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SUPPLEMENT TO PROSPECTUS
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT TWO
DATED MAY 1, 1998
EXCHANGE OFFER
EXCHANGE OFFER
In all states except New Hampshire, Maryland, New York, Oregon and the
territory of Guam, 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, 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 five fixed account investment options: one, three, five and
seven 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
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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 different from 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 Withdrawal Charge Number of Complete Withdrawal Charge
Years Purchase Percentage Years Purchase
Payments In Contract Payments in Contract
<S> <C> <C> <C>
0 8% 0 6%
1 8% 1 6%
2 8% 2 5%
3 6% 3 5%
4 4% 4 4%
5 2% 5 3%
6+ 0% 6 2%
7+ 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)
Separate Account Annual Expenses
Mortality and expense risk fees 1.25%
Administration fee - asset based 0.15%
-----
Total Separate Account Annual Expenses 1.40%
NEW CONTRACT CONTRACT OWNER TRANSACTION EXPENSES
Annual Administration Fee $30*
Dollar Cost Averaging Charge none
*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.
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OLD CONTRACT SEPARATE ACCOUNT ANNUAL EXPENSES
<TABLE>
<CAPTION>
Separate Account Annual Expenses
<S> <C> <C>
Mortality and Expense Risk Charge ANNUAL RATE
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>
OLD CONTRACT CONTRACT OWNER TRANSACTION EXPENSES
Record Keeping Charge $30**
Dollar Cost Averaging Charge
(if selected and applicable) $5***
*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.
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Minimum Death Benefit for New Contracts
Minimum Death Benefit for New Contracts Issued on or After May 1, 1998
(See below for state applicability)
In the states of Connecticut, Washington D.C., Florida, Maryland,
Massachusetts, Minnesota, Montana, Oregon, Puerto Rico, Texas and Washington
(the "Old Death Benefit States"), the death benefit described under "Death
Benefit for New Contracts Issued Prior to May 1, 1998" will continue to apply to
contracts issued on or after May 1, 1998.
If any contract owner dies and the oldest owner had an attained age of
less than 81 years on the contract date, the death benefit will be determined as
follows: During the first contract year, the death benefit will be the greater
of: (a) the contract value or (b) the sum of all purchase payments made, less
any amounts deducted in connection with partial withdrawals. During any
subsequent contract year, the death benefit will be the greater of: (a) the
contract value or (b) the death benefit on the last day of the previous contract
year, plus any purchase payments made and less any amounts deducted in
connection with partial withdrawals since then. If any contract owner dies on or
after his or her 81st birthday, the death benefit will be the greater of (a)
contract value or (b) the death benefit on the last day of the contract year
ending just prior to the owner's 81st birthday, plus any payments made, less
amounts deducted in connection with partial withdrawals.
If any contract owner dies and the oldest owner had an attained age of
81 years or greater on the contract date, the death benefit will be the greater
of: (a) the contract value or (b) the excess of (i) the sum of all purchase
payments over (ii) the sum of any amounts deducted in connection with partial
withdrawals.
Death Benefit for New Contracts Issued Prior to May 1, 1998
The death benefit described below applies to New Contracts issued prior
to May 1, 1998 as well as New Contracts issued on or after May 1, 1998 in the
Old Death Benefit States.
CONTRACTS ISSUED PRIOR TO MAY 1, 1998. If any contract owner dies on or
prior to his or her 85th birthday and the oldest owner had an attained age of
less than 81 years on the contract date, the death benefit will be determined as
follows: During the first contract year, the death benefit will be the greater
of: (a) the contract value or (b) the sum of all purchase payments made, less
any amounts deducted in connection with partial withdrawals. During any
subsequent contract year, the death benefit will be the greater of: (a) the
contract value or (b) the death benefit on the last day of the previous contract
year, plus any purchase payments made and less any amounts deducted in
connection with partial withdrawals since then.
If any contract owner dies after his or her 85th birthday and the
oldest owner had an attained age of less than 81 years on the contract date, the
death benefit will be the greater of: (a) the contract value or (b) the excess
of (i) the sum of all purchase payments over (ii) the sum of any amounts
deducted in connection with partial withdrawals. If any contract owner dies and
the oldest owner had an attained age greater than 80 on the contract date, the
death benefit will be the contract value less any applicable withdrawal charges
at the time of payment of benefits. For contracts issued on or after October 1,
1997, any withdrawal charges applied against the death benefit shall be waived
by the Company. be waived by the Company.
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.
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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 3% 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 20/21, Ven 22/23
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