<PAGE> 1
As filed with the Securities and Exchange Commission on February 28, 2000
Registration No. 333-38081
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
POST EFFECTIVE AMENDMENT NO. 2
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A
(Exact Name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
(Name of Depositor)
500 Boylston Street Suite 400
Boston, Massachusetts 02116-3739
(Address of Depositor's Principal Executive Offices)
(617) 663-3000
(Depositor's Telephone Number, Including Area Code)
James D. Gallagher, Esq.
Vice President, Secretary and General Counsel
The Manufacturers Life Insurance Company of North America
73 Tremont Street, Suite 1300
Boston, Massachusetts 02108-3915
(Name and Address of Agent for Service)
Copies to:
J. Sumner Jones, Esq.
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on [date] pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_X_ on May 1, 2000 pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
___ this post-effective amendment designated a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT A
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
N-4 Item
Part A Caption in Prospectus
- ------ ---------------------
1 Cover Page
2 Special Terms
3 Summary
4 Performance Data; Financial Statements
5 General Information about The Manufacturers Life Insurance Company of
North America, The Manufacturers Life Insurance Company of North
America Separate Account A and Manufacturers Investment Trust
6 Charges and Deductions; Administration Fees; Reduction or Elimination
of Annual Administration Fee; Mortality and Expense Risk Charge; Taxes;
Appendix A; Appendix B
7 Accumulation Provisions; Purchase Payments; Accumulation Units; Net
Investment Factor; Transfers Among Investment Options; Telephone
Transactions; Special Transfer Services-Dollar Cost Averaging;
Withdrawals; Special Withdrawal Services-Income Plan; Owner Inquiries;
Other Contract Provisions; Ownership; Beneficiary; Modification Annuity
Provisions; General; Annuity Options; Determination of Amount of the
First Variable Annuity Payment; Annuity Units and the Determination of
Subsequent Variable Annuity Payments; Transfers After Maturity Date
9 Accumulation Provisions; Death Benefit Before Maturity Date; Annuity
Provisions; Death Benefit on or After Maturity Date
10 Accumulation Provisions; Purchase Payments; Accumulation Units; Value
of Accumulation Units; Net Investment Factor; Distribution of Contracts
11 Withdrawals; Restrictions under the Texas Optional Retirement Program;
Accumulation Provisions; Purchase Payments; Other Contract Provisions;
Ten Day Right to Review
12 Federal Tax Matters; Introduction; The Company's Tax Status; Taxation
of Annuities in General; Diversification Requirements; Qualified
Retirement Plans
13 Legal Proceedings
14 Statement of Additional Information - Table of Contents
Caption in Statement of
Part B Additional Information
- ------ ----------------------
15 Cover Page
16 Table of Contents
17 General Information and History
18 Services-Independent Auditors; Services-Servicing Agent
19 Not Applicable
20 Services-Principal Underwriter
21 Performance Data
22 Not Applicable
23 Financial Statements
<PAGE> 3
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
ANNUITY SERVICE OFFICE MAILING ADDRESS
500 Boylston Street, Suite 400 Post Office Box 9230
Boston, Massachusetts 02116-3739 Boston, Massachusetts 02205-9230
(617) 663-3000
(800) 344-1029
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 ANNUITY CONTRACT
NON-PARTICIPATING
This Prospectus describes an annuity contract issued by The
Manufacturers Life Insurance Company of North America ("WE" or "US"). The
"CONTRACT" is a flexible purchase payment, deferred, combination fixed and
variable annuity contract, including both an individual contract and a
participating interest in a group contract. Both are designed and offered to
provide retirement programs for eligible individuals and retirement plans.
Participation in a group contract will be separately accounted for by the
issuance of a certificate evidencing your interest under the contract. An
individual contract will usually be issued only where a group contract may not
be used.
- Contract values and annuity benefit payments are based upon
thirty-nine investment options. Thirty-eight options are
variable account options and one is a fixed account option.
- Contract values (other than those allocated to the fixed
account) and variable annuity benefit payments will vary
according to the investment performance of the sub-accounts of
one of our separate accounts, The Manufacturers Life Insurance
Company of North America Separate Account A (the "VARIABLE
ACCOUNT"). Contract values may be allocated to, and
transferred among, one or more of those sub-accounts.
- Each sub-account's assets are invested in a corresponding
portfolio of a mutual fund, Manufacturers Investment Trust
(the "TRUST"). We will provide the contract owner ("YOU") a
prospectus for the Trust with this Prospectus.
- SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
- Special Terms are defined in a glossary in Appendix A.
- For information relating to contracts sold prior to May, 2000
("PRIOR CONTRACTS"), see Appendix E.
- Except as specifically noted here and under the captions
"FIXED ACCOUNT INVESTMENT OPTION" below and "FIXED ACCOUNT
INVESTMENT OPTIONS" in Appendix E, this Prospectus describes
only the variable portion of the contract and prior contracts.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS INFORMATION ABOUT THE VARIABLE ACCOUNT AND THE VARIABLE PORTION OF THE
CONTRACT THAT YOU SHOULD KNOW BEFORE INVESTING.
THE CONTRACTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"). NEITHER THE SEC NOR ANY STATE HAS DETERMINED
WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
ADDITIONAL INFORMATION about the contract and the Variable Account is contained
in a Statement of Additional Information, dated the same date as this
Prospectus, which has been filed with the SEC and is incorporated herein by
reference. The Statement of Additional Information is available without charge
upon request by writing us at the address on the front cover or by telephoning
(800) 344-1029.
The SEC maintains a Web site (www.sec.gov) that contains the Statement of
Additional Information and other information about us, the contracts and the
Variable Account.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
General Information and History......................................... 3
Performance Data........................................................ 3
Services
Independent Auditors............................................... 9
Servicing Agent.................................................... 10
Principal Underwriter ............................................. 10
Financial Statements.................................................... 11
The date of this Prospectus is May 1, 2000
MRPG.PRO5/00
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY ..................................................... 4
GENERAL INFORMATION ABOUT US,
THE VARIABLE ACCOUNT AND THE TRUST .......................... 8
The Manufacturers Life Insurance Company of North
America ......................................... 8
The Variable Account ................................... 8
The Trust .............................................. 9
DESCRIPTION OF THE CONTRACT ................................. 13
ELIGIBLE GROUPS AND INDIVIDUALS .......................... 13
ACCUMULATION PERIOD PROVISIONS ........................... 13
Purchase Payments ...................................... 13
Accumulation Units ..................................... 14
Value of Accumulation Units ............................ 14
Net Investment Factor .................................. 14
Transfers Among Investment Options ..................... 15
Maximum Number of Investment Options ................... 15
Telephone Transactions ................................. 15
Special Transfer Services - Dollar Cost Averaging ...... 16
Asset Rebalancing Program .............................. 16
Withdrawals ............................................ 16
Telephone Redemptions ............................... 17
Special Withdrawal Services - the Income Plan .......... 17
Death Benefit During Accumulation Period ............... 18
In General .......................................... 18
Amount of Death Benefit ............................. 19
Payment of Death Benefit ............................ 19
Optional Annual Step Death Benefit ................ [ ]
PAY-OUT PERIOD PROVISIONS ................................... 20
General ................................................ 20
Annuity Options ........................................ 20
Determination of Amount of the First Variable
Annuity Benefit Payment ................................ 21
Annuity Units and the Determination of
Subsequent Variable Annuity Benefit Payments ........... 22
Transfers During Pay-out Period ........................ 22
Death Benefit During Pay-out Period .................... 22
OTHER CONTRACT PROVISIONS ................................ 23
Ten Day Right to Review ................................ 23
Ownership .............................................. 23
Annuitant .............................................. 23
Beneficiary ............................................ 24
Modification ........................................... 24
Discontinuance of New Owners ........................... 24
Misstatement and Proof of Age, Sex or Survival ......... 24
FIXED ACCOUNT INVESTMENT OPTION ............................. 24
Securities Registration ................................ 24
Guarantee .............................................. 24
Reinsurance ............................................ 24
Investment Options ..................................... 25
Investment Accounts .................................... 25
Renewals ............................................... 25
Transfers .............................................. 26
Withdrawals ............................................ 26
Fixed Annuity Options .................................. 27
CHARGES AND DEDUCTIONS ...................................... 27
Administration Fees .................................... 27
Reduction or Elimination of Annual
Administration Fees ................................. 28
Mortality and Expense Risks Charge ..................... 28
Optional Death Benefit Fee ........................... [ ]
Taxes .................................................. 28
Expenses of Distributing Contracts ..................... 29
FEDERAL TAX MATTERS ......................................... 29
INTRODUCTION ............................................. 29
OUR TAX STATUS ........................................... 29
TAXATION OF ANNUITIES IN GENERAL ......................... 29
Tax Deferral During Accumulation Period .............. 29
Non-Natural Owners .................................. 30
Diversification Requirements ........................ 30
Ownership Treatment ................................. 30
Delayed Pay-out Periods ............................. 31
Taxation of Partial and Full Withdrawals ............... 31
Taxation of Annuity Benefit Payments ................... 31
Taxation of Death Benefit Proceeds ..................... 32
Penalty Tax on Premature Distributions ................. 32
Aggregation of Contracts ................................ 33
Loss of Interest Deduction Where Contracts
are Held by or for the Benefit of Certain Non-
Natural Persons ..................................... 33
QUALIFIED RETIREMENT PLANS .................................. 33
Direct Rollovers ....................................... 34
Loans .................................................. 17
FEDERAL INCOME TAX WITHHOLDING .............................. 35
GENERAL MATTERS ............................................. 35
Performance Data ....................................... 35
Asset Allocation and Timing Services ................... 35
Restrictions Under The Texas Optional
Retirement Program .................................. 35
Distribution of Contracts .............................. 36
Contract Owner Inquiries ............................... 36
Confirmation Statements ................................ 36
Legal Proceedings ...................................... 36
Year 2000 Issues ....................................... 36
Cancellation of Contract ............................... 37
Voting Interest ........................................ 38
APPENDIX A: SPECIAL TERMS .................................. A-1
APPENDIX B: STATE PREMIUM TAXES ............................ B-1
APPENDIX C: PENNSYLVANIA MAXIMUM MATURITY AGE .............. C-1
APPENDIX D: QUALIFIED PLAN TYPES ........................... D-1
APPENDIX E: PRIOR CONTRACTS ................................ E-1
</TABLE>
<PAGE> 7
SUMMARY
OVERVIEW OF THE CONTRACT. The contracts offered by this Prospectus are a group
contract, including an owner's participating interest in the group contract, and
an individual contract. Usually, a group contract certificate will be issued. An
individual contract is intended for use where a group contract is not available.
Specific accounts are maintained under a group contract for each member of an
eligible group participating in the contract as evidenced by the issuance of a
certificate. The contracts provide for the accumulation of contract values prior
to the maturity date (the "ACCUMULATION" period) and the payment of annuity
benefits on a variable and/or fixed basis (the "PAY-OUT" period).
The contracts are designed primarily as funding vehicles for "wrap fee
arrangements" offered by brokerage firms which may charge an additional fee for
their services. We will treat any such fees assessed against the contract as
partial withdrawals from the contract. See "Federal Tax Matters" for further
information on the tax implications of assessing such fees against the contract.
When you purchase a variable annuity for any tax-qualified retirement plan, the
variable annuity does not provide any additional tax deferred treatment of
earnings beyond the treatment provided by the plan. Consequently, you should
purchase a variable annuity for a tax-qualified plan only on the basis of other
benefits offered by the variable annuity. These benefits may include lifetime
income payments, family protection through the death benefit, and guaranteed
fees.
PRIOR CONTRACTS. We have a class of variable annuity contract which is no longer
being issued but under which purchase payments may continue to be made ("PRIOR
CONTRACTS"). Prior contracts were sold during the period from March, 1998 until
May, 2000. This Prospectus principally describes the contract offered by this
Prospectus but also describes the prior contracts. The principal differences
between the contract offered by this Prospectus and the prior contracts relate
to the availability of additional fixed investment options available under the
prior contracts, the unavailability of the optional annual step death benefit
under the prior contracts, the minimum initial purchase payment, and certain
charges made by us. For information concerning prior contracts, see Appendix E.
PURCHASE PAYMENT LIMITS. The minimum initial purchase payment is $25,000.
Subsequent purchase payments must be at least $30. Purchase payments normally
may be made at any time. If a purchase payment would cause your contract value
to exceed $1,000,000, or your contract value already exceeds $1,000,000, you
must obtain our approval in order to make the payment. If permitted by state
law, we may cancel your contract if you have made no payments for two years,
your contract value is less than $2,000 and your payments over the life of your
contract, minus your withdrawals over the life of the contract, is less than
$2,000.
INVESTMENT OPTIONS. During the accumulation period, contract values may be
allocated among up to seventeen of the available investment options. Currently,
thirty-three Variable Account investment options and one fixed account
investment option are available under the contract. Each of the thirty-three
Variable Account investment options is a sub-account of the Variable Account
that invests in a corresponding portfolio of the Trust. A full description of
each Trust portfolio is in the accompanying Prospectus of the Trust. The portion
of your contract value in the Variable Account and monthly variable annuity
payments will reflect the investment performance of the sub-accounts selected.
Purchase payments may also be allocated to the one-year fixed investment option.
Under the fixed account investment option, we guarantee the principal value of
purchase payments and the rate of interest credited to the investment account
for the term of the guarantee period. Subject to certain regulatory limitations,
we may elect to add, subtract or substitute investment options.
TRANSFERS. During the accumulation period, you may transfer your contract values
among any of the investment options. During the pay-out period, you may transfer
your allocations among the Variable Account investment options, but transfers
from Variable Account options to the fixed account option or from the fixed
account option to Variable Account options are not permitted.
WITHDRAWALS. During the accumulation period, you may withdraw all or a portion
of your contract value. The amount you withdraw from any investment account must
be at least $300 or, if less, your entire balance in that investment account. If
a partial withdrawal would reduce your contract value to less than $300, we will
treat your withdrawal request as a request to withdraw all of your contract
value. An administration fee may apply to your withdrawal. A withdrawal may be
subject to income tax and a 10% penalty tax. A systematic withdrawal plan
service is available under the contract.
4
<PAGE> 8
DEATH BENEFITS. We will pay the death benefit to your BENEFICIARY if you die
during the accumulation period. If a contract is owned by more than one person,
then the surviving owner will be deemed the beneficiary of the deceased owner.
No death benefit is payable on the death of any ANNUITANT (a natural person or
persons to whom ANNUITY BENEFIT PAYMENTS are made and whose life is used to
determine the duration of annuity benefit payments involving life
contingencies), 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 amount of the death
benefit will be calculated as of the date on which our Annuity Service Office
receives written notice and proof of death and all required claim forms.
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, we will make the remaining guaranteed payments to the beneficiary.
OPTIONAL ANNUAL STEP DEATH BENEFIT. If you elect the annual step death benefit
rider, the death benefit we will pay if the contract owner dies during the
accumulation period is set forth under "Optional Annual Step Death Benefit."
ANNUITY BENEFIT PAYMENTS. We offer a variety of fixed and variable annuity
benefit payment options. Periodic annuity benefit payments will begin on the
"MATURITY DATE" (the date marking the end of the accumulation period and the
beginning of the pay-out period). You select the maturity date, the frequency of
payment and the type of annuity benefit payment option. Annuity benefit payments
are made to the annuitant.
TEN DAY REVIEW. You may cancel your contract by returning it to us within 10
days of receiving it.
MODIFICATION. The contract or certificate may not be modified by us without your
consent except 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, we may
change the administration fees, mortality and expense risk charges, annuity
purchase rates and the market value charge as to any certificate issued after
the effective date of the modification.
TAXATION. Generally all earnings on the underlying investments are tax-deferred
until withdrawn or until annuity benefit payments begin. Normally, a portion of
each annuity benefit payment is taxable as ordinary income. Partial and total
withdrawals generally are taxable as ordinary income to the extent contract
value prior to the withdrawal exceeds the purchase payments you have made, minus
any prior withdrawals that were not taxable. A 10% penalty tax may apply to
withdrawals prior to age 59-1/2.
DISCONTINUANCE OF NEW OWNERS. In the case of group contracts, on thirty days'
notice to the group holder, we may limit or discontinue acceptance of new
applications and the issuance of new certificates.
CHARGES AND DEDUCTIONS. The following table and Example are designed to assist
you in understanding the various costs and expenses related to the contract. The
table reflects expenses of the Variable Account and the underlying portfolios of
the Trust. In addition to the items listed in the following table, premium taxes
may be applicable to certain contracts. The items listed under "Separate Account
Annual Expenses" are more completely described in this Prospectus under "Charges
and Deductions.". The items listed under "Trust Annual Expenses" are described
in detail in the accompanying Trust Prospectus.
See Appendix E for a discussion of different charges and deductions applicable
to prior contracts.
ANNUAL ADMINISTRATION FEE........................................ $40*
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and expense risks fee................................. 0.30%
Administration fee.............................................. 0.15%
Total Separate Account Annual Expense........................... 0.45%
Optional death benefit fee .................................... 0.20%**
</TABLE>
5
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<TABLE>
<S> <C>
Total Separate Account Annual Expense with optional death benefit fee 0.65%**
</TABLE>
*The $40 annual administration fee will not be assessed prior to the maturity
date if at the time of its assessment the sum of all investment accounts is
greater than or equal to $25,000.
**The optional death benefit fee will apply only where a contract owner has
elected the optional annual step death benefit rider.
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets for the fiscal year ended December
31, 1999)
<TABLE>
<CAPTION>
TOTAL TRUST
OTHER EXPENSES ANNUAL EXPENSES
MANAGEMENT (AFTER EXPENSE (AFTER EXPENSE
TRUST PORTFOLIO FEES REIMBURSEMENT) REIMBURSEMENT)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets........ 0.850% 0.260% 1.110%
Science & Technology................ 1.100% 0.060% 1.160%
International Small Cap............. 1.100% 0.270% 1.370%
Aggressive Growth................... 1.000%(F) 0.130% 1.130%
Emerging Small Company.............. 1.050% 0.070% 1.120%
Small Company Blend................. 1.050% 0.250%(A) 1.300%(E)
Mid Cap Growth...................... 0.950%(F) 0.070% 1.020%
Mid Cap Stock....................... 0.925% 0.100%(A) 1.025%(E)
Overseas............................ 0.950% 0.260% 1.210%
International Stock................. 1.050% 0.200% 1.250%
International Value................. 1.000% 0.230%(A) 1.230%(E)
Mid Cap Blend....................... 0.850%(F) 0.060% 0.910%
Small Company Value................. 1.050% 0.170% 1.220%
Global Equity....................... 0.900% 0.160% 1.060%
Growth.............................. 0.850% 0.050% 0.900%
Large Cap Growth.................... 0.875%(F) 0.100% 0.975%
Quantitative Equity................. 0.700% 0.060% 0.760%
Blue Chip Growth.................... 0.875%(F) 0.050% 0.925%
Real Estate Securities.............. 0.700% 0.070% 0.770%
Value............................... 0.800% 0.070% 0.870%
Growth & Income..................... 0.750% 0.050% 0.800%
U.S. Large Cap Value................ 0.875% 0.070%(A) 0.945%(E)
Equity-Income....................... 0.875%(F) 0.060% 0.935%
Income & Value...................... 0.800%(F) 0.080% 0.880%
Balanced............................ 0.800% 0.070% 0.870%
High Yield.......................... 0.775% 0.065% 0.840%
Strategic Bond...................... 0.775% 0.095% 0.870%
Global Bond......................... 0.800% 0.180% 0.980%
Total Return........................ 0.775% 0.060%(A) 0.835%(E)
Investment Quality Bond............. 0.650% 0.120% 0.770%
Diversified Bond.................... 0.750% 0.090% 0.840%
U.S. Government Securities.......... 0.650% 0.070% 0.720%
Money Market........................ 0.500% 0.050% 0.550%
Lifestyle Aggressive 1000(D)........ 0.075% 1.060%(B) 1.135%(C)
Lifestyle Growth 820(D)............. 0.057% 0.990%(B) 1.047%(C)
Lifestyle Balanced 640(D)........... 0.057% 0.910%(B) 0.967%(C)
Lifestyle Moderate 460(D)........... 0.066% 0.860%(B) 0.926%(C)
Lifestyle Conservative 280(D)....... 0.075% 0.780%(B) 0.855%(C)
</TABLE>
A Based on estimates to be made during the current fiscal year.
B Reflects expenses of the Underlying Portfolios.
6
<PAGE> 10
C The investment adviser to the Trust, Manufacturers Securities Services,
LLC ("MSS" or the "Adviser") has voluntarily agreed to pay certain
expenses of each Lifestyle Trust (excluding the expenses of the
Underlying Portfolios) as noted below. This voluntary expense
reimbursement may be terminated at any time. If such expense
reimbursement was not in effect, Total Trust Annual Expenses would be
0.03% higher, except for the Lifestyle Growth 820 Trust and Lifestyle
Moderate 460 Trust, which would be 0.04% higher (based on current
advisory fees and the Other Expenses of the Lifestyle Trusts for the
fiscal year ended December 31, 1999) 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 . 0.075% 1.090% 1.165%
Lifestyle Growth 820 ...... 0.057% 1.030% 1.087%
Lifestyle Balanced 640 .... 0.057% 0.940% 0.997%
Lifestyle Moderate 460 .... 0.066% 0.900% 0.966%
Lifestyle Conservative 280 0.075% 0.810% 0.885%
</TABLE>
If total expenses of a Lifestyle Trust (absent reimbursement) exceed 0.075%, the
Adviser will reduce the advisory fee or reimburse expenses of that Lifestyle
Trust by an amount such that total expenses of the Lifestyle Trust including the
advisory fee but excluding: (a) the expenses of the underlying portfolios, (b)
taxes, (c) portfolio brokerage, (d) interest, (e) litigation and (f)
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Trust's business, equal 0.075%. If the total expenses of
a Lifestyle Trust (absent reimbursement) are equal to or less then 0.075%, then
no expenses will be reimbursed by the Adviser.
D 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 in
which it invests, and the investment return of each Lifestyle Trust
will be net of the Underlying Portfolio expenses. Each Lifestyle
Portfolio must bear its own expenses. However, the Adviser is currently
paying certain of these expenses as described in footnote ( C ) above.
E Annualized - For the period May 1, 1999 (commencement of operations) to
December 31, 1999.
F Management Fees changed effective May 1, 1999. Fees shown are the
current management fees.
EXAMPLE
I. The Annual Step Benefit is NOT reflected in the following example
An owner will have paid the following expenses on a $1,000 investment, assuming
a 5% annual return on assets, regardless of whether the contract owner
annuitized as provided in the contract, surrendered 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........ $16 $49 $85 $186
Science & Technology................ $16 $51 $88 $191
International Small Cap............. $18 $57 $99 $214
Aggressive Growth................... $16 $50 $86 $188
Emerging Small Company.............. $16 $50 $86 $187
Small Company Blend................. $18 $55 $95 $206
Mid Cap Growth...................... $15 $46 $80 $176
Mid Cap Stock....................... $15 $47 $81 $176
Overseas............................ $17 $52 $90 $197
International Stock................. $17 $54 $92 $201
International Value................. $17 $53 $91 $199
Mid Cap Blend....................... $14 $43 $74 $164
Small Company Value................. $17 $53 $91 $198
Global Equity....................... $15 $48 $82 $180
Growth.............................. $14 $43 $74 $162
</TABLE>
7
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C>
Large Cap Growth.................... $15 $45 $78 $171
Quantitative Equity................. $12 $38 $66 $147
Blue Chip Growth.................... $14 $44 $75 $165
Real Estate Securities.............. $12 $39 $67 $148
Value............................... $13 $42 $72 $159
Growth and Income................... $13 $40 $69 $151
U.S. Large Cap...................... $14 $44 $76 $167
Equity-Income....................... $14 $44 $76 $166
Income & Value...................... $14 $42 $73 $160
Balanced............................ $13 $42 $72 $159
High Yield.......................... $13 $41 $71 $156
Strategic Bond...................... $13 $42 $72 $159
Global Bond......................... $15 $45 $78 $171
Total Return........................ $13 $41 $70 $155
Investment Quality Bond............. $12 $39 $67 $148
Diversified Bond.................... $13 $41 $71 $156
U.S. Government Securities.......... $12 $37 $64 $142
Money Market........................ $10 $32 $55 $122
Lifestyle Aggressive 1000........... $16 $50 $86 $188
Lifestyle Growth 820................ $15 $47 $82 $179
Lifestyle Balanced 640.............. $14 $45 $77 $170
Lifestyle Moderate 460.............. $14 $44 $75 $165
Lifestyle Conservative 280.......... $13 $41 $72 $157
</TABLE>
II. The Annual Step Benefit is reflected in the following example
An owner will have paid the following expenses on a $1,000 investment, assuming
a 5% annual return on assets, regardless of whether the contract owner
annuitized as provided in the contract, surrendered 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........ $18 $55 $95 $207
Science & Technology................ $18 $57 $98 $213
International Small Cap............. $21 $63 $109 $235
Aggressive Growth................... $18 $56 $96 $209
Emerging Small Company.............. $18 $56 $96 $208
Small Company Blend................. $20 $61 $105 $227
Mid Cap Growth...................... $17 $53 $91 $198
Mid Cap Stock....................... $17 $53 $91 $198
Overseas............................ $19 $58 $101 $218
International Stock................. $19 $60 $103 $222
International Value................. $19 $59 $102 $220
Mid Cap Blend....................... $16 $49 $85 $186
Small Company Value................. $19 $59 $101 $219
Global Equity....................... $17 $54 $93 $202
Growth.............................. $16 $49 $84 $185
Large Cap Growth.................... $17 $51 $88 $193
Quantitative Equity................. $14 $45 $77 $169
Blue Chip Growth.................... $16 $50 $86 $187
Real Estate Securities.............. $14 $45 $78 $170
Value............................... $15 $48 $83 $181
Growth and Income................... $15 $46 $79 $174
U.S. Large Cap...................... $16 $50 $87 $189
Equity-Income....................... $16 $50 $86 $188
Income & Value...................... $16 $48 $83 $182
Balanced............................ $15 $48 $83 $181
High Yield.......................... $15 $47 $81 $178
</TABLE>
8
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
Strategic Bond...................... $15 $48 $83 $181
Global Bond......................... $17 $51 $89 $193
Total Return........................ $15 $47 $81 $177
Investment Quality Bond............. $14 $45 $78 $170
Diversified Bond.................... $15 $47 $81 $178
U.S. Government Securities.......... $14 $43 $75 $165
Money Market........................ $12 $38 $66 $145
Lifestyle Aggressive 1000........... $18 $56 $97 $210
Lifestyle Growth 820................ $17 $53 $92 $201
Lifestyle Balanced 640.............. $16 $51 $88 $192
Lifestyle Moderate 460.............. $16 $50 $86 $187
Lifestyle Conservative 280.......... $15 $48 $82 $180
</TABLE>
For purposes of presenting the foregoing Examples, we have made certain
assumptions. We have assumed that, where applicable, the maximum sales load is
deducted, that there are no transfers or other transactions and that the "Other
Expenses" line item under "Trust Annual Expenses" will remain the same. Those
assumptions, (each of which is mandated by the SEC in an attempt to provide
prospective investors with standardized data with which to compare various
annuity contracts) do not take into account certain features of the contract and
prospective changes in the size of the Trust which may operate to change the
expenses borne by contract owners. CONSEQUENTLY, THE AMOUNTS LISTED IN THE
EXAMPLES ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES BORNE BY CONTRACT OWNERS MAY BE GREATER OR LESSER
THAN THOSE SHOWN.
In addition, for purposes of calculating the values in the above
Examples, we have translated the $40 annual administration charge listed under
"Annual Contract Fee" to a 0.136% annual asset charge based on a $22,000
estimated approximate average size of contracts of this series. We have also
assumed that the contract owner has not elected the optional annual step death
benefit rider. If the contract owner had elected such rider, the expenses borne
by the contract owner would be greater than those shown in the Example.
LOCATION OF FINANCIAL STATEMENTS OF REGISTRANT AND DEPOSITOR
Our financial statements and those of the Variable Account may be found
in the Statement of Additional Information.
GENERAL INFORMATION ABOUT US, THE VARIABLE ACCOUNT AND THE TRUST
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
We are an indirect subsidiary of MFC.
We are a stock life insurance company organized under the laws of
Delaware in 1979. Our principal office is located at 500 Boylston Street, Suite
400, Boston, Massachusetts 02116-3739. Our ultimate parent is Manulife Financial
Corporation ("MFC"), based in Toronto, Canada. MFC is the holding company of The
Manufacturers Life Insurance Company and its subsidiaries, collectively known as
Manulife Financial.
The Manufacturers Life Insurance Company of North America's financial ratings
are as follows:
A++ A.M. Best
Superior in financial strength; 1st category of 15
AAA Duff & Phelps
Highest in claims paying ability; 1st category of 18
AA+ Standard & Poor's
Very strong in financial strength; 2nd category of 21
Aa2 Moody's
Excellent in financial strength; 3rd category of 21
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<PAGE> 13
These ratings, which are current as of the date of this prospectus and are
subject to change, are assigned as a measure of The Manufacturers Life Insurance
Company of North America's ability to honor the death benefit, fixed account
guarantees and life annuitization guarantees but not specifically to its
products, the performance (return) of these products, the value of any
investment in these products upon withdrawal or to individual securities held in
any portfolio.
THE VARIABLE ACCOUNT
The Variable Account is one of our separate accounts that invests the contract
values you allocate to it in the Trust portfolio(s) you select.
We established the Variable Account on August 24, 1984. The income,
gains and losses, whether or not realized, from assets of the Variable Account
are credited to or charged against the Variable Account without regard to our
other income, gains or losses. Nevertheless, all obligations arising under the
contracts are our general corporate obligations. Assets of the Variable Account
may not be charged with liabilities arising out of any of our other business.
The Variable Account is registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act") as a unit investment trust. A
unit investment trust is a type of investment company which invests its assets
in specified securities, such as the shares of one or more investment companies.
Registration under the 1940 Act does not involve supervision by the SEC of the
management or investment policies or practices of the Variable Account. If we
determine that it would be in the best interests of persons having voting rights
under the contracts, the Variable Account may be operated as a management
company under the 1940 Act or it may be deregistered if 1940 Act registration
were no longer required.
The Variable Account currently has thirty-three sub-accounts. We
reserve the right, subject to compliance with applicable law, to add other
sub-accounts, eliminate existing sub-accounts, combine sub-accounts or transfer
assets in one sub-account to another sub-account that we, or an affiliated
company, may establish. We will not eliminate existing sub-accounts or combine
sub-accounts without the prior approval of the appropriate state or federal
regulatory authorities.
THE TRUST
The Trust is a mutual fund in which the Variable Account invests.
The assets of each sub-account of the Variable Account are invested in
shares of a corresponding investment portfolio of the Trust. The Trust is
registered under the 1940 Act as an open-end management investment company. Each
of the portfolios is diversified for purposes of the 1940 Act, except for the
Global Bond Trust and the five Lifestyle Trusts which are non-diversified. The
Trust receives investment advisory services from Manufacturers Securities
Services, LLC ("MSS").
The Trust currently has sixteen subadvisers who manage all of the
portfolios one of which is Manufacturers Adviser Corporation ("MAC"). Both MSS
and MAC are affiliates of ours.
<TABLE>
<CAPTION>
SUBADVISER TRUST PORTFOLIOS MANAGED
- ---------- ------------------------
<S> <C>
A I M Capital Management, Inc. Aggressive Growth Trust
Mid Cap Growth Trust
AXA Rosenberg Investment Management LLC Small Company Value Trust
Capital Guardian Trust Company Small Company Blend Trust
U.S. Large Cap Value Trust
Income & Value Trust
Diversified Bond Trust
Fidelity Management Trust Company Overseas Trust
Mid Cap Blend Trust
Large Cap Growth Trust
Founders Asset Management LLC International Small Cap Trust
Balanced Trust
</TABLE>
10
<PAGE> 14
<TABLE>
<S> <C>
Franklin Advisers, Inc. Emerging Small Company Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Money Market Trust
Lifestyle Trusts*
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Pacific Investment Management Company Global Bond Trust
Total Return Trust
Rowe Price-Fleming International, Inc. International Stock Trust
Salomon Brothers Asset Management Inc Strategic Bond Trust
U.S. Government Securities Trust
State Street Global Advisors Growth Trust
Lifestyle Trusts*
T. Rowe Price Associates, Inc. Science & Technology Trust
Blue Chip Growth Trust
Equity-Income Trust
Templeton Investment Counsel, Inc. International Value Trust
Wellington Management Company, LLP Mid Cap Stock Trust
Growth & Income Trust
Investment Quality Bond Trust
</TABLE>
*State Street Global Advisors provides subadvisory consulting services to
Manufacturers Adviser Corporation regarding management of the Lifestyle Trusts.
The following is a brief description of each portfolio:
The PACIFIC RIM EMERGING MARKETS TRUST seeks long-term growth of
capital by investing in a diversified portfolio that is comprised primarily of
common stocks and equity-related securities of corporations domiciled in
countries in the Pacific Rim region.
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital.
Current income is incidental to the portfolio's objective.
The INTERNATIONAL SMALL CAP TRUST seeks long-term 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 AGGRESSIVE GROWTH TRUST seeks long-term capital appreciation by
investing the portfolio's asset principally in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies which in the opinion of
the subadviser are expected to achieve earnings growth over time at a rate in
excess of 15% per year. Many of these companies are in the small and
medium-sized category.
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<PAGE> 15
The EMERGING SMALL COMPANY TRUST seeks long-term growth of capital by
investing, under normal market conditions, at least 65% of the portfolio's total
assets in common stock equity securities of companies with market
capitalizations that approximately match the range of capitalization of the
Russell 2000 Index ("small cap stocks") at the time of purchase.
The SMALL COMPANY BLEND TRUST seeks long-term growth of capital and
income by investing the portfolio's assets, under normal market conditions,
primarily in equity and equity-related securities of companies with market
capitalizations that approximately match the range of capitalization of the
Russell 2000 Index ("small cap stocks") at the time of purchase.
The MID CAP GROWTH TRUST seeks long-term capital appreciation by
investing the portfolio's assets principally in common stocks, with emphasis on
medium-sized and smaller emerging growth companies.
The MID CAP STOCK TRUST seeks long-term growth of capital by investing
primarily in equity securities of companies with market capitalizations that
approximately match the range of capitalization of the Wilshire Mid Cap 750
Index.
The OVERSEAS TRUST seeks growth of capital by investing, under normal
market conditions, at least 65% of the portfolio's assets in foreign securities
(including American Depositary Receipts (ADRs) and European Depositary Receipts
(EDRs). The portfolio expects to invest primarily in equity securities.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by
investing primarily in common stocks of established, non-U.S. companies.
The INTERNATIONAL VALUE TRUST seeks long-term growth of capital by
investing, under normal market conditions, primarily in equity securities of
companies located outside the U.S., including in emerging markets.
The MID CAP BLEND 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 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 GLOBAL EQUITY TRUST seeks long-term capital appreciation by
investing primarily in equity securities throughout the world, including U.S.
issuers and emerging markets.
The GROWTH TRUST seeks long-term growth of capital by investing
primarily in large capitalization growth securities (market capitalizations of
approximately $1 billion or greater).
The LARGE CAP GROWTH TRUST seeks long-term growth of capital by
investing, under normal market conditions, at least 65% of the portfolio's
assets in equity securities of companies with large market capitalizations.
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.
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<PAGE> 16
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 GROWTH & 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 U.S. LARGE CAP VALUE TRUST seeks long-term growth of capital and
income by investing the portfolio's assets, under normal market conditions,
primarily in equity and equity-related securities of companies with market
capitalization greater than $500 million.
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 INCOME & VALUE TRUST seeks the balanced accomplishment of (a)
conservation of principal and (b) long-term growth of capital and income by
investing the portfolio's assets in both equity and fixed-income securities. The
subadviser has full discretion to determine the allocation between equity and
fixed-income securities.
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 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 BOND TRUST seeks to realize maximum total return, consistent
with preservation of capital and prudent investment management by investing the
portfolio's asset primarily in fixed-income securities denominated in major
foreign currencies, baskets of foreign currencies (such as the ECU),and the U.S.
dollar.
The TOTAL RETURN TRUST seeks to realize maximum total return,
consistent with preservation of capital and prudent investment management by
investing, under normal market conditions, at least 65% of the portfolio's
assets in a diversified portfolio of fixed income securities of varying
maturities. The average portfolio duration will normally vary within a three- to
six- year time frame based on Pacific Investment Management Company's forecast
for interest rates.
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 DIVERSIFIED BOND TRUST seeks high total return as is consistent
with the conservation of capital by investing at least 75% of the portfolio's
assets in fixed-income securities.
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<PAGE> 17
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current
income consistent with preservation of capital and maintenance of liquidity, by
investing in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
derivative securities such as collateralized mortgage obligations backed by such
securities.
The MONEY MARKET TRUST seeks maximum current income consistent with
preservation of principal and liquidity by investing in high quality money
market instruments with maturities of 397 days or less issued primarily by
United States entities.
The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long-term growth
of capital (current income is not a consideration) by investing 100% of the
Lifestyle Trust's assets in other portfolios of the Trust ("UNDERLYING
PORTFOLIOS") which invest primarily in equity securities.
The LIFESTYLE GROWTH 820 TRUST seeks to provide long-term growth of
capital with consideration also given to current income by investing
approximately 20% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 80% of its assets
in Underlying Portfolios which invest primarily in equity securities.
The LIFESTYLE BALANCED 640 TRUST seeks to provide a balance between a
high level of current income and growth of capital with a greater emphasis given
to capital growth by investing approximately 40% of the Lifestyle Trust's assets
in Underlying Portfolios which invest primarily in fixed income securities and
approximately 60% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE MODERATE 460 TRUST seeks to provide a balance between a
high level of current income and growth of capital with a greater emphasis given
to high income by investing approximately 60% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 40% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of
current income with some consideration also given to growth of capital by
investing approximately 80% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in fixed income securities and approximately
20% of its assets in Underlying Portfolios which invest primarily in equity
securities.
A full description of the Trust, including the investment objectives,
policies and restrictions of, and the risks relating to investment in, each
portfolio is contained in the Trust Prospectus for the Trust which we provided
you along with this Prospectus. The Trust prospectus should be read carefully
before allocating purchase payments to a subaccount.
If the shares of a Trust portfolio are no longer available for
investment or in our judgment investment in a Trust portfolio becomes
inappropriate, we may eliminate the shares of a portfolio and substitute shares
of another portfolio of the Trust or another open-end registered investment
company. Substitution may be made with respect to both existing investments and
the investment of future purchase payments. However, we will make no such
substitution without first notifying you and obtaining approval of the SEC (to
the extent required by the 1940 Act).
You instruct us how to vote Trust shares.
We will vote shares of the Trust portfolios held in the Variable
Account at the Trust's shareholder meetings according to voting instructions
received from the persons having the voting interest under the contracts. We
will determine the number of portfolio shares for which voting instructions may
be given not more than 90 days prior to the meeting. Trust proxy material will
be distributed to each person having the voting interest under the contract
together with appropriate forms for giving voting instructions. We will vote all
portfolio shares that we hold (including our own shares and those we hold in the
Variable Account for contract owners in proportion to the instructions so
received.
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<PAGE> 18
During the accumulation period, the contract owner has the voting
interest under a contract. During the pay-out period, the annuitant has the
voting interest under a contract. We reserve the right to make any changes in
the voting rights described above that may be permitted by the Federal
securities laws, regulations or interpretations thereof. For further information
on voting interests under the contract see "Voting Interests" in this
prospectus.
DESCRIPTION OF THE CONTRACT
ELIGIBLE GROUPS AND INDIVIDUALS
The Contracts are designed primarily as a funding vehicle for "wrap fee
arrangements"
The contracts are designed primarily as funding vehicles for "wrap fee
arrangements" offered by brokerage firms which may charge an additional fee for
their services. We will treat any such fees assessed against the contract as
partial withdrawals from the contract. See "Federal Tax Matters" for further
information on the tax implications of assessing such fees against the contract.
Usually, a group certificate will be issued. An individual contract is
intended for use where a group contract is not available. Group contracts have
been issued to the 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 group contract has been issued
may become an owner under the contract, or a person may purchase an individual
contract, where available, by submitting a completed application and a minimum
purchase payment. A certificate summarizing the rights and benefits of the owner
under the group contract, or an individual contract, may be issued to an
applicant acceptable to us. We reserve the right to decline to issue a
certificate or contract to any person in our sole discretion. All rights and
privileges under a group contract may be exercised by each owner as to his or
her interest unless expressly reserved to the group holder. Provisions of any
plan in connection with which the contract was issued may restrict an owner's
ability to exercise contractual rights and privileges.
Initial purchase payments usually must be at least $25,000, subsequent ones at
least $30, and total payments no more than $1 million (without our approval).
ACCUMULATION PERIOD PROVISIONS
PURCHASE PAYMENTS
Your purchase payments are made to us at our Annuity Service Office.
The minimum initial purchase payment is $25,000. Subsequent purchase payments
must be at least $30. Purchase payments may be made at any time. We may provide
for purchase payments to be automatically withdrawn from your bank account on a
periodic basis. If a purchase payment would cause your contract value to exceed
$1,000,000 or your contract value already exceeds $1,000,000, you must obtain
our approval in order to make the payment.
If permitted by state law, we may cancel a contract at the end of any
two consecutive contract years in which no purchase payments have been made, if
both:
- the total purchase payments made over the life of the
contract, less any withdrawals, are less than $2,000; and
- the contract value at the end of such two year period is less
than $2,000.
We may vary the cancellation of contract privileges in certain states
in order to comply with state insurance laws and regulations. If we cancel your
contract, we will pay you the contract value computed as of the valuation period
during which the cancellation occurs, minus the amount of any outstanding loan
and minus the annual $30 administration fee. The amount paid will be treated as
a withdrawal for federal tax purposes and thus may be subject to income tax and
to a 10% penalty tax (see "FEDERAL TAX MATTERS").
Purchase payments are allocated among the investment options in
accordance with the percentages you designate. You may change the allocation of
subsequent purchase payments at any time by writing us or by telephone.
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<PAGE> 19
The Guarantee Plus Program lets you use the fixed account to protect against
loss.
In addition, you have the option to participate in our Guarantee Plus
Program. Under the Guarantee Plus Program, the initial purchase payment is split
between the fixed and the variable investment options. The percentage of the
initial purchase payment allocated to a fixed account will assure that the fixed
account allocation will have grown to an amount at least equal to the total
initial purchase payment at the end of the guaranteed period. The balance of the
initial purchase payment is allocated among the variable investment options as
indicated on the contract or certificate specifications page. You may elect to
participate in the Guarantee Plus Program and may obtain full information
concerning the program and its restrictions from your securities dealer or our
Annuity Service Office.
For information relating to the minimum initial purchase payment under
prior contracts, see Appendix E.
ACCUMULATION UNITS
The value of an investment account is measured in "accumulation units," which
vary in value with the performance of the underlying Trust portfolio.
During the accumulation period, we will establish an "INVESTMENT
ACCOUNT" for you for each Variable Account investment option to which you
allocate a portion of your contract value. Amounts are credited to those
investment accounts in the form of "ACCUMULATION UNITS" (units of measure used
to calculate the value of the variable portion of your contract during the
accumulation period). The number of accumulation units to be credited to each
investment account is determined by dividing the amount allocated to that
investment account by the value of an accumulation unit for that investment
account next computed after the purchase payment is received at our Annuity
Service Office complete with all necessary information or, in the case of the
first purchase payment, pursuant to the procedures described below.
Initial purchase payments received by mail will usually be credited in
the valuation period during which they are received at our Annuity Service
Office, and in any event not later than two business days after our receipt of
all information necessary for issuing the contract. You will be informed of any
deficiencies preventing processing if your contract cannot be issued. If the
deficiencies are not remedied within five business days after receipt, your
purchase payment will be returned promptly, unless you specifically consent to
our retaining your purchase payment until all necessary information is received.
Initial purchase payments received by wire transfer from broker-dealers will be
credited in the valuation period during which the payment was received by us if
the broker-dealers have made special arrangements with us.
VALUE OF ACCUMULATION UNITS
The value of your accumulation units will vary from one business day to
the next depending upon the investment results of the investment options you
select. The value of an accumulation unit for each sub-account was arbitrarily
set at $10 or $12.50 for the first business day under other contracts we have
issued. The value of an accumulation unit for any subsequent business day is
determined by multiplying the value of an accumulation unit for the immediately
preceding business day by the net investment factor for such sub-account
(described below) for the business day for which the value is being determined.
Accumulation units will be valued as of the end of each business day.
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 may be greater or less than or equal to one; therefore, the
value of an accumulation unit may increase, decrease or remain the same. The net
investment factor for each sub-account for any valuation period is determined by
dividing (a) by (b) and subtracting (c) from the result:
Where (a) is:
- the net asset value per share of a portfolio share held in the
sub-account determined at the end of the current valuation
period, plus
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<PAGE> 20
- The per share amount of any dividend or capital gain
distributions made by the portfolio on shares held in the
sub-account if the "ex-dividend" date occurs during the
current valuation period.
Where (b) is the net asset value per share of a portfolio share held in the
sub-account determined as of the end of the immediately preceding valuation
period.
Where (c) is a factor representing the charges deducted from the sub-account on
a daily basis for administrative expenses, a portion of the distribution
expenses, and mortality and expense risks. That factor is equal on an annual
basis to 0.45% (0.15% for administrative expenses and 0.30% for mortality and
expense risks) or 0.60% if you elect the optional annual step death benefit (an
additional 0.15%, the optional death benefit fee).
TRANSFERS AMONG INVESTMENT OPTIONS
Contract value may be transferred among investment options.
During the accumulation period, you may transfer amounts among the
variable account investment options and from those investment options to the
fixed account investment options at any time upon written notice to us or by
telephone if you authorize us in writing to accept your telephone transfer
requests. Accumulation units will be canceled from the investment account from
which you transfer amounts and credited to the investment account to which you
transfer amounts. Your contract value on the date of the transfer will not be
affected by a transfer. You must transfer at least $300 or, if less, the entire
value of the investment account. If after the transfer the amount remaining in
the investment account is less than $100, then we will transfer the entire
amount instead of the requested amount. We reserve the right to limit, upon
notice, the maximum number of transfers you may make to one per month or six at
any time within a contract year. In addition, we reserve the right to defer a
transfer at any time we are unable to purchase or redeem shares of the Trust
portfolios. We also reserve the right to modify or terminate the transfer
privilege at any time (to the extent permitted by applicable law).
Currently, we do not impose a charge for transfer requests. The first
twelve transfers in a contract year are free of any transfer charge. For each
additional transfer in a contract year, we do not currently assess a charge but
reserve the right (to the extent permitted by your contract) to assess a
reasonable charge to reimburse us for the expenses of processing transfers.
Where permitted by law, we may accept your authorization for a third
party to make transfers for you subject to our rules. However, the contract is
not designed for professional market timing organizations or other entities or
persons engaging in programmed, frequent or large exchanges (collectively,
"market timers") to speculate on short-term movements in the market since such
activity may be disruptive to the Trust portfolios and increase their
transaction costs. Therefore, in order to prevent excessive use of the exchange
privilege, we reserve the right to (a) reject or restrict any specific purchase
and exchange requests and (b) impose specific limitations with respect to market
timers, including restricting exchanges by market timers to certain variable
investment options (transfers by market timers into or out of fixed investment
options is not permitted).
MAXIMUM NUMBER OF INVESTMENT OPTIONS
You currently are limited to a maximum of seventeen investment options
(including the fixed account investment option) during the accumulation period.
In calculating this limit, investment options to which you have allocated
purchase payments at any time during the accumulation period will be counted
toward the seventeen maximum even if you no longer have contract value allocated
to the investment option.
TELEPHONE TRANSACTIONS
Telephone transfers and withdrawals are permitted.
You are permitted to request transfers and withdrawals by telephone. We
will not be liable for following instructions communicated by telephone that we
reasonably believe to be genuine. To be permitted to request a transfer or
withdrawal by telephone, you must elect the option on the Application. (If you
do not initially elect an option in the Application form, you may request
authorization by executing an appropriate authorization form that we will
provide you upon request.) We will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and may only be liable for
any losses due to unauthorized or fraudulent instructions where we fail to
employ our procedures properly. Such procedures include the following. Upon
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telephoning a request, you will be asked to provide information that verifies
that it is you calling. For both your and our protection, we will tape record
all conversations with you. All telephone transactions will be followed by a
confirmation statement.
SPECIAL TRANSFER SERVICES - DOLLAR COST AVERAGING
Dollar Cost Averaging and Asset Rebalancing programs are available.
We administer a Dollar Cost Averaging ("DCA") program. If you enter
into a DCA agreement, you may instruct us to transfer monthly a predetermined
dollar amount from any sub-account or the one year fixed account investment
option to other sub-accounts until the amount in the sub-account from which the
transfer is made or one year fixed account investment option is exhausted.
The DCA program is generally suitable if you are making a substantial
deposit and desire to control the risk of investing at the top of a market
cycle. The DCA program allows investments to be made in equal installments over
time in an effort to reduce that risk. If you are interested in the DCA program,
you may elect to participate in the program on the application or by separate
application. You may obtain a separate application and full information
concerning the program and its restrictions from your securities dealer or our
Annuity Service Office. There is no charge for participation in the DCA program.
ASSET REBALANCING PROGRAM
We administer an Asset Rebalancing Program which enables you to specify
the percentage levels you would like to maintain in particular portfolios. Your
contract value will be automatically rebalanced pursuant to the schedule
described below to maintain the indicated percentages by transfers among the
portfolios. The entire value of the variable investment accounts must be
included in the Asset Rebalancing Program. Other investment programs, such as
the DCA program, or other transfers or withdrawals may not work in concert with
the Asset Rebalancing Program. Therefore, you should monitor your use of these
other programs and any other transfers or withdrawals while the Asset
Rebalancing Program is being used. If you are interested in the Asset
Rebalancing Program, you may obtain a separate application and full information
concerning the program and its restrictions from your securities dealer or our
Annuity Service Office. There is no charge for participation in the Asset
Rebalancing Program.
Asset rebalancing will only be permitted on the following time
schedules:
- quarterly on the 25th day of the last month of the quarter (or
the next business day if the 25th is not a business day);
- semi-annually on June 25th or December 26th (or the next
business day if these dates are not business days); or
- annually on December 26th (or the next business day if
December 26th is not a business day).
WITHDRAWALS
During the accumulation period, you may withdraw all or a portion of
your contract value upon written request (complete with all necessary
information) to our Annuity Service Office. You may make withdrawals by
telephone if you have authorized telephone withdrawals, as described above under
"Telephone Transactions." For certain qualified contracts, exercise of the
withdrawal right may require the consent of the qualified plan participant's
spouse under the Internal Revenue Code of 1986, as amended (the "CODE"). In the
case of a total withdrawal, we will pay the contract value as of the date of
receipt of the request at our Annuity Service Office, less the annual $30
administration fee if applicable and any unpaid loans, and the contract will be
canceled. In the case of a partial withdrawal, we will pay the amount requested
and cancel that number of accumulation units credited to each investment account
equal in value to the amount withdrawn from that investment account.
You may withdraw all or a portion of your contract value, but may incur tax
liability as a result.
When making a partial withdrawal, you should specify the investment
options from which the withdrawal is to be made. The amount requested from an
investment option may not exceed the value of that investment option. If you do
not specify the investment options from which a partial withdrawal is to be
taken, the withdrawal will be taken from the variable account investment options
until exhausted and then from the fixed account
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investment options. If the partial withdrawal is less than the total value in
the variable account investment options, the withdrawal will be taken
proportionately from all of your variable account investment options. For rules
governing the order and manner of withdrawals from the fixed account investment
option (see "FIXED ACCOUNT INVESTMENT OPTION").
There is no limit on the frequency of partial withdrawals; however, the
amount withdrawn must be at least $300 or, if less, the entire balance in the
investment option. If after the withdrawal (and deduction of any withdrawal
charge) the amount remaining in the investment option is less than $100, we will
treat the partial withdrawal as a withdrawal of the entire amount held in the
investment option. If a partial withdrawal plus any applicable withdrawal charge
would reduce the contract value to less than $300, we will treat the partial
withdrawal as a total withdrawal of the contract value.
The amount of any withdrawal from the variable account investment
options will be paid promptly, and in any event within seven days of receipt of
the request, complete with all necessary information at our Annuity Service
Office, except that we reserve the right to defer the right of withdrawal or
postpone payments for any period when:
- the New York Stock Exchange is closed (other than customary
weekend and holiday closings),
- trading on the New York Stock Exchange is restricted,
- an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably
practicable or it is not reasonably practicable to determine
the value of the Variable Account's net assets, or
- the SEC, by order, so permits for the protection of security
holders; provided that applicable rules and regulations of the
SEC shall govern as to whether trading is restricted or an
emergency exists.
TELEPHONE REDEMPTIONS. You may request the option to withdraw a portion
of your contract value by telephone by completing a separate application. We
reserve the right to impose maximum withdrawal amounts and procedural
requirements regarding this privilege. For additional information on Telephone
Redemptions see "Telephone Transactions" above.
SPECIAL WITHDRAWAL SERVICES - THE INCOME PLAN
Systematic "Income Plan" withdrawals are available.
We administer an Income Plan ("IP") which permits you to pre-authorize
a periodic exercise of the contractual withdrawal rights described above. After
entering into an IP agreement, you may instruct us to withdraw a level dollar
amount from specified investment options on a periodic basis. The total of IP
withdrawals in a contract year is limited to not more than 20% of the purchase
payments made. If an additional withdrawal is made from a contract participating
in an IP, the IP will terminate automatically and may be reinstated only on or
after the next contract anniversary. The IP is not available to contracts
participating in the dollar cost averaging program or for which purchase
payments are being automatically deducted from a bank account on a periodic
basis. IP withdrawals will be free of withdrawal and market value charges. IP
withdrawals, like other withdrawals, may be subject to income tax and a 10%
penalty tax (see "FEDERAL TAX MATTERS"). If you are interested in an IP, you may
obtain a separate application and full information concerning the program and
its restrictions from your securities dealer or our Annuity Service Office. The
IP program is free.
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If you die during the accumulation period, your beneficiary will receive a death
benefit that might exceed your contract value.
DEATH BENEFIT DURING ACCUMULATION PERIOD
See Appendix E for information on the death benefit provisions under
prior contracts.
IN GENERAL. The following discussion applies principally to contracts
that are not issued in connection with qualified plans, i.e., "NON-QUALIFIED
CONTRACTS." Tax law requirements applicable to qualified plans, and the tax
treatment of amounts held and distributed under such plans, are quite complex.
Accordingly, if your contract is to be used in connection with a qualified plan,
you should seek competent legal and tax advice regarding the suitability of the
contract for the situation involved and the requirements governing the
distribution of benefits, including death benefits, from a contract used in the
plan. In particular, if you intend to use the contract in connection with a
qualified plan, you should consider that the contract provides an optional death
benefit (described below) that could be characterized as an "incidental death
benefit." There are limits on the amount of incidental benefits that may be
provided under certain qualified plans and the provision of such benefits may
result in currently taxable income to plan participants (see "FEDERAL TAX
MATTERS
AMOUNT OF DEATH BENEFIT. If an owner who has not elected the optional
annual step death benefit discussed below dies during the accumulation period,
the death benefit will be the greater of the contract value or the minimum death
benefit. The minimum death benefit is equal to the sum of all purchase payments
made by or on behalf of you minus a reduction for any partial withdrawals made
by or on behalf of you. The amount of the reduction is the greater of:
- the amount of the partial withdrawal, or
- the amount obtained by multiplying the minimum death benefit
prior to the withdrawal by the ratio of the partial withdrawal
to the contract value prior to the withdrawal.
Partial withdrawals include amounts applied under an annuity option
under the contract. If you have any debt under the contract, the death benefit
otherwise payable is reduced by such debt.
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
our Annuity Service Office. No person is entitled to the death benefit until
this time.
PAYMENT OF DEATH BENEFIT. We will pay the death benefit to the
beneficiary if any contract owner dies before the maturity date.
The death benefit may be taken in the form of a lump sum immediately.
If not taken immediately, the contract will continue subject to the following:
- The beneficiary will become the owner.
- Any excess of the death benefit over the contract value will
be allocated to the investment accounts in proportion to their
relative values on the date of receipt at our Annuity Service
Office of due proof of the owner's death.
- No additional purchase payments may be made.
- If the deceased owner's spouse is the beneficiary, the spouse
continues the contract as the new owner. In such a case, the
distribution rules applicable when a contract owner dies will
apply when the spouse, as the owner, dies. In addition, a
death benefit will be paid upon the death of the spouse. For
purposes of calculating the death benefit payable upon the
death of the spouse, the death benefit paid upon the first
owner's death will be treated as a purchase payment to the
contract. In addition, the death benefit on the last day of
the previous contract year (or the last day of the contract
year ending just prior to the owner's 81st birthday, if
applicable) shall be set to zero as of the date of the first
owner's death.
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- If the beneficiary is not the deceased owner's spouse,
distribution of the owner's entire interest in the contract
must be made within five years of the owner's death, or
alternatively, distribution may be made as an annuity, under
one of the annuity options described below, which begins
within one of the owner's death and is payable over the life
of the beneficiary or over a period not extending beyond the
life expectancy of the beneficiary. Upon the death of the
beneficiary, the death benefit will equal the contract value
and must be distributed immediately in a single sum.
If any annuitant is changed and any owner is not a natural person, the
entire interest in the contract 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. For purposes of subsequent calculations of the death benefit prior to
the maturity date, the contract value on the date of the change will be treated
as a payment made on that date. In addition, all payments made and all amounts
deducted in connection with partial withdrawals prior to the date of the change
will not be considered in the determination of the death benefit. No such change
in death benefit will be made if the person whose death will cause the death
benefit to be paid is the same after the change in ownership or if ownership is
transferred to the owner's spouse.
Death benefits will be paid within seven days of the date the amount of
the death benefit is determined, as described above, subject to postponement
under the same circumstances that payment of withdrawals may be postponed (see
"WITHDRAWALS").
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OPTIONAL ANNUAL STEP DEATH BENEFIT. We offer an optional death benefit which
provides an enhanced level of protection for your beneficiaries. Under the
contract, you may elect the optional annual step death benefit. If an owner who
has elected the optional annual step death benefit dies during the accumulation
period, the death benefit will be the greater of:
- the death benefit described above (that is, the greater of the
contract value or the minimum death benefit), or
- the annual step death benefit.
The annual step death benefit is equal to the greatest contract value
on a contract anniversary occurring after the effective date of the rider and
prior to the oldest owner's having an attained age of 81, increased by all
purchase payments made and minus any amounts deducted in connection with partial
withdrawals since that contract anniversary.
With the optional annual step death benefit, if the owner dies during
the accumulation period and the death benefit is not taken immediately in the
form of a lump sum, the contract will continue as described under "Payment of
Death Benefit" above but subject in addition to the following:
- If the beneficiary is the deceased owner's spouse, the
contract and the optional annual step death benefit will
continue with the surviving spouse as the new owner. Upon the
death of the surviving spouse prior to the maturity date, we
will pay a death benefit, and the entire interest in the
contract must be distributed to the new beneficiary in
accordance with the distribution rules applicable when a owner
dies. For purposes of calculating this death benefit, the
death benefit paid upon the first owner's death will be
treated as a purchase payment to the contract. In addition,
all purchase payments made and all amounts deducted in
connection with partial withdrawals prior to the date of the
first owner's death will not be considered in the
determination of the death benefit. In determining the annual
step death benefit, contract values as of all prior contract
anniversaries will be set at zero as of the date of the first
owner's death.
The optional annual step death benefit can only be elected at issue
and, once elected, is irrevocable. If the oldest owner is age 80 or older at
issue of the contract, the annual step death benefit will be zero. Your election
of the optional annual step death benefit will terminate only upon the earliest
to occur (i) the date the contract terminates, (ii) the maturity date, or (iii)
the date on which the death benefit is paid.
If you elect the optional annual step death benefit, we will deduct
daily from the value of each of your variable investment accounts an optional
death benefit fee equal on an annual basis to 0.20%. This fee compensates us for
assuming mortality risks associated with the optional annual step death benefit
and will increase the asset-based fees for the contract. (See "CHARGES AND
DEDUCTIONS" below).
PAY-OUT PERIOD PROVISIONS
GENERAL
Annuity benefits may be paid in several ways.
The proceeds of the contract payable on death, withdrawal or the
contract maturity date may be applied to the annuity options described below,
subject to the distribution of death benefit provisions (see "DEATH BENEFIT
DURING ACCUMULATION PERIOD").
Generally, we will begin paying annuity benefits to the annuitant under
the contract on the contract's maturity date (the date dividing the accumulation
period from the pay-out period). The maturity date is the date specified on the
contract or certificate specifications page, unless you change that date. If no
date is specified, the maturity date is the maximum maturity date described
below. The maximum maturity date is the first day of the month following the
later of the 85th birthday of the annuitant or the tenth contract anniversary.
You may specify a different maturity date at any time by written request at
least one month before both the previously specified and the new maturity date.
The new maturity date may not be later than the maximum maturity date unless we
consent. Maturity dates which occur when the annuitant is at an advanced age,
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.
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You may select the frequency of annuity payments. However, if the
contract value at the maturity date is such that a monthly payment would be less
than $20, we may pay the contract value, minus any unpaid loans, in one lump sum
to the annuitant on the maturity date.
ANNUITY OPTIONS
Annuity benefit payments are available under the contract on a fixed,
variable, or combination fixed and variable basis. Upon purchase of the
contract, and at any time during the accumulation period, you may select one or
more of the annuity options described below on a fixed and/or variable basis
(except Option 5 which is available on a fixed basis only) or choose an
alternate form of payment acceptable to us. If an annuity option is not
selected, we will provide as a default option a life annuity with payments
guaranteed for 10 years as described below. Annuity payments will be determined
based on the Investment Account Value of each investment option at the maturity
date. Internal Revenue Service ("IRS") regulations may preclude the availability
of certain annuity options in connection with certain qualified contracts. Thus,
for example, in the case of contracts or certificates issued as IRAs, the
co-annuitant referred to in options 2(a) and 2(b) must be your spouse, the life
expectancy of the annuitant in option 1(b) and of the joint annuitants in option
2(b) must be at least ten years, and options 3, 4, and 5 are available only with
our consent.
The following annuity options are guaranteed in the contract. Please
read the description of each annuity option carefully. In general, a nonrefund
life annuity provides the highest level of payments. However, because there is
no guarantee that any minimum number of payments will be made, an annuitant may
receive only one payment if the annuitant dies prior to the date the second
payment is due. Annuities with payments guaranteed for a certain number of years
may also be elected but the amount of each payment will be lower than that
available under the nonrefund life annuity option.
OPTION 1(A): NON-REFUND LIFE ANNUITY - An annuity with payments during
the lifetime of the annuitant. No payments are due after the death of
the annuitant. Because there is no guarantee that any minimum number of
payments will be made, an annuitant may receive only one payment if the
annuitant dies prior to the date the second payment is due.
OPTION 1(B): LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS - An
annuity with payments guaranteed for 10 years and continuing thereafter
during the lifetime of the annuitant. Because payments are guaranteed
for 10 years, annuity payments will be made to the end of such period
if the annuitant dies prior to the end of the tenth year.
OPTION 2(A): JOINT & SURVIVOR NON-REFUND LIFE ANNUITY - An annuity with
payments during the lifetimes of the annuitant and a designated
co-annuitant. No payments are due after the death of the last survivor
of the annuitant and co-annuitant. Because there is no guarantee that
any minimum number of payments will be made, an annuitant or
co-annuitant may receive only one payment if the annuitant and
co-annuitant die prior to the date the second payment is due.
OPTION 2(B): JOINT & SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR
10 YEARS - An annuity with payments guaranteed for 10 years and
continuing thereafter during the lifetimes of the annuitant and a
designated co-annuitant. Because payments are guaranteed for 10 years,
annuity payments will be made to the end of such period if both the
annuitant and the co-annuitant die prior to the end of the tenth year.
In addition to the foregoing annuity options which we are contractually
obligated to offer at all times, we currently offer the following annuity
options. We may cease offering the following annuity options at any time and may
offer other annuity options in the future.
OPTION 3: LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5, 15 OR 20 YEARS -
An Annuity with payments guaranteed for 5, 15 or 20 years and
continuing thereafter during the lifetime of the annuitant. Because
payments are guaranteed for the specific number of years, annuity
payments will be made to the end of the last year of the 5, 15 or 20
year period.
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OPTION 4: JOINT & TWO-THIRDS SURVIVOR NON-REFUND LIFE ANNUITY - An
annuity with full payments during the joint lifetime of the annuitant
and a designated co-annuitant and two-thirds payments during the
lifetime of the survivor. Because there is no guarantee that any
minimum number of payments will be made, an annuitant or co-annuitant
may receive only one payment if the annuitant and co-annuitant die
prior to the date the second payment is due.
OPTION 5: PERIOD CERTAIN ONLY ANNUITY FOR 5, 10, 15 OR 20 YEARS - An
annuity with payments for a 5, 10, 15 or 20 year period and no payments
thereafter.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY BENEFIT PAYMENT
The first variable annuity payment is determined by applying that
amount of the contract value used to purchase a variable annuity to the annuity
tables contained in the contract. The amount of the contract value will be
determined as of a date not more than ten business days prior to the maturity
date. The amount of the first and all subsequent fixed annuity payments is
determined on the same basis using the portion of the contract value used to
purchase a fixed annuity. Contract value used to determine annuity payments will
be reduced by any applicable premium taxes.
The rates contained in the annuity tables vary with the annuitant's sex
and age and the annuity option selected. However, for contracts issued in
connection with certain employer-sponsored retirement plans sex-distinct tables
may not be used. Under such tables, the longer the life expectancy of the
annuitant under any life annuity option or the longer the period for which
payments are guaranteed under the option, the smaller the amount of the first
monthly variable annuity payment will be.
ANNUITY UNITS AND THE DETERMINATION OF SUBSEQUENT VARIABLE ANNUITY BENEFIT
PAYMENTS
Variable annuity benefit payments subsequent to the first will be based
on the investment performance of the sub-accounts selected during the pay-out
period. The amount of subsequent payments is determined by dividing the amount
of the first annuity payment from each sub-account by the annuity unit value of
that sub-account (as of the same date the contract value to effect the annuity
was determined) to establish the number of annuity units which will thereafter
be used to determine payments. This number of annuity units for each sub-account
is then multiplied by the appropriate annuity unit value as of a uniformly
applied date not more than ten business days before the annuity payment is due,
and the resulting amounts for each sub-account are then totaled to arrive at the
amount of the payment to be made. The number of annuity units generally remains
constant during the annuity benefit payment period.
The value of an annuity unit for each sub-account for any valuation
period is determined by multiplying the annuity unit value for the immediately
preceding valuation period by the net investment factor for that sub-account
(see "NET INVESTMENT FACTOR") for the valuation period for which the annuity
unit value is being calculated and by a factor to neutralize the assumed
interest rate.
A 3% assumed interest rate is built into the annuity tables in the
contract used to determine the first variable annuity payment.
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TRANSFERS DURING PAY-OUT PERIOD
Some transfers are permitted during the pay-out period, but subject to a few
more limitations that during the accumulation period.
Once variable annuity benefit payments have begun, you may transfer all
or part of the investment upon which those payments are based from one
sub-account to another. You must submit your transfer request to our Annuity
Service Office at least 30 days before the due date of the first annuity benefit
payment to which your transfer will apply. Transfers after the maturity date
will be made by converting the number of annuity units being transferred to the
number of annuity units of the sub-account to which the transfer is made, so
that the next annuity payment if it were made at that time would be the same
amount that it would have been without the transfer. Thereafter, annuity benefit
payments will reflect changes in the value of the new annuity units. We reserve
the right to limit, upon notice, the maximum number of transfers to four per
contract year. Once annuity payments have commenced, no transfers may be made
from a fixed annuity option to a variable annuity option or from a variable
annuity option to a fixed annuity option. In addition, we reserve the right to
defer the transfer privilege at any time that we are unable to purchase or
redeem shares of the Trust portfolios. We also reserve the right to modify or
terminate the transfer privilege at any time in accordance with applicable law.
DEATH BENEFIT DURING PAY-OUT PERIOD
If an annuity option providing for payments for a guaranteed period has
been selected, and the annuitant dies during the pay-out period, we will make
the remaining guaranteed payments to the beneficiary. Any remaining payments
will be made as rapidly as under the method of distribution being used as of the
date of the annuitant's death. If no beneficiary is living, we will commute any
unpaid guaranteed payments to a single sum (on the basis of the interest rate
used in determining the payments) and pay that single sum to the estate of the
last to die of the annuitant and the beneficiary.
OTHER CONTRACT PROVISIONS
TEN DAY RIGHT TO REVIEW
You have a ten-day right to cancel your contract.
The owner may cancel the contract or certificate by returning it to our
Annuity Service Office or agent at any time within ten days after receiving it.
Within seven days of receiving a returned contract or certificate, we will pay
the owner, the contract value less any debt, computed at the end of the
valuation period during which we receive the returned contract.
No charge is imposed upon return of the contract within the ten-day
right to review period. The ten-day right to review may vary in certain states
in order to comply with the requirements of state insurance laws and
regulations. When the contract is issued as an individual retirement annuity
under the Code Sections 408, during the first seven days of the ten-day period,
we will return all purchase payments if this is greater than the amount
otherwise payable.
OWNERSHIP
You are entitled to exercise all rights under the contract. In the case of a
group contract, you are entitled to exercise all rights under your certificate
not reserved to the group holder.
The owner is entitled to exercise all rights under the contract. In the
case of a group annuity contract, 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 interest as specified in
his or her certificate. During the accumulation period, the owner is the person
designated in the contract or certificate specifications page or as subsequently
named. During the pay-out period, the annuitant is the owner. If amounts become
payable to any beneficiary under the contract, the beneficiary is the owner.
In the case of non-qualified contracts, the owner's interest in a
contract may be changed, or a certificate or individual contract may be
collaterally assigned, at any time prior to the maturity date, subject to the
rights of any irrevocable beneficiary. Ownership of a group contract may be
assigned at any time by the group holder. Assigning a contract, or changing the
ownership of a contract, may be treated as a (potentially taxable) distribution
of the contract value for federal tax purposes (see "FEDERAL TAX MATTERS"). 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.
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Any change of ownership or assignment must be made in writing. We must
approve any change. Any assignment and any change, if approved, will be
effective as of the date we receive the request at our Annuity Service Office.
We assume no liability for any payments made or actions taken before a change is
approved or an assignment is accepted or responsibility for the validity or
sufficiency of any assignment. An absolute assignment will revoke the interest
of any revocable beneficiary.
In the case of qualified contracts, ownership of the contract or an
owner's interest in the contract generally may not be transferred except by the
trustee of an exempt employees' trust which is part of a retirement plan
qualified under Section 401 of the Code or as otherwise permitted by applicable
IRS regulations. Subject to the foregoing, an owner's 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 us.
ANNUITANT
The "annuitant" is either you or someone you designate.
The annuitant is any natural person or persons whose life is used to
determine the duration of annuity payments involving life contingencies. The
annuitant is entitled to receive all annuity payments under the contract. 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
contract specifications page or in the application, unless changed.
On the death of the annuitant prior to the maturity date, 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. Thus, in the case of an IRA, the owner and
annuitant must be the same person and the annuitant cannot be changed.
BENEFICIARY
The "beneficiary" is the person you designate to receive the death benefit if
you die.
The beneficiary is the person, persons or entity designated in the
contract or certificate specifications page (or as subsequently changed).
However, if there is a surviving contract owner, that person will be treated as
the beneficiary. The beneficiary may be changed subject to the rights of any
irrevocable beneficiary. Any change must be made in writing, approved by us, and
(if approved) will be effective as of the date on which written. We assume no
liability for any payments made or actions taken before the change is approved.
If no beneficiary is living, the contingent beneficiary will be the beneficiary.
The interest of any beneficiary is subject to that of any assignee. If no
beneficiary or contingent beneficiary is living, the beneficiary is the estate
of the deceased contract owner. In the case of certain qualified contracts or
certificates, IRS regulations may limit designations of beneficiaries.
MODIFICATION
We may not modify your contract or certificate without your consent,
except to the extent required to make it conform to any law or regulation or
ruling issued by a governmental agency. However, in the case of group contracts,
on 60 days' notice to the group holder, we may change the administration fees,
mortality and expense risk charges, 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.
DISCONTINUANCE OF NEW OWNERS
In the case of group contracts, on thirty days' notice to the group
holder, we may limit or discontinue acceptance of new applications and the
issuance of new certificates.
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MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL
We may require proof of age, sex or survival of any person upon whose
age, sex or survival any payment depends. If the age or sex of the annuitant has
been misstated, the benefits will be those that would have been provided for the
annuitant's correct age and sex. If we have made incorrect annuity payments, the
amount of any underpayment will be paid immediately and the amount of any
overpayment will be deducted from future annuity payments.
FIXED ACCOUNT INVESTMENT OPTION
Fixed account investment options are not securities.
SECURITIES REGISTRATION Contract values allocated to the fixed account
investment option are held in our general account. Interests in the fixed
account investment option are not registered under the Securities Act of 1933,
as amended, (the "1933 Act") and our general account is not registered as an
investment company under the 1940 Act. Neither interests in the fixed account
investment option nor the general account are subject to the provisions or
restrictions of the 1933 Act or the 1940 Act. Disclosures relating to interests
in the fixed account investment option and the general account nonetheless may
be required by the federal securities laws to be accurate.
GUARANTEE. Pursuant to a Guarantee Agreement dated March 31, 1996, The
Manufacturers Life Insurance Company ("Manulife"), unconditionally guarantees to
us, on behalf of and for the benefit of us and owners of fixed annuity contracts
we issue, that it will, on demand, make funds available to us for the timely
payment of contractual claims under fixed annuity contracts issued after June
27, 1984. This Guarantee covers the fixed portion of the contracts described in
this Prospectus. This Guarantee may be terminated by Manulife on notice to us.
Termination will not affect Manulife's continuing liability with respect to all
fixed annuity contracts issued prior to the termination of the Guarantee except
if:
- the liability to pay contractual claims under the contracts is
assumed by another insurer, or
- we are sold and the buyer's guarantee is substituted for the
Manulife guarantee.
REINSURANCE. Effective June 30, 1995, we entered into a Reinsurance
Agreement with Peoples Security Life Insurance Company ("PEOPLES") pursuant to
which Peoples reinsures certain amounts with respect to the fixed account
portion of the contract described in this Prospectus issued prior to January 1,
1999. Under this Reinsurance Agreement, we remain liable for the contractual
obligations of the contracts' fixed accounts and Peoples agrees to reimburse us
for certain amounts and obligations in connection with the fixed accounts.
Peoples' contractual liability runs solely to us, and no owner shall have any
right of action against Peoples. For contract issued after January 1, 1999, The
Manufacturers Life Insurance Company (U.S.A.) reinsures certain amounts with
respect to the fixed account portion of the contract under a reinsurance
agreement with substantially similar terms to the Peoples Reinsurance Agreement.
Fixed account investment options guarantee interest of at least 3%.
INVESTMENT OPTIONS. Currently, a one-year fixed account investment
option is available under the contract. We 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. We determine the
guaranteed interest rates on new amounts allocated or transferred to a fixed
investment account from time-to-time, according to market conditions. In no
event will the guaranteed rate of interest be less than 3%. Once an interest
rate is guaranteed for a fixed investment account, it is guaranteed for the
duration of the guarantee period and we may not change it.
INVESTMENT ACCOUNTS. You may allocate purchase payments, or make
transfers from the variable investment options, to the one-year fixed account
investment option at any time prior to the maturity date. We establish a
separate investment account each time you allocate or transfer amounts to the
fixed account investment option. Amounts may not be allocated to a fixed account
investment option that would extend the guarantee period beyond the maturity
date.
RENEWALS. At the end of a guarantee period, you may renew the fixed
investment account for another one-year guarantee period at the then current
interest rate or transfer the amounts to a variable account investment option,
all without the imposition of any charge.
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If you do not specify the renewal option desired, we will renew the
one-year guarantee period that 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, we will credit interest up to the maturity date at the then
current interest rate for one-year guarantee periods.
TRANSFERS. During the accumulation period, you may transfer amounts
from the fixed account investment option to the variable account investment
options at the end of the guaranteed period; however, amounts may be transferred
prior to the end of the guarantee period pursuant to the DCA program. Where
there are multiple investment accounts within the one-year fixed account
investment option, amounts must be transferred from the one-year fixed account
investment option on a first-in-first-out basis.
Withdrawals and some transfers from fixed account investment options are
permitted during the accumulation period.
WITHDRAWALS. You may make total and partial withdrawals of amounts held
in the fixed account investment option at any time during the accumulation
period. Withdrawals from the fixed account investment option will be made in the
same manner and be subject to the same limitations as set forth under
"WITHDRAWALS" plus the following provisions also apply to withdrawals from the
fixed account investment options:
- We reserve the right to defer payment of amounts withdrawn
from the fixed account investment option for up to six months
from the date we receive the written withdrawal request. If a
withdrawal is deferred for more than 30 days pursuant to this
right, we will pay interest on the amount deferred at a rate
not less than 3% per year (or a higher rate if required by
applicable law).
- If there are multiple investment accounts under the fixed
account investment option, amounts must be withdrawn from
those accounts on a first-in-first-out basis.
If you do not specify the investment options from which a partial
withdrawal is to be taken, the partial withdrawal will be taken from the
variable account investment options until exhausted and then from the fixed
account investment options. Such withdrawals will be made from the investment
options beginning with the shortest guarantee period. Within such a sequence,
where there are multiple investment accounts within a fixed account investment
option, withdrawals will be made on a first-in-first-out basis. For this
purpose, the DCA fixed account investment option is considered to have a shorter
guarantee period than the one-year fixed account investment option.
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" below).
FIXED ANNUITY OPTIONS. Subject to the distribution of death benefits
provisions (see "DEATH BENEFIT DURING ACCUMULATION PERIOD" above), on death,
withdrawal or the maturity date of the contract, the proceeds may be applied to
a fixed annuity option (see "ANNUITY OPTIONS" above). The amount of each fixed
annuity payment is determined by applying the portion of the proceeds (minus any
applicable premium taxes) applied to purchase the fixed annuity to the
appropriate table in the contract. If the table we are then using is more
favorable to you, we will substitute that table. We guarantee the dollar amount
of fixed annuity payments.
CHARGES AND DEDUCTIONS
Charges and deductions under the contracts are assessed against
purchase payments, contract values or annuity payments. Currently, there are no
deductions made from purchase payments, except for premium taxes in certain
states. In addition, there are deductions from and expenses paid out of the
assets of the Trust portfolios that are described in the accompanying prospectus
of the Trust.
For information on certain charges and deductions under prior
contracts, see Appendix E.
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We deduct an annual $40 fee and asset-based charges totaling 0.45% on an annual
basis for administration, and mortality and expense risks.
ADMINISTRATION FEES
Two fees may be deducted under a contract to compensate us for our
costs of providing all administrative services attributable to the contracts and
the operations of the Variable Account:
Normally, we will deduct an administration fee of $40 each year.
However, if during the accumulation period the contract value is equal to or
greater than $25,000 at the time of the fees assessment, we will waive the fee.
During the accumulation period, this administration fee is deducted on the last
day of each contract year. It is withdrawn from each investment option in the
same proportion that the value of that investment option bears to the contract
value. If the entire contract value is withdrawn on other than the last day of
any contract year, the $40 administration fee will be deducted from the amount
paid. During the annuity period, the fee is deducted on a pro-rata basis from
each annuity payment.
A daily charge in an amount equal to 0.15% of the value of each
variable investment account on an annual basis is deducted from each sub-account
as an administration fee. This asset-based administration fee will not be
deducted from the fixed account investment option. The charge will be reflected
in the contract value as a proportionate reduction in the value of each variable
investment account. Because this portion of the administrative fee is a
percentage of assets rather than a flat amount, larger contract values will in
effect pay a higher proportion of this portion of the administrative expense
than smaller contract values.
Even though administrative expenses may increase, we guarantee that we
will not increase the amount of the administration fees as to any outstanding
individual contracts or any certificates under group contracts issued prior to
the effective date of the modification of those fees.
REDUCTION OR ELIMINATION OF ANNUAL ADMINISTRATION FEES
The amount of the annual administration fee on a contract or
certificate may be reduced or eliminated when sales of the contracts or
certificates are made to a group of individuals in such a manner that results in
savings of administration expenses. We will determine entitlement to such a
reduction or elimination of the administration charges in the following manner:
- The size and type of group to which administrative services
are provided will be considered.
- The total amount of purchase payments to be received will be
considered.
- There may be other circumstances of which we are not presently
aware, which could result in reduced administrative expense.
If, after consideration of the foregoing factors, we determine that
there will be a reduction in administration expenses, we will provide a
reduction in the annual administration fee. The administration fee may be waived
when a contract is issued to officers, directors or employees (or a relative
thereof), of us or of Manulife, the Trust or any of their affiliates. In no
event will reduction or elimination of the administration fees be permitted
where that reduction or elimination will be unfairly discriminatory to any
person. FOR FURTHER INFORMATION, CONTACT YOUR REGISTERED REPRESENTATIVE.
MORTALITY AND EXPENSE RISKS CHARGE
The mortality risk we assume is the risk that annuitants may live for a
longer period of time than we estimate. We assume this mortality risk by virtue
of annuity rates incorporated into the contract which cannot be changed in the
case of individual contracts or with respect to existing certificates in the
case of group contracts. This assures each annuitant that his or her longevity
will not have an adverse effect on the amount of annuity payments. We also
assume mortality risks in connection with our guarantee that, if the contract
owner dies during the accumulation period, we will pay a death benefit. (See
"DEATH BENEFIT BEFORE MATURITY DATE") The expense risk we assume is the risk
that the administration charges may be insufficient to cover actual expenses.
To compensate us for assuming these risks, we deduct from each of the
sub-accounts a daily charge in an amount equal to 0.30% of the value of the
variable investment accounts on an annual basis. The charge will be reflected in
your contract value as a proportionate reduction in the value of each variable
investment account. The
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rate of the mortality and expense risks charge cannot be increased under an
individual contract. The rate can be increased under a group contract, but only
as to certificates issued after the effective date of the increase and upon 60
days' prior written notice to the group holder.
We may issue contracts and certificates with a mortality or expense
risk charge at rates less than those set out above, if we conclude that the
mortality or expense risks of the groups involved are less than the risks we
have determined for persons for whom the contracts have been generally designed.
If the charge is insufficient to cover the actual cost of the mortality and
expense risks assumed, we will bear the loss. Conversely, if the charge proves
more than sufficient, the excess will be profit to us and will be available for
any proper corporate purpose including, among other things, payment of
distribution expenses. On the Period Certain Only Annuity Option, if you elect
benefits payable on a variable basis, the mortality and expense risk charge is
assessed although we bear only the expense risk and not any mortality risk. The
mortality and expense risk charge is not assessed against the fixed account
investment option.
OPTIONAL DEATH BENEFIT FEE
If you elect the optional annual step death benefit, we will deduct
daily from the value of each of your variable investment accounts the optional
death benefit fee which is equal on an annual basis to 0.15%. This fee
compensates us for assuming mortality and expense risks associated with the
optional annual step death benefit and is in addition to the mortality and
expense risks charge described above. If applicable, the optional death benefit
fee will increase the asset-based fees otherwise charged under the contract by
0.15% on an annual basis.
TAXES
We reserve the right to charge, or provide for, certain taxes against
purchase payments, contract values or annuity payments. Such taxes may include
premium taxes or other taxes levied by any government entity which we determine
to have resulted from our:
- establishment or maintenance of the Variable Account,
- receipt of purchase payments,
- issuance of the contacts, or
- commencement or continuance of annuity payments under the
contracts or certificates.
In addition, we will withhold taxes to the extent required by applicable law.
Except for residents of those states which apply premium taxes upon
receipt of purchase payments, premium taxes will be deducted from the contract
value used to provide for fixed or variable annuity payments. For residents of
those states which apply premium taxes upon receipt of purchase payments,
premium taxes will be deducted upon payment of any withdrawal benefits, upon any
annuitization, or payment of death benefits. The amount deducted will depend on
the premium tax assessed in the applicable state. State premium taxes currently
range from 0% to 3.5% depending on the jurisdiction and the tax status of the
contract and are subject to change by the legislature or other authority. See
Appendix B for a table of State Premium Taxes.
EXPENSES OF DISTRIBUTING CONTRACTS
MSS, the principal underwriter for the contracts, pays compensation to
selling brokers in varying amounts which under normal circumstances are not
expected to exceed 0.30% of purchase payments plus 0.30% of the contract value
per year commencing one year after each purchase payment. These expenses are not
assessed against the contracts but are instead paid by MSS. See "Distribution of
Contracts" for further information.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion of the federal income tax treatment of the
contract is not exhaustive, does not purport to cover all situations, and is not
intended as tax advice. The federal income tax treatment of an annuity
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contract is unclear in certain circumstances. You should consult a qualified tax
advisor with regard to the application of the law to your circumstances. This
discussion is based on the Code, IRS 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. References
below to the contract generally include the certificate in the case of group
contracts.
This discussion does not address state or local tax consequences
associated with the purchase of a contract. In addition, WE MAKE NO GUARANTEE
REGARDING ANY TAX TREATMENT -- FEDERAL, STATE, OR LOCAL -- OF ANY CONTRACT OR OF
ANY TRANSACTION INVOLVING A CONTRACT.
OUR TAX STATUS
We are taxed as a life insurance company. Because the operations of the
Variable Account are a part of, and are taxed with, our operations, the Variable
Account is not separately taxed as a "regulated investment company" under the
Code. Under existing federal income tax laws, we are not taxed on the investment
income and capital gains of the Variable Account. We do not anticipate that we
will be taxed on the income and gains of the Variable Account, but if we are, we
may impose a corresponding charge against the Variable Account.
TAXATION OF ANNUITIES IN GENERAL
Gains inside the contract are usually tax-deferred until you make a withdrawal,
the annuitant starts receiving annuity benefit payments, or the beneficiary
receives a death benefit payment.
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any
increase in the contract value is generally not taxable to the owner or
annuitant until received, either in the form of annuity payments, or in some
other form of distribution. Certain requirements must be satisfied in order for
this general rule to apply, including:
- the contract must be owned by an individual (or treated as
owned by an individual),
- the investments of the Variable Account must be "adequately
diversified" in accordance with IRS regulations,
- we, rather than the owner, must be considered the owner of the
assets of the Variable Account for federal tax purposes, and
- the contract must provide for appropriate amortization,
through annuity payments, of the contract's purchase payments
and earnings, e.g., the pay-out period must not begin near the
end of the annuitant's life expectancy.
NON-NATURAL OWNERS. As a general rule, deferred annuity contracts held
by "non-natural persons" (such as a corporation, trust or other similar entity)
are not treated as annuity contracts for federal income tax purposes. The
investment income on such contracts is taxed as ordinary income that is received
or accrued by the owner of the contract during the taxable year. There are
several exceptions to this general rule for non-natural contract owners. First,
contracts will generally be treated as held by a natural person if the nominal
owner is a trust or other entity which holds the contract as an agent for a
natural person. This special exception will not apply, however, in the case of
any employer who is the nominal owner of an annuity contract under a
non-qualified deferred compensation arrangement for its employees.
Exceptions to the general rule for non-natural contract owners will
also apply with respect to:
- contracts acquired by an estate of a decedent by reason of the
death of the decedent,
- certain qualified contracts,
- certain annuities purchased by employers upon the termination
of certain qualified plans,
- certain annuities used in connection with structured
settlement agreements, and
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- 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.
DIVERSIFICATION REQUIREMENTS. For a contract to be treated as an
annuity for Federal income tax purposes, the investments of the Variable Account
must be "adequately diversified" in accordance with Treasury Department
Regulations. The Secretary of the Treasury has issued regulations which
prescribe standards for determining whether the investments of the Variable
Account are "adequately diversified." If the Variable Account failed to comply
with these diversification standards, a contract would not be treated as an
annuity contract for federal income tax purposes and the owner would generally
be taxable currently on the excess of the contract value over the premiums paid
for the contract.
Although we do not control the investments of the Trust, we expect that
the Trust will comply with such regulations so that the Variable Account will be
considered "adequately diversified."
OWNERSHIP TREATMENT. In certain circumstances, a variable annuity
contract owner may be considered the owner, for federal income tax purposes, of
the assets of the insurance company separate account used to support his or her
contract. In those circumstances, income and gains from such separate account
assets would be includible in the owner's gross income. The IRS has stated in
published rulings that a variable contract owner will be considered the owner of
separate account assets if the owner possesses "incidents of ownership" in those
assets, such as the ability to exercise investment control over the assets. In
addition, the Treasury Department announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued in the
form 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 the contract 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 contract has the choice of many more investment
options to which to allocate premiums and contract values, and may be able to
transfer among investment options more frequently than in such rulings. THESE
DIFFERENCES COULD RESULT IN THE OWNER BEING TREATED AS THE OWNER OF THE ASSETS
OF THE VARIABLE ACCOUNT AND THUS SUBJECT TO CURRENT TAXATION ON THE INCOME AND
GAINS FROM THOSE ASSETS. In addition, we do not know what standards will be set
forth in the regulations or rulings which the Treasury Department has stated it
expects to issue. We therefore reserve the right to modify the contract as
necessary to attempt to prevent the contract owners from being considered the
owners of the assets of the Variable Account.
DELAYED PAY-OUT PERIODS. If the contract's pay-out period commences (or
is scheduled to commence) at a time when the annuitant has reached an advanced
age, e.g., past age 85, it is possible that the contract would not be treated as
an annuity for Federal income tax purposes. In that event, the income and gains
under the contract could be currently includible in the owner's income.
The remainder of this discussion assumes that the contract will be
treated as an annuity contract for Federal income tax purposes and that we will
be treated as the owner of the Variable Account assets.
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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
the "INVESTMENT IN THE CONTRACT." In the case of a full withdrawal, amounts
received are includible in income to the extent they exceed the "investment in
the contract." For these purposes the investment in the contract at any time
equals the total of the purchase payments made under the contract to that time
(to the extent such payments were neither deductible when made nor excludible
from income as, for example, in the case of certain employer contributions to
qualified contracts) less any amounts previously received from the contract
which were not included in income.
Other than in the case of certain qualified contracts, any amount
received as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) any portion of the contract value, is treated as a
withdrawal of such amount or portion. (Loans, assignments and pledges are
permitted only in limited circumstances under qualified contracts.) The
investment in the contract is increased by the amount includible in income with
respect to such assignment or pledge, though it is not affected by any other
aspect of the assignment or pledge (including its release). If an individual
transfers his or her interest in an annuity contract without adequate
consideration to a person other than the owner's spouse (or to a former spouse
incident to divorce), the owner will be taxed on the difference between the
contract value and his or her investment in the contract at the time of
transfer. In such a case, the transferee's investment in the contract will be
increased to reflect the increase in the transferor's income.
The contract may be used in connection with a wrap fee arrangement.
Under such arrangements, a fee, typically equal to a specified percentage of the
assets included in the arrangement is imposed. We will treat any such fees
assessed against the contract as partial withdrawals from the contract.
There may be special income tax issues present in situations where the
owner and the annuitant are not the same person and are not married to one
another. A tax advisor should be consulted in those situations.
TAXATION OF ANNUITY BENEFIT PAYMENTS
A portion of each annuity payment is usually taxable as ordinary income.
Normally, a portion of each annuity benefit payment is taxable as
ordinary income. The taxable portion of an annuity benefit payment is equal to
the excess of the payment over the "exclusion amount." In the case of variable
annuity payments, the exclusion amount is the investment in the contract
(defined above) allocated to the variable annuity option, adjusted for any
period certain or refund feature, when payments begin to be made divided by the
number of payments expected to be made (determined by IRS regulations which take
into account the annuitant's life expectancy and the form of annuity benefit
selected). In the case of fixed annuity payments, the exclusion amount is the
amount determined by multiplying the payment by the ratio of (a) to (b), where:
(a) is the investment in the contract allocated to the fixed annuity option
(adjusted for any period certain or refund feature) and
(b) is the total expected value of fixed annuity payments for the term of the
contract (determined under IRS regulations).
A simplified method of determining the taxable portion of annuity payments
applies to contracts issued in connection with certain qualified plans other
than IRAs.
Once the total amount of the investment in the contract is excluded
using these ratios, annuity payments will be fully taxable. If annuity payments
cease because of the death of the annuitant and before the total amount of the
investment in the contract is recovered, the unrecovered amount generally will
be allowed as a deduction to the annuitant in his or her last taxable year.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a contract because of the death of an
owner or the annuitant. During the accumulation period, death benefit proceeds
are includible in income as follows:
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- if distributed in a lump sum, they are taxed in the same
manner as a full withdrawal, as described above, or
- if distributed under an annuity option, they are taxed in the
same manner as annuity payments, as described above.
During the pay-out period, where a guaranteed period exists under an
annuity option and the annuitant dies before the end of that period, payments
made to the beneficiary for the remainder of that period are includible in
income as follows:
- if received in a lump sum, they are includible in income to
the extent that they exceed the unrecovered investment in the
contract at that time, or
- if distributed in accordance with the existing annuity option
selected, they are fully excludable from income until the
remaining investment in the contract is deemed to be
recovered, and all annuity payments thereafter are fully
includible in income.
Withdrawals prior to age 59-1/2 may incur a 10% penalty tax.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any payment from a
non-qualified contract. Exception to this penalty tax includes distributions
- received on or after the owner reaches age 59-1/2;
- attributable to the owner's becoming disabled (as defined in
the tax law);
- 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);
- 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);
- made under an annuity contract purchased with a single premium
when the annuity starting date (as defined in the tax law) is
no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less
frequently than annually, during the annuity period; or
- made with respect to certain annuities issued in connection
with structured settlement agreements.
A similar penalty tax, applicable to distributions from certain qualified
contracts, is discussed below.
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AGGREGATION OF CONTRACTS
In certain circumstances, the amount of an annuity payment or a
withdrawal from a contract that is includible in income may be determined by
combining some or all of the non-qualified contracts owned by an individual. For
example, if a person purchases a contract offered by this Prospectus and also
purchases at approximately the same time an immediate annuity, the IRS may treat
the two contracts as one contract. Similarly, if a person transfers part of his
interest in one annuity contract to purchase another annuity contract, the IRS
might treat the two contracts as one contract. In addition, if a person
purchases two or more deferred annuity contracts from the same insurance company
(or its affiliates) during any calendar year, all such contracts will be treated
as one contract. The effects of such aggregation are not clear; however, it
could affect the amount of a withdrawal or an annuity payment that is taxable
and the amount which might be subject to the penalty tax described above.
LOSS OF INTEREST DEDUCTION WHERE CONTRACTS ARE HELD BY OR FOR THE BENEFIT OF
CERTAIN NON-NATURAL PERSONS.
In the case of contracts issued after June 8, 1997 to a non-natural
taxpayer (such as a corporation or a trust), or held for the benefit of such an
entity, recent changes in the tax law may result in a portion of otherwise
deductible interest no longer being deductible by the entity, regardless of
whether the interest relates to debt used to purchase or carry the contract.
However, this interest deduction disallowance does not affect contracts where
the income on such contracts is treated as ordinary income that is received or
accrued by the owner during the taxable year. Entities that are considering
purchasing the contract, or entities that will be beneficiaries under a
contract, should consult a tax advisor.
QUALIFIED RETIREMENT PLANS
Special tax provisions apply to qualified plans. Consult your tax advisor prior
to using the contract with a qualified plan.
The contracts are also designed for use in connection with certain
types of retirement plans which receive favorable treatment under the Code
("QUALIFIED PLANS"). Numerous special tax rules apply to the participants in
qualified plans and to the contracts used in connection with qualified plans.
Therefore, no attempt is made in this Prospectus to provide more than general
information about use of the contract with the various types of qualified plans.
Brief descriptions of various types of qualified plans in connection with which
we may issue a contract. Persons intending to use the contract in connection
with a qualified plan should consult a tax advisor.
Brief descriptions of various types of qualified plans in connection
with which we may issue a contract are contained in Appendix D of this
Prospectus. Appendix D also discusses certain potential tax consequences
associated with the use of the contract with qualified plans which should be
considered by a purchaser.
The tax rules applicable to qualified plans vary according to the type
of plan and the terms and conditions of the plan itself. For example, for both
withdrawals and annuity payments under certain qualified contracts, there may be
no "investment in the contract" and the total amount received may be taxable.
Also, loans from qualified contracts, where allowed, are subject to a variety of
limitations, including restrictions as to the amount that may be borrowed, the
duration of the loan, and the manner in which the loan must be repaid. (You
should always consult your tax advisor and retirement plan fiduciary prior to
exercising your loan privileges.)
Both the amount of the contribution that may be made, and the tax
deduction or exclusion that you may claim for that contribution, are limited
under qualified plans. If you are considering the purchase of a contract in
connection with a qualified plan, you should consider, in evaluating the
suitability of the contract, that the contract requires a minimum initial
payment of $25,000. If this contract is used in connection with a qualified
plan, the owner and annuitant must be the same individual. If a co-annuitant is
named, all distributions made while the annuitant is alive must be made to the
annuitant. Also, if a co-annuitant is named who is not the annuitant's spouse,
the annuity options which are available may be limited, depending on the
difference in ages between the annuitant and co-annuitant. Furthermore, the
length of any guarantee period may be limited in some circumstances.
Additionally, for contracts issued in connection with qualified plans subject to
the Employee Retirement Income Security Act, the spouse or ex-spouse of the
owner will have rights in the contract. In such a case, the owner may need the
consent of the spouse or ex-spouse to change annuity options or make a
withdrawal from the contract.
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<PAGE> 39
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 IRAs and
other qualified plans will result in the imposition of an excise tax. This
excise tax generally equals 50% of the amount by which a minimum required
distribution exceeds the actual distribution from the qualified plan. In the
case of IRAs, distributions of minimum amounts (as specified in the tax law)
must generally commence by April 1 of the calendar year following the calendar
year in which the owner attains age 70-1/2. In the case of certain other
qualified plans, distributions of such minimum amounts must generally commence
by the later of this date or April 1 of the calendar year following the calendar
year in which the employee retires.
There is also a 10% penalty tax on the taxable amount of any payment
from certain qualified contracts (but not Section 457 plans). (The amount of the
penalty tax is 25% of the taxable amount of any payment received from a "SIMPLE
retirement account" during the 2-year period beginning on the date the
individual first participated in any qualified salary reduction arrangement - as
defined in the tax law - maintained by the individual's employer.) There are
exceptions to this penalty tax which vary depending on the type of qualified
plan. In the case of an "Individual Retirement Annuity" or an "IRA," including a
"SIMPLE IRA," exceptions provide that the penalty tax does not apply to a
payment:
- received on or after the owner reaches age 59-1/2,
- received on or after the owner's death or because of the
owner's disability (as defined in the tax law), or
- made as a series of substantially equal periodic payments (not
less frequently than annually) for the life (or life
expectancy) of the owner or for the joint lives (or joint life
expectancies) of the owner and designated beneficiary (as
defined in the tax law).
These exceptions, as well as certain others not described herein, generally
apply to taxable distributions from other qualified plans (although, in the case
of plans qualified under Sections 401 and 403, the exception for substantially
equal periodic payments applies only if the owner has separated from service).
In addition, the penalty tax does not apply to certain distributions from IRAs
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. If you wish to take a distribution from an IRA for these
purposes, you should consult your tax advisor.
Certain special tax considerations may apply if the contract is used in
connection with a wrap fee arrangement. For example, if the contract is
qualified under section 403(b) of the Code, distribution restrictions applicable
to such contacts may prohibit the use of contract value to pay wrap fees.
When issued in connection with a qualified plan, a contract will be
amended as generally necessary to conform to the requirements of the plan.
However, the rights of any person to any benefits under qualified plans may be
subject to the terms and conditions of the plans themselves, regardless of the
terms and conditions of the contract. In addition, we will not be bound by terms
and conditions of qualified plans to the extent those terms and conditions
contradict the contract, unless we consent.
DIRECT ROLLOVERS
If the contract is used in connection with a retirement plan that is
qualified under Sections 401(a), 403(a), or 403(b) of the Code, any "ELIGIBLE
ROLLOVER DISTRIBUTION" from the contract will be subject to "direct rollover"
and mandatory withholding requirements. An eligible rollover distribution
generally is any taxable distribution from such qualified plans, excluding
certain amounts such as (i) minimum distributions required under Section
401(a)(9) of the Code, (ii) certain distributions for life, life expectancy, or
for 10 years or more which are part of a "series of substantially equal periodic
payments," and (iii) hardship distributions as defined in the tax law.
Under these requirements, Federal income tax equal to 20% of the
eligible rollover distribution will be withheld from the amount of the
distribution. Unlike withholding on certain other amounts distributed from the
contract, discussed below, the owner cannot elect out of withholding with
respect to an eligible rollover distribution However, this 20% withholding will
not apply if, instead of receiving the eligible rollover distribution,
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<PAGE> 40
the person entitled to the distribution elects to have it directly transferred
to certain qualified plans. Prior to receiving an eligible rollover
distribution, a notice will be provided explaining generally the direct rollover
and mandatory withholding requirements and how to avoid the 20% withholding by
electing a direct rollover.
LOANS
Some qualified contracts have a loan feature.
We offer a loan privilege only to owners of contracts issued in
connection with Section 403(b) qualified plans that are not subject to Title I
of ERISA. If you are not an owner of such a contract, none of this discussion
about loans applies to your contract. If you are an owner of such a contract,
you may borrow from us, using your contract as the only security for the loan.
Loans are subject to certain tax law restrictions and to applicable retirement
program rules (collectively, "LOAN RULES"). You should consult your tax advisor
and retirement plan fiduciary prior to taking a loan under the contract.
The maximum loan value of a contract is normally 80% of the contract
value, although loan rules may serve to reduce that maximum in some cases. The
amount available for a loan at any given time is the loan value less any unpaid
prior loans. Unpaid prior loans equal the amount of any prior loans plus
interest accrued on those loans. Loans will be made only upon written request
from the owner. We will make loans within seven days of receiving a properly
completed loan application (applications are available from our Annuity Service
Office), subject to postponement under the same circumstances that payment of
withdrawals may be postponed (see "WITHDRAWALS").
When you request a loan, we will reduce your investment in the
investment accounts and transfer the amount of the loan to the "LOAN ACCOUNT," a
part of our general account. You may designate the investment accounts from
which the loan is to be withdrawn. Absent such a designation, the amount of the
loan will be withdrawn from the investment accounts in accordance with the rules
for making partial withdrawals (see "WITHDRAWALS"). The contract provides that
you may repay unpaid loans at any time. Under applicable loan rules, loans
generally must be repaid within five years, repayments must be made at least
quarterly and repayments must be made in substantially equal amounts. When a
loan is repaid, the amount of the repayment will be transferred from the loan
account to the investment accounts. You may designate the investment accounts to
which a repayment is to be allocated. Otherwise, the repayment will be allocated
in the same manner as your most recent purchase payment. On each contract
anniversary, we will transfer from the investment accounts to the loan account
the excess of the balance of your loan over the balance in your loan account.
We charge interest of 6% per year on contract loans. Loan interest is
payable in arrears and, unless paid in cash, the accrued loan interest is added
to the amount of the debt and bears interest at 6% as well. We credit interest
with respect to amounts held in the loan account at a rate of 4% per year.
Consequently, the net cost of loans under the contract is 2%. If on any date
unpaid loans under your contract exceed your contract value, your contract will
be in default. In such case you will receive a notice indicating the payment
needed to bring your contract out of default and will have a thirty-one day
grace period within which to pay the default amount. If the required payment is
not made within the grace period, your contract may be terminated without value.
The amount of any unpaid loans will be deducted from the death benefit
otherwise payable under the contract. In addition, loans, whether or not repaid,
will have a permanent effect on the contract value because the investment
results of the investment accounts will apply only to the unborrowed portion of
the contract value. The longer a loan is unpaid, the greater the effect is
likely to be. The effect could be favorable or unfavorable. If the investment
results are greater than the rate being credited on amounts held in your loan
account while your loan is unpaid, your contract value will not increase as
rapidly as it would have if no loan were unpaid. If investment results are below
that rate, your contract value will be greater than it would have been had no
loan been outstanding.
FEDERAL INCOME TAX WITHHOLDING
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<PAGE> 41
We may be required to withhold amounts from some payments for federal income tax
payments.
We will withhold and remit to the U.S. Government a part of the taxable
portion of each distribution made under a contract unless the person receiving
the distribution notifies us at or before the time of the distribution that he
or she elects not to have any amounts withheld. In certain circumstances, we may
be required to withhold tax. The withholding rates applicable to the taxable
portion of periodic annuity payments are the same as the withholding rates
generally applicable to payments of wages. In addition, the withholding rate
applicable to the taxable portion of non-periodic payments (including
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
PERFORMANCE DATA
Each of the sub-accounts may quote total return figures in its
advertising and sales materials. PAST PERFORMANCE FIGURES ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE OF ANY SUB-ACCOUNT. The sub-accounts may advertise
both "standardized" and "non-standardized" total return figures. Standardized
figures will include average annual total return figures for one, five and ten
years, or from the inception date of the relevant sub-account of the Variable
Account (if that period since inception is shorter than one of those periods).
Non-standardized total return figures may be quoted including figures that do
not assume redemption at the end of the time period. Non-standardized figures
also include total return numbers from the inception date of the portfolio or
ten years, whichever period is shorter. Where the period since inception is less
than one year, the total return quoted will be the aggregate return for the
period.
Average annual total return is the average annual compounded rate of
return that equates a purchase payment to the market value of that purchase
payment on the last day of the period for which 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 the contract, standardized
performance data will be the historical performance of the Trust portfolio from
the date the applicable sub-account of the Variable Account first became
available for investment under other contracts that we offer, adjusted to
reflect current contract charges. In the case of non-standardized performance,
performance figures will be the historical performance of the Trust portfolio
from the inception date of the portfolio (or in the case of the Trust portfolios
created in connection with the merger of Manulife Series Fund, Inc. into the
Trust, the inception date of the applicable predecessor Manulife Series Fund
portfolio), adjusted to reflect current contract charges.
ASSET ALLOCATION AND TIMING SERVICES
We are aware that certain third parties are offering asset allocation
and timing services in connection with the contracts. In certain cases we have
agreed to honor transfer instructions from such asset allocation and timing
services where we have received powers of attorney, in a form acceptable to us,
from the contract owners participating in the service. WE DO NOT ENDORSE,
APPROVE OR RECOMMEND SUCH SERVICES IN ANY WAY AND YOU SHOULD BE AWARE THAT FEES
PAID FOR SUCH SERVICES ARE SEPARATE AND IN ADDITION TO FEES PAID UNDER THE
CONTRACTS.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 830.105 of the Texas Government Code permits participants in
the Texas Optional Retirement Program ("ORP") to withdraw their interest in a
variable annuity contract issued under the ORP only upon:
- termination of employment in the Texas public institutions of
higher education,
- retirement,
- death, or
- the participant's attainment of age 70-1/2.
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<PAGE> 42
Accordingly, before any amounts may be distributed from the contract, proof must
be furnished to us that one of these four events has occurred. The foregoing
restrictions on withdrawal do not apply in the event a participant in the ORP
transfers the contract value to another contract or another qualified custodian
during the period of participation in the ORP. Loans are not available under
contracts subject to the ORP.
DISTRIBUTION OF CONTRACTS
We pay broker/dealers to sell the Contracts.
Manufacturers Securities Services, LLC ("MSS"), a Delaware limited
liability company that we control, is the principal underwriter of the
contracts. It is also the investment adviser to the Trust. MSS is a
broker-dealer registered under the Securities Exchange Act of 1934 ("1934 Act")
and a member of the National Association of Securities Dealers, Inc. ("NASD")
and is located at 73 Tremont Street, Boston, Massachusetts 02118-3915. Sales of
the contracts and certificates will be made by registered representatives of
broker-dealers authorized by ManEquity to sell them. Such registered
representatives will also be licensed insurance agents of the Company. MSS will
pay distribution compensation to selling brokers/dealers in varying amounts
which under normal circumstances are not expected to exceed 0.30% of purchase
payments. In addition, MSS may pay trail compensation after the first contract
year, which under normal circumstances will not exceed 0.30% 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.
CONTRACT OWNER INQUIRIES
Your inquiries should be directed to our Annuity Service Office at P.O.
Box 9230, Boston, Massachusetts 02205-9230.
CONFIRMATION STATEMENTS
You will be sent confirmation statements for certain transactions in
your account. You should carefully review these statements to verify their
accuracy. Any mistakes should immediately be reported to our Company's Annuity
Service Office. If you fail to notify our Annuity Service Office of any mistake
within 60 days of the mailing of the confirmation statement, you will be deemed
to have ratified the transaction.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party
or to which the assets of the Variable Account are subject. Neither we nor MSS
are involved in any litigation that is of material importance to either, or that
relates to the Variable Account.
YEAR 2000 ISSUES
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect us, including those
related to customers, suppliers, or other third parties, have been fully
resolved.
CANCELLATION OF CONTRACT
We may, at our option, cancel a contract at the end of any two
consecutive contract years in which no purchase payments by or on behalf of you,
have been made, if both:
- the total purchase payments made for the contract, less any
withdrawals, are less than $2,000; and
- the contract value at the end of such two year period is less
than $2,000.
We, as a matter of administrative practice, will attempt to notify you prior to
such cancellation in order to allow you to make the necessary purchase payment
to keep the contract in force. The cancellation of contract provisions may vary
in certain states in order to comply with the requirements of insurance laws and
regulations in such states.
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<PAGE> 43
VOTING INTEREST
As stated above under "The Trust," we will vote shares of the Trust
portfolios held in the Variable Account at the Trust's shareholder meetings
according to voting instructions received from the persons having the voting
interest under the contracts.
Accumulation Period. During the accumulation period, the owner has the
voting interest under a contract. The number of votes for each portfolio for
which voting instructions may be given is determined by dividing the value of
the investment account corresponding to the sub-account in which such portfolio
shares are held by the net asset value per share of that portfolio.
Pay-out Period. During the pay-out period, the annuitant has the voting
interest under a contract. The number of votes as to each portfolio for which
voting instructions may be given is determined by dividing the reserve for the
contract allocated to the sub-account in which such portfolio shares are held by
the net asset value per share of that portfolio.
Generally, the number of votes tends to decrease as annuity payments
progress since the amount of reserves attributable to a contract will usually
decrease after commencement of annuity payments. We will determine the number of
portfolio shares for which voting instructions may be given not more than 90
days prior to the meeting.
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APPENDIX A
SPECIAL TERMS
The following terms as used in this Prospectus have the indicated
meanings:
ACCUMULATION UNIT - A unit of measure that is used to calculate the
value of the variable portion of the contract before the maturity date.
ACCUMULATION PERIOD - The accumulation period is the period between the
issue date of the contract and the maturity date of the contract. During this
period, purchase payment(s) are typically made to the contract by the owner.
ANNUITANT - Any natural person or persons to whom annuity payments are
made and whose life is used to determine the duration of annuity payments
involving life contingencies. If the contract owner names more than one person
as an "annuitant," the second person named shall be referred to as
"co-annuitant." The "annuitant" and "co-annuitant" will be referred to
collectively as "annuitant." The "annuitant" is as designated on the
specification page of the contract or certificate, unless changed.
ANNUITY OPTION - The method you select. At the maturity date, the
Company will provide an annuity with payments guaranteed for 10 years and for
the lifetime of the annuitant, if the annuitant lives more than 10 years. This
will be the annuity option unless changed.
ANNUITY SERVICE OFFICE - The address of our Annuity Service Office 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 you that serves as your
application for an individual contract or participation under a group contract.
BENEFICIARY - The person, persons or entity entitled to the death
benefit under the contract upon the death of a contract owner or, in certain
circumstances, an annuitant. The beneficiary is as specified in the contract or
certificate specifications page, unless changed. If there is a surviving
contract owner, that person will be deemed the beneficiary.
CERTIFICATE - The document which is issued to you which summarizes your
rights and benefits as owner of a participating interest in a group contract.
CONTRACT ANNIVERSARY - For an individual contract, the anniversary of
the contract date. For a group contract, the anniversary of the date of issue of
a certificate under the contract.
CONTRACT APPLICATION - The document signed by you, as Group Holder,
that evidences your application for a Contract or, where context requires, the
document signed by you, as a prospective owner applying for an individual
contract or a certificate evidencing participation in a group contract.
CONTRACT DATE - The date of issue of the contract.
CONTRACT VALUE - The total of the investment account values and, if
applicable, any amount in the loan account attributable to the contract.
CONTRACT YEAR - The period of twelve consecutive months beginning on
the contract date or any anniversary thereof.
DEBT - Any amounts in 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.
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<PAGE> 45
DUE PROOF OF DEATH - Due Proof of Death is required upon the death of
the contract owner or annuitant, as applicable.
One of the following must be received at our 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 our Annuity Service Office.
FIXED ANNUITY - An annuity option with payments which are predetermined
and guaranteed as to dollar amount.
GENERAL ACCOUNT - All our assets other than assets in separate
accounts.
GROUP HOLDER - The person, persons or entity to whom a group contract
is issued.
INVESTMENT ACCOUNT - An account we establish which represents your
interest in an investment option during the Accumulation Period.
INVESTMENT ACCOUNT VALUE - The value of your allocation to an
investment account.
INVESTMENT OPTIONS - The investment choices available to contract
owners. Currently, there are thirty-three variable account investment options
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.
MARKET VALUE CHARGE - A charge that may be assessed if amounts are
withdrawn or transferred from the three, five or seven year investment options
prior to the end of the interest rate guarantee period.
MATURITY DATE - The date on which annuity benefits commence. The
maturity date is the date specified on the contract or 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.
NET PURCHASE PAYMENT - The purchase payment less the amount of premium
tax, if any.
NON-QUALIFIED CONTRACTS - Contracts which are not issued under
qualified plans.
OWNER - In the case of a group contract, 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. In the case of an
individual contract, the person, persons or entity named in the contract and
entitled to all of the ownership rights under the contract. The owner is
specified contract or certificate specifications page, unless changed.
PAY-OUT PERIOD - The pay-out period is the time (beginning on the
maturity date) when we make payments to you.
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 you pay to us as consideration for the
benefits provided by the contract.
QUALIFIED CONTRACTS - Contracts issued under qualified plans.
QUALIFIED PLANS - Retirement plans which receive favorable tax
treatment under Section 401, 403, 408, 408A or 457 of the Internal Revenue Code
of 1986, as amended.
SEPARATE ACCOUNT - A segregated account that we establish that is not
commingled with our general assets and obligations.
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<PAGE> 46
SUB-ACCOUNT(s) - One or more of the sub-accounts of the Variable
Account. Each sub-account is invested in shares of a different Trust portfolio.
VALUATION DATE - Any date on which the New York Stock Exchange is open
for business and the net asset value of a Trust portfolio is determined.
VALUATION PERIOD - Any period from one valuation date to the next,
measured from the time on each such date that the net asset value of each
portfolio is determined.
VARIABLE ACCOUNT - One of our separate accounts that is used to fund
the contracts.
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.
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<PAGE> 47
B-1
<PAGE> 48
APPENDIX B
[TO BE UPDATED BY ACTUARIAL]
STATE PREMIUM TAXES
Premium taxes vary according to the state and are subject to change. In many
jurisdictions there is no tax at all. For current information, a tax adviser
should be consulted.
<TABLE>
<CAPTION>
TAX RATE
NON-QUALIFIED QUALIFIED
STATE CONTRACTS CONTRACTS
<S> <C> <C>
CALIFORNIA 0.50% 2.35%
DISTRICT OF COLUMBIA 2.25% 2.25%
KENTUCKY 2.00% 2.00%
MAINE 0.00% 2.00%
NEVADA 0.00% 3.50%
PUERTO RICO 1.00% 1.00%
SOUTH DAKOTA 0.00% 1.25%
WEST VIRGINIA 1.00% 1.00%
WYOMING 0.00% 1.00%
</TABLE>
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<PAGE> 49
APPENDIX C
PENNSYLVANIA MAXIMUM MATURITY AGE
For all contracts issued in Pennsylvania the maximum maturity age based upon the
issue age of the annuitant is as follows:
ISSUE AGE MAXIMUM MATURITY AGE
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
The annuitant must exercise a settlement annuity option no later than the
maximum maturity age stated above. For example, an annuitant who is age 60 at
issue must exercise a settlement option prior to age 86. We will use the issue
age of the youngest annuitant in the determination of the required settlement
option date.
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<PAGE> 50
APPENDIX D
QUALIFIED PLAN TYPES
Set forth below are brief descriptions of the types of qualified plans in
connection with which we will issue contracts. Persons intending to use the
contract in connection with qualified plans should consult their tax advisor.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to
an individual retirement program known as an "Individual Retirement Annuity" or
"IRA." IRAs are subject to limits on the amounts that may be contributed and
deducted, the persons who may be eligible and on the time when distributions may
commence. Also, distributions from certain other types of qualified retirement
plans may be "rolled over" on a tax-deferred basis into an IRA. The contract may
not, however be used in connection with an "Education IRA" under Section 530 of
the Code.
IRAs generally may not provide life insurance coverage, but they may
provide a death benefit that equals the greater of the premiums paid and the
contract value. The contract provides an optional death benefit that in certain
circumstances may exceed the greater of the purchase payments and the contract
value. It is possible that the optional death benefit could be viewed as
providing life insurance coverage with the result that the contract would not be
viewed as satisfying the requirements of an IRA.
SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRAS)
Section 408(k) of the Code allows employers to establish simplified
employee pension plans for their employees, using the employees' IRAs for such
purposes, if certain criteria are met. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to IRAs.
As discussed above (see Individual Retirement Annuities),
there is some uncertainty regarding the treatment of the contract's optional
death benefit for purposes of the tax rules governing IRAs (which would include
SEP-IRAs).
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 treatment of the contract's optional
death benefit for purposes of the tax rules governing IRAs (which would include
SIMPLE IRAs). Employers intending to use the contract with the optional death
benefit in connection with such plans should seek competent advice.
ROTH IRAS
Section 408A of the Code permits eligible individuals to contribute to
a type of IRA known as a "Roth IRA." Roth IRAs are generally subject to the same
rules as non-Roth IRAs, but differ in certain respects.
Among the differences are that contributions to a Roth IRA are not
deductible and "qualified distributions" from a Roth IRA are excluded from
income. A qualified distribution is a distribution that satisfies two
requirements. First, the distribution must be made in a taxable year that is at
least five years after the first taxable year for which a contribution to any
Roth IRA established for the owner was made. Second, the distribution must be:
- made after the owner attains age 59-1/2;
- made after the owner's death;
- attributable to the owner being disabled; or
- a qualified first-time homebuyer distribution within the
meaning of Section 72(t)(2)(F) of the Code.
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<PAGE> 51
In addition, distributions from Roth IRAs need not commence when the owner
attains age 70-1/2. A Roth IRA may accept a "qualified rollover contribution"
from a non-Roth IRA, but a Roth IRA may not accept rollover contributions from
other qualified plans.
As discussed above (see Individual Retirement Annuities), there is some
uncertainty regarding the treatment of the contract's optional death benefit for
purposes of the tax rules governing IRAs (which would include Roth IRAs).
Furthermore, the state tax treatment of a Roth IRA may differ from the Federal
income tax treatment of a Roth IRA. If you intend to use the contract in
connection with a Roth IRA, you should seek competent tax advice.
CORPORATE AND SELF-EMPLOYED ("H.R. 10" AND "KEOGH") PENSION AND PROFIT-SHARING
PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of tax-favored retirement plans for employees. The
Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R. 10" or "Keogh," permits self-employed individuals also to
establish such tax-favored retirement plans for themselves and their employees.
Such retirement plans may permit the purchase of the contracts in order to
provide benefits under the plans.
The contract provides an optional death benefit that in certain
circumstances may exceed the greater of the purchase payments and the contract
value. It is possible that the IRS could characterize the death benefit as an
"incidental death benefit." If so, the contract owner could be deemed to receive
currently taxable income. In addition, there are limitations on the amount of
the incidental benefits that may be provided under pension and profit sharing
plans. The provision of such benefits also may result in current taxable income
to participants. Employers intending to use the contract in connection with such
plans should seek competent advice.
TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and
employees of certain types of charitable, educational and scientific
organizations specified in Section 501(c)(3) of the Code to have their employers
purchase annuity contracts for them and, subject to certain limitations, to
exclude the amount of purchase payments from gross income for tax purposes.
These annuity contracts are commonly referred to as "tax-sheltered annuities".
Purchasers of the contracts for such purposes should seek competent advice as to
eligibility, limitations on permissible amounts of purchase payments and other
tax consequences associated with the contracts.
In particular, purchasers should consider that the contract provides an
optional death benefit that in certain circumstances may exceed the greater of
the purchase payments and the contract value. It is possible that such a death
benefit could be characterized as an "incidental death benefit." If so, the
contract owner could be deemed to receive currently taxable income. In addition,
there are limitations on the amount of incidental benefits that may be provided
under a tax-sheltered annuity. Even if the death benefit under the contract were
characterized as an incidental death benefit, it is unlikely to violate those
limits unless the purchaser also purchases a life insurance contract as part of
his or her tax-sheltered annuity plan.
Tax-sheltered annuity contracts must contain restrictions on
withdrawals of:
- contributions made pursuant to a salary reduction agreement in
years beginning after December 31, 1988,
- earnings on those contributions, and
- earnings after 1988 on amounts attributable to salary
reduction contributions (and earnings on those contributions)
held as of the last day of the year beginning before January
1, 1989.
These amounts can be paid only if the employee has reached age 59-1/2, separated
from service, died, or become disabled (within the meaning of the tax law), or
in the case of hardship (within the meaning of the tax law). Amounts permitted
to be distributed in the event of hardship are limited to actual contributions;
earnings thereon cannot be distributed on account of hardship. Amounts subject
to the withdrawal restrictions applicable to Section 403(b)(7) custodial
accounts may be subject to more stringent restrictions. (These limitations on
withdrawals do not apply to the extent we are directed to transfer some or all
of the contract value to the issuer of another tax-sheltered annuity or into a
Section 403(b)(7) custodial account.)
D-2
<PAGE> 52
DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS
Section 457 of the Code permits employees of state and local
governments and tax-exempt organizations to defer a portion of their
compensation without paying current taxes. The employees must be participants in
an eligible deferred compensation plan. Generally, a contract purchased by a
state or local government or a tax-exempt organization will not be treated as an
annuity contract for federal income tax purposes. The contract will be issued in
connection with a section 457 deferred compensation plan sponsored by a state or
local government only if the plan has established a trust to hold plan assets,
including the contract.
D-3
<PAGE> 53
APPENDIX E
PRIOR CONTRACTS
We have a class of variable annuity contract which is no longer being
issued but under which purchase payments may continue to be made ("PRIOR
CONTACTS"). Prior contracts were sold from March, 1998 until May, 2000.
The prior contracts were designed as funding vehicles for amounts that
are "rolled over" from employee benefit plans. The contracts serve primarily as
Individual Retirement Annuities under Section 408 of the Internal Revenue Code
("IRAs") although they were also used to fund other plans qualifying for special
income tax treatment under the Code or plans not entitled to such special income
tax treatment under the Code.
The principal differences between the contract offered by this
Prospectus and the prior contracts relate to:
- the availability of additional fixed account investment
options under prior contracts,
- the unavailability of the optional annual step death benefit
rider under prior contracts,
- the minimum initial purchase payment, and
- certain charges made by us.
These differences are described below. A separate expense summary for these
prior contracts is also set forth below.
EXPENSE SUMMARY
The following table and Example are designed to assist you in
understanding the various costs and expenses related to the prior contracts. The
table reflects expenses of the Variable Account and the underlying portfolios of
the Trust. In addition to the items listed in the following table, premium taxes
may be applicable to certain contracts. The items listed under "Separate Account
Annual Expenses" are more completely described in this Prospectus. The items
listed under "Trust Annual Expenses" are described in detail in the accompanying
Trust Prospectus.
<TABLE>
<S> <C>
ANNUAL ADMINISTRATION FEE............................................................... $ 30*
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
Mortality and expense risks fee......................................................... 0.85%
Administration fee...................................................................... 0.15%
----
Total Separate Account Annual Expense................................................... 1.00%
</TABLE>
* The $30 annual administration fee will not be assessed prior to the maturity
date if at the time of its assessment the sum of all investment accounts is
greater than or equal to $100,000.
TRUST ANNUAL EXPENSES
See "Summary - Trust Annual Expenses" in the Prospectus.
EXAMPLE
An owner will have paid the following expenses on a $1,000 investment, assuming
a 5% annual return on assets, regardless of whether the owner annuitized as
provided in the contract, surrendered the contract or did not surrender the
contract at the end of the applicable time period:
E-1
<PAGE> 54
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $23 $70 $120 $258
Science & Technology................ $23 $72 $123 $263
International Small Cap............. $25 $78 $133 $284
Aggressive Growth................... $23 $71 $121 $260
Emerging Small Company.............. $23 $71 $121 $259
Mid Cap Growth...................... $22 $67 $116 $249
Overseas............................ $24 $73 $125 $268
International Stock................. $24 $74 $127 $272
Mid Cap Blend....................... $21 $64 $110 $238
Small Company Value................. $24 $74 $126 $269
Global Equity....................... $22 $69 $118 $253
Growth.............................. $21 $64 $110 $236
Large Cap Growth.................... $21 $66 $113 $244
Quantitative Equity................. $19 $60 $102 $222
Blue Chip Growth.................... $21 $65 $111 $239
Real Estate Securities.............. $19 $60 $103 $223
Value............................... $20 $63 $108 $233
Growth and Income................... $20 $61 $104 $226
Equity-Income....................... $21 $65 $111 $240
Income & Value...................... $20 $63 $109 $234
Balanced............................ $20 $63 $108 $233
High Yield.......................... $20 $62 $107 $230
Strategic Bond...................... $20 $63 $108 $233
Global Bond......................... $21 $66 $114 $245
Investment Quality Bond............. $19 $60 $103 $223
Diversified Bond.................... $20 $62 $107 $230
U.S. Government Securities.......... $19 $58 $100 $218
Money Market........................ $17 $53 $ 92 $199
Lifestyle Aggressive 1000........... $23 $71 $122 $261
Lifestyle Growth 820................ $22 $68 $117 $252
Lifestyle Balanced 640.............. $21 $66 $113 $243
Lifestyle Moderate 460.............. $21 $65 $111 $239
Lifestyle Conservative 280.......... $20 $62 $107 $232
</TABLE>
For purposes of presenting the foregoing Example, we have made certain
assumptions. We have assumed that, where applicable, the maximum sales load is
deducted, that there are no transfers or other transactions and that the "Other
Expenses" line item under "Trust Annual Expenses" will remain the same. Those
assumptions, (each of which is mandated by the SEC in an attempt to provide
prospective investors with standardized data with which to compare various
annuity contracts) do not take into account certain features of the contract and
prospective changes in the size of the Trust which may operate to change the
expenses borne by contract owners. CONSEQUENTLY, THE AMOUNTS LISTED IN THE
EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES BORNE BY CONTRACT OWNERS MAY BE GREATER OR LESSER
THAN THOSE SHOWN.
In addition, for purposes of calculating the values in the above
Example, we have translated the $30 annual administration charge listed under
"Annual Contract Fee" to a 0.136% annual asset charge based on a $22,000
estimated approximate average size of contracts of this series.
A TABLE OF ACCUMULATION UNIT VALUES RELATING TO THE CONTRACT IS SET FORTH BELOW.
FIXED ACCOUNT INVESTMENT OPTIONS
FIXED INVESTMENT OPTIONS. Under the contract described in the
prospectus there is only a one year fixed account investment option. Under the
prior contracts there are five fixed account investment options: one, three,
five and seven year investment accounts and a fixed investment account which may
be established under the Dollar Cost
E-2
<PAGE> 55
Averaging ("DCA") program ("DCA fixed investment account") to make automatic
monthly transfers from a fixed account to one or more variable investment
options. (See "Dollar Cost Averaging" below.) We 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. We
determine the guaranteed interest rates on new amounts allocated or transferred
to a fixed investment account from time-to-time, according to market conditions.
In no event will the guaranteed rate of interest be less than 3%. Once an
interest rate is guaranteed for a fixed investment account, it is guaranteed for
the duration of the guarantee period and we may not change it.
RENEWALS. Under the prior contracts, at the end of a guarantee period,
you 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. You 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 you do not specify the renewal option desired, we 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, we 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 we will credit interest up to the maturity date at the then
current interest rate for one year guarantee periods.
MARKET VALUE CHARGE. Under the prior contracts, any amount withdrawn,
transferred or borrowed from a fixed investment account prior to the end of the
guarantee period may be subject to a market value charge. A market value charge
is assessed only when current interest rates are higher than the guaranteed
interest rate on the account. The purpose of the charge is to compensate us for
our investment losses on amounts withdrawn, transferred or borrowed prior to the
maturity date. The formula for calculating this charge is set forth below. 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. In the case of group contracts we reserve the right to
modify the market value charge as to any certificates issued after the effective
date of a change 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).
We make no market value charge on withdrawals from the fixed account
investment options in the following situations:
- death of the owner;
- amounts withdrawn to pay fees or charges;
- amounts applied at the maturity date to purchase an annuity at
the guaranteed rates provided in the contract;
E-3
<PAGE> 56
- amounts withdrawn from investment accounts within one month
prior to the end of the guarantee period;
- amounts withdrawn from a one-year fixed investment account;
- amounts withdrawn in any contract year that do not exceed 10%
of (i) total purchase payments less (ii) any prior partial
withdrawals in that contract year.
Notwithstanding application of the foregoing formula, in no event will
the market value charge
- 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%,
- be greater than 10% of the amount transferred or withdrawn, or
- 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.
DOLLAR COST AVERAGING ("DCA"). If you enter into a DCA agreement, you
may instruct us to transfer monthly a predetermined dollar amount from any
sub-account or the one year fixed account investment option to other
sub-accounts until the amount in the sub-account from which the transfer is made
or DCA fixed account investment option is exhausted. Under the prior contracts,
in states where approved by the state insurance department, a special one year
fixed account investment option may be established under the DCA program to make
automatic transfers. Only purchase payments (and not existing contract values)
may be allocated to the DCA fixed account investment option. The DCA fixed
account investment option is not available under the contract described in the
prospectus.
WITHDRAWALS. Under the prior contracts, the market value
charge described above may apply to withdrawals from any fixed investment option
except for a one year fixed 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.
If you request a partial withdrawal in excess of your amount in the
variable account investment options and do not specify the fixed account
investment options from which the withdrawal is to be made, such withdrawal will
be made from your 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.
LOANS. We offer a loan privilege only to owners of contracts or
certificates issued in connection with Section 403(b) qualified plans that are
not subject to Title I of ERISA. If you own such a contract, you may borrow from
us, using your contract as the only security for the loan, in the same manner
and subject to the same limitations as 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.
DEATH BENEFIT PROVISIONS
OPTIONAL ANNUAL STEP DEATH BENEFIT. The optional annual step death
benefit which is available under the contract described in the prospectus is not
available under the prior contracts.
INITIAL PURCHASE PAYMENT
The minimum initial purchase payment is $25,000 under the contract
described in the prospectus and was $3,500 under the prior contracts.
CERTAIN CHARGES AND DEDUCTIONS
Certain charges and deductions under prior contracts differ from the
charges and deductions under the contract described in the prospectus.
E-4
<PAGE> 57
ANNUAL ADMINISTRATION FEE
Under the contract described in the prospectus, we will normally deduct
an annual administration fee of $40. However, if, during the accumulation
period, the contract value is equal to or greater than $25,000 at the time of
assessment of this fee, we will waive the fee.
For prior contracts, the annual administration fee is $30, and we will
waive this fee if, during the accumulation period, the contract value is equal
to or greater than $100,000 at the time of assessment of the fee.
A daily charge in an amount equal to 0.15% of the value of each
variable investment account on an annual basis is deducted from each sub-account
as an administration fee under both the contract described in this prospectus
and the prior contracts.
MORTALITY AND EXPENSE RISKS CHARGE
Under the contract described in the prospectus, the mortality and
expense risks charge which we assess is 0.30% (or 0.45% if the optional annual
step death benefit rider is elected). Under the prior contracts, this charge is
0.85%.
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 Market
1998 $12.500000 $11.267395 0.000
1999 11.267395 18.168886 224.463
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Science & Technology
1998 $12.500000 $15.503436 4,015.626
1999 15.503436 30.621118 15,088.635
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
International Small Cap
1998 $12.500000 $12.202690 334.680
1999 12.202690 22.341682 6,651.249
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Aggressive Growth
1998 $12.500000 $12.027610 216.003
1999 12.027610 15.83478 325.123
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Emerging Small Company
1998 $12.500000 $11.312902 6,458.290
1999 11.312902 19.436616 1,702.501
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Mid Cap Growth
1998 $12.500000 $13.903872 3,648.192
1999 13.903872 19.917321 3,240.142
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Overseas
1998 $12.500000 $11.720466 330.533
1999 11.720466 16.319479 215.524
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
International Stock
1998 $12.500000 $12.656070 0.000
1999 12.656070 16.253406 389.992
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Mid Cap Blend
1998 $12.500000 $12.103394 4,814.848
1999 12.103394 15.307946 876.769
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Small Company Value
1998 $12.500000 $10.897925 0.000
1999 10.897925 0.000
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Global Equity
1998 $12.500000 $12.195410 672.794
</TABLE>
E-5
<PAGE> 58
<TABLE>
<S> <C> <C> <C>
1999 12.195410 12.516028 553.040
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Growth
1998 $12.500000 $13.655376 521.187
1999 13.655376 18.549262 6,215.486
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Large Cap Growth
1998 $12.500000 $13.271688 309.757
1999 13.271688 16.46198 329.341
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Quantitative Equity
1998 $12.500000 $14.006399 2,087.403
1999 14.006399 16.959503 5,575.181
- ----------------------------------------- ------------------------- ------------------------- --------------------------------
Blue Chip Growth
1998 $12.500000 $14.123586 8,341.366
1999 14.123586 16.700133 10,828.723
- ------------------------------------------- ----------------------- -------------------------- ----------------------------
Real Estate Securities
1998 $12.500000 $10.417728 1,081.138
1999 10.417728 9.488883 1,068.493
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Value
1998 $12.500000 $11.207507 405.978
1999 11.207507 10.786297 290.973
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Growth & Income
1998 $12.500000 $13.924321 6,874.303
1999 13.924321 16.387611 12,931.753
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Equity-Income
1998 $12.500000 $12.464044 27,051.493
1999 12.464044 12.759601 27,275.103
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Income & Value
1998 $12.500000 $13.179250 1,854.886
1999 $13.179250 14.18104 1,701.854
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Balanced
1998 $12.500000 $13.203432 914.156
1999 13.203432 12.856009 1,912.865
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
High Yield
1998 $12.500000 $12.279967 2,098.051
1999 12.279967 13.130722 2,176.489
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Strategic Bond
1998 $12.500000 $12.280627 147.794
1999 12.280627 12.428556 315.740
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Global Bond
1998 $12.500000 $13.080198 0.000
1999 13.080198 0.000
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Investment Quality Bond
1998 $12.500000 $13.269922 87.491
1999 13.269922 12.902584 1,629.528
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Diversified Bond
1998 $12.500000 $13.161158 139.729
1999 13.161158 13.123588 543.569
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
U.S. Government Securities
1998 $12.500000 $13.159699 4,840.536
1999 13.159699 12.999097 4,333.170
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Money Market
1998 $12.500000 $12.872909 4,306.330
1999 12.872909 13.331106 78,626.678
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Lifestyle Aggressive 1000
1998 $12.500000 $11.895710 363.913
1999 11.895710 13.497935 1,565669
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Lifestyle Growth 820
</TABLE>
E-6
<PAGE> 59
<TABLE>
<S> <C> <C> <C>
1998 $12.500000 $12.159849 5,302.697
1999 12.159849 14.033145 5,144.277
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Lifestyle Balanced 640
1998 $12.500000 $12.282889 6,978.000
1999 $12.282889 13.671696 11,201.806
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Lifestyle Moderate 460
1998 $12.500000 $12.868825 5,852.516
1999 12.868825 13.746687 11,142.295
- ------------------------------------------- ------------------------ -------------------------- ----------------------------
Lifestyle Conservative 280
1998 $12.500000 $13.175636 2240.611
1999 13.175636 13.593172 2,571.768
</TABLE>
- - * Units under this series of contracts were first credited under the
sub-accounts on March 30, 1998.
E-7
<PAGE> 60
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 61
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 ANNUITY CONTRACTS
NON-PARTICIPATING
This Statement of Additional Information is not a Prospectus. It
contains information in addition to that described in the Prospectus and should
be read in conjunction with the Prospectus dated the same date as this Statement
of Additional Information. The Prospectus may be obtained by writing The
Manufacturers Life Insurance Company of North America at the mailing address of
the Annuity Service Office, P.O. Box 9230, Boston, Massachusetts 02205-9230 or
telephoning (800) 344-1029.
The date of this Statement of Additional Information is May 1, 2000.
The Manufacturers Life Insurance Company of North America
500 Boylston Street, Suite 400
Boston, Massachusetts 02116-3739
(617) 663-3000
(800) 344-1029
MRPG.SAT5/00
<PAGE> 62
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
General Information and History.................................. 3
Performance Data................................................. 3
Services
Independent Auditors...................................... 9
Servicing Agent........................................... 10
Principal
Underwriter............................................. 10
Financial Statements............................................. 11
2
<PAGE> 63
GENERAL INFORMATION AND HISTORY
The Manufacturers Life Insurance Company of North America Separate
Account A ("VARIABLE ACCOUNT") is a separate investment account of The
Manufacturers Life Insurance Company of North America ("WE" or "US"). We are a
stock life insurance company organized under the laws of Delaware in 1979. Prior
to October 1, 1997 we were known as North American Security Life Insurance
Company Our principal office is located at 500 Boylston Street, Boston,
Massachusetts 02116-3739. Our ultimate parent is Manulife Financial Corporation
("MFC"), a Canadian mutual life insurance company based in Toronto, Canada. MFC
is the holding company of The Manufacturers Life Insurance Company and its
subsidiaries, collectively known as Manulife Financial.
PERFORMANCE DATA
Each of the sub-accounts may in its advertising and sales materials
quote total return figures. The sub-accounts may advertise both "standardized"
and "non-standardized" total return figures, although standardized figures will
always accompany non-standardized figures. Non-standardized total return figures
may be quoted assuming both :
- redemption at the end of the time period, and
- not assuming redemption at the end of the time period.
Standardized figures include total return figures from:
- the inception date of the sub-account of the Variable Account
which invests in the portfolio, or
- ten years, whichever period is shorter.
Non-standardized figures include total return numbers from:
- inception date of the portfolio, or
- ten years, whichever period is shorter.
Such figures will always include the average annual total return for
recent one year and, when applicable, five and ten year periods, and where less
than ten years, the inception date of the sub-account, in the case of
standardized returns, and the inception date of the portfolio, in the case of
non-standardized returns. Where the period since inception is less than one
year, the total return quoted will be the aggregate return for the period. The
average annual total return is the average annual compounded rate of return that
equates a purchase payment to the market value of such purchase payment on the
last day of the period for which such return is calculated. The aggregate total
return is the percentage change (not annualized) that equates a purchase payment
to the market value of such purchase payment on the last day of the period for
which such return is calculated. For purposes of the calculations it is assumed
that an initial payment of $1,000 is made on the first day of the period for
which the return is calculated.
In calculating standardized return figures, all recurring charges (all
asset charges - mortality and expense risk fees, administrative fees, and
distribution fees) are reflected, and the asset charges are reflected in changes
in unit values. Standardized total return figures will be quoted assuming
redemption at the end of the period. Non-standardized total return figures
reflecting redemption at the end of the time period are calculated on the same
basis as the standardized returns. Non-standardized total return figures not
reflecting redemption at the end of the time period are calculated on the same
basis as the standardized returns except that the calculations assume no
redemption at the end of the period and do not reflect deduction of the annual
contract fee. We believe such non-standardized figures 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 the contract, standardized performance data will be the
historical performance of the Trust portfolio from the date the applicable
sub-account of the Variable Account first became available for investment under
other contracts offered by us, adjusted to reflect current contract charges. In
the case of non-standardized performance, performance figures will be the
historical performance of the Trust portfolio from the inception date of the
portfolio (or in the case of the Trust portfolios created in connection with the
merger of Manulife Series Fund, Inc.)
3
<PAGE> 64
PRIOR CONTRACT
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1999
(NOT REFLECTING THE OPTIONAL TERM RIDER)
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
TRUST PORTFOLIO
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets 61.12% N/A -.017% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Science & Technology 97.38% N/A 45.29% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Small Cap 82.95% N/A 22.61% 03/04/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Aggressive Growth 31.52% N/A 10.29% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Emerging Small Company 71.67% N/A 25.73% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Mid Cap Growth 43.11% N/A 22.79% 03/04/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Overseas 39.10% N/A 11.63% 01/09/95
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Stock 28.29% N/A 13.97% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Mid Cap Blend 26.34% 22.06% 12.78%+ 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Small Company Value 6.78% N/A -1.96% 10/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Global Equity 2.49% 10.03% 7.55%+ 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Growth 35.70% N/A 26.69% 07/15/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Large Cap Growth 23.90% 18.49% 11.57%+ 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Quantitative Equity 20.95% N/A 25.05% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Blue Chip 18.11% 24.08% 14.56% 12/11/92
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Real Estate Securities -9.05% N/A -3.42% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Value -3.89% N/A 4.12% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Growth and Income 17.55% 24.61% 17.20% 04/23/91
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Equity-Income 2.23% 15.52% 12.88% 02/19/93
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Income & Value 7.47% 12.74% 8.67%+ 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Balanced -2.77% N/A 8.82% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
High Yield 6.79% N/A 6.56% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Strategic Bond 1.07% 8.27% 5.98% 02/19/93
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Global Bond -7.74% 6.38% 6.89%+ 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Total Return N/A N/A N/A 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Investment Quality Bond -2.90% 6.33% 5.03%+ 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Diversified Bond -0.42% 8.24% 6.32%+ 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
</TABLE>
4
<PAGE> 65
<TABLE>
<S> <C> <C> <C> <C>
U.S. Government Securities -1.36% 5.63% 5.70%+ 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Money Market 3.42% 3.93% 3.72%+ 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 13.33% N/A 8.89% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 15.27% N/A 10.96% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 11.17% N/A 9.54% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 6.69% N/A 9.28% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 3.03% N/A 7.66% 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> 66
PRIOR CONTRACT
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1999
(NOT REFLECTING THE OPTIONAL TERM RIDER)
<TABLE>
<CAPTION>
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* 61.12% 3.40% 2.09% 10/04/94
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Science & Technology 97.38% N/A 45.29% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
International Small Cap 82.95% N/A 22.61% 03/04/96
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Aggressive Growth 31.52% N/A 10.29% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Emerging Small Company 71.67% N/A 25.73% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Mid Cap Growth 43.11% N/A 22.79% 03/04/96
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Overseas 39.10% N/A 11.63% 01/09/95
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
International Stock 28.29% N/A 13.97% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Mid Cap Blend 26.34% 22.06% 12.78%+ 06/18/85
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Small Company Value 6.78% N/A -1.96% 10/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Global Equity 2.49% 10.03% 7.55%+ 03/18/88
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Growth 35.70% N/A 26.69% 07/15/96
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Large Cap Growth 23.90% 18.49% 11.57%+ 08/03/89
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Quantitative Equity* 20.95% 23.71% 14.72%+ 04/30/87
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Blue Chip 18.11% 24.08% 14.56% 12/11/92
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Real Estate Securities* -9.05% 5.97% 9.46%+ 04/30/87
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Value -3.89% N/A 4.12% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Growth and Income 17.55% 24.61% 17.20% 04/23/91
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Equity-Income 2.23% 15.52% 12.88% 02/19/93
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Income & Value 7.47% 12.74% 8.67%+ 08/03/89
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Balanced -2.77% N/A 8.82% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
High Yield 6.79% N/A 6.56% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Strategic Bond 1.07% 8.27% 5.98% 02/19/93
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Global Bond -7.74% 6.38% 6.89%+ 03/18/88
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Total Return N/A N/A N/A 05/01/99
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Investment Quality Bond -2.90% 6.33% 5.03%+ 06/18/85
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Diversified Bond -0.42% 8.24% 6.32%+ 08/03/89
</TABLE>
6
<PAGE> 67
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
U.S. Government Securities -1.36% 5.63% 5.70%+ 03/18/88
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Money Market 3.42% 3.93% 3.72%+ 06/18/85
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Aggressive 1000 13.33% N/A 8.89% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Growth 820 15.27% N/A 10.96% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Balanced 640 11.17% N/A 9.54% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Moderate 460 6.69% N/A 9.28% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Conservative 280 3.03% N/A 7.66% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based upon the historical
performance of the portfolio, adjusted to reflect current contract charges.
On December 31, 1996, Manulife Series Fund, Inc. merged with the Trust.
Performance for each of these sub-accounts is based on the historical
performance of the respective predecessor Manulife Series Fund, Inc.
portfolio for periods prior to December 31, 1996.
7
<PAGE> 68
PRIOR CONTRACT
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1999
(NOT REFLECTING THE OPTIONAL TERM RIDER)
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* 61.25% 19.02% 12.48% 10/04/94
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Science & Technology 97.51% N/A 207.20% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Small Cap 83.09% N/A 119.12% 03/04/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Aggressive Growth 31.65% N/A 34.63% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Emerging Small Company 71.81% N/A 99.26% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Mid Cap Growth 43.25% N/A 120.25% 03/04/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Overseas 39.24% N/A 73.87% 01/09/95
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Stock 28.42% N/A 48.48% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Value N/A N/A N/A 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Mid Cap Blend 26.48% 171.95% 236.03%+ 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Small Company Value 6.92% N/A -3.90% 10/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Global Equity 2.63% 62.13% 109.14%+ 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Growth 35.84% N/A 127.61% 07/15/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Large Cap Growth 24.04% 134.55% 201.58%+ 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Quantitative Equity* 21.08% 190.83% 298.08%+ 04/30/87
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Blue Chip 18.24% 195.17% 162.98% 12/11/92
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Real Estate Securities* -8.92% 34.27% 148.78%+ 04/30/87
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Value -3.76% N/A 13.25% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Growth and Income 17.69% 201.58% 300.23% 04/23/91
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Equity-Income 2.37% 106.55% 131.11% 02/19/93
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Income & Value 7.60% 82.95% 132.00%+ 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Balanced -2.63% N/A 29.24% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
High Yield 6.93% N/A 21.39% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Strategic Bond 1.20% 49.49% 50.07% 02/19/93
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Global Bond -7.60% 36.90% 96.39%+ 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Investment Quality Bond -2.77% 36.64% 65.02%+ 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Diversified Bond -0.29% 49.33% 86.39%+ 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
</TABLE>
8
<PAGE> 69
<TABLE>
<S> <C> <C> <C> <C>
U.S. Government Securities -1.22% 32.21% 75.81%+ 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Money Market 3.56% 22.00% 45.75%+ 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 13.47% N/A 29.35% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 15.41% N/A 36.79% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 11.31% N/A 31.64% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 6.82% N/A 30.71% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 3.17% N/A 25.02% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based upon the historical
performance of the portfolio, adjusted to reflect current contract charges.
On December 31, 1996, Manulife Series Fund, Inc. merged with the Trust.
Performance for each of these sub-accounts is based on the historical
performance of the respective predecessor Manulife Series Fund, Inc.
portfolio for periods prior to December 31, 1996.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1999
(NOT REFLECTING THE OPTIONAL TERM RIDER)
[TO BE UPDATED]
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
TRUST PORTFOLIO
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets 61.12% N/A -.017% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Science & Technology 97.38% N/A 45.29% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Small Cap 82.95% N/A 22.61% 03/04/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Aggressive Growth 31.52% N/A 10.29% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Emerging Small Company 71.67% N/A 25.73% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Mid Cap Growth 43.11% N/A 22.79% 03/04/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Overseas 39.10% N/A 11.63% 01/09/95
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Stock 28.29% N/A 13.97% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Mid Cap Blend 26.34% 22.06% 12.78%+ 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Small Company Value 6.78% N/A -1.96% 10/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Global Equity 2.49% 10.03% 7.55%+ 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Growth 35.70% N/A 26.69% 07/15/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Large Cap Growth 23.90% 18.49% 11.57%+ 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Quantitative Equity 20.95% N/A 25.05% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Blue Chip 18.11% 24.08% 14.56% 12/11/92
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Real Estate Securities -9.05% N/A -3.42% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
</TABLE>
9
<PAGE> 70
<TABLE>
<S> <C> <C> <C> <C>
Value -3.89% N/A 4.12% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Growth and Income 17.55% 24.61% 17.20% 04/23/91
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Equity-Income 2.23% 15.52% 12.88% 02/19/93
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Income & Value 7.47% 12.74% 8.67%+ 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Balanced -2.77% N/A 8.82% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
High Yield 6.79% N/A 6.56% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Strategic Bond 1.07% 8.27% 5.98% 02/19/93
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Global Bond -7.74% 6.38% 6.89%+ 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Total Return N/A N/A N/A 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Investment Quality Bond -2.90% 6.33% 5.03%+ 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Diversified Bond -0.42% 8.24% 6.32%+ 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
U.S. Government Securities -1.36% 5.63% 5.70%+ 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Money Market 3.42% 3.93% 3.72%+ 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 13.33% N/A 8.89% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 15.27% N/A 10.96% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 11.17% N/A 9.54% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 6.69% N/A 9.28% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 3.03% N/A 7.66% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
</TABLE>
* Inception date of the sub-account of the Variable Account which invests in
the portfolio.
+ 10 year average annual return.
10
<PAGE> 71
NEW CONTRACT
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1999
(REFLECTING THE OPTIONAL TERM RIDER)
[TO BE UPDATED]
<TABLE>
<CAPTION>
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* 61.12% 3.40% 2.09% 10/04/94
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Science & Technology 97.38% N/A 45.29% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
International Small Cap 82.95% N/A 22.61% 03/04/96
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Aggressive Growth 31.52% N/A 10.29% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Emerging Small Company 71.67% N/A 25.73% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Mid Cap Growth 43.11% N/A 22.79% 03/04/96
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Overseas 39.10% N/A 11.63% 01/09/95
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
International Stock 28.29% N/A 13.97% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Mid Cap Blend 26.34% 22.06% 12.78%+ 06/18/85
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Small Company Value 6.78% N/A -1.96% 10/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Global Equity 2.49% 10.03% 7.55%+ 03/18/88
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Growth 35.70% N/A 26.69% 07/15/96
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Large Cap Growth 23.90% 18.49% 11.57%+ 08/03/89
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Quantitative Equity* 20.95% 23.71% 14.72%+ 04/30/87
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Blue Chip 18.11% 24.08% 14.56% 12/11/92
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Real Estate Securities* -9.05% 5.97% 9.46%+ 04/30/87
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Value -3.89% N/A 4.12% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Growth and Income 17.55% 24.61% 17.20% 04/23/91
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Equity-Income 2.23% 15.52% 12.88% 02/19/93
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Income & Value 7.47% 12.74% 8.67%+ 08/03/89
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Balanced -2.77% N/A 8.82% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
High Yield 6.79% N/A 6.56% 01/01/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Strategic Bond 1.07% 8.27% 5.98% 02/19/93
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Global Bond -7.74% 6.38% 6.89%+ 03/18/88
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Total Return N/A N/A N/A 05/01/99
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Investment Quality Bond -2.90% 6.33% 5.03%+ 06/18/85
</TABLE>
11
<PAGE> 72
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Diversified Bond -0.42% 8.24% 6.32%+ 08/03/89
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
U.S. Government Securities -1.36% 5.63% 5.70%+ 03/18/88
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Money Market 3.42% 3.93% 3.72%+ 06/18/85
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Aggressive 1000 13.33% N/A 8.89% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Growth 820 15.27% N/A 10.96% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Balanced 640 11.17% N/A 9.54% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Moderate 460 6.69% N/A 9.28% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
Lifestyle Conservative 280 3.03% N/A 7.66% 01/07/97
- ----------------------------------- -------------------- ------------------ ------------------------ ---------------
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based upon the historical
performance of the portfolio, adjusted to reflect current contract charges.
On December 31, 1996, Manulife Series Fund, Inc. merged with the Trust.
Performance for each of these sub-accounts is based on the historical
performance of the respective predecessor Manulife Series Fund, Inc.
portfolio for periods prior to December 31, 1996.
12
<PAGE> 73
NEW CONTRACT
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1999
(REFLECTING THE OPTIONAL TERM RIDER)
[TO BE UPDATED]
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* 61.25% 19.02% 12.48% 10/04/94
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Science & Technology 97.51% N/A 207.20% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Small Cap 83.09% N/A 119.12% 03/04/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Aggressive Growth 31.65% N/A 34.63% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Emerging Small Company 71.81% N/A 99.26% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Mid Cap Growth 43.25% N/A 120.25% 03/04/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Overseas 39.24% N/A 73.87% 01/09/95
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Stock 28.42% N/A 48.48% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Value N/A N/A N/A 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Mid Cap Blend 26.48% 171.95% 236.03%+ 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Small Company Value 6.92% N/A -3.90% 10/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Global Equity 2.63% 62.13% 109.14%+ 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Growth 35.84% N/A 127.61% 07/15/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Large Cap Growth 24.04% 134.55% 201.58%+ 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Quantitative Equity* 21.08% 190.83% 298.08%+ 04/30/87
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Blue Chip 18.24% 195.17% 162.98% 12/11/92
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Real Estate Securities* -8.92% 34.27% 148.78%+ 04/30/87
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Value -3.76% N/A 13.25% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Growth and Income 17.69% 201.58% 300.23% 04/23/91
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Equity-Income 2.37% 106.55% 131.11% 02/19/93
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Income & Value 7.60% 82.95% 132.00%+ 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Balanced -2.63% N/A 29.24% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
High Yield 6.93% N/A 21.39% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Strategic Bond 1.20% 49.49% 50.07% 02/19/93
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Global Bond -7.60% 36.90% 96.39%+ 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Investment Quality Bond -2.77% 36.64% 65.02%+ 06/18/85
</TABLE>
13
<PAGE> 74
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Diversified Bond -0.29% 49.33% 86.39%+ 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
U.S. Government Securities -1.22% 32.21% 75.81%+ 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Money Market 3.56% 22.00% 45.75%+ 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 13.47% N/A 29.35% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 15.41% N/A 36.79% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 11.31% N/A 31.64% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 6.82% N/A 30.71% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 3.17% N/A 25.02% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
</TABLE>
+ 10 year average annual return.
* Performance for each of these sub-accounts is based upon the historical
performance of the portfolio, adjusted to reflect current contract charges.
On December 31, 1996, Manulife Series Fund, Inc. merged with the Trust.
Performance for each of these sub-accounts is based on the historical
performance of the respective predecessor Manulife Series Fund, Inc.
portfolio for periods prior to December 31, 1996.
* * * * *
In addition to the non-standardized returns quoted above, each of the
sub-accounts may from time to time quote aggregate non-standardized total
returns calculated in the same manner as set forth above for other time periods.
From time to time the Trust may include in its advertising and sales literature
general discussions of economic theories, including but not limited to,
discussions on how demographic and political trends can affect the financial
markets. Further, the Trust may also include in its advertising and sales
literature specific information on each of the Trust's subadvisers, including
but not limited to, research capabilities of a subadviser, assets under
management, information relating to other clients of a subadviser, and other
generalized information.
SERVICES
INDEPENDENT AUDITORS
The financial statements of the Company and the Variable Account at
December 31, 1999 and 1998 and for the three years in the period ended December
31, 1999 and for the Variable Account at December 31, 1999 and for the two years
in the period ended December 31, 1999 appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
Our financial statements which are included in this Statement of
Additional Information should be considered only as bearing on our ability to
meet our obligations under the contracts. They should not be considered as
bearing on the investment performance of the assets held in the Variable
Account.
14
<PAGE> 75
SERVICING AGENT
Computer Sciences Corporation Financial Services Group ("CSC FSG")
provides to us a computerized data processing recordkeeping system for variable
annuity administration. CSC FSG provides various daily, semimonthly, monthly,
semiannual and annual reports including:
- daily updates on:
- accumulation unit values
- variable annuity participants and transaction
- agent production and commissions;
- semimonthly commission statements;
- monthly summaries of agent production and daily transaction
reports;
- semiannual statements for contract owners; and
- annual contract owner tax reports.
We pay CSC FSG approximately $7.80 per policy per year, plus certain other fees
for the services provided.
PRINCIPAL UNDERWRITER
Manufacturers Securities Services, LLC ("MSS"), the successor to NASL
Financial Services, Inc., a Delaware limited liability company controlled by us,
serves as principal underwriter of the contracts. Contracts are offered on a
continuous basis. The aggregate dollar amount of underwriting commissions paid
to MSS in 1999, 1998 and 1997 were $183,494,116 $122,828,714 and $29,615,342
respectively. MSS did not retain any of these amounts during such periods.
15
<PAGE> 76
FINANCIAL STATEMENTS
16
<PAGE> 77
PART C
OTHER INFORMATION
<PAGE> 78
Guide to Name Changes and Successions:
The following name changes took place October 1, 1997:
<TABLE>
<CAPTION>
Old Name New Name
<S> <C>
NASL Variable Account The Manufacturers Life Insurance Company of North
America Separate Account A
North American Security The Manufacturers Life Insurance Company of North
Life Insurance Company America
</TABLE>
The following name changes took place November 1, 1997:
<TABLE>
<CAPTION>
Old Name New Name
<S> <C>
NAWL Holding Co., Inc. Manulife-Wood Logan Holding Co., Inc.
</TABLE>
The following name changes took place September 24, 1999:
<TABLE>
<CAPTION>
Old Name New Name
<S> <C>
Wood Logan Associates, Inc. Manulife Wood Logan, Inc.
</TABLE>
On September 30, 1997, Manufacturers Securities Services, LLC succeeded to the
business of NASL Financial Services, Inc.
* * * * *
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements of the Registrant, The Manufacturers Life
Insurance Company of North America Separate Account A (Part B
of the registration statement). - TO BE FILED BY AMENDMENT.
(2) Financial Statements of the Depositor, The Manufacturers Life
Insurance Company of North America (Part B of the registration
statement). - TO BE FILED BY AMENDMENT
(b) Exhibits
(1) (i) Resolution of the Board of Directors of North American
Security Life Insurance Company establishing the NASL
Variable Account -- Incorporated by reference to Exhibit
(b)(1)(i) to Form N-4, file number 33-76162, filed
February 25, 1998.
(ii) Resolution of the Board of Directors of North American
Security Life Insurance Company redesignating existing
sub-accounts and dividing the NASL Variable Account to
create additional sub-accounts, dated May 30, 1995 --
Previously filed as Exhibit (b)(1)(ii) to post-effective
amendment no. 2 to Form N-4, file no. 33-76684, filed
March 1, 1996.
(iii) Resolution of the Board of Directors of North American
Security Life Insurance Company redesignating existing
sub-accounts and dividing the NASL Variable Account to
create additional sub-accounts, dated September 30, 1996
-- Previously filed as Exhibit (b)(1)(iii) to post
effective amendment no. 3 to Form N-4, file no.
33-76684, filed February 28, 1997.
(iv) Resolution of the Board of Directors of North American
Security Life Insurance Company redesignating existing
sub-accounts and dividing the NASL Variable Account to
create additional sub-accounts, dated September 30, 1996
-- Previously filed as Exhibit (b)(1)(iv) to post
effective amendment no. 3 to Form N-4, file no.
33-76684, filed February 28, 1997.
(v) Resolution of the Board of Directors of North American
Security Life Insurance Company redesignating existing
sub-accounts and dividing the NASL Variable Account to
create four additional sub-accounts dated September 26,
1997 -- Incorporated by reference to Exhibit (b)(1)(v)
to Form N-4, file number 33-76162 filed February 25,
1998.
<PAGE> 79
(2) Agreements for custody of securities and similar investments -
Not Applicable.
(3) (i) Underwriting Agreement - Incorporated by reference to
Exhibit 3 (i) to post-amendment No. 6 on Form N-4, file
number 33-76162, filed March 1, 1999 on behalf of The
Manufacturers Life Insurance Company of North America.
(ii) Form of broker-dealer agreement - Incorporated by
reference to Exhibit 3 (iv) to post-effective amendment
No. 4 on Form N-4, file number 33-76162, filed February
28, 1998 on behalf of The Manufacturers Life Insurance
Company of North America.
(iii) Form of Promotional Agent Agreement. Incorporated by
reference to Exhibit 3 (iii) to pre-effective amendment
no. 1 to this registration statement filed on March 17,
1998 on behalf of The Manufacturers Life Insurance
Company of North America.
<PAGE> 80
(4) (i) Form of Flexible Payment Deferred Combination Fixed and
Variable Group Annuity Contract, Non-Participating --
Incorporated by reference to Exhibit 4 (i) to this
registration statement filed on October 16, 1997 on
behalf of The Manufacturers Life Insurance Company of
North America.
(ii) Specimen Certificate Under Flexible Payment Deferred
Combination Fixed and Variable Group Annuity Contract,
Non-Participating --Incorporated by reference to Exhibit
3 (ii) to this registration statement filed on October
16, 1997 on behalf of The Manufacturers Life Insurance
Company of North America.
(iii) Specimen Endorsements to Contract: (i) Individual
Retirement Annuity Endorsement; (ii) ERISA Tax-sheltered
Annuity Endorsement; (iii) Tax-sheltered Annuity
Endorsement; (iv) Section 401 Plans Endorsement; (v)
Texas Optional Retirement Program Endorsement; (vi)
Qualified Contract Provisions; (vii) Fixed Account
Endorsement; (viii) Death Benefit Endorsement --
Previously filed as Exhibit (b)(4)(iii) to post
effective amendment no. 4 to Form N-4 filed February 26,
1998.
(iv) Individual Retirement Annuity Endorsement --
Incorporated by reference to Exhibit 3 (iv) to this
registration statement filed on October 16, 1997 on
behalf of The Manufacturers Life Insurance Company of
North America.
(v) Roth Individual Retirement Annuity Endorsement -
Incorporated by reference to Exhibit (b)(4)(ii)(F) to
Form N-4, file number 33-76162, filed March 1, 1999.
(vi) Optional Term Rider Endorsement - Filed Herewith
(5) (i) Specimen Application for Flexible Payment Deferred
Combination fixed and Variable Group Annuity Contract,
Non-Participating. - Incorporated by reference to
Exhibit 3 (iv) to pre-effective amendment No. 1 this
registration statement filed on March 17, 1998 on behalf
of The Manufacturers Life Insurance Company of North
America.
(ii) Specimen Certificate Application - Incorporated by
reference to Exhibit (b)(5)(ii) to post effective
amendment no. 4 to Form N-4, file number 33-76684, filed
February 26, 1998 on behalf of Separate Account A of The
Manufacturers Life Insurance Company of North America.
(6) (i) Certificate of Incorporation of North American Security
Life Insurance Company -- Incorporated by reference to
Exhibit (3)(i) to Form 10Q of The Manufacturers Life
Insurance Company of North America filed November 14,
1997.
(ii) Certificate of Amendment of Certificate of Incorporation
of the Company, Name Change July 1984 -- Incorporated by
reference to Exhibit (3)(i)(a) to Form 10Q of The
Manufacturers Life Insurance Company of North America,
filed November 14, 1997.
(iii) Certificate of Amendment of Certificate of
Incorporation, Name change March 1997 -- Incorporated by
reference to Exhibit (3)(i)(a) to post effective
amendment no. 1 to Form S-1 on behalf of The
Manufacturers Life Insurance Company of North America,
file number 333-6011, filed October 9, 1997.
(vi) Amended and Restated By-laws of The Manufacturers Life
Insurance Company of North America -- Incorporated by
reference to Exhibit (3)(ii) to Form 10Q of The
Manufacturers Life Insurance Company of North America
filed November 14, 1997.
<PAGE> 81
(7) (i) Contract of reinsurance in connection with the variable
annuity contracts being offered - Variable Annuity
Guaranteed Death Benefit Reinsurance Contract between
North American Security Life Insurance Company
Connecticut General Life Insurance Company, effective
July 1, 1995 -- Incorporated by reference to Exhibit
(b)(7)(ii) to post-effective amendment no. 2 to Form
N-4,file number 33-76684, filed March 1, 1996 on behalf
of the NASL Variable Account of North American Security
Life Insurance Company.
(ii) Contract of reinsurance in connection with the variable
annuity contracts being offered - Variable Annuity
Guaranteed Death Benefit Reinsurance Contract between
North American Security Life Insurance Company and
Connecticut General Life Insurance Company, effective
July 1, 1995 -- Incorporated by reference to Exhibit
(b)(7)(iii) to post-effective amendment no. 2 to Form
N-4, file number 33-76684, filed March 1, 1996 on behalf
of the NASL Variable Account of North American Security
Life Insurance Company.
(iii) Contract of reinsurance in connection with the variable
annuity contracts being offered - Automatic Reinsurance
Agreement between North American Security Life Insurance
Company and Swiss Re America, effective August 1, 1995
-- Incorporated by reference to Exhibit (b)(7)(iv) to
post-effective amendment no. 3 to Form N-4, file number
33-76684, filed February 28, 1997 on behalf of the NASL
Variable Account of North American Security Life
Insurance Company.
(iv) Contract of reinsurance in connection with the variable
annuity contracts being offered - Reinsurance Agreement
between North American Security Life Insurance Company
and PaineWebber Life Insurance Company, effective
December 31, 1994 -- Previously filed as Exhibit
(b)(7)(v) to post-effective amendment no. 3 to Form N-4,
file no. 33-76684, filed February 28, 1997.
(v) Coinsurance Agreement between North American Security
Life Insurance Company and Peoples Security Life
Insurance Company, effective June 30, 1995 -
Incorporated by reference to Exhibit 10(iv) to
pre-effective amendment No. 1 to Form S-1, file number
333-6011 filed January 29, 1997
(8) Other material contracts not made in the ordinary course of
business which are to be performed in whole or in part on or
after the date the registration statement is filed:
(i) Form of Remote Service Agreement dated November 1, 1996
between North American Security Life Insurance Company
and CSC Continuum, Inc.-- Incorporated by reference to
Exhibit (b)(8)(i) to post-effective amendment no. 3 to
Form N-4, file number 33-76684 , filed February 28, 1997
on behalf of the NASL Variable Account of North American
Security Life Insurance Company.
(9) Opinion of James D. Gallagher, Esq. as to the legality of the
securities being registered and consent to use of opinion.
Incorporated by reference to Exhibit 9 to pre-effective
amendment no. 1 to this registration statement filed on March
17, 1998 on behalf of The Manufacturers Life Insurance Company
of North America.
(10) Written consent of Ernst & Young LLP independent certified
public accountants. TO BE FILED BY AMENDMENT
(11) All financial statements omitted from Item 23, Financial
Statements -- Not Applicable.
(12) Agreements in consideration for providing initial capital
between or among Registrant, Depositor Underwriter or initial
contract owners -- Not Applicable.
(13) Schedule for computation of performance quotations provided in
the Registration Statement in response to Item
21--Incorporated by reference to Exhibit (b)(13) to
post-effective amendment no. 2 to Form N-4, file number
33-76684, filed March 1, 1996 on
<PAGE> 82
behalf of the NASL Variable Account of North American
Security Life Insurance Company.
(14) Financial Data Schedule --Not Applicable
(15) (i) Power of Attorney - John D. Richardson (Chairman of the
Board of Directors, North American Security Life
Insurance Company) -- Previously filed as Exhibit
(b)(15)(iii) to post-effective amendment no. 2 to Form
N-4, 33-76684, filed April 29, 1997.
(ii) Power of Attorney - David W. Libbey, Principal Financial
Officer, North American Security Life Insurance Company
-- Incorporated by reference to Exhibit (24)(ii) to Form
10Q of The Manufacturers Life Insurance Company of North
America filed November 14, 1997.
(iii) Power of Attorney - Peter S. Hutchison (Director, The
Manufacturers Life Insurance Company of North America)
-- Incorporated by reference to Exhibit (b)(15)(iii) to
Form N-4, file number 33-76162 filed February 25, 1998.
Item 25. Directors and Officers of the Depositor.
OFFICERS AND DIRECTORS OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH
AMERICA
<TABLE>
<CAPTION>
Name and Principal
Business Address Position with Depositor
- ---------------- -----------------------
<S> <C>
John D. DesPrez III Director and Chairman of the Board of Directors
73 Tremont Street
Boston, MA 02108
James R. Boyle Director and President
500 Boylston Street
Boston, MA 02116
John Richardson Director
200 Bloor Street East
Toronto, Ontario
Canada M4W-1E5
Robert Boyda Vice President, Investment Management Services
73 Tremont Street
Boston, MA 02108
James D. Gallagher Vice President, Secretary and General Counsel
73 Tremont Street
Boston, MA 02108
David W. Libbey Vice President, Treasurer & Chief Financial Officer
73 Tremont Street
Boston, MA 02108
Janet Sweeney Vice President, Human Resources
73 Tremont Street
Boston, MA 02108
John G. Vrysen Vice President and Chief Actuary
73 Tremont Street
Boston, MA 02108
Kevin S. Hill Vice President, Business Implementation
</TABLE>
<PAGE> 83
<TABLE>
<S> <C>
500 Boylston Street
Boston, Ma 02116
Brian A. Kroll Vice President, Product Development
500 Boylston Street
Boston, MA 02116
Jonnie Smith Vice President, Customer Service and Administration
500 Boylston Street
Boston, MA 02116
</TABLE>
Item 26. Persons Controlled by or Under Common Control with Depositor or
Registrant.
MANULIFE FINANCIAL CORPORATION
Corporate Organization as at December 31, 1999
Manulife Financial Corporation (Canada)
The Manufacturers Life Insurance Company (Canada)
1. Manulife Data Services Inc. - Barbados (100%)
2. MF Leasing (Canada) Inc. - Ontario (100%)
2.1 1332953 Ontario Inc. - Ontario (100%)
3. Enterprise Capital Management Inc. - Ontario (20%)
4. Cantay Holdings Inc. - Canada (100%)
5. 994744 Ontario Inc. - Ontario (100%)
6. 3426505 Canada Inc. - Canada (100%)
7. Family Realty First Corp. - Ontario (100%)
8. Manulife Bank of Canada - Canada (100%)
9. Manulife Securities International Ltd. - Canada (100%)
10. NAL Resources Limited - Alberta (100%)
11. Manulife International Capital Corporation Limited - Ontario (100%)
11.1. Golf Town Canada Inc. - Canada (100%)
11.2. Regional Power Inc. - Ontario (100%)
11.2.1. Addalam Power Corporation - Philippines
11.2.2. La Regionale Power Angliers Inc. - Canada (100%)
11.2.3. La Regionale Power Port-Cartier Inc. - Canada (100%)
11.3. VFC Inc. - Canada (100%)
11.4. 1198184 Ontario Limited - Ontario (100%)
12. 1293319 Ontario Inc. - Ontario (100%)
13. FNA Financial Inc. - Canada (100%)
13.1. Elliott & Page Limited - Ontario (100%)
13.2. Seamark Asset Management Ltd. - Canada (67.86%)
13.3. NAL Resources Management Limited - Canada (100%)
13.3.1. Caravan Oil & Gas Ltd. - Alberta (12.2%)
13.3.2. Carrack Energy Inc. - Alberta (16%)
13.4. First North American Insurance Company - Canada (100%)
<PAGE> 84
14. MLI Resources Inc. - Alberta (100%)
15. Stylus Exploration Inc. - Alberta (100%)
16. Manucab Ltd. - Canada (100%)
16.1. Plazcab Service Limited - Newfoundland (100%)
17. The Manufacturers Investment Corporation - Michigan (100%)
17.1.Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
17.1.1. Manulife Reinsurance Limited - Bermuda (100%)
17.1.1.1. MRL Holding, LLC - Delaware (99%)
17.1.2. MRL Holding, LLC - Delaware (1%)
17.1.2.1. Manulife-Wood Logan Holding Co. Inc. - Delaware (22.4%)
17.1.3. The Manufacturers Life Insurance Company (U.S.A.) - Michigan (100%)
17.1.3.1. Manulife-Wood Logan Holding Co. Inc. - Delaware (77.6%)
17.1.3.1.1. Manulife Wood Logan, Inc. - Connecticut (100%)
17.1.3.1.2. The Manufacturers Life Insurance Company of North
America - Delaware (100%)
17.1.3.1.2.1. Manufacturers Securities Services, LLC - Delaware
(90%)
17.1.3.1.2.2. The Manufacturers Life Insurance Company of New
York - New York (100%)
17.1.3.1.2.2.1 Manufacturers Securities Services, LLC -
Delaware (10%)
17.1.3.2. Flex Leasing 1, LLC - Delaware (50%)
17.1.3.3. Ennal, Inc. - Ohio (100%)
17.1.3.4. ESLS Investment Limited, LLC - Ohio (100%)
17.1.3.5. Thornhill Leasing Investments, LLC - Delaware (90%)
17.1.3.6. The Manufacturers Life Insurance Company of America - Michigan
(100%)
17.1.3.6.1. Manulife Holding Corporation - Delaware (100%)
17.1.3.6.1.1. ManEquity, Inc. - Colorado (100%)
17.1.3.6.1.2. Manufacturers Adviser Corporation - Colorado
(100%)
17.1.3.6.1.3. Manulife Capital Corporation - Delaware (100%)
17.1.3.6.1.3.1. MF Private Capital, Inc. - Delaware (80.4%)
17.1.3.6.1.3.1.1. MF Private Capital Securities, Inc. -
Delaware (100%)
17.1.3.6.1.3.1.2. MFPC Ventures, Inc. - Delaware (100%)
17.1.3.6.1.3.1.3. MFPC Insurance Advisors, Inc. -
Delaware (100%)
17.1.3.6.1.4. Manulife Property Management of Washington, D.C.
Inc. - Washington, D.C. (100%)
17.1.3.4.1.5. ManuLife Service Corporation - Colorado (100%)
17.1.3.4.1.6. Manulife Leasing Co., LLC. - Delaware (80%)
18. Manulife International Investment Management Limited - U.K. (100%)
18.1. Manulife International Fund Management Limited - U.K. (100%)
19. WT(SW) Properties Ltd. - U.K. (100%)
20. Manulife Europe Ruckversicherungs-Aktiengesellschaft - Germany (100%)
21. Manulife International Holdings Limited - Bermuda (100%)
21.1. Manulife Provident Funds Trust Company Limited - Hongkong (100%)
21.2. Manulife (International) Limited - Bermuda (100%)
21.2.1. Zhong Hong Life Insurance Co. Ltd. - China (51%)
21.3. Manulife Funds Direct (Barbados) Limited - Barbados (100%)
21.3.1. Manulife Funds Direct (Hong Kong) Limited - Hongkong (100%)
21.3.2. Pt. Manulife Aset Manajemen Indonesia - Indonesia (55%)
22. ManuLife (International) Reinsurance Limited - Bermuda (100%)
22.1. Manufacturers Life Reinsurance Limited - Barbados (100%)
22.2. Manufacturers P&C Limited - Barbados (100%)
22.3. Manulife Management Services Ltd. - Barbados (100%)
<PAGE> 85
23. Chinfon-Manulife Insurance Company Limited - Bermuda (60%)
24. Manulife Century Investments (Bermuda) Limited - Bermuda (13%)
25. Manulife Century Investments (Alberta) Inc. - Alberta (100%)
25.1 Manulife Century Investments (Bermuda) Limited - Bermuda (87%)
25.1.1 Daihyaku System Service Co. Ltd. - Japan (90%)
25.2 Manulife Century Investments (Luxembourg) S.A. - Luxembourg (100%)
25.2.1 Manulife Century Investments (Netherlands) B.V. - Netherlands
(100%)
25.2.1.1 Daihyaku Manulife Holdings (Bermuda) Limited - Bermuda
(100%)
25.2.1.1.1 Manulife Century Life Insurance Company - Japan
(8.8%)
25.2.1.2 Manulife Century Life Insurance Company - Japan (74.6%)
25.2.1.2.1 Daihyaku System Service Co. Ltd. - Japan (10%)
25.2.1.2.2 Manulife Century Business Company - Japan (100%)
25.2.1.2.3 Kyoritsu Confirm Co., Ltd. - Japan (9.1%)
25.2.1.2.4 Daihyaku Premium Collection Co., Ltd. - Japan (10%)
25.2.1.3 Kyoritsu Confirm Co., Ltd. - Japan (90.9%)
25.2.1.4 Daihyaku Premium Collection Co., Ltd. - Japan (57%)
26. P.T. Asuransi Jiwa Dharmala ManuLife - Indonesia (51%)
26.1. P.T. Buanadays Sarana Informatika - Indonesia (100%)
26.2. P.T. Asuransi Jiwa Arta Mandiri Prime - Indonesia (100%)
27. OUB Manulife Pte. Ltd. - Singapore (50%)
28. The Manufacturers Life Insurance Company (Phils.) Inc. - Philippines (100%)
Item 27. Number of Contract owners.
As of December 31, 1999, there were 55 qualified contracts and 0 nonqualified
contracts outstanding.
Item 28. Indemnification.
Article 9 of the Articles of Incorporation of the Company provides as follows:
NINTH: A director of this corporation shall not be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
except to the extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended. Any repeal or modification of the foregoing
sentence shall not adversely affect any right or protection of a director of the
corporation existing hereunder with respect to any act or omission occurring
prior to such repeal or modification.
Article XIV of the By-laws of the Company provides as follows:
Each Director or officer, whether or not then in office, shall be indemnified by
the Company against all costs and expenses reasonably incurred by or imposed
upon him or her, including legal fees, in connection with or resulting from any
claim, action, suit or proceeding, whether civil, criminal or administrative, in
which he or she may become involved as a party or otherwise, by reason of his or
her being or having been a Director or officer of the Company.
(1) Indemnity will not be granted to any Director or officer with
respect to any claim, action, suit or proceeding which shall be brought against
such Director or officer by or in the right of the Company, and
(2) Indemnification for amounts paid and expenses incurred in settling
such action, claim, suit or proceeding, will not be granted, until it shall be
determined by a disinterested majority of the Board of Directors or by a
majority of any disinterested committee or group of persons to whom the question
may be referred by the Board, that said Director or officer did indeed act in
good faith and in a manner he or she reasonably believed to be in, or not
adverse, to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had
<PAGE> 86
reasonably cause to believe that his or her conduct was legal, and that the
payment of such costs, expenses, penalties or fines is in the interest of the
Company, and not contrary to public policy or other provisions of law.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendre or its equivalent, shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he or she reasonably believed to be in, or not adverse, to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Indemnification shall be made by the corporation upon determination by a
disinterested majority of the Board of Directors or of a majority of any
disinterested committee or group or persons to whom the question may be referred
to by said Board, that the person did indeed act in good faith and in a manner
he or she reasonably believed to be in, or not adverse, to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
reasonably cause to believe that his or her conduct was legal.
The foregoing right to indemnity shall not be exclusive of any other rights to
which such Director or officer may be entitled as a matter of law.
The foregoing right to indemnity shall also extend to the estate of any deceased
Director or officer with respect to any such claim, action, suit or proceeding
in which such Director or officer or his or her estate may become involved by
reason of his or her having been a Director or officer of the Company, and
subject to the same conditions outlined above.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 29. Principal Underwriters.
a. Set forth below is information concerning other investment companies
for which Manufacturers Securities Services, LLC, the principal underwriter of
the contracts, acts as investment adviser or principal underwriter.
<TABLE>
<CAPTION>
Name of Investment Company Capacity in which acting
- -------------------------- ------------------------
<S> <C>
Manufacturers Investment Trust Investment Adviser
The Manufacturers Life Insurance Principal Underwriter
Company of North America
Separate Account A
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
Name of Investment Company Capacity in which acting
- -------------------------- ------------------------
<S> <C>
The Manufacturers Life Insurance Principal Underwriter
Company of North America
Separate Account B
The Manufacturers Life Insurance Principal Underwriter
Company of New York
Separate Account A
The Manufacturers Life Insurance Principal Underwriter
Company of New York
Separate Account B
</TABLE>
b. The Manufacturers Life Insurance Company of North America is the
managing member of Manufacturers Securities Services, LLC and has sole power to
act on behalf of Manufacturers Securities Services, LLC. The officers and
directors of The Manufacturers Life Insurance Company of North America are set
forth under Item 25
c. None.
Item 30. Location of Accounts and Records.
All books and records are maintained at 500 Boylston Street, Suite 400, Boston,
MA 02116-3739 and at 73 Tremont Street, Boston, MA 02108.
Item 31. Management Services.
None.
Item 32. Undertakings.
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The Manufacturers Life Insurance Company of North America (the "Company") hereby
represents that the fees and charges deducted under the contracts issued
pursuant to this registration statement in the aggregate are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by the Company.
<PAGE> 88
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, The Manufacturers Life Insurance Company of North
America Separate Account A, has caused this Amendment to the Registration
Statement to be signed on its behalf, in the City of Boston, and Commonwealth of
Massachusetts on this 28th day of February, 2000.
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA SEPARATE ACCOUNT A
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
(Depositor)
By: /s/James R. Boyle
------------------------------------
James R. Boyle, President
Attest:
/s/ James D. Gallagher
- -----------------------------
James D. Gallagher, Secretary
Pursuant to the requirements of the Securities Act of 1933, the
Depositor has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned on the 28th day of February, 2000 in
the City of Boston, and Commonwealth of Massachusetts.
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /s/James R. Boyle
------------------------------------
James R. Boyle, President
Attest:
/s/James D. Gallagher
- -----------------------------
James D. Gallagher, Secretary
<PAGE> 89
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities with the
Depositor as indicated on this 28th day of February, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
* Director and Chairman
-------------------------------- of the Board
John D. DesPrez III
/s/James R. Boyle. Director, and President
- --------------------------------- (Principal Executive Officer)
James R. Boyle.
*-------------------------------- Director
John D. Richardson
*-------------------------------- Vice President and
David W. Libbey Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
*By: /s/James D. Gallagher
----------------------------
James D. Gallagher
Attorney-in-Fact
Pursuant to Powers
of Attorney
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4(vi) Optional Term Rider Endorsement
</TABLE>
<PAGE> 1
ANNUAL STEP DEATH BENEFIT RIDER
THIS RIDER IS EFFECTIVE ON THE RIDER DATE. ELECTION OF THIS RIDER IS IRREVOCABLE
AND MAY ONLY BE TERMINATED AS PROVIDED IN THE TERMINATION PROVISIONS BELOW. IT
IS A PART OF, AND SUBJECT TO, THE OTHER TERMS AND CONDITIONS OF THE CONTRACT.
DEFINITIONS
ANNUAL STEP DEATH BENEFIT The Annual Step Death Benefit is the greatest
Anniversary Value after the Rider Date and prior
to the oldest Owner's attained age 81. The
Anniversary Value is equal to the Contract Value
on a Contract Anniversary, increased by all
Payments made, less any amount deducted in
connection with partial withdrawals, since that
Contract Anniversary. If the oldest Owner is age
80 or older on the Rider Date, the Annual Step
Death Benefit is zero.
RIDER DATE The date of issue of this Rider, as specified on
the Specifications Page.
DEATH BENEFIT
On the death of any Owner prior to the Maturity Date, a Death Benefit will be
determined as of the date on which written notice and proof of death and all
required claim forms are received at the Company's Annuity Service Office. The
Death Benefit will be determined as the greatest of:
a) The Death Benefit described under "Death Benefit Before Maturity Date" in the
Contract;
b) The Contract Value;
c) The sum of all Payments made, less any amount deducted in connection with
partial withdrawals; or
d) The Annual Step Death Benefit.
If the Beneficiary is the deceased Owner's Spouse, the Contract and this Rider
will continue with the surviving spouse as the new Owner. Upon the death of the
surviving spouse prior to the Maturity Date, a second Death Benefit will be paid
and the entire interest in the Contract must be distributed to the new
Beneficiary in accordance with the provisions of the Contract. For purposes of
calculating the Death Benefit payable upon the death of the surviving spouse,
the Death Benefit paid upon the first Owner's death will be treated as a Payment
to the Contract. This Payment will not be included in cumulative Payments and is
not eligible for a Payment Enhancement. In addition, all Payments made and all
amounts deducted in connection with partial withdrawals prior to the date of the
first Owner's death will not be considered in determination of the Death
Benefit. In determination of the Annual Step Death Benefit, the Anniversary
Values for all prior Contract Anniversaries will be set to zero as of the date
of the first Owner's death.
DEATH BENEFIT RIDER FEE
To compensate us for assuming mortality risks associated with the Death Benefit
Rider, We deduct from each variable Investment Option a Death Benefit Rider Fee
each Valuation Period at an annual rate set forth on the Specifications Page.
The Death Benefit Rider Fee increases the Asset Fee described in Part 11, Fees
and Deductions, in the Contract.
TERMINATION
This Rider will only terminate upon the earliest of (a) the date the Contract
terminates, (b) the Maturity Date, or (c) the date on which the Death Benefit
described in this Rider is paid.
<PAGE> 2
MISCELLANEOUS
Except as modified by this Rider, the Definitions, General Provisions and
Ownership sections of the Contract also apply to this Rider. If this Rider is
added after the Contract Date, its effective date will be the Rider Date stated
in the Specifications Page. If this Rider is added at the time the Contract is
issued, it will be effective on the Contract Date.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
/s/ David W. Libbey
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David W. Libbey
[MANUFACTURERS LIFE INSURANCE LOGO]
Vice President, Treasurer & CFO
