contract value on the Step-Up Date. For purposes of
subsequent calculation of the Income Base, the contract value on the Step-Up
Date will be treated as a purchase payment made on that date. In addition, all
payments made and all amounts deducted in connection with partial withdrawals
prior to the Step-Up Date will not be considered in determining the Income Base.
Conditions of Exercise of the Income Benefit. The Income Benefit may be
exercised subject to the following conditions:
1. The Income Benefit must be exercised within 30 days immediately
following an Election Date. An Election Date is the seventh or later certificate
anniversary following the date the income benefit is elected or, in the case of
a step-up of the Income Base, the seventh or later certificate anniversary
following the Step-Up Date.
2. The Income Benefit must be exercised by the later of (i) the
certificate anniversary immediately prior to the annuitant's 85th birthday or
(ii) the tenth certificate anniversary.
Monthly Income Factors. The Income Benefit may be used to purchase a
guaranteed lifetime income under the following annuity options: (1) Life Annuity
with a 10-Year Period Certain or (2) Joint and Survivor Life Annuity with a
20-Year Period Certain.
Option 1: Life Annuity with a 10-Year Period certain. An annuity with
payments guaranteed for 10 years and continuing thereafter during the
lifetime of the annuitant. Since payments are guaranteed for 10 years,
annuity payments will be made to the end of such period if the
annuitant dies prior to the end of the tenth year.
Option 2: Joint and Survivor Life Annuity with a 20-Year Period
Certain. An annuity with payments guaranteed for 20 years and
continuing thereafter during the lifetime of the annuitant and a
designated co-annuitant. Since payments are guaranteed for 20 years,
annuity payments will be made to the end of such period if both the
annuitant and the co-annuitant die prior to the end of the twentieth
year.
The monthly income factors depend upon the annuitant's (and
co-annuitant's, if any) sex and age (nearest birthday) and the annuity option
selected. The factors are based on the 1983 Table A projected at Scale G, and
reflect an assumed interest rate of 3% per year.
Illustrated below are Income Benefit amounts per $100,000 of initial
payments, for a male annuitant and a female co-annuitant both age 60 (at issue),
on certificate anniversaries as indicated below, assuming no subsequent payments
or withdrawals and assuming there was no step-up of the Income Base. The Company
will, upon request, provide illustrations of the Income Benefit for an annuitant
based on other assumptions.
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<PAGE> 36
<TABLE>
<CAPTION>
Income Benefit-Annual Income
Income Benefit-Annual Income Joint & Survivor Life Annuity
Contract Anniversary at Life Annuity with 10 Year with 20 Year Period Certain
Election Period Certain
-------------------------------- -------------------------------- -------------------------------
<S> <C> <C>
7 $ 9,797 $ 7,830
10 $12,593 $ 9,842
15 $19,124 $14,293
</TABLE>
Income Rider Fee. The risk assumed by the Company associated with the
Income Benefit is that the annuity benefits payable under the Income Benefit are
greater than the annuity benefits that would have been payable had the owner
selected another annuity benefit permitted by the contract (see "ANNUITY
PROVISIONS"). To compensate the Company for this risk, the Company charges an
annual Income Rider Fee (the "Rider Fee"). On or before Maturity Date, the Rider
Fee is deducted on each certificate anniversary. The amount of the Rider Fee is
equal to .25% multiplied by the Income Base in effect on that certificate
anniversary. The fee is withdrawn from each investment option in the same
proportion that the value of the investment account of each investment option
bears to the contract value.
In the case of full withdrawal of contract value on any date other than
the certificate anniversary, the Company will deduct the Rider Fee from the
amount paid upon withdrawal. In the case of a full withdrawal, the Rider Fee is
equal to .25% multiplied by the Income Base immediately prior to withdrawal. The
Rider Fee will not be deducted during the annuity period. For purposes of
determining the Rider Fee, annuity payment commencement shall be treated as a
full withdrawal.
THE INCOME BENEFIT DOES NOT PROVIDE CONTRACT VALUE OR GUARANTEE
PERFORMANCE OF ANY INVESTMENT OPTION. BECAUSE THIS BENEFIT IS BASED ON
CONSERVATIVE ACTUARIAL FACTORS, THE LEVEL OF LIFETIME INCOME THAT IT GUARANTEES
MAY OFTEN BE LESS THAN THE LEVEL THAT WOULD BE PROVIDED BY APPLICATION OF
CONTRACT VALUE AT CURRENT ANNUITY FACTORS. THEREFORE, THE INCOME BENEFIT SHOULD
BE REGARDED AS A SAFETY NET. AS DESCRIBED ABOVE UNDER "INCOME BENEFIT,"
WITHDRAWALS WILL REDUCE THE INCOME BENEFIT.
CHARGES AND DEDUCTIONS
Charges and deductions are assessed against purchase payments, contract
values or annuity payments. Currently, there are no deductions made from
purchase payments, except for premium taxes in certain states. In addition,
there are deductions from and expenses paid out of the assets of the Trust
portfolios that are described in the accompanying prospectus of the Trust.
WITHDRAWAL CHARGES
If a withdrawal is made from the contract by an owner before the
maturity date of the certificate, a withdrawal charge (contingent deferred sales
charge) may be assessed against amounts withdrawn attributable to purchase
payments that have been in the contract for the owner less than seven complete
years. There is never a withdrawal charge with respect to earnings accumulated
for an owner in the contract, certain other free withdrawal amounts described
below or purchase payments by or on behalf of the owner that have been in the
contract more than seven complete years. In no event may the total withdrawal
charges exceed 6% of the total purchase payments made by or on behalf of the
owner. The amount of the withdrawal charge and when it is assessed is discussed
below:
1. Each withdrawal is allocated first to the "free withdrawal amount"
and second to "unliquidated purchase payments" for each certificate. In any
certificate year, the free withdrawal amount for that year is the greater of (1)
the excess of the owner's contract value on the date of withdrawal over the
unliquidated purchase payments made by or on behalf of the owner (the
accumulated earnings on the owner's certificate) or (2) the excess of (i) over
(ii), where (i) is 10% of total purchase payments made by or on behalf of the
owner and (ii) is all prior partial withdrawals made by or on behalf of the
owner in that certificate year. Withdrawals allocated to the free withdrawal
amount may be withdrawn without the imposition of a withdrawal charge.
2. If an owner makes a withdrawal for an amount in excess of the free
withdrawal amount, the excess will be allocated to purchase payments made by or
on behalf of the owner which will be liquidated on a first-in first-out basis.
On any withdrawal request, the Company will liquidate purchase payments made by
or on behalf of the owner equal to the amount of the withdrawal request which
exceeds the free withdrawal amount in the order such purchase payments were
made: the oldest unliquidated purchase payment first, the next purchase payment
second, etc. until all purchase payments have been liquidated.
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<PAGE> 37
3. Each purchase payment or portion thereof liquidated in connection
with a withdrawal request is subject to a withdrawal charge based on the length
of time the purchase payment has been in the contract. The amount of the
withdrawal charge is calculated by multiplying the amount of the purchase
payment being liquidated by the applicable withdrawal charge percentage obtained
from the table below.
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS
PURCHASE PAYMENT IN WITHDRAWAL CHARGE
CONTRACT PERCENTAGE
-----------------------------------------------------------------
<S> <C>
0 6%
1 6%
2 5%
3 5%
4 4%
5 3%
6 2%
7+ 0%
</TABLE>
The total withdrawal charge will be the sum of the withdrawal charges
for the purchase payments being liquidated.
4. The withdrawal charge is deducted from the owner's contract value
remaining after the owner is paid the amount requested, except in the case of a
complete withdrawal when it is deducted from the amount otherwise payable. In
the case of a partial withdrawal, the amount requested from an investment
account may not exceed the value of that investment account less any applicable
withdrawal charge plus market value charge.
5. There is generally no withdrawal charge on distributions made as a
result of the death of the owner or, if applicable, annuitant (see "DEATH
BENEFIT BEFORE MATURITY DATE - Amount of Death Benefit") and no withdrawal
charges are imposed on the maturity date if the owner annuitizes as provided in
the contract.
The amount collected from the withdrawal charge will be used to
reimburse the Company for the compensation paid to cover selling concessions to
broker-dealers, preparation of sales literature and other expenses related to
sales activity.
For examples of calculation of the withdrawal charge, see Appendix A.
See Appendix D for information on withdrawal charges applicable to certain
contracts which are no longer being issued (Ven 8 contracts). Withdrawals from
the fixed account investment options may be subject to a market value charge in
addition to the withdrawal charge described above (see "FIXED ACCOUNT INVESTMENT
OPTIONS"). The Company reserves the right to modify the withdrawal charge as to
certificates issued after the effective date of a change specified in written
notice to the group holder.
REDUCTION OR ELIMINATION OF WITHDRAWAL CHARGES
The amount of the withdrawal charge on a contract or certificate may be
reduced or eliminated when some or all of the certificates are to be sold to a
group of individuals in such a manner that results in savings of sales expenses.
The entitlement to such a reduction in the withdrawal charge will be determined
by the Company in the following manner:
1. The size and type of group to which the 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 sales with
fewer sales contacts.
2. The total amount of purchase payments to be received will be
considered. Per dollar sales expenses are likely to be less on larger purchase
payments than on smaller ones.
3. Any prior or existing relationship with the Company will be
considered. Certificate sales expenses are likely to be less when there is a
prior or existing relationship because of the likelihood of implementing more
sales with fewer sales contacts.
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<PAGE> 38
4. The level of commissions paid to selling broker-dealers will be
considered. Certain broker-dealers may offer certificates 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 certificates, thereby reducing the Company's sales
expenses.
5. There may be other circumstances of which the Company is not
presently aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, it is determined that
there will be a reduction in sales expenses, the Company will provide a
reduction in the withdrawal charge. The withdrawal charge will be eliminated
when a certificate is issued to an officer, director or employee (or a relative
thereof) of the Company, Manulife, the Trust or any of their affiliates. In no
event will reduction or elimination of the withdrawal charge be permitted where
such reduction or elimination will be unfairly discriminatory to any person.
Withdrawal Charge Waiver in Connection with Clinton's Administration's
Fiscal Year 1999 Budget Proposal
The Clinton administration's Fiscal Year 1999 Budget proposal dated
February 2, 1998 (the "1999 Budget Proposal") contains proposals to change the
taxation of non-qualified annuity contracts (see "FEDERAL TAX MATTERS -
Introduction."). While it is uncertain whether the 1999 Budget Proposal will
become law, if the 1999 Budget Proposal is enacted substantially as proposed,
withdrawal charges will be waived on purchase payments made on or after February
2, 1998, provided such amounts are withdrawn within 60 days of the date that the
1999 Budget Proposal becomes law. The Company reserves the right to terminate
this withdrawal charge waiver at any time. If the waiver is terminated, purchase
payments made from February 2, 1998 to the termination date of the waiver will
not be subject to withdrawal charge as provided above. This waiver does not
affect a contract owner's right to cancel a contract within the ten day right to
review period (see "OTHER CONTRACT PROVISIONS -- Ten Day Right to Review").
Withdrawals may be subject to income tax to the extent of earnings under the
contract and, if made prior to age 59 1/2, generally will be subject to a 10%
IRS penalty tax (see "FEDERAL TAX MATTERS - Taxation of Partial and Full
Withdrawals").
ADMINISTRATION FEES
Except as noted below, the Company will deduct each year an annual
administration fee of $30 from each owner's contract value as partial
compensation for the cost of providing all administrative services attributable
to the contracts and certificates and the operations of the Variable Account and
the Company in connection with the contracts and certificates. However, if prior
to the maturity date the contract value is greater than or equal to $100,000 at
the time of the fee's assessment, the fee will be waived. Prior to the maturity
date, this administration fee is deducted on the last day of each certificate
year. It is withdrawn from each investment option in the same proportion that
the value of such investment option bears to the sum of the investments options.
If an owner's entire contract value is withdrawn on other than the last day of
any certificate year, the $30 administration fee will be deducted from the
amount paid. During the annuity period, the fee is deducted on a pro-rata basis
from each annuity payment. See Appendix D for the administration fee applicable
to certain contracts which are no longer being issued (Ven 8 contracts).
A daily charge in an amount equal to 0.15% of the value of each
variable investment account on an annual basis is also deducted from each
sub-account to reimburse the Company for administrative expenses. This
asset-based administrative charge will not be deducted from the fixed account
investment options. The charge will be reflected in each owner's contract value
as a proportionate reduction in the value of each variable investment account.
Because this portion of the administrative fee is a percentage of assets rather
than a flat amount, larger contract values will in effect pay a higher
proportion of this portion of the administrative expense than smaller contract
values.
The Company does not expect to recover from such fees any amount in
excess of its accumulated administrative expenses. Even though administrative
expenses may increase, the Company guarantees that it will not increase the
amount of the administration fees as to any certificates issued prior to the
effective date of the Company's modification of such fees. There is no necessary
relationship between the amount of the administrative charge imposed on a given
certificate and the amount of the expense that may be attributed to that
certificate.
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<PAGE> 39
REDUCTION OR ELIMINATION OF ANNUAL ADMINISTRATION FEE
The amount of the annual administration fee on a contract or a
certificate may be reduced or eliminated when some or all of the certificates
are to be sold to a group of individuals in such a manner that results in
savings of administration expenses. The entitlement to such a reduction or
elimination of the administration charges will be determined by the Company in
the following manner:
1. The size and type of group to which administrative services are to
be provided will be considered.
2. The total amount of purchase payments to be received will be
considered.
3. There may be other circumstances of which the Company is not
presently aware, which could result in reduced administrative expense.
If, after consideration of the foregoing factors, it is determined that
there will be a reduction or elimination of administration expenses, the Company
will provide a reduction in the annual administration fee. In no event will
reduction or elimination of the administration fees be permitted where such
reduction or elimination will be unfairly discriminatory to any person. The
Company may waive all or a portion of the administration fee when a certificate
is issued to an officer, director or employee, or relative thereof, of the
Company, Manulife, the Trust or any of their affiliates.
MORTALITY AND EXPENSE RISK CHARGE
The mortality risk assumed by the Company is the risk that annuitants
may live for a longer period of time than estimated. The Company assumes this
mortality risk by virtue of annuity rates incorporated into the contract which
cannot be changed with respect to existing certificates. This assures each
annuitant that his longevity will not have an adverse effect on the amount of
annuity payments. Also, the Company guarantees that if an owner dies before the
maturity date, it will pay a death benefit (see "DEATH BENEFIT BEFORE MATURITY
DATE"). The expense risk assumed by the Company is the risk that the
administration charges or withdrawal charge may be insufficient to cover actual
expenses.
To compensate it for assuming these risks, the Company currently
deducts from each of the sub-accounts a daily charge in an amount equal to 1.25%
of the value of the variable investment accounts on an annual basis, consisting
of .8% for the mortality risk and .45% for the expense risk. The charge will be
reflected in each owner's contract value as a proportionate reduction in the
value of each variable investment account. The rate of the mortality and expense
risk charge can be increased, but only as to certificates issued after the
effective date of the increase and upon 60 days' prior written notice to the
group holder. The Company may issue contracts and certificates with a mortality
or expense risk charge at rates less than those set out above, if it concludes
that the mortality or expense risks of the groups involved are less than the
risks it has determined for persons for whom the contracts and certificates have
been generally designed. If the charge is insufficient to cover the actual cost
of the mortality and expense risks undertaken, the Company will bear the loss.
Conversely, if the charge proves more than sufficient, the excess will be profit
to the Company and will be available for any proper corporate purpose including,
among other things, payment of distribution expenses. On the Period Certain Only
Annuity Option, where an owner elects benefits payable on a variable basis, the
mortality and expense risk charge is assessed although the Company bears only
the expense risk and not any mortality risk. The mortality and expense risk
charge is not assessed against the fixed account investment options.
TAXES
The Company reserves the right to charge, or provide for, certain taxes
against purchase payments (either at the time of payment or liquidation),
contract values, payment of death benefit or annuity payments. Such taxes may
include premium taxes or other taxes levied by any government entity which the
Company determines to have resulted from the (i) establishment or maintenance of
the Variable Account, (ii) receipt by the Company of purchase payments, (iii)
issuance of the contracts or certificates, or (iv) commencement or continuance
of annuity payments under the contracts or certificates. In addition, the
Company will withhold taxes to the extent required by applicable law.
Except for residents of those states which apply premium taxes upon
receipt of purchase payments, premium taxes will be deducted from the contract
value used to provide for fixed or variable annuity payments. For residents of
those states which apply premium taxes upon receipt of purchase payments,
premium taxes will be deducted upon payment of any withdrawal benefits, upon any
38
<PAGE> 40
annuitization, or payment of death benefits. The amount deducted will depend on
the premium tax assessed in the applicable state. State premium taxes currently
range from 0% to 3.5% depending on the jurisdiction and the tax status of the
contract and are subject to change by the legislature or other authority (see
"APPENDIX B: STATE PREMIUM TAXES").
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion of the Federal income tax treatment of the
contract or certificate is not exhaustive, does not purport to cover all
situations, and is not intended as tax advice. The Federal income tax treatment
of a group annuity contract is unclear in certain circumstances, and a qualified
tax advisor should always be consulted with regard to the application of law to
individual circumstances. This discussion is based on the Code, Treasury
Department regulations, and interpretations existing on the date of this
Prospectus. These authorities, however, are subject to change by Congress, the
Treasury Department, and judicial decisions.
The 1999 Budget Proposal contains proposals to change the taxation of
non-qualified annuity contracts. The 1999 Budget Proposal proposes to tax
exchanges of variable contracts for fixed contracts, exchanges of fixed
contracts for variable contracts, exchanges of variable contracts for variable
contracts and reallocation within variable contracts. Currently, owners of
annuity contracts may exchange their contracts for another annuity without
currently incurring tax, and reallocations among investment options are not
treated as a taxable exchange. In addition, the 1999 Budget Proposal proposes
that the contract owner's basis in annuity contracts be reduced annually by
1.25% of the cash value for purposes of determining the taxable gain on
surrenders, withdrawals, and all annuity payments except those made for life at
the rates guaranteed in the contract. Currently, basis in annuity contracts is
not reduced by this amount. The 1999 Budget Proposal states that it generally
would apply only to contracts issued after the date of first congressional
committee action, but that the new exchange and reallocation rules would also
apply to any existing contract that was materially changed. While it is
uncertain whether the 1999 Budget Proposal will become law, if the 1999 Budget
Proposal is enacted substantially as proposed, withdrawal charges will be waived
(see "CHARGES AND DEDUCTIONS Reduction or Elimination of Withdrawal Charge").
This discussion does not address state or local tax consequences
associated with the purchase of a contract or certificate. In addition, THE
COMPANY MAKES NO GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR
LOCAL -- OF ANY CONTRACT OR CERTIFICATE OR OF ANY TRANSACTION INVOLVING A
CONTRACT OR CERTIFICATE.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under the Code. Since
the operations of the Variable Account are a part of, and are taxed with, the
operations of the Company, the Variable Account is not separately taxed as a
"regulated investment company" under the Code. Under existing Federal income tax
laws, investment income and capital gains of the Variable Account are not taxed
to the extent they are applied under a contract. The Company does not anticipate
that it will incur any Federal income tax liability attributable to such income
and gains of the Variable Account, and therefore the Company does not intend to
make provisions for any such taxes. If the Company is taxed on investment income
or capital gains of the Variable Account, then the Company may impose a charge
against the Variable Account in order to make provisions for such taxes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any
increase in an owner's contract value is generally not taxable to the owner or
annuitant until received, either in the form of annuity payments as contemplated
by the certificate, or in some other form of distribution. However, certain
requirements must be satisfied in order for this general rule to apply,
including: (1) the certificate must be owned by an individual (or treated as
owned by an individual), (2) the investments of the Variable Account must be
"adequately diversified" in accordance with Treasury Department regulations, (3)
the Company, rather than the owner, must be considered the owner of the assets
of the Variable Account for Federal tax purposes, and (4) the certificate must
provide for appropriate amortization, through annuity payments, of the
certificate's purchase payments and earnings, e.g., the maturity date must not
occur at too advanced an age.
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<PAGE> 41
Non-Natural Owners. As a general rule, deferred annuity contracts (or
certificates) held by "non-natural persons" such as a corporation, trust or
other similar entity, as opposed to a natural person, are not treated as annuity
contracts for Federal income tax purposes. The investment income on such
contracts (or certificates) is taxed as ordinary income that is received or
accrued by the owner during the taxable year. There are several exceptions to
this general rule for non-natural 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. Thus, if a
group annuity contract is held by a trustee, certificate owners who are
individuals should be treated as owning an annuity contract for Federal tax
purposes. However, this special exception will not apply in the case of any
employer who is the nominal owner of an annuity contract under a non-qualified
deferred compensation arrangement for its employees.
In addition, exceptions to the general rule for non-natural owners will
apply with respect to (1) certificates acquired by an estate of a decedent by
reason of the death of the decedent, (2) certain qualified contracts or
certificates, (3) certain annuities purchased by employers upon the termination
of certain qualified plans, (4) certain annuities used in connection with
structured settlement agreements, and (5) annuities 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 Certificates are Held by or for the
Benefit of Certain Non-Natural Persons. In the case of certificates issued after
June 8, 1997 to a non-natural taxpayer (such as a corporation or a trust), or
held for the benefit of such an entity, recent changes in the tax law may result
in otherwise deductible interest no longer being deductible by the entity,
regardless of whether the interest relates to debt used to purchase or carry the
certificate. However, this interest deduction disallowance does not affect
certificates where the income on such certificates is treated as ordinary income
that is received or accrued by the owner during the taxable year. Entities that
are considering purchasing the certificate, or entities that will be
beneficiaries under a certificate, should consult a tax advisor.
Diversification Requirements. For a contract to be treated as an
annuity contract 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 certificate would not be treated
as an annuity contract for Federal income tax purposes and an owner would be
taxable currently on the excess of his or her contract value over the premiums
he or she paid for the certificate.
Although the Company does not control the investments of the Trust, it
expects that the Trust will comply with such regulations so that the Variable
Account will be considered "adequately diversified."
Ownership Treatment. In certain circumstances, a variable annuity owner
may be considered the owner, for Federal income tax purposes, of the assets of
the separate account used to support his or her contract. In those
circumstances, income and gains from such separate account assets would be
includible in the variable annuity owner's gross income. The IRS has stated in
published rulings that a variable annuity owner will be considered the owner of
separate account assets if the owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. In
addition, the Treasury Department announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts [of a separate account] without being
treated as owners of the underlying assets." As of the date of this Prospectus,
no such guidance has been issued.
The ownership rights under this certificate are similar to, but
different in certain respects from, those described by the IRS in rulings in
which it was determined that policyholders were not owners of separate account
assets. For example, an owner under this certificate 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 owner being treated as the owner of the
assets of the Variable Account and thus subject to current taxation on the
income and gains from those assets. In addition, the Company does not know what
standards will be set forth in the regulations or rulings which the Treasury
Department has stated it expects to issue. The Company therefore reserves the
right to modify the contract and certificate as necessary to attempt to prevent
owners from being considered the owners of the assets of the Variable Account.
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Delayed Maturity Dates. If the maturity date occurs (or is scheduled to
occur) at a time when the annuitant has reached an advanced age, e.g., past age
85, it is possible that the certificate would not be treated as an annuity for
Federal income tax purposes. In that event, the income and gains under the
certificate could be currently includible in the owner's income.
The remainder of this discussion assumes that the contract will be
treated as an annuity contract for Federal income tax purposes and that the
Company will be treated as the owner of the Variable Account assets.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal, amounts received are includible in
income to the extent the owner's contract value before the withdrawal exceeds
his or her "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 certificate
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 contributions to
qualified plans) less any amounts previously received from the certificate which
were not included in income.
Other than in the case of certain qualified contracts or certificates,
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 a certificate 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 his or her contract
value and the "investment in the contract" at the time of transfer. In such
case, the transferee's investment in the contract will be increased to reflect
the increase in the transferor's income.
The certificate provides a death benefit that in certain circumstances
may exceed the greater of the purchase payments made by or on behalf of an owner
and the contract value. As described elsewhere in this Prospectus, the Company
imposes certain charges with respect to the death benefit. It is possible that
those charges (or some portion thereof) could be treated for Federal income tax
purposes as a partial withdrawal from the certificate.
There may be special income tax issues present in situations where the
owner and the annuitant are not the same person and are not married to one
another. A tax advisor should be consulted in those situations.
TAXATION OF ANNUITY PAYMENTS
Normally, the portion of each annuity payment taxable as ordinary
income is equal to the excess of the payment over the exclusion amount. In the
case of variable annuity payments, the exclusion amount is the "investment in
the contract" (defined above) allocated to the variable annuity option, adjusted
for any period certain or refund feature, when payments begin to be made divided
by the number of payments expected to be made (determined by Treasury Department
regulations which take into account the annuitant's life expectancy and the form
of annuity benefit selected). In the case of fixed annuity payments, the
exclusion amount is the amount determined by multiplying (1) the payment by (2)
the ratio of the investment in the contract allocated to the fixed annuity
option, adjusted for any period certain or refund feature, to the total expected
value of annuity payments for the term of the contract (determined under
Treasury Department regulations). A simplified method of determining the taxable
portion of annuity payments applies to certificates 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 certificate because of the death of
an owner or an annuitant. Prior to the maturity date, such death benefit
proceeds are includible in income as follows: (1) if distributed in a lump sum,
they are taxed in the same manner as a full withdrawal, as described above, or
(2) if distributed under an annuity option, they are taxed in the same manner as
annuity payments, as described above. After the maturity date, where a
guaranteed period exists under an annuity option and the annuitant
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dies before the end of that period, payments made to the beneficiary for the
remainder of that period are includible in income as follows: (1) if received in
a lump sum, they are includible in income to the extent that they exceed the
unrecovered investment in the contract at that time, or (2) if distributed in
accordance with the existing annuity option selected, they are fully excludable
from income until the remaining investment in the contract is deemed to be
recovered, and all annuity payments thereafter are fully includible in income.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any payment from a
non-qualified certificate unless the payment is: (a) received on or after the
owner reaches age 59 1/2; (b) attributable to the owner becoming disabled (as
defined in the tax law); (c) made to a beneficiary on or after the death of the
owner or, if the owner is not an individual, on or after the death of the
primary annuitant (as defined in the tax law); (d) made as a series of
substantially equal periodic payments (not less frequently than annually) for
the life (or life expectancy) of the annuitant or for the joint lives (or joint
life expectancies) of the annuitant and designated beneficiary (as defined in
the tax law), (e) made under a certificate 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 certificate and substantially equal periodic payments are
made, not less frequently than annually, during the annuity period; or (f) made
with respect to certain annuities issued in connection with structured
settlement agreements. (A similar penalty tax, applicable to distributions from
certain qualified contracts, is discussed below.)
AGGREGATION OF CONTRACTS
In certain circumstances, the amount of an annuity payment or a
withdrawal from a certificate that is includible in income may be determined by
combining some or all of the non-qualified certificates and annuity contracts
owned by an individual. For example, if a person purchases a certificate 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 or
certificates from the same insurance company (or its affiliates) during any
calendar year, all such contracts will be treated as one contract. The effects
of such aggregation are not clear; however, it could affect the amount of a
withdrawal or an annuity payment that is taxable and the amount which might be
subject to the penalty tax described above.
QUALIFIED RETIREMENT PLANS
The certificates are also designed for use in connection with certain
types of retirement plans which receive favorable treatment under the Code.
Numerous special tax rules apply to the participants in such qualified plans and
to the contracts used in connection with such qualified plans. Therefore, no
attempt is made in this Prospectus to provide more than general information
about use of the certificate with the various types of qualified plans.
The tax rules applicable to qualified plans vary according to the type
of plan and the terms and conditions of the plan itself. For example, for both
withdrawals and annuity payments under certain qualified contracts, there may be
no "investment in the contract" and the total amount received may be taxable.
Also, loans from qualified contracts (or certificates), where allowed, are
subject to a variety of limitations, including restrictions as to the amount
that may be borrowed, the duration of the loan, and the manner in which the loan
must be repaid. (Owners should always consult their tax advisors and retirement
plan fiduciaries prior to exercising their loan privileges.) Both the amount of
the contribution that may be made, and the tax deduction or exclusion that the
owner may claim for such contribution, are limited under qualified plans. If
this certificate is used in connection with a qualified plan, the owner and
annuitant must be the same individual. If a co-annuitant is named, all
distributions made while the annuitant is alive must be made to the annuitant.
Also, if a co-annuitant is named who is not the annuitant's spouse, the annuity
options which are available may be limited, depending on the difference in ages
between the annuitant and co-annuitant. Furthermore, the length of any guarantee
period may be limited in some circumstances to satisfy certain minimum
distribution requirements under the Code.
In addition, special rules apply to the time at which distributions
must commence and the form in which the distributions must be paid. For example,
failure to comply with minimum distribution requirements applicable to qualified
plans will result in the imposition of an excise tax. This excise tax generally
equals 50% of the amount by which a minimum required distribution exceeds the
actual distribution from the qualified plan. In the case of IRAs, distributions
of minimum amounts (as specified in the tax law) must generally commence by
April 1 of the calendar year following the calendar year in which the owner
attains age 70 1/2. In the case of certain other qualified plans, distributions
of such minimum amounts generally must commence by the later of this date or
April 1 of the calendar year following the calendar year in which the employee
retires.
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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 agreement (as
defined in the tax law) maintained by the individual's employer.) There are
exceptions to this penalty tax which vary depending on the type of qualified
plan. In the case of an "Individual Retirement Annuity" or an "IRA", including a
"SIMPLE IRA," exceptions provide that the penalty tax does not apply to a
payment (a) received on or after the owner reaches age 59 1/2, (b) received on
or after the owner's death or because of the owner's disability (as defined in
the tax law), or (c) made as a series of substantially equal periodic payments
(not less frequently than annually) for the life (or life expectancy) of the
owner or for the joint lives (or joint life expectancies) of the owner and
designated beneficiary (as defined in the tax law). These exceptions, as well as
certain others not described herein, generally apply to taxable distributions
from other qualified plans (although, in the case of plans qualified under
Sections 401 and 403, exception "c" above for substantially equal periodic
payments applies only if the owner has separated from service). In addition, the
penalty tax does not apply to certain distributions from IRAs taken after
December 31, 1997 which are used for qualified first time home purchases or for
higher education expenses. Special conditions must be met to qualify for these
two exceptions to the penalty tax. Owners wishing to take a distribution from an
IRA for these purposes should consult their tax advisor.
When issued in connection with a qualified plan, a contract and
certificate will be amended as generally necessary to conform to the
requirements of the type of plan. However, owners, annuitants, and beneficiaries
are cautioned that the rights of any person to any benefits under qualified
plans may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the contract and certificate. In
addition, the Company shall not be bound by terms and conditions of qualified
plans to the extent such terms and conditions contradict the contract or
certificate, unless the Company consents.
QUALIFIED PLAN TYPES
Following are brief descriptions of various types of qualified plans in
connection with which the Company may issue a certificate.
Individual Retirement Annuities. Section 408 of the Code permits
eligible individuals to contribute to an individual retirement program known as
an "IRA." IRAs are subject to limits on the amounts that may be contributed, the
persons who may be eligible and on the time when distributions may commence.
Also, distributions from certain other types of qualified retirement plans may
be "rolled over" on a tax-deferred basis into an IRA. The certificate may not,
however, be used in connection with an "Education IRA" under Section 530 of the
Code.
IRAs generally may not provide life insurance, but they may provide a
death benefit that equals the greater of the premiums paid and the contract's
cash 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 certificate's death benefit could be viewed as providing life
insurance coverage with the result that the certificate 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
tax treatment of the certificate's death benefit for purposes of the tax rules
governing IRAs (which would include SEP-IRAs). Employers intending to use the
contract or certificates in connection with such plans should seek competent
advice.
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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 certificate's death benefit for purposes of the
tax rules governing IRAs (which would include SIMPLE IRAs). Employees 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
contract or certificates 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 made by or on behalf of an owner 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
death benefits that may be provided under pension and profit sharing plans. In
addition, the provision of such benefits may result in currently taxable income
to participants. Employers intending to use the contract or certificates 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 or certificates 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 or
certificates. In particular, purchasers should consider that the contract
provides a death benefit that in certain circumstances may exceed the greater of
the purchase payments made by or on behalf of an owner and the contract value.
It is possible that such death benefit could be characterized as an incidental
death benefit. If the death benefit were so characterized, this could result in
currently taxable income to purchasers. In addition, there are limitations on
the amount of incidental death benefits that may be provided under a
tax-sheltered annuity. Even if the death benefit under the contract were
characterized as an incidental death benefit, it is unlikely to violate those
limits unless the purchaser also purchases a life insurance contract as part of
his or her tax-sheltered annuity plan.
Tax-sheltered annuity contracts must contain restrictions on
withdrawals of (i) contributions made pursuant to a salary reduction agreement
in years beginning after December 31, 1988, (ii) earnings on those
contributions, and (iii) earnings after 1988 on amounts attributable to salary
reduction contributions (and earnings on those contributions) held as of the
last day of the year beginning before January 1, 1989. These amounts can be paid
only if the employee has reached age 59 1/2, separated from service, died, or
become disabled (within the meaning of the tax law), or in the case of hardship
(within the meaning of the tax law). Amounts permitted to be distributed in the
event of hardship are limited to actual contributions; earnings thereon cannot
be distributed on account of hardship. Amounts subject to the withdrawal
restrictions applicable to Section 403(b)(7) custodial accounts may be subject
to more stringent restrictions. (These limitations on withdrawals do not apply
to the extent the Company is directed to transfer some or all of the contract
value to the issuer of another tax-sheltered annuity or into a Section 403(b)(7)
custodial account.)
Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations. Section 457 of the Code permits employees of state and
local governments and tax-exempt organizations to defer a portion of their
compensation without paying current taxes. The employees must be participants in
an eligible deferred compensation plan. Generally, a contract or certificate
purchased by a state or local government or a tax-exempt organization will not
be treated as an annuity contract for Federal income tax purposes. Those who
intend to use the contracts or certificates in connection with such plans should
seek competent advice.
Roth IRAs. Recently enacted Section 408A of the Code permits eligible
individuals to contribute to a type of IRA known as a "Roth IRA." Roth IRAs
differ from other IRAs in several respects. Among the differences is that,
although contributions to a Roth IRA are not deductible, "qualified
distributions" from a Roth IRA will be excludable from income. Additionally, the
eligibility and mandatory distribution requirements for Roth IRAs differ from
non-Roth IRAs. Furthermore, a rollover may be made to a Roth IRA only if it is a
"qualified rollover contribution." A "qualified rollover contribution" is a
rollover contribution to a Roth IRA from another Roth IRA or from a non-Roth
IRA, but only if such rollover contribution meets the rollover requirements for
IRAs under Section 408(d)(3) of the Code. In the case of a qualified rollover
contribution or a transfer from a non-Roth IRA to a Roth IRA, any portion of the
amount rolled over which would be includible in gross income were it not part of
a qualified rollover contribution or a nontaxable transfer will be includible in
gross income. However, the 10 percent penalty tax on premature distributions
generally will not apply.
All or part of amounts in a non-Roth IRA may be converted into a Roth
IRA. Such a conversion can be made without taking an actual distribution from
the IRA. For example, an individual may make a conversion by notifying the IRA
issuer or trustee, whichever is applicable. The conversion of an IRA to a Roth
IRA is a special type of qualified rollover distribution. Hence, the IRA
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participant must be eligible to make a qualified rollover distribution in order
to convert an IRA to a Roth IRA. A conversion typically will result in the
inclusion of some or all of the IRA value in gross income, as described above.
Persons with adjusted gross incomes in excess of $100,000 or who are married and
file a separate return are not eligible to make a qualified rollover
contribution or a transfer in a taxable year from a non-Roth IRA to a Roth IRA.
Any "qualified distribution" from a Roth IRA is excludible from gross
income. A "qualified distribution" is a payment or distribution which satisfies
two requirements. First, the payment or distribution must be (a) made after the
owner attains age 59 1/2, (b) made after the owner's death, (c) attributable to
the owner being disabled, or (d) a qualified first-time homebuyer distribution
within the meaning of Section 72(t)(2)(F) of the Code. Second, the payment or
distribution must be made in a taxable year that is at least five years after
(a) the first taxable year for which a contribution was made to any Roth IRA
established for the owner, or (b) in the case of a payment or distribution
properly allocable to a qualified rollover contribution from a non-Roth IRA (or
income allocable thereto), the taxable year in which the rollover contribution
was made. A distribution from a Roth IRA which is not a qualified distribution
is generally taxed in the same manner as a distribution from non-Roth IRAs.
Distributions from a Roth IRA need not commence at age 70 1/2.
As described above (see "Individual Retirement Annuities"), there is
some uncertainty regarding the proper characterization of the contract's death
benefit for purposes of the tax rules governing IRAs (which include Roth IRAs).
Persons intending to use the contract in connection with a Roth IRA should seek
competent advice.
The state income tax treatment of a Roth IRA may differ from the
Federal income tax treatment of a Roth IRA. A tax advisor should be consulted
regarding the state law treatment of a Roth IRA.
DIRECT ROLLOVERS
If the certificate 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 certificate 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
certificate, discussed below, the owner cannot elect out of withholding with
respect to an eligible rollover distribution. However, this 20% withholding will
not apply if, instead of receiving the eligible rollover distribution, the
distributee elects to have it directly transferred to certain qualified plans.
Prior to receiving an eligible rollover distribution, a notice will be provided
explaining generally the direct rollover and mandatory withholding requirements
and how to avoid the 20% withholding by electing a direct rollover.
FEDERAL INCOME TAX WITHHOLDING
The Company will withhold and remit to the U.S. government a part of
the taxable portion of each distribution made under a certificate unless the
distributee notifies the Company at or before the time of the distribution that
he or she elects not to have any amounts withheld. In certain circumstances, the
Company may be required to withhold tax, as explained above. The withholding
rates applicable to the taxable portion of periodic annuity payments (other than
eligible rollover distributions) are the same as the withholding rates generally
applicable to payments of wages. In addition, the withholding rate applicable to
the taxable portion of non-periodic payments (including withdrawals prior to the
maturity date and rollovers from non-Roth IRAs to Roth IRAs) is 10%. As
discussed above, the withholding rate applicable to eligible rollover
distributions is 20%.
GENERAL MATTERS
TAX DEFERRAL
The status of the contract as an annuity generally allows all earnings
on the underlying investments to be tax-deferred until withdrawn or until
annuity payments begin (see "FEDERAL TAX MATTERS"). This tax deferred treatment
may be beneficial to owners in building assets in a long-term investment
program.
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PERFORMANCE DATA
Each of the sub-accounts may in its advertising and sales materials
quote total return figures. The sub-accounts may advertise both "standardized"
and "non-standardized" total return figures, although standardized figures will
always accompany non-standardized figures. Non-standardized total return figures
may be quoted assuming both (i) redemption at the end of the time period and
(ii) not assuming redemption at the end of the time period. Standardized figures
include total return figures from: (i) the inception date of the sub-account of
the Variable Account which invests in the portfolio or (ii) ten years, whichever
period is shorter. Non-standardized figures include total return numbers from
(i) inception date of the portfolio or (ii) ten years, whichever period is
shorter. Such figures will always include the average annual total return for
recent one year and, when applicable, five and ten year periods and, where less
than ten years, the inception date of the sub-account, in the case of
standardized returns, and the inception date of the portfolio, in the case of
non-standardized returns. Where the period since inception is less than one
year, the total return quoted will be the aggregate return for the period. The
average annual total return is the average annual compounded rate of return that
equates a purchase payment to the market value of such purchase payment on the
last day of the period for which such return is calculated. The aggregate total
return is the percentage change (not annualized) that equates a purchase payment
to the market value of such purchase payment on the last day of the period for
which such return is calculated. For purposes of the calculations it is assumed
that an initial payment of $1,000 is made on the first day of the period for
which the return is calculated. For total return figures quoted for periods
prior to the commencement of the offering of this contract, August 9, 1994,
standardized performance data will be the historical performance of the Trust
portfolio from the date the applicable sub-account of the Variable Account first
became available for investment under other contracts offered by the Company,
adjusted to reflect current contract charges. In the case of non-standardized
performance, performance figures will be the historical performance of the Trust
portfolio from the inception date of the portfolio (or in the case of the Trust
portfolios created in connection with the merger of Manulife Series Fund, Inc.
into the Trust, the inception date of the applicable predecessor Manulife Series
Fund Inc. portfolio) adjusted to reflect current contract charges. Past
performance figures quoted are not intended to indicate future performance of
any sub-account. More detailed information on the computations is set forth in
the Statement of Additional Information.
FINANCIAL STATEMENTS
Financial Statements for the Variable Account and the Company are
contained in the Statement of Additional Information.
ASSET ALLOCATION AND TIMING SERVICES
The Company is aware that certain third parties are offering asset
allocation and timing services in connection with the contracts. In certain
cases the Company has agreed to honor transfer instructions from such asset
allocation and timing services where it has received powers of attorney, in a
form acceptable to it, from the owners participating in the service. THE COMPANY
DOES NOT ENDORSE, APPROVE OR RECOMMEND SUCH SERVICES IN ANY WAY AND
GROUPHOLDERS/OWNERS SHOULD BE AWARE THAT FEES PAID FOR SUCH SERVICES ARE
SEPARATE AND IN ADDITION TO FEES PAID UNDER THE CONTRACTS AND CERTIFICATES.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 830.105 of the Texas Government Code permits participants in
the Texas Optional Retirement Program ("ORP") to withdraw their interest in a
variable annuity contract issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education, (2) retirement,
(3) death, or (4) the participant's attainment of age 70 1/2. Accordingly,
before any amounts may be distributed from the contract, proof must be furnished
to the Company that one of the four events has occurred. The foregoing
restrictions on withdrawal do not apply in the event a participant in the ORP
transfers his or her contract value to another contract or another qualified
custodian during the period of participation in the ORP. Loans are not available
under contracts issued under the ORP.
DISTRIBUTION OF CONTRACTS
MSS located at 73 Tremont Street, Boston, Massachusetts 02108, a
Delaware limited liability company controlled by the Company, is the principal
underwriter of the contracts and certificates in addition to providing advisory
services to the Trust. MSS is a broker-dealer registered under the Securities
Exchange Act of 1934 (the "1934 Act") and a member of the National Association
of Securities Dealers, Inc. ("NASD"). MSS has entered into an 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
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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 Hoflding, LLC
and 15% owned by the principals of Wood Logan. Sales of the contracts and
certificates will be made by registered representatives of broker-dealers
authorized by MSS to sell them. Such registered representatives will also be
licensed insurance agents of the Company. Under the promotional agent agreement,
Wood Logan will recruit and provide sales training and licensing assistance to
such registered representatives. In addition, Wood Logan will prepare sales and
promotional materials for the Company's approval. MSS will pay distribution
compensation to selling brokers in varying amounts which under normal
circumstances are not expected to exceed 6% of purchase payments. In addition,
MSS may pay trail compensation after the first certificate year, which under
normal circumstances will not exceed 0.75% of contract value per year. MSS may
from time to time pay additional compensation pursuant to promotional contests.
Additionally, in some circumstances, MSS will provide reimbursement of certain
sales and marketing expenses. MSS will pay the promotional agent for providing
marketing support for the distribution of the contracts and certificates.
OWNER INQUIRIES
All owner inquiries should be directed to the Company's Annuity Service
Office at P.O. Box 9230, Boston, Massachusetts 02205-9230.
CONFIRMATION STATEMENTS
Owners will be sent confirmation statements for certain transactions in
their account. Owners should carefully review these statements to verify their
accuracy. Any mistakes should immediately be reported to the Company's Annuity
Service Office. If the owner fails to notify the Company's Annuity Service
Office of any mistake within 60 days of the mailing of the confirmation
statement, the owner will be deemed to have ratified the transaction.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party
or to which the assets of the Variable Account are subject. Neither the Company
nor MSS are involved in any litigation that is of material importance in
relation to their total assets or that relates to the Variable Account.
OTHER INFORMATION
A registration statement has been filed with the SEC under the 1933 Act
with respect to the variable portion of the contracts discussed in this
Prospectus. Not all the information set forth in the registration statement,
amendments and exhibits thereto has been included in this Prospectus. Statements
contained in this Prospectus or the Statement of Additional Information
concerning the content of the contracts and other legal instruments are only
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the SEC.
YEAR 2000 ISSUES
Like other business organizations and individuals, the Company would be
adversely affected if its computer systems and those of its service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. The Company is completing an assessment of the Year 2000
impact on its systems and business processes. Management believes that the
Company will complete its 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 the Company believes it will complete the Year 2000
project is based on management's best estimates, which were derived utilizing
numerous assumptions of future events. However, there can be no guarantee that
these 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.
47
<PAGE> 49
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information and History....................................... 3
Performance Data...................................................... 3
Services
Independent Auditors........................................... 10
Servicing Agent................................................ 10
Principal Underwriter.......................................... 10
Cancellation of Certificate........................................... 10
Financial Statements.................................................. 11
</TABLE>
<PAGE> 50
APPENDIX A
EXAMPLES OF CALCULATION OF WITHDRAWAL CHARGE*
Example 1 - Assume a single payment of $50,000 is made by an owner into the
contract and a certificate is issued. 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 value of the certificate were completely withdrawn. This illustration
is based on hypothetical contract values.
<TABLE>
<CAPTION>
CERTIFICATE HYPOTHETICAL FREE WITHDRAWAL
YEAR CONTRACT WITHDRAWAL PAYMENTS CHARGE
VALUE AMOUNT LIQUIDATED -----------------------------
PERCENT AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2 55,000 5,000(a) 50,000 6% 3,000
4 50,500 5,000(b) 45,500 5% 2,275
6 60,000 10,000(c) 50,000 3% 1,500
8 70,000 20,000(d) 50,000 0% 0
</TABLE>
(a) During any certificate year the free withdrawal amount is the greater
of accumulated earnings, or 10% of the total payments made by the owner
less any prior partial withdrawals in that certificate year. In the
second certificate year the earnings under the contract and 10% of
payments both equal $5,000. Consequently, on total withdrawal $5,000 is
withdrawn free of the withdrawal charge, the entire $50,000 payment is
liquidated and the withdrawal charge is assessed against such
liquidated payment (contract value less free withdrawal amount).
(b) In the example for the fourth certificate year, the accumulated
earnings of $500 is less than 10% of payments, therefore the free
withdrawal amount is equal to 10% of payments ($50,000 X 10% = $5,000)
and the withdrawal charge is only applied to payments liquidated
(contract value less free withdrawal amount).
(c) In the example for the sixth certificate year, the accumulated earnings
of $10,000 is greater than 10% of payments ($5,000), therefore the free
withdrawal amount is equal to the accumulated earnings of $10,000 and
the withdrawal charge is applied to the payments liquidated (contract
value less free withdrawal amount).
(d) There is no withdrawal charge on any payments liquidated that have been
in the contract for at least 7 years.
Example 2 - Assume a single payment of $50,000 is made by an owner into
the contract and a certificate is issued. No transfers are made, no additional
payments are made and there are a series of four partial withdrawals made during
the third certificate year of $2,000, $5,000, $7,000, and $8,000. The
illustration below is based on hypothetical contract values.
<TABLE>
<CAPTION>
HYPOTHETICAL PARTIAL WITHDRAWAL FREE WITHDRAWAL
CONTRACT REQUESTED WITHDRAWAL PAYMENTS CHARGE
VALUE AMOUNT LIQUIDATED ----------------------------
PERCENT AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
65,000 2,000 15,000(a) 0 5% 0
49,000 5,000 3,000(b) 2,000 5% 100
52,000 7,000 4,000(c) 3,000 5% 150
44,000 8,000 0(d) 8,000 5% 400
</TABLE>
49
<PAGE> 51
(a) The free withdrawal amount during any certificate year is the greater
of the contract value less the unliquidated payments (accumulated
earnings), or 10% of payments less 100% of all prior withdrawals in
that certificate year. For the first example, accumulated earnings of
$15,000 is the free withdrawal amount since it is greater than 10% of
payments less prior withdrawals ($5,000-0). The amount requested
($2,000) is less than the free withdrawal amount so no payments are
liquidated and no withdrawal charge applies.
(b) The contract has negative accumulated earnings ($49,000-$50,000), so
the free withdrawal amount is limited to 10% of payments less all prior
withdrawals. Since $2,000 has already been withdrawn in the current
certificate year, the remaining free withdrawal amount during the third
certificate year is $3,000. The $5,000 partial withdrawal will consist
of $3,000 free of withdrawal charge, and the remaining $2,000 will be
subject to a withdrawal charge and result in payments being liquidated.
The remaining unliquidated payments are $48,000.
(c) The contract has increased in value to $52,000. The unliquidated
payments are $48,000 so the accumulated earnings are $4,000, which is
greater than 10% of payments less prior withdrawals
($5,000-$2,000-$5,000<0). Hence the free withdrawal amount is $4,000.
Therefore, $3,000 of the $7,000 partial withdrawal will be subject to a
withdrawal charge and result in payments being liquidated. The
remaining unliquidated payments are $45,000.
(d) The free withdrawal amount is zero since the contract has negative
accumulated earnings ($44,000-$45,000) and the full 10% of payments
($5,000) has already been withdrawn. The full amount of $8,000 will
result in payments being liquidated subject to a withdrawal charge. At
the beginning of the next certificate year the full 10% of payments
would be available again for withdrawal requests during that year.
* Examples do not illustrate withdrawal charges applicable to Ven 8 contracts.
<PAGE> 52
APPENDIX B
STATE PREMIUM TAXES
Premium taxes vary according to the state and are subject to change. In
many jurisdictions there is no tax at all. For current information, a tax
advisor should be consulted.
<TABLE>
<CAPTION>
TAX RATE
QUALIFIED NON-QUALIFIED
STATE CONTRACTS CONTRACTS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
CALIFORNIA........................................... .50% 2.35%
DISTRICT OF COLUMBIA................................. 2.25% 2.25%
KENTUCKY............................................. 2.00% 2.00%
MAINE................................................ .00% 2.00%
NEVADA............................................... .00% 3.50%
PUERTO RICO.......................................... 1.00% 1.00%
SOUTH DAKOTA*........................................ .00% 1.25%
WEST VIRGINIA........................................ 1.00% 1.00%
WYOMING.............................................. .00% 1.00%
</TABLE>
* Premium tax paid upon receipt of premium (no tax at annuitization if tax paid
on premium at issue).
51
<PAGE> 53
APPENDIX C
PENNSYLVANIA MAXIMUM MATURITY AGE
For all certificates issued in Pennsylvania the maximum maturity age based upon
the issue age of the annuitant is as follows:
<TABLE>
<CAPTION>
ISSUE AGE MAXIMUM MATURITY AGE
- --------------------------------------------------------------------------------
<S> <C>
70 or less 85
71-75 86
76-80 88
81-85 90
86-90 93
91-93 96
94-95 98
96-97 99
98-99 101
100-101 102
102 103
103 104
104 105
105 106
</TABLE>
It is required that the annuitant exercise a settlement annuity option
no later than the maximum maturity age stated above. For example an annuitant
age 60 at issue must exercise a settlement option prior to the attainment of age
86. The Company will use the issue age of the youngest named annuitant in the
determination of the required settlement option date.
If certificates are issued with annuitants over age 84, a withdrawal
charge could be imposed if they terminate the certificate 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 7-year withdrawal
charge schedule of the certificate.
52
<PAGE> 54
APPENDIX D
PRIOR CONTRACTS
Prior to February, 1995, the Company issued a class of variable annuity
contract which is no longer being issued but under which purchase payments may
continue to be made ("prior contract") -- "Ven 8" contracts, which were sold
during the period from September, 1992 until February, 1995.
The principal differences between the contract offered by this
Prospectus and the prior contract relate to the investment options available
under the contracts, a minimum interest rate to be credited for any guarantee
period under the fixed portion of the contracts, the charges made by the Company
and the death benefit provisions.
INVESTMENT OPTIONS
The investment options under the prior contract differ as follows from
the investment options described in this Prospectus. The prior contract does not
allow for investments in the five and seven year fixed account investments
options. The prior contract allows investments in a six year fixed account
investment option not available under the contract offered by this Prospectus.
The prior contract does not provide the Company the authority to offer
additional fixed account investment options for any yearly period from two to
ten years.
FIXED ACCOUNT MINIMUM INTEREST GUARANTEE
The minimum interest rate to be credited for any guarantee period under
the fixed portion of the prior contract is 4%.
MARKET VALUE CHARGE
For purposes of calculating the market value adjustment factor (see
"Fixed Account Investment Options - Market Value Charge") the maximum difference
between "B" and "A" will be 3%. The adjustment factor will never be greater than
2x(A-4%) and never less than zero. ("A" is the guaranteed interest rate on the
investment account. "B" is the guaranteed interest rate available, on the date
the request is processed, for amounts allocated to a new investment account with
the same length of guarantee period as the investment account from which the
amounts are being withdrawn.)
There will be no market value charge on withdrawals from the fixed
account investment options in the following situations: (a) death of the
annuitant; (b) amounts withdrawn to pay fees or charges; (c) amounts applied at
the maturity date to purchase an annuity as provided in the certificate; (d)
amounts withdrawn from three and six year investment accounts within one month
prior to the end of the guarantee period; and (e) amounts withdrawn in any year
that do not exceed 10% of total purchase payments less any prior partial
withdrawals in that certificate year.
Notwithstanding application of the market value adjustment formula, in
no event will the market value charge (i) exceed the earnings attributable to
the amount withdrawn from an investment account, (ii) together with any
withdrawal charges for an investment account be greater than 10% of the amount
transferred or withdrawn, or (iii) reduce the amount payable on withdrawal or
transfer below the amount required under the non-forfeiture laws of the state
with jurisdiction over the contract. The cumulative effect of the market value
and withdrawal charges (or the effect of the withdrawal charge itself) could,
however, result in a owner receiving total withdrawal proceeds of less than the
owner's investment in the contract.
53
<PAGE> 55
WITHDRAWAL CHARGES
The withdrawal charges under the prior contract differ from the
withdrawal charges described in this Prospectus.
Prior Contract Withdrawal Charge
The withdrawal charge assessed under the prior contract is as follows:
If a withdrawal is made from the contract by an owner before the
maturity date of the certificate, a withdrawal charge (contingent deferred sales
charge) may be assessed against amounts withdrawn attributable to purchase
payments that have been in the contract for the owner less than six complete
years. There is never a withdrawal charge with respect to earnings accumulated
for an owner in the contract, certain other free withdrawal amounts described
below or purchase payments by or on behalf of the owner that have been in the
contract more than six complete years. In no event may the total withdrawal
charges exceed 6% of the total purchase payments made by or on behalf of the
owner. The amount of the withdrawal charge and when it is assessed is discussed
below:
1. Each withdrawal is allocated first to the "free withdrawal amount"
and second to "unliquidated purchase payments" for each certificate. In any
certificate year, the free withdrawal amount for that year is the greater of (1)
the excess of the owner's contract value on the date of withdrawal over the
unliquidated purchase payments made by or on behalf of the owner (the
accumulated earnings on the owner's certificate) or (2) 10% of total purchase
payments made by or on behalf of the owner less any prior partial withdrawals by
the owner in that certificate year. Withdrawals allocated to the free withdrawal
amount may be withdrawn without the imposition of a withdrawal charge.
2. If an owner makes a withdrawal for an amount in excess of the free
withdrawal amount, the excess will be allocated to purchase payments which will
be liquidated on a first-in first-out basis. On any withdrawal request, the
Company will liquidate purchase payments equal to the amount of the withdrawal
request which exceeds the free withdrawal amount in the order such purchase
payments were made: the oldest unliquidated purchase payment first, the next
purchase payment second, etc. until all purchase payments have been liquidated.
3. Each purchase payment or portion thereof liquidated in connection
with a withdrawal request is subject to a withdrawal charge based on the length
of time the purchase payment has been in the contract. The amount of the
withdrawal charge is calculated by multiplying the amount of the purchase
payment being liquidated by the applicable withdrawal charge percentage obtained
from the table below.
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS WITHDRAWAL CHARGE
PURCHASE PAYMENT IN CONTRACT PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C>
0 6%
1 6%
2 5%
3 4%
4 3%
5 2%
6+ 0%
</TABLE>
The total withdrawal charge will be the sum of the withdrawal charges
for the purchase payments being liquidated.
4. The withdrawal charge is deducted from the owner's contract value
remaining after the owner is paid the amount requested, except in the case of a
complete withdrawal when it is deducted from the amount otherwise payable. In
the case of a partial withdrawal, the amount requested from an investment
account may not exceed the value of that investment account less any applicable
withdrawal charge and market value charge.
5. There is generally no withdrawal charge on distributions made as a
result of the death of the annuitant or owner and no withdrawal charges are
imposed on the maturity date if the owner annuitizes as provided in the
contract.
54
<PAGE> 56
OTHER CONTRACT CHARGES
The prior contract makes no provision for the waiver of the $30 annual
administration fee when prior to the maturity date the contract value equals or
exceeds $100,000 at the time of the fee's assessment.
DEATH BENEFIT PROVISIONS
Prior Contract Death Benefit Provisions
The provisions governing the death benefit prior to the maturity date
under the prior contract are as follows:
Death of Annuitant who is not the Owner. The Company will pay the
minimum death benefit, less any debt, to the beneficiary if the owner is not the
annuitant and the annuitant dies before the owner and before the maturity date.
If there is more than one such annuitant, the minimum death benefit will be paid
on the death of the last surviving co-annuitant. The minimum death benefit will
be paid either as a lump sum or in accordance with any of the annuity options
available under the contract. An election to receive the death benefit under an
annuity option must be made within 60 days after the date on which the death
benefit first becomes payable. Rather than receiving the minimum death benefit,
the beneficiary may elect to continue his or her participation under the
contract as a new owner. (In general, a beneficiary who makes such an election
will nonetheless be treated for Federal income tax purposes as if he or she had
received the minimum death benefit.)
Death of Annuitant who is the Owner. The Company will pay the minimum
death benefit, less any debt, to the beneficiary if the owner is the annuitant,
dies before the maturity date and is not survived by a co-annuitant. If the
certificate is a non-qualified certificate, the owner is the annuitant and the
owner dies before the maturity date survived by a co-annuitant, the Company,
instead of paying the minimum death benefit to the beneficiary, will pay to the
successor owner an amount equal to the amount payable on total withdrawal
without reduction for any withdrawal charge. If the certificate is a
non-qualified certificate, distribution of the minimum death benefit to the
beneficiary (or of the amount payable to the successor owner) must be made
within five years after the owner's death. If the beneficiary or successor
owner, as appropriate, is an individual, in lieu of distribution within five
years of the owner's death, distribution may be made as an annuity which begins
within one year of the owner's death and is payable over the life of the
beneficiary (or the successor owner, as appropriate) or over a period not in
excess of the life expectancy of the beneficiary (or the successor owner, as
appropriate). If the owner's spouse is the beneficiary (or the successor owner,
as appropriate) that spouse may elect to continue his or her participation under
the contract as a new owner in lieu of receiving the distribution. In such a
case, the distribution rules applicable when a owner dies generally will apply
when that spouse, as the owner, dies.
Death of Owner who is not the Annuitant. If the owner is not the
annuitant and dies before the maturity date and before the annuitant, the
successor owner shall have the ownership rights of the owner and will be
entitled to the owner's interest in the contract. If the certificate is a
non-qualified contract, an amount equal to the amount payable on total
withdrawal, without reduction for any withdrawal charge, will be paid to the
successor owner. Distribution of the amount to the successor owner must be made
within five years of the owner's death. If the successor owner is an individual,
in lieu of distribution within five years of the owner's death, distribution may
be made as an annuity which begins within one year of the owner's death and is
payable over the life of the successor owner (or over a period not greater than
the successor owner's life expectancy). If the owner's spouse is the successor
owner, that spouse may elect to continue his or her participation under the
contract as a new owner in lieu of receiving the distribution. In such a case,
the distribution rules applicable when an owner dies generally will apply when
that spouse, as the owner, dies.
For purposes of these death benefit provisions applicable on an owner's
death (whether or not such owner is an annuitant), if a non-qualified
certificate has more than one individual owner, death benefits must be paid as
provided in the contract upon the death of any such owner. If both owners are
individuals, the distributions will be made to the remaining owner rather than
to the successor owner.
Entity as Owner. In the case of a non-qualified certificate where the
owner is not an individual (for example, the owner is a corporation or a trust),
the special rules stated in this paragraph apply. For purposes of distributions
of death benefits before the maturity date, any annuitant under the certificate
will be treated as the owner, and a change in the annuitant or any co-annuitant
shall be treated as the death of the owner. In the case of distributions which
result from a change in an annuitant when the annuitant does not actually die,
the amount distributed will be reduced by charges which would otherwise apply
upon withdrawal.
If a non-qualified certificate has both an individual and a
non-individual owner, death benefits must be paid as provided in the contract
upon the death of any annuitant, a change in any annuitant, or the death of any
individual owner, whichever occurs earlier.
55
<PAGE> 57
The minimum death benefit during the first six certificate years will
be equal to the greater of: (a) the owner's contract value on the date due proof
of death and all required claim forms are received at the Company's Annuity
Service Office, or (b) the sum of all purchase payments made by or on behalf of
the owner, less any amount deducted in connection with partial withdrawals made
by the owner. During any subsequent six contract year period, the minimum death
benefit will be the greater of (a) the owner's contract value on the date due
proof of death and all required claim forms are received at the Company's
Annuity Service Office, or (b) the minimum death benefit on the last day of the
previous six certificate year period plus any purchase payments made by or on
behalf of the owner and less any amount deducted in connection with partial
withdrawals made by the owner since then. If the annuitant dies after the first
of the month following his or her 85th birthday, the minimum death benefit will
be the owner's contract value on the date due proof of death and all required
claim forms are received at the Company' Annuity Service Office.
Death benefits will be paid within seven days of receipt of due proof
of death and all required claim forms at the Company's Annuity Service Office,
subject to postponement under the same circumstances that payment of withdrawals
may be postponed.
OTHER CONTRACT PROVISIONS
Contract Maturity Date
Under the prior contract, the contract maturity date is the later of
the first day of the month following the 85th birthday of the annuitant or the
sixth certificate anniversary. The prior contract allows the owner to specify a
different maturity date at any time by written request at least one month before
both the previously specified and the new maturity date. The new maturity date
must be the first day of a month no later than the first day of the month
following the 85th birthday of the annuitant.
Annuity Tables Assumed Interest Rate
A 4% assumed interest rate is built into the annuity tables in the
prior contract used to determine the first variable annuity payment to be made
under that contract.
Beneficiary
Under the prior contract certain provisions relating to beneficiary are
as follows:
The beneficiary is the person, persons or entity designated in the
application or as subsequently named to whom benefits will be paid on the death
of the annuitant. The beneficiary may be changed by the owner during the
lifetime of the annuitant and prior to the maturity date subject to the rights
of any irrevocable beneficiary. Any change must be made in writing, approved by
the Company and if approved, will be effective as of the date on which written.
The Company assumes no liability for any payments made or actions taken before
the change is approved. Prior to the maturity date, if no beneficiary survives
the annuitant, the owner or the owner's estate will be the beneficiary. The
interest of any beneficiary is subject to that of any assignee. In the case of
certain qualified contracts or certificates, regulations promulgated by the
Treasury Department prescribe certain limitations on the designation of a
beneficiary.
Ownership
Under the prior contract certain provisions relating to ownership are
as follows:
The contract is owned by the group holder. However, all contract rights
and privileges not expressly reserved to the group holder may be exercised by
each owner as to his or her interests as specified in his or her certificate.
Prior to the maturity date, an owner is the person designated in an application
or as subsequently named. On and after a certificate's maturity date, the
annuitant is the owner and after the death of the annuitant, the beneficiary is
the owner.
In the case of non-qualified contracts, ownership of the contract may
be changed at any time. In the case of non-qualified certificates, an owner may
assign his or her interest in the contract during the lifetime of the annuitant
prior to the maturity date, subject to the rights of any irrevocable
beneficiary. Assigning a contract or interest therein, or changing the ownership
of a contract or certificate, may be treated as a distribution of all or a
portion of the contract value for Federal tax purposes. Any change of ownership
or assignment must be made in writing. Any change must be approved by the
Company. Any assignment and any change, if approved, will be effective as of the
date on which written. The Company assumes no liability for any payments made or
actions taken before a change is approved or assignment is accepted or
responsibility for the validity or sufficiency of any assignment.
56
<PAGE> 58
Modification
The prior contract does not include "free withdrawal percentage" among
contract terms the Company is authorized to change on 60 days' notice to the
group holder.
GUARANTEED RETIREMENT INCOME PROGRAM
The Guaranteed Retirement Income Program is not available for prior
contracts.
TABLE OF ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
===================================================================================
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
START OF YEAR* END OF YEAR AT END OF YEAR
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997 $12.500000 $ 8.180904 18,049.496
- -----------------------------------------------------------------------------------
Science & Technology
1997 $12.500000 $13.647195 68,696.549
- -----------------------------------------------------------------------------------
International Small Cap
1996 $12.500000 $13.493094 265,493.981
1997 13.493094 13.410016 148,139.543
- -----------------------------------------------------------------------------------
Emerging Growth
1997 $12.500000 $14.574077 29,183.460
- -----------------------------------------------------------------------------------
Pilgrim Baxter Growth
1997 $12.500000 $12.327066 33,654.601
- -----------------------------------------------------------------------------------
Small/Mid Cap
1996 $12.500000 $13.215952 293,815.378
1997 13.215952 15.020670 362,356.638
- -----------------------------------------------------------------------------------
International Stock
1997 $12.500000 $12.652231 18,313.864
- -----------------------------------------------------------------------------------
Worldwide Growth
1997 $12.500000 $13.965674 8,228.033
- -----------------------------------------------------------------------------------
Global Equity
1992 $12.003976 $11.790318 28,203.763
1993 11.790318 15.450341 985,277.929
1994 15.450341 15.500933 2,268,423.530
1995 15.500933 16.459655 2,132,127.330
1996 16.459655 18.276450 1,785,966.081
1997 18.276450 21.770913 1,662,176.913
- -----------------------------------------------------------------------------------
Small Company Value
1997 $12.500000 $11.898363 21,030.641
- -----------------------------------------------------------------------------------
Equity
1992 $12.386657 $13.143309 122,807.657
1993 13.143309 15.075040 1,315,253.114
1994 15.075040 14.786831 1,958,082.571
1995 14.786831 20.821819 2,278,573.962
1996 20.821819 24.664354 2,007,082.996
1997 24.664354 29.002593 1,794,644.944
- -----------------------------------------------------------------------------------
Growth
1996 $12.500000 $13.727312 98,424.809
1997 13.727312 16.968111 276,494.410
- -----------------------------------------------------------------------------------
Quantitative Equity
1997 $12.500000 $16.107191 32,343.397
- -----------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 59
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
START OF YEAR* END OF YEAR AT END OF YEAR
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Blue Chip Growth
1992 $10.000000 $ 9.923524 58,049.495
1993 9.923524 9.413546 707,931.534
1994 9.413546 8.837480 1,001,113.147
1995 8.837480 11.026969 1,257,014.677
1996 11.026969 13.688523 1,223,305.806
1997 13.688523 17.134232 1,282,330.299
- --------------------------------------------------------------------------------
Real Estate Securities
1997 $12.500000 $14.949140 46,874.008
- --------------------------------------------------------------------------------
Value
1997 $12.500000 $15.057118 41,009.600
- --------------------------------------------------------------------------------
International Growth and Income
1995 $10.000000 $10.554228 100,475.374
1996 10.554228 11.718276 223,718.019
1997 11.718276 11.545714 216,124.371
- --------------------------------------------------------------------------------
Growth and Income
1992 $10.942947 $11.927411 149,476.889
1993 11.927411 12.893007 1,610,454.400
1994 12.893007 13.076664 2,142,828.604
1995 13.076664 16.660889 2,230,320.953
1996 16.660889 20.178770 2,214,190.721
1997 20.178770 26.431239 2,165,598.782
- --------------------------------------------------------------------------------
Equity-Income
1993 $10.000000 $11.175534 715,700.792
1994 11.175534 11.107620 1,432,473.155
1995 11.107620 13.548849 1,741,975.072
1996 13.548849 16.011513 1,661,006.752
1997 16.011513 20.479412 1,587,287.165
- --------------------------------------------------------------------------------
Balanced
1997 $12.500000 $14.609853 3,333.690
- --------------------------------------------------------------------------------
Aggressive Asset Allocation
1992 $10.880194 $11.623893 21,660.089
1993 11.623893 12.642493 244,300.482
1994 12.642493 12.381395 395,864.362
1995 12.381395 14.990551 422,911.593
1996 14.990551 16.701647 365,478.331
1997 16.701647 19.614359 297,611.885
- --------------------------------------------------------------------------------
High Yield
1997 $12.500000 $13.890491 59,072.119
- --------------------------------------------------------------------------------
Moderate Asset Allocation
1992 $11.012835 $11.772128 120,020.418
1993 11.772128 12.775798 1,245,900.794
1994 12.775798 12.396295 1,690,801.919
1995 12.396295 14.752561 1,435,414.191
1996 14.752561 15.995076 1,266,755.972
1997 15.995076 18.276161 1,089,331.565
- --------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
START OF YEAR* END OF YEAR AT END OF YEAR
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conservative Asset Allocation
1992 $11.102574 $11.821212 415,991.541
1993 11.821212 12.705196 56,414.765
1994 12.705196 12.298940 330,900.271
1995 12.298940 14.320582 478,239.388
1996 14.320582 15.113142 325,608.369
1997 15.113142 16.607511 340,682.860
- ------------------------------------------------------------------------------------------------------------
Strategic Bond
1993 $10.000000 $10.750617 381,406.287
1994 10.750617 9.965972 564,406.390
1995 9.965972 11.716972 682,547.892
1996 11.716972 13.250563 797,845.050
1997 13.250563 14.500997 763,855.628
- ------------------------------------------------------------------------------------------------------------
Global Government Bond
1992 $13.322602 $13.415849 56,786.509
1993 13.415849 15.741586 745,370.831
1994 15.741586 14.630721 694,644.982
1995 14.630721 17.772344 586,608.921
1996 17.772344 19.803954 494,576.435
1997 19.803954 20.104158 436,440.899
- ------------------------------------------------------------------------------------------------------------
Capital Growth Bond
1997 $12.500000 $13.475788 391.426
- ------------------------------------------------------------------------------------------------------------
Investment Quality Bond
1992 $13.147350 $13.936240 59,746.432
1993 13.936240 15.118716 319,417.770
1994 15.118716 14.216516 384,804.353
1995 14.216516 16.751499 371,328.627
1996 16.751499 16.943257 361,839.590
1997 16.943257 18.336912 291,735.510
- ------------------------------------------------------------------------------------------------------------
U.S. Government Securities
1992 $13.015785 $13.651495 212,815.440
1993 13.651495 14.490734 783,550.472
1994 14.490734 14.111357 585,709.535
1995 14.111357 16.083213 494,142.862
1996 16.083213 16.393307 390,696.559
1997 16.393307 17.535478 345,437.781
- ------------------------------------------------------------------------------------------------------------
Money Market
1992 $12.892485 $13.137257 28,928.622
1993 13.137257 13.303085 331,225.229
1994 13.303085 13.623292 1,079,557.666
1995 13.623292 14.190910 530,610.979
1996 14.190910 14.699636 846,105.590
1997 14.699636 15.241915 454,080.933
- ------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000
1997 $12.500000 $13.669625 19,900.057
- ------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820
1997 $12.500000 $14.033299 60,974.946
- ------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640
1997 $12.500000 $14.066417 59,780.667
- ------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460
1997 $12.500000 $14.016704 0.000
- ------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280
1997 $12.500000 $13.825120 88,291.620
============================================================================================================0
</TABLE>
59
<PAGE> 61
* Units under this series of contracts were first credited under the
sub-accounts on September, 1992, except in the case of Blue Chip Growth where
units were first credited on December 11, 1992; Equity-Income where units were
first credited on February 19, 1992; International Growth and Income where units
were first credited on January 9, 1995; Small/Mid Cap and International Small
Cap where units were first credited on March 4, 1996; Growth where units were
first credited on July 15, 1996; Pacific Rim Emerging Markets, Science &
Technology, Emerging Growth, Pilgrim Baxter Growth, International Stock,
Worldwide Growth, Quantitative Equity, Real Estate Securities, Value, Balanced,
High Yield, Capital Growth Bond, Lifestyle Aggressive 1000, Lifestyle Growth
820, Lifestyle Balanced 640, Lifestyle Moderate 460, Lifestyle Conservative 280
where units were first credited on January 2, 1997 and Small Company Value where
units were first credited on October 1, 1997.
60
<PAGE> 62
- --------------------------------------------------------------------------------
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 PAYMENT DEFERRED COMBINATION
FIXED AND VARIABLE GROUP ANNUITY CONTRACT
NON-PARTICIPATING
This Statement of Additional Information is not a Prospectus. It contains
information in addition to that described in the Prospectus and should be read
in conjunction with the Prospectus dated the same date as this Statement of
Additional Information. The Prospectus may be obtained by writing The
Manufacturers Life Insurance Company of North America at the Annuity Service
Office, P.O. Box 9230, Boston, Massachusetts 02205-9230 or telephoning (800)
344-1029.
The date of this Statement of Additional Information is May 1, 1998.
The Manufacturers Life Insurance Company of North America
116 Huntington Avenue
Boston, Massachusetts 02116
(617) 266-6004
- --------------------------------------------------------------------------------
V22/23.SAI598
<PAGE> 63
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information and History.................................... 3
Performance Data................................................... 3
Services
Independent Auditors........................................ 10
Servicing Agent............................................. 10
Principal Underwriter....................................... 10
Cancellation of Certificate........................................ 10
Financial Statements............................................... 11
</TABLE>
<PAGE> 64
GENERAL INFORMATION AND HISTORY
The Manufacturers Life Insurance Company of North America Separate
Account A (the "Variable Account") is a separate investment account of The
Manufacturers Life Insurance Company of North America (the "Company"), a stock
life insurance company organized under the laws of Delaware in 1979. The
ultimate parent of the Company is The Manufacturers Life Insurance Company
("Manulife"), a Canadian mutual life insurance company based in Toronto, Canada.
Prior to January 1, 1996, the Company was a wholly owned subsidiary of North
American Life Assurance Company ("NAL"), a Canadian mutual life insurance
company. On January 1, 1996 NAL and Manulife merged with the combined company
retaining the Manulife name.
PERFORMANCE DATA
Each of the sub-accounts may in its advertising and sales materials
quote total return figures. The sub-accounts may advertise both "standardized"
and "non-standardized" total return figures, although standardized figures will
always accompany non-standardized figures. Non-standardized total return figures
may be quoted assuming both (i) redemption at the end of the time period and
(ii) not assuming redemption at the end of the time period. Standardized figures
include total return figures from: (i) the inception date of the sub-account of
the Variable Account which invests in the portfolio or (ii) ten years, whichever
period is shorter. Non-standardized figures include total return numbers from:
(i) inception date of the portfolio or (ii) ten years, whichever period is
shorter. Such figures will always include the average annual total return for
recent one year and, when applicable, five and ten year periods and, where less
than ten years, the inception date of the sub-account, in the case of
standardized returns, and the inception date of the portfolio, in the case of
non-standardized returns. Where the period since inception is less than one
year, the total return quoted will be the aggregate return for the period. The
average annual total return is the average annual compounded rate of return that
equates a purchase payment to the market value of such purchase payment on the
last day of the period for which such return is calculated. The aggregate total
return is the percentage change (not annualized) that equates a purchase payment
to the market value of such purchase payment on the last day of the period for
which such return is calculated. For purposes of the calculations it is assumed
that an initial payment of $1,000 is made on the first day of the period for
which the return is calculated.
In calculating standardized return figures, all recurring charges (all
asset charges (mortality and expense risk fees and administration fees)) are
reflected, and the asset charges are reflected in changes in unit values.
Standardized total return figures will be quoted assuming redemption at the end
of the period. Non-standardized total return figures reflecting redemption at
the end of the time period are calculated on the same basis as the standardized
returns. Non-standardized total return figures not reflecting redemption at the
end of the time period are calculated on the same basis as the standardized
returns except that the calculations assume no redemption at the end of the
period and do not reflect deduction of the annual contract fee. The Company
believes such non-standardized not reflecting redemptions at the end of the time
period are useful to owners who wish to assess the performance of an ongoing
contract of the size that is meaningful to the individual owner.
For total return figures quoted for periods prior to the commencement
of the offering of this contract, August 9, 1994, standardized performance data
will be the historical performance of the Trust portfolio from the date the
applicable sub-account of the Variable Account first became available for
investment under other contracts offered by the Company; adjusted to reflect
current contract charges. In the case of non-standardized performance,
performance figures will be the historical performance of the Trust portfolio
from the inception date of the portfolio (or in the case of the Trust portfolios
created in connection with the merger of Manulife Series Fund, Inc. into the
Trust, the inception date of the applicable predecessor Manulife Series Fund,
Inc. portfolio), adjusted to reflect current contract charges.
3
<PAGE> 65
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
========================================================================================
TRUST PORTFOLIO 1 YEAR 5 YEARS SINCE INCEPTION INCEPTION
OR 10 YEARS, DATE*
WHICHEVER IS
SHORTER
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets N/A N/A -37.94% 01/01/97
- ----------------------------------------------------------------------------------------
Science & Technology N/A N/A 3.17% 01/01/97
- ----------------------------------------------------------------------------------------
International Small Cap -6.04% N/A 0.72% 03/04/96
- ----------------------------------------------------------------------------------------
Emerging Growth N/A N/A 10.53% 01/01/97
- ----------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -6.76% 01/01/97
- ----------------------------------------------------------------------------------------
Small/Mid Cap 7.59% N/A 7.45% 03/04/96
- ----------------------------------------------------------------------------------------
International Stock N/A N/A -4.31% 01/01/97
- ----------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 5.66% 01/01/97
- ----------------------------------------------------------------------------------------
Global Equity 13.06% 12.51% 8.18% 03/18/88
- ----------------------------------------------------------------------------------------
Small Company Value N/A N/A -9.98% 10/01/97
- ----------------------------------------------------------------------------------------
Equity 11.53% 16.67% 13.50%+ 06/18/85
- ----------------------------------------------------------------------------------------
Growth 17.55% N/A 19.40% 07/15/96
- ----------------------------------------------------------------------------------------
Quantitative Equity N/A N/A 22.79% 01/01/97
- ----------------------------------------------------------------------------------------
Blue Chip Growth 19.11% 10.96% 10.78% 12/11/92
- ----------------------------------------------------------------------------------------
Real Estate Securities N/A N/A 13.53% 01/01/97
- ----------------------------------------------------------------------------------------
Value N/A N/A 14.39% 01/01/97
- ----------------------------------------------------------------------------------------
International Growth and Income -6.84% N/A 3.33% 01/09/95
- ----------------------------------------------------------------------------------------
Growth and Income 24.92% 16.77% 15.44% 04/23/91
- ----------------------------------------------------------------------------------------
Equity-Income 21.84% N/A 15.35% 02/19/93
- ----------------------------------------------------------------------------------------
Balanced N/A N/A 10.82% 01/01/97
- ----------------------------------------------------------------------------------------
Aggressive Asset Allocation 11.38% 10.44% 8.51% 08/03/89
- ----------------------------------------------------------------------------------------
High Yield N/A N/A 5.06% 01/01/97
- ----------------------------------------------------------------------------------------
Moderate Asset Allocation 8.20% 8.57% 7.51% 08/03/89
- ----------------------------------------------------------------------------------------
Conservative Asset Allocation 3.84% 6.36% 6.21% 08/03/89
- ----------------------------------------------------------------------------------------
Strategic Bond 3.41% N/A 7.26% 02/19/93
- ----------------------------------------------------------------------------------------
Global Government Bond -4.03% 7.79% 7.31% 03/18/88
- ----------------------------------------------------------------------------------------
Capital Growth Bond N/A N/A 1.88% 01/01/97
- ----------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 66
<TABLE>
<CAPTION>
========================================================================================
TRUST PORTFOLIO 1 YEAR 5 YEARS SINCE INCEPTION INCEPTION
OR 10 YEARS, DATE*
WHICHEVER IS
SHORTER
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Quality Bond 2.27% 4.93% 5.42%+ 06/18/85
- ----------------------------------------------------------------------------------------
U.S. Government Securities 1.09% 4.41% 5.82% 03/18/88
- ----------------------------------------------------------------------------------------
Money Market -1.99% 2.23% 3.93%+ 06/18/85
- ----------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 3.36% 01/07/97
- ----------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 6.22% 01/07/97
- ----------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 6.49% 01/07/97
- ----------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 6.09% 01/07/97
- ----------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 4.56% 01/07/97
========================================================================================
</TABLE>
* Inception date of the sub-account of the Variable Account which invests in
the portfolio.
+ 10 year average annual return.
5
<PAGE> 67
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
=================================================================================================
TRUST PORTFOLIO 1 YEAR 5 YEARS SINCE INCEPTION INCEPTION
OR 10 YEARS, DATE*
WHICHEVER IS
SHORTER
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* -38.04% N/A -10.58% 10/04/94
- -------------------------------------------------------------------------------------------------
Science & Technology N/A N/A 3.17% 01/01/97
- -------------------------------------------------------------------------------------------------
International Small Cap -6.04% N/A 0.72% 03/04/96
- -------------------------------------------------------------------------------------------------
Emerging Growth N/A N/A 10.53% 01/01/97
- -------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -6.76% 01/01/97
- -------------------------------------------------------------------------------------------------
Small/Mid Cap 7.59% N/A 7.45% 03/04/96
- -------------------------------------------------------------------------------------------------
International Stock N/A N/A -4.31% 01/01/97
- -------------------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 5.66% 01/01/97
- -------------------------------------------------------------------------------------------------
Global Equity 13.06% 12.51% 8.18% 03/18/88
- -------------------------------------------------------------------------------------------------
Small Company Value N/A N/A -9.98% 10/01/97
- -------------------------------------------------------------------------------------------------
Equity 11.53% 16.67% 13.50%+ 06/18/85
- -------------------------------------------------------------------------------------------------
Growth 17.55% N/A 19.40% 07/15/96
- -------------------------------------------------------------------------------------------------
Quantitative Equity* 21.97% 14.40% 13.48%+ 04/30/87
- -------------------------------------------------------------------------------------------------
Blue Chip Growth 19.11% 10.96% 10.78% 12/11/92
- -------------------------------------------------------------------------------------------------
Real Estate Securities* 10.70% 14.83% 14.22%+ 04/30/87
- -------------------------------------------------------------------------------------------------
Value N/A N/A 14.39% 01/01/97
- -------------------------------------------------------------------------------------------------
International Growth and Income -6.84% N/A 3.33% 01/09/95
- -------------------------------------------------------------------------------------------------
Growth and Income 24.92% 16.77% 15.44% 04/23/91
- -------------------------------------------------------------------------------------------------
Equity-Income 21.84% N/A 15.35% 02/19/93
- -------------------------------------------------------------------------------------------------
Balanced N/A N/A 10.82% 01/01/97
- -------------------------------------------------------------------------------------------------
Aggressive Asset Allocation 11.38% 10.44% 8.51% 08/03/89
- -------------------------------------------------------------------------------------------------
High Yield N/A N/A 5.06% 01/01/97
- -------------------------------------------------------------------------------------------------
Moderate Asset Allocation 8.20% 8.57% 7.51% 08/03/89
- -------------------------------------------------------------------------------------------------
Conservative Asset Allocation 3.84% 6.36% 6.21% 08/03/89
- -------------------------------------------------------------------------------------------------
Strategic Bond 3.41% N/A 7.26% 02/19/93
- -------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 68
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
TRUST PORTFOLIO 1 YEAR 5 YEARS SINCE INCEPTION INCEPTION
OR 10 YEARS, DATE*
WHICHEVER IS
SHORTER
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Government Bond -4.03% 7.79% 7.31% 03/18/88
- -------------------------------------------------------------------------------------------
Capital Growth Bond* 1.31% 4.99% 6.97%+ 06/26/84
- -------------------------------------------------------------------------------------------
Investment Quality Bond 2.27% 4.93% 5.42%+ 06/18/85
- -------------------------------------------------------------------------------------------
U.S. Government Securities 1.09% 4.41% 5.82% 03/18/88
- -------------------------------------------------------------------------------------------
Money Market -1.99% 2.23% 3.93%+ 06/18/85
- -------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 3.36% 01/07/97
- -------------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 6.22% 01/07/97
- -------------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 6.49% 01/07/97
- -------------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 6.09% 01/07/97
- -------------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 4.56% 01/07/97
===========================================================================================
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based on 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
presented for these sub-accounts is based upon the performance of the respective
predecessor Manulife Series Fund, Inc. portfolio for periods prior to December
31, 1996.
7
<PAGE> 69
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
=================================================================================================
TRUST PORTFOLIO 1 YEAR 5 YEARS SINCE INCEPTION INCEPTION
OR 10 YEARS, DATE*
WHICHEVER IS
SHORTER
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* -35.04% N/A -9.28% 10/04/94
- -------------------------------------------------------------------------------------------------
Science & Technology N/A N/A 9.18% 01/01/97
- -------------------------------------------------------------------------------------------------
International Small Cap -0.62% N/A 3.92% 03/04/96
- -------------------------------------------------------------------------------------------------
Emerging Growth N/A N/A 16.59% 01/01/97
- -------------------------------------------------------------------------------------------------
Pilgrim Baxter Growth N/A N/A -1.38% 01/01/97
- -------------------------------------------------------------------------------------------------
Small/Mid Cap 13.66% N/A 10.58% 03/04/96
- -------------------------------------------------------------------------------------------------
International Stock N/A N/A 1.22% 01/01/97
- -------------------------------------------------------------------------------------------------
Worldwide Growth N/A N/A 11.73% 01/01/97
- -------------------------------------------------------------------------------------------------
Global Equity 19.12% 13.05% 8.23% 03/18/88
- -------------------------------------------------------------------------------------------------
Small Company Value N/A N/A -4.81% 01/01/97
- -------------------------------------------------------------------------------------------------
Equity 17.59% 17.15% 13.54%+ 06/18/85
- -------------------------------------------------------------------------------------------------
Growth 23.61% N/A 23.23% 07/15/96
- -------------------------------------------------------------------------------------------------
Quantitative Equity* 28.03% 14.92% 13.52%+ 04/30/87
- -------------------------------------------------------------------------------------------------
Blue Chip Growth 25.17% 11.54% 11.23% 12/11/92
- -------------------------------------------------------------------------------------------------
Real Estate Securities* 16.76% 15.34% 14.27%+ 04/30/87
- -------------------------------------------------------------------------------------------------
Value N/A N/A 20.46% 01/01/97
- -------------------------------------------------------------------------------------------------
International Growth and Income -1.47% N/A 4.94% 01/09/95
- -------------------------------------------------------------------------------------------------
Growth and Income 30.99% 17.25% 15.62% 04/23/91
- -------------------------------------------------------------------------------------------------
Equity-Income 27.90% N/A 15.87% 02/19/93
- -------------------------------------------------------------------------------------------------
Balanced N/A N/A 16.88% 01/01/97
- -------------------------------------------------------------------------------------------------
Aggressive Asset Allocation 17.44% 11.03% 8.57% 08/03/89
- -------------------------------------------------------------------------------------------------
High Yield N/A N/A 11.12% 01/01/97
- -------------------------------------------------------------------------------------------------
Moderate Asset Allocation 14.26% 9.20% 7.56% 08/03/89
- -------------------------------------------------------------------------------------------------
Conservative Asset Allocation 9.89% 7.04% 6.26% 08/03/89
- -------------------------------------------------------------------------------------------------
Strategic Bond 9.44% N/A 7.94% 02/19/93
- -------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 70
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
TRUST PORTFOLIO 1 YEAR 5 YEARS SINCE INCEPTION INCEPTION
OR 10 YEARS, DATE*
WHICHEVER IS
SHORTER
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Government Bond 1.52% 8.43% 7.36% 03/18/88
- --------------------------------------------------------------------------------------------
Capital Growth Bond* 7.20% 5.70% 7.02%+ 06/26/84
- --------------------------------------------------------------------------------------------
Investment Quality Bond 8.23% 5.64% 5.47%+ 06/18/85
- --------------------------------------------------------------------------------------------
U.S. Government Securities 6.97% 5.14% 5.87% 03/18/88
- --------------------------------------------------------------------------------------------
Money Market 3.69% 3.02% 3.98%+ 06/18/85
- --------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000 N/A N/A 9.38% 01/07/97
- --------------------------------------------------------------------------------------------
Lifestyle Growth 820 N/A N/A 12.29% 01/07/97
- --------------------------------------------------------------------------------------------
Lifestyle Balanced 640 N/A N/A 12.55% 01/07/97
- --------------------------------------------------------------------------------------------
Lifestyle Moderate 460 N/A N/A 12.16% 01/07/97
- --------------------------------------------------------------------------------------------
Lifestyle Conservative 280 N/A N/A 10.62% 01/07/97
============================================================================================
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based on 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
presented for these sub-accounts is based upon the performance of the respective
predecessor Manulife Series Fund, Inc. portfolio for periods prior to December
31, 1996.
* * * * *
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.
9
<PAGE> 71
SERVICES
INDEPENDENT AUDITORS
The financial statements of the Company and the Variable Account at
December 31, 1997 and 1996 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 report 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.
The consolidated statements of income, changes in shareholder's equity
and cash flows of the Company for the year ended December 31, 1995, appearing in
this Statement of Additional Information have been included elsewhere herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The financial statements of the Company which are included in the
Statement of Additional Information should be considered only as bearing on the
ability of the Company to meet its obligations under the contracts. They should
not be considered as bearing on the investment performance of the assets held in
the Variable Account.
SERVICING AGENT
Computer Sciences Corporation Financial Services Group ("CSC FSG")
provides to the Company a computerized data processing recordkeeping system for
variable annuity administration. CSC FSG provides various daily, semimonthly,
monthly, semiannual and annual reports including: daily updates on accumulation
unit values, variable annuity participants and transactions, agent production
and commissions; semimonthly commission statements; monthly summaries of agent
production and daily transaction reports; semiannual statements for contract
owners; and annual contract owner tax reports. CSC FSG receives approximately
$7.80 per policy per year, plus certain other fees paid by the Company for the
services provided.
PRINCIPAL UNDERWRITER
Manufacturers Securities Services, LLC ("MSS"), a Delaware limited
liability company controlled by the Company, serves as principal underwriter of
the contracts. Contracts are offered on a continuous basis. The aggregate dollar
amount of underwriting commissions paid to MSS in 1997, 1996 and 1995 were
$105,479,741, $83,031,288 and $68,782,161, respectively. MSS did not retain any
of these amounts during such periods.
CANCELLATION OF CERTIFICATE
The Company may, at its option, cancel a certificate and an owner's
participation under a contract at the end of any two consecutive certificate
years in which no purchase payments by or on behalf of the owner have been made,
if both (i) the total purchase payments made for the certificate, less any
withdrawals, are less than $2,000; and (ii) the contract value for the owner at
the end of such two year period is less than $2,000. The Company, as a matter of
administrative practice, will attempt to notify a certificate owner prior to
such cancellation in order to allow the certificate owner to make the necessary
purchase payment to keep the certificate in force. The cancellation of
certificate provisions may vary in certain states in order to comply with the
requirements of insurance laws and regulations in such states.
10
