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As filed with the Securities and Exchange Commission on February 26, 1998
Registration No. 33-92466
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 4
UNDER THE
SECURITIES ACT OF 1933
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA SEPARATE ACCOUNT B,
FORMERLY NASL VARIABLE LIFE ACCOUNT
(Exact name of trust)
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA,
FORMERLY NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
(Name of depositor)
116 Huntington Avenue
Boston, MA 02116
(Address of Depositor's Principal Executive Offices)
James D. Gallagher, Esq.
Vice President, Secretary Copy to:
and General Counsel J. Sumner Jones, Esq.
The Manufacturers Life Insurance Company Jones & Blouch L.L.P.
of North America Suite 405 West
73 Tremont Street 1025 Thomas Jefferson Street
Boston, MA 02108 Washington, DC 20007-0805
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
----
on [date] pursuant to paragraph (b) of Rule 485
----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
----
X on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
----
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RECONCILIATION AND THE TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
ITEM NO. OF CAPTION IN
FORM N-8B-2 PROSPECTUS
- --------------------------------------------------------------------------------
1. Cover Page
2. Cover Page
3. Not Applicable
4. OTHER MATTERS: Distribution of the Contract
5. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: The Manufacturers Life Insurance Company of
North America Separate Account B , The Manufacturers Life
Insurance Company of North America
6. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: The Manufacturers Life Insurance Company of
North America Separate Account B
7. Not Applicable
8. Not Required
9. OTHER MATTERS: Legal Proceedings
10. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: The Manufacturers Life Insurance Company of
North America, Manufacturers Investment Trust; OTHER MATTERS:
Voting Rights; CHARGES AND DEDUCTIONS; DESCRIPTION OF THE
CONTRACT
11. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: Manufacturers Investment Trust
12. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: Manufacturers Investment Trust
13. CHARGES AND DEDUCTIONS; FEDERAL TAX MATTERS; OTHER MATTERS:
Distribution of the Contract
14. DESCRIPTION OF THE CONTRACT: Application for a Contract
15. DESCRIPTION OF THE CONTRACT: Allocation of Payments
16. DESCRIPTION OF THE CONTRACT: Payments; GENERAL INFORMATION ABOUT
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA, THE
MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE
ACCOUNT B AND MANUFACTURERS INVESTMENT TRUST: Manufacturers
Investment Trust
17. DESCRIPTION OF THE CONTRACT: Withdrawals; CHARGES AND
DEDUCTIONS: Withdrawal Charge
18. DESCRIPTION OF THE CONTRACT; CHARGES AND DEDUCTIONS; FEDERAL TAX
MATTERS
19. OTHER MATTERS: Notices and Reports to Contract Holders
20. Not Applicable
21. DESCRIPTION OF THE CONTRACT: Loans
22. Not Applicable
23. OTHER MATTERS: Safekeeping of Separate Account Assets
24. DESCRIPTION OF THE CONTRACT
25. GENERAL INFORMATION THE MANUFACTURERS LIFE INSURANCE COMPANY OF
NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH
AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS INVESTMENT TRUST:
The Manufacturers Life Insurance Company of North America
26. Not Applicable
27. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: The Manufacturers Life Insurance Company of
North America
28. OTHER MATTERS: Officers and Directors of the Company
29. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: The Manufacturers Life Insurance Company of
North America
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. OTHER MATTERS: Distribution of the Contract
36. Not Required
37. Not Applicable
38. OTHER MATTERS: Distribution of the Contract
39. OTHER MATTERS: Distribution of the Contract
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40. Not Applicable
41. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: The Manufacturers Life Insurance Company of
North America; OTHER MATTERS: Distribution of the Contract
42. Not Applicable
43. Not Applicable
44. DESCRIPTION OF THE CONTRACT: Allocation of Payments
45. Not Applicable
46. DESCRIPTION OF THE CONTRACT; CHARGES AND DEDUCTIONS
47. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: Manufacturers Investment Trust, The
Manufacturers Life Insurance Company of North America Separate
Account B
48. Not Applicable
49. Not Applicable
50. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: The Manufacturers Life Insurance Company of
North America Separate Account B
51. Cover Page; DESCRIPTION OF THE CONTRACT; CHARGES AND DEDUCTIONS
52. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B AND MANUFACTURERS
INVESTMENT TRUST: The Manufacturers Life Insurance Company of
North America Separate Account B, Manufacturers Investment Trust
53. FEDERAL TAX MATTERS
54. Not Applicable
55. Not Applicable
56. Not Required
57. Not Required
58. Not Required
59. FINANCIAL STATEMENTS
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Service Office Mailing Address
116 Huntington Avenue P.O. Box 9236
Boston, Massachusetts 02116 Boston, Massachusetts
(617) 266-6004 (800) 224-3687 02205-9236
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THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA SEPARATE ACCOUNT B
- --------------------------------------------------------------------------------
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA
VENTURE LIFE MODIFIED SINGLE PAYMENT VARIABLE
LIFE INSURANCE CONTRACT NON-PARTICIPATING
This Prospectus describes Venture Life, a modified single payment
combination fixed and variable life insurance contract (the "contract"), offered
by The Manufacturers Life Insurance Company of North America, formerly North
American Security Life Insurance Company (the "Company"), a stock life insurance
company the ultimate parent of which is The Manufacturers Life Insurance Company
("Manulife"). The contract is designed primarily for use in estate planning. The
contract requires the contract owner to make an initial premium payment of at
least $10,000 and, subject to certain restrictions, permits additional premium
payments.
The contract provides for a face amount which is the minimum death benefit
while the contract is in force. The contract can be issued on either a single
life or last survivor basis. At the death of the insured while the contract is
in force, the Company will pay the death benefit (minus any indebtedness) to the
beneficiary.
Values under the contract may be allocated to a fixed investment option and
held in the Company's general account, or to one or more of twenty-nine
currently available variable investment options and held in The Manufacturers
Life Insurance Company of North America Separate Account B, formerly NASL
Variable Life Account (the "Variable Account"), a separate account of the
Company. Except as specifically noted herein and as set forth in the caption
"FIXED INVESTMENT OPTION" below, this Prospectus describes only the variable
portion of the contract.
Assets allocated to the Variable Account will be held in one or more of
twenty-nine Sub-Accounts of the Variable Account (the "Sub-Accounts"). The
assets of each Sub-Account are invested in shares of Manufacturers Investment
Trust (the "Trust"), a mutual fund having an investment Portfolio for each
Sub-Account of the Variable Account. See the accompanying Prospectus of the
Trust. The value of a contract owner's interest in the Variable Account will,
and a contract's death benefit may, vary with the investment performance of the
Portfolios underlying the Sub-Accounts to which values are allocated. The
Company does not guarantee the performance of any Portfolio.
BECAUSE THE CONTRACT WILL TYPICALLY BE TREATED AS A MODIFIED ENDOWMENT
CONTRACT FOR FEDERAL INCOME TAX PURPOSES, LOANS, PARTIAL WITHDRAWALS OR
SURRENDER OF THE CONTRACT MAY BE SUBJECT TO INCOME TAX AND A 10% PENALTY TAX.
It may not be advantageous to purchase variable life insurance as a
replacement for existing insurance.
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 A PROSPECTIVE PURCHASER SHOULD KNOW BEFORE INVESTING. IN ADDITION,
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") MAINTAINS A WEB SITE
(HTTP://WWW.SEC.GOV) THAT CONTAINS MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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VENLIFE.598 The date of the Prospectus is May 1, 1998
<PAGE> 6
TABLE OF CONTENTS
SPECIAL TERMS........................................................... 3
SUMMARY................................................................. 5
GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE COMPANY OF
NORTH AMERICA, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH
AMERICA SEPARATE ACCOUNT B, AND MANUFACTURERS INVESTMENT TRUST.......... 7
DESCRIPTION OF THE CONTRACT............................................. 12
Application for a Contract........................................ 12
Payments.......................................................... 12
Allocation of Payments............................................ 13
Variable Investment Options....................................... 13
Transfers Among Investment Options................................ 14
Telephone Transactions............................................ 14
Dollar Cost Averaging............................................. 14
Asset Rebalancing Program......................................... 14
Loans............................................................. 15
Withdrawals....................................................... 15
Death Benefit..................................................... 16
Annuity Payment Options........................................... 17
Termination....................................................... 18
Reinstatement..................................................... 18
Fixed Investment Option........................................... 18
Ten Day Right to Review........................................... 19
Ownership......................................................... 20
Beneficiary....................................................... 20
Miscellaneous Contract Provisions................................. 20
CHARGES AND DEDUCTIONS.................................................. 21
Monthly Deduction................................................. 21
Distribution Charge............................................... 21
Premium Tax Charge................................................ 22
Federal Tax Charge................................................ 22
Administration Charge............................................. 22
Cost of Insurance Charge.......................................... 22
Mortality and Expense Risk Charge................................. 22
Withdrawal Charge................................................. 22
Other Taxes....................................................... 24
FEDERAL TAX MATTERS..................................................... 24
Introduction...................................................... 24
The Company's Tax Status......................................... 24
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Taxation of Life Insurance Contracts in General................... 24
Federal Income Tax Withholding.................................... 24
OTHER MATTERS........................................................... 28
Voting Rights..................................................... 28
Notices and Reports to Contract Owners............................ 29
Distribution of the Contract...................................... 29
Officers and Directors of the Company............................. 29
Confirmation Statements........................................... 31
Legal Proceedings................................................. 31
Legal Matters..................................................... 31
Independent Auditors.............................................. 31
Safekeeping of Variable Account Assets............................ 32
Other Information................................................. 32
Contract Owner Inquiries.......................................... 32
CONTRACT ILLUSTRATIONS.................................................. 32
FINANCIAL STATEMENTS.................................................... 32
3
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SPECIAL TERMS
Age and Attained Age The age at the insured's last birthday on the
contract date. If the insured is more than one
person, "age" is the joint equivalent age
specified on the contract specifications page.
"Attained age" is age plus the number of complete
contract years.
Annuity Option One of several alternative methods by which
payment of the proceeds may be made. If no annuity
option is specified, then proceeds will be paid in
a lump-sum.
Beneficiary The person, persons, or entity to whom the death
benefit proceeds are payable following the death
of the insured.
Cash Value The contract value minus any applicable withdrawal
charge.
Company The Manufacturers Life Insurance Company of North
America
Contingent The person, persons or entity who becomes the
Beneficiary beneficiary if the beneficiary is not alive.
Contract The anniversary of the contract date.
Anniversary
Code The Internal Revenue Code of 1986, as amended.
Contract Date The date from which contract anniversary, contract
year and monthly anniversary day are determined.
The contract date is specified on the contract
specifications page.
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 contract anniversary
thereafter.
Death Benefit The death benefit is determined on the date of the
insured's death and will be the greater of (a) the
face amount or (b) the contract value multiplied
by the death benefit factor stated in the
contract.
Debt Any amounts in the loan account attributable to
the contract plus any accrued loan interest.
Face Amount The minimum death benefit provided by the
contract. The initial face amount is shown on the
contract specifications page. The face amount may
be reduced as a result of partial withdrawals and
may be increased as the result of additional
premium payments.
General Account All of the assets of the Company other than assets
in separate accounts.
In Force The contract is in effect, beginning on the later
of the issue date or receipt of the initial
payment, until the contract is terminated.
Insured The person whose life is covered by the contract,
as specified on the contract specifications page.
If more than one person is so named, all
provisions of the contract which are based on the
death of the insured will be based on the date of
the death of the last survivor of those persons.
Investment Account An account the Company establishes for the owner
which represents the owner's interest in an
investment option.
Investment Account Value The value of the owner's investment in an
investment account.
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Investment Options The fixed and variable investments available to
contract owners. Currently, one fixed and
twenty-nine variable investment options are
available under the contract. The Company
currently limits the number of investment options
to which an owner may allocate contract value to
ten.
Issue Date The date the application is approved and the
contract is issued, as specified on the contract
specification page.
Loan Account The portion of the assets held in the Company's
general account that is used as collateral when a
loan is taken.
Maturity Date The date on which proceeds are payable if the
insured is living, and the contract has not been
surrendered for payment of its surrender value, as
specified on the contract specifications page (the
contract anniversary when the insured has attained
age 100, unless the extended maturity option is
elected).
Monthly Anniversary Day The same day each month as the contract date. If
there is no monthly anniversary day in a calendar
month, the monthly anniversary day will be the
last day of the current calendar month.
Owner or
Contract Owner The person, persons or entity entitled to the
ownership rights under the contract.
Payment or
Premium Payment An amount paid by a contract owner to the Company
as consideration for the benefits provided by the
contract.
Portfolio or The registered management investment companies
Trust Portfolio (or any successor companies offered under the
contract) in which the separate account may
invest.
Proceeds Upon the death of the insured while the contract
is in force prior to the maturity date, the amount
to be paid to the beneficiary (the death benefit
minus any debt). Upon surrender of the contract or
on the maturity date, the surrender value to be
paid to the contract owner.
Separate Account A segregated account of the Company that
is not commingled with the Company's general
assets and obligations.
Service Office Any office the Company designates for the receipt
of payments and processing of contract owner
requests.
Sub-Account(s) The subdivisions of the separate account used to
permit a contract owner's contract value, less
indebtedness, to be allocated among the
Portfolios.
Surrender Value The cash value less any debt.
Trust Manufacturers Investment Trust
Unliquidated
Payments The sum of all payments under the contract, minus
the sum of payments liquidated, if any, due to
partial withdrawals.
Valuation Date Any date on which the New York Stock Exchange is
open for business and the net asset value of a
Portfolio is determined.
Valuation Period Any period from one valuation date to the next,
measured from the time on each valuation date that
the net asset value of each Portfolio is
determined.
Variable Account The Manufacturers Life Insurance Company of North
America Separate Account B, which is a separate
account of the Company.
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SUMMARY
THE CONTRACT
The contract is a modified single payment variable life insurance contract.
The contract provides a death benefit and is designed for use in estate
planning. During the insured's life, the contract provides that the contract
value will accumulate on a fixed and/or variable basis. The variable portion of
the contract will vary with the investment performance of an owner's variable
investment accounts. Any portion of contract value allocated to the fixed
investment option will accumulate based on the interest rate(s) credited by the
Company.
PAYMENTS
The contract requires the contract owner to make an initial payment of at
least $10,000 and, subject to certain restrictions, permits additional payments.
After the first contract anniversary, one additional premium payment of at least
$1,000 may be made at any time during each contract year. Provided that the
insured is between ages 40 and 70, up to the lesser of $5,000 or 5% of the
initial payment may be paid without submitting new evidence of insurability.
Additional payments may or may not increase the contract's face amount (see
"PAYMENTS").
INVESTMENT OPTIONS
Payments may be allocated among the thirty investment options currently
available under the contract: twenty-nine variable investment options and one
fixed investment option. Contract value may be allocated to a maximum of ten
investment options at any one time. The twenty-nine variable investment options
are the twenty-nine Sub-Accounts of the Variable Account, a separate account
established by the Company. The Sub-Accounts invest in corresponding Portfolios
of the Trust: Science and Technology Trust, International Small Cap Trust,
Emerging Growth Trust, Pilgrim Baxter Growth Trust, Small/Mid Cap Trust,
International Stock Trust, Global Equity Trust, Equity Trust, Growth Trust, Blue
Chip Growth Trust, Real Estate Securities Trust, Value Trust, International
Growth and Income Trust, Growth and Income Trust, Equity-Income Trust,
Aggressive Asset Allocation Trust, High Yield Trust, Moderate Asset Allocation
Trust, Conservative Asset Allocation Trust, Strategic Bond Trust, Global
Government Bond Trust, Investment Quality Bond Trust, U.S. Government Securities
Trust, Money Market Trust, Lifestyle Aggressive 1000 Trust, Lifestyle Growth 820
Trust, Lifestyle Balanced 640 Trust, Lifestyle Moderate 460 Trust and the
Lifestyle Conservative 280 Trust (see the accompanying Prospectus of the Trust).
The portion of the contract value in the Variable Account will reflect the
investment performance of the Sub-Accounts selected (see "THE MANUFACTURERS LIFE
INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B"). Premium payments may
also be allocated to the fixed investment option. Under the fixed investment
option, the Company guarantees the principal value of payments and the rate of
interest credited to the investment account until the next contract anniversary.
The portion of the contract value in the fixed investment option will reflect
such interest and principal guarantees (see "FIXED INVESTMENT OPTION"). Subject
to certain regulatory limitations, the Company may elect to add, subtract or
substitute investment options.
If the initial payment is received at the Service Office prior to the issue
date, the entire payment will be allocated to the Company's General Account.
This amount will be allocated to the Money Market Sub-Account as of the issue
date of the contract. The contract value will then be allocated among the
investment accounts in accordance with the applicant's instructions on the later
of (a) fifteen days after the issue date of the contract or (b) the date the
initial payment is received at the Service Office.
TRANSFERS
Prior to the maturity date, amounts may be transferred among the variable
investment options and from the variable investment options to the fixed
investment option without charge. In addition, amounts may be transferred prior
to the maturity date from the fixed investment option to the variable investment
options within 30 days of each contract anniversary (and in other limited
circumstances) (see "FIXED INVESTMENT OPTION"). After the maturity date,
transfers are not permitted. Transfers from any investment account must be at
least $300 or, if less, the entire balance in the investment account. If after
the transfer the amount remaining in the investment account of the contract from
which the transfer is made is less than $100, then the Company will transfer the
entire amount instead of the requested amount. The Company may impose certain
additional limitations on transfers (see "TRANSFERS AMONG INVESTMENT OPTIONS").
Transfer privileges may
6
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also be used under a special service offered by the
Company to dollar cost average an investment in the contract (see "DOLLAR COST
AVERAGING").
WITHDRAWALS
Prior to the earlier of the maturity date or the death of the insured, the
owner may withdraw all or a portion of the contract value. The amount withdrawn
from any investment account must be at least $300 or, if less, the entire
balance of the investment account. If a partial withdrawal plus any applicable
withdrawal charge would reduce the contract value to less than $300, the
withdrawal request will be treated as a request to withdraw the entire contract
value. A withdrawal charge may be imposed (see "WITHDRAWALS"). A withdrawal may
be subject to income tax and a 10% penalty tax (see "FEDERAL TAX MATTERS").
LOANS
A owner may obtain one or both of two types of loans using the contract as
the sole security for the loan. At the time a loan is requested, the aggregate
amount of all loans (including the currently applied for loan) may not exceed
90% of the cash value (see "LOANS"). A loan may be subject to income tax and a
10% penalty tax (see "FEDERAL TAX MATTERS").
CONFIRMATION STATEMENTS
Owners will be sent confirmation statements for certain transactions in
their account. Owners should carefully review these statements to verify their
accuracy. Any mistakes should immediately be reported to the Company's Service
Office. If the owner fails to notify the Company's Service Office of any mistake
within 60 days of the mailing of the confirmation statement, the owner will be
deemed to have ratified the transaction.
CHARGES AND DEDUCTIONS
Contract Charges
No deduction is made from premium payments under the contract. On each
monthly anniversary day (or, if the monthly anniversary is not a valuation date,
the next valuation date after the monthly anniversary), charges are deducted
proportionately from all investment accounts.
Certain charges are expressed as an annual percentage of the owner's
contract value:
Three of these charges are deducted only during the first ten
contract years:
o 0.25% for distribution costs incurred by the Company,
o 0.25% for state premium taxes to be paid by the Company as a
result of receipt of premium payments, and
o 0.15% for the Company's increased Federal taxes caused by
its receipt of premium payments.
Two of these charges are deducted for all contract years:
o A 0.40% charge for contract administration, and
o A 0.35% charge for the death benefit provided by the
contract (0.55% after the first ten contract years). If
there is more than one insured, this charge is 0.10% (0.30%
after the first ten contract years). This cost of insurance
charge may vary; however, it is guaranteed not to exceed
charges based upon the Commissioner's 1980 Standard Ordinary
Mortality Table (the "1980 CSO Table").
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In addition, there are two other contract charges:
o A charge at an annual rate of 0.90% of the value of each
variable investment account is deducted monthly for the
mortality and expense risks assumed by the Company in
connection with the contract.
o A monthly administrative charge of $2.50 per month will be
imposed upon contracts with less than $100,000 of total
premium payments (see "CHARGES AND DEDUCTIONS").
Trust Charges
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.
DEATH BENEFIT
The contract provides for a face amount which is the minimum death benefit
under the contract. The death benefit may be greater than the face amount as a
result of favorable investment performance. At the death of the insured, the
Company will pay the proceeds to the beneficiary. The proceeds equal the death
benefit less any debt under the contract (see "DEATH BENEFIT").
TEN DAY REVIEW
Within 10 days of receipt of a contract, the contract owner may cancel the
contract by returning it to the Company (see "TEN DAY RIGHT TO REVIEW").
TERMINATION
The contract will terminate and life insurance coverage will cease if the
owner surrenders the contract, or if the insured dies. It also will terminate 61
days after a monthly anniversary day when the contract surrender value is less
than zero unless the owner makes payments within the 61 day grace period
sufficient to prevent the termination. Unless the owner elects the extended
maturity option, the contract will also terminate on the maturity date specified
on the contract specifications page (the contract anniversary when the attained
age of the insured is 100) (see "TERMINATION").
GENERAL INFORMATION ABOUT
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA,
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE
ACCOUNT B AND MANUFACTURERS INVESTMENT TRUST
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
The Manufacturers Life Insurance Company of North America, (the "Company")
is a stock life insurance company organized under the laws of Delaware in 1979.
The Company's principal office is located at 116 Huntington Avenue, Boston,
Massachusetts 02116. The Company is also the depositor of The Manufacturers Life
Insurance Company of North America Separate Account B, (the "Variable Account")
a separate account of the Company that issues variable life contracts. The
ultimate parent of the Company is The Manufacturers Life Insurance Company
("Manulife"), a Canadian mutual life insurance company based in Toronto, Canada.
Prior to January 1, 1996, the Company was a wholly owned subsidiary of North
American Life Assurance Company ("NAL"), a Canadian mutual life insurance
company. On January 1, 1996 North American Life and Manulife merged with the
combined company retaining the name Manulife.
On January 20, 1998, the Board of Directors of Manulife asked the
management of Manulife to prepare a plan for conversion of Manulife from a
mutual life insurance company to an investor-owned, publicly-traded stock
company. Any demutualization plan for Manulife is subject to the approval of the
Manulife Board of Directors and policyholders as well as regulatory approval.
8
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THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA SEPARATE ACCOUNT B
The Company established the Variable Account in 1986, as a separate account
under Delaware law. The income, gains and losses, whether or not realized, from
assets of the Variable Account are, in accordance with the contract, credited to
or charged against the Variable Account without regard to other income, gains or
losses of the Company. Nevertheless, all obligations arising under the contract
are general corporate obligations of the Company. Assets of the Variable Account
may not be charged with liabilities arising out of any other business of the
Company.
The Variable Account is registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act") as a unit investment trust. A
unit investment trust is a type of investment company which invests its assets
in specified securities, such as the shares of one or more investment companies.
Registration under the 1940 Act does not involve supervision by the SEC of the
management or investment policies or practices of the Variable Account. If
deemed by the Company to be in the best interests of persons having voting
rights under the contract, the Variable Account may be operated as a management
company under the 1940 Act or it may be deregistered if registration under the
1940 Act is no longer required.
There are currently twenty-nine Sub-Accounts within the Variable Account,
one for each of the twenty-nine Portfolios described below. The Company reserves
the right to add other Sub-Accounts, eliminate existing Sub-Accounts, combine
Sub-Accounts or transfer assets in one Sub-Account to another Sub-Account
established by the Company or an affiliated company. The Company will not
eliminate existing Sub-Accounts or combine Sub-Accounts without obtaining any
necessary approval of the appropriate state or Federal regulatory authorities.
MANUFACTURERS INVESTMENT TRUST
The assets of each sub-account of the Variable Account are invested in
shares of a corresponding Portfolio of the Trust. A description of each
Portfolio is set forth below. The Trust is registered under the 1940 Act as an
open-end management investment company. Each of the portfolios is diversified
for purposes of the 1940 Act, except for the Global Government Bond Trust,
Emerging Growth Trust and the five Lifestyle Trusts which are non-diversified.
The Trust receives investment advisory services from Manufacturers Securities
Services, LLC, the successor to NASL Financial Services, Inc. ("MSS").
The Trust currently has fourteen subadvisers who manage all of the
portfolios:
SUBADVISER SUBADVISER TO
Fidelity Management Trust Company Equity Trust
Conservative Asset Allocation Trust
Moderate Asset Allocation Trust
Aggressive Asset Allocation Trust
Founders Asset Management LLC. Growth Trust
International Small Cap Trust
Fred Alger Management, Inc. Small/Mid Cap Trust
J.P. Morgan Investment Management Inc. International Growth and Income Trust
Oechsle International Advisors, L.P. Global Government Bond Trust
Manufacturers Adviser Corporation Real Estate Securities Trust
Money Market Trust
Lifestyle Aggressive 1000 Trust
Lifestyle Growth 820 Trust
Lifestyle Balanced 640 Trust
Lifestyle Moderate 460 Trust
Lifestyle Conservative 280 Trust
9
<PAGE> 14
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Pilgrim Baxter & Associates, Ltd. Pilgrim Baxter Growth Trust
Rowe Price-Fleming International, Inc. International Stock Trust
T. Rowe Price Associates, Inc. Science & Technology Trust
Blue Chip Growth Trust
Equity-Income Trust
Wellington Management Company LLP Growth and Income Trust
Investment Quality Bond Trust
Salomon Brothers Asset Management Inc. U.S. Government Securities Trust
Strategic Bond Trust
Warburg Pincus Asset Management, Inc. Emerging Growth Trust
The following is a brief description of each Portfolio:
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 capital appreciation by
investing primarily in securities issued by foreign companies which
have total market capitalization or annual revenues of $1 billion or
less. These securities may represent companies in both established and
emerging economies throughout the world.
The EMERGING GROWTH TRUST seeks maximum capital appreciation by
investing primarily in a Portfolio of equity securities of domestic
companies. The Emerging Growth Trust ordinarily will invest at least
65% of its total assets in common stocks or warrants of emerging growth
companies that represent attractive opportunities for maximum capital
appreciation.
The PILGRIM BAXTER GROWTH TRUST seeks capital appreciation by investing
in companies believed by the Subadviser to have an outlook for strong
earnings growth and the potential for significant capital appreciation.
The SMALL/MID CAP TRUST seeks long-term capital appreciation by
investing at least 65% of its total assets (except during temporary
defensive periods) in small/mid cap equity securities. As used herein
small/mid cap equity securities are equity securities of companies
that, at the time of purchase, have total market capitalization between
$500 million and $5 billion.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by
investing primarily in common stocks of established, non-U.S.
companies.
The 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 EQUITY TRUST seeks growth of capital by investing primarily in
common stocks of United States issuers and securities convertible into
or carrying the right to buy common stocks.
The GROWTH TRUST seeks long term growth of capital by investing at
least 65% of the Portfolio's total assets in common stocks of
well-established, high-quality growth companies that the Subadviser
believes have the potential to increase earnings faster than the rest
of the market.
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<PAGE> 15
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of capital
(current income is a secondary objective) and many of the stocks in the
Portfolio are expected to pay dividends.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of
long-term capital appreciation and satisfactory current income by
investing in real estate related equity and debt securities.
The VALUE TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk by
investing primarily in common and preferred stocks, convertible
securities, rights and warrants to purchase common stocks, ADRs and
other equity securities of companies with equity capitalizations
usually greater than $300 million.
The INTERNATIONAL GROWTH AND INCOME TRUST seeks long-term growth of
capital and income by investing, under normal circumstances, at least
65% of its total assets in equity securities of foreign issuers. The
Portfolio may also invest in debt securities of corporate or sovereign
issuers rated A or higher by Moody's Investor Services, Inc. or
Standard & Poor's Corporation or, if unrated, of equivalent credit
quality as determined by the subadviser.
The GROWTH AND INCOME TRUST seeks long-term growth of capital and
income, consistent with prudent investment risk, by investing primarily
in a diversified Portfolio of common stocks of United States issuers
which the Subadviser believes are of high quality.
The EQUITY-INCOME TRUST seeks to provide substantial dividend income
and also long-term capital appreciation by investing primarily in
dividend-paying common stocks, particularly of established companies
with favorable prospects for both increasing dividends and capital
appreciation.
The HIGH YIELD TRUST seeks to realize an above-average total return
over a market cycle of three to five years, consistent with reasonable
risk, by investing primarily in high yield debt securities, including
corporate bonds and other fixed-income securities.
The AUTOMATIC ASSET ALLOCATION TRUSTS seek the highest potential total
return consistent with a specified level of risk tolerance --
conservative, moderate or aggressive -- by investing primarily in the
kinds of securities in which the Equity, Investment Quality Bond, U.S.
Government Securities and Money Market Trusts may invest.
o The AGGRESSIVE ASSET ALLOCATION TRUST seeks the highest total
return consistent with an aggressive level of risk tolerance.
This Portfolio attempts to limit the decline in Portfolio value
in very adverse market conditions to 15% over any three year
period.
o The MODERATE ASSET ALLOCATION TRUST seeks the highest total
return consistent with a moderate level of risk tolerance. This
Portfolio attempts to limit the decline in Portfolio value in
very adverse market conditions to 10% over any three year period.
o The CONSERVATIVE ASSET ALLOCATION TRUST seeks the highest total
return consistent with a conservative level of risk tolerance.
This Portfolio attempts to limit the decline in Portfolio value
in very adverse market conditions to 5% over any three year
period.
The STRATEGIC BOND TRUST seeks a high level of total return consistent
with preservation of capital by giving its Subadviser broad discretion
to deploy the Portfolio's assets among certain segments of the
fixed-income market as the Subadviser believes will best contribute to
achievement of the Portfolio's investment objective.
The GLOBAL GOVERNMENT BOND TRUST seeks a high level of total return by
placing primary emphasis on high current income and the preservation of
capital by investing primarily in a global Portfolio of high-quality,
fixed-income securities of foreign and United States governmental
entities and supranational issuers.
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<PAGE> 16
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by
investing primarily in a diversified Portfolio of investment grade
corporate bonds and U.S. Government bonds with intermediate to longer
term maturities. The Portfolio may also invest up to 20% of its assets
in non-investment grade fixed income securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current
income consistent with preservation of capital and maintenance of
liquidity, by investing in debt obligations and mortgage-backed
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and derivative securities such as collateralized
mortgage obligations backed by such securities.
The MONEY MARKET TRUST seeks maximum current income consistent with
preservation of principal and liquidity by investing in high quality
money market instruments with maturities of 397 days or less issued
primarily by United States entities.
The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long-term growth
of capital (current income is not a consideration) by investing 100% of
the Lifestyle Trust's assets in other Portfolios of the Trust
("Underlying Portfolios") which invest primarily in equity securities.
The LIFESTYLE GROWTH 820 TRUST seeks to provide long term growth of
capital with consideration also given to current income by investing
approximately 20% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in fixed income securities and
approximately 80% of its assets in Underlying Portfolios which invest
primarily in equity securities.
The LIFESTYLE BALANCED 640 TRUST seeks to provide a balance between a
high level of current income and growth of capital with a greater
emphasis given to capital growth by investing approximately 40% of the
Lifestyle Trust's assets in Underlying Portfolios which invest
primarily in fixed income securities and approximately 60% of its
assets in Underlying Portfolios which invest primarily in equity
securities.
The LIFESTYLE MODERATE 460 TRUST seeks to provide a balance between a
high level of current income and growth of capital with a greater
emphasis given to high income by investing approximately 60% of the
Lifestyle Trust's assets in Underlying Portfolios which invest
primarily in fixed income securities and approximately 40% of its
assets in Underlying Portfolios which invest primarily in equity
securities.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of
current income with some consideration also given to growth of capital
by investing approximately 80% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities
and approximately 20% of its assets in Underlying Portfolios which
invest primarily in equity securities.
In pursuing the Strategic Bond, High Yield and Investment Quality Bond
Trusts' investment objective, each portfolio expects to invest a portion of its
assets in high yield securities, commonly known as "junk bonds" which also
present a high degree of risk. The risks of these securities include price
volatility and risk of default in the payment of interest and principle. See
"Risk Factors Relating to High Yield Securities" contained in the Trust
Prospectus before investing in any of these Trusts.
In pursuing the Pacific Rim Emerging Markets, International Stock,
Worldwide Growth, International Small Cap, Global Equity, Strategic Bond,
International Growth and Income, High Yield and Global Government Bond Trusts'
investment objective, each portfolio may invest up to 100% of its assets in
foreign securities which may present additional risks. See "Foreign Securities"
in the Trust Prospectus before investing in any of these Trusts.
If the shares of any Portfolio are no longer available for investment
or in the Company's judgment, investment in a Portfolio becomes inappropriate in
view of the purposes of the Variable Account, the Company may eliminate the
shares of a Portfolio and substitute shares of another Portfolio or another
open-end registered investment company. Substitution may be made with respect to
both existing investments and the investment of future payments. However, no
substitution will be made without notice to contract owners and prior approval
of the SEC to the extent required by the 1940 Act. The Variable Account may
purchase other securities for
12
<PAGE> 17
additional Sub-Accounts or to fund classes of contracts not offered through this
Prospectus without giving such notice or seeking SEC approval.
A full description of the Trust, including the investment objectives,
policies and restrictions and expenses of each of the Portfolios and a
description of procedures for handling potential conflicts of interest arising
from the use of the Trust to fund both variable annuity and variable life
insurance contracts, is contained in the Prospectus for the Trust which
accompanies this Prospectus and should be read by a prospective purchaser before
investing.
DESCRIPTION OF THE CONTRACT
APPLICATION FOR A CONTRACT
To purchase a contract a prospective contract owner must submit an
application to the Company. A contract will be issued only on the lives of
insureds from ages 20 through 80 who supply evidence of insurability
satisfactory to the Company. Contracts insuring more than one person will only
be issued to a male life/female life combination where the difference in their
"adjusted ages" (age last birthday plus three years if tobacco user) is not more
than 15 years. Acceptance is subject to the Company's underwriting rules. The
Company reserves the right to reject an application for any lawful reason
provided similarly-situated risks are treated in a consistent manner and unfair
discrimination is avoided. IF A CONTRACT IS NOT ISSUED, THE PREMIUM PAYMENTS
WILL BE RETURNED WITHOUT INTEREST. No change in the terms or conditions of a
contract will be made without the consent of the owner.
The contract will be effective on the contract date only after the Company
has received all outstanding delivery requirements and received the initial
payment. The contract date is the date used to determine all future cyclical
transactions on the contract, e.g., monthly anniversary day and contract years.
The contract date may be prior to, or the same as, the date the contract is
issued.
If the face amount exceeds current limits established by the Company, the
initial payment will not be accepted with the application. In other cases where
an initial payment is received with the application, the Company will provide
conditional insurance during underwriting according to the terms of a prepayment
receipt and temporary life insurance agreement. The conditional insurance will
be the insurance applied for, up to a maximum of $100,000. If no payment was
submitted with the application, on contract delivery we will require sufficient
payment to place the insurance in force.
PAYMENTS
The contract is designed to permit an initial payment and, subject to
certain conditions, additional payments. The initial payment purchases a death
benefit initially equal to the contract's face amount. The minimum initial
payment is $10,000.
Under current underwriting rules, which are subject to change, proposed
insureds are eligible for simplified underwriting without a medical examination
if their application responses and initial payment meet simplified underwriting
standards. Customary underwriting standards will apply to all other proposed
insureds. The maximum initial premium currently permitted on a simplified
underwriting basis varies with the issue age of the insured according to the
following table:
<TABLE>
<CAPTION>
ISSUE AGE SIMPLIFIED UNDERWRITING MAXIMUM INITIAL PAYMENT
<S> <C>
20-39 Not available
40-44 $20,000
45-54 $30,000
55-64 $50,000
65-80 $100,000
</TABLE>
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<PAGE> 18
If the additional payment is greater than the Guaranteed Additional Payment (as
defined below) and is not made to avoid termination of the contract, new
evidence of insurability of the insured will be required. No additional payment
will be accepted until evidence of insurability is provided to the Company.
Additional payments may be made at any time and in any amount necessary to
avoid termination of the contract. Other additional payments may be made at any
time after the first contract anniversary, subject to the following conditions:
(1) each additional payment must be at least $1,000;
(2) only one payment may be paid in any contract year;
(3) the attained age of the insured must be less than 81; and
(4) absent submission of new evidence of insurability of the
insured, the maximum additional payment permitted in a
contract year is the "Guaranteed Additional Payment". The
Guaranteed Additional Payment is the lesser of $5,000 or a
percentage of the initial payment (5% for attained ages 40-70,
and 0% for attained ages 20-39 and 71-80).
An additional payment may result in an increase in the face amount of
insurance. If necessary, the Company will increase the face amount by an amount
sufficient to permit the contract to remain within the definition of a "life
insurance contract" under Section 7702 of the Internal Revenue Code of 1986, as
amended (the "Code").
ALLOCATION OF PAYMENTS
The Company will establish an investment account for the contract owner for
each variable investment option to which the contract owner allocates payments.
The contract owner may allocate contract value to a maximum of ten investment
options at any one time.
If the initial payment is received at the Service Office prior to the issue
date, the entire payment will be allocated to the Company's General Account. On
the issue date, this amount will be allocated to the Money Market Sub-Account as
of the date the initial payment is received at the Service Office. The contract
value will then be allocated among the investment accounts in accordance with
the applicant's instructions on the later of (a) fifteen days after the issue
date of the contract or (b) the date the initial payment is received at the
Service Office. Additional payments are first applied to the amount of any debt
under any outstanding loan. Thereafter, additional payments will be allocated
among investment options in accordance with the contract owner's instructions as
of the date the payment is received at the Service Office.
VARIABLE INVESTMENT OPTIONS
The investment account for a variable investment option represents the
contract owner's interest in that investment option. The value of a variable
investment account may increase or decrease daily depending on the net
investment experience (described below) for a Sub-Account. The investment
account value reflects payments, amounts transferred to the investment account,
the net investment experience of the Sub-Account, and any withdrawals, loans,
transfers and charges taken from the investment account.
The net investment experience for a variable investment account is the
investment performance of the underlying Trust Portfolio of a Sub-Account from
one valuation period to the next. The net investment experience for any
valuation period is determined by dividing (a) by (b):
Where (a) is:
(1) the net asset value of a Portfolio share held in the Sub-Account
determined at the end of the current valuation period, plus
(2) the per share amount of any dividend or capital gain distributions
made by the Portfolio on shares held in the Sub-Account if the "ex-dividend"
date occurs during the current valuation period.
Where (b) is:
14
<PAGE> 19
the net asset value of a Portfolio share held in the Sub-Account
determined as of the end of the immediately preceding valuation period.
TRANSFERS AMONG INVESTMENT OPTIONS
Before the maturity date the contract owner may transfer amounts among the
variable investment options and from such investment options to the fixed
investment option at any time and without charge upon written notice to the
Company or by telephone if the contract owner authorizes the Company in writing
to accept telephone transfer requests. Amounts may only be transferred from the
fixed investment option to the variable investment options within 30 days of the
contract anniversary. The Company will effect such transfers so that the
contract value on the date of the transfer will not be affected by the transfer.
The contract owner must transfer at least $300 or, if less, the entire value of
the investment account. If after the transfer the amount remaining in the
investment account is less than $100, then the Company will transfer the entire
amount instead of the requested amount. The Company reserves the right to limit,
upon notice, the maximum number of transfers a contract owner may make to one
per month or six at any time within a contract year. In addition, the Company
reserves the right to defer the transfer privilege at any time that the Company
is unable to purchase or redeem shares of the Trust Portfolios. The Company also
reserves the right to modify or terminate the transfer privilege at any time in
accordance with applicable law.
TELEPHONE TRANSACTIONS
Contract owners are permitted to request transfers by telephone. The
Company will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. To be permitted to request transfers
by telephone, a contract owner must elect the option on an appropriate
authorization form provided by the Company. The Company will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine
and may only be liable for any losses due to unauthorized or fraudulent
instructions where it fails to employ its procedures properly. Such procedures
include the following: Upon telephoning a request, contract owners will be asked
to provide certain identifying information. For the contract owner's and
Company's protection, all conversations with contract owners will be tape
recorded. All telephone transactions will be followed by a confirmation
statement of the transaction.
DOLLAR COST AVERAGING
The Company administers a Dollar Cost Averaging ("DCA") program which
enables a contract owner to pre-authorize a periodic exercise of the contractual
transfer rights described above. Contract owners entering into a DCA agreement
instruct the Company to transfer monthly a predetermined dollar amount from any
Sub-Account or the fixed investment option to other Sub-Accounts until the
amount in the Sub-Account from which the transfer is made or the fixed
investment option is exhausted. The DCA program is generally suitable for
contract owners making a substantial deposit to the contract and who desire to
control the risk of investing at the top of a market cycle. The DCA program
allows such investments to be made in equal installments over time in an effort
to reduce such risk. Contract owners interested in the DCA program may obtain a
separate application and full information concerning the program and its
restrictions from their securities dealer or the Service Office. There is no
charge for participation in the DCA program.
ASSET REBALANCING PROGRAM
The Company administers an Asset Rebalancing Program which enables a
contract owner to indicate to the Company the percentage levels he or she would
like to maintain in particular Trust Portfolios. On the last business day of
every calendar quarter, the contract owner's contract value will be
automatically rebalanced to maintain the indicated percentages by transfers
among the Portfolios. (The fixed investment option is not eligible for
participation in the Asset Rebalancing Program.) The entire value of the
contract owners' 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, contract owners should monitor their use of
these programs and other transfers or withdrawals while the Asset Rebalancing
Program is being used. Contract owners interested in the Asset Rebalancing
Program may obtain a separate application and full information concerning the
program from their securities dealer or the Service Office. There is no charge
for participation in the Asset Rebalancing Program.
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<PAGE> 20
LOANS
While the contract is in force, the owner may obtain loans using the
owner's contract as the sole security for the loan. The maximum loan amount is
90% of cash value at the time of the loan; the minimum loan amount is $1,000.
Contract loans may be subject to income tax and a 10% penalty tax (see "FEDERAL
TAX MATTERS"). When an owner requests a loan, the Company will reduce the
owner's investment in the investment accounts and transfer the amount of the
loan to the loan account, a part of the Company's general account. The owner may
designate the investment accounts from which the loan is to be withdrawn. Absent
such a designation, the amount of the loan will be withdrawn from the investment
accounts on a pro rata basis. On each contract anniversary, the Company will
transfer from the investment accounts to the loan account the amount by which
the debt on the contract exceeds the balance in the loan account. In addition,
any additional payments are first applied to the amount of any debt under any
outstanding loan.
The Company charges interest of 6% per year on contract loans. Loan
interest is payable in arrears and, unless paid in cash, the accrued loan
interest is added to the amount of the debt and bears interest at 6% as well.
Except for the target loan amount described below, the loan account will be
credited interest at the rate of 4% per year.
The target loan amount is equal to the greater of:
(a) the excess of the contract value over the unliquidated payments, or
(b) 10% of total payments made under the contract.
The amount of the loan account that is less than or equal to the target
loan amount will be credited interest at the rate of 6% per year (unless a lower
rate becomes necessary in order to maintain the tax status of the contract). The
portion of the loan account that qualifies as target loan amount is determined
on the contract date and each monthly anniversary day.
If on any date debt under a contract exceeds the contract value, the
contract will be in default. In such case, the owner will receive a notice
indicating the payment needed to bring the contract out of default and will have
a sixty-one day grace period within which to pay that amount. If the required
payment is not made within the grace period, the contract will be terminated.
The amount of any debt will be deducted from the death benefit otherwise
payable under the contract (see "DEATH BENEFIT"). In addition, debt, 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 debt is outstanding, the greater the
effect is likely to be. The effect could be favorable or unfavorable. If the
investment results are greater than the rate being credited on amounts held in
the loan account while the debt is outstanding, the contract value will not
increase as rapidly as it would have if no debt were outstanding. If investment
results are below that rate, the contract value will be higher than it would
have been had no debt been outstanding.
The owner may repay any debt in whole or in part at any time while the
contract is in force. An amount equal to the amount of the loan repayment will
be transferred from the loan account and allocated among the investment accounts
in the same percentage as additional payments are allocated, unless the owner
requests otherwise.
WITHDRAWALS
Prior to the earlier of the maturity date or the death of the insured, the
owner may withdraw all or a portion of the contract value upon written request,
complete with all necessary information to the Service Office. In the case of a
total withdrawal, the Company will pay the surrender value as of the date of
receipt of the request at the Service Office, and the contract will terminate.
In the case of a partial withdrawal from an investment account, the Company will
pay the amount requested and deduct that amount plus any applicable withdrawal
charge from such investment account. All request to withdraw all or a portion of
the contract value must be in writing. Telephone withdrawals are not permitted.
(see "CHARGES AND DEDUCTIONS").
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<PAGE> 21
When making a partial withdrawal, the contract owner should specify the
investment accounts from which the withdrawal is to be made. The amount
requested from an investment account may not exceed the value of that investment
account less any applicable withdrawal charge. If the contract owner does not
specify the investment account from which a partial withdrawal is to be taken, a
partial withdrawal will be taken from all the investment accounts. The face
amount will be reduced proportionally to the reduction in the contract value due
to the partial withdrawal.
For the rules governing the order and manner of withdrawals from the fixed
investment option (see "FIXED 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 account. If after the withdrawal (and deduction of any withdrawal
charge) the amount remaining in the investment account is less than $100, the
Company will treat the partial withdrawal as a withdrawal of the entire amount
held in the investment account. If a partial withdrawal plus any applicable
withdrawal charge would reduce the contract value to less than $300, the Company
will treat the partial withdrawal as a total withdrawal of the contract value.
The amount of any withdrawal from the variable investment options will be
paid promptly, and in any event within seven days of receipt of the request,
complete with all necessary information at the Service Office, except that the
Company reserves the right to defer the right of withdrawal or postpone payments
for any period when: (1) the New York Stock Exchange is closed (other than
customary weekend and holiday closings), (2) trading on the New York Stock
Exchange is restricted, (3) an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) the SEC, by order, so permits for the protection of security
holders; provided that applicable rules and regulations of the SEC shall govern
as to whether the conditions described in (2) and (3) exist.
Withdrawals from the contract may be subject to income tax and a 10%
penalty tax (see "FEDERAL TAX MATTERS").
DEATH BENEFIT Upon receipt of proof of the death of the insured while the
contract is in force, the Company will pay the death benefit proceeds to the
beneficiary. The amount of the death benefit is determined on the date the
Company receives proof of the insured's death and will be the greater of (a) the
face amount or (b) the contract value times the death benefit factor from the
following table:
17
<PAGE> 22
<TABLE>
<CAPTION>
Death Death
Attained Benefit Attained Benefit
Age Factor Age Factor
--- ------ --- ------
<S> <C> <C> <C>
40 or
younger 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75-90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94-99 101%
</TABLE>
Proof of death is received when one of the following is received at the
Service Office:
(a) A certified copy of a death certificate; or
(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 the Company.
All or part of the death benefit proceeds may be paid in cash or applied
under an annuity option (see "ANNUITY PAYMENT OPTIONS"). If there is any debt
under the contract, the death benefit proceeds equal the death benefit, as
described above, less such debt.
ANNUITY PAYMENT OPTIONS
Proceeds payable under the contract are payable either in a lump sum or in
accordance with one or more annuity options. If no annuity option is specified,
then proceeds will be paid in a lump sum. The person to receive payments under
an option is called the payee and for joint and survivor annuities, the second
person named is called the co-payee. An annuity option may be chosen only if the
amount to be applied for any payee is at least $2,000. Each periodic payment
must be at least $25. In addition to the annuity options described below, the
owner may choose any form of settlement acceptable to the Company.
The following options are guaranteed in the contract:
Option 1(a): Non-Refund Life Annuity - An annuity with payments during
the lifetime of the payee. No payments are due after the death of the
payee. Since there is no guarantee that any minimum number of payments
will be made, an annuitant may receive only one payment if the
annuitant dies prior to the date the second payment is due.
Option 1(b): Life Annuity with Payments Guaranteed for 10 Years - An
annuity with payments guaranteed for 10 years and continuing thereafter
during the lifetime of the payee. Since payments are guaranteed for 10
years, annuity payments will be made to the end of such period if the
payee dies prior to the end of the tenth year.
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<PAGE> 23
Option 2(a): Joint & Survivor Non-Refund Life Annuity - An annuity with
payments during the lifetimes of the payee and a designated co-payee.
No payments are due after the death of the last survivor of the payee
and co-payee. Since there is no guarantee that any minimum number of
payments will be made, a payee or co-payee may receive only one payment
if the payee and co-payee 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 payee and a
designated co-payee. Since payments are guaranteed for 10 years,
annuity payments will be made to the end of that period if both the
payee and the co-payee die prior to the end of the tenth year.
In addition to the foregoing annuity options which the Company is
contractually obligated to offer at all times, the Company currently offers the
following annuity options. The Company may cease offering the following annuity
options at any time and may offer other annuity options in the future.
Option 3: Life annuity with Payments Guaranteed for 5, 15 or 20 Years -
An annuity with payments guaranteed for 5, 15 or 20 years and
continuing thereafter during the lifetime of the payee. Since payments
are guaranteed for the specific number of years, annuity payments will
be made to the end of the last year of the 5, 15 or 20 year period.
Option 4: Joint & Two-Thirds Survivor No-Refund Life Annuity - An
annuity with full payments during the joint lifetime of the payee and a
designated co-payee and two-thirds payments during the lifetime of the
survivor. Since there is no guarantee that any minimum number of
payments will be made, a payee or co-payee may receive only one payment
if the payee and co-payee die prior to the date the second payment is
due.
Death Benefit under Annuity Payment Options
If annuity payments have been selected based on an annuity option
providing for payments for a guaranteed period, and the payee(s) dies, the
Company will make the remaining guaranteed payments to the payee's named
beneficiary. If no beneficiary is living, the Company will commute any unpaid
guaranteed payments to a single sum (on the basis of the interest rate used in
determining the payments) and pay that single sum to the estate of the payee.
TERMINATION
The contract will terminate and life insurance coverage will cease on
the earliest of the following:
(a) the date the owner surrenders the contract; or
(b) the maturity date of the contract; or
(c) the end of the grace period described below; or
(d) the death of the insured.
A grace period of 61 days commences on a monthly anniversary day on
which the contract's surrender value is less than zero. If sufficient payment is
not made by the end of the grace period, the contract will terminate without
value. The Company will mail the owner and any assignee written notice of the
amount of payment that will be required to continue the contact in force at
least 61 days before the end of the grace period. The payment required will be
no greater than the amount required to pay the monthly deduction for three
months as of the day the grace period began. If payment is not made by the end
of the grace period, the owner's contract will terminate without value.
Termination on the maturity date may be avoided if the insured is
living on that date and if the owner sends the Company written notice that the
owner elects the contract's extended maturity option prior to the maturity date.
If the extended maturity option is elected, the entire contract value will be
transferred to the fixed investment account on the maturity date and no further
cost of insurance charges will be incurred. Death benefit proceeds will then be
equal to the surrender value. A decision to elect, or not to elect, the extended
maturity option will have income tax consequences (see "FEDERAL TAX MATTERS").
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REINSTATEMENT
During the life of the insured, this contract may be reinstated within two
years from the end of the grace period unless it was surrendered for payment of
its surrender value. To reinstate, the Company must receive satisfactory proof
of the insurability of the insured, and any debt must be repaid or reinstated.
Sufficient payment must be made to cover:
(a) all monthly deductions that are due and unpaid during the grace
period, and
(b) three months of the guaranteed maximum cost of insurance as of the
date of reinstatement.
The contract value on the reinstated date will reflect:
(a) the contract value at the time of termination; plus (b) payments made
at the time of reinstatement.
The withdrawal charge will be based on the number of contract years from the
original contract date.
FIXED INVESTMENT OPTION
Investment Option. A one year fixed investment option is available under
the contract. Under the one year fixed investment option, the Company guarantees
the principal value of payments and the rate of interest credited to the
investment account until the next contract anniversary. The portion of the
contract value in the one year fixed investment option will reflect such
interest and principal guarantees. The guaranteed interest rates on new amounts
allocated or transferred to the fixed investment account are determined from
time-to-time by the Company in accordance with market conditions. The effective
interest rate credited at any time to the fixed investment account of a contract
is the weighted average of all guaranteed rates for the contract. In no event
will the guaranteed rate of interest be less than 3%. Once an interest rate is
guaranteed for an amount in the fixed investment account, it is guaranteed until
the next contract anniversary and may not be changed by the Company.
Pursuant to a Guarantee Agreement dated November 19, 1993, (originally
entered into by North American Life and assumed by Manulife in the merger),
Manulife, the ultimate parent of the Company, unconditionally guarantees to the
Company on behalf of and for the benefit of the Company and owners of fixed
contracts issued by the Company that it will, on demand, make funds available to
the Company for the timely payment of contractual claims under fixed contracts.
This Guarantee covers the fixed portion of the contracts described in this
Prospectus. This Guarantee may be terminated by Manulife on notice to the
Company. Termination will not affect Manulife's continuing liability with
respect to all fixed contracts issued prior to the termination of the Guarantee.
Investment Account. Contract owners may allocate payments, or make
transfers from the variable investment options, to the fixed investment option
at any time prior to the maturity date. The Company will establish an investment
account when amounts are allocated to the fixed investment option.
Renewals. At the end of a guarantee period, the contract owner may
establish a new investment account with a one year guarantee period at the then
current interest rate or transfer the amounts to a variable investment option,
all without the imposition of any charge. If the contract owner does not specify
the renewal option desired, the Company will select the fixed investment option.
Transfers. Prior to the maturity date, the contract owner may transfer
amounts from the fixed investment account to the variable investment options
within 30 days of the contract anniversary. Amounts in the fixed investment
account may be transferred prior to the end of the contract year pursuant to the
Dollar Cost Averaging program.
Withdrawals. The contract owner may make total and partial withdrawals of
amounts held in the fixed investment account at any time prior to the maturity
date or his or her death. Withdrawals from the fixed investment account will be
made in the same manner and be subject to the same limitations as set forth
under "WITHDRAWALS." The Company reserves the right to defer payment of amounts
withdrawn from the fixed investment account for up to six months from the date
it receives the written withdrawal request (if a withdrawal is
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deferred for more than 30 days pursuant to this right, the Company will pay
interest on the amount deferred at a rate not less than 3% per year or such
higher rate as may be required by the applicable state or jurisdiction).
Withdrawals allocated to the free withdrawal amount may be withdrawn
without the imposition of a withdrawal charge. If withdrawals are taken from
more than one investment account, the free withdrawal amount will be applied to
all investment accounts on a pro rata basis.
Withdrawals from the contract may be subject to income tax and a 10%
penalty tax (see "FEDERAL TAX MATTERS").
Securities Registration. Due to certain exemptive and exclusionary
provisions, interests in the fixed investment account are not registered under
the Securities Act of 1933 (the "1933 Act") and the Company's general account is
not registered as an investment company under the 1940 Act. Accordingly, neither
interests in the fixed investment account nor the general account are subject to
the provisions or restrictions of the 1933 Act or the 1940 Act and the staff of
the SEC has not reviewed the disclosures in the Prospectus relating thereto.
Disclosures relating to interests in the fixed investment account and the
general account, however, may be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy of statements
made in a registration statement.
TEN DAY RIGHT TO REVIEW
The contract owner may cancel the contract by returning it to the Service
Office or agent at any time within 10 days after receipt of the contract. Within
7 days of receipt of the contract by the Company, the Company will refund the
payment made for the contract, less any debt or partial withdrawals.
No withdrawal 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 insurance laws and
regulations in such states.
OWNERSHIP
The contract owner is the person entitled to exercise all rights under the
contract and is the person designated in the contract specifications page or as
subsequently named. If amounts become payable to any beneficiary under the
contract, the beneficiary is the contract owner.
Any change of ownership or assignment must be made in writing. Any change
must be approved by the Company. Any assignment and any change, if approved,
will be effective as of the date the Company receives the request at the Service
Office. The Company assumes no liability for any payments made or actions taken
before a change is approved or an assignment is accepted or responsibility for
the validity or sufficiency of any assignment. An absolute assignment will
revoke the interest of any revocable beneficiary.
BENEFICIARY
The beneficiary is the person, persons or entity designated in the contract
specifications page or as subsequently named. The beneficiary may be changed
subject to the rights of any irrevocable beneficiary. Any change must be made in
writing, approved by the Company and if approved, will be effective as of the
date on which written. The Company assumes no liability for any payments made or
actions taken before the change is approved. If no beneficiary is living, the
contingent beneficiary will be the beneficiary. The interest of any revocable
beneficiary is subject to that of any assignee. If no beneficiary or contingent
beneficiary is living, the beneficiary is the owner or the owner's estate.
MISCELLANEOUS CONTRACT PROVISIONS
Limit on Right to Contest
With regard to the life of each insured, the contract will be incontestable
after it has been in force during the lifetime of the insured for two years from
the issue date. Any increase in face amount for which evidence of insurability
was obtained will be incontestable only after the increase has been in force,
during the insured's
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lifetime, for two years from the effective date of the increase. The two year
incontestability period may vary in certain states in order to comply with the
requirements of insurance laws and regulations in such states.
In issuing the contract, the Company has relied upon the application.
The statements in that application, in the absence of fraud, are considered
representations and not warranties. No statement made in connection with the
contract application will be used by the Company to void the contract or to deny
a claim unless that statement is a part of the contract application or any
amendments thereof.
Suicide Exclusion
If any insured commits suicide, while sane or insane, within two years
of the issue date, the Company will return payments made, less any debt and any
partial withdrawals. If any insured commits suicide, while sane or insane,
within two years from the effective date of any increase in face amount for
which evidence of insurability was established, the Company will return the
additional payment which increased the face amount.
Misrepresentation of Age or Sex
If the age or sex of any insured has been misstated, the death benefit
proceeds will be limited to those which would have been appropriate for the
insured's correct age and sex.
Assignment
While the insured is alive, the owner may assign the contract. No
assignment will be binding on the Company unless it is written in a form
acceptable to the Company and received at the Service Office. The Company will
not be liable for any payments made or actions taken before the Company accepts
the assignment. An absolute assignment will revoke the interest of any revocable
beneficiary. The Company will not be responsible for the validity of any
assignment. An assignment may result in income tax and a 10% penalty tax (see
"FEDERAL TAX MATTERS").
Creditors' Claims
To the extent permitted by law, no benefits payable under this contract
will be subject to the claims of the contract owner's or the beneficiary's
creditors.
Non-Participation
The contract is non-participating and will not share in the Company's
profits or surplus earnings. The Company will pay no dividends on the contract.
Notices and Elections
To be effective, all notices and elections made under the contract must
be in writing, signed by the owner and received by the Company at the Service
Office. Certain exceptions may apply (see "Telephone Transactions"). Unless
otherwise provided in the contract, all notices, requests and elections will be
effective when received at the Service Office, complete with all necessary
information.
Modification
The Company will not change or modify the contract without the owner's
consent except to the extent necessary to conform to any applicable law or
regulation or any ruling issued by a government agency. The provisions of the
contract shall be interpreted so as to comply with the requirements of Section
7702 of the Code.
CHARGES AND DEDUCTIONS
Charges and deductions under the contracts are assessed against
contract values. 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.
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MONTHLY DEDUCTION
On each monthly anniversary day, a deduction is made from contract
value to compensate the Company for the cost of insurance and certain other
expenses incurred in connection with the contract. The monthly deduction amount
is determined as of that valuation date, or if the monthly anniversary day is
not a valuation date, the immediately following valuation date is used. The
monthly deduction will be allocated among the investment accounts on a pro rata
basis. The monthly deduction will vary from month to month. If the surrender
value is insufficient to cover the monthly deduction due on any monthly
anniversary day, the contract may terminate without value (see "TERMINATION").
DISTRIBUTION CHARGE
During the first ten contract years, a distribution charge equal to an
annual rate of 0.25% of contract value will be deducted monthly as compensation
for a portion of the sales expenses the Company incurs with respect to the
contract (see "DISTRIBUTION OF THE CONTRACT"). The Company will monitor
distribution charges, Federal tax charges and contingent deferred sale charges
deducted under a contract to ensure that the sum of these charges will never
exceed 9% of aggregate payments made under that contract.
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PREMIUM TAX CHARGE
During the first ten contract years, a premium tax charge equal to an
annual rate of 0.25% of contract value will be deducted monthly to defray
premium taxes the Company pays to state and local governments in connection with
the contract. This charge is designed to offset the average premium tax the
Company expects to pay with respect to a contract (approximately 2.50% of
premium payments received), but will not necessarily equal the premium tax paid
by the Company with respect to a particular contract.
FEDERAL TAX CHARGE
During the first ten contract years, a Federal tax charge equal to an
annual rate of 0.15% of contract value will be deducted monthly to defray an
increased Federal tax liability resulting from the application of Section 848 of
the Code.
ADMINISTRATION CHARGE
An administration charge equal to an annual rate of 0.40% of contract
value will be deducted monthly as compensation for administrative expenses,
including those for insurance underwriting and contract issuance, establishing
and maintaining contract records, calculating contract values, providing reports
to contract owners, preparation and filing of tax records and forms and
processing contract transactions such as transfers, contract loans, partial
withdrawals and surrenders. The administration charge is guaranteed never to
increase over the life of the contract, and was established to cover average
anticipated administrative expenses to be incurred over the period this class of
contract will be in force.
An administrative charge of $2.50 per month will be imposed upon
contracts with less than $100,000 of total premium payments. This charge, when
imposed, offsets the lower asset base from which the Company can recover its
costs of contract administration through the asset-based administrative charge
described above.
COST OF INSURANCE CHARGE
The Company will make a monthly deduction for the cost of providing
life insurance coverage for the insured. This charge is guaranteed not to exceed
the maximum cost of insurance charge determined on the basis of the mortality
table guaranteed in the contract, calculated using the 1980 CSO Table.
Currently, a cost of insurance charge equal to an annual rate of 0.35% of
contract value (0.55% of contract value after the first ten contract years) will
be deducted monthly. If there is more than one insured, a cost of insurance
charge equal to an annual rate of 0.10% of contract value (0.30% of contract
value after the first ten contract years). The Company reserves the right to
increase or decrease this current cost of insurance charge so long as the
maximum charges guaranteed in the contract are not exceeded.
MORTALITY AND EXPENSE RISK CHARGE
A mortality and expense risk charge equal to an annual rate of 0.90% of
the value of variable investment accounts will be deducted monthly for assuming
the mortality and expense risks under the contract. The mortality risk assumed
under the contract is the risk that the cost of providing the death benefit will
exceed the maximum guaranteed cost of insurance charge. The expense risk assumed
under the contract is the risk that the cost of providing administrative
services will exceed the revenues from the administration charges.
WITHDRAWAL CHARGE
If the contract owner makes a partial withdrawal or surrenders the
contract during the first nine contract years, the Company will impose a
withdrawal charge which declines during that nine-year period, however, no
withdrawal charges will be imposed upon death of the insured. The withdrawal
charge consists of two components: a contingent deferred sales charge and an
unrecovered premium tax charge. The withdrawal charge is applicable only to that
portion of the proceeds of a surrender or partial withdrawal that exceeds the
"free withdrawal amount." The free withdrawal amount is the greater of (a) or
(b) as defined below; however, the free withdrawal amount may never exceed the
surrender value.
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(a) the excess of the contract value on the date of withdrawal or
surrender over the unliquidated payments; or
(b) 10% of total payments less all prior partial withdrawals in that
contract year.
The total amount of the withdrawal charge is determined by multiplying the
amount withdrawn or surrendered in excess of the free withdrawal amount by the
applicable total withdrawal charge percentage shown in the following table:
Total
Contract Unrecovered Withdrawal
Year CDSC Premium Tax Charge
---- ---- ----------- ------
1 6.75% 2.25% 9.00%
2 6.50% 2.00% 8.50%
3 6.25% 1.75% 8.00%
4 5.50% 1.50% 7.00%
5 4.75% 1.25% 6.00%
6 4.00% 1.00% 5.00%
7 3.25% 0.75% 4.00%
8 2.50% 0.50% 3.00%
9 1.75% 0.25% 2.00%
10+ 0% 0% 0%
The Company will monitor distribution charges, Federal tax charge and contingent
deferred sale charges deducted under a contract to ensure that the sum of these
charges will never exceed 9% of aggregate payments made under that contract.
The total withdrawal charge will be eliminated when a contract is
issued to an officer, director or employee (or a relative thereof) of the
Company, Manulife, the Trust or any of their affiliates.
Withdrawal Charge Waiver in Connection with Clinton's Administration's Fiscal
Year 1999 Budget Proposal
The Clinton administration's Fiscal Year 1999 Budget proposal dated
February 2, 1998 (the "Budget Proposal") contains proposals to change the
taxation of life insurance contracts. See "FEDERAL TAX MATTERS Introduction".
While it is uncertain whether the Budget Proposal will become law, if the Budget
Proposal is enacted substantially as proposed, withdrawal charges will be waived
on purchase payments made on or after February 2, 1998, provided such amounts
are withdrawn within 60 days of the date that the Budget Proposal becomes law.
The Company reserves the right to terminate this withdrawal charge waiver at any
time. If the waiver is terminated, purchase payments made from February 2, 1998
to the termination date of the waiver will not be subject to withdrawal charge
as provided above. This waiver does not affect a contract owner's right to
cancel a contract within the ten day right to review period. See "DESCRIPTION OF
THE CONTRACT -- Ten Day Right to Review". Withdrawals may be subject to income
tax to the extent of earnings under the contract and, if the contract is a
modified endowments contract and the withdrawal is made prior to age 59 1/2,
generally will be subject to a 10% IRS penalty tax. See "FEDERAL TAX MATTERS -
Taxation of Partial and Full Withdrawals".
The revenues from the contingent deferred sales charge and the
distribution charge may be insufficient to defray all distribution expenses. If
there is a shortfall, the Company will bear the expense from its general account
assets. Such assets may include profits, if any, from the cost of insurance and
mortality and expense risk charges described above.
The unrecovered premium tax charge is designed to reimburse the Company
upon a surrender or partial withdrawal during the first nine contract years for
state premium taxes it will have paid in connection with receipt of contract
payments. The amounts deducted pursuant to the asset-based charge for premium
taxes prior to withdrawal, plus the deferred premium tax charges deducted upon
the amounts surrendered or withdrawn, will approximately equal the Company's
expected state premium tax obligations as a result of its receipt of contract
payments, based upon an estimated 2.5% average premium tax obligation.
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OTHER TAXES
The Company reserves the right to make charges for any additional tax
obligations that may be incurred in the future as a result of establishing or
maintaining the Variable Account, issuing a contract, receiving payments under a
contract, or from commencing or continuing annuity option payments under a
contract.
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 the contract is
unclear in certain circumstances, and a qualified tax advisor should always be
consulted with regard to the application of law to individual circumstances.
This discussion is based on the Code, Treasury Department regulations, and
interpretations existing on the date of this Prospectus. These authorities,
however, are subject to change by Congress, the Treasury Department, and
judicial decisions.
The Clinton administration's Fiscal Year 1999 Budget Proposal dated
February 2, 1998 (the "Budget Proposal") contains proposals to change the
taxation of life insurance contracts. The Budget Proposal proposes to tax
exchanges of variable contracts for fixed contracts, exchanges of fixed
contracts for variable contracts, exchanges of variable contracts for variable
contracts and reallocation within variable contracts. Currently, owners of life
contracts may exchange their contracts for another life insurance contract
without currently incurring tax, and reallocations among investment options are
not treated as a taxable exchange. In addition, the Budget Proposal proposes
that the contract owner's basis in life insurance contracts be reduced by
certain amounts (related to the cost of insurance and possibly expenses) for
purposes of determining the taxable gain on in the contract. Currently, basis in
life insurance contracts is not reduced by this amount. The Budget Proposal
states that it generally would apply only to contracts issued after the date of
first congressional committee action, but that the new exchange and reallocation
rules would also apply to any existing contract that was materially changed.
While it is uncertain whether the Budget Proposal will become law, if the Budget
Proposal is enacted substantially as proposed, withdrawal charges will be
waived. See "CHARGES AND DEDUCTIONS - Withdrawal Charge."
This discussion does not address state or local tax consequences
associated with the purchase of the contract. In addition, THE COMPANY MAKES NO
GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY
CONTRACT OR OF ANY TRANSACTION INVOLVING A CONTRACT.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under the Code. Since
the operations of the Variable Account are a part of, and are taxed with, the
operations of the Company, the Variable Account is not separately taxed as a
"regulated investment company" under the Code. Under existing Federal income tax
laws, investment income and capital gains of the Variable Account are not taxed
to the extent they are applied under a contract. The Company does not anticipate
that it will incur any Federal income tax liability attributable to such income
and gains of the Variable Account, and therefore the Company does not intend to
make any provision for such taxes. If the Company is taxed on investment income
or capital gains of the Variable Account, then the Company may impose a charge
against the Variable Account to make provision for such taxes. The Company's
Federal tax liability is increased, however, in respect of the contracts because
of the Federal tax law's treatment of deferred acquisition costs (for which the
Company imposes a Federal tax charge) (see "CHARGES AND DEDUCTIONS").
TAXATION OF LIFE INSURANCE CONTRACTS IN GENERAL
Tax Status of the Contract
Section 7702 of the Code establishes a statutory definition of life
insurance for Federal tax purposes. The Company believes that the contract will
meet the statutory definition of life insurance, which places limitations on the
amount of premium payments that may be made and the contract values that can
accumulate relative to the
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death benefit. As a result, the death benefit payable under the contract will
generally be excludable from the beneficiary's gross income, and interest and
other income credited under the contract will not be taxable unless certain
withdrawals are made (or are deemed to be made) from the contract prior to the
insured's death, as discussed below. This tax treatment will only apply,
however, if (1) the investments of the Variable Account are "adequately
diversified" in accordance with Treasury Department regulations, and (2) the
Company, rather than the contract owner, is considered the owner of the assets
of the Variable Account for Federal income tax purposes.
DIVERSIFICATION REQUIREMENTS. The Code and Treasury Department
regulations prescribe the manner in which the investments of a segregated asset
account, such as the Variable Account, are to be "adequately diversified." If
the Variable Account fails to comply with these diversification standards, the
contract will not be treated as a life insurance contract for Federal income tax
purposes and the owner would generally be taxable currently on the income on the
contract (as defined in the tax law). The Company expects that the Variable
Account, through the Trust, will comply with these diversification requirements.
Although the investment adviser of the Trust is an affiliate of the Company, the
Company does not have control over the Trust or its investments. Nonetheless,
the Company believes that each Trust Portfolio in which the Variable Account
owns shares will be operated in compliance with the diversification requirements
prescribed by the Code and Treasury Department regulations.
OWNERSHIP TREATMENT. In certain circumstances, variable life insurance
contract owners may be considered the owners, for Federal income tax purposes,
of the assets of a segregated asset account, such as the Variable Account, used
to support their contracts. In those circumstances, income and gains from the
segregated asset account would be includible in the contract owners' gross
income. The Internal Revenue Service (the "IRS") has stated in published rulings
that a variable contract owner will be considered the owner of the assets of a
segregated asset account if the owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. In
addition, the Treasury Department announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts [of a segregated asset 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 contract owners were not owners of the assets of a segregated
asset account. For example, the owner of this contract has the choice of many
more investment options to which to allocate premium payments and variable
investment account values, and may be able to transfer among investment options
more frequently, than in such rulings. These differences could result in the
contract owner being treated as the owner of a portion of the assets of the
Variable Account and thus subject to current taxation on the income and gains
from those assets. In addition, the Company does not know what standards will
be set forth in the regulations or rulings which the Treasury Department has
stated it expects to issue. The Company therefore reserves the right to modify
the contract as necessary to attempt to prevent contract owners from being
considered the owners of the assets of the Variable Account. However, there is
no assurance that such efforts would be successful.
The remainder of this discussion assumes that the contract will be
treated as a life insurance contract for Federal tax purposes.
Tax Treatment of Life Insurance Death Benefit Proceeds
In general, the amount of the death benefit payable from a contract by
reason of the death of the insured is excludable from gross income under Section
101 of the Code. Certain transfers of the contract for valuable consideration,
however, may result in a portion of the death benefit being taxable.
If the death benefit is not received in a lump sum and is, instead,
applied under one of the settlement options, payments generally will be prorated
between amounts attributable to the death benefit which will be excludable from
the beneficiary's income and amounts attributable to interest (accruing after
the insured's death) which will be includible in the beneficiary's income.
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Tax Deferral During Accumulation Period
Under existing provisions of the Code, except as described below, any
increase in an owner's contract value is generally not taxable to the owner
unless amounts are received (or are deemed to be received) from the contract
prior to the insured's death. If there is a total withdrawal from the contract,
the surrender value will be includible in the owner's income to the extent the
amount received exceeds the "investment in the contract." (If there is any debt
at the time of a total withdrawal, such debt will be treated as an amount
received by the owner.) The "investment in the contract" generally is the
aggregate amount of premium payments and other consideration paid for the
contract, less the aggregate amount received under the contract previously to
the extent such amounts received were excludable from gross income. Whether
partial withdrawals (or other amounts deemed to be distributed) from the
contract constitute income to the owner depends, in part, upon whether the
contract is considered a "modified endowment contract" (a "MEC") for Federal
income tax purposes.
Contracts Which Are MECs
------------------------
Characterization of a Contract as a MEC. In general, this contract will
constitute a MEC unless (1) it was received in exchange for another life
insurance contract which was not a MEC, and (2) no premium payments (other than
the exchanged contract are paid into the contract during the first even contract
years. In addition, even if the contract initially is not a MEC, it may in
certain circumstances become a MEC. These circumstances would include a later
increase in benefits, any other material change of the contract (within the
meaning of the tax law), and a withdrawal or reduction in the death benefit
during the first seven contract years.
Tax Treatment of Withdrawals, Loans, Assignments and Pledges under
MECs. If the contract is a MEC, withdrawals from the contract will be treated
first as withdrawals of income and then as a recovery of premium payments. Thus,
withdrawals will be includible in income to the extent the contract value
exceeds the investment in the contract. The amount of any loan (including unpaid
interest thereon) under the contract will be treated as a withdrawal from the
contract for tax purposes. In addition, if the owner assigns or pledges any
portion of the value of a contract (or agrees to assign or pledge any portion),
such portion will be treated as a withdrawal from the contract for tax purposes.
The owner's investment in the contract is increased by the amount includible in
income with respect to such assignment, pledge, or loan, though it is not
affected by any other aspect of the assignment, pledge, or loan (including its
release or repayment). Before assigning, pledging, or requesting a loan under a
contract which is a MEC, an owner should consult a qualified tax advisor.
Penalty Tax. Generally, withdrawals (or the amount of any deemed
withdrawals) from a MEC are subject to a penalty tax equal to 10% of the portion
of the withdrawal that is includible in income, unless the withdrawals are made
(1) after the owner attains age 59 1/2, (2) because the owner has become
disabled (as defined in the tax law), or (3) as substantially equal periodic
payments over the life or life expectancy of the owner (or the joint lives or
life expectancies of the owner and his or her beneficiary, as defined in the tax
law).
Aggregation of Contracts. All life insurance contracts which are MECs
and which are purchased by the same person from the Company or any of its
affiliates within the same calendar year will be aggregated and treated as one
contract for purposes of determining the amount of a withdrawal (including a
deemed withdrawal) that is includible in income. The effects of such aggregation
are not clear; however, it could affect the amount of a withdrawal (or a deemed
withdrawal) that is taxable and the amount which might be subject to the 10%
penalty tax described above.
Contracts Which Are Not MECs
----------------------------
Tax Treatment of Withdrawals Generally. If the contract is not a MEC
(described above), the amount of any withdrawal from the contract will be
treated first as a non-taxable recovery of premium payments and then as income
from the contract. Thus, a withdrawal from a contract that is not a MEC will not
be includible in income except to the extent it exceeds the investment in the
contract immediately before the withdrawal.
Certain Distributions Required by the Tax Law in the First 15 Contract
Years. As indicated under "Payments", Section 7702 places limitations on the
amount of premium payments that may be made and the contract values that can
accumulate relative to the death benefit. Where cash distributions are required
under Section 7702 in connection with a reduction in benefits during the first
15 years after the contract is issued (or if
28
<PAGE> 33
withdrawals are made in anticipation of a reduction in benefits, within the
meaning of the tax law, during this period), some or all of such amounts may be
includible in income. A reduction in benefits may result upon a decrease in the
face amount, if withdrawals are made, and in certain other instances.
Tax Treatment of Loans. If a contract is not a MEC, a loan received
under the contract generally will be treated as indebtedness of the owner. As a
result, no part of any loan under such a contract will constitute income to the
owner so long as the contract remains in force. Nevertheless, in those
situations where the interest rate credited to the loan account equals the
interest rate charged for the loan, it is possible that some or all of the loan
proceeds may be includible in income. If a policy lapses (or if all contract
value is withdrawn) when a loan is outstanding, the amount of the loan
outstanding will be treated as withdrawal proceeds for purposes of determining
whether any amounts are includible in the owner's income.
Last Survivor Contracts
Although the Company believes that the contract, when issued as a last
survivor contract, complies with Section 7702 of the Code, the manner in which
Section 7702 should be applied to last survivor contracts is not directly
addressed by Section 7702. In the absence of final regulations or other guidance
issued under Section 7702 regarding this form of contract, there is necessarily
some uncertainty whether a last survivor contract will meet the Section 7702
definition of a life insurance contract. Prospective owners considering purchase
of the contract as a last survivor contract should consult a qualified tax
advisor.
Where the owner of the contract is the last surviving insured, the
death proceeds will generally be includible in the contract owner's estate on
his or her death for purposes of the Federal estate tax. If the contract owner
dies and was not the last surviving insured, the fair market value of the
contract would be included in the contract owner's estate. In general, no part
of the contract value would be includible in the last surviving insured's estate
if he or she neither retained incidents of ownership at death nor had given up
ownership within three years before death.
Treatment of Maturity Benefits and Extension of Maturity Date
At the maturity date, the surrender value will be paid to the contract
owner, and this amount will be includible in income to the extent the amount
received exceeds the investment in the contract. If the contract owner elects to
extend the maturity date past the year in which the insured attains age 100
(which must be done prior to the original maturity date), the Company believes
the contract will continue to qualify as a life insurance contract for Federal
tax purposes. However, there is some uncertainty regarding this treatment, and
it is possible that the contract owner would be viewed as constructively
receiving the cash value in the year the insured attains age 100. If this were
the case, an amount equal to the excess of the cash value over the investment in
the contract would be includible in the contract owner's income at that time.
Actions to Ensure Compliance with the Tax Law
The Company believes that the maximum amount of premium payments it has
determined for the contracts will comply with the Federal tax definition of life
insurance. The Company will monitor the amount of premium payments, and, if the
premium payments during a contract year exceed those permitted by the tax law,
the Company will refund the excess premiums within 60 days of the end of the
contract year and will pay interest and other earnings (which will be includible
in income subject to tax) as required by law on the amount refunded. The Company
also reserves the right to increase the death benefit (which may result in
larger charges under a contract) or to take any other action deemed necessary to
ensure the compliance of the contract with the Federal tax definition of life
insurance.
Other Considerations
Changing the owner, exchanging the contract, and other changes under
the contract may have tax consequences (in addition to those discussed herein)
depending on the circumstances of such change.
Federal estate tax, state and local estate and inheritance tax, and
other tax consequences of ownership or receipt of contract proceeds depend on
the circumstances of each contract owner or beneficiary. Federal estate tax is
integrated with Federal gift tax under a unified rate schedule. In general,
estates valued at less than
29
<PAGE> 34
the "applicable exclusion amount" will not incur a Federal estate tax liability.
The applicable exclusion amount for decedents dying in 1998 is $625,000 and
increases annually until it reaches $1,000,000 for decedents dying in 2006 and
after. In addition, an unlimited marital deduction may be available for Federal
estate and gift tax purposes.
If the contract owner (whether or not he or she is an insured)
transfers ownership of the contract to someone two or more generations younger,
the transfer may be subject to the generation-skipping tax, the amount subject
to tax being the value of the contract. The generation-skipping tax provisions
generally apply to transfers which would be subject to the gift or estate tax
rules. Individuals are generally allowed an aggregate generation-skipping tax
exemption of $1 million. For generation skipping transfers of decedents dying
after 1998, this exemption is indexed for inflation.
Because the Federal estate tax, gift tax, and generation skipping tax
rules are complex, prospective contract owners should consult a qualified tax
advisor before using this contract for estate planning purposes.
DISALLOWANCE OF INTEREST DEDUCTIONS
The contract generally will be characterized as a single premium life
insurance contract under Section 264 of the Code and, as a result, interest paid
on any loans under the contract will not be tax deductible, irrespective of
whether the owner is an individual or a non-natural entity, such as a
corporation or a trust. In addition, in the case of contracts issued to a
non-natural taxpayer, or held for the benefit of such an entity, a portion of
the taxpayer's otherwise deductible interest expenses may not be deductible as a
result of ownership of a contract even if no loans are taken under the contract.
An exception to the latter rule is provided for certain life insurance contracts
which cover the life of an individual who is a 20-percent owner, or an officer,
director, or employee of, a trade or business. Entities that are considering
purchasing the policy, or entities that will be beneficiaries under a contract,
should consult a tax advisor.
FEDERAL INCOME TAX WITHHOLDING
The Company will withhold and remit to the Federal government a part of
the taxable portion of withdrawals made under a contract unless the owner
notifies the Company in writing at or before the time of the withdrawal that he
or she elects not to have any amounts withheld. Regardless of whether the owner
requests that no taxes be withheld or whether the Company withholds a sufficient
amount of taxes, the owner will be responsible for the payment of any taxes and
early distribution penalties that may be due on the amounts received. The owner
may also be required to pay penalties under the estimated tax rules, if the
owner's withholding and estimated tax payments are insufficient to satisfy the
owner's total tax liability.
OTHER MATTERS
VOTING RIGHTS
The Company will vote shares of the Trust Portfolios held in the
Variable Account at meetings of shareholders of the Trust in accordance with
voting instructions received from the persons having the voting interest under
the contracts. The number of Portfolio shares for which voting instructions may
be given will be determined by the Company in the manner described below, not
more than 90 days prior to the meeting of the Trust. Trust proxy material will
be distributed to each person having the voting interest under the contract
together with appropriate forms for giving voting instructions. Portfolio shares
held in the Variable Account that are attributable to contract owners and as to
which no timely instructions are received and Portfolio shares held in the
Variable Account that are beneficially owned by the Company will be voted by the
Company in proportion to the instructions received.
Prior to the maturity date, the person having the voting interest under
a contract is the contract owner and the number of votes as to each Portfolio
for which voting instructions may be given is determined by dividing the value
of the investment account corresponding to the Sub-Account in which such
Portfolio shares are held by the net asset value per share of that Portfolio.
The Company may, if required by state insurance officials, disregard
voting instructions that would require shares to be voted to change the
sub-classification or investment policies of a Portfolio or to approve or
30
<PAGE> 35
disapprove an investment advisory contract for a Portfolio. In addition, the
Company may disregard voting instructions that would require changes in the
investment policies or investment adviser or Subadviser of a Portfolio if the
Company reasonably disapproves of these changes in accordance with applicable
Federal regulations. If the Company disregards any voting instructions, it will
advise contract owners of that action, and its reasons therefore, in its next
communication to contract owners.
The Company reserves the right to make any changes in the voting rights
described above that may be permitted by the securities laws or regulations or
interpretations of these laws or regulations. In particular, if applicable
securities laws or regulations are amended or present interpretations of them
change, and, as a result, the Company determines that it is permitted to vote in
its own right shares of the Portfolios held in the Variable Account, the Company
may elect to do so.
NOTICES AND REPORTS TO CONTRACT OWNERS
Within 30 days after each calendar quarter, the Company will send the
owner a statement showing, among other things, the contract value and
information concerning any loans. Within 10 days after any transaction involving
purchase, sale or transfer of amounts allocated to the Variable Account, the
owner will be sent a confirmation statement. The owner also will be sent an
annual and semi-annual report for the Variable Account and each Portfolio, which
will include a list of the securities held in each Portfolio.
At least once each contract year, the Company will send to contract
owners a statement showing the face amount and the contract value of the
contract and any outstanding loan secured by the contract as of the date of the
statement. The statement will also show premium payments, and monthly deductions
under the contract since the last statement, and any other information required
by any applicable law or regulation.
DISTRIBUTION OF CONTRACTS
MSS, located at 73 Tremont Street, Boston, Massachusetts 02108, a
Delaware limited liability company controlled by the Company, is the principal
underwriter of the contracts in addition to providing advisory services to the
Trust. MSS is a broker-dealer registered under the Securities Exchange Act of
1934 (the "1934 Act") and a member of the National Association of Securities
Dealers, Inc. ("NASD"). MSS has entered into a non-exclusive promotional agent
agreement with Wood Logan Associates, Inc. ("Wood Logan"). Wood Logan is a
broker-dealer registered under the 1934 Act and a member of the NASD. Wood Logan
is a wholly owned subsidiary of a holding company that is 62.5% owned by The
Manufacturers Life Insurance Company (U.S.A.), 22.5% owned by MRL Holding, LLC
and approximately 15% owned by the principals of Wood Logan. Sales of the
contracts will be made by registered representatives of broker-dealers
authorized by MSS to sell them. Such registered representatives will also be
licensed insurance agents of the Company. Under the promotional agent agreement,
Wood Logan will recruit and provide sales training and licensing assistance to
such registered representatives. In addition, Wood Logan will prepare sales and
promotional materials for the Company's approval. MSS will pay distribution
compensation to selling brokers in varying amounts which under normal
circumstances are not expected to exceed 7% of purchase payments. In addition,
MSS may pay trail compensation after the first contract year, which under normal
circumstances will not exceed 0.25% of contract value per year. MSS may from
time to time pay additional compensation pursuant to promotional contests.
Additionally, in some circumstances, MSS will provide reimbursement of certain
sales and marketing expenses. MSS will pay the promotional agent for providing
marketing support for the distribution of the contracts.
OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers of the Company, together with
their principal occupations during the past five years, are as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY PRINCIPAL OCCUPATION
<S> <C> <C>
John D. DesPrez III Director* and President Senior Vice President, U.S. Annuities,
Age: 41 Manulife, September 1996 to present;
Director and President of the Company,
September 1996 to present; Vice President,
Mutual Funds, Manulife, January, 1995 to
September 1996,
</TABLE>
31
<PAGE> 36
<TABLE>
<S> <C> <C>
President and Chief Executive Officer, North
American Funds, March 1993 to September
1996; Vice President and General Counsel of
the Company, January 1991 to June 1994.
</TABLE>
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY PRINCIPAL OCCUPATION
<S> <C> <C>
Peter S. Hutchison Director* Senior Vice President, Corporate Taxation,
Age: 48 Manulife, January 1996 to present; Director
of the Company January 1991 to present;
Executive Vice President and Chief Financial
Officer, North American Life, September 1994
to December 31, 1995; Senior Vice President
and Chief Actuary, North American Life,
April 1992 to August 1994.
John D. Richardson Director* and Chairman of the Board Senior Vice President and General Manager,
Age: 60 U.S. Operations, Manulife, January 1995 to
present; Director and Chairman of the Board
of the Company, March 1997 to present; Senior
Vice President and General Manager, Canadian
Operations, Manulife, June 1992 to January
1995.
Robert Boyda Vice President, Investment Vice President, Investment Management
Age: 41 Management Services Services of the Company, January 1997 to
present; Assistant Vice President,
Management Service, Manulife, August 1994 to
January 1997; General Manager, Retail
Banking, CIBC, January 1987 to April 1994.
James R. Boyle Vice President, Administration Vice President, Administration Accumulation
Age: 38 Products, Manulife September 1996 to
present; Vice President, Administration of
the Company, September 1996 to present; Vice
President, Treasurer and Chief
Administrative Officer, North American
Funds, June 1994 to September 1996;
Corporate Controller of the Company, July
1993 to June 1994; Mutual Fund Accounting
Executive of the Company, June 1992 to July
1993.
James D. Gallagher Vice President, Secretary and Vice President, Legal Services U.S.
Age: 43 General Counsel Operations, Manulife, January 1996 to
present; Vice President, Secretary and
General Counsel of the Company, June 1994 to
present; Vice President and Associate
General Counsel, The Prudential Insurance
Company of America, 1990-1994.
Richard C. Hirtle Vice President, Strategic Vice President, Strategic Development,
Age: 42 Development & Accumulation Life Annuities, Manulife, December 1997 to
present; Vice President, Strategic
Development & Accumulation Life Products of
the Company December 1997
</TABLE>
32
<PAGE> 37
<TABLE>
<S> <C> <C>
to present; Vice President, Treasurer, Chief
Financial Officer of the Company November
1988 to December 1997.
</TABLE>
33
<PAGE> 38
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY PRINCIPAL OCCUPATION
<S> <C> <C>
Hugh C. McHaffie Vice President, U.S. Annuities Vice President, Product and Development,
Age: 39 Product and Development Annuities, Manulife, January 1996 to present;
Vice President U.S. Annuities Product and
Development of the Company August 1994 to
present; Product Development Executive of the
Company, August 1990 to August 1994.
David W. Libbey Vice President, Treasurer, and Vice President and Chief Financial Officer,
Age: 50 Chief Financial Officer Annuities, Manulife, December 1997 to
present; Vice President, Treasurer and Chief
Financial Officer of the Company December
1997 to present; Vice President, Finance of
the Company June 1997 to December 1997; Vice
President & Actuary, Paul Revere Insurance
Group June 1970 to March 1997.
Janet Sweeney Vice President, Corporate Services Vice President, Human Resources, U.S.
Age: 47 Operations, Manulife, January 1996 to
present; Vice President, Corporate Services
of the Company, January 1995 to present;
Executive, Corporate Services of the
Company, July 1989 to December 1994.
John G. Vrysen Vice President and Chief Actuary Vice President and Chief Financial Officer,
Age: 42 U.S. Operations, Manulife, January 1996 to
present; Vice President and Chief Actuary of
the Company, January 1986 to present.
</TABLE>
CONFIRMATION STATEMENTS
Owners will be sent confirmation statements for certain transactions in
their account. Owners should carefully review these statements to verify their
accuracy. Any mistakes should immediately be reported to the Company's Service
Office. If the owner fails to notify the Company's Service Office of any mistake
within 60 days of the mailing of the confirmation statement, the owner will be
deemed to have ratified the transaction.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party
or to which the assets of the Variable Account are subject. Neither the Company
nor MSS are involved in any litigation that is of material importance in
relation to their total assets or that relates to the Variable Account.
LEGAL MATTERS
All matters of applicable state law pertaining to the contract,
including the Company's right to issue the contract thereunder, have been passed
upon by James D. Gallagher, Esq., Vice President, Secretary and General Counsel
of the Company. Certain matters relating to the Federal securities laws have
been passed upon by Jones & Blouch L.L.P., Washington, D.C.
INDEPENDENT AUDITORS
The financial statements of the Company and the Variable Account at
December 31, 1997 and 1996 and for the years then ended appearing in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
34
<PAGE> 39
The consolidated statements of income, changes in shareholder's equity
and cash flows for the year ended December 31, 1994, appearing in Part II have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accounts, given on the authority of that firm as experts in
accounting and auditing.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
The assets of the Variable Account are held by the Company. The assets
of the Variable Account are kept physically segregated and held separate and
apart from the general account of the Company. The Company maintains records of
all purchases and redemptions of shares of each Trust Portfolio. Additional
protection for the assets of the Variable Account is afforded by the Company's
blanket fidelity bond issued by American Home Assurance Company, in the
aggregate amount of $50 million ($25 million for any one claim) , covering all
of the officers and employees of the Company.
OTHER INFORMATION
A registration statement has been filed with the SEC under the 1933 Act, as
amended, with respect to the variable portion of the contracts discussed in the
Prospectus. Not all the information set forth in the registration statement,
amendments and exhibits thereto has been included in this Prospectus. Statements
contained in this Prospectus concerning the content of the contracts and other
legal instruments are only summaries. For a complete statement of the terms of
these documents, reference should be made to the instruments filed with the SEC.
CONTRACT OWNER INQUIRIES
All contract owner inquiries should be directed to the Service Office.
CONTRACT ILLUSTRATIONS
The following tables have been prepared to illustrate the way in which
a contract operates. The tables assume that an initial premium payment of
$25,000 is allocated equally among the Sub-Accounts of the Variable Account,
with no allocation to the fixed investment account, and that no subsequent
payments, transfers, partial withdrawals, or loans have been made. A female
nonsmoker age 55 and a male nonsmoker age 65 with face amounts of $85,564 and
$51,179, respectively, are illustrated for an individual insured. The
illustration for a contract with two insureds assumes a joint equal age of 65
with a face amount of $79,644.
The tables illustrate how the contract value, the surrender value and
the death benefit of a contract would vary over time if the investment return on
the assets of each Portfolio were a uniform, gross (i.e., before taking into
consideration fees or expenses incurred by each Portfolio, other than
transaction expenses such as brokerage commissions) after-tax annual rates of
0%, 6% or 12%. The contract value, surrender value and death benefit would be
different from those shown if the returns averaged 0%, 6% or 12%, but fluctuated
over and under those averages throughout the years.
The charges reflected in the tables include the (1) distribution charge
equal to an annual rate of 0.25% of contract value for the first ten contract
years, (2) premium tax charge equal to an annual rate of 0.25% of contract value
for the first ten contract years, (3) Federal tax charge equal to an annual rate
of 0.15% of contract value for the first ten contract years, (4) administration
charge equal to an annual rate of 0.40% of contract value, (5) mortality and
expense charge equal to an annual rate of 0.90% of variable investment account
values, (6) $2.50 monthly maintenance fee, (7) current and guaranteed cost of
insurance charges, and (8) any withdrawal charge which may be applicable in the
first nine contract years. A simple average of total trust expenses for the
twenty-nine investment portfolios of 0.95% is also reflected in the tables. The
expenses of the Portfolios may fluctuate from year to year, but are assumed to
remain constant for purposes of these tables.
The tables reflect the fact that no charges (other than those described
above) for Federal, state or local taxes are currently made against the Variable
Account. If such a charge is made in the future, it would take a higher gross
rate of return to produce after-tax returns of 0%, 6% and 12% than it does now.
35
<PAGE> 40
Surrender values in the tables do not reflect any tax consequences of a
surrender, as those consequences would vary according to the individual
circumstances of the contract owner. It should be noted that surrenders of the
contract may be subject to income tax and a 10% penalty tax (see "FEDERAL TAX
MATTERS").
Upon request, the Company will furnish comparable illustrations based
on the insured's age, gender, smoking status, risk class, the initial premium
payment, and the investment option selected by the contract owner or prospective
owner.
From time to time, in supplemental sales literature for the contract
that quotes performance data for one or more of the Trust Portfolios, the
Company may include surrender values and death benefit figures computed using
the same methodology as that used in the following illustrations, but with the
average annual total return of the Portfolio for which performance data is shown
in the sales literature replacing the hypothetical rates of return in the
following tables. This information may be shown in the form of graphs, charts,
tables and examples. The contract will be offered to the public only on or after
the date of this Prospectus. However, total return data may be used in sales
literature for as long a period as a Portfolio has been in existence. The
results for any period prior to the contract being offered would be calculated
as if the contract had been offered during that period of time, with all charges
assumed to be those applicable to the contract.
36
<PAGE> 41
$25,000 INITIAL PAYMENT: $51,179 FACE AMOUNT
MALE NONSMOKER: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
Payment
Plus Contract Contract Contract
Policy Interest Contract Surrender Death Contract Surrender Death Contract Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $ 24,170 $ 22,220 $ 51,179 $ 25,622 $ 23,541 $ 51,179 $ 27,073 $ 24,861 $ 51,179
2 27,563 23,367 21,594 51,179 26,260 24,240 51,179 29,320 27,195 51,179
3 28,941 22,590 20,983 51,179 26,914 24,961 51,179 31,757 29,757 51,179
4 30,388 21,838 20,484 51,179 27,586 25,836 51,179 34,399 32,649 51,179
5 31,907 21,109 19,993 51,179 28,275 26,775 51,179 37,263 35,763 51,179
6 33,502 20,404 19,509 51,179 28,982 27,732 51,179 40,368 39,118 51,179
7 35,178 19,722 19,033 51,179 29,708 28,708 51,179 43,734 42,734 51,179
8 36,936 19,061 18,564 51,179 30,452 29,702 51,179 47,384 46,634 52,596
9 38,783 18,422 18,103 51,179 31,216 30,716 51,179 51,341 50,841 55,961
10 40,722 17,803 17,803 51,179 32,000 32,000 51,179 55,631 55,631 59,525
15 51,973 15,336 15,336 51,179 37,064 37,064 51,179 85,726 85,726 90,012
20 66,332 13,191 13,191 51,179 42,956 42,956 51,179 131,197 131,197 137,757
25 84,659 11,327 11,327 51,179 49,810 49,810 52,301 200,809 200,809 210,850
30 108,049 9,706 9,706 51,179 57,891 57,891 58,470 308,028 308,028 311,109
</TABLE>
ASSUMPTIONS: (1) No loans or partial withdrawals have been made. (2) Current
values reflect current cost of insurance charges and a $2.50 monthly maintenance
fee. (3) Net investment returns are calculated as the hypothetical gross
investment return less all current contract charges and deductions shown in the
prospectus and current average fund expense of 0.95%.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing economic conditions,
prevailing rates and rates of inflation. The death benefit and contract value
would be different from those shown if the actual rates of return averaged 0%,
6%, and 12% over a period of years but also fluctuated above or below those
averages for individual contract years. No representation can be made by North
American Security Life or the Trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
37
<PAGE> 42
$25,000 INITIAL PAYMENT: $85,564 FACE AMOUNT
FEMALE NONSMOKER: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
Payment
Plus Contract Contract Contract
Policy Interest Contract Surrender Death Contract Surrender Death Contract Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $ 24,170 $ 22,220 $ 85,564 $ 25,622 $ 23,541 $ 85,564 $ 27,073 $ 24,861 $ 85,564
2 27,563 23,367 21,594 85,564 26,260 24,240 85,564 29,320 27,195 85,564
3 28,941 22,590 20,983 85,564 26,914 24,961 85,564 31,757 29,757 85,564
4 30,388 21,838 20,484 85,564 27,586 25,836 85,564 34,399 32,649 85,564
5 31,907 21,109 19,993 85,564 28,275 26,775 85,564 37,263 35,763 85,564
6 33,502 20,404 19,509 85,564 28,982 27,732 85,564 40,368 39,118 85,564
7 35,178 19,722 19,033 85,564 29,708 28,708 85,564 43,734 42,734 85,564
8 36,936 19,061 18,564 85,564 30,452 29,702 85,564 47,384 46,634 85,564
9 38,783 18,422 18,103 85,564 31,216 30,716 85,564 51,341 50,841 85,564
10 40,722 17,803 17,803 85,564 32,000 32,000 85,564 55,631 55,631 85,564
15 51,973 15,336 15,336 85,564 37,064 37,064 85,564 85,563 85,563 99,254
20 66,332 13,191 13,191 85,564 42,956 42,956 85,564 132,547 132,547 141,825
25 84,659 11,327 11,327 85,564 49,810 49,810 85,564 205,879 205,879 216,173
30 108,049 9,706 9,706 85,564 57,784 57,784 85,564 316,770 316,770 332,608
</TABLE>
ASSUMPTIONS: (1) No loans or partial withdrawals have been made. (2) Current
values reflect current cost of insurance charges and a $2.50 monthly maintenance
fee. (3) Net investment returns are calculated as the hypothetical gross
investment return less all current contract charges and deductions shown in the
prospectus and current average fund expense of 0.95%.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing economic conditions,
prevailing rates and rates of inflation. The death benefit and contract value
would be different from those shown if the actual rates of return averaged 0%,
6%, and 12% over a period of years but also fluctuated above or below those
averages for individual contract years. No representation can be made by North
American Security Life or the Trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
38
<PAGE> 43
$25,000 INITIAL PAYMENT: $79,644 FACE AMOUNT
LAST SURVIVOR: JOINT EQUIVALENT AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
Payment
Plus Contract Contract Contract
Policy Interest Contract Surrender Death Contract Surrender Death Contract Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $ 24,240 $ 22,283 $ 79,644 $ 25,696 $ 23,609 $ 79,644 $ 27,152 $ 24,934 $ 79,644
2 27,563 23,494 21,709 79,644 26,402 24,370 79,644 29,480 27,355 79,644
3 28,941 22,769 21,148 79,644 27,128 25,158 79,644 32,010 30,010 79,644
4 30,388 22,066 20,697 79,644 27,875 26,125 79,644 34,760 33,010 79,644
5 31,907 21,384 20,251 79,644 28,644 27,144 79,644 37,749 36,249 79,644
6 33,502 20,722 19,811 79,644 29,434 28,184 79,644 40,998 39,748 79,644
7 35,178 20,080 19,377 79,644 30,247 29,247 79,644 44,529 43,529 79,644
8 36,936 19,457 18,948 79,644 31,084 30,334 79,644 48,366 47,616 79,644
9 38,783 18,852 18,525 79,644 31,944 31,444 79,644 52,537 52,037 79,644
10 40,722 18,265 18,265 79,644 32,829 32,829 79,644 57,071 57,071 79,644
15 51,973 15,936 15,936 79,644 38,509 38,509 79,644 88,592 88,592 93,022
20 66,332 13,887 13,887 79,644 45,200 45,200 79,644 137,470 137,470 144,343
25 84,659 12,083 12,083 79,644 53,081 53,081 79,644 213,072 213,072 223,725
30 108,049 10,495 10,495 79,644 62,366 62,366 79,644 330,777 330,777 334,085
</TABLE>
ASSUMPTIONS: (1) No loans or partial withdrawals have been made. (2) Current
values reflect current cost of insurance charges and a $2.50 monthly maintenance
fee. (3) Net investment returns are calculated as the hypothetical gross
investment return less all current contract charges and deductions shown in the
prospectus and current average fund expense of 0.95%.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing economic conditions,
prevailing rates and rates of inflation. The death benefit and contract value
would be different from those shown if the actual rates of return averaged 0%,
6%, and 12% over a period of years but also fluctuated above or below those
averages for individual contract years. No representation can be made by North
American Security Life or the Trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
39
<PAGE> 44
$25,000 INITIAL PAYMENT: $51,179 FACE AMOUNT
MALE NONSMOKER: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
Payment
Plus Contract Contract Contract
Policy Interest Contract Surrender Death Contract Surrender Death Contract Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $ 23,660 $ 21,755 $ 51,179 $ 25,118 $ 23,082 $ 51,179 $ 26,577 $ 24,410 $ 51,179
2 27,563 22,260 20,580 51,179 25,178 23,250 51,179 28,271 26,146 51,179
3 28,941 20,789 19,326 51,179 25,171 23,358 51,179 30,101 28,101 51,179
4 30,388 19,232 18,061 51,179 25,089 23,508 51,179 32,087 30,337 51,179
5 31,907 17,570 16,665 51,179 24,917 23,572 51,179 34,255 32,755 51,179
6 33,502 15,776 15,113 51,179 24,637 23,531 51,179 36,635 35,385 51,179
7 35,178 13,820 13,367 51,179 24,226 23,357 51,179 39,266 38,266 51,179
8 36,936 11,656 11,381 51,179 23,651 23,017 51,179 42,195 41,445 51,179
9 38,783 9,235 9,100 51,179 22,877 22,469 51,179 45,491 44,991 51,179
10 40,722 6,499 6,499 51,179 21,859 21,859 51,179 49,221 49,221 52,666
15 51,973 * * * 11,779 11,779 51,179 75,827 75,827 79,618
20 66,332 * * * * * * 115,519 115,519 121,295
25 84,659 * * * * * * 172,808 172,808 181,449
30 108,049 * * * * * * 260,522 260,522 263,127
</TABLE>
ASSUMPTIONS: (1) No loans or partial withdrawals have been made. (2) Guaranteed
values reflect guaranteed cost of insurance charges and a $2.50 monthly
maintenance fee. (3) Net investment returns are calculated as the hypothetical
gross investment return less all guaranteed contract charges and deductions
shown in the prospectus and current average fund expense of 0.95%.
* Unless additional payment is made, the contract will not stay in force
resulting in loss of insurance coverage. See "TERMINATION" and "REINSTATEMENT".
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing economic conditions,
prevailing rates and rates of inflation. The death benefit and contract value
would be different from those shown if the actual rates of return averaged 0%,
6%, and 12% over a period of years but also fluctuated above or below those
averages for individual contract years. No representation can be made by North
American Security Life or the Trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
40
<PAGE> 45
$25,000 INITIAL PAYMENT: $85,564 FACE AMOUNT
FEMALE NONSMOKER: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
Payment
Plus Contract Contract Contract
Policy Interest Contract Surrender Death Contract Surrender Death Contract Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $ 23,870 $ 21,947 $ 85,564 $ 25,322 $ 23,268 $ 85,564 $ 26,773 $ 24,588 $ 85,564
2 27,563 22,738 21,018 85,564 25,626 23,661 85,564 28,686 26,561 85,564
3 28,941 21,601 20,073 85,564 25,915 24,042 85,564 30,756 28,756 85,564
4 30,388 20,461 19,203 85,564 26,187 24,529 85,564 32,998 31,248 85,564
5 31,907 19,310 18,302 85,564 26,438 25,002 85,564 35,430 33,930 85,564
6 33,502 18,144 17,362 85,564 26,663 25,455 85,564 38,067 36,817 85,564
7 35,178 16,950 16,372 85,564 26,852 25,878 85,564 40,925 39,925 85,564
8 36,936 15,716 15,319 85,564 26,993 26,258 85,564 44,023 43,273 85,564
9 38,783 14,424 14,186 85,564 27,071 26,580 85,564 47,382 46,882 85,564
10 40,722 13,063 13,063 85,564 27,077 27,077 85,564 51,031 51,031 85,564
15 51,973 5,227 5,227 85,564 26,713 26,713 85,564 77,764 77,764 90,206
20 66,332 * * * 22,422 22,422 85,564 120,447 120,447 128,878
25 84,659 * * * 7,218 7,218 85,564 187,068 187,068 196,421
30 108,049 * * * * * * 287,743 287,743 302,130
</TABLE>
ASSUMPTIONS: (1) No loans or partial withdrawals have been made. (2) Guaranteed
values reflect guaranteed cost of insurance charges and a $2.50 monthly
maintenance fee. (3) Net investment returns are calculated as the hypothetical
gross investment return less all guaranteed contract charges and deductions
shown in the prospectus and current average fund expense of 0.95%.
* Unless additional payment is made, the contract will not stay inforce
resulting in loss of insurance coverage. See "TERMINATION" and "REINSTATEMENT".
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing economic conditions,
prevailing rates and rates of inflation. The death benefit and contract value
would be different from those shown if the actual rates of return averaged 0%,
6%, and 12% over a period of years but also fluctuated above or below those
averages for individual contract years. No representation can be made by North
American Security Life or the Trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
41
<PAGE> 46
$25,000 INITIAL PAYMENT: $79,644 FACE AMOUNT
LAST SURVIVOR: JOINT EQUIVALENT AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
Payment
Plus Contract Contract Contract
Policy Interest Contract Surrender Death Contract Surrender Death Contract Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 26,250 $ 24,240 $ 22,283 $ 79,644 $ 25,696 $ 23,609 $ 79,644 $ 27,152 $ 24,934 $ 79,644
2 27,563 23,465 21,683 79,644 26,377 24,348 79,644 29,459 27,334 79,644
3 28,941 22,666 21,052 79,644 27,035 25,072 79,644 31,930 29,930 79,644
4 30,388 21,831 20,478 79,644 27,661 25,911 79,644 34,574 32,824 79,644
5 31,907 20,947 19,841 79,644 28,242 26,742 79,644 37,404 35,904 79,644
6 33,502 19,998 19,123 79,644 28,766 27,516 79,644 40,432 39,182 79,644
7 35,178 18,964 18,306 79,644 29,216 28,216 79,644 43,673 42,673 79,644
8 36,936 17,822 17,362 79,644 29,573 28,823 79,644 47,150 46,400 79,644
9 38,783 16,549 16,268 79,644 29,818 29,318 79,644 50,889 50,389 79,644
10 40,722 15,105 15,105 79,644 29,921 29,921 79,644 54,921 54,921 79,644
15 51,973 4,254 4,254 79,644 28,259 28,259 79,644 84,414 84,414 88,635
20 66,332 * * * 16,948 16,948 79,644 130,939 130,939 137,486
25 84,659 * * * * * * 201,589 201,589 211,669
30 108,049 * * * * * * 311,016 311,016 314,127
</TABLE>
ASSUMPTIONS: (1) No loans or partial withdrawals have been made. (2) Guaranteed
values reflect guaranteed cost of insurance charges and a $2.50 monthly
maintenance fee. (3) Net investment returns are calculated as the hypothetical
gross investment return less all guaranteed contract charges and deductions
shown in the prospectus and current average fund expense of 0.95%.
* Unless additional payment is made, the contract will not stay inforce
resulting in loss of insurance coverage. See "TERMINATION" and "REINSTATEMENT".
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing economic conditions,
prevailing rates and rates of inflation. The death benefit and contract value
would be different from those shown if the actual rates of return averaged 0%,
6%, and 12% over a period of years but also fluctuated above or below those
averages for individual contract years. No representation can be made by North
American Security Life or the Trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
42
<PAGE> 47
PART II
<PAGE> 48
PART II
UNDERTAKINGS
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940, as amended.
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.
Rule 484 Undertaking.
Section IX, paragraph D of the Promotional Agent Agreement among the Company,
formerly North American Security Life Insurance Company (referred to therein as
"Security Life"), Manufacturers Securities Services, LLC, formerly NASL
Financial Services, Inc. (referred to therein as "NASL Financial") and Wood
Logan Associates, Inc. (referred to therein as "Promotional Agent") provides as
follows:
a. NASL Financial and Security Life agree to indemnify and hold harmless
Promotional Agent, its officers, directors and employees against any and
all losses, claims, damages or liabilities to which they may become
subject under the Securities Act of 1933 ("1933 Act"), the 1934 Act or
other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact or any omission
or alleged omission to state a material fact required to be stated or
necessary to make the statements made not misleading in any registration
statement for the Contracts filed pursuant to the 1933 Act or any
prospectus included as a part thereof, as from time to time amended and
supplemented, or any advertisement or sales literature approved in writing
by NASL Financial or Security Life pursuant to Section VI, paragraph B of
this Agreement.
b. Promotional Agent agrees to indemnify and hold harmless NASL Financial and
Security Life, their officers, directors and employees against any and all
losses, claims, damages or liabilities to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon: (i) any oral or written misrepresentation by Promotional Agent
or its officers, directors, employees or agents unless such
misrepresentation is contained in any registration statement for the
Contracts or Fund shares, any prospectus included as a part thereof, as
from time to time amended and supplemented, or any advertisement or sales
literature approved in writing by NASL Financial pursuant to Section VI,
paragraph B of this Agreement or, (ii) the failure of
1
<PAGE> 49
Promotional Agent or its officers, directors, employees or agents to comply
with any applicable provisions of this Agreement.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The cross-reference sheet
The Prospectus consisting of 42 pages
The undertaking required by Section 26 of the Investment Company Act of
1940
The undertaking pursuant to Rule 484
The signatures
Written consents of the following persons:
(a) Coopers & Lybrand, L.P.P., certified public accountants. 6/
(b) Ernst & Young LLP, certified public accountants. 6/
The following exhibits:
EXHIBITS
1. The following exhibits correspond to those required by the instructions to
Form S-6:
2
<PAGE> 50
(A)(1)(a)(i) Resolution of the Board of Directors of North American
Security Life Insurance Company, dated April 30, 1986,
establishing the NASL Variable Life Account. 1/
(A)(1)(a)(ii) Resolution of the Board of Directors of North American
Security Life Insurance Company, dated May 30, 1995,
amending the terms of the NASL Variable Life Account. 1/
(A)(1)(a)(iii) Resolution of the Board of Directors of North American
Security Life Insurance Company, dated September 30,
1996, amending the terms of the NASL Variable Life
Account. 2/
(A)(2) Not Applicable
(A)(3)(a)(i) Underwriting Agreement. 3/
(A)(3)(a)(ii)(a) Promotional Agent Agreement. 7/
(A)(3)(a)(ii)(b) Amendment to Promotional Agent Agreement. 3/
(A)(3)(b) Form of Selling Agreement Agreement. 3/
(A)(3)(c) Not Applicable
(A)(4) Not Applicable
(A)(5) Form of Modified Single Payment Variable Life Insurance
Policy. 1/
(A)(6)(a)(i) Certificate of Incorporation of North American Security Life
Insurance Company. 4/
(A)(6)(a)(ii) Certificate of Amendment of Certificate of Incorporation
of the Company, Name Change July 1984. 4/
(A)(6)(a)(iii) Certificate of Amendment of Certificate of Incorporation
of the Company, Authorization of Capital December
1994. 4/
(A)(6)(a)(iv) Certificate of Amendment of Certificate of Incorporation, Name
change March 1997. 5/
3
<PAGE> 51
(A)(6)(a)(v) Certificate of Amendment of Certificate of Incorporation of
the Company, Registered Agent July 1997. 4/
(A)(6)(b) Amended and Restated By-laws of The Manufacturers Life
Insurance Company of North America. 4/
(A)(7) Not Applicable
(A)(8) Not Applicable
(A)(9) Not Applicable
(A)(10) Form of Application for Modified Single Payment Variable Life
Insurance Policies. 1/
(2) Opinion and Consent of James D. Gallagher, Esq. 2/
(6) Memorandum describing Issuance, Transfer, Redemption and
Exchange Procedures for the Policy. 1/
(7)(a) Power of Attorney - John D. Richardson, Director and Chairman
of North American Security Life Insurance Company. 2/
(7)(b) Power of Attorney - David W. Libbey (Principal Financial
Officer, North American Security Life Insurance Company). 4/
(7)(c) Power of Attorney - Peter Hutchison (Director, The
Manufacturers Life Insurance Company of North America). 3/
(27) Financial Data Schedule. 6/
2. Consents of the following:
(a) Ernst & Young LLP 6/
(b) Coopers & Lybrand, L.L.P. 6/
3. No financial statement will be omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I.
- ----------------------------------------
1/ Filed herewith.
4
<PAGE> 52
2/ Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-6 for NASL Variable Life Account, filed with the SEC on
April 29, 1997, File No. 33-92466.
3/ Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 for The Manufacturers Life Insurance Company of North
America, filed with the SEC on February 25, 1998, File No. 33-76162.
4/ Incorporated by reference to Form 10Q of The Manufacturers Life Insurance
Company of North America, filed with the SEC on November 14, 1997, File No.
812-06037.
5/ Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 for The Manufacturers Life Insurance Company of North
America, filed with the SEC on October 9, 1997, File No. 333-6011.
6/ To be filed by Amendment.
7/ Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 for The Manufacturers Life Insurance Company of North
America, filed with the SEC on April 29, 1997, File No. 33-76162
5
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, The
Manufacturers Life Insurance Company of North America Separate Account B has
duly caused this amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, and
Commonwealth of Massachusetts on the 26th day of February, 1998.
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA SEPARATE ACCOUNT B
----------------------------------------
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA
----------------------------------------
(Depositor)
By: /s/ John D. DesPrez
----------------------------------------
John D. DesPrez III, 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, thereunto duly authorized, on the 26th day of
February, 1998 in the city of Boston, and Commonwealth of Massachusetts.
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA SEPARATE ACCOUNT B
----------------------------------------
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA
----------------------------------------
(Depositor)
By: /s/ John D. DesPrez
----------------------------------------
John D. DesPrez III, President
Attest:
/s/ James D. Gallagher
- --------------------------------
James D. Gallagher, Secretary
<PAGE> 54
Pursuant to the requirements of the Securities Act of 1933, this
amended Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ John D. DesPrez III Director and President 2/26/98
- -------------------------- -------
John D. DesPrez III (Date)
* Director 2/26/98
- -------------------------- -------
Peter S. Hutchison (Date)
* Director and Chairman 2/26/98
- -------------------------- of the Board of Directors -------
John D. Richardson (Date)
/s/ David W. Libbey Vice President, Treasurer 2/26/98
- -------------------------- and Chief Financial Officer -------
David W. Libbey (Principal Financial Officer) (Date)
*By: /s/ James D. Gallagher 2/26/98
---------------------------- -------
James D. Gallagher (Date)
Attorney-in-Fact
Pursuant to Powers
of Attorney
<PAGE> 55
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(A)(1)(a)(i) Resolution of the Board of Directors of
North American Security Life Insurance
Company, dated April 30, 1986, establishing
the NASL Variable Life Account
(A)(1)(a)(ii) Resolution of the Board of Directors of
North American Security Life Insurance
Company, dated May 30, 1995, amending the
terms of the NASL Variable Life Account
(A)(5) Form of Modified Single Premium Variable
Life Insurance Policy
(A)(10) Form of Application for Modified Single
Premium Variable Life Insurance Policies
(6) Memorandum describing Issuance, Transfer,
Redemption and Exchange Procedures for the
Policy
6
<PAGE> 1
ACTION BY UNANIMOUS CONSENT OF THE
BOARD OF DIRECTORS OF
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
Pursuant to the authority of Section 141(f) of the General Corporation
Law of the State of Delaware, the undersigned, being all of the directors of the
Corporation, do take and adopt the following action by their written consent:
RESOLVED, That pursuant to Title 18, Sub. 2932(a) of the
Delaware Code Annotated, as amended, the Corporation does hereby
establish a separate account which is divided into three sub-accounts
for use in connection with the offer and sale of variable life
insurance contracts, the issuance of which is hereby authorized. Such
separate account is hereby designated as the "NASL Variable Life
Account" and such sub-accounts are designated as "Equity," "Bond" and
"Money Market," respectively;
FURTHER RESOLVED, That each variable life insurance contract
issued by the Corporation shall provide that the portion of the assets
of the separate account equal to the reserves and other contract
liabilities with respect to such account shall not be chargeable with
liabilities arising out of any other business the Company may conduct
and, consistent with the provisions of Title 18, Sub. 2932 (a) (1) of
the Delaware Code Annotated, as amended, that the income, gains and
losses, realized or unrealized, from assets allocated to the separate
account shall be credited to or charged against such account without
regard to other income, gains or losses of the Corporation;
FURTHER RESOLVED, That the officers of the Corporation are
hereby authorized and directed to take all such action as may be
necessary or appropriate to cause the separate account to be registered
as a unit investment trust under the Investment Company Act of 1940, as
amended, and one or more applications to be made for such exemptive or
other orders under that Act as may be necessary or desirable;
FURTHER RESOLVED, That the officers of the Corporation are
hereby authorized and directed to take all such action as may be
necessary or appropriate to cause to be filed with the Securities and
Exchange Commission in accordance with the provisions of the Securities
Act of 1933, as amended, one or more registration statements and any
amendments thereto, relating to such variable life insurance contracts;
FURTHER RESOLVED, That the officers of the Corporation are
hereby authorized and directed to perform all such acts and do all such
things as may, in their judgment and discretion, be necessary or
desirable to give full effect to these resolutions so as to enable the
Corporation to establish the separate account and issue the variable
life insurance contracts, including, without limitation: (a) the
preparation and execution of custodian agreements, underwriting
agreements, service agreements, and such other agreements and documents
respecting such separate account or contracts as they may deem
necessary or desirable; (b) the determination of the terms and
conditions of the
<PAGE> 2
variable life insurance contracts herein authorized; and (c) the
determination of the jurisdiction or jurisdictions in which action
shall be taken to obtain the requisite qualification, registration or
authorization for the sale of such variable life insurance contracts.
DATED at Toronto as of the 30th day of April, 1986.
/s/ J. J. DESCHENES /s/ E. T. HILL
- ------------------------ -------------------------
J. J. Deschenes E. T. Hill
/s/ W. J. ATHERTON
- ------------------------
W. J. Atherton
<PAGE> 1
SECRETARY'S CERTIFICATE
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
I, PHYLLIS C. COLACE, ASSISTANT SECRETARY THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA (the "Company") does hereby certify that the following
is a true and correct copy of the action taken by the Board of Directors, at a
meeting of the Board of Directors, on May 30, 1995, and that the following
resolutions in pertinent part are in full force and effect on the date hereof:
Authorization for Additional Sub-Accounts of Variable Separate Accounts
- -----------------------------------------------------------------------
- --Variable Life
- ---------------
WHEREAS, pursuant to Title 18, Section 2932(a) of the Delaware Code
Annotated, as amended, the Company, pursuant to a resolution dated
April 30, 1986, established a separate account, designated the NASL
Variable Life Account, and divided the separate account into three
sub-accounts, designated the "Equity," "Bond" and "Money Market"
sub-accounts, respectively, for use in connection with the offer and
sale of variable life insurance contracts; it is
RESOLVED, that the Company does hereby redesignate the three
sub-accounts as the "Equity Trust," the "Investment Quality Bond Trust"
and the "Money Market Trust" and does hereby divide the separate
account to create eleven additional sub-accounts, designated the
"Global Equity Trust," the "Pasadena Growth Trust," the "Value Equity
Trust," the "Growth and Income Trust," the "Strategic Bond Trust," the
"Global Government Bond Trust," the "International Growth and Income
Trust," the "U.S. Government Securities Trust," the "Aggressive Asset
Allocation Trust," the "Moderate Asset Allocation Trust" and the
"Conservative Asset Allocation Trust"; and it is
FURTHER RESOLVED, that, from time to time, the sub-accounts may be
redesignated and the separate account divided to create additional
sub-accounts without further action by the Board of Directors of the
Company.
Variable Account
WHEREAS, pursuant to Title 18, Section 2932(a) of the Delaware Code
Annotated, as amended, the Company, pursuant to a resolution dated
August 24, 1984, established a separate account, designated the NASL
Variable Account, and divided the separate account into three
sub-accounts, designated the "Equity," "Bond" and "Money Market"
sub-accounts, respectively, for use in connection with the offer and
sale of variable annuity contracts; it is
RESOLVED, that the Company does hereby redesignate the three
sub-accounts as the "Equity Trust," the "Investment Quality Bond Trust"
and the "Money Market Trust" and does hereby divide the separate
account to create eleven additional sub-accounts, designated the
"Global Equity Trust," the "Pasadena Growth Trust," the "Value Equity
Trust," the "Growth and Income Trust," the "Strategic Bond Trust," the
"Global Government Bond Trust," the "International Growth and Income
Trust," the "U.S. Government Securities Trust," the "Aggressive Asset
Allocation Trust," the "Moderate Asset Allocation Trust" and the
"Conservative Asset Allocation Trust"; and it is
FURTHER RESOLVED, that, from time to time, the sub-accounts may be
redesignated and the separate account divided to create additional
sub-accounts without further action by the Board of Directors of the
Company.
DATED at Boston, Massachusetts as of FEBRUARY 5, 1998
/s/ Phyllis C. Colace
----------------------------------
PHYLLIS C. COLACE
ASSISTANT SECRETARY
<PAGE> 1
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
- --------------------------------------------------------------------------------
EXECUTIVE OFFICE: SERVICE OFFICE: HOME OFFICE
Venture Life Department P.O. Box 9236 GMF Wilmington, Delaware
116 Huntington Avenue Boston, MA 02205-9236
Boston, MA 02116 1-800-600-3814
THIS IS A LEGAL CONTRACT - READ IT CAREFULLY.
WE AGREE to pay the benefits of this Contract in accordance with its terms.
THIS CONTRACT is issued in consideration of the Payments.
TEN DAY RIGHT TO REVIEW
THE CONTRACT OWNER MAY CANCEL THE CONTRACT BY RETURNING IT TO OUR SERVICE OFFICE
OR AGENT AT ANY TIME WITHIN 10 DAYS AFTER RECEIPT OF THE CONTRACT. WITHIN 7 DAYS
OF RECEIPT OF THE CONTRACT BY US, WE WILL REFUND THE PAYMENT MADE FOR THE
CONTRACT.
SIGNED FOR THE COMPANY at its Executive Office, Boston, Massachusetts,
on the Issue Date.
Vice President President
Modified Single Payment Variable Life Insurance
Non-Participating
THE DEATH BENEFIT AND CONTRACT VALUE PROVIDED BY THIS CONTRACT WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT ARE VARIABLE, AND MAY INCREASE OR
DECREASE DAILY. THE CONTRACT VALUE IS NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
SEE THE DEATH BENEFIT PROVISIONS ON PAGE 7.
SEE DETAILS OF THE VARIABLE ACCOUNT PROVISIONS ON PAGE 7.
VENLIFE.001
<PAGE> 2
INTRODUCTION
This is a modified single payment variable life insurance contract. The contract
is designed to permit a large Initial Payment and, subject to certain
conditions, additional Payments. The contract provides a death benefit. The
death benefit may be paid in a lump sum or under an Annuity Option as described
in the Payment of Contract Benefits provision.
During the Insured's life, the Contract provides that the Contract Value will
accumulate on either a fixed or variable basis or a combination of both. The
variable portion of the Contract will vary with the investment performance of an
Owner's Variable Account. The fixed portion of the Contract will accumulate
based on the interest rate credited by the Company.
You must allocate Payments among one or more Investment Options. The Investment
Options are identified on the Contract Specifications Page.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Contract Specifications Page Page
PART 1 - DEFINITIONS_______________________________________________________ 1
PART 2 - GENERAL PROVISIONS________________________________________________ 3
PART 3 - OWNERSHIP_________________________________________________________ 5
PART 4 - PAYMENTS, GRACE PERIOD AND REINSTATEMENT__________________________ 5
PART 5 - DEATH BENEFIT_____________________________________________________ 7
PART 6 - VARIABLE ACCOUNT PROVISIONS_______________________________________ 7
PART 7 - FIXED ACCOUNT PROVISIONS__________________________________________ 8
PART 8 - TRANSFERS_________________________________________________________ 8
PART 9 - CONTRACT VALUE____________________________________________________ 9
PART 10 - WITHDRAWAL BENEFIT________________________________________________ 9
PART 11 - LOAN BENEFIT_____________________________________________________ 11
PART 12 - FEES AND DEDUCTIONS______________________________________________ 12
PART 13 - PAYMENT OF CONTRACT BENEFITS_____________________________________ 13
VENLIFE.001
<PAGE> 3
CONTRACT SPECIFICATIONS PAGE
CONTRACT DATE: 11/06/1997 ISSUE DATE: 11/06/1997
INITIAL PAYMENT: $ 100,000.00 MATURITY DATE: 11/06/2027
FACE AMOUNT: $ 291,563.00 GOVERNING LAW: DE
INITIAL INVESTMENT OPTION: MONEY MARKET
ALLOCATION PERCENTAGES INITIAL INTEREST
(SEE REVERSE FOR ALL AVAILABLE OPTIONS) RATE
VARIABLE INVESTMENT OPTIONS:
EQUITY 100.00%
----------
TOTAL 100.00%
INSURED: BETSY DOE CONTRACT NUMBER: 000000099
AGE/SEX: 55/FEMALE OWNER: BETSY DOE
SMOKING NONSMOKER
STATUS:
VENLIFE.001
<PAGE> 4
RISK CLASS: STANDARD
VENLIFE.001
<PAGE> 5
AVAILABLE INVESTMENT OPTIONS
FIXED INVESTMENT OPTIONS
1 Year Fixed
VARIABLE INVESTMENT OPTIONS
Science & Technology T. Rowe Price Associates, Inc.
International Small Cap Founders Asset Management, Inc.
Emerging Growth Warburg, Pincus Counsellors, Inc.
Pilgrim Baxter Growth Pilgrim Baxter & Associates
Small/Mid Cap Fred Alger Management, Inc.
International Stock Rowe Price-Fleming International, Inc.
Global Equity Morgan Stanley Asset Management Inc.
Growth Founders Asset Management, Inc.
Equity Fidelity Management Trust Company
Blue Chip Growth T. Rowe Price Associates, Inc.
Real Estate Securities Manufacturers Adviser Corporation
Value Miller Anderson & Sherrerd, LLP
International Growth & Income J.P. Morgan Investment Management Inc.
Growth and Income Wellington Management Company, LLP
Equity-Income T. Rowe Price Associates, Inc.
Aggressive Asset Allocation Fidelity Management Trust Company
High Yield Miller Anderson & Sherrerd, LLP
Moderate Asset Allocation Fidelity Management Trust Company
Conservative Asset Allocation Fidelity Management Trust Company
Strategic Bond Salomon Brothers Asset Management Inc.
Global Government Bond Oechsle International Advisors, L.P.
Investment Quality Bond Wellington Management Company, LLP
U.S. Government Securities Salomon Brothers Asset Management Inc.
Money Market Manufacturers Adviser Corporation
Lifestyle Portfolios: Manufacturers Adviser Corporation
Conservative 280
Moderate 460
Balanced 640
Growth 820
Aggressive 1000
VENLIFE.001
<PAGE> 6
CONTRACT SPECIFICATIONS PAGE (CONTINUED)
FEES AND DEDUCTIONS
Administration Charge: 0.40% Annually (1)
Distribution Charge (Contract Years 1-10): 0.25% Annually (1)
Federal Tax Charge (Contract Years 1-10): 0.15% Annually (1)
Premium Tax Charge (Contract Years 1-10): 0.25% Annually (1)
Mortality and Expense Charge: 0.90% Annually (2)
Monthly Maintenance Fee: $2.50
(1) This charge is deducted monthly from the Investment Accounts on a pro rata
basis. The monthly charge is equal to one-twelfth of this factor times the
Contract Value.
(2) This charge is deducted monthly from the Investment Accounts on a pro rata
basis. The monthly charge is equal to one-twelfth of this factor times the
Investment Account Value of Variable Investment Options only.
TABLE OF WITHDRAWAL CHARGES
Contract Contingent Deferred Unrecovered Total Withdrawal
Year Sales Load + Premium = Charge
Tax
-------- ------------------- ----------- ----------------
1 6.75% 2.25% 9.00%
2 6.50% 2.00% 8.50%
3 6.25% 1.75% 8.00%
4 5.50% 1.50% 7.00%
5 4.75% 1.25% 6.00%
6 4.00% 1.00% 5.00%
7 3.25% 0.75% 4.00%
8 2.50% 0.50% 3.00%
9 1.75% 0.25% 2.00%
10+ 0.00% 0.00% 0.00%
INSURED: BETSY DOE CONTRACT NUMBER: 000000099
AGE/SEX: 55/FEMALE OWNER: BETSY DOE
SMOKING STATUS: NONSMOKER
RISK CLASS: STANDARD
VENLIFE.001
<PAGE> 7
TABLE OF GUARANTEED RATES - FEMALE
Guaranteed Maximum Monthly Cost of Insurance Rates
per $1000 of Net Amount at Risk
Attained Attained
Age Nonsmoker Smoker Age Nonsmoker Smoker
--------------------------------- ----------------------------------
20 0.0842 0.0976 60 0.7388 1.0839
21 0.0859 0.0992 61 0.8010 1.1632
22 0.0867 0.1017 62 0.8784 1.2654
23 0.0884 0.1042 63 0.9735 1.3897
24 0.0900 0.1067 64 1.0806 1.5286
25 0.0917 0.1092 65 1.1962 1.6754
26 0.0942 0.1134 66 1.3162 1.8249
27 0.0959 0.1167 67 1.4388 1.9695
28 0.0984 0.1209 68 1.5659 2.1161
29 0.1017 0.1259 69 1.7076 2.2758
30 0.1042 0.1318 70 1.8742 2.4648
31 0.1076 0.1368 71 2.0777 2.7049
32 0.1109 0.1426 72 2.3279 2.9998
33 0.1151 0.1501 73 2.6285 3.3519
34 0.1201 0.1585 74 2.9757 3.7549
35 0.1259 0.1677 75 3.3649 4.1972
36 0.1343 0.1818 76 3.7879 4.6698
37 0.1443 0.1986 77 4.2435 5.1659
38 0.1551 0.2178 78 4.7391 5.6933
39 0.1668 0.2386 79 5.2913 6.2710
40 0.1810 0.2637 80 5.9234 6.9226
41 0.1960 0.2905 81 6.6558 7.6677
42 0.2111 0.3172 82 7.5074 8.5225
43 0.2261 0.3440 83 8.4777 9.5196
44 0.2412 0.3708 84 9.5594 10.6131
45 0.2579 0.3992 85 10.7444 11.7893
46 0.2754 0.4285 86 12.0280 13.0418
47 0.2946 0.4587 87 13.4123 14.3609
48 0.3147 0.4913 88 14.9028 15.7562
49 0.3373 0.5274 89 16.5166 17.2301
50 0.3624 0.5659 90 18.2733 18.8930
51 0.3900 0.6070 91 20.2227 20.7186
52 0.4218 0.6540 92 22.4528 22.7883
53 0.4570 0.7061 93 25.1486 25.2821
54 0.4930 0.7590 94 28.7360 28.7360
55 0.5316 0.8136 95 34.1581 34.1581
56 0.5701 0.8675 96 43.5428 43.5428
57 0.6079 0.9180 97 62.1940 62.1940
58 0.6456 0.9676 98 83.3333 83.3333
59 0.6884 1.0207 99 83.3333 83.3333
VENLIFE.001
<PAGE> 8
PART 1 DEFINITIONS
- --------------------------------------------------------------------------------
WE AND YOU "We", "us", and "our" means The Manufacturers Life
Insurance Company of North America. "You" or "your"
means the Owner of this Contract.
AGE The age at the Insured's last birthday on the
Contract Date. If the Insured is more than one
person, Age is the Joint Equivalent Age specified on
the Contract Specifications Page. Attained age is Age
plus the number of complete Contract Years.
ALLOCATION PERCENTAGES The portion of a Payment to be invested in each
Investment Option. You may change the Allocation
Percentages at any time, without charge, by giving us
written notice.
ANNUITY OPTION The method selected by you for annuity payments made
by us.
BENEFICIARY The person, persons, or entity to whom the Proceeds
are payable following the Insured's death.
CASH VALUE The Contract Value less any applicable withdrawal
charge.
CONTINGENT BENEFICIARY The person, persons or entity who becomes the
Beneficiary if the Beneficiary is not alive.
CONTRACT ANNIVERSARY The anniversary of the Contract Date.
CONTRACT DATE The date from which Contract Anniversary, Contract
Year and Monthly Anniversary Day are determined. The
Contract Date is specified on the Contract
Specifications Page.
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 thereafter.
DEBT Any amounts in the Loan Account attributable to the
Contract plus any accrued loan interest.
FACE AMOUNT The minimum death benefit provided by this Contract.
The initial Face Amount is shown on the Contract
Specifications Page. The Face Amount may be reduced
in accordance with the terms of the Withdrawal
Benefit provision. The Face Amount may be increased
as the result of additional Payments.
GENERAL ACCOUNT All the assets of The Manufacturers Life Insurance
Company of North America other than assets in
separate accounts.
INFORCE The Contract is in effect, beginning on the later of
the Issue Date or receipt of the Initial Payment,
until terminated as described in the Termination
provision of Part 2, General Provisions.
INSURED The person or persons whose life is covered by this
Contract as specified on the Contract Specifications
Page. If more than one person is so named, all
provisions of the Contract which are based on the
death of the "Insured" will be based on the date of
death of the last survivor of the persons so named.
VENLIFE.002
1
<PAGE> 9
INVESTMENT ACCOUNT An account established by us which represents your
interest in an Investment Option.
INVESTMENT ACCOUNT VALUE The value of your investment in an Investment
Account.
INVESTMENT OPTIONS The Investment Options can be either fixed or
variable. The Investment Options available under this
Contract are shown on the Contract Specifications
Page and application. We reserve the right to limit
the number of Investment Options to which an Owner
may allocate Contract Value.
ISSUE DATE The date your application is approved and this
contract is issued as specified on the Contract
Specifications Page.
LOAN ACCOUNT Assets held in our General Account as collateral for
contract loans.
MATURITY DATE The date on which Proceeds are payable if the Insured
is living and the Contract has not been surrendered
for payment of its Surrender Value. The Maturity Date
is shown on the Contract Specifications Page.
MONTHLY ANNIVERSARY DAY The same day each month as the Contract Date. If
there is no Monthly Anniversary Day in a calendar
month, the Monthly Anniversary Day will be the last
day of the current calendar month.
OWNER OR CONTRACT OWNER The person, persons or entity entitled to the
ownership rights under this Contract. The Owner is as
designated on the Contract Specifications Page and
application, unless changed.
PAYMENT An amount paid to us by you as consideration for the
benefits provided by the Contract.
PORTFOLIO OR TRUST A separate portfolio of Manufacturers Investment
PORTFOLIO Trust, a mutual fund in which the Variable Account
invests, or any successor mutual fund.
PROCEEDS Upon death of the Insured prior to the Maturity Date,
Proceeds will be the death benefit less any Debt.
Upon surrender of the Contract or on the Maturity
Date, Proceeds will be the Surrender Value.
SEPARATE ACCOUNT A segregated account of The Manufacturers Life
Insurance Company of North America that is not
commingled with our general assets and obligations.
SERVICE OFFICE Any office designated by us for the receipt of the
Payment and processing of Contract Owner requests.
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.
SURRENDER VALUE The Cash Value less any Debt.
UNLIQUIDATED PAYMENT The Payment less the portion of the Payment
liquidated, if any, due to partial withdrawals.
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 The Manufacturers Life Insurance Company Separate
Account B, which is a separate account of The
Manufacturers Life Insurance Company of North
America.
VENLIFE.002
2
<PAGE> 10
PART 2 GENERAL PROVISIONS
- --------------------------------------------------------------------------------
ENTIRE CONTRACT The entire contract consists of this Contract, any
Contract endorsements, and a copy of the application
and any amendments thereof. Only our President,
Vice-President or Secretary may agree to change or
waive any provisions of the Contract. The change or
waiver must be in writing.
We will not change or modify this Contract without
your consent except as may be required to make it
conform to any applicable law or regulation or any
ruling issued by a government agency. This contract
is intended to qualify for treatment as a life
insurance contract under Section 7702 of the Internal
Revenue Code as it now exists or may later be
amended. We reserve the right to endorse this
contract to maintain its qualification for treatment
as a life insurance contract under the Internal
Revenue Code.
BASIS OF COMPUTATION Minimum benefits and values are computed on the basis
of the Commissioner's 1980 Standard Ordinary
Mortality Table, age last birthday. The benefits and
values available under this Contract are not less
than the minimum required by any statute of the state
in which the Contract is issued. We have filed a
detailed statement of the method used to calculate
the benefits and values with the Department of
Insurance in the state in which the Contract is
issued, if required by law.
INCONTESTABILITY In issuing this Contract, we have relied upon the
application. The statements contained in the
application are considered, in the absence of fraud,
representations and not warranties. No statement made
in connection with the application will be used by us
to void the Contract or to deny a claim unless that
statement is part of the application or any
amendments thereof.
With regard to the life of each Insured, this
Contract shall be incontestable after it has been
Inforce during the lifetime of the Insured for two
years from the Issue Date.
Any increase in the Face Amount for which evidence of
insurability was obtained, will be incontestable only
after the increase has been Inforce, during the
Insured's lifetime, for two years from the effective
date of the increase.
SUICIDE If any Insured commits suicide, while sane or insane,
within two years of the Issue Date, we will return
Payments made, less any Debt, and less any partial
withdrawals.
If any Insured commits suicide, while sane or insane,
within two years from the effective date of any
increase in the Face Amount for which evidence of
insurability was established, we will return the
additional Payment which increased the Face Amount.
ASSIGNMENT While the Insured is alive, you may assign this
Contract. No assignment will be binding on us unless
it is written in a form acceptable to us and received
at our Service Office. We will not be liable for any
payments made or actions we take before the
assignment is accepted by us. An absolute assignment
will revoke the interest of any revocable
Beneficiary. We will not be responsible for the
validity of any assignment.
VENLIFE.002
3
<PAGE> 11
CLAIMS OF CREDITORS To the extent permitted by law, no benefits payable
under this Contract will be subject to the claims of
your or the Beneficiary's creditors.
MISSTATEMENT OF AGE OR If the age and/or sex of any Insured has been
SEX misstated, the Proceeds will be those which the
Payments would have provided for the correct age and
sex.
ADDITION, DELETION OR We reserve the right, subject to compliance with
SUBSTITUTION OF applicable law, to make additions to, deletions from,
INVESTMENT or substitutions for the Portfolio shares that are
OPTIONS held by the Variable Account or that the Variable
Account may purchase. We reserve the right to
eliminate the shares of any of the eligible
Portfolios and to substitute shares of another
Portfolio of the Trust, or of another open-end
registered investment company, if the shares of any
eligible Portfolio are no longer available for
investment, or if in our judgment further investment
in any eligible Portfolio should become inappropriate
in view of the purposes of the Variable Account. We
will not substitute any shares attributable to your
interest in a Sub-Account without notice to you and
prior approval of the Securities and Exchange
Commission to the extent required by the Investment
Company Act of 1940. Nothing contained herein shall
prevent the Variable Account from purchasing other
securities for other series or classes of contracts,
or from effecting a conversion between shares of
another open-end investment company.
We reserve the right, subject to compliance with
applicable law, to establish additional Sub-Accounts
which would invest in shares of a new Portfolio of
the Trust or in shares of another open-end investment
company. We also reserve the right, subject to
compliance with applicable law, to eliminate existing
Sub-Accounts, to combine Sub-Accounts or to transfer
assets in a Sub-Account to another Separate Account
established by us or an affiliated company. In the
event of any such substitutions or changes, we may,
by appropriate endorsement, make such changes in this
and other Contracts as may be necessary or
appropriate to reflect such substitutions or changes.
If deemed by us to be in the best interests of
persons having voting rights under the Contracts, the
Variable Account may be operated as a management
company under the Investment Company Act of 1940 or
it may be deregistered under such Act in the event
such registration is no longer required.
BENEFICIARY The Beneficiary is as designated in the application,
unless changed. If no such Beneficiary is living, the
Beneficiary is the "Contingent Beneficiary". If no
Beneficiary or Contingent Beneficiary is living, the
Beneficiary is the Owner or the Owner's estate.
EXCHANGE PROVISION You have the right to exchange this Contract for a
life insurance contract that provides for benefits
that do not vary with the investment return of the
Sub-Accounts. This is done by transferring, without
charge, the entire Contract Value to the fixed
Investment Option.
NON-PARTICIPATING Your Contract is non-participating and will not share
in our profits or surplus earnings. We will pay no
dividends on your Contract.
ANNUAL REPORT TO OWNER At least once each year we will send you a report
containing information required by the Investment
Company Act of 1940 and applicable state law.
INSULATION The portion of the assets of the Variable Account
equal to the reserves and other contract liabilities
with respect to such account are not chargeable with
liabilities arising out of any other business we may
conduct. Moreover, the income, gains and losses,
realized or unrealized, from assets allocated to the
VENLIFE.002
4
<PAGE> 12
Variable Account shall be credited to or charged
against such account without regard to our other
income, gains or losses.
CURRENCY AND PLACE OF All payments made to or by us shall be made in the
PAYMENTS lawful currency of the United States of America at
our Service Office or elsewhere if we consent.
NOTICES AND ELECTIONS To be effective, all notices and elections you make
under this Contract must be in writing, signed by you
and received by us at our Service Office. Unless
otherwise provided in this Contract, all notices,
requests and elections will be effective when
received by us, complete with all necessary
information and your signature, at our Service
Office.
GOVERNING LAW This Contract will be governed by the laws of the
jurisdiction indicated on the Contract Specifications
Page.
TERMINATION This Contract will terminate on the earliest of the
following:
(a) the date you surrender the Contract; or
(b) the Maturity Date of the Contract; or
(c) the end of the grace period as described in Part
4, Payments, Grace Period and Reinstatement; or
(d) the death of the Insured.
EXTENDED MATURITY OPTION If the Insured is living on the Maturity Date, you
may elect to continue this contract. We must receive
written notice of such election prior to the Maturity
Date. If the Extended Maturity Option is elected, on
the Maturity Date the entire Contract Value will be
transferred to the fixed Investment Option and no
further cost of insurance charges will be incurred.
Proceeds will be equal to the Surrender Value.
PART 3 OWNERSHIP
- --------------------------------------------------------------------------------
GENERAL The Owner of this Contract shall be the person,
persons, or entity designated on the Contract
Specifications Page and application or the latest
change filed with us.
CHANGE OF OWNER, While the Insured is alive, and subject to the rights
BENEFICIARY of an irrevocable Beneficiary, you may change the
Owner or Beneficiary by written request in a form
acceptable to us and which is received at our Service
Office. You need not send us the Contract unless we
request it. Any change must be approved by us. If
approved, any change in Beneficiary will take effect
on the date you signed the request. If approved, any
change in Owner will take effect on the date we
received the request at our Service Office. We will
not be liable for any payments or actions we take
before the change is approved.
PART 4 PAYMENTS, GRACE PERIOD AND
REINSTATEMENT
- --------------------------------------------------------------------------------
VENLIFE.002
5
<PAGE> 13
GENERAL All Payments under this Contract are payable at our
Service Office or such other place as we may
designate. The minimum Initial Payment is $10,000.
Additional Payments may be made at any time and in
any amount necessary to avoid termination of the
Contract. Other additional Payments may be made at
any time after the first Contract Anniversary,
subject to the following conditions:
(a) Each additional Payment must be at least $1,000,
(b) Only one Payment may be made in any Contract
Year,
(c) The Insured's attained age must be less than 81,
and
(d) If the additional Payment is in excess of the
Guaranteed Additional Payment, we must receive
satisfactory proof of the insurability of the Insured
before we will accept the additional Payment.
An additional Payment may result in an increase in
the Face Amount. If the additional Payment, plus the
sum of all previous Payments, would exceed the
Guideline Premium Limitation established by Federal
tax law, we will increase the Face Amount by an
amount sufficient to bring the Contract into
compliance with the Guideline Premium Limitation.
GUARANTEED ADDITIONAL The Guaranteed Additional Payment is equal to the
PAYMENT lesser of:
(1) $5,000, or
(2) a percentage of the Initial Payment. The
percentage is equal to 5% for attained ages 40-70, 0%
for ages 20-39 and 71-80.
ALLOCATION OF PAYMENT We will allocate the Initial Payment to the Initial
Investment Option indicated on the Contract
Specifications Page. The Contract Value will then be
allocated in accordance with the Allocation
Percentages shown on the Contract Specifications Page
on the later of (a) 15 days after the Issue Date, or
(b) the date the Initial Payment is received at the
Service Office.
Additional payments will be allocated among
Investment Options in accordance with the current
Allocation Percentages as of the date the Payment is
received at the Service Office. You may change the
Allocation Percentages at any time, without charge,
by giving us written notice.
GRACE PERIOD This Contract will terminate 61 days after a Monthly
Anniversary Day on which the Surrender Value is less
than zero. The 61 day period is a Grace Period. If
sufficient payment is not made by the end of the
Grace Period, the Contract will terminate without
value. We will mail the Owner and any assignee
written notice of the amount of payment that will be
required to continue this Contract Inforce at least
61 days before the end of the Grace Period. The
payment required will be no greater than the amount
required to pay the monthly deduction for three
months as of the day the Grace Period began. If that
payment is not paid by the end of the Grace Period,
this Contract will terminate without value.
REINSTATEMENT During the Insured's life, this Contract may be
reinstated within two years from the end of the Grace
Period, unless it was surrendered for payment of its
Surrender Value. To reinstate, we must receive
satisfactory proof of the insurability of the
Insured, any Debt must be repaid or reinstated, and
we must receive an amount at least equal to:
VENLIFE.002
6
<PAGE> 14
(a) payment to cover all monthly deductions that are
due and unpaid during the Grace Period, plus
(b) payment to cover three months of the guaranteed
maximum cost of insurance charges described in the
Cost of Insurance provision of Part 12, Fees and
Deductions, as of the date of reinstatement.
The Contract Value on the reinstated date will
reflect:
(a) the Contract Value at the time of termination;
plus
(b) Payments made at the time of reinstatement.
VENLIFE.002
7
<PAGE> 15
PART 5 DEATH BENEFIT
- --------------------------------------------------------------------------------
GENERAL While the Contract is Inforce, we will pay the
Proceeds to the Beneficiary after receipt of all
required claim forms and proof of death of the
Insured.
DEATH BENEFIT The Death Benefit will be determined on the date We
receive "proof of death" of the Insured and the Death
Benefit will be the greater of:
(a) the Face Amount; or
(b) the Contract Value times the Death Benefit Factor
from the following table.
<TABLE>
<CAPTION>
Death Death Death
Attained Benefit Attained Benefit Attained Benefit
Age Factor Age Factor Age Factor
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
40 or 54 157% 69 116%
younger 250% 55 150% 70 115%
41 243% 56 146% 71 113%
42 236% 57 142% 72 111%
43 229% 58 138% 73 109%
44 222% 59 134% 74 107%
45 215% 60 130% 75 105%
46 209% 61 128% through
47 203% 62 126% 90 105%
48 197% 63 124% 91 104%
49 191% 64 122% 92 103%
50 185% 65 120% 93 102%
51 178% 66 119% 94 101%
52 171% 67 118% through
53 164% 68 117% 99 101%
</TABLE>
PROOF OF DEATH Proof of death is required upon the death of the
Insured. Proof of death is one of the following
received at the Service Office:
(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.
(c) Any other proof satisfactory to us.
PART 6 VARIABLE ACCOUNT PROVISIONS
- --------------------------------------------------------------------------------
INVESTMENT ACCOUNT We will establish a separate Investment Account for
you for each Investment Option to which you allocate
amounts. The Investment Account for a variable
Investment Option represents your interest in that
Investment Option.
VENLIFE.002
8
<PAGE> 16
INVESTMENT ACCOUNT VALUE The Investment Account Value of an Investment Account
for a Variable Investment Option may increase or
decrease daily depending on the "net investment
experience" for a Sub-Account. The Investment Account
Value reflects Payments, amounts transferred to the
Investment Account, the net investment experience of
the Sub-Account, and any withdrawals, loans,
transfers or charges taken from the Investment
Account.
NET INVESTMENT EXPERIENCE The net investment experience for an Investment
Account for a variable Investment Option is the
investment performance of the underlying Trust
Portfolio of a Sub-Account from one Valuation Period
to the next. The net investment experience for any
Valuation Period is determined by dividing (a) by (b)
where:
(a) is the net result of:
(1) the net asset value per share of a Portfolio
share held in the Sub-Account determined as of
the end of the current Valuation Period, plus
(2) The per share amount of any dividend or
capital gain distributions made by the Portfolio
on shares held in the Sub-Account if the
"ex-dividend" date occurs during the current
Valuation Period, and
(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.
PART 7 FIXED ACCOUNT PROVISIONS
- --------------------------------------------------------------------------------
INVESTMENT ACCOUNT We will establish an Investment Account for you when
you allocate amounts to the fixed Investment Option.
Amounts invested in this Investment Account will earn
interest at the guaranteed rate in effect on the date
the amounts are allocated until the next Contract
Anniversary.
We will determine the guaranteed rate from time to
time for new allocations, but in no event will the
minimum guaranteed rate for the fixed Investment
Account be less than 3%.
RENEWALS The renewal amount is the Investment Account Value at
the end of a particular Contract Year. The renewal
amount will be automatically renewed in the fixed
Investment Option at the guaranteed rate then in
effect, unless you specify otherwise. The renewal
amount will earn interest at this guaranteed rate
until the next Contract Anniversary.
INVESTMENT ACCOUNT VALUE The amount in the fixed Investment Account will
accumulate at a rate of interest determined by us and
in effect on the date the amount is allocated to the
In vestment Account. The Investment Account Value is
the accumulated value of the amount invested in the
Investment Account reduced by any withdrawals, loans,
transfers or charges taken from the Investment
Account.
PART 8 TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS While the Insured is alive, you may transfer amounts
among Investment Accounts of the Contract; however,
amounts may only be transferred from the
VENLIFE.002
9
<PAGE> 17
fixed Investment Account within 30 days of the
Contract Anniversary. There is no transaction charge
for transfers. Amounts will be canceled from the
Investment Account from which amounts are transferred
and credited to the Investment Account to which
amounts are transferred. We will effect such
transfers so that the Contract Value on the date of
transfer will not be affected by the transfer. We
reserve the right to limit, upon notice, the maximum
number of transfers you may make per Contract Year to
one per month or six at any time within a Contract
Year. We also may limit the number of Investment
Options to which you may allocate Contract Value.
You must transfer at least $300 or, if less, the
entire amount in the Investment Account each time you
make a transfer. If, after the transfer, the amount
remaining in the Investment Account from which the
transfer is made is less than $100, then we will
transfer the entire amount instead of the requested
amount.
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. In addition, in
accordance with applicable law, the Company reserves
the right to modify or terminate the transfer
privilege at any time.
PART 9 CONTRACT VALUE
- --------------------------------------------------------------------------------
GENERAL Your Contract Value is equal to the total of the
Investment Account Values and, if applicable, any
amount in the Loan Account attributable to the
Contract.
MONTHLY DEDUCTION On every Monthly Anniversary Day, we will deduct each
of the charges (a) through (g) from the Investment
Accounts as of the end of the Valuation Period,
where:
(a) is the Administration Charge;
(b) is the Distribution Charge;
(c) is the Federal Tax Charge;
(d) is the Premium Tax Charge;
(e) is the Mortality and Expense Charge;
(f) is the Cost of Insurance Charge; and
(g) is the Monthly Maintenance Fee, if any.
The monthly deduction will be taken from the
Investment Accounts on a pro rata basis. These
charges are described in more detail in Part 12, Fees
and Deductions.
PART 10 WITHDRAWAL BENEFIT
- --------------------------------------------------------------------------------
PAYMENT OF WITHDRAWALS While the Insured is alive, you may withdraw part or
all of the Contract Value by sending us a written
request. We will pay all withdrawals within seven
days of receipt at the Service Office subject to
postponement in certain circumstances,
VENLIFE.002
10
<PAGE> 18
as specified below.
IMPACT ON FACE AMOUNT A withdrawal will reduce the Face Amount. The reduced
Face Amount will be equal to (a) times (b), where:
(a) equals the Face Amount prior to withdrawal,
(b) equals the Contract Value after withdrawal,
divided by the Contract Value prior to withdrawal.
SUSPENSION OF PAYMENTS We may defer the right of withdrawal, or postpone the
date of payment, from the variable Investment
Accounts for any period when: (1) the New York Stock
Exchange is closed (other than customary weekend and
holiday closing); (2) trading on the New York Stock
Exchange is restricted; (3) an emergency exists as a
result of which disposal of securities held in the
Variable Account is not reasonably practicable or it
is not reasonably practicable to determine the value
of the Variable Account's net assets; or (4) the
Securities and Exchange Commission, by order, so
permits for the protection of security holders;
provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to
whether the conditions described in (2) and (3)
exist.
We may defer the right of withdrawal from the fixed
Investment Accounts for not more than six months from
the day we receive written request and the Contract,
if required. If such payments are deferred 30 days or
more, the amount deferred will earn interest at a
rate not less than 3% per year.
TOTAL WITHDRAWAL Upon receipt of your request to withdraw all of your
Contract Value, we will terminate the Contract and
pay you the Surrender Value.
PARTIAL WITHDRAWAL If you are withdrawing part of the Contract Value,
you should specify the amount to be withdrawn from
each Investment Option of the Contract. If you do not
specify, the requested amount will be withdrawn from
the Investment Accounts on a pro rata basis.
We will deduct the Withdrawal Charge, if applicable,
from the Contract Value remaining after payment of
the requested amount.
WITHDRAWAL CHARGE If a withdrawal is made from the Contract before the
end of the ninth Contract Year, a Withdrawal Charge
may be assessed. The Withdrawal Charge consists of
two components; a Contingent Deferred Sales Charge
and an Unrecovered Premium Tax Charge. The amount of
the Withdrawal Charge and when it is assessed is
discussed below:
(1) The free withdrawal amount is the greater of (a)
or (b) below, however, it
(a) is the excess of the Contract Value on the
date of withdrawal over the Unliquidated
Payments, or
(b) is the excess of (i) over (ii), where:
(i) equals 10% of total Payments,
(ii) equals 100% of all prior partial
withdrawals in that Contract Year.
The free withdrawal amount may be withdrawn free
of a Withdrawal Charge.
(2) If a withdrawal is made for an amount greater
than the free withdrawal amount, all or part of total
Payments will be liquidated.
VENLIFE.002
11
<PAGE> 19
(3) A Withdrawal Charge will be assessed against the
portion of the Payments liquidated. The Withdrawal
Charge is determined by multiplying the amount of the
Payments being liquidated by the applicable
Withdrawal Charge Percentage shown on the Contract
Specifications Page.
(4) The Withdrawal Charge is deducted from the
Contract Value remaining after you are paid the
amount requested, except in the case of a complete
withdrawal when it is deducted from the amount
otherwise payable. In the case of a partial
withdrawal, the amount requested from an Investment
Account may not exceed the value of that Investment
Account less any applicable Withdrawal Charge.
(5) In no event will the aggregate Withdrawal Charge
be greater than 9% of the Payments made.
FREQUENCY AND AMOUNT OF You may make as many partial withdrawals as you wish.
PARTIAL WITHDRAWAL Any withdrawal from an Investment Account of the
Contract must be at least $300 or the entire balance
of the Investment Account, if less. If after the
withdrawal, the amount remaining in the Investment
Account is less than $100, then we will consider the
withdrawal request to be a request for withdrawal of
the entire amount held in the Investment Account. If
a partial withdrawal would reduce the Contract Value
to less than $300, then we will treat the partial
withdrawal request as a total withdrawal of the
Contract Value.
PART 11 LOAN BENEFIT
- --------------------------------------------------------------------------------
GENERAL While this Contract is Inforce, you may borrow money
using the Contract as sole security for the loan. We
will usually make a loan within seven days after we
receive the request, subject to the Suspension of
Payments provision as set forth in Part 10.
MAXIMUM LOAN The maximum loan amount is 90% of the Cash Value. You
may borrow an amount up to the maximum loan amount
less any existing Debt.
MINIMUM LOAN A loan request must be for at least $1,000.
EFFECT OF LOAN When a loan is made, an amount equal to the amount of
the loan is transferred to the Loan Account. You
should specify the amount to be transferred from each
Investment Option of the Contract. If you do not
specify, the requested amount will be transferred
from the Investment Accounts on a pro rata basis.
Since the amount of a loan is removed from the
Investment Accounts, a loan will have a permanent
effect on the Death Benefit and Contract Value. The
longer the loan is outstanding, the greater the
effect is likely to be. Depending on the investment
results of the Variable Account or fixed Investment
Account while the loan is outstanding, the effect
could be favorable or unfavorable.
LOAN INTEREST We will charge interest of 6% per year on loans.
Interest will be payable in arrears on each Contract
Anniversary. Any interest not paid when due will be
added to the Debt and bear interest in the same
manner. Except for the target loan amount described
below, the Loan Account will be credited interest at
the rate of 4% per year.
TARGET LOAN AMOUNT The target loan amount is equal to the greater of:
(a) the excess of the Contract Value over the
Unliquidated Payments, or
(b) 10% of total Payments.
VENLIFE.002
12
<PAGE> 20
The amount of the Loan Account that is less than or
equal to the target loan amount will be credited
interest at the rate of 6% per year, unless a lower
rate becomes necessary in order to maintain the tax
status of the Contract. The portion of the Loan
Account that qualifies as target loan amount is
determined on the Contract Date and each Monthly
Anniversary Day.
REPAYMENT You may repay any Debt in whole or in part while the
Contract is Inforce. An amount equal to the amount of
the loan repayment will be transferred from the Loan
Account and allocated among the Investment Accounts
in the same percentage as additional Payments are
allocated, unless you request otherwise.
TERMINATION If, on any date, the Debt exceeds the Cash Value, the
Contract will be in default. We will send notice of
default to you, and any assignee of record at our
Service Office, and tell you what payment is
necessary to continue your coverage under this
Contract. A 61-day grace period will begin on the day
we mail notice that the contract is in default. If
such payment is not paid within the grace period, all
coverage under this Contract will terminate without
value.
PART 12 FEES AND DEDUCTIONS
- --------------------------------------------------------------------------------
GENERAL Each Monthly Anniversary Day charges for
administration, distribution, federal tax, premium
tax, mortality and expense risk, and cost of
insurance are determined as of that Valuation Date.
If the Monthly Anniversary Day is not a Valuation
Date, the immediately following Valuation Date will
be used.
ADMINISTRATION CHARGE The Administration Charge compensates us for the cost
of providing administrative services attributable to
this Contract. This charge is based on Contract Value
and is deducted at a maximum annual rate of 0.40%.
DISTRIBUTION CHARGE The Distribution Charge compensates us for
distribution expenses. This charge is based on
Contract Value and is deducted at a maximum annual
rate of 0.25% for the first ten Contract Years.
FEDERAL TAX CHARGE The Federal Tax Charge compensates us for federal
taxes imposed under Section 848 of the Internal
Revenue Code. This charge is based on Contract Value
and is deducted at a maximum annual rate of 0.15% for
the first ten Contract Years.
PREMIUM TAX CHARGE The Premium Tax Charge compensates us for state
premium taxes incurred. This charge is based on
Contract Value and is deducted at a maximum annual
rate of 0.25% for the first ten Contract Years. If
you withdraw all of your Contract Value before the
end of the ninth Contract Year, any premium tax due
and unpaid will be deducted from your Contract Value.
MORTALITY AND EXPENSE The Mortality and Expense Charge compensates us for
CHARGE assuming mortality and expense risks. This charge is
based on the Investment Account Value of Variable
Investment Options only, and is deducted at a maximum
annual rate of 0.90%. The mortality risk assumed by
us is the risk that the cost of providing the death
benefit under this Contract will exceed the maximum
guaranteed Cost Of Insurance Charge. The expense risk
assumed by us is the risk that the cost of providing
administrative services for these contracts will
exceed the Administration Charge.
VENLIFE.002
13
<PAGE> 21
COST OF INSURANCE CHARGE The Cost of Insurance Charge compensates us for the
cost of providing a death benefit in excess of the
Contract Value for this Contract, and is deducted
monthly. We guarantee that the amount of this charge
will not exceed the guaranteed maximum monthly cost
of insurance charge. The guaranteed maximum monthly
cost of insurance charge for any contract month is
equal to (a) times (b), where;
(a) is the guaranteed maximum monthly cost of
insurance rate shown on the Contract Specifications
Page, and
(b) is the net amount at risk and is equal to the
excess of (i) over (ii), where;
(i) is the death benefit as of the Monthly
Anniversary Day, and
(ii) is the Contract Value as of Monthly
Anniversary Day, less the sum of the Administration
Charge, Distribution Charge, Federal Tax Charge,
Premium Tax Charge, Mortality and Expense Charge, and
Monthly Maintenance Fee.
We may use monthly cost of insurance rates that are
lower than the guaranteed maximum rates shown on the
Contract Specifications Page. We may change the
monthly cost of insurance rate from time to time
based on our expectation as to future experience for
mortality, expenses, taxes, or persistency. Any
change in cost of insurance rates will apply to all
individuals in the same rating class as the Insured.
No change in cost of insurance rates or rating class
will occur due to the deterioration of the Insured's
health.
MONTHLY MAINTENANCE FEE The Monthly Maintenance Fee, shown on the Contract
Specifications Page, will be deducted on each Monthly
Anniversary Day.
TAXES We reserve the right to charge certain taxes against
your Payments (either at the time of payment or
liquidation), Contract Value, or payment of Proceeds,
as appropriate. Such taxes may include any premium
taxes or other taxes levied by any government entity
which we, in our sole discretion, determine have
resulted from the establishment or maintenance of the
Variable Account, or from the receipt by us of the
Payments, or from the issuance of this Contract, or
from the commencement or continuance of Annuity
Option payments under this Contract.
PART 13 PAYMENT OF CONTRACT BENEFITS
- --------------------------------------------------------------------------------
GENERAL Proceeds payable under this Contract are payable
either in a lump sum or in accordance with one or
more of the Annuity Options described below.
The person named to receive payments under an option
is called the payee and for joint and survivor
annuities, the second person named is called the
co-payee. An option may be chosen only if the amount
to be applied for any payee is at least $2,000. Each
periodic payment must be at least $25.
ALTERNATE ANNUITY OPTIONS Instead of settlement in accordance with the Annuity
Options described below, you may choose an alternate
form of settlement acceptable to us.
DESCRIPTION OF ANNUITY Option 1: Life Annuity
OPTIONS
(a) Life Non-Refund. We will make payments during the
lifetime of the payee. No payments are due after the
death of the payee.
VENLIFE.002
14
<PAGE> 22
(b) Life 10-Year Certain. We will make payments for
10 years and after that during the lifetime of the
payee. No payments are due after the death of the
payee or, if later, the end of the 10-year period
certain.
Option 2: Joint and Survivor Life Annuity
(a) Joint and Survivor Non-Refund. We will make
payments during the joint lifetime of the payee and
co-payee. Payments will then continue during the
remaining lifetime of the survivor. No payments are
due after the death of the last survivor of the payee
and co-payee.
(b) Joint and Survivor with 10-Year Certain. We will
make payments for 10 years and after that during the
joint lifetime of the payee and co-payee. Payments
will then continue during the remaining lifetime of
the survivor. No payments are due after the death of
the survivor of the payee and co-payee or, if later,
the end of the 10-year period certain.
ANNUITY PAYMENT RATES The annuity payment rates on the attached tables
show, for each $1,000 applied, the dollar amount of
the monthly fixed annuity payment, when this payment
is based on the minimum guaranteed interest rate of
3% per year. The annuity payment rates for payments
made on a less frequent basis (quarterly, semiannual
or annual) will be quoted by us upon request.
The annuity payment rates are based on the 1983 Table
A projected at Scale G with interest at the rate of
3% per annum and assume births in year 1942. The
amount of each annuity payment will depend upon the
sex and adjusted age of the payee, and the co-payee,
if any. The adjusted age is determined from the
actual age nearest birthday at the time the first
monthly annuity payment is due, as follows:
<TABLE>
<CAPTION>
Calendar Adjustment Calendar Adjustment
Year of Birth to Actual Age Year of Birth to Actual Age
------------------------------ ------------------------------
<S> <C> <C> <C>
1899 - 1905 +6 1946 - 1951 -1
1906 - 1911 +5 1952 - 1958 -2
1912 - 1918 +4 1959 - 1965 -3
1919 - 1925 +3 1966 - 1972 -4
1926 - 1932 +2 1973 - 1979 -5
1933 - 1938 +1 1980 - 1986 -6
1939 - 1945 +0 1987+ -7
</TABLE>
The dollar amount of annuity payment for any age or
combination of ages not shown following or for any
other form of Annuity Option agreed to by us will be
quoted on request.
VENLIFE.002
15
<PAGE> 23
AMOUNT OF FIRST MONTHLY PAYMENT
PER $1000 OF PROCEEDS
Option 1: Life Annuity
Option 1(A): Non-Refund Option 1(B): 10-Year Certain
- ---------------------------------- ----------------------------------
Adjusted Age Adjusted Age
of Payee Male Female of Payee Male Female
- ---------------------------------- ----------------------------------
55 4.27 3.86 55 4.22 3.84
60 4.69 4.19 60 4.61 4.15
65 5.25 4.61 65 5.10 4.55
70 6.02 5.19 70 5.71 5.07
75 7.01 5.99 75 6.42 5.73
80 8.34 7.10 80 7.20 6.52
85 10.13 8.64 85 7.97 7.37
Option 2: Joint and Survivor Life Annuity
Option 2(A): Non-Refund
Age of Co-Payee
- ----------- -----------------------------------------------------------------
Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Payee Younger Younger Age Older Older
- ----------- -----------------------------------------------------------------
55 3.25 3.39 3.55 3.72 3.87
60 3.41 3.60 3.81 4.02 4.21
65 3.62 3.87 4.14 4.41 4.67
70 3.89 4.21 4.57 4.95 5.29
75 4.24 4.67 5.17 5.67 6.11
80 4.71 5.30 5.97 6.63 7.19
85 5.35 6.15 7.05 7.92 8.60
Option 2(B): 10 Year Certain
Age of Co-Payee
- ----------- -----------------------------------------------------------------
Adjusted
Age of Male 10 Years 5 Years Same 5 Years 10 Years
Payee Younger Younger Age Older Older
- ----------- -----------------------------------------------------------------
55 3.25 3.39 3.55 3.72 3.87
60 3.41 3.60 3.80 4.01 4.21
65 3.62 3.86 4.13 4.41 4.66
70 3.89 4.21 4.56 4.92 5.24
- --------------------------------------------------------------------------------
VENLIFE.002
16
<PAGE> 24
75 4.24 4.66 5.13 5.58 5.95
80 4.69 5.25 5.85 6.39 6.78
85 5.28 6.00 6.71 7.27 7.67
- --------------------------------------------------------------------------------
Monthly installments for ages not shown will be furnished on request
VENLIFE.002
17
<PAGE> 25
- --------------------------------------------------------------------------------
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
- --------------------------------------------------------------------------------
Manulife Financial and the block design are registered service marks of The
Manufacturers Life Insurance Company and are used by it and its subsidiaries.
<PAGE> 1
EXHIBIT A(10)
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
- --------------------------------------------------------------------------------
LIFE
INSURANCE
APPLICATION
Part II
VENVUL.APP PART II
<PAGE> 2
116 Huntington Avenue
Boston, MA 02116
Phone No. (617)-266-6008
(800)-224-3687
Fax No. (617)-375-5723
- --------------------------------------------------------------------------------
FEDERAL FAIR CREDIT REPORTING ACT NOTICE
================================================================================
Thank you for applying for Life Insurance with The Manufacturers Life Insurance
Company of North America. As required by the Federal Fair Credit Act, we wish to
advise that in connection with the insurance applied for, an investigative
consumer report may be requested by the Company with respect to any person
proposed for insurance. Such a report may contain information as to character,
general reputation, personal characteristics and mode of living except as may be
related directly or indirectly to such person's sexual orientation, or the
person proposed for insurance, and is customarily obtained through personal
interviews with neighbors, friends, or associates, or the subject of the report.
We will furnish the nature of the report to you if you send us a written request
for it.
NOTICE TO PROPOSED INSURED ON EXCHANGE OF INFORMATION
================================================================================
Information regarding your insurability will be treated as confidential. The
Manufacturers Life Insurance Company of North America or its reinsurers may,
however, make a brief report thereon to the Medical Information Bureau, a
non-profit membership organization of life insurance companies, which operates
an information exchange on behalf of its members. If you apply to another
Medical Information Bureau member for life or health insurance coverage, or a
claim for benefits is submitted to such a company, the Medical Information
Bureau, upon request, will supply such company with the information in its file.
Upon receipt or a request from you, the Medical Information Bureau will arrange
disclosure of any information it may have in your file. If you question the
accuracy of information the Medical Information Bureau's file, you may contact
the Medical Information Bureau and seek a correction. The address of the Medical
Information Bureau's information office is: Post Office Box 105, Essex Station,
Boston MA 02112 Telephone (617)-426-3660
Subject to our authorization, The Manufacturers Life Insurance Company of North
America or its reinsurers may also release information in their file to other
life insurance companies to whom you may apply for life or health insurance, or
to whom a claim for benefits may be submitted.
UNDERWRITING DEPARTMENT
The Manufacturers Life Insurance Company of North America
REPRESENTATIVE MUST detach this page and give to Proposed Insured.
VENVUL.APP PART II
<PAGE> 3
LIFE INSURANCE APPLICATION - PART II
- --------------------------------------------------------------------------------
1. PROPOSED INSURED INFORMATION
Name
--------------------------------------------------------------------
First Middle Last
Business
--------------------------------------------------------------------
Company
--------------------------------------------------------------------
Street
--------------------------------------------------------------------
City State Zip
PROPOSED SECOND INSURED - Complete if applicable
Name
--------------------------------------------------------------------
First Middle Last
Business
--------------------------------------------------------------------
Company
--------------------------------------------------------------------
Street
--------------------------------------------------------------------
City State Zip
CONTRACT NOTICE - Proposed Insured at:
[ ] Residence [ ] Business [ ] Other (please indicate address below)
Address
--------------------------------------------------------------------
Street
--------------------------------------------------------------------
City State Zip
VENVUL.APP PART II
<PAGE> 4
2. EXISTING INSURANCE
Life Insurance in force (if none, please state)
LIFE I Company Type Year of Issue Life Amount ADB Amount
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
LIFE II Company Type Year of Issue Life Amount ADB Amount
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
Proposed
Proposed Joint Insured
Insured (if applicable)
-----------------------------
3. Has Proposed Insured(s) been convicted in YES NO YES NO
the past 2 years of: driving under the |-----| |-----|
influence of alcohol or drugs; or two or |-----|-------||-----|-------|
more moving violations? If "YES", complete | || |
supplemental form. |-------------||-------------|
4. a. Drivers license number: ------------ ------------
b. State: ------------ ------------
5. Have you in the past 2 years participated in YES NO YES NO
or intend to participate in: any flights as |-----| |-----|
a trainee, pilot or crew member, underwater |-----|-------||-----|-------|
sports (SCUBA diving, skin diving, | || |
snorkeling); sky sports (skydiving, |-------------||-------------|
hanggliding, parachuting, ballooning); motor
racing (auto, motorcycle, motorboat)? If
"YES", complete supplemental form.
6. Do you intend to travel or reside outside of YES NO YES NO
the United States? If "YES", give details in |-----| |-----|
Remarks. |-----|-------||-----|-------|
| || |
|-------------||-------------|
7. Height: ft.___ in.___ ft.___ in.___
8. a. Weight: lbs._________ lbs._________
VENVUL.APP PART II
<PAGE> 5
b. Any weight change in the past year? YES NO YES NO
|-----| |-----|
|-----|-------||-----|-------|
| || |
|-------------||-------------|
If "YES": lbs._________ lbs._________
Gain Loss Gain Loss
[ ] [ ] [ ] [ ]
9. Have you ever been treated or had any known YES NO YES NO
indication of: frequent fatigue; loss or |-----| |-----|
appetite; frequent night sweats; chronic |-----|-------||-----|-------|
diarrhea; enlarged lymph nodes; unexplained | || |
infectious skin lesions? |-------------||-------------|
10. Have you ever:
a. received treatment, advice or YES NO YES NO
counselling from a physician, other |-----| |-----|
practitioner or an organization for |-----|-------||-----|-------|
an alcohol problem? | || |
|-------------||-------------|
b. used cocaine or other drugs except as YES NO YES NO
prescribed by a physician or licensed |-----| |-----|
practitioner? |-----|-------||-----|-------|
| || |
|-------------||-------------|
Proposed
Proposed Joint Insured
Insured (if applicable)
-----------------------------
11. Have you ever been treated for or diagnosed
as having:
a Cancer; tumor; or diabetes? YES NO YES NO
|-----| |-----|
|-----|-------||-----|-------|
| || |
|-------------||-------------|
b High blood pressure; stroke; or disease YES NO YES NO
or disorder of heart, blood or |-----| |-----|
circulatory system? |-----|-------||-----|-------|
| || |
|-------------||-------------|
c Any mental or nervous disorder; YES NO YES NO
epilepsy; any muscular or skeletal |-----| |-----|
disorder; or any paralysis or |-----|-------||-----|-------|
deformity? | || |
|-------------||-------------|
d Disease or disorder of: kidneys; lungs; YES NO YES NO
stomach; liver; digestive system; or |-----| |-----|
urinary system? |-----|-------||-----|-------|
| || |
|-------------||-------------|
e Any disorder of the eyes, ears, nose or YES NO YES NO
throat? |-----| |-----|
|-----|-------||-----|-------|
| || |
|-------------||-------------|
VENVUL.APP PART II
<PAGE> 6
12. Are you now receiving treatment or YES NO YES NO
medication? |-----| |-----|
|-----|-------||-----|-------|
| || |
|-------------||-------------|
13. Other than above, have you within the past YES NO YES NO
5 years; had a checkup or consultation; been |-----| |-----|
a patient in a medical facility; or been |-----|-------||-----|-------|
advised to have to have any diagnostic | || |
test, hospitalization or surgery? |-------------||-------------|
14. Family History
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Age if Living State of Health or Cause of Death Age at Death
- ---------------------------------------------------------------------------------------------
Father
- ---------------------------------------------------------------------------------------------
Mother
- ---------------------------------------------------------------------------------------------
Brothers & Sisters
No. Living ___
No. Dead ___
- ---------------------------------------------------------------------------------------------
</TABLE>
15. Give details to each yes answer to questions 7 through 13 below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIFE I:
- -----------------------------------------------------------------------------------------------------------------------------------
Detail and severity of condition, specific Physician/Health
Question Number Onset (Mo/Yr) Recov. (Mo/Yr) diagnosis, medication/treatment Facility Address
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
VENVUL.APP PART II
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIFE II:
- -----------------------------------------------------------------------------------------------------------------------------------
Detail and severity of condition, specific Physician/Health
Question Number Onset (Mo/Yr) Recov. (Mo/Yr) diagnosis, medication/treatment Facility Address
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
To the best of my knowledge and belief, the answers recorded are true and
complete.
Signed at: Date:
------------------------ --------------------------
city/state Month/date/year
Agent/Broker:
--------------------------------------------------------------
Proposed Insured
--------------------------------------------------------------
Joint Insured
--------------------------------------------------------------
(if applicable)
Personal History
Interviewer
--------------------------------------------------------------
VENVUL.APP PART II
<PAGE> 1
EXHIBIT C
NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY
DESCRIPTION OF PURCHASE, TRANSFER AND REDEMPTION PROCEDURES
This document sets forth, as required by Rule 6e-3(T)(b)(12)(ii), the
administrative procedures that will be followed by North American Security Life
Insurance Company (the "Company") and any office the Company designates for the
receipt of payments and processing of contract owner requests (the "Service
Office") in connection with the issuance of its modified single payment
combination fixed and variable life insurance contract (the "Contract"), the
transfer of assets held thereunder, and the redemption by contract owners of
their interests in said Contracts.
PURCHASE, TRANSFER AND REDEMPTION PROCEDURES
--------------------------------------------
I. PURCHASES AND RELATED TRANSACTIONS
A. Premiums and Underwriting Standards
-----------------------------------
This Contract is a modified single premium contract. The Contract
permits the contract owner to pay a single premium and, subject to
restrictions, additional premiums. The minimum initial payment is
$10,000. Under current underwriting rules, which are subject to
change, proposed insureds are eligible for simplified underwriting
without a medical examination if their application responses and
initial payments meet simplified underwriting standards. Customary
underwriting standards will apply to all other proposed insureds. The
maximum initial premium currently permitted on a simplified
underwriting basis varies with the issue age of the insured according
to the following table:
SIMPLIFIED UNDERWRITING
ISSUE AGE MAXIMUM INITIAL PAYMENT
20-39 Not Available
40-44 $20,000
45-54 $30,000
55-64 $50,000
65-80 $100,000
If the additional payment is greater than the Guaranteed Additional
Payment (as defined below) and is not made to avoid termination of the
contract, new evidence of insurability of the insured will be
required. No additional payment will be accepted until evidence of
insurability is provided to the Company.
<PAGE> 2
Additional payments may be made at any time and in any amount
necessary to avoid termination of the contract. Other additional
payments may be made at any time after the first contract anniversary,
subject to the following conditions:
1. each additional payment must be at least $1,000;
2. only one payment may be paid in any contract year;
3. the attained age of the insured must be less than 81; and
4. absent submission of new evidence of insurability of the insured,
the maximum additional payment permitted in a contract year is
the "Guaranteed Additional Payment." The Guaranteed Additional
Payment is the lesser of $5,000 or a percentage of the initial
payment (5% for attained ages 40-70, and 0% for attained ages
20-39 and 71-80).
If the additional payment is greater than the Guaranteed Additional
Payment and is not made to avoid termination of the contract, new
evidence of insurability of the insured will be required. No
additional payment will be accepted until evidence of insurability
satisfactory to the Company is provided.
No premium will be accepted which does not meet the tax qualification
guidelines for life insurance under the Internal Revenue Code.
B. Application
-----------
To purchase a contract a prospective contract owner must submit an
application to the Company. A contract will be issued only on the
lives of insured from ages 20 through 80 who supply evidence of
insurability satisfactory to the Company. Contract insuring more than
one person will only be issued to a male life/female life combination
where the difference in their "adjusted ages" (age last birthday plus
three years if tobacco user) is not more than 15 years. Acceptance is
subject to the Company's current underwriting rules. The Company
reserves the right to reject an application for any lawful reason
provided similarly-situated risks are treated in a consistent manner
and unfair discrimination is avoided. If a contract is not issued, the
premium payments will be returned without interest. No change in the
terms or conditions of a contract will be made without the consent of
the owner.
The contract will be effective on the contract date only after the
Company has received all outstanding delivery requirements and
received the initial payment. The contract date is the date used to
determine all future cyclical transactions on the contract, e.g.,
monthly anniversary day and contract years. The contract date may be
prior to, or the same as, the date the contract is issued.
If the face amount exceeds current limits established by the Company,
the initial payments will not be accepted with the application. In
other cases where an initial payment is received with the application,
the Company will provide temporary insurance during underwriting
according to the terms of a prepayment receipt and temporary life
insurance agreement subject to the restrictions described below. If no
payment was submitted with the application, on contract delivery the
Company will require sufficient payment to place the insurance in
force.
2
<PAGE> 3
C. Temporary Insurance
-------------------
The temporary life insurance on the life of the proposed insured will
become effective on the later of : (i) the date of the prepayment
receipt and temporary life insurance agreement or (ii) the signature
date of Part II of the application (if Part II is required). The
temporary insurance will be the insurance applied for, up to a maximum
of $50,000. If the Company determines that a proposed insured is
insurable as a standard risk, the $50,000 maximum will be increased to
$100,000. This increase in maximum will be retroactive to the
effective date of the temporary life insurance without regard to
change of insurability or death after that date. If more than one
temporary life insurance agreement is in effect on a proposed insured,
the aggregate temporary life insurance on that proposed insured will
not exceed $100,000.
Any contract issued on the basis of the application of a proposed
insured will replace the temporary insurance if: (i) the proposed
insured is living when the contract is delivered to the owner; (ii)
the owner accepts the contract; and (iii) any balance of premium, if
any, then due is paid. If the contract is not accepted and paid for at
the time of delivery: (i) the temporary insurance will terminate, (ii)
the contract will not be in force; and (iii) the prepayment will be
refunded to the owner.
The Company can terminate the temporary life insurance before the
death of the proposed insured by (i) notice of termination to the
owner at the premium notice address shown in Part I of the application
and (ii) refund of the prepayment to the owner at the same address.
The temporary insurance will expire 60 days after the date of Part II
of the application, unless sooner terminated. Notice of the
termination will be sent to the owner.
If the proposed insured dies while the temporary life insurance is in
force, the prepayment will be used as the premium with any excess
being refunded to the owner or any additional premium due being
deducted from the death proceeds.
The Company will determine if a proposed insured is insurable by using
the regular underwriting rules, limits and standards of the Company.
This determination will be made as of the effective date of the
temporary insurance. The Company may, however, require for this
purpose further medical examination, tests and reports after the
effective date. Any contract issued on the basis of the application
will be dated as of the effective date of the temporary insurance.
D. Premium Allocation
------------------
The Company will establish an investment account for the contract
owner for each variable investment option to which the contract owner
allocates payments. The contract owner may allocate contract value to
a maximum of ten investment options at any one time.
If the initial payment is received at the Service Office prior to the
issue date, the entire payment will be allocated to the Company's
General Account. On the issue date, this
3
<PAGE> 4
amount will be allocated to the Money Market Sub-Account as of the
date the initial payment is received at the Service Office. This
procedure may cause the Money Market Sub-Account to have an asset
shortfall. This shortfall will be reimbursed by the Company depositing
additional funds into the Money Market Sub-Account in an amount
sufficient to cover this shortfall.
After the issue date, the contract value will then be allocated among
the investment accounts in accordance with the applicant's
instructions on the later of (a) fifteen days after the issue date of
the contract or (b) the date the initial payment is received at the
Service Office. Additional payments will be allocated among investment
options in accordance with the contract owner's instructions as of the
date the payment is received at the Service Office.
II. TRANSFER AMONG INVESTMENT OPTIONS
A. General Transfers
-----------------
Before the maturity date the contract owner may transfer amounts among
the variable investment options and from such investment options to
the fixed investment option at any time and without charge upon
written notice to the Company or by telephone if the contract owner
authorizes the Company in writing to accept telephone transfer
requests. Amounts may only be transferred from the fixed investment
option to the variable investment options within 30 days of the
contract anniversary as more fully described in the paragraph below.
The Company will effect such transfers so that the contract value on
the date of the transfer will not be affected by the transfer. The
contract owner must transfer at least $300 or, if less, the entire
value of the investment account. If after the transfer the amount
remaining in the investment account is less than $100, then the
Company will transfer the entire amount instead of the requested
amount. The Company reserves the right to limit, upon notice, the
maximum number of transfers a contract owner may make to one per month
or six at any time within a contract year. In addition, the Company
reserves the right to defer the transfer privilege at any time that
the Company is unable to purchase or redeem shares of the NASL Series
Trust (the open end management investment company in which the
Sub-Accounts of the NASL Variable Life Account invest.) The Company
also reserves the right to modify or terminate the transfer privilege
at any time in accordance with applicable law.
Prior to the maturity date, the contract owner may transfer amounts
from the fixed investment account to the variable investment options
within 30 days of the contract anniversary. Amounts in the fixed
investment account may be transferred prior to the end of the contract
year as follows: (i) transfers may be made pursuant to the Dollar Cost
Averaging program and (ii) transfers may be made from the fixed
investment account to the variable investment options if, at the time
of the transfer, the guaranteed interest rate for the funds to be
transferred is equal to or greater than the then current guaranteed
rate for funds being transferred into the fixed investment account.
The Company may withdraw its permission to make the transfers
described in (ii) above at any time after April 30, 1996.
4
<PAGE> 5
B. Dollar Cost Averaging
---------------------
The Company administers a Dollar Cost Averaging ("DCA") program
which enables a contract owner to pre-authorize a periodic exercise of
the contractual transfer rights described above under "General
Transfers." Contract owners entering into a DCA agreement instruct the
Company to transfer monthly a predetermined dollar amount from any
Sub-Account or the fixed investment option to other Sub-Accounts until
the amount in the Sub-Account from which the transfer is made or the
fixed investment option is exhausted.
C. Asset Rebalancing Program
-------------------------
The Company administers an Asset Rebalancing Program which enables a
contract owner to indicate to the Company the percentage levels he or
she would like to maintain in particular NASL Series Trust portfolios.
On the last business day of every calendar quarter, the contract
owner's contract value will be automatically rebalanced to maintain
the indicated percentages by transfers among the portfolios. (The
fixed investment option is not eligible for participation in the Asset
Rebalancing Program.) The entire value of the contract owners'
investment accounts must be included in the Asset Rebalancing Program.
III. "REDEMPTION" PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Cash Value
------------------------
1. Variable Investment Accounts. Prior to the earlier of the
maturity date or the death of the insured, the owner may withdraw all
or a portion of the contract value upon written request, complete with
all necessary information, to the Company. In the case of a total
withdrawal, the Company will pay the surrender value as of the date of
receipt of the request at the Company, and the contract will
terminate. In the case of a partial withdrawal from an investment
account, the Company will pay the amount requested and deduct that
amount plus any applicable withdrawal charge from such investment
account. If the contract owner does not specify the investment account
from which a partial withdrawal is to be taken, a partial withdrawal
will be taken proportionally from all the investment accounts. The
face amount will be reduced proportionally to the reduction in the
contract value due to the partial withdrawal.
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 account. If after the withdrawal (and
deduction of any withdrawal charge) the amount remaining in the
investment account is less than $100, the Company will treat the
partial withdrawal as a withdrawal of the entire amount held in the
investment account. If a partial withdrawal plus any applicable
withdrawal charge would reduce
5
<PAGE> 6
the contract value to less than $300, the Company will treat the
partial withdrawal as a total withdrawal of the contract value.
The amount of any withdrawal from the variable investment options will
be paid promptly, and in any event within seven days of receipt of the
request, complete with all necessary information, at the Service
Office, except that the Company reserves the right to defer the right
of withdrawal or postpone payments for any period when: (1) the New
York Stock Exchange is closed (other than customary weekend and
holiday closings), (2) trading on the New York Stock Exchange is
restricted, (3) an emergency exists as a result of which disposal of
securities held in the NASL Variable Life Account is not reasonably
practicable or it is not reasonably practicable to determine the value
of the NASL Variable Life Account's net assets, or (4) the Securities
and Exchange Commission (the "Commission"), by order, so permits for
the protection of security holders; provided that applicable rules and
regulations of the Commission shall govern as to whether the
conditions described in (2) and (3) exists.
The contract owner may request the option to withdraw a portion of the
contract value by telephone if the contract owner authorizes the
Company in writing to accept telephone redemptions.
2. Fixed Investment Account. The contract owner may make total
and partial withdrawals of amounts held in the fixed investment
account at any time prior to the maturity date or his or her death.
Withdrawals from the fixed investment account will be made in the same
manner and be subject to the same limitations as set forth above under
"Variable Investment Account." The Company reserves the right to defer
payment of an amount withdrawn from the fixed investment account for
up to six months from the date it receives the written withdrawal
request (if a withdrawal is deferred for more than 30 days pursuant to
this right, the Company will pay interest on the amount deferred at a
rate of not less than 3% per year or such higher rate as may be
required by the applicable state or jurisdiction).
Withdrawals allocated to the free withdrawal amount may be withdrawn
without the imposition of a withdrawal charge. If withdrawals are
taken from more than one investment account, the free withdrawal
amount will be applied to all investment accounts on a pro rata basis.
B. Benefit Claims
--------------
1. General. Upon receipt of proof of the death of the insured
while the contract is in force, the Company will pay the death benefit
proceeds to the beneficiary. The amount of the death benefit is
determined on the date the Company receives proof of the insured's
death. Proof of death is received when one of the following is
received at the Service Office: (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 the Company. All or part of the death benefit proceeds
may be paid in cash or applied under an annuity option as described
6
<PAGE> 7
below under "Annuity Payment Options." If there is any debt under the
contract, the death benefit proceeds equal the death benefit, as
described above, less such debt.
2. Annuity Payment Options. Proceeds payable under the contract
are payable either in a lump sum or in accordance with one or more
annuity options. If no annuity option is specified, then proceeds will
be paid in a lump sum. An annuity option may be chosen only if the
amount to be applied for any payee (the person to receive payments
under an option) is at least $2,000. Each periodic payment must be at
least $25. In addition to the annuity options provided by the Company,
the owner may choose any form of settlement acceptable to the Company.
If annuity payments have been selected based on an annuity option
providing for payments for a guaranteed period, and the payee(s) dies,
the Company will make the remaining guaranteed payments to the payee's
named beneficiary. If no beneficiary is living, the Company will
commute any unpaid guaranteed payments to a single sum (on the basis
of the interest rate used in determining the payments) and pay that
single sum to the estate of the payee.
C. Contract Termination
--------------------
The contract will terminate and life insurance coverage will cease on
the earliest of the following: (a) the date the owner surrenders the
contract; (b) the maturity date of the contract; (c) the end of the
grace period described below; or (d) the death of the insured. A grace
period of 61 days commences on a monthly anniversary day (as defined
in the prospectus) on which the contract's surrender value is less
than zero. If sufficient payment is not made by the end of the grace
period, the contract will terminate without value. The Company will
mail the owner and any assignee written notice of the amount of
payment that will be required to continue the contract in force at
least 61 days before the end of the grace period. The payment required
will be no greater than the amount required to pay the monthly
deduction for three months as of the day the grace period began. If
payment is not made by the end of the grace period, the owner's
contract will terminate without value.
Termination on the maturity date (when the insured obtains the age of
100 years) may be avoided if the insured is living on that date and if
the owner sends the Company written notice that the owner elects the
contract's extended maturity option prior to the maturity date. If the
extended maturity option is elected, the entire contract value will be
transferred to the fixed investment account on the maturity date and
no further cost of insurance charges will be incurred. Death benefit
proceeds will then be equal to the surrender value.
During the life of the insured, the contract may be reinstated within
two years from the end of the grace period unless it was surrendered
for payment of its surrender value. To reinstate, the Company must
receive satisfactory proof of the insurability of the insured, and any
debt must be repaid or reinstated. Sufficient payment must be made to
cover: (a) all monthly deductions that are due and unpaid during the
grace period, and (b) three months of the guaranteed maximum cost of
insurance as of the date of reinstatement. The contract value on the
reinstated date will reflect: (a) the
7
<PAGE> 8
contract value at the time of termination; plus (b) payments made at
the time of reinstatement. The withdrawal charge will be based on the
number of years the contract is in force.
D. Contract Loans
--------------
1. General Provisions. While the contract is in force, the owner
may obtain loans using the owner's contract as the sole security for
the loan. The maximum loan amount is 90% of cash value at the time of
the loan; the minimum loan amount is $1,000.
When a contract owner requests a loan, the Company will reduce the
owner's investment in the investment accounts and transfer the amount
of the loan to the loan account, a part of the Company's general
account. The owner may designate the investment accounts from which
the loan is to be withdrawn. Absent such a designation, the amount of
the loan will be withdrawn from the investment accounts on a pro rata
basis.
2. Loans Interest and Credited Interest. Interest will accrue
daily on the contract loan. On each contract anniversary, the Company
will transfer from the investment accounts to the loan account the
amount by which the debt on the contract exceeds the balance in the
loan account.
The Company charges interest of 6% per year on contract loans. Loan
interest is payable in arrears and, unless paid in cash, the accrued
loan interest is added to the amount of the debt and bears interest at
6% as well. Except for the target loan amount described below, the
loan account will be credited interest at the rate of 4% per year.
The target loan amount is equal to the greater of:
(a) the excess of the contract value over the unliquidated payments,
or
(b) 10% of total payments made under the contract.
The amount of the loan account that is less than or equal to the
target loan amount will be credited interest at the rate of 6% per
year (unless a lower rate becomes necessary in order to maintain the
tax status of the contract). The portion of the loan account that
qualifies as target loan amount is determined on the contract date and
each monthly anniversary day.
3. Loan Repayments. The owner may repay any debt in whole or in
part at any time while the contract is in force. An amount equal to
the amount of the loan repayment will be transferred from the loan
account and allocated among the investment accounts in the same
percentage as additional payments are allocated, unless the owner
requests otherwise.
4. Termination Due to Excessive Indebtedness. If on any date debt
under a contract exceeds the contract value, the contract will be in
default. In such case, the
8
<PAGE> 9
owner will receive a notice indicating the payment needed to bring the
contract out of default and will have a sixty-one day grace period
within which to pay that amount. If the required payment is not made
within the grace period, the contract will be terminated.
5. Effect of Loans on Account Value. The amount of any debt will
be deducted from the death benefit otherwise payable under the
contract. In addition, debt, 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 debt is outstanding, the greater the
effect is likely to be. The effect could be favorable or unfavorable.
If the investment results are greater than the rate being credited on
amounts held in the loan account while the debt is outstanding, the
contract value will not increase as rapidly as it would have if no
debt were outstanding. If investment result are below that rate, the
contract value will be higher than it would have been had no debt been
outstanding.
IV. TELEPHONE TRANSACTIONS
Contract owners are permitted to request transfers or withdrawals by
telephone. To be permitted to request a transfer or withdrawal by
telephone, a contract owner must elect the option on an appropriate
authorization form provided by the Company. The Company will employ
reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures include the following: Upon
telephoning a request, contract owners will be asked to provide certain
identifying information such as a social security number, address, account
number or mother's maiden name. For the contract owner's and Company's
protection, all conversations with contract owners will be tape recorded.
All telephone transactions will be followed by a confirmation statement of
the transaction.
