<PAGE> 1
SUPPLEMENT TO PROSPECTUS
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT TWO
DATED MAY 1, 1998
EXCHANGE OFFER
EXCHANGE OFFER
In the states of Maryland and Oregon, the contracts described in this
Prospectus ("Old Contracts") may be issued in exchange for Venture Combination
Fixed And Variable Annuity contracts ("New Contracts") issued by The
Manufacturers Life Insurance Company of North America ("Manulife North
America"), an affiliate of the issuer of the Old Contracts, The Manufacturers
Life Insurance Company of America ("ManAmerica").
The Company will permit an owner of an outstanding Old Contract to exchange
the Old Contract for a New Contract without the imposition of a withdrawal
charge at the time of exchange, except a possible market value adjustment as
described below. For purposes of computing the applicable withdrawal charge upon
any withdrawals made subsequent to the exchange, the New Contract will be deemed
to have been issued on the date the Old Contract was issued, and any purchase
payment credited to the Old Contract will be deemed to have been credited to the
New Contract on the date it was credited under the Old Contract. The death
benefit under the New Contract on the date of its issue will be the contract
value under the Old Contract on the date of exchange, and will "step up"
annually thereafter as described in paragraph "5." below.
Old Contract owners interested in a possible exchange should carefully
review both the New Contract prospectus and the remainder of this Prospectus
before deciding to make an exchange.
AN EXCHANGE MAY NOT BE IN THE BEST INTERESTS OF AN OWNER OF AN OLD
CONTRACT. Further, under the Old Contracts, a market value adjustment may apply
to any amounts transferred from a fixed investment account in connection with an
exchange. (Reference should be made to the discussion of the market value
adjustment under "Market Value Adjustment" in this prospectus.) The Company
believes that an exchange as described above will not be a taxable event for
Federal tax purposes; however, any owner considering an exchange should consult
a tax adviser. The Company reserves the right to terminate this exchange offer
or to vary its terms at any time.
* * * *
THE PRINCIPAL DIFFERENCES BETWEEN THE OLD CONTRACT AND THE NEW CONTRACT ARE
AS FOLLOWS:
1. NUMBER OF VARIABLE INVESTMENT OPTIONS
The Old Contract has eight variable investment options whereas the New
Contract has thirty five variable investment options.
2. FIXED ACCOUNT INVESTMENT OPTIONS
The Old Contract has a Guaranteed Interest Account as well as Fixed
Accounts with guarantee periods ranging from 1 to 10 years whereas the New
Contract offers four fixed account investment options: one, three and six year
guaranteed investment accounts and a dollar cost averaging fixed investment
account. The market value adjustment for the Old Contract Fixed Accounts is
different from the market value charge for the New Contract fixed account
investment options. The Old Contract adjustment and the New Contract charge both
reduce the withdrawal amount when current interest rates are higher than the
credited rate on the fixed investment although the magnitude of the adjustments
may
MAN.598(1)-Ven7
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differ due to differences in adjustment formulas. The Old Contract adjustment
also provides upside potential, increasing the withdrawal value when current
interest rates are lower than the fixed account credited rate. The New Contract
charge does not provide this upside potential. See "Market Value Adjustment" in
the Old Contract prospectus and "Fixed Account Investment Options" in the New
Contract prospectus.
3. SURRENDER CHARGES
The surrender charges under the New Contract are lower than the Old
Contract. The surrender charges under the Old Contract and the New Contract are
as follows:
<TABLE>
<CAPTION>
Old Contract New Contract
- ------------ ------------
Number of Complete Years Withdrawal Charge Number of Complete Years Withdrawal Charge
Purchase Payments In Percentage Purchase Payments in Percentage
Contract Contract
<S> <C> <C> <C>
0 8% 0 6%
1 8% 1 6%
2 8% 2 5%
3 6% 3 4%
4 4% 4 3%
5 2% 5 2%
6+ 0% 6+ 0%
</TABLE>
4. SEPARATE ACCOUNT AND FIXED ACCOUNT EXPENSES; CONTRACT OWNER TRANSACTION
EXPENSES
The New Contract and the Old Contract have different separate account and
fixed account annual expenses as well as different contract owner transaction
expenses as noted in the chart below:
New Contract Separate Account Annual Expenses
- ---------------------------------------------
(as a percentage of average account value)
<TABLE>
<CAPTION>
Separate Account Annual Expenses
<S> <C>
Mortality and expense risk fees 1.25%
Administration fee - asset based 0.15%
----
Total Separate Account Annual Expenses 1.40%
New Contract Owner Transaction Expenses
- ---------------------------------------
Annual Administration Fee $30
Dollar Cost Averaging Charge none
</TABLE>
2
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Old Contract Separate Account Annual Expenses
- ---------------------------------------------
Separate Account Annual Expenses
<TABLE>
<CAPTION>
Mortality and Expense Risk Charge Annual Rate
-----------
<S> <C>
Charged daily as a percentage of average Variable Account Values* 0.80%
Charged monthly as a percentage of the policy month-start
Variable and Fixed Account Assets* 0.45%
----
1.25%
Other Separate Account Expenses
Charge for administration charged daily as a percentage of average
Variable Account Values 0.20%
-----
Total Separate Account Annual Expenses 1.45%
</TABLE>
<TABLE>
<CAPTION>
Old Contract Owner Transaction Expenses
- ---------------------------------------
<S> <C>
Record Keeping Charge $30**
Dollar Cost Averaging Charge
(if selected and applicable) $ 5***
</TABLE>
*A mortality and expense risk charge of 0.80% per annum is deducted daily from
separate account assets, and a mortality and expense risk charge of 0.45% per
annum is deducted monthly from variable policy values and fixed account values.
**A record-keeping charge of 2% of the policy value up to a maximum of $30 is
deducted during the accumulation period on the last day of a policy year. The
charge is also deducted upon full surrender of a policy on a date other than the
last day of a policy year.
***Transfers pursuant to the optional Dollar Cost Averaging program are free if
policy value exceeds $15,000 at the time of the transfer, but otherwise incur a
$5 charge.
5. MINIMUM DEATH BENEFIT
Differences Between the Minimum Death Benefit of Old Contract and the New
Contract are as follows:
Minimum Death Benefit for Old Contract
Upon the occurrence of the death of the original policyowner, ManAmerica
will compare the policy value to the Survivor Benefit Amount (described below)
and, if the policy value is lower, ManAmerica will deposit sufficient funds into
the Money-Market Variable Account to make the policy value equal the Survivor
Benefit Amount. Any funds which ManAmerica deposits into the Money-Market
Variable Account will not be deemed a purchase payment for purposes of
calculating withdrawal charges.
The Survivor Benefit Amount is calculated as follows: (1) when the policy
is issued, the Survivor Benefit Amount is set equal to the initial purchase
payment; (2) each time a purchase payment is made, the Survivor Benefit Amount
is increased by the amount of the purchase payment; (3) each time a withdrawal
is made, the Survivor Benefit Amount is reduced by the same percentage as the
Gross Withdrawal Amount (withdrawal amounts prior to deduction of charges and
any adjustment for applicable market value adjustments) bears to the policy
value; (4) in jurisdictions where it is allowed, on every sixth policy
anniversary ManAmerica will set the Survivor Benefit Amount to the greater of
its current value or the policy value on that policy anniversary, provided the
original contract owner is still alive and is not older than age 85.
3
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Minimum Death Benefit for New Contracts
The minimum death benefit during the first six contract years will be equal
to the greater of: (a) the contract value on the date due proof of death and all
required claim forms are received at Manulife North America's Annuity Service
Office, or (b) the sum of all purchase payments made, less any amount deducted
in connection with partial withdrawals. During any subsequent contract year
period, the minimum death benefit will be the greater of: (a) the contract value
on the date due proof of death and all required claim forms are received at
Manulife North America's Annuity Service Office, or (b) the minimum death
benefit on the last day of the previous contract year period plus any purchase
payments made and less any amount deducted in connection with partial
withdrawals since then. If the annuitant dies after the first of the month
following his or her 85th birthday, the minimum death benefit will be the
greater of the contract value or the excess of the sum of all purchase payments
less the sum of any amounts deducted in connection with partial withdrawals on
the date due proof of death and all required claim forms are received at
Manulife North America's Annuity Service Office.
6. ANNUITY PAYMENTS
Annuity payments under the Old Contract will be made on a fixed basis only
whereas annuity payments under the New Contract may be made on a fixed or
variable basis or a combination of fixed and variable bases.
7. ANNUITY VALUE GUARANTEE
The Old Contract guarantees that, in those jurisdictions where permitted,
under certain conditions the policy value available at the annuity commencement
date will be the greater of the policy value or an amount reflecting the
purchase payment and withdrawals made by the contract owner (the "Annuity Value
Guarantee"). The New Contract does not have an Annuity Value Guarantee.
8. ANNUITY PURCHASE RATES
The annuity purchase rates guaranteed in the New Contract are based on the
1983 Table A projected at Scale G, assume births in year 1942 and reflect an
assumed interest rate of 4% per year. The annuity purchase rates guaranteed in
the Old Contract are based on the 1983 Individual Annuity Mortality Tables and
an assumed interest rate of 3% per year.
* * * *
Contract owners who do not wish to exchange their Old Contracts for the New
Contracts may continue to make purchase payments to their Old Contracts. Or,
they can keep their Old Contracts and buy a New Contract to which to apply
additional purchase payments.
The above comparison does not take into account differences between the Old
Contracts, as amended by qualified plan endorsements, and the New Contracts, as
amended by similar qualified plan endorsements. Owners using their Old Contract
in connection with a qualified plan should consult a tax advisor. See also the
Federal Tax Matters section of this prospectus and the New Contract
prospectuses.
THE DATE OF THIS SUPPLEMENT IS MAY 1, 1998.
Man.598(1) - Ven 7
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