<PAGE>
Reg. No 33-45851, Rule 497(e)
SUPPLEMENT DATED JANUARY 4, 1996, TO MAY 1, 1995, PROSPECTUS FOR
UNUM LIFE INSURANCE COMPANY OF AMERICA
GROUP VARIABLE ANNUITY CONTRACT
VA-I SEPARATE ACCOUNT
The following information supplements UNUM/America's VA-I Separate Account
prospectus and should be read in conjunction with it.
The Dreyfus Stock Index Fund, in which assets of the Index Account are
invested, has changed its fund managers. The second paragraph of the description
of the "Dreyfus Stock Index Fund" on Page 13 of the prospectus should now read
as follows:
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, acts as the Fund manager and Mellon Equity Associates, an affiliate of
Dreyfus located at 500 Grant Street, Pittsburgh, Pennsylvania 15258, is the Fund
index manager.
80050
<PAGE>
UNUM
LIFE INSURANCE
COMPANY OF AMERICA
Group Variable Annuity Contracts
VA-I SEPARATE ACCOUNT
2211 Congress Street
Portland, Maine 04122
(207) 770-2211
VARIABLE ANNUITY III
[LOGO]
- ------------------------------------
PROSPECTUS
- ------------------------------------
MAY 1, 1995
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS OF
THE APPLICABLE UNDERLYING FUNDS WHICH SHOULD BE RETAINED FOR FUTURE REFERENCE.
80017
This prospectus describes group annuity contracts ("Contracts") offered by UNUM
Life Insurance Company of America ("UNUM/America"), a subsidiary of UNUM Holding
Company and its wholly-owned parent company, UNUM Corporation. The Contracts are
designed to enable Participants and Employers to accumulate funds for retirement
programs meeting the requirements of the following Sections of the Internal
Revenue Code of 1986, as amended (the "Code"): 401(a), 403(b), 408 and 457 and
other related Sections as well as for programs offering non-qualified annuities.
A Participant is an employee or other person affiliated with the Contractholder
on whose behalf a Participant Account is maintained under the terms of the
Contract.
The Contracts permit Contributions to be deposited in the Guaranteed Interest
Division, which is part of UNUM/America's General Account, and in certain Sub-
Accounts in UNUM/America's VA-I Separate Account ("Variable Investment
Division"). Contributions to the Guaranteed Interest Division earn interest at a
guaranteed rate declared by UNUM/America. Contributions to the Variable
Investment Division will increase or decrease in dollar value depending on the
investment performance of the underlying funds in which the Sub-Accounts invest.
Currently, the Variable Investment Division consists of the nine Sub-Accounts
listed below: Next to each listed Sub-Account is the name of the fund (the
"Fund") in which the Sub-Account invests. For more information about the
investment objectives, policies and risks of the Funds please refer to the
prospectus for each of the Funds.
<TABLE>
<S> <C>
Index Account................ "Dreyfus Stock Index Fund"
Growth I Account............. Fidelity's "Variable Insurance
Products Fund: Growth
Portfolio"
Asset Manager Account........ Fidelity's "Variable Insurance
Products Fund II: Asset
Manager Portfolio"
Growth II Account............ Twentieth Century's "TCI
Portfolios, Inc.: TCI Growth"
Balanced Account............. Twentieth Century's "TCI
Portfolios, Inc.: TCI
Balanced"
International Stock
Account..................... "T. Rowe Price International
Series, Inc."
Socially Responsible
Account..................... "Calvert Socially Responsible
Series"
Equity-Income Account........ Fidelity's "Variable Insurance
Products Fund: Equity-Income
Portfolio"
Small Cap Account............ "Dreyfus Variable Investment
Fund: Small Cap Portfolio"
</TABLE>
This prospectus is intended to provide information regarding the Contracts
offered by UNUM/America that you should know before investing. Please read and
retain this prospectus for future reference. A Statement of Additional
Information, dated May 1, 1995, has been filed with the Securities and Exchange
Commission and is available at no charge by writing or calling UNUM/ America
2211 Congress Street, Portland, Maine 04122, (207) 770-2211, Attention:
Retirement Security Division.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
DEFINITIONS 3
SUMMARY (INCLUDING FEE TABLE AND PERFORMANCE INFORMATION) 5
CONDENSED FINANCIAL INFORMATION 10
FINANCIAL STATEMENTS 11
UNUM/AMERICA, VARIABLE INVESTMENT DIVISION AND THE FUND 11
CONTRACT PROVISIONS 15
DEDUCTIONS AND CHARGES 21
ANNUITY PERIOD 23
FEDERAL INCOME TAX CONSIDERATIONS 25
VOTING RIGHTS 28
OTHER CONTRACT PROVISIONS 28
GUARANTEED INTEREST DIVISION 29
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION 32
</TABLE>
2
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: An accounting unit of measure used to record amounts of
increases to, decreases from and accumulations in each Sub-Account during the
Accumulation Period.
ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each
Sub-Account on any Valuation Date.
ACCUMULATION PERIOD: The period commencing on a Participant's Participation Date
and terminating when the Participant's Account balance is reduced to zero,
either through withdrawal(s), conversion to an annuity, imposition of charges,
payment of a Death Benefit or a combination thereof.
ANNUITANT: The person receiving annuity payments under the terms of the
Contract.
ANNUITY COMMENCEMENT DATE: The date on which UNUM/America makes the first
annuity payment to the Annuitant as required by the Retired Life Certificate.
ANNUITY CONVERSION AMOUNT: The amount applied toward the purchase of an annuity.
ANNUITY PERIOD: The period concurrent with or following the Accumulation Period,
during which an Annuitant's annuity payments are made.
BENEFICIARY: The person(s) designated to receive a Participant's Account balance
in the event of the Participant's death during the Accumulation Period or the
person(s) designated to receive any applicable remainder of an annuity in the
event of the Annuitant's death during the Annuity Period.
BUSINESS DAY: A day on which UNUM/America and the New York Stock Exchange are
customarily open for business.
CONTRIBUTIONS: All amounts deposited under a Contract, including any amount
transferred from another contract or Trustee.
CONTRACT: A Group Variable Annuity contract issued by UNUM/America to the
Contractholder.
CONTRACTHOLDER: The party named as the contractholder on the group annuity
contract issued by UNUM/America. The Contractholder may be an Employer, a
retirement plan trust, an association or any other entity allowed under the law.
DIVISION(S): The Guaranteed Interest Division and/or the Variable Investment
Division.
EMPLOYER: The organization specified in the Contract which offers the Plan to
its employees.
GENERAL ACCOUNT: All assets of UNUM/America other than those in the Variable
Investment Division or any other separate account.
GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is reduced
when a withdrawal occurs, including any applicable Annual Administration Charge.
GUARANTEED ANNUITY: An annuity for which UNUM/America guarantees the amount of
each payment for as long as the annuity is payable.
GUARANTEED INTEREST DIVISION: The Division maintained by UNUM/America for the
Contracts and other contracts for which UNUM/America guarantees the principal
amount and interest credited thereto subject to any fees and charges as set
forth in the Contract. Amounts allocated to the Guaranteed Interest Division are
part of the General Account.
NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant
Account less any Net Withdrawal Amounts, outstanding loan (including principal
and due and accrued interest) and amounts converted to a Payout Annuity.
NET WITHDRAWAL AMOUNT: The amount paid when a withdrawal occurs.
3
<PAGE>
PARTICIPANT: An employee or other person affiliated with the Contractholder on
whose behalf an Account is maintained under the terms of the Contract.
PARTICIPANT ACCOUNT: An account maintained for a Participant during the
Accumulation Period the total balance of which equals the Participant's Account
balance in the Variable Investment Division plus the Participant's Account
balance in the Guaranteed Interest Division.
PARTICIPATION ANNIVERSARY: For each Participant, a date at one year intervals
from the Participant's Participation Date. If an anniversary occurs on a
non-Business Day, it is treated as occurring on the next Business Day.
PARTICIPATION DATE: A date assigned to each Participant corresponding to the
date on which the first Contribution on behalf of that Participant is received
by UNUM/America. A Participant will receive a new Participation Date if such
Participant makes a Total Withdrawal, as defined in this prospectus, and
Contributions on behalf of the Participant are resumed under any Contract.
PARTICIPATION YEAR: A period beginning with one Participation Anniversary and
ending the day before the next Participation Anniversary, except for the first
Participation Year which begins with the Participation Date.
PAYOUT ANNUITY: A series of payments paid under the terms of a Contract to a
person. A Payout Annuity may be either a Guaranteed Annuity or a Variable
Annuity.
PLAN: The retirement program offered by an Employer to its employees for which a
Contract is used to accumulate funds.
SUB-ACCOUNT: An account established in the Variable Investment Division which
invests in shares of a corresponding Fund.
UNUM/AMERICA: UNUM Life Insurance Company of America, at its home office in
Portland, Maine.
VALUATION DATE: A Business Day. Accumulation Units and Annuity Units are
computed as of the close of trading on the New York Stock Exchange.
VALUATION PERIOD: A period used in measuring the investment experience of each
Sub-Account. The Valuation Period begins at the close of trading on the New York
Stock Exchange on one Valuation Date and ends at the corresponding time on the
next Valuation Date.
VARIABLE ANNUITY: An annuity with payments that increase or decrease in
accordance with the investment results of the selected Sub-Accounts.
VARIABLE INVESTMENT DIVISION: The Division which is maintained by UNUM/America
for these Contracts and other UNUM/America contracts for which UNUM/America does
not guarantee the principal amount or investment results. The Variable
Investment Division is the VA-I Separate Account which is a group of assets
segregated from the General Account whose income, gains and losses, realized or
unrealized, are credited to or charged against the variable investment Division
without regard to other income, gains or losses of UNUM/America. The Variable
Investment Division currently consists of nine Sub-Accounts. Additional
Sub-Accounts may be added in the future.
4
<PAGE>
SUMMARY
UNUM LIFE INSURANCE COMPANY OF AMERICA
UNUM/America is a life insurance company founded in Maine in 1966.
UNUM/America is a subsidiary of UNUM Holding Company and its wholly-owned parent
company, UNUM Corporation whose stock is traded on the New York Stock Exchange.
The consolidated assets of UNUM Corporation as of December 31, 1994 were $13.1
billion.
CONTRACTS OFFERED
The Group Variable Annuity Contracts offered by this prospectus are
available to Employers and other entities to provide a way to accumulate funds
for retirement and to provide Payout Annuities. UNUM/America offers Contracts
designed to enable Participants and Employers to accumulate funds for retirement
programs meeting the requirements of the following Sections of the Internal
Revenue Code of 1986, as amended (the "Code"): 401(a), 403(b), 408, 457 and
other related Sections as well as for programs offering non-qualified annuities.
HOW CONTRIBUTIONS ARE MADE
Contributions under the Contract are deposited by the Contractholder.
Depending upon the type of Plan offered, Contributions may consist of salary
reduction Contributions, Employer Contributions or Participant post-tax
Contributions. Contributions are forwarded by the Contractholder to UNUM/America
and allocated among the two Divisions in accordance with information provided by
the Contractholder. See "Contract Provisions, Contributions under the Contract".
DIVISIONS OFFERED
Contributions may be allocated to the Guaranteed Interest Division or to the
Variable Investment Division or to both Divisions. The Variable Investment
Division currently consists of nine Sub-Accounts. A Contractholder may choose to
offer between zero and nine of the Sub-Accounts to its Participants under a
Contract. The Sub-Accounts invest their assets in shares of a corresponding
Fund. For a full description of the Funds, see the prospectuses for the Funds.
TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
During the Accumulation Period, a Participant or a Contractholder under
certain Plans may make transfers between and among Divisions and Sub-Accounts.
Certain Plans may limit the transfers in dollar amount, type of Contribution, or
frequency. Certain Plans may require Contractholder approval for a transfer. See
"Transfers between Divisions and Sub-Accounts".
WITHDRAWALS AND DISTRIBUTIONS
During the Accumulation Period, a Participant may withdraw any part of their
account balance subject to the restrictions imposed by the Code and regulations
thereof and by the applicable Plan. With respect to Plans subject to Title I of
the Employee Retirement Income Security Act of 1974 (ERISA), the Contractholder
must authorize UNUM/America to process a withdrawal request by a Participant.
Withdrawal requests under Section 457 Plans must also be authorized by the
Contractholder. With respect to withdrawal requests by Participants under Plans
not subject to Title I of ERISA, certain Contracts may require that the
Participants must certify to UNUM/America that an eligible event under the Code
has occurred. Withdrawal and Distribution requests must be in writing and in a
form acceptable to UNUM/ America.
5
<PAGE>
Certain Plans are also subject to the distribution requirements under
Section 401(a)(9) of the Code including the incidental death benefit
requirements of Section 401(a)(9)(G). Certain transfers from one Qualified Plan
contract to another Qualified Plan contract are not subject to withdrawal
restrictions under the Code. Certain withdrawals are subject to a 10% Federal
Excise Tax for premature distributions. See "Federal Income Tax Considerations."
DEATH BENEFITS
The Contracts provide for a Death Benefit for a Participant who dies during
the Accumulation Period. See "Contract Provisions, Death Benefits."
PAYOUT ANNUITIES
As permitted by the applicable Plan, a Contractholder or a Participant who
requests a withdrawal or a Beneficiary of a deceased Participant may elect to
convert all or part of the Participant's Account balance or the Death Benefit,
as appropriate, to a Payout Annuity. UNUM/America offers both Guaranteed and
Variable Annuities. The range of annuity options available include life
annuities and annuities for a specific time period as well as others described
more fully in this prospectus. See "Annuity Period."
FREE-LOOK PROVISION
A Participant under a Section 403(b) or 408 Plan and certain Non-qualified
Plans has ten days, in most cases, from the date the Participant receives an
Active Life Certificate to notify UNUM/America in writing that the Participant
does not choose to participate under the Contract and to receive a return of
funds. See "Free-Look Period."
FEE TABLE
The following table and examples, prescribed by the SEC, are included to
assist Contractholders and Participants in understanding the transaction and
operating expenses imposed directly or indirectly under the Contracts. The
standardized tables and examples assume the highest deductions possible under
the Contracts, whether or not such deductions actually would be made from a
Participant's Account.
<TABLE>
<S> <C>
CONTRACT RELATED TRANSACTION EXPENSES(1)
Sales Load Imposed on Purchases: 0%
ANNUAL ADMINISTRATION CHARGE(2) $25
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily net assets)
Mortality and Expense Risk Charge: 1.20%
Other Charges: 0.00%
Total Separate Account
Annual Expenses: 1.20%
FUND EXPENSES(7)
(as a percentage of average daily net assets)
<CAPTION>
Sales Load Imposed on Purchases: 0%
ANNUAL ADMINISTRATION CHARGE(2)
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily net assets)
Mortality and Expense Risk Charge:
Other Charges:
Total Separate Account
Annual Expenses:
FUND EXPENSES(7)
(as a percentage of average daily net assets)
</TABLE>
<TABLE>
<CAPTION>
INDEX(3) G-I(4) AMGR(6) G-II BAL INT'L SOC RES EQI(4) SMCAP(5)
---------- -------- --------- --- --- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees: .14 .62 .72 1.0 1.0 1.05 .70 .52 .23
Other Expenses:
(after expense reimbursements): .26 .07 .08 -- -- -- .10 .06 .32
Total Fund Expenses: .40 .69 .80 1.0 1.0 1.05 .80 .58 .55
</TABLE>
6
<PAGE>
Example #1: Assuming total withdrawal of the Participant's Account balance
at the end of the period shown.(6)
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
INDEX G-I AMGR G-II BAL INT'L SOC RES EQI SMCAP
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 17.01 19.93 21.03 23.04 23.04 23.54 21.03 18.82 18.52
3 Years 52.72 61.59 64.94 70.99 70.99 72.49 64.94 58.24 57.32
5 Years 90.83 105.80 111.42 121.56 121.56 124.08 111.42 100.15 98.60
10 Years 197.68 228.50 239.95 260.42 260.42 265.47 239.95 216.92 213.74
</TABLE>
Example #2: Assuming annuitization of the Contract at the end of the period
shown.
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
INDEX G-I AMGR G-II BAL INT'L SOC RES EQI SMCAP
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 17.01 19.93 21.03 23.04 23.04 23.54 21.03 18.82 18.52
3 Years 52.72 61.59 64.94 70.99 70.99 72.49 64.94 58.24 57.32
5 Years 90.83 105.80 111.42 121.56 121.56 124.08 111.42 100.15 98.60
10 Years 197.68 228.50 239.95 260.42 260.42 265.47 239.95 216.92 213.74
</TABLE>
Example #3: Assuming persistency of the Contracts through the periods shown.
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
INDEX G-I AMGR G-II BAL INT'L SOC RES EQI SMCAP
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 17.01 19.93 21.03 23.04 23.04 23.54 21.03 18.82 18.52
3 Years 52.72 61.59 64.94 70.99 70.99 72.49 64.94 58.24 57.32
5 Years 90.83 105.80 111.42 121.56 121.56 124.08 111.42 100.15 98.60
10 Years 197.68 228.50 239.95 260.42 260.42 265.47 239.95 216.92 213.74
</TABLE>
For purposes of these Examples, the effect of the Annual Administration
Charge has been computed based on both the (i) aggregate amount of Annual
Administration Charges collected during the most recent fiscal year and (ii) the
total average net assets attributable to the Contracts during that year.
- ------------------------
(1) Premium taxes are not shown. UNUM/America deducts the amount of premium
taxes, if any, when paid. Loans taken by a Participant with respect to the
Participant's Account balance in the Guaranteed Interest Division may be
subject to a charge for establishing the loan.
(2) The Employer has the option of paying the Annual Administration charge on
behalf of the Participants under a Contract. In such a situation, the
projected expenses would be lower than those indicated in the examples. This
charge is not imposed during the Annuity Period. In certain situations the
Annual Administrative Charge may be reduced or eliminated. See "Deductions &
Charges--Annual Administrative Charge".
(3) Total Fund Operating Expenses, excluding brokerage commissions and
transaction fees, are guaranteed not to exceed .40% of the Dreyfus Stock
Index Fund, Inc.'s average daily net assets. To the extent these Fund
expenses exceed .40% of the Fund's average daily net assets, The Dreyfus
Corporation, the Fund's administrator, will bear such excess expense. For
the fiscal year ending December 31, 1994, the excess expense was .16%.
(4) A portion of the brokerage commissions the fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been :
Growth I--0.70%; Asset Manager--0.81%; and Equity-Income--0.60%.
7
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(5) From time to time, The Dreyfus Corporation may waive receipt of its fees
and/or voluntarily assume certain expenses of the Fund, which would have the
effect of lowering the overall expense ratio of the Fund and increasing
yield to investors at the time such amounts are waived or assumed, as the
case may be. The Fund will not pay The Dreyfus Corporation at a later time
for any amounts it may waive nor will the Fund reimburse The Dreyfus
Corporation any amounts it may assume. To the extent that the Dreyfus
Corporation does not waive these amounts, under the terms of the Investment
Advisory Agreement, the Fund has agreed to pay the Dreyfus Corporation a
monthly fee at the annual rate of .75 of 1% of the value of the Small Cap
Portfolio's average daily net assets.
(6) The Contracts are designed for retirement planning. Withdrawals prior to
retirement or the Annuity Commencement Date are not consistent with the
long-term purposes of the Contracts and the applicable tax laws.
(7) Until complete order instructions are received, initial Contributions may be
allocated temporarily to Fidelity's Variable Insurance Products Fund: Money
Market Portfolio ("VIPF Money Market Portfolio"). Management fees for this
fund are 0.20%. Other expenses (after expense reimbursements) are 0.07%.
Total Fund Expenses are 0.27%. The Mortality and Expense Risk Charge is not
assessed.
The fee table and examples reflect estimated expenses and charges of both
the Sub-Accounts and the applicable Fund. However, the examples should not be
considered a representation of past or future expenses and charges of the
Sub-Accounts or the Funds. Similarly, the assumed 5% annual rate of return is
not an estimate or a guarantee of future investment performance. See "Deductions
and Charges" in this prospectus and the discussion of Fund Management in the
prospectus for each of the Funds for further information.
PERFORMANCE INFORMATION
From time-to-time the Variable Investment Division may advertise or use in
sales literature information concerning the investment performance of the
various Sub-Accounts. No performance presentation should be considered as
representative of future investment results. Actual performance is a function
not only of the investment management of the underlying Funds and market forces,
but of the time and frequency of Contributions, the charges and fees imposed
under the Contract, the fees and expenses of the Funds, and transfers made by a
Participant, among other factors.
The investment performance of the Sub-Accounts may be advertised in
comparison with the performances of other variable annuities, other investment
companies (such as mutual funds), and recognized indices (such as the Dow Jones
Industrial Average, Standard & Poor's 500 Composite Stock Price Index, NASDAQ
Index, Consumer Price Index), and data published by Lipper Analytical Services,
Inc., Morningstar, and Variable Annuity Research and Data Service or comparable
services. Performance of the Sub-Accounts may also be compared with performance
of other types of investments. Some advertisements may also include published
editorial comments and performance rankings by independent organizations and
publications that monitor the performance of separate accounts and mutual funds.
The Sub-Accounts may advertise average annual total return performance
information according to the SEC standardized formula. Average annual total
return shows the average annual percentage increase, or decrease, in the value
of a hypothetical $1,000 contribution allocated to a Sub-Account from the
beginning to the end of each specified period of time. The SEC standardized
formula gives effect to all applicable charges under the Contracts. This method
of calculating performance further assumes that (i) a $1,000 contribution was
allocated to a Sub-Account, (ii) no transfers or additional payments were made
and (iii) the withdrawal of the investment occurs at the
8
<PAGE>
end of the period. Premium taxes are not included in the term "charges" for
purposes of this calculation. The Sub-Accounts may also advertise this total
return performance as described above on a cumulative basis.
The Sub-Accounts may present total return information computed on a calendar
year basis. The Sub-Accounts may also present total return information over
specified periods of time (computed on an average annual or cumulative basis)
assuming that no administrative charge will be deducted. The Sub-Accounts may
present hypothetical examples that apply the total return to a hypothetical
initial investment. The Sub-Accounts may also present total return information
based on different amounts of periodic investments. For additional performance
information, please refer to the Statement of Additional Information.
PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contractholders,
UNUM/America may reflect endorsements. Endorsements are often in the form of a
list of organizations, individuals or other parties which recommend UNUM/America
or the Contracts. The endorser's name will be used only with the endorser's
consent. It should be noted that the list of endorsements may change from time
to time.
Also, from time to time, the rating of UNUM/America as an Insurance company
by A.M. Best may be referred to in advertisements or in reports to
Contractholders. Each year the A.M. Best Company reviews the financial status of
thousands of Insurers, culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance Industry. Best's ratings range from A++ to F. An A++
rating means, in the opinion of A.M. Best, that the insurer has demonstrated the
strongest ability to meet its respective policyholder and other contractual
obligations. UNUM/ America's A.M. Best rating is A++ (November 1994) which is
defined as "Superior."
In addition, the claims-paying ability of UNUM/America as measured by the
Standard and Poor's Rating Group may be referred to in advertisements or in
reports to Contractholders. A Standard and Poor's insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Standard and Poor's ratings range from AAA to CCC. UNUM/America's
claims-paying rating is AA (January 1995) which is defined as "Excellent."
From time to time UNUM/America may refer to Moody's Investors Service rating
of UNUM/America. Moody's Investors Service financial strength ratings indicate
an insurance company's ability to discharge policyholder obligations and claims
and are based on an analysis of the insurance company and its relationship to
its parent, subsidiaries, and affiliates. Moody's Investors Service ratings
range from Aaa to C. UNUM/America's financial strength rating is Aa2 (March
1995) which is defined as "Excellent."
9
<PAGE>
CONDENSED FINANCIAL INFORMATION
The financial data included below should be read in conjunction with the
financial statements and the related data included in the Statement of
Additional Information.
ACCUMULATION UNIT VALUES
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
SUB-ACCOUNT 1989 1990 1991 1992 1993 1994
- ------------------------------------- --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Index Account
December 12 Commencement $ 9.9060
Beginning of Period $ 9.9629 $ 9.4953 $ 12.1814 $ 12.8906 $ 13.9245
End of Period $ 9.9629 $ 9.4953 $ 12.1814 $ 12.8906 $ 13.9245 $ 13.8792
Growth I Account
May 1 Commencement $ 10.00
Beginning of Period $ 12.1759 $ 13.1505 $ 15.5094
End of Period $ 12.1759 $ 13.1505 $ 15.5094 $ 15.3208
Growth II Account
May 1 Commencement $ 10.00
Beginning of Period $ 11.5975 $ 11.3049 $ 12.3212
End of Period $ 11.5975 $ 11.3049 $ 12.3212 $ 12.0313
Asset Manager Account
May 1 Commencement $ 10.00
Beginning of Period $ 10.7598 $ 11.8933 $ 14.2241
End of Period $ 10.7598 $ 11.8933 $ 14.2241 $ 13.1979
Balanced Account
May 1 Commencement $ 10.00
Beginning of Period $ 12.4515 $ 11.5582 $ 12.2957
End of Period $ 12.4515 $ 11.5582 $ 12.2957 $ 12.2225
International Stock
May 1 Commencement $ 10.00
Beginning of Period
End of Period $ 9.8622
Socially Responsible
May 1 Commencement $ 10.00
Beginning of Period
End of Period $ 9.9692
Equity-Income
May 1 Commencement $ 10.00
Beginning of Period
End of Period $ 10.4780
Small Cap
May 1 Commencement $ 10.00
Beginning of Period
End of Period $ 10.3818
Pending Allocation Account
October 15 Commencement $ 10.00
Beginning of Period
End of Period $ 10.1054
</TABLE>
10
<PAGE>
Number of Accumulation Units Outstanding at end of Period
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
----- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Index Account 0 72,405 296,075 836,187 1,526,878 1,929,447
Growth I Account 5,166 317,275 1,340,146 3,071,862
Growth II Account 53,904 566,562 1,242,216 1,733,360
Asset Manager Account 36,645 462,405 2,232,731 4,369,937
Balanced Account 13,453 282,439 673,424 1,041,814
Socially Responsible Account 26,073
Equity-Income Account 320,659
International Stock Account 354,936
Small Cap Account 400,376
Pending Allocation Account 11,980
</TABLE>
Number of Mutual Fund Shares held by each of the corresponding Sub-Accounts
as of December 31st of each year
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
----- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Stock Index Fund 0 58,271 241,984 703,885 1,611,415 2,070,026
Fidelity's Variable Insurance Products Fund:
Growth Portfolio: 0 0 3,399 211,238 900,965 2,170,399
Twentieth Century's TCI Portfolios, Inc. TCI
Growth Portfolio 72,384 756,506 1,642,987 2,264,937
Fidelity's Variable Insurance Products Fund
II: Asset Manager's Portfolio 0 0 31,429 412,427 2,060,497 4,183,403
Twentieth Century's TCI Portfolios, Inc. TCI
Balanced 0 0 27,075 568,960 1,364,740 2,137,066
Calvert Socially Responsible Series 0 0 0 0 0 180,421
Fidelity's Variable Insurance Products Fund:
Equity-Income Portfolio 0 0 0 0 0 218,939
T. Rowe Price International Stock Portfolio 0 0 0 0 0 343,942
Dreyfus Variable Investment Fund: Small Cap
Portfolio 0 0 0 0 0 113,847
Fidelity's Variable Insurance Products Fund:
Money Market Portfolio 0 0 0 0 0 121,067
</TABLE>
FINANCIAL STATEMENTS
The financial statements of the Variable Investment Division and of
UNUM/America may be found in the Statement of Additional Information.
UNUM/AMERICA, VARIABLE INVESTMENT DIVISION AND THE FUND
UNUM LIFE INSURANCE COMPANY OF AMERICA
UNUM/America is a life insurance company chartered under Maine law in 1966.
On November 18, 1986, UNUM/America's name was changed from Unionmutual Stock
Life Insurance Company of America to UNUM Life Insurance Company of America. On
December 31, 1991, UNUM/America was merged with UNUM Life Insurance Company and
UNUM Pension and Insurance Company, with the surviving company being UNUM Life
Insurance Company of America. UNUM/America's principal executive offices are
located at 2211 Congress Street, Portland, Maine 04122. UNUM/America's telephone
number is (207) 770-2211. UNUM/America provides a broad line of disability,
health and life insurance products, in addition to group retirement products.
UNUM/America is currently licensed to issue variable contracts in 50 states.
Administrative services necessary for the operation of the Variable Investment
Division and the Contracts are provided by UNUM/America. See "Deductions and
Charges--Annual Administration Charge."
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<PAGE>
UNUM/America is a subsidiary of UNUM Holding Company and its wholly-owned
parent company, UNUM Corporation. UNUM Corporation was organized under Delaware
law on January 11, 1985. UNUM Corporation is a publicly-owned company whose
stock is traded on the New York Stock Exchange. UNUM Corporation has
consolidated assets of $13.1 billion as of December 31, 1994.
UNUM SALES CORPORATION
UNUM Sales Corporation (UNUM/Sales), a subsidiary of UNUM Corporation, is
the principal underwriter of the Contracts. As such, UNUM/Sales will be offering
the Contracts and performing all duties and functions that are necessary and
proper for the distribution of the Contracts.
UNUM/Sales has also entered into sales agreements with independent
broker-dealers for the sale of the Contracts. UNUM/Sales' principal business
office is at 2211 Congress Street, Portland, Maine 04122.
THE VARIABLE INVESTMENT DIVISION
On December 31, 1991, pursuant to the merger of UNUM Life Insurance Company
and UNUM Pension and Insurance Company into UNUM/America, the Variable
Investment Division was transferred intact to UNUM/America. Prior to that, on
July 8, 1988, the Board of Directors of UNUM Life Insurance Company authorized
the establishment of the Variable Investment Division called the TSAVA Separate
Account in accordance with the Maine Insurance Code. On February 7, 1991, the
Board of Directors of UNUM Life Insurance Company expanded the scope of the
Variable Investment Division and changed its name to the VA-I Separate Account.
Under Maine law, the funds in the Variable Investment Division are owned by
UNUM/America and UNUM/America is not, nor can UNUM/America be, a trustee with
respect to those funds. The Variable Investment Division is registered with the
Securities and Exchange Commission ("SEC") as a unit investment trust under the
Investment Company Act of 1940 ("1940 Act"). Registration with the SEC does not
involve supervision of the management or investment practices or policies of
either the Variable Investment Division or UNUM/America by the SEC.
The Variable Investment Division currently consists of nine Sub-Accounts.
The Sub-Accounts invest in shares of the Funds. Therefore, the investment
experience of the Sub-Accounts depends on the performance of the Funds.
The income, gains and losses, realized or unrealized, from assets allocated
to the Variable Investment Division are credited to or charged against the
Variable Investment Division, without regard to other income, gains or losses in
UNUM/America's general account or any other separate account. The Contract
provides that the assets of the Variable Investment Division may not be charged
with liabilities arising out of any other business of UNUM/America. UNUM/America
may accumulate in the Variable Investment Division proceeds from charges under
the Contract and other amounts in excess of the Variable Investment Division
assets representing Contract reserves and liabilities. UNUM/America is the
issuer of the Contracts and the obligations set forth therein, other than those
of the Contractholder or the Participant, are UNUM/America's.
THE FUNDS
The nine Sub-Accounts invest directly in nine corresponding Funds. Each of
these Funds was formed as an investment vehicle for insurance company separate
accounts.
Information about each of the Funds, including their investment objectives
and investment management, is contained below. Additional information about the
Funds, their investment policies, risks, fees and expenses and all other aspects
of their operations, can be found in the prospectuses for the Funds, which
should be read carefully before investing. Additional copies of the Funds'
prospectuses, as well as their Statements of Additional Information, can be
obtained
12
<PAGE>
directly from each of the Funds without charge by writing to the particular
Funds at the addresses noted on the front of the prospectus. Shares of the Funds
are sold not only to the Sub-Accounts but also to variable annuity and variable
life separate accounts of other insurance companies. For a disclosure of
possible conflicts involved in the Sub-Accounts investing in Funds that are so
offered, see the applicable Fund prospectus.
"DREYFUS STOCK INDEX FUND"
Dreyfus Stock Index Fund (formerly know as the Dreyfus Life and Annuity
Index Fund, Inc.) is an open-end, non-diversified management investment company
known as an index fund. Its goal is to provide investment results that
correspond to the price and yield performance of publicly traded common stocks
in the aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The Fund sells its shares to the Index Account at net asset
value, without the imposition of a sales charge.
Wells Fargo Nikko Investment Advisors ("WFNIA") acts as the Fund manager.
WFNIA is jointly owned by Wells Fargo Investment Advisors, the Fund's
predecessor index manager, and the Nikko Securities Co., Ltd. and an affiliate.
WFNIA is located at 45 Fremont Street, San Francisco, California 94105.
"CALVERT SOCIALLY RESPONSIBLE SERIES"
The Calvert Socially Responsible Series is a series of Acacia Capital
Corporation (the "Fund"), a diversified open-end management investment company
whose investment advisor is Calvert Asset Management Company, Inc. located at
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
The Calvert Socially Responsible Series seeks growth of capital through
investment in enterprises that make a significant contribution to society
through their products and services and through the way they do business. Shares
of the Fund are offered only to insurance companies for allocation to certain of
their variable accounts.
"DREYFUS VARIABLE INVESTMENT FUND"
Dreyfus Variable Investment Fund is an open-end, diversified management
investment company that is intended to be a funding vehicle for variable annuity
contracts and variable life insurance policies to be offered by the separate
accounts of various life insurance companies.
THE SMALL CAP PORTFOLIO: The Portfolio seeks to maximize capital appreciation.
The Small Cap Portfolio seeks out companies that The Dreyfus Corporation
believes have the potential for significant growth. Under normal market
conditions, the Portfolio will invest at least 65% of its total assets in
companies with market capitalization of less than $750 million, at the time of
purchase, both domestic and foreign where there is a belief that new or
innovative products or services should enhance prospects for growth in future
earnings. The Portfolio may also invest in special situations such as corporate
restructurings, mergers or acquisitions.
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, serves as the Fund's investment adviser.
FIDELITY'S "VARIABLE INSURANCE PRODUCTS FUND"
The Variable Insurance Products Fund was designed to provide investment
vehicles for variable annuity and variable life insurance contracts of various
insurance companies.
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<PAGE>
EQUITY-INCOME PORTFOLIO: The Portfolio seeks reasonable income by normally
investing at least 65% of its total assets in income-producing common or
preferred stock and the remainder in debt securities.
GROWTH PORTFOLIO: The Portfolio seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
MONEY MARKET PORTFOLIO: The Portfolio seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity. For
more information regarding the Portfolio, into which initial Contributions are
invested pending First UNUM's receipt of a complete order, please see the
"Initial Contributions" section.
Fidelity Management & Research Company ("FMR") is the manager of the
Equity-Income Portfolio, the Growth Portfolio and the Money Market Portfolio and
is located at 82 Devonshire Street, Boston, Massachusetts 02109.
FIDELITY'S "VARIABLE INSURANCE PRODUCTS FUND II"
Variable Insurance Products Fund II is designed to provide investment
vehicles for variable annuity and variable life insurance contracts.
ASSET MANAGER PORTFOLIO: The Portfolio seeks high total return with reduced risk
over the long term by allocating its assets among domestic and foreign stocks,
bonds and short-term fixed income instruments.
FMR is the manager of the Portfolio and is located at 82 Devonshire Street,
Boston, Massachusetts 02109
TWENTIETH CENTURY'S "TCI PORTFOLIOS, INC."
TCI Portfolios, Inc. is a fund which offers its shares only to insurance
companies to fund the benefits of variable annuity or variable life insurance
contracts. The Portfolios are managed by Investors Research Corporation which
also manages the Twentieth Century family of mutual funds. Investors Research
Corporation has its principal place of business at Twentieth Century Tower, 4500
Main Street, Kansas City, Missouri 64111.
UNUM/America may perform certain administrative services that would
otherwise be performed by Twentieth Century Services, Inc., and Investors
Research may pay UNUM/America for such services.
TCI GROWTH: The Portfolio seeks capital growth by investing in common stocks
(including securities convertible into common stocks) and other securities that
meet certain fundamental and technical standards of selection and, in the
opinion of the fund's management, have better than average potential for
appreciation.
TCI BALANCED: The Portfolio seeks capital growth and current income. Its
investment team intends to maintain approximately 60% of the portfolio's assets
in common stocks that are considered by its manager to have better than average
prospects for appreciation and the balance in bonds and other fixed income
securities.
"T. ROWE PRICE INTERNATIONAL SERIES, INC."
T. Rowe Price International Series is a fund which offers its shares only to
insurance companies to fund the benefits of variable annuity contracts. It is
managed by Rowe Price-Fleming International, Inc., one of America's largest
international mutual fund managers with approximately $18.0 billion under
management from its offices in Baltimore, London, Tokyo and Hong Kong.
The International Stock Portfolio seeks long-term growth of capital and
income through investments primarily in common stocks of established, non-U.S.
companies.
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<PAGE>
CONTRACT PROVISIONS
GENERAL
UNUM/America has designed these Contracts for Employers and other entities
to enable Participants and Employers to accumulate funds for retirement programs
meeting the requirements of the following Sections of the Internal Revenue Code
of 1986, as amended (the "Code"): 401(a), 403(b), 408, 457 and other related
Sections as well as for programs offering non-qualified annuities. An Employer,
Association or trustee in some circumstances, may enter into a Contract with
UNUM/America by filling out an application and returning it to UNUM/America.
Upon UNUM/America's acceptance of the application, Contractholders or an
affiliated Employer can forward Contributions on behalf of employees who then
become Participants under the Contracts. For Plans that have allocated rights to
the Participant, UNUM/America will issue to each Participant a separate Active
Life Certificate that describes the basic provisions of the Contract to each
Participant.
CONTRIBUTIONS UNDER THE CONTRACT
Generally, under the Contracts, Contributions are forwarded by the
Contractholders to UNUM/ America for investment. Depending on the Plan, the
Contributions may consist of salary reduction Contributions, Employer
Contributions or post-tax Contributions.
Contributions may accumulate on either a guaranteed or variable basis
depending upon the Divisions available under the Contract and/or the Division in
which the Contributions are deposited. Contributions to the Guaranteed Interest
Division become part of UNUM/America's General Account and are guaranteed a
minimum rate of interest. UNUM/America will also declare in advance a guaranteed
interest rate which will be effective for all amounts in the Participant's
Account balance in the Guaranteed Interest Division during the designated year.
This rate will never be less than the minimum rate of interest. UNUM/America may
also declare in advance separate interest rate guarantees which are in excess of
the guaranteed interest rate for some or all of the Participant's Account
balance in the Guaranteed Interest Division for specific period(s) during the
designated year. UNUM/America assumes the risk of investment gain or loss on
contributions to the Guaranteed Interest Division. Contributions to the Variable
Investment Division are credited with a rate of return dependent upon the
investment experience of the Sub-Accounts in which the Contributions are
invested.
Contributions by Participants may be in any amount unless there is a minimum
amount set by the Contractholder or Plan. A Contract may require the
Contractholder to contribute a minimum annual amount on behalf of all
Participants. Annual Contributions under Qualified Plans may be subject to
maximum limits imposed by the Code. Annual Contributions under non-qualified
plans may be limited by the terms of the Contract. In the Statement of
Additional Information see "Tax Law Considerations" for a discussion of these
limits. Subject to any restrictions imposed by the Plan or the Code, transfers
from other contracts and qualified rollover Contributions will be accepted.
Section 830.205 of the Texas Education Code provides that Employer or state
Contributions (other than salary reduction Contributions) on behalf of
Participants in the Texas Optional Retirement Program ("ORP") vest after one
year of participation in the program. UNUM/America will return Employer
Contributions to the Contractholder for those employees who terminate employment
in all Texas institutions of higher education before becoming vested. During
this first participation year in the ORP, ORP Participants may only direct
Employer and state Contributions to the Guaranteed Interest Division.
Contributions must be in United States funds unless UNUM/America agrees in
writing to accept other currencies. Any non-US funds will be converted to U.S.
funds. All withdrawals and distributions under this Contract will be in U.S.
funds. If a bank or other financial institution does not honor the check or
other payment method constituting a Contribution, UNUM/America will treat the
15
<PAGE>
Contribution as invalid. All allocations and subsequent transfers resulting from
the invalid Contributions shall be reversed and the party responsible for the
invalid Contribution shall reimburse UNUM/America for any losses or expenses
resulting from the invalid Contribution.
INITIAL CONTRIBUTIONS
The initial Contribution for a Participant will be credited to the
Participant's Account no later than two Business Days after it is received by
UNUM/America if it is preceded or accompanied by a completed enrollment form
containing all the information necessary for processing the Participant's
Contribution. If UNUM/America does not receive a completed enrollment form,
UNUM/America will notify the Contractholder or the Participant that UNUM/America
does not have the necessary information to process the Contribution. If the
necessary information is not provided to UNUM/America within five (5) Business
Days after UNUM/America first receives the initial Contribution, UNUM/America
will return the initial Contribution less any withdrawal(s) by the Participant
or by the Contractholder, unless the Participant or the Contractholder
specifically consents to UNUM/America retaining the Contribution until the
enrollment form is made complete.
Notwithstanding the above, when the Contract includes language regarding the
"Pending Allocation Account", the following shall apply: Where state approval
has been obtained, if UNUM/America receives Contributions which are not
accompanied by a properly completed Enrollment Form, UNUM/ America will notify
the Contractholder of that fact and deposit the Contributions to the Pending
Allocation Account, unless such Contributions are designated to another Account
in accordance with the Plan. Within two business days of receipt of a properly
completed Enrollment Form, the Participant's Account balance in the Pending
Allocation Account will be transferred in accordance with the allocation
percentages elected on the Enrollment Form. All future Contributions will also
be allocated in accordance with these percentages until such time as the
Participant may notify UNUM/America of a change. If a properly completed
Enrollment Form is not received after three monthly notices have been sent, the
Participant's Account balance in the Pending Allocation Account will be refunded
to the Contractholder within 105 days of the date of the initial Contribution.
The Pending Allocation Account invests in Fidelity's Variable Insurance Products
Fund: Money Market Portfolio and is not available as an investment option under
the group annuity contract. Mortality & Expense Risk Charges and the Annual
Administration Charge do not apply to this Account. These charges will be
applicable upon receipt of a properly completed Enrollment Form and the
Participant's contract Participation Date will be the date money was deposited
in the Pending Allocation Account.
ALLOCATION OF CONTRIBUTIONS
A Participant must designate in writing, subject to the Plan, the percent of
their Contribution which will be allocated to each Division and to each
Sub-Account available under their Contract. The Contributions allocation
percentage to the Guaranteed Investment Division or any Sub-Account can be in
any whole percent. Participants, whose Employer offers two or more UNUM/America
contracts for the same type of Qualified or Non-qualified Plans, may allocate
Contributions to a maximum of ten Sub-Accounts and Guaranteed Interest Division.
Participants, subject to the terms of the Plan, may change the allocation of
Contributions by notifying UNUM/America in writing or by telephone in accordance
with procedures published by UNUM/America. Telephone requests for allocation
changes follow the same verification of identity rules as for Transfers. (See
"Telephone Transfers.") When UNUM/America receives a notice in writing, the form
must be acceptable to UNUM/America. Upon receipt by UNUM/ America, the change
will be effective for all Contributions received concurrently with the
allocation change form and for all future Contributions, unless a later date is
requested. Changes in the allocation of future Contributions have no effect on
amounts a Participant may have already contributed. Such amounts, however, may
be transferred between Divisions and Sub-Accounts pursuant to the requirements
described in "Transfers between Divisions and Sub-Accounts." Allocations of
employer contributions may be restricted by the applicable plan.
16
<PAGE>
SUBSEQUENT CONTRIBUTIONS
The Contractholder will forward Contributions to UNUM/America specifying the
amount being contributed on behalf of each Participant. The Contractholder must
send Contributions and provide such allocation information in accordance with
procedures established by UNUM/America. The Contributions shall be allocated
among the Guaranteed Interest Division and the Variable Investment Division in
accordance with the Contractholder's or the Participant's written instructions
as described above in "Allocation of Contributions."
INVESTMENT OF CONTRIBUTIONS
Contributions are invested as of the date of receipt at UNUM/America,
provided that they are received on a Business Day and allocation information is
provided in a form acceptable to UNUM/ America in accordance with procedures
established by UNUM/America. Contributions on behalf of a Participant which are
allocated to the Variable Investment Division will be credited with Accumulation
Units as of that date. A Participant's interest in the Variable Investment
Division during the Accumulation Period is represented by the value of the
Accumulation Units credited to the Participant's Account balance in the Variable
Investment Division. The number of Accumulation Units credited to a
Participant's Account in a Sub-Account is calculated by dividing the
Contribution allocated to the Sub-Account by the dollar value of an Accumulation
Unit next determined after receipt of the Contribution. The number of
Accumulation Units purchased will not vary as a result of any subsequent
fluctuations in the Accumulation Unit Value. The Accumulation Unit Value, of
course, fluctuates with the investment performance of the underlying Fund and
also reflects deductions and charges made against the Variable Investment
Division.
DETERMINATION OF ACCUMULATION UNIT VALUE
UNUM/America determines the Accumulation Unit Value of each Sub-Account on
each Valuation Date. The Accumulation Unit Values for all Sub-Accounts other
than the Index Account were initially set at ten dollars ($10). The Accumulation
Unit Value was initially set at $9.9060 for the Index Account. Subsequent
Accumulation Unit Values are determined by multiplying the Net Investment Factor
for the current Valuation Period by the Accumulation Unit Value as of the end of
the immediately preceding Valuation Period.
UNUM/America uses a Net Investment Factor to measure the daily fluctuations
in value of a Sub-Account. The Net Investment Factor for any Valuation Period is
determined as follows:
(a) The net asset value per share of the underlying Fund as of the end
of a Valuation Period is added to the amount per share of any dividends or
capital gain distributions paid by the Fund during that Valuation Period;
(b) The amount in (a) above is then divided by the net asset value per
share of the underlying Fund as of the end of the immediately preceding
Valuation Period;
(c) The result of (a) divided by (b) is then multiplied by one minus the
ANNUAL mortality and expense risk charge to the n/365th power where n equals
the number of calendar days since the immediately preceding Valuation Date.
The above calculation will be adjusted by the amount per share of any taxes
which are incurred by UNUM/America because of the existence of the Variable
Investment Division.
The Participant's Account balance is equal to the sum of the Participant's
Account balances in both the Variable Investment Division and the Guaranteed
Interest Division.
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TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
During the Accumulation Period, transfers may be made of all or part of a
Participant's Account balance in any Division or Sub-Account to another
Sub-Account or Division subject to the limitations described below and in the
applicable Plan. Transfers will not change the allocation of future
Contributions to the Divisions and Sub-Accounts. UNUM/America does not require
that any minimum amount be transferred. To effect a transfer, UNUM/America must
receive a written transfer request in a form acceptable to UNUM/America. During
any one calendar year, a Participant may make one transfer or withdrawal from
the Guaranteed Interest Division to the Variable Investment Division in an
amount not to exceed 20% of the Guaranteed Interest Division Account balance.
Transfers to or from the Variable Investment Division are made using the
Accumulation Unit Value next computed following UNUM/America's receipt of the
written transfer request.
TELEPHONE TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
UNUM/America may accept telephone transfers from Participants when this is
allowed by the Contractholder. In order to prevent unauthorized or fraudulent
transfers, UNUM/America will require a Participant to provide certain
identifying information before UNUM/America will act upon their instructions.
UNUM/America may also assign the Participant a Personal Identification Number
(PIN) to serve as identification. UNUM/America will not be liable for following
telephone instructions it reasonably believes are genuine. Telephone transfer
requests may be recorded and written confirmation of all transfer requests will
be mailed to the Participant or Contractholder on the next Business Day.
Telephone transfers will be processed on the Business Day that they are received
when they are received at the UNUM/America Home Office before 4:00 P.M. ET. If
the Participant or Contractholder determines that a transfer has been made in
error, the Participant or Contractholder must notify UNUM/America within 30 days
of the confirmation notice date. The telephone number for placing a telephone
transfer is 1-800-341-0441. See "Contract Provisions, Transfers between
Divisions and Sub-Accounts."
WITHDRAWALS
During the Accumulation Period, withdrawals may be made from either or both
Divisions of all or part of the Participant's Account balance in a Division or
Sub-Account remaining after deductions for any applicable (1) Annual
Administration Charge (imposed on Total Withdrawals), (2) premium taxes, and (3)
outstanding loan including loan security. Annuity Conversion Amounts are not
considered withdrawals. See "Annuity Period, Annuities: General."
All withdrawal requests must be submitted in a form acceptable to
UNUM/America and must indicate the amount, the Sub-Accounts and the Division(s)
from which the withdrawal is to be made. UNUM/America does not require that any
minimum amount be withdrawn. Telephone withdrawal requests are not available.
Withdrawals from the Variable Investment Division are made by reducing the
Participant's number of Accumulation Units in the applicable Sub-Account. In
determining the number of Accumulation Units to be reduced, UNUM/America uses
the Accumulation Unit Value next computed after UNUM/America's receipt of the
written withdrawal request.
Payment of all Variable Investment Division withdrawal amounts generally
will be made within seven days following receipt by UNUM/America of the
withdrawal request in a form acceptable to UNUM/ America. See "Market
Emergencies."
During any one calendar year, a Participant may make one transfer or
withdrawal from the Guaranteed Interest Division to the Variable Investment
Division in an amount not to exceed 20% of the Guaranteed Interest Division
Account balance.
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<PAGE>
TOTAL WITHDRAWALS
A Total Withdrawal can only be made by a Participant who has no outstanding
loans under the Contract. A Total Withdrawal of a Participant's Account will
occur when (a) the Participant or Contractholder requests the liquidation of the
Participant's entire Account balance, or (b) the amount requested results in a
remaining Participant's account balance of less than or equal to the Annual
Administrative Charge, in which case the request is treated as if it were a
request for liquidation of the Participant's entire account balance.
Any Active Life Certificate must be surrendered to UNUM/America when a Total
Withdrawal occurs. If a Contractholder resumes Contributions on behalf of a
Participant after a Total Withdrawal, the Participant will receive a new
Participation Date and Active Life Certificate.
A Participant refund under the free-look provisions is not considered a
Total Withdrawal.
PARTIAL WITHDRAWALS
A Partial Withdrawal of a Participant's Account will occur when less than a
Total Withdrawal is made from a Participant's Account.
SYSTEMATIC WITHDRAWAL OPTION
Participants who are at least age 59 1/2, are separated from service from
their employer or are disabled and certain spousal beneficiaries and alternate
payees who are former spouses may be eligible for a Systematic Withdrawal Option
("SWO") under the Contract. Under the SWO a Participant may elect to withdraw
either a monthly amount which is an approximation of the interest earned between
each payment period based upon the interest rate in effect at the beginning of
each respective payment period or a flat dollar amount withdrawn on a periodic
basis. Payments are made only from the Guaranteed Interest Account. A
Participant must have a vested pre-tax account balance of at least $10,000 in
order to select the SWO. A Participant may transfer amounts from the Variable
Investment Division to the Guaranteed Interest Division in order to support SWO
payments. These transfers, however, are subject to the transfer restrictions
described in this Prospectus and/or imposed by any applicable Plan. A one-time
fee of up to $30 may be charged to set up the SWO. This charge is waived for
total vested pre-tax account balances of $25,000 or more. More information about
SWO, including applicable fees and charges, is available in the Contracts and
Active Life Certificates as well as from UNUM/America.
MAXIMUM CONSERVATION OPTION
Under certain Contracts participants who are at least age 70 1/2 may request
that UNUM/America calculate and pay to them the minimum annual distribution
required by Sections 401(a)(9), 403(b)(10), 408(a) or 457(d) of the Code. The
Participant must complete forms as required by UNUM/America in order to elect
this option. UNUM/America will base its calculation solely on the Participant's
Account value with UNUM/America. Participants who select this option are
responsible for determining the minimum distributions amount applicable to their
non-UNUM/America contracts.
WITHDRAWAL RESTRICTIONS
Withdrawals under Section 403(b) Contracts are subject to the limitations
under Section 403(b)(11) of the Code and regulations thereof and in any
applicable Plan document. That section provides that salary reduction
Contributions deposited and earnings credited on any salary reduction
Contributions after December 31, 1988 may only be withdrawn if the Participant
has (1) died; (2) become disabled; (3) attained age 59 1/2; (4) separated from
service; or (5) incurred a hardship. Amounts accumulated in one Section
403(b)(1) contract may be transferred to another Section 403(b)(1) contract or
Section 403(b)(7) custodial account without a penalty under the Code.
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If amounts accumulated in a Section 403(b)(7) custodial account are deposited
in a Contract, such amounts will be subject to the same withdrawal restrictions
as are applicable to post-1988 salary reduction Contributions under the
Contracts. For more information on these provisions see "Federal Income Tax
Considerations."
Withdrawal requests for a Participant under Section 457(b) Plans and Plans
subject to Title I of ERISA must be authorized by the Contractholder on behalf
of a Participant. All withdrawal requests will require the Contractholder's
written authorization and written documentation specifying the portion of the
Participant's Account balance which is available for distribution to the
Participant. Withdrawal requests for Section 457(f) Plans must be requested by
the Contractholder.
As required by Section 830.105 of the Texas Education Code, withdrawal
requests by Participants in the Texas Optional Retirement Program ("ORP") are
only permitted in the event of (1) death; (2) retirement; (3) termination of
employment in all Texas institutions of higher education; or (4) attainment of
age 70 1/2. A Participant in an ORP Contract is required to obtain a certificate
of termination from the Participant's Employer before a withdrawal request can
be granted.
For withdrawal requests (other than transfers to other investment vehicles),
by Participants under Plans not subject to Title I of ERISA and non-457 Plans,
the Participant must certify to UNUM/America that one of the events listed in
the Code has occurred (and provide supporting information, if requested) and
that UNUM/America may rely on such representation in granting such withdrawal
request. See "Federal Income Tax Considerations." A Participant should consult
their tax adviser as well as review the provisions of their Plan before
requesting a withdrawal.
In addition to the restrictions noted above, a Plan may contain additional
withdrawal or transfer restrictions.
Early withdrawals, as defined under Section 72(q) and 72(t) of the Code, may
be subject to a ten percent excise tax.
DEATH BENEFITS
The payment of death benefits will be governed by the provisions of the
applicable Plan and the Code. In the event of the death of a Participant during
the Accumulation Period, UNUM/America will pay the Beneficiary, if one is
living, or the Plan the greater of the following amounts:
(1) The Net Contributions, or
(2) The Participant's Account balance less any outstanding loan
(including principal and due and accrued interest), as of the date of
notification.
If UNUM/America is not notified of the Participant's death within six months
of such death, the Beneficiary will receive the Death Benefit amount described
in paragraph (2).
A Beneficiary may elect to have the Death Benefit (1) paid as a lump sum,
(2) converted to a Payout Annuity or (3) as a combination of a lump sum payment
and a Payout Annuity.
UNUM/America will calculate the Death Benefit as of the end of the Valuation
Period during which it receives both satisfactory notification of the
Participant's death and an election of a form of Death Benefit (as described
below). Payment of a lump sum election will be made within the time period
prescribed by Federal law but in no case later than seven days following such
calculation. Payment of an annuity option will be paid in accordance with the
provisions regarding annuities. See "Annuity Period." If no election is made
within sixty days following UNUM/America's receipt of satisfactory notice of the
Participant's death, the Death Benefit will be paid in the form of a lump sum
payment and will be calculated as of the end of the Valuation Period during
which that sixtieth day occurs (and payment will be made within the time period
prescribed by Federal law but in no case later than seven days after such
calculation date).
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Satisfactory proof of death may consist of: a copy of a certified death
certificate; a copy of a certified decree of a court of competent jurisdiction
as to the finding of death; a written statement by a medical doctor who attended
the deceased at the time of death; or any other proof satisfactory to UNUM/
America.
Notwithstanding the above, if the Beneficiary is someone other than the
spouse of the deceased Participant, the Code provides that the Beneficiary may
not elect an annuity which would commence later than December 31st of the
calendar year following the calendar year of the Participant's death. If a
non-spousal Beneficiary elects to receive payment in a single lump sum, the Code
provides that such payment must be received no later than December 31st of the
fourth calendar year following the calendar year of the Participant's death.
If the Beneficiary is the surviving spouse of the deceased Participant,
distributions are not required under the Code to begin earlier than December
31st of the calendar year in which the Participant would have attained age
70 1/2. If the surviving spouse dies before the date distributions commence,
then, for purposes of determining the date distributions to the Beneficiary must
commence, the date of death of the surviving spouse is substituted for the date
of death of the Participant.
If there is no living named Beneficiary on file with UNUM/America at the
time of a Participant's death and unless the Plan directs otherwise,
UNUM/America will pay the Death Benefit to the Participant's estate in the form
of a lump sum payment, upon receipt of satisfactory proof of the Participant's
death, but only if such proof of death is received by UNUM/America no later than
the end of the fourth calendar year following the year of the Participant's
death. In such case, valuation of the Death Benefit will occur as of the end of
the Valuation Period during which due proof of death is received by
UNUM/America, and the lump sum Death Benefit will be paid within the time period
prescribed by Federal law but in no case later than seven days of that date.
DEDUCTIONS AND CHARGES
CHARGES AGAINST THE VARIABLE INVESTMENT DIVISION
Certain charges will be assessed as a percentage of the value of the net
assets of the Variable Investment Division to compensate UNUM/America for risks
assumed in connection with the Contracts.
MORTALITY AND EXPENSE RISK CHARGES
UNUM/America deducts from the net assets of the Variable Investment Division
a daily charge of 1.20% on an annual basis.
This charge is assessed both during the Accumulation Period and the Annuity
Period although, during the Annuity Period, UNUM/America will bear no mortality
risk with respect to the Annuity Options that do not involve life contingencies.
This amount is intended to compensate UNUM/America for certain Mortality and
Expense Risks UNUM/America assumes in operating the Variable Investment Division
and for providing services to the Participant. The 1.2% cumulative charge
consists of .25% for the Expense Risk and .95% for the Mortality Risk. The
relative proportion of these charges, consistent with industry practice, is
estimated and, therefore, may change based on UNUM/America's experience in
administering the Contracts. However, the total cumulative charge may not be
altered.
The Expense Risk is the risk that UNUM/America's actual expenses in issuing
and administering the Contract will be more than UNUM/America estimated. The
Mortality Risk borne by UNUM/America arises from the chance that UNUM/America's
actuarial estimate of mortality rates during the Annuity Period, as guaranteed
in the Contract, may prove erroneous and that an Annuitant may live longer than
expected. This contractual guarantee assures that neither an
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Annuitant's own longevity nor an improvement in life expectancy generally will
have any adverse effect under the Contracts. In addition, UNUM/America bears
the Mortality Risk that it guarantees to pay a Death Benefit that may be higher
than the Participant's Account balance upon the death of the Participant prior
to the Annuity Period.
UNUM/America may ultimately realize a profit from these charges to the
extent they are not needed to meet the actual expenses incurred.
CHARGES AGAINST THE CONTRACTS
The charges that UNUM/America assesses in connection with the Contracts are
described below.
ANNUAL ADMINISTRATION CHARGE
UNUM/America provides many administrative functions in connection with the
Contracts, including receiving and allocating Contributions in accordance with
the Contracts, making annuity payments when they become due, and preparing and
filing all reports required to be filed by the Variable Investment Division. In
addition, UNUM/America provides Participants with account statements and
accounting services that keep track of pre-tax monies, employee and Employer
monies, vested account balances and rollover or transferred monies.
In consideration for these administrative services, UNUM/America currently
deducts $25 (or the balance of the Participant's Account if less) per year from
each Participant's Account balance on the last Business Day of the month in
which a Participation Anniversary occurs. This charge is deducted only during
the Accumulation Period. This Annual Administration Charge is also withdrawn
from a Participant's Account balance if and when a Participant's Account is
totally withdrawn on any date other than the last Business Day of the month in
which the Participation Anniversary occurs. The Annual Administrative Charge,
which contributes to the cost of administrative expenses with respect to each
Contract, may be increased or decreased (subject to any appropriate regulatory
approvals) but UNUM/America does not anticipate a profit from such charge.
The Annual Administration Charge may be reduced or waived for those
Participants who are participating under another UNUM/America contract which
imposes an Annual Administration Charge or where UNUM/America's interest costs
or expenses are reduced due to the terms of the Contract, economies of scale or
administrative assistance provided by the Contractholder. In addition, the
Employer has the option of paying the Annual Administration charge on behalf of
the Participants under a Contract.
A Contractholder may also choose to have the Annual Administration Charge
paid only by those Participants in the Variable Investment Division. Contracts
offering this provision will typically have a declared interest rate in the
Guaranteed Interest Division which is lower than under contracts not offering
this provision. For contracts offering this provision, the Annual Administration
Charge will be withdrawn as described in this section.
PREMIUM TAXES
Certain states require that a premium tax be paid on contributions to a
variable annuity contract. Others assess a premium tax at the time of
annuitization. UNUM/America will deduct any applicable premium tax from the
Participant's Account balance at the time required by state law.
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MISCELLANEOUS
The Variable Investment Division purchases shares from the Funds at net
asset value. The net asset value reflects investment management fees and other
expenses that have already been deducted from the assets of the Funds. The
Funds' investment management fees, expenses and expense limitations, if
applicable, are more fully described in each prospectus for the Funds.
ANNUITY PERIOD
PAYOUT ANNUITIES: GENERAL
To the extent permitted by the Plan, the Participant, or the Beneficiary of
a deceased Participant, may elect to convert all or part of the Participant's
Account balance or the Death Benefit to a Payout Annuity. Payout Annuities are
available as either a Guaranteed or Variable Annuity or a combination of both.
Annuity payments from the Guaranteed Interest Division remain constant
throughout the annuity period. Annuity payments from the Variable Investment
Division fluctuate depending upon the investment experience of the applicable
Sub-Accounts. Variable Annuity payments are based upon Annuity Unit Values. See
"Annuity Payments" below and "Determination of Variable Annuity Payments" in the
Statement of Additional Information for further information.
The Annuity Commencement Date marks the date on which UNUM/America makes the
first annuity payment to an Annuitant. For Plans subject to Section 401(a)(9)(B)
of the Code, a Beneficiary must select an Annuity Commencement Date that is not
later than one year after the date of the Participant's death. A Participant or
Contractholder may select any Annuity Commencement Date for the Annuitant which
is then reflected in the Retired Life Certificate. However, since an annuity
payment is considered a distribution under the Code, selection of an Annuity
Commencement Date may be affected by the distribution restrictions under the
Code and the minimum distribution requirements under Section 401(a)(9) of the
Code. See "Federal Income Tax Considerations." The selection of an Annuity
Commencement Date, the annuity option, the amount of the Payout Annuity and
whether the amount is to be paid as a Guaranteed or a Variable Annuity must be
made by the Participant in writing, in a form satisfactory to UNUM/America, and
received by UNUM/America at least 30 days in advance of the Annuity Commencement
Date. After the Annuity Commencement Date an Annuitant may not change either
their annuity option or the type (i.e., variable or guaranteed) of Payout
Annuity for any amount applied toward the purchase of an annuity.
The Annuity Conversion Amount is either the Participant's Account balance,
or a portion thereof, or the Death Benefit plus interest, as of the Annuity
Payment Calculation Date. The initial Annuity Payment Calculation Date will be
the first day of the calendar month next following the Annuity Commencement Date
for a Guaranteed Annuity and 10 Business Days prior to the first day of the
calendar month next following the Annuity Commencement Date for a Variable
Annuity. For Guaranteed Annuities, the Annuity Payment Calculation Date is the
first day of a calendar month. For Variable Annuities, the Annuity Payment
Calculation Date is the date 10 Business Days prior to the first day of a
calendar month; the 10 Business Days being necessary to calculate the amount of
the Payout Annuity payments and to mail the checks in advance of their
first-of-month due dates.
If the Participant's Account balance or the Beneficiary's Death Benefit is
less than $2,000.00 or if the amount of the first scheduled payment is less than
$20.00, UNUM/America may, at its option, cancel the annuity and pay the
Participant or Beneficiary the entire amount in a lump sum.
PAYOUT ANNUITY PAYMENTS
The amount of each annuity payment will depend upon the Annuity Conversion
Amount applied to an annuity option, the form of the annuity option selected and
the age of the Participant
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at the Annuity Commencement Date. Unless otherwise notified, UNUM/America will
apply the Participant's Account balance in the Guaranteed Interest Division
toward a Guaranteed Annuity and the Participant's Account balance in the
Variable Investment Division toward a Variable Annuity.
The payment amount for a Guaranteed Annuity is determined by dividing the
Participant's Annuity Conversion Amount in the Guaranteed Interest Division as
of the initial Annuity Payment Calculation Date by the applicable Annuity
conversion Factor as defined in the Contract.
The initial payment amount for a Variable Annuity is determined by dividing
the Participant's Annuity Conversion Amount(s) in the applicable Sub-Account(s)
as of the initial Annuity Payment Calculation Date by the applicable Annuity
Conversion Factor as defined in the Contract. The amounts of subsequent payments
vary depending on the investment experience of the Sub-Account(s) and the
interest rate option selected by the Contractholder or Annuitant. The payment
amounts will not be affected by UNUM/America's mortality or expense experience
and will not be reduced by an Annual Administration Charge. For additional
information on the determination of subsequent payment amounts, refer to the
Statement of Additional Information, "Determination of Variable Annuity
Payments."
PAYOUT ANNUITY OPTIONS
UNUM/America offers a range of annuity options including, but not limited
to, the following:
LIFE ANNUITY
Payments are made monthly during the lifetime of the Annuitant, and the
annuity terminates with the last payment preceding death.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10, 15 OR 20 YEARS
Payments are made monthly during the lifetime of the Annuitant with a
monthly payment guaranteed to the Beneficiary for the remainder of the selected
number of years, if the Annuitant dies before the end of the period selected.
Payments under this annuity option are smaller than a Life Annuity without a
guaranteed payment period.
JOINT AND SURVIVOR ANNUITIES
Payments are made monthly during the joint lifetime of the Annuitant and a
designated second person.
PAYMENTS GUARANTEED FOR 10, 15 OR 20 YEARS
Annuity payments are guaranteed monthly for the selected number of years.
While there is no right to make any total or partial withdrawals during the
Annuity Period, an Annuitant who has selected this annuity option as a Variable
Annuity or a surviving Beneficiary may request at any time during the payment
period that the present value of any remaining installments be paid in one lump
sum.
Under Qualified Plans, any annuity selected must be payable over a period
that does not extend beyond the life expectancy of the Participant and the
Participant's designated Beneficiary. If the Beneficiary is someone other than
the Participant's spouse, the present value of payments to be made to the
Participant must be more than 50% of the present value of the total payments to
be made to the Participant and the Beneficiary.
In the event that an Annuitant dies before the end of a designated Annuity
period, the Beneficiary, if any, or the Annuitant's estate will receive any
remaining payments due under the annuity option in effect.
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FEDERAL INCOME TAX CONSIDERATIONS
The following discussion assumes that the contracts will qualify as annuity
contracts for Federal income tax purposes. The description of the Federal income
tax status of amounts received under the Contracts is not exhaustive and is not
a intended to cover all situations. Contractholders and Participants should seek
advice from their tax advisers on a regular basis as to the application of
Federal (and, where applicable, state and local) tax laws to amounts received by
them or their Beneficiaries under the Contracts. All dollar amounts and
percentages stated below are subject to change according to Federal law. For
additional Federal Income Tax Considerations, please refer to the Statement of
Additional Information.
NON-QUALIFIED PLANS
Under a non-qualified Plan, an individual may make Contributions to the
Contract which are neither tax-deductible or tax deferred. The earnings on the
contributions accumulate on a tax-deferred basis until withdrawn. Non-qualified
Plans investing in annuity contracts are subject to the Federal taxation rules
of Section 72 of the Code.
The Code does not limit the Participant's contributions to a Section 72
plan. There are no Code restrictions on withdrawals or minimum age when the
Participant must begin withdrawals.
SECTION 401(A) PLANS
Section 401(a) of the Code provides special tax treatment for pension,
profit sharing and stock bonus Plans established by employers for their
employees. Contributions to a Section 401(a) Plan and any earnings attributable
to such Contributions are currently excluded from the Participant's income.
Section 401(a) Plans are subject to, among other things, limitations on: maximum
contributions, minimum coverage and participation, minimum funding, minimum
vesting requirements and distribution requirements. The specific limitations are
outlined in the plan document adopted by the employer.
A Participant who makes a withdrawal from a Section 401(a) program must
include that amount in current income. In addition, Section 401(k)(2) of the
Code requires that salary reduction Contributions made and/or earnings credited
on any salary reduction Contributions may not be withdrawn from the
Participant's Section 401(k) program prior to the Participant having (1)
attained age 59 1/2, (2) separated from service, (3) become disabled (4) died or
(5) incurred a hardship. Hardship withdrawals may not include any income
credited after December 31, 1988 that is attributable to any salary reduction
Contributions. In addition, Section 402 of the Code permits tax-free rollovers
from Section 401(a) programs to individual retirement annuities or certain other
Section 401(a) programs under certain circumstances.
SECTION 403(B) PLANS
A Participant who is an employee of a hospital or other tax-exempt
organization described in Section 501(c)(3) or 501(e) of the Code may exclude
from current earnings amounts contributed to a Section 403(b) program. Under the
terms of a Section 403(b) program, an Employer may make Contributions directly
to the program on behalf of the Participant, the Participant may enter into a
salary reduction agreement with the Participant's Employer authorizing the
Employer to contribute a percentage of the Participant's salary to the program
and/or the Participant may authorize the Employer to make after tax
Contributions to the program. Currently, the Code permits employees to defer up
to $9,500 of their income through salary agreements. All Contributions made to
the Section 403(b) program are subject to the limitations described in Code
Sections 402(g) regarding elective deferral amounts, 403(b)(2) regarding the
maximum exclusion allowance, and 415(a)(2) and 415(c) regarding the limitations
on annual additions.
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A Participant who makes a withdrawal from their Section 403(b) program must
include that amount in current income. In addition, Section 403(b)(11) of the
Code requires that salary reduction Contributions made and/or earnings credited
on any salary reduction Contributions after December 31, 1988 may not be
withdrawn from the Participant's Section 403(b) program prior to the Participant
having (1) attained age 59 1/2, (2) separated from service, (3) become disabled
(4) died or (5) incurred a hardship. Hardship withdrawals may not include any
income credited after December 31, 1988 that is attributable to any salary
reduction Contributions. The Internal Revenue Service has ruled (Revenue Ruling
90-24) that amounts may be transferred between Section 403(b) investment
vehicles as long as the transferred funds retain withdrawal restrictions at
least as restrictive as that of the transferring investment vehicle. In
addition, Section 403(b)(8) of the Code permits tax-free rollovers from Section
403(b) programs to individual retirement annuities or other Section 403(b)
programs under certain circumstances. Qualified distributions eligible for
rollover treatment may be subject to a 20% federal tax withholding depending on
whether or not the distribution is paid directly to an eligible retirement plan.
SECTION 408 PLANS (IRAS)
Under current law, individuals may contribute and deduct the lesser of
$2,000 or 100% of their compensation to an IRA. In the case of a spousal IRA,
the maximum deduction is the lesser of $2,250 or 100% of compensation. The
deduction for contributions is phased out for individuals who are considered
active participants under qualified Plans and whose Adjusted Gross Income
attains a certain level. For a single person the $2,000 deduction is available
when the taxpayers Adjusted Gross Income is $25,000 or less. For each $50 that
the taxpayer's Adjusted Gross Income rises above $25,000, the taxpayer's
deductible IRA is reduced by $10. When the single taxpayer's Adjusted Gross
Income is $35,000 or greater, a tax deduction for an IRA is no longer available.
For a married couple filing jointly, the threshold level is $40,000 rather than
$25,000. For a married person filing separately, the threshold is $0.
In addition, certain amounts distributed from Section 401(a) and 403(b)
Plans may be rolled over to an IRA on a tax-free basis if done in a timely
manner (within 60 days of the Participant's receipt of the distribution). The
limitations on contributions discussed above do not apply to amounts rolled over
to an IRA.
All Participants in an IRA receive an IRA Disclosure. This document explains
the tax rules that apply to IRAs in greater detail.
ELIGIBLE SECTION 457 PLANS
Eligible Section 457 Plans may be established by state and local governments
as well as private tax-exempt organizations (other than churches). Participants
may contribute on a before tax basis to a deferred compensation Plan of their
employer in accordance with the employer's Plan and Section 457 of the Code.
Section 457 places limitations on the amount of contributions to these Plans.
Generally, the limitation is one-third of includable compensation or $7,500
whichever is less. In the Participant's final year of employment the $7,500
limit is increased to $15,000.
Participants in an Eligible 457 Plan may not receive a withdrawal or other
distribution from their Plan except in the event of separation of service from
the employer, attainment of age 70 1/2, or when faced with an unforeseen
emergency. The Contractholder's Plan may further restrict the Participant's
rights to a withdrawal.
An employee electing to participate in an Eligible Section 457 Plan should
understand that their rights and benefits are governed strictly by the terms of
the Plan, that they are in fact a general creditor of the Employer under the
terms of the Plan, that the Employer is legal owner of any contract issued with
respect to the Plan and that the Employer retains all rights under the contract
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issued with respect to the Plan. Participants under Eligible Section 457 Plans
should look to the terms of their Plan for any charges in regard to
participation other than those disclosed in this Prospectus.
SECTION 457(F) PLANS
Section 457(f) Plans may be established by state and local governments as
well as private tax-exempt organizations. Employers and participants may
contribute on a before-tax basis to a deferred compensation Plan of their
employer in accordance with the employer's Plan. Section 457(f) does not place
limitations on the amount of contributions to these Plans; however, the Internal
Revenue Service may review these plans to determine if the deferral amount is
acceptable to the IRS based on the nature of the 457(f) Plan.
Participants in a 457(f) Plan may not receive a withdrawal or other
distribution from their 457(f) Plan until a distributable event occurs. The Plan
will define such events.
An employee electing to participate in a Section 457(f) Plan should
understand that their rights and benefits are governed strictly by the terms of
the Plan, that they are in fact a general creditor of the Employer under the
terms of the Plan, that the Employer is legal owner of any contract issued with
respect to the Plan and that the Employer retains all rights under the contract
issued with respect to the Plan. Participants under Section 457(f) Plans should
look to the terms of their Plan for any charges in regard to participating other
than those disclosed in this Prospectus.
TAXATION OF ANNUITIES: GENERAL
In Qualified Plans such as 401(a), 403(b), 408 and Eligible 457, the
Participant is not taxed on the value in their accounts until they receive
payments from the account. In some situations, default or forgiveness of a loan
will result in taxable income. Distributions from all these plans are taxed
under the rules of Sections 72 and 402 of the Code.
TAXATION PRIOR TO THE ANNUITY COMMENCEMENT DATE
Section 72 of the Code provides that a total or partial withdrawal prior to
the Annuity Commencement Date will be taxable to the extent the amount of the
income in the Participant's account exceeds the Participant's investment in the
Participant's account. In general, distributions from a Participant's account
under Sections 401(a), 403(b) and 408 Plans under which the Participant made
after-tax contributions will be taxable according to a formula based on the
ratio of the Participant's investment in the contract to the total value of the
Participant's account balance as of the date of the distribution. Under an
Eligible 457 plan the Participant is taxed on the value when it is made
available to the Participant. In a 457(f) plan the participant is taxed when
their right to a distribution is no longer subject to a substantial risk of
forfeiture.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS
Section 72(q) and 72(t) impose a 10% excise tax on certain premature
distributions for non-qualified and Section 401(a), 403(b) and 408 Plans. The
penalty tax will not apply to distributions made on account of the Participant
having (i) attained age 59 1/2; (ii) become disabled; or (iii) died. The penalty
tax will also not apply under 401(a) and 403(b) retirement plans where a
Participant separates from service after age 55. In addition, the penalty does
not apply if the distribution is received as a series of substantially equal
periodic payments made for the life (or life expectancy) of the Participant or
the joint lives (or life expectancies) of the Participant and a designated
Beneficiary. The 10% excise tax is an additional tax; it does not apply to any
money that the Participant receives as a return of their cost basis. The 10%
excise tax does not apply to Section 457 Plans.
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MINIMUM DISTRIBUTIONS
Participants in Plans subject to Code Sections 401(a), 403(b), 408 and
Eligible 457 Plans are subject to Minimum Distribution Rules. For a Participant
who attains age 70 1/2 after December 31, 1987, distributions must begin by
April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2. For a Participant who attains age 70 1/2 before
January 1, 1988, distributions must begin on the April 1 of the calendar year
following the later of (1) the calendar year in which the Participant attains
age 70 1/2 or (2) the calendar year in which the Participant retires.
VOTING RIGHTS
UNUM/America is the legal owner of the shares of the Funds held by the
Variable Investment Division. As such, UNUM/America is entitled to vote those
Fund shares with respect to issues such as the election of a Fund's directors,
ratification of a Fund's choice of independent auditors and other matters
required by the 1940 Act to be voted on by shareholders.
In those years in which the Funds hold a shareholder meeting, UNUM/America
will solicit from Contractholders voting instructions with respect to Fund
shares held by the Variable Investment Division. Each Contractholder will
receive a number of votes in proportion to the Contractholder's investment in
the corresponding Sub-Account as of the record date established by the Fund.
During the Accumulation Period, a Participant has the right to instruct
Contractholders as to the votes attributable to their Participant Account
balance in the Sub-Accounts. Annuitants have similar rights with respect to the
annuity amount attributable to the Sub-Accounts.
UNUM/America will furnish Contractholders with sufficient Fund proxy
material and voting instruction forms for all Participants who have voting
rights under the Contract. UNUM/America will vote those Fund shares attributable
to the Contract for which UNUM/America receives no voting instructions in the
same proportion as UNUM/America will vote shares for which UNUM/America has
received instructions. UNUM/America will vote shares attributable to amounts
UNUM/America may have in the Variable Investment Division in the same proportion
as votes that UNUM/America receives from Contractholders. If the federal
securities laws or regulations or any interpretation of them changes so that
UNUM/America is permitted to vote shares of the Fund in UNUM/America's own right
or to restrict Participant voting, UNUM/America may do so.
Fund shares may be held by separate accounts of insurance companies
unaffiliated with UNUM/ America. Fund shares held by those separate accounts
will be voted, in most cases, according to the instruction of owners of
insurance policies and contracts issued by those other unaffiliated insurance
companies. This will dilute the effect of the voting instructions of the
Contractholders in the Variable Investment Division. UNUM/America does not
foresee any disadvantage to this. Pursuant to conditions imposed in connection
with regulatory relief, the Fund's Board of Directors has an obligation to
monitor events to identify conflicts that may arise and to determine what
action, if any, should be taken. For further information, see the prospectuses
for the Funds.
OTHER CONTRACT PROVISIONS
RIGHTS RESERVED BY UNUM/AMERICA
UNUM/America reserves the right, subject to compliance with applicable law,
including approval by the Contractholder or the Participants if required by law,
(1) to create additional Sub-Accounts in the Variable Investment Division, (2)
to combine or eliminate Sub-Accounts in the Variable Investment Division, (3) to
transfer assets from one Sub-Account in the Variable Investment Division to
another, (4) to transfer assets to the General Account and other separate
accounts, (5) to cause the deregistration and subsequent re-registration of the
Variable Investment Division
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under the Investment Company Act of 1940, (6) to operate the Variable Investment
Division under a committee and to discharge such committee at any time, and
(7) to eliminate any voting rights which the Contractholder or the Participants
may have with respect to the Variable Investment Division, (8) to amend the
Contract to meet the requirements of the Investment Company Act of 1940 or other
federal securities laws and regulations, (9) to operate the Variable Investment
Division in any form permitted by law, (10) to substitute shares of another
fund for the shares held by a Sub-Account, and (11) to make any change required
by the Internal Revenue Code, ERISA or the Securities Act of 1933. Participants
will be notified if any changes are made that result in a material change in the
underlying investments of the Variable Investment Division.
ASSIGNABILITY
The Contracts are not assignable without UNUM/America's prior written
consent. In addition, a Participant, a Beneficiary or an Annuitant may not,
unless permitted by law, assign or encumber any payment due under the Contract.
MARKET EMERGENCIES
While UNUM/America may not suspend the right of redemption or delay payment
from the Variable Investment Division for more than the time period allowed
under Federal law but in no case longer than seven days, the following events
may delay payment for more than seven days: (1) any period when the New York
Stock Exchange is closed (other than customary weekend and holiday closings);
(2) any period when trading in the markets normally utilized is restricted, or
an emergency exists as determined by the Securities and Exchange Commission, so
that disposal of investments or determination of the Accumulation Unit Value or
Variable Annuity payment value is not reasonably practicable; or (3) for such
other periods as the Securities and Exchange Commission by order may permit for
the protection of the Participants.
FREE-LOOK PERIOD
Participants under Sections 403(b), 408 and certain Non-qualified Plans will
receive an Active Life Certificate upon UNUM/America's receipt of a duly
completed participation enrollment form. If the Participant chooses not to
participate under the Contract, the Participant may exercise the free-look right
by sending a written notice to UNUM/America that the Participant does not wish
to participate under the Contract, within 10 days after the date the Active Life
Certificate is received by the Participant. For purposes of determining the date
on which the Participant has sent written notice, the postmark date will be
used.
If a Participant exercises the free-look right in accordance with the
foregoing procedure, UNUM/America will refund in full the Participant's
aggregate Contributions less aggregate withdrawals made on behalf of the
Participant or, if greater, with respect to Contributions to the Variable
Investment Division, the Participant's Account balance in the Variable
Investment Division on the date the Participant's written notice is received
by UNUM/America.
GUARANTEED INTEREST DIVISION
GENERAL
Contributions to the Guaranteed Interest Division become part of
UNUM/America's General Account. The General Account is subject to regulation and
supervision by the Maine Insurance Department as well as the insurance laws and
regulations of the jurisdictions in which the Contracts are distributed. In
reliance on certain exemptions, exclusions and rules, UNUM/America has not
registered the interests in the General Account as a security under the
Securities Act of 1933 and has not registered the General Account as an
investment company under the 1940 Act.
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<PAGE>
Accordingly, neither the General Account nor any interests therein are
subject to regulation under the 1933 Act or the 1940 Act. UNUM/America has been
advised that the staff of the SEC has not made a review of the disclosures which
are included in this prospectus which relate to the General Account and the
Guaranteed Interest Division. These disclosures, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. This
prospectus is generally intended to serve as a disclosure document only for
aspects of the Contract involving the Variable Investment Division and contains
only selected information regarding the Guaranteed Interest Division. Complete
details regarding the Guaranteed Interest Division are in the Contract.
Amounts contributed to the Guaranteed Interest Division are guaranteed a
minimum interest rate of at least 3.0%. UNUM/America will also declare in
advance a guaranteed interest rate which will be effective for all amounts in
the Participant's Account balance in the Guaranteed Interest Division during the
designated year. This rate will never be less than the minimum rate of interest.
UNUM/America may also declare in advance separate interest rate guarantees which
are in excess of the guaranteed interest rate for some or all of the
Participant's Account balance in the Guaranteed Interest Division for specific
period(s) during the designated year. A Participant who makes a Contribution to
the Guaranteed Interest Division is credited with interest from the day of
deposit in the Guaranteed Interest Division.
PARTICIPANT'S ACCOUNT BALANCE IN THE GUARANTEED INTEREST DIVISION
The Participant's Account balance in the Guaranteed Interest Division on any
Valuation Date will reflect the amount and frequency of any Contributions
allocated to the Guaranteed Interest Division, plus any transfers from the
Variable Investment Division and interest credited to the Guaranteed Interest
Division, less any withdrawals, Annual Administration Charges and loan-related
charges allocated to the Guaranteed Interest Division and any transfers to the
Variable Investment Division.
TRANSFERS, TOTAL AND PARTIAL WITHDRAWALS
During any one calendar year a Participant may make one withdrawal or
transfer from the Guaranteed Interest Division in an amount not to exceed 20% of
the Guaranteed Interest Division account balance. Any Participant stating their
intention to liquidate their Guaranteed Interest Division account balance,
however, may make one withdrawal request for five consecutive calendar years
from their Guaranteed Interest Division account balance in the following
percentage:
<TABLE>
<CAPTION>
PERCENTAGE OF GUARANTEED
YEAR REQUEST INTEREST DIVISION
RECEIVED BY UNUM AVAILABLE
- ------------------- -------------------------
<S> <C>
1 20 %
2 25 %
3 33.33%
4 50 %
5 100 %
</TABLE>
The five consecutive withdrawals may mot be submitted more frequently than
twelve months apart. UNUM/America also reserves the right to require that any
Participant stating their intention to liquidate their Guaranteed Interest
Division Account Balance stop Contributions to the Contract.
In addition, a Participant may withdraw 100% of their Guaranteed Interest
Division account balance at any time provided that UNUM/America receives
satisfactory proof of the following events: (a) the Participant has attained age
59 1/2; (b) the Participant has died; (c) the Participant has incurred a
disability as defined under the Contract; (d) the Participant has separated from
service from their Employer; and (e) the Participant has incurred a financial
hardship. A Contractholder has the option of choosing to eliminate financial
hardship as an event entitling the Participant to a 100% withdrawal from the
Contract and also to add a requirement that the Participant be 55 years of age
30
<PAGE>
upon separation from service to be entitled to a 100% withdrawal from the
Guaranteed Interest Division. Contractholders choosing one or both of these
optional provisions will receive a higher declared interest rate on the
Guaranteed Interest Division than will Contracts without these provisions.
LOANS
During a Participant's Accumulation Period, a Participant, whose Plan
permits loans, may apply for a loan under the Contract by completing a loan
application available from UNUM/America. Loans are secured by the Participant's
Account balance in the Guaranteed Interest Division. The amounts and terms of a
Participant loan may be subject to the restrictions imposed under Section 72(p)
of the Code, Title I of ERISA, and any applicable Plans. With respect to Plans
subject to Title I of ERISA, the initial amount of a Participant loan may not
exceed the lesser of 50% of the Participant's vested Account balance in the
Guaranteed Interest Division or $50,000 and must be at least $1,000.00. A
Participant in a Plan that is not subject to ERISA may borrow up to $10,000 of
their vested Account balance without regard to the 50% limitation stated above.
A Participant may have only one loan outstanding at any time and may not
establish more than one loan in any six month period. Amounts serving as
collateral for the loan are not subject to the minimum interest rate under the
Contract and will always accrue interest at a rate which is 3% below the loan
interest rate. A one-time fee of up to $50 may be charged to set up a loan. In
addition, if a Participant defaults on the loan repayment, a loan default charge
of up to 5% will be deducted from the outstanding balance of the loan amount
due. More information about loans, including interest rates and applicable fees
and charges, is available in the Contracts, Active Life Certificates, and
Annuity Loan Agreement as well as from UNUM/America.
DEFERRAL PERIODS
If a payment is to be made from the Guaranteed Interest Division,
UNUM/America may defer the payment for the period permitted by the law of the
jurisdiction in which the Contract is distributed, but in no event, for more
than 6 months after a written election is received by UNUM/America. During the
period of deferral, interest at the then current interest rate will continue
to be credited to a Participant's Account in the Guaranteed Interest Division.
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<PAGE>
TABLE OF CONTENTS FOR
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
DEFINITIONS 2
DETERMINATION OF ACCUMULATION UNIT VALUES 2
DETERMINATION OF VARIABLE ANNUITY PAYMENTS 3
PERFORMANCE CALCULATIONS 4
TAX LAW CONSIDERATIONS 9
DISTRIBUTION OF CONTRACTS 11
CUSTODIAN 11
INDEPENDENT AUDITORS/ACCOUNTANTS 11
FINANCIAL STATEMENTS 12
Financial Statements of Variable Investment Division
Financial Statements of UNUM/America
</TABLE>
32
