<PAGE> 1
As filed with the Securities and Exchange
Commission on April 29, 1998.
Registration No. 33-79112
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 5
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT A
(Exact name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
(Formerly, First North American Life Assurance Company)
(Name of Depositor)
Corporate Center at Rye
555 Theodore Fremd Avenue, Suite C-209
Rye, New York 10580-9966
(Address of Depositor's Principal Executive Offices)
(914) 921-1020
(Depositor's Telephone Number Including Area Code)
A. Scott Logan
President
The Manufacturers Life Insurance
Company of New York
Corporate Center at Rye
555 Theodore Fremd Avenue
Suite C-209
Rye, New York 10580
(Name and Address of Agent for Service)
Copy to:
J. Sumner Jones, Esq.
Jones & Blouch, L.L.P.
1025 Thomas Jefferson St. N.W.
Suite 405 West
Washington, D.C. 20007-0805
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/X/ on May 1, 1998 pursuant to paragraph (b)(1) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)
/ / 75 days after filing pursuant to paragraph (a)
/ / on [date] pursuant to paragraph (a)(1) of Rule 485
<PAGE> 2
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
N-4 Item Caption in Prospectus
Part A
1.-------------------------Cover Page
2.-------------------------Special Terms
3.-------------------------Summary
4.-------------------------Performance Data;
Financial Statements
5.-------------------------General Information about
The Manufacturers Life Insurance Company of New York
The Manufacturers Life Insurance Company of
New York Separate Account A
Manufacturers Investment Trust
6.-------------------------Charges and Deductions;
Withdrawal Charge;
Administration Fees;
Mortality and Expense Risk
Charge; Taxes; Appendix A; Appendix B
7.-------------------------Accumulation Provisions;
Company Approval;
Purchase Payments;
Accumulation Units;
Net Investment Factor;
Transfers Among
Investment Options;
Special Transfer Services - Dollar Cost Averaging;
Asset Rebalancing Program;
Withdrawals;
Special Withdrawal Services - Income Plan;
Contract Owner Inquiries;
Other Contract Provisions;
Ownership; Beneficiary;
Modification;
8.-------------------------Annuity Provisions; General;
Annuity Options; Determination of Amount of the First
Variable Annuity Payment;
Annuity Units and the Determination of Subsequent
Variable Annuity Payments;
Transfers After Maturity Date
<PAGE> 3
9.-------------------------Accumulation Provisions;
Death Benefit Before
Maturity Date; Annuity
Provisions; Death Benefit
After Maturity Date
10.------------------------Accumulation Provisions;
Purchase Payments; Accumulation Units;
Value of Accumulation Units; Net Investment Factor;
Distribution of Contracts
11.------------------------Withdrawals; Accumulation Provisions;
Purchase Payments; Other Contract
Provisions; Ten Day Right to Review
12.------------------------Federal Tax Matters; Introduction;
The Company's Tax Status;
Taxation of Annuities in General;
Diversification Requirements;
Qualified Retirement Plans
13.------------------------Legal Proceedings
14.------------------------Statement of Additional
Information - Table of Contents
Part B---Caption in Statement of Additional Information
15.------------------------Cover Page
16.------------------------Table of Contents
17.------------------------General History and Information.
18.------------------------Services-Accountants;
Services-Servicing Agent
19.------------------------Not Applicable
20.------------------------Principal Underwriter
21.------------------------Performance Data
22.------------------------Not Applicable
23.------------------------Financial Statements
<PAGE> 4
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW
YORK Annuity Service Office and Mailing Address:
Corporate Center at Rye
555 Theodore Fremd Avenue, Suite C-209
Rye, New York 10580-9966
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT A
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
This Prospectus describes a flexible purchase payment individual
deferred combination fixed and variable annuity contract (the "contract") issued
by The Manufacturers Life Insurance Company of New York, formerly First North
American Life Assurance Company (the "Company"), a stock life insurance company
organized under the laws of the state of New York. The contract is designed for
use in connection with retirement plans which may or may not qualify for special
Federal income tax treatment.
The contract provides for the accumulation of contract values and the
payment of annuity benefits on a variable and/or fixed basis. The contract
offers forty investment options: thirty-five variable and five fixed. The
variable portion of the contract value and annuity payments, if selected on a
variable basis, will vary according to the investment performance of the
sub-accounts of The Manufacturers Life Insurance Company of New York Separate
Account A, formerly NASL Variable Account (the "Variable Account"). The Variable
Account is a separate account established by the Company. Purchase payments and
earnings on those purchase payments may be allocated to and transferred among
one or more of thirty-five sub-accounts of the Variable Account. The assets of
each sub-account are invested in shares of Manufacturers Investment Trust,
formerly the NASL Series Trust (the "Trust"), a mutual fund having an investment
portfolio for each sub-account of the Variable Account (see the accompanying
Prospectus of the Trust). Fixed contract values may be accumulated under one,
three, five and seven year fixed account investment options and a dollar cost
averaging fixed account investment option. Except as specifically noted herein
and as set forth under the caption "FIXED ACCOUNT INVESTMENT OPTIONS" below,
this Prospectus describes only the variable portion of the contract.
Additional information about the variable portion of the contract and
Variable Account is contained in a Statement of Additional Information, dated
the same date as this Prospectus, which has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated herein by reference. The
Statement of Additional Information is available without charge upon request by
writing the Company at the above address or telephoning (914) 921-1020. In
addition, the SEC maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding registrants that file electronically with the SEC.
The table of contents for the Statement of Additional Information is included on
page 40 of this Prospectus.
Shares of the Trust are not deposits or obligations of, or guaranteed
or endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS INFORMATION ABOUT THE VARIABLE ACCOUNT AND THE VARIABLE PORTION OF THE
CONTRACT THAT A PROSPECTIVE PURCHASER SHOULD KNOW BEFORE INVESTING.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1998.
V24. PR0598
<PAGE> 6
TABLE OF CONTENTS
SPECIAL TERMS........................................ 3
SUMMARY ............................................. 5
GENERAL INFORMATION ABOUT THE
MANUFACTURES LIFE INSURANCE COMPANY OF
NEW YORK,
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NEW YORK SEPARATE ACCOUNT A
AND MANUFACTURERS INVESTMENT TRUST 11
The Manufacturers Life Insurance Company of New York 11
The Manufacturers Life Insurance Company of New York
Separate Account A................................ 11
Manufacturers Investment Trust.................... 11
DESCRIPTION OF THE CONTRACT.......................... 16
ACCUMULATION PROVISIONS .......................... 16
Purchase Payments ........................... 16
Accumulation Units .......................... 17
Value of Accumulation Units ................. 17
Net Investment Factor ....................... 17
Transfers Among Investment Options .......... 18
Maximum Number of Investment Options......... 18
Special Transfer Services -
Dollar Cost Averaging..................... 18
Asset Rebalancing Program.................... 18
Withdrawals.................................. 19
Special Withdrawal Services -
the Income Plan........................... 20
Loans........................................ 20
Death Benefit Before Maturity Date........... 21
ANNUITY PROVISIONS ............................... 22
General ..................................... 22
Annuity Options ............................. 22
Determination of Amount of the First Variable
Annuity Payment.............................. 23
Annuity Units and the Determination of
Subsequent Variable Annuity Payments ........ 23
Transfers After Maturity Date ............... 24
Death Benefit on or After Maturity Date...... 24
OTHER CONTRACT PROVISIONS ........................ 24
Ten Day Right to Review ..................... 24
Ownership ................................... 24
Beneficiary ................................. 25
Annuitant.................................... 25
Modification ................................ 25
Company Approval ............................ 25
Misstatement and Proof of Age, Sex or Survival 25
FIXED ACCOUNT INVESTMENT OPTIONS.................. 26
CHARGES AND DEDUCTIONS .............................. 28
Withdrawal Charges................................ 28
Administration Fees.............................. 29
Mortality and Expense Risk Charge ................ 30
Taxes ............................................ 30
FEDERAL TAX MATTERS ................................. 30
INTRODUCTION ..................................... 30
THE COMPANY'S TAX STATUS ......................... 31
TAXATION OF ANNUITIES IN GENERAL ................. 31
Tax Deferral During Accumulation Period...... 31
Taxation of Partial and Full Withdrawals..... 32
Taxation of Annuity Payments................. 33
Taxation of Death Benefit Proceeds........... 33
Penalty Tax on Premature Distributions....... 34
Aggregation of Contracts..................... 34
QUALIFIED RETIREMENT PLANS........................... 34
Qualified Plan Types......................... 35
Direct Rollovers............................. 37
FEDERAL INCOME TAX WITHHOLDING.................... 37
GENERAL MATTERS...................................... 37
Tax Deferral...................................... 37
Performance Data.................................. 37
Financial Statements.............................. 37
Asset Allocation and Timing Services.............. 38
Distribution of Contracts ........................ 38
Contract Owner Inquiries.......................... 38
Confirmation Statements........................... 38
Legal Proceedings ................................ 39
Other Information ................................ 39
Year 2000 Issues.................................. 39
STATEMENT OF ADDITIONAL INFORMATION
Table of Contents.................................. 39
APPENDIX A
Examples of Calculation of Withdrawal Charge...... 40
2
<PAGE> 7
SPECIAL TERMS
The following terms as used in this Prospectus have the indicated
meanings:
Accumulation Unit - A unit of measure that is used to calculate the
value of the variable portion of the contract before the maturity date.
Annuitant - Any natural person or persons whose life is used to
determine the duration of annuity payments involving life contingencies. If the
contract owner names more than one person as an "annuitant," the second person
named shall be referred to as "co-annuitant." The "annuitant" and "co-annuitant"
will be referred to collectively as "annuitant." The "annuitant" is as
designated on the contract specification page or in the application, unless
changed.
Annuity Option - The method selected by the contract owner (or as
specified in the contract if no selection is made) for annuity payments made by
the Company.
Annuity Service Office - The service office of the Company is Corporate
Center at Rye, 555 Theodore Fremd Avenue, Suite C-209, Rye, New York 10580-9966.
Annuity Unit - A unit of measure that is used after the maturity date
to calculate variable annuity payments.
Beneficiary - The person, persons or entity entitled to the death
benefit under the contract upon the death of a contract owner or, in certain
circumstances, an annuitant. The beneficiary is as specified in the application,
unless changed. If there is a surviving contract owner, that person will be
deemed the beneficiary (see also "Successor Owner").
Contingent Beneficiary - The person, persons or entity to become the
beneficiary if the beneficiary is not alive. The contingent beneficiary is as
specified in the application, unless changed.
Contract Anniversary - The anniversary of the contract date.
Contract Date - The date of issue of the contract.
Contract Value - The total of the investment account values and, if
applicable, any amount in the loan account attributable to the contract.
Contract Year - The period of twelve consecutive months beginning on
the contract date or any anniversary thereof.
Debt - Any amounts in the loan account attributable to the contract
plus any accrued loan interest. The loan provision is applicable to certain
qualified contracts only.
Due Proof of Death - Due Proof of Death is required upon the death of
the contract owner or annuitant, as applicable. One of the following must be
received at the Annuity Service Office:
(a) A certified copy of a death certificate;
(b) A certified copy of a decree of a court of competent jurisdiction
as to the finding of death; or
(c) Any other proof satisfactory to us.
Death benefits will be paid within 7 days of receipt of due proof of death and
all required claim forms by the Annuity Service Office.
Fixed Annuity - An annuity option with payments which are predetermined
and guaranteed as to dollar amount.
General Account - All the assets of the Company other than assets in
separate accounts.
Investment Account - An account established by the Company which
represents a contract owner's interest in an investment option prior to the
maturity date.
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<PAGE> 8
Investment Account Value - The value of a contract owner's investment
in an investment account.
Investment Options - The investment choices available to contract
owners. Currently, there are thirty-five variable and five fixed investment
options under the contract.
Loan Account - The portion of the general account that is used for
collateral when a loan is taken.
Market Value Charge - A charge that may be assessed if amounts are
withdrawn or transferred from the three, five or seven year investment options
prior to the end of the interest rate guarantee period.
Maturity Date - The date on which annuity benefits commence. The
maturity date is the date specified on the contract specifications page and is
generally the first day of the month following the later of the annuitant's 90th
birthday or the tenth contract anniversary, unless changed.
Net Purchase Payment - The purchase payment less the amount of premium
tax, if any.
Non-Qualified Contracts - Contracts which are not issued under
qualified plans.
Owner or Contract Owner - The person, persons (co-owner) or entity
entitled to all of the ownership rights under the contract. The owner has the
legal right to make all changes in contractual designations where specifically
permitted by the contract. The owner is as specified in the application, unless
changed.
Portfolio or Trust Portfolio - A separate investment portfolio of the
Trust, a mutual fund in which the Variable Account invests, or of any successor
mutual fund.
Purchase Payment - An amount paid by a contract owner to the Company as
consideration for the benefits provided by the contract.
Qualified Contracts - Contracts issued under qualified plans.
Qualified Plans - Retirement plans which receive favorable tax
treatment under Section 401, 403, 408 or 408A of the Internal Revenue Code of
1986, as amended (the "Code").
Separate Account - A segregated account of the Company that is not
commingled with the Company's general assets and obligations.
Sub-Account(s) - One or more of the sub-accounts of the Variable
Account. Each sub-account is invested in shares of a different Trust portfolio.
Successor Owner - The person, persons or entity to become the Owner if
the Owner dies prior to the Maturity Date. The Successor Owner is as specified
in the application, unless changed. If no Successor Owner is designated or the
Successor Owner dies before the Owner, the Owner's estate is the Successor Owner
(see also "Beneficiary").
Valuation Date - Any date on which the New York Stock Exchange is open
for business and the net asset value of a Trust portfolio is determined.
Valuation Period - Any period from one valuation date to the next,
measured from the time on each such date that the net asset value of each
portfolio is determined.
Variable Account - The Variable Account, which is a separate account of
the Company.
Variable Annuity - An annuity option with payments which: (1) are not
predetermined or guaranteed as to dollar amount, and (2) vary in relation to the
investment experience of one or more specified sub-accounts.
4
<PAGE> 9
SUMMARY
The Contract. The contract offered by this Prospectus is flexible
purchase payment individual deferred combination fixed and variable annuity
contract. The contract provides for the accumulation of contract values and the
payment of annuity benefits on a variable and/or fixed basis. Except as
specifically noted herein and as set forth under the caption "FIXED ACCOUNT
INVESTMENT OPTIONS" below, this Prospectus describes only the variable portion
of the contract.
Retirement Plans. The contract may be issued pursuant to either
non-qualified retirement plans or plans qualifying for special income tax
treatment under the Internal Revenue Code of 1986, as amended (the "Code"), such
as individual retirement accounts and annuities, including Roth IRAs, pension
and profit-sharing plans for corporations and sole proprietorships/ partnerships
("H.R. 10" and "Keogh" plans) and tax-sheltered annuities for public school
systems and tax-exempt organizations (see "QUALIFIED RETIREMENT PLANS").
Purchase Payments. A contract may be issued upon the making of an
initial purchase payment of as little as $30. A minimum of $300 must be paid
during the first contract year. Purchase payments may be made at any time,
except that if a purchase payment would cause the contract value to exceed
$1,000,000, or the contract value already exceeds $1,000,000, additional
purchase payments will be accepted only with the prior approval of the Company.
The Company may, at its option, cancel a contract at the end of any two
consecutive contract years in which no purchase payments have been made, if both
(i) the total purchase payments made over the life of the contract, less any
withdrawals, are less than $2,000; and (ii) the contract value at the end of
such two year period is less than $2,000. The cancellation of contract
privileges may vary in certain states in order to comply with the requirements
of insurance laws and regulations in such state (see "PURCHASE PAYMENTS").
Investment Options. Purchase payments may be allocated among the forty
investment options currently available under the contract: thirty-five variable
account investment options and five fixed account investment options. Due to
current administrative capabilities, a contract is limited to a maximum of 17
investment options (including all fixed account investment options) during the
period prior to the maturity date of the contract. The thirty-five variable
account investment options are the thirty-five sub-accounts of the Variable
Account, a separate account established by the Company. The sub-accounts invest
in corresponding portfolios of the Trust: Pacific Rim Emerging Markets Trust,
Science and Technology Trust, International Small Cap Trust, Emerging Growth
Trust, Pilgrim Baxter Growth Trust, Small/Mid Cap Trust, International Stock
Trust, Worldwide Growth Trust, Global Equity Trust, Small Company Value Trust,
Equity Trust, Growth Trust, Quantitative Equity Trust, Blue Chip Growth Trust,
Real Estate Securities Trust, Value Trust, International Growth and Income
Trust, Growth and Income Trust, Equity-Income Trust, Balanced Trust, Aggressive
Asset Allocation Trust, High Yield Trust, Moderate Asset Allocation Trust,
Conservative Asset Allocation Trust, Strategic Bond Trust, Global Government
Bond Trust, Capital Growth Bond Trust, Investment Quality Bond Trust, U.S.
Government Securities Trust, Money Market Trust, Lifestyle Aggressive 1000
Trust, Lifestyle Growth 820 Trust, Lifestyle Balanced 640 Trust, Lifestyle
Moderate 460 Trust and the Lifestyle Conservative 280 Trust (see the
accompanying Prospectus of the Trust). The portion of the contract value in the
Variable Account and monthly annuity payments, if selected on a variable basis,
will reflect the investment performance of the sub-accounts selected (see "THE
MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT A"). Purchase
payments may also be allocated to the four fixed account investment options:
one, three, five and seven year guaranteed investment accounts and a dollar cost
averaging investment account. Under the fixed account investment options, the
Company guarantees the principal value of purchase payments and the rate of
interest credited to the investment account for the term of the guarantee
period. The portion of the contract value in the fixed account investment
options and monthly annuity payments, if selected on a fixed basis, will reflect
such interest and principal guarantees (see "FIXED ACCOUNT INVESTMENT OPTIONS").
Subject to certain regulatory limitations, the Company may elect to add,
subtract or substitute investment options.
Transfers. Prior to the maturity date, amounts may be transferred among
the variable account investment options and from the variable account investment
options to the fixed account investment options without charge. In addition,
amounts may be transferred prior to the maturity date among the fixed account
investment options and from the fixed account investment options to the variable
account investment options, subject to a one year holding period requirement
(with certain exceptions) and a market value charge which may apply to such a
transfer (see "FIXED ACCOUNT INVESTMENT OPTIONS"). After the maturity date,
transfers are not permitted from variable annuity options to fixed annuity
options or from fixed annuity options to variable annuity options. Transfers
from any investment account must be at least $300 or, if less, the entire
balance in the investment account. If, after the transfer the amount remaining
in the investment account of the contract from which the transfer is made is
less than $100, then
5
<PAGE> 10
we will transfer the entire amount instead of the requested amount. The Company
may impose certain additional limitations on transfers (see "TRANSFERS AMONG
INVESTMENT OPTIONS" and "TRANSFERS AFTER MATURITY DATE"). Transfer privileges
may also be used under a special service offered by the Company to dollar cost
average an investment in the contract (see "SPECIAL TRANSFER SERVICES - DOLLAR
COST AVERAGING").
Withdrawals. Prior to the earlier of the maturity date or the death of
the contract owner, the owner may withdraw all or a portion of the contract
value. The amount withdrawn from any investment account must be at least $300
or, if less, the entire balance of the investment account. If a partial
withdrawal plus any applicable withdrawal charge would reduce the contract value
to less than $300, the withdrawal request will be treated as a request to
withdraw the entire contract value. A withdrawal charge and an administration
fee may be imposed (see "WITHDRAWALS"). A withdrawal may be subject to income
tax and a 10% penalty tax (see "FEDERAL TAX MATTERS"). Withdrawal privileges may
also be exercised pursuant to the Company's systematic withdrawal plan service
(see "SPECIAL WITHDRAWAL SERVICES - THE INCOME PLAN").
Loans. The Company offers a loan privilege to owners of contracts
issued in connection with Section 403(b) qualified plans that are not subject to
Title I of ERISA. Owners of such contracts may obtain loans using the contract
as the only security for the loan. The effective cost of a contract loan is 2%
per year of the amount borrowed (see "LOANS").
Confirmation Statements. Owners will be sent confirmation statements
for certain transactions in their account. Owners should carefully review these
statements to verify their accuracy. Any mistakes should immediately be reported
to the Company's Annuity Service Office. If the owner fails to notify the
Company's Annuity Service Office of any mistake within 60 days of the mailing of
the confirmation statement, the owner will be deemed to have ratified the
transaction.
Death Benefits. The Company will pay the death benefit described below
(which, as defined, is net of any debt) to the beneficiary if any contract owner
dies before the maturity date. If there is a surviving contract owner, that
contract owner will be deemed to be the beneficiary. No death benefit is payable
on the death of any annuitant, except that if any contract owner is not a
natural person, the death of any annuitant will be treated as the death of an
owner. The death benefit will be determined as of the date on which written
notice and proof of death and all required claim forms are received at the
Company's Annuity Service Office.
If any contract owner dies and the oldest owner had an attained age of
less than 81 years on the contract date, the death benefit will be determined as
follows: During the first contract year, the death benefit will be the greater
of: (a) the contract value or (b) the sum of all purchase payments made, less
any amounts deducted in connection with partial withdrawals. During any
subsequent contract year, the death benefit will be the greater of: (a) the
contract value or (b) the death benefit on the last day of the previous contract
year, plus any purchase payments made and less any amounts deducted in
connection with partial withdrawals since then. In addition, a death benefit
will be paid upon the death of the spouse. For purposes of calculating the death
benefit payable upon the death of the spouse, the death benefit paid upon the
first owner's death will be treated as a purchase payment to the contract. If
any contract owner dies on or after his or her 81st birthday, the death benefit
will be the greater of (a) the contract value or (b) the death benefit on the
last day of the contract year ending just prior to the owner's 81st birthday,
plus any payments made, less amounts deducted in connection with partial
withdrawals.
If any contract owner dies and the oldest owner had an attained age of
81 years or greater on the contract date, the death benefit will be the greater
of: (a) the contract value or (b) the excess of (I) the sum of all purchase
payments over (ii) the sum of any amounts deducted in connection with partial
withdrawals. If there is any debt under the contract, the death benefit equals
the death benefit, as described above, less such debt (see "DEATH BENEFIT BEFORE
MATURITY DATE"). If the annuitant dies after the maturity date and annuity
payments have been selected based on an annuity option providing for payments
for a guaranteed period, the Company will make the remaining guaranteed payments
to the beneficiary (see "DEATH BENEFIT ON OR AFTER MATURITY DATE").
Annuity Payments. The Company offers a variety of fixed and variable
annuity options. Periodic annuity payments will begin on the maturity date. The
contract owner selects the maturity date, frequency of payment and annuity
option (see "ANNUITY PROVISIONS").
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<PAGE> 11
Ten Day Review. Within 10 days of receipt of a contract, the contract
owner may cancel the contract by returning it to the Company (see "TEN DAY RIGHT
TO REVIEW").
Charges and Deductions. The following table and Example are designed to
assist contract owners in understanding the various costs and expenses that
contract owners bear directly and indirectly. The table reflects expenses of the
separate account and the underlying portfolio company. The items listed under
"Contract Owner Transaction Expenses" and "Separate Account Annual Expenses" are
more completely described in this Prospectus (see "CHARGES AND DEDUCTIONS"). The
items listed under "Trust Annual Expenses" are described in detail in the
accompanying Trust Prospectus to which reference should be made.
CONTRACT OWNER TRANSACTION EXPENSES
Deferred sales load (as percentage of purchase payments)
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS WITHDRAWAL CHARGE
PURCHASE PAYMENT IN PERCENTAGE
CONTRACT
<S> <C>
0 6%
1 6%
2 5%
3 5%
4 4%
5 3%
6 2%
7+ 0%
</TABLE>
Annual Contract Fee..........................................................$30
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and expense risk fees............................................1.25%
Administration fee - asset based..........................................0.15%
Total Separate Account Annual Expenses.....................................1.40%
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT)*** ANNUAL EXPENSES
- --------------- ---- ----------------- ---------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets........ 0.850% 0.570% 1.420%
Science and Technology.............. 1.100% 0.160% 1.260%
International Small Cap............. 1.100% 0.210% 1.310%
Emerging Growth..................... 1.050% 0.060% 1.110%
Pilgrim Baxter Growth............... 1.050% 0.130% 1.180%
Small/Mid Cap....................... 1.000% 0.050% 1.050%
International Stock................. 1.050% 0.330% 1.380%
Worldwide Growth.................... 1.000% 0.320% 1.320%
Global Equity....................... 0.900% 0.110% 1.010%
Small Company Value................. 1.050% 0.100%* 1.150%
Equity.............................. 0.750% 0.050% 0.800%
Growth ............................. 0.850% 0.100% 0.950%
Quantitative Equity................. 0.700% 0.070% 0.770%***
Blue Chip Growth.................... 0.925% 0.050% 0.975%
Real Estate Securities.............. 0.700% 0.070% 0.770%***
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT)*** ANNUAL EXPENSES
- --------------- ---- ----------------- ---------------
<S> <C> <C> <C>
Value............................... 0.800% 0.160% 0.960%
International Growth and Income..... 0.950% 0.170% 1.120%
Growth and Income................... 0.750% 0.040% 0.790%
Equity Income....................... 0.800% 0.050% 0.850%
Balanced ........................... 0.800% 0.080% 0.880%
Aggressive Asset Allocation......... 0.750% 0.150% 0.900%
High Yield.......................... 0.775% 0.110% 0.885%
Moderate Asset Allocation........... 0.750% 0.100% 0.850%
Conservative Asset Allocation....... 0.750% 0.140% 0.890%
Strategic Bond...................... 0.775% 0.100% 0.875%
Global Government Bond.............. 0.800% 0.130% 0.930%
Capital Growth Bond................. 0.650% 0.080% 0.730%***
Investment Quality Bond............. 0.650% 0.090% 0.740%
U.S. Government Securities.......... 0.650% 0.070% 0.720%
Money Market ....................... 0.500% 0.040% 0.540%
Lifestyle Aggressive 1000#.......... 0% 1.116%** 1.116%
Lifestyle Growth 820#............... 0% 1.048%** 1.048%
Lifestyle Balanced 640#............ 0% 0.944%** 0.944%
Lifestyle Moderate 460#............. 0% 0.850%** 0.850%
Lifestyle Conservative 260#......... 0% 0.708%** 0.708%
</TABLE>
*Based on estimates of payments to be made during the current fiscal year.
**Reflects expenses of the Underlying Portfolios. Manufacturers Securities
Services, LLC has voluntarily agreed to pay the expenses of each Lifestyle Trust
(excluding the expenses of the Underlying Portfolios). This voluntary expense
reimbursement may be terminated at any time. If such expense reimbursement was
not in effect, Total Trust Annual Expenses would be .04% higher (based on
expenses of the Lifestyle Trusts for the fiscal year ended December 31, 1997) as
noted in the chart below:
<TABLE>
<CAPTION>
Management Other Total Trust Annual
Fees Expenses Expenses
<S> <C> <C> <C>
Lifestyle Aggressive 1000 Trust 0% 1.156% 1.156%
Lifestyle Growth 820 Trust 0% 1.088% 1.088%
Lifestyle Balanced 640 Trust 0% 0.984% 0.984%
Lifestyle Moderate 460 Trust 0% 0.890% 0.890%
Lifestyle Conservative 280 Trust 0% 0.748% 0.748%
</TABLE>
***During the one year period ended December 31, 1997, Manufacturers Securities
Services, LLC voluntarily waived fees payable to it and/or reimbursed expenses
to the extent necessary to prevent "Total Trust Annual Expenses" for the
Quantitative Equity, Real Estate and Capital Growth Bond Trusts from exceeding
.50% of the Trust's average net assets. This voluntary fee waiver was terminated
effective January 1, 1998. Expenses shown in the table for these three Trusts do
not reflect the fee waiver.
#Each Lifestyle Trust will invest in shares of the Underlying Portfolios.
Therefore, each Lifestyle Trust will bear its pro rata share of the fees and
expenses incurred by the Underlying Portfolios and the investment return of each
Lifestyle Trust will be net of the Underlying Portfolio expenses. Each Lifestyle
Portfolio must also bear its own expenses. However, the Advisor is currently
paying those expenses as described in footnote (**) above.
8
<PAGE> 13
Example
A contract owner would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets, if the contract owner surrendered the
contract at the end of the applicable time period:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $84 $138 $192 $321
Science & Technology................ 83 133 184 305
International Small Cap............. 83 134 187 310
Emerging Growth..................... 81 129 177 291
Pilgrim Baxter Growth............... 82 131 180 298
Small/Mid Cap....................... 81 127 174 285
International Stock................. 84 136 190 317
Worldwide Growth.................... 83 135 187 311
Global Equity....................... 81 126 172 281
Small Company Value*................ 82 130
Equity.............................. 79 120 161 260
Growth.............................. 80 124 169 275
Quantitative Equity................. 78 119 160 257
Blue Chip Growth.................... 80 125 170 277
Real Estate Securities.............. 78 119 160 257
Value............................... 80 125 169 276
International Growth and Income..... 82 129 177 292
Growth and Income................... 78 120 161 259
Equity-Income....................... 79 121 164 265
Balanced............................ 79 122 165 268
Aggressive Asset Allocation......... 80 123 166 270
High Yield.......................... 79 122 165 268
Moderate Asset Allocation........... 79 121 164 265
Conservative Asset Allocation....... 79 123 166 269
Strategic Bond...................... 79 122 165 267
Global Government Bond.............. 80 124 168 273
Capital Growth Bond................. 78 118 158 253
Investment Quality Bond............. 78 118 158 254
U.S. Government Securities.......... 78 118 157 252
Money Market........................ 76 112 148 233
Lifestyle Aggressive 1000........... 82 129 177 291
Lifestyle Growth 820................ 81 127 174 285
Lifestyle Balanced 640.............. 80 124 168 274
Lifestyle Moderate 460.............. 79 121 164 265
Lifestyle Conservative 280.......... 78 117 156 250
</TABLE>
* The Example of Expenses for the Small Company Value Trust contains figures
only for 1 and 3 years, since it is a newly formed Trust.
A contract owner would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets, if the contract owner annuitized as
provided in the contract or did not surrender the contract at the end of the
applicable time period:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $29 $89 $152 $321
Science & Technology................ 28 85 144 305
International Small Cap............. 28 86 147 310
Emerging Growth..................... 26 80 137 291
Pilgrim Baxter Growth............... 27 82 140 298
Small/Mid Cap....................... 25 78 134 285
International Stock................. 29 88 150 317
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Worldwide Growth.................... 28 86 147 311
Global Equity....................... 25 77 132 281
Small Company Value*................ 26 81
Equity.............................. 23 71 121 260
Growth.............................. 24 75 129 275
Quantitative Equity................. 23 70 120 257
Blue Chip Growth.................... 25 76 130 277
Real Estate Securities.............. 23 70 120 257
Value............................... 25 76 129 276
International Growth and Income..... 26 80 137 292
Growth and Income................... 23 70 121 259
Equity-Income....................... 23 72 124 265
Balanced............................ 24 73 125 268
Aggressive Asset Allocation......... 24 74 126 270
High Yield.......................... 24 73 125 268
Moderate Asset Allocation........... 23 72 124 265
Conservative Asset Allocation....... 24 73 126 269
Strategic Bond...................... 24 73 125 267
Global Government Bond.............. 24 75 128 273
Capital Growth Bond................. 22 69 118 253
Investment Quality Bond............. 22 69 118 254
U.S. Government Securities.......... 22 68 117 252
Money Market........................ 20 63 108 233
Lifestyle Aggressive 1000........... 26 80 137 291
Lifestyle Growth 820................ 25 78 134 285
Lifestyle Balanced 640.............. 24 75 128 274
Lifestyle Moderate 460.............. 23 72 124 265
Lifestyle Conservative 280.......... 22 68 116 250
</TABLE>
* The Example of Expenses for the Small Company Value Trust contains figures for
only 1 and 3 years, since it is a newly formed Trust.
For purposes of presenting the foregoing Example, the Company has made
certain assumptions mandated by the SEC. The Company has assumed that, where
applicable, the maximum sales load is deducted, that there are no transfers or
other transactions and that the "Other Expenses" line item under "Trust Annual
Expenses" will remain the same. Such assumptions, which are mandated by the SEC
in an attempt to provide prospective investors with standardized data with which
to compare various annuity contracts, do not take into account certain features
of the contract and prospective changes in the size of the Trust which may
operate to change the expenses borne by contract owners. Consequently, the
amounts listed in the Example above should not be considered a representation of
past or future expenses and actual expenses borne by contract owners may be
greater or lesser than those shown.
In addition, for purposes of calculating the values in the above
Example, the Company has translated the $30 annual administration charge listed
under "Annual Contract Fee" to a 0.063% annual asset charge based on the $47,500
approximate average size. So translated, such charge would be higher for smaller
contracts and lower for larger contracts.
* * * * * * * *
The above summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and Statement of Additional
Information and the Prospectus and Statement of Additional Information for the
Trust, to which reference should be made. This Prospectus generally describes
only the variable aspects of the contract, except where fixed aspects are
specifically mentioned.
10
<PAGE> 15
GENERAL INFORMATION ABOUT
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK,
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT A AND
MANUFACTURERS INVESTMENT TRUST
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
The Manufacturers Life Insurance Company of New York (the "Company") is
a stock life insurance company organized in 1992 under the laws of the state of
New York. The Company's principal office is located at Corporate Center at Rye,
555 Theodore Fremd Avenue, Suite C-209, Rye, New York 10580-9966.
The Company is a wholly-owned subsidiary of The Manufacturers Life
Insurance Company of North America, formerly North American Security Life
Insurance Company, ("Manulife North America"). Manulife North America is a stock
life insurance company organized under the laws of Delaware in 1979 with its
principal office located at 116 Huntington Avenue, Boston, Massachusetts 02116.
Manulife North America's principal business is offering a variable annuity
contract, similar to that offered by the Company in New York, 49 other states,
the District of Columbia and Puerto Rico.
The ultimate parent of Manulife North America is The Manufacturers Life
Insurance Company ("Manulife"), a Canadian mutual life insurance company based
in Toronto, Canada. Prior to January 1, 1996, Manulife North America was a
wholly owned subsidiary of North American Life Assurance Company ("NAL"), a
Canadian mutual life insurance company. On January 1, 1996 NAL and Manulife
merged with the combined company retaining the name Manulife.
On January 19, 1998, the Board of Directors of Manulife asked the
management of Manulife to prepare a plan for conversion of Manulife from a
mutual life insurance company to an investor-owned, publicly-traded stock
company. Any demutualization plan for Manulife is subject to the approval of the
Manulife Board of Directors and policyholders as well as regulatory approval.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT A
The Company established The Manufacturers Life Insurance Company of New
York Separate Account A (the " Variable Account") on March 4, 1992 as a separate
account under the laws of New York. The income, gains and losses, whether or not
realized, from assets of the Variable Account are, in accordance with the
contracts, credited to or charged against the Variable Account without regard to
other income, gains or losses of the Company. Nevertheless, all obligations
arising under the contracts are general corporate obligations of the Company.
Assets of the Variable Account may not be charged with liabilities arising out
of any other business of the Company.
The Variable Account is registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act") as a unit investment trust. A
unit investment trust is a type of investment company which invests its assets
in specified securities, such as the shares of one or more investment companies.
Registration under the 1940 Act does not involve supervision by the SEC of the
management or investment policies or practices of the Variable Account. If
deemed by the Company to be in the best interests of persons having voting
rights under the contracts, the Variable Account may be operated as a management
company under the 1940 Act or it may be deregistered under such Act in the event
such registration is no longer required.
There are currently thirty-five sub-accounts within the Variable
Account. The Company reserves the right, subject to prior approval of the New
York Superintendent of Insurance and compliance with applicable law, to add
other sub-accounts, eliminate existing sub-accounts, combine sub-accounts or
transfer assets in one sub-account to another sub-account established by the
Company or an affiliated company.
MANUFACTURERS INVESTMENT TRUST
The assets of each sub-account of the Variable Account are invested in
shares of a corresponding portfolio of the Manufacturers Investment Trust ( the
"Trust"). A description of each portfolio is set forth below. The Trust is
registered under the 1940 Act as an open-end management investment company. Each
of the portfolios is diversified for purposes of the 1940 Act, except for the
Global Government Bond Trust, the Emerging Growth Trust and the five Lifestyle
Trusts, which are non-diversified. The Trust receives investment advisory
services from Manufacturers Securities Services, LLC ("MSS"), successor to NASL
Financial Services, Inc. ("NASL Financial"). The Trust currently has fifteen
Subadvisers who manage all of the portfolios:
11
<PAGE> 16
SUBADVISER SUBADVISER TO
Fidelity Management Trust Company Equity Trust
Conservative Asset Allocation Trust
Moderate Asset Allocation Trust
Aggressive Asset Allocation Trust
Founders Asset Management LLC Growth Trust
Worldwide Growth Trust
Balanced Trust
International Small Cap Trust
Fred Alger Management, Inc. Small/Mid Cap Trust
J.P. Morgan Investment Management Inc. International Growth and Income
Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Capital Growth Bond Trust
Money Market Trust
Lifestyle Trusts
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Oechsle International Advisors, L.P. Global Government Bond Trust
Pilgrim Baxter & Associates, Ltd. Pilgrim Baxter Growth Trust
Rosenberg Institutional Equity Management Small Company Value Trust
Rowe Price-Fleming International, Inc. International Stock Trust
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
T. Rowe Price Associates, Inc. Science & Technology Trust
Blue Chip Growth Trust
Equity-Income Trust
Warburg Pincus Asset Management, Inc. Emerging Growth Trust
Wellington Management Company, LLP Growth and Income Trust
Investment Quality Bond Trust
12
<PAGE> 17
The following is a brief description of each portfolio:
The PACIFIC RIM EMERGING MARKETS TRUST seeks long-term growth of
capital by investing in a diversified portfolio that is comprised
primarily of common stocks and equity-related securities of
corporations domiciled in countries in the Pacific Rim region.
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital.
Current income is incidental to the portfolio's objective.
The INTERNATIONAL SMALL CAP TRUST seeks capital appreciation by
investing primarily in securities issued by foreign companies which
have total market capitalization or annual revenues of $1 billion or
less. These securities may represent companies in both established and
emerging economies throughout the world.
The EMERGING GROWTH TRUST seeks maximum capital appreciation by
investing primarily in a portfolio of equity securities of domestic
companies. The Emerging Growth Trust ordinarily will invest at least
65% of its total assets in common stocks or warrants of emerging growth
companies that represent attractive opportunities for maximum capital
appreciation.
The PILGRIM BAXTER GROWTH TRUST seeks capital appreciation by investing
in companies believed by the subadviser to have an outlook for strong
earnings growth and the potential for significant capital appreciation.
The SMALL/MID CAP TRUST seeks long term capital appreciation by
investing at least 65% of its total assets (except during temporary
defensive periods) in small/mid cap equity securities. As used herein
small/mid cap equity securities are equity securities of companies
that, at the time of purchase, have total market capitalization between
$500 million and $5 billion.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by
investing primarily in common stocks of established, non-U.S.
companies.
The WORLDWIDE GROWTH TRUST seeks long-term growth of capital by
normally investing at least 65% of its total assets in equity
securities of growth companies in a variety of markets throughout the
world.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by
investing primarily in equity securities throughout the world,
including U.S. issuers and emerging markets.
The SMALL COMPANY VALUE TRUST seeks long term growth of capital by
investing in equity securities of smaller companies which are traded
principally in the markets of the United States.
The EQUITY TRUST seeks growth of capital, by investing primarily in
common stocks of United States issuers and securities convertible into
or carrying the right to buy common stocks.
The GROWTH TRUST seeks long term growth of capital by investing at
least 65% of the portfolio's total assets in common stocks of
well-established, high-quality growth companies that the subadviser
believes have the potential to increase earnings faster than the rest
of the market.
The QUANTITATIVE EQUITY TRUST seeks to achieve intermediate and
long-term growth through capital appreciation and current income by
investing in common stocks and other equity securities of well
established companies with promising prospects for providing an above
average rate of return.
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of
capital. Current income is a secondary objective and many of the stocks
in the portfolio are expected to pay dividends.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of
long-term capital appreciation and satisfactory current income by
investing in real estate related equity and debt securities.
13
<PAGE> 18
The VALUE TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk by
investing primarily in common and preferred stocks, convertible
securities, rights and warrants to purchase common stocks, ADRs and
other equity securities of companies with equity capitalizations
usually greater than $300 million.
The INTERNATIONAL GROWTH AND INCOME TRUST seeks long-term growth of
capital and income by investing, under normal circumstances, at least
65% of its total assets in equity securities of foreign issuers. The
Portfolio may also invest in debt securities of corporate or sovereign
issuers rated A or higher by Moody's Investor Services, Inc. or
Standard and Poor's Corporation or, if unrated, of equivalent credit
quality as determined by the subadviser.
The GROWTH AND INCOME TRUST seeks long-term growth of capital and
income, consistent with prudent investment risk, by investing primarily
in a diversified portfolio of common stocks of United States issuers
which the subadviser believes are of high quality.
The EQUITY-INCOME TRUST seeks to provide substantial dividend income
and also long term capital appreciation by investing primarily in
dividend-paying common stocks, particularly of established companies
with favorable prospects for both increasing dividends and capital
appreciation.
The BALANCED TRUST seeks current income and capital appreciation by
investing in a balanced portfolio of common stocks, U.S. and foreign
government obligations and a variety of corporate fixed-income
securities.
The HIGH YIELD TRUST seeks to realize an above-average total return
over a market cycle of three to five years, consistent with reasonable
risk by investing primarily in high yield debt securities, including
corporate bonds and other fixed-income securities.
The AUTOMATIC ASSET ALLOCATION TRUSTS seek the highest potential total
return consistent with a specified level of risk tolerance --
conservative, moderate or aggressive -- by investing primarily in the
kinds of securities in which the Equity, Investment Quality Bond, U.S.
Government Securities and Money Market Trusts may invest.
- The AGGRESSIVE ASSET ALLOCATION TRUST seeks the highest
total return consistent with an aggressive level of risk
tolerance. This Trust attempts to limit the decline in
portfolio value in very adverse market conditions to 15% over
any three year period.
- The MODERATE ASSET ALLOCATION TRUST seeks the highest total
return consistent with a moderate level of risk tolerance.
This Trust attempts to limit the decline in portfolio value in
very adverse market conditions to 10% over any three year
period.
- The CONSERVATIVE ASSET ALLOCATION TRUST seeks the highest
total return consistent with a conservative level of risk
tolerance. This Trust attempts to limit the decline in
portfolio value in very adverse market conditions to 5% over
any three year period.
The STRATEGIC BOND TRUST seeks a high level of total return consistent
with preservation of capital by giving its subadviser broad discretion
to deploy the portfolio's assets among certain segments of the
fixed-income market as the subadviser believes will best contribute to
achievement of the portfolio's investment objective.
The GLOBAL GOVERNMENT BOND TRUST seeks a high level of total return by
placing primary emphasis on high current income and the preservation of
capital, by investing primarily in a global portfolio of high-quality,
fixed-income securities of foreign and United States governmental
entities and supranational issuers.
The CAPITAL GROWTH BOND TRUST seeks to achieve growth of capital by
investing in medium-grade or better debt securities, with income as a
secondary consideration. The Capital Growth Bond Trust differs from
most "bond" funds in that its primary objective is capital
appreciation, not income.
14
<PAGE> 19
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by
investing primarily in a diversified portfolio of investment grade
corporate bonds and U.S. Government bonds with intermediate to longer
term maturities. The portfolio may also invest up to 20% of its assets
in non-investment grade fixed income securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current
income consistent with preservation of capital and maintenance of
liquidity, by investing in debt obligations and mortgage-backed
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and derivative securities such as collateralized
mortgage obligations backed by such securities.
The MONEY MARKET TRUST seeks maximum current income consistent with
preservation of principal and liquidity, by investing in high quality
money market instruments with maturities of 397 days or less issued
primarily by United States entities.
The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long term growth
of capital (current income is not a consideration) by investing 100% of
the Lifestyle Trust's assets in other portfolios of the Trust
("Underlying Portfolios") which invest primarily in equity securities.
The LIFESTYLE GROWTH 820 TRUST seeks to provide long term growth of
capital with consideration also given to current income by investing
approximately 20% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in fixed income securities and
approximately 80% of its assets in Underlying Portfolios which invest
primarily in equity securities.
The LIFESTYLE BALANCED 640 TRUST seeks to provide a balance between a
high level of current income and growth of capital with a greater
emphasis given to capital growth by investing approximately 40% of the
Lifestyle Trust's assets in Underlying Portfolios which invest
primarily in fixed income securities and approximately 60% of its
assets in Underlying Portfolios which invest primarily in equity
securities.
The LIFESTYLE MODERATE 460 TRUST seeks to provide a balance between a
high level of current income and growth of capital with a greater
emphasis given to high income by investing approximately 60% of the
Lifestyle Trust's assets in Underlying Portfolios which invest
primarily in fixed income securities and approximately 40% of its
assets in Underlying Portfolios which invest primarily in equity
securities.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of
current income with some consideration also given to growth of capital
by investing approximately 80% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities
and approximately 20% of its assets in Underlying Portfolios which
invest primarily in equity securities.
In pursuing the Strategic Bond, High Yield and Investment Quality Bond
Trusts' investment objective, each portfolio expects to invest a portion of its
assets in high yield securities, commonly known as "junk bonds" which also
present a high degree of risk. The risks of these securities include price
volatility and risk of default in the payment of interest and principal. See
"Risk Factors Relating to High Yield Securities" contained in the Trust
Prospectus before investing in any of these Trusts.
In pursuing the Pacific Rim Emerging Markets, International Stock,
Worldwide Growth, Global Equity, Strategic Bond, International Growth and
Income, International Small Cap, High Yield and Global Government Bond Trusts'
investment objective, each portfolio may invest up to 100% of its assets in
foreign securities, which may present additional risks. See "Foreign Securities"
contained in the Trust Prospectus before investing in any of these Trusts.
If the shares of a Trust portfolio are no longer available for
investment or in the Company's judgment investment in a Trust portfolio becomes
inappropriate in view of the purposes of the Variable Account, the Company may
eliminate the shares of a portfolio and substitute shares of another portfolio
of the Trust or another open-end registered investment company. Substitution may
be made with respect to both existing investments and the investment of future
purchase payments. However, no such substitution will be made without notice to
the contract owner and prior approval of the SEC to the extent required by the
1940 Act.
15
<PAGE> 20
The Company will vote shares of the Trust portfolios held in the
Variable Account at meetings of shareholders of the Trust in accordance with
voting instructions received from the persons having the voting interest under
the contracts. The number of portfolio shares for which voting instructions may
be given will be determined by the Company in the manner described below, not
more than 90 days prior to the meeting of the Trust. Trust proxy material will
be distributed to each person having the voting interest under the contract
together with appropriate forms for giving voting instructions. Portfolio shares
held in the Variable Account that are attributable to contract owners and as to
which no timely instructions are received, and portfolio shares held in the
Variable Account that are beneficially owned by the Company will be voted by the
Company in proportion to the instructions received.
Prior to the maturity date, the person having the voting interest under
a contract is the contract owner and the number of votes as to each portfolio
for which voting instructions may be given is determined by dividing the value
of the investment account corresponding to the sub-account in which such
portfolio shares are held by the net asset value per share of that portfolio.
After the maturity date, the person having the voting interest under a contract
is the annuitant and the number of votes as to each portfolio for which voting
instructions may be given is determined by dividing the reserve for the contract
allocated to the sub-account in which such portfolio shares are held by the net
asset value per share of that portfolio. Generally, the number of votes tends to
decrease as annuity payments progress since the amount of reserves attributable
to a contract will usually decrease after commencement of annuity payments. The
Company reserves the right to make any changes in the voting rights described
above that may be permitted by the Federal securities laws or regulations or
interpretations of these laws or regulations.
A full description of the Trust, including the investment objectives,
policies and restrictions of each of the portfolios is contained in the
Prospectus for the Trust which accompanies this Prospectus and should be read by
a prospective purchaser before investing.
DESCRIPTION OF THE CONTRACT
ACCUMULATION PROVISIONS
PURCHASE PAYMENTS
Purchase payments are paid to the Company at its Annuity Service
Office. The minimum purchase payment is $30, however, at least $300 must be paid
during the first contract year. Purchase payments may be made at any time. The
Company may provide for purchase payments to be automatically withdrawn from a
contract owner's bank account on a periodic basis. If a purchase payment would
cause the contract value to exceed $1,000,000 or the contract value already
exceeds $1,000,000, additional purchase payments will be accepted only with the
prior approval of the Company.
The Company may, at its option, cancel a contract at the end of any
three consecutive contract years in which no purchase payments have been made,
if both (i) the total purchase payments made over the life of the contract, less
any withdrawals, are less than $2,000; and (ii) the contract value at the end of
such three year period is less than $2,000. The cancellation of contract
privileges may vary in certain states in order to comply with the requirements
of insurance laws and regulations in such state. Upon cancellation the Company
will pay the contract owner the contract value computed as of the valuation
period during which the cancellation occurs less any debt and less the annual
$30 administration fee. The amount paid will be treated as a withdrawal for
Federal tax purposes and thus may be subject to income tax and to a 10% penalty
tax (see "FEDERAL TAX MATTERS").
Purchase payments are allocated among the investment options in
accordance with the percentages designated by the contract owner. In addition,
contract owners have the option to participate in the Guarantee Plus Program
administered by the Company. Under the Guarantee Plus Program the initial
purchase payment is split between the fixed and variable investment options. A
percentage of the initial purchase payment is allocated to the chosen fixed
account, such that, at the end of the guaranteed period the fixed account will
have grown to an amount at least equal to the total initial purchase payment.
The percentage depends upon the current interest rate of the fixed investment
option. The balance of the initial purchase payment is allocated among the
variable investment options as indicated on the contract specifications page.
Contract owners may elect to participate in the Guarantee Plus Program and may
obtain full information concerning the program and its restrictions from their
securities dealers or the Annuity Service Office. The contract owner may change
the allocation of subsequent purchase payments at any time upon written notice
to the Company.
16
<PAGE> 21
ACCUMULATION UNITS
The Company will establish an investment account for the contract owner
for each variable account investment option to which such contract owner
allocates purchase payments. Purchase payments are credited to such investment
accounts in the form of accumulation units. The following discussion of
accumulation units, the value of accumulation units and the net investment
factor formula pertains only to the accumulations in the variable account
investment options. The parallel discussion regarding accumulations in the fixed
account investment options appears elsewhere in this Prospectus (see "FIXED
ACCOUNT INVESTMENT OPTIONS").
The number of accumulation units to be credited to each investment
account is determined by dividing the net purchase payment allocated to that
investment account by the value of an accumulation unit for that investment
account for the valuation period during which the purchase payment is received
at the Company's Annuity Service Office complete with all necessary information
or, in the case of the first purchase payment, pursuant to the procedures
described below.
Initial purchase payments received by mail will usually be credited in
the valuation period during which received at the Annuity Service Office, and in
any event not later than two business days after receipt of all information
necessary for processing issuance of the contract. The applicant will be
informed of any deficiencies preventing processing if the contract cannot be
issued and the purchase payment credited within two business days after receipt.
If the deficiencies are not remedied within five business days after receipt,
the purchase payment will be returned promptly to the applicant, unless the
applicant specifically consents to the Company's retaining the purchase payment
until all necessary information is received. Initial purchase payments received
by wire transfer from broker-dealers will be credited in the valuation period
during which received where such broker-dealers have made special arrangements
with the Company.
VALUE OF ACCUMULATION UNITS
The value of accumulation units will vary from one valuation period to
the next depending upon the investment results of the particular sub-accounts to
which purchase payments are allocated. The value of an accumulation unit for
each sub-account was arbitrarily set at $10 or $12.50 for the first valuation
period under contracts issued by the Company or an affiliate of the Company. The
value of an accumulation unit for any subsequent valuation period is determined
by multiplying the value of an accumulation unit for the immediately preceding
valuation period by the net investment factor for such sub-account (described
below) for the valuation period for which the value is being determined.
NET INVESTMENT FACTOR
The net investment factor is an index used to measure the investment
performance of a sub-account from one valuation period to the next. The net
investment factor for each sub-account for any valuation period is determined by
dividing (a) by (b) and subtracting (c) from the result:
Where (a) is:
(1) the net asset value per share of a portfolio share held in
the sub-account determined at the end of the current valuation
period, plus
(2) the per share amount of any dividend or capital gain
distributions made by the portfolio on shares held in the
sub-account if the "ex-dividend" date occurs during the
current valuation period.
Where (b) is:
the net asset value per share of a portfolio share held in the
sub-account determined as of the end of the immediately
preceding valuation period.
Where (c) is:
a factor representing the charges deducted from the
sub-account on a daily basis for administrative expenses and
mortality and expense risks. Such factor is equal on an annual
basis to 1.40% (0.15%
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for administrative expenses and 1.25% for mortality and
expense risks). The charges deducted from the sub-account
reduce the value of the accumulation units for the
sub-account.
The net investment factor may be greater or less than or equal
to one; therefore, the value of an accumulation unit may
increase, decrease or remain the same.
TRANSFERS AMONG INVESTMENT OPTIONS
Before the maturity date the contract owner may transfer amounts among
the variable account investment options and from such investment options to the
fixed account investment options at any time and without charge upon written
notice to the Company. Accumulation units will be canceled from the investment
account from which amounts are transferred and credited to the investment
account to which amounts are transferred. The Company will effect such transfers
so that the contract value on the date of the transfer will not be affected by
the transfer. The contract owner must transfer at least $300 or, if less, the
entire value of the investment account. If after the transfer the amount
remaining in the investment account is less than $100, then the Company will
transfer the entire amount instead of the requested amount. The Company reserves
the right to limit, upon notice, the maximum number of transfers a contract
owner may make to one per month or six at any time within a contract year. In
addition, the Company reserves the right to defer the transfer privilege at any
time that the Company is unable to purchase or redeem shares of the Trust
portfolios. The Company also reserves the right to modify or terminate the
transfer privilege at any time in accordance with applicable law.
MAXIMUM NUMBER OF INVESTMENT OPTIONS
Due to current administrative capabilities, a contract owner is limited
to a maximum of 17 investment options (including all fixed account investment
options) during the period prior to the maturity date of the contract (the
"Contract Period"). In calculating this limit for each contract owner,
investment options to which the contract owner has allocated purchase payments
at any time during the Contract Period will be counted toward the 17 maximum
even if the contract owner no longer has contract value allocated to these
investment options.
SPECIAL TRANSFER SERVICES - DOLLAR COST AVERAGING
The Company administers a Dollar Cost Averaging ("DCA") program which
enables a contract owner to pre-authorize a periodic exercise of the contractual
transfer rights described above. Contract owners entering into a DCA agreement
instruct the Company to transfer monthly a predetermined dollar amount from any
sub-account or the one year fixed account investment option to other
sub-accounts until the amount in the sub-account from which the transfer is made
or one year fixed account investment option is exhausted. A DCA fixed account
investment option may be established under the DCA program to make automatic
transfers. Only initial and subsequent net payments may be allocated to the DCA
fixed account investment option. The DCA program is generally suitable for
contract owners making a substantial deposit to the contract and who desire to
control the risk of investing at the top of a market cycle. The DCA program
allows such investments to be made in equal installments over time in an effort
to reduce such risk. Contract owners interested in the DCA program may elect to
participate in the program on the contract application or by separate
application. Contract owners may obtain a separate application and full
information concerning the program and its restrictions from their securities
dealer or the Annuity Service Office. There is no charge for participation in
the DCA program.
ASSET REBALANCING PROGRAM
The Company administers an Asset Rebalancing Program which enables a contract
owner to indicate to the Company the percentage levels he or she would like to
maintain in particular portfolios. The contract owner's contract value will be
automatically rebalanced, pursuant to the schedule described below, to maintain
the indicated percentages by transfers among the portfolios. (Fixed Account
Investment Options are not eligible for participation in the Asset Rebalancing
Program.) The entire value of the variable investment accounts must be included
in the Asset Rebalancing Program. Other investment programs, such as the DCA
program, or other transfers or withdrawals may not work in concert with the
Asset Rebalancing Program. Therefore, contract owners should monitor their use
of these other programs and any other transfers or withdrawals while the Asset
Rebalancing Program is being used. Contract owners interested in the Asset
Rebalancing Program may obtain a separate application and full information
concerning the program and its restrictions from their securities dealer or the
Annuity Service Office. There is no charge for participation in the Asset
Rebalancing Program.
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For rebalancing programs begun on or after October 1, 1996 asset
rebalancing will only be permitted on the following time schedules:
(i) quarterly on the 25th day of the last month of the quarter (or the
next business day if the 25th is not a business day);
(ii) semi-annually on June 25th or December 26th (or the next business
day if these dates are not business days); or
(iii) annually on December 26th (or the next business day if December
26th is not a business day).
Rebalancing will continue to take place on the last business day of every
calendar quarter for rebalancing programs begun prior to October 1, 1996.
WITHDRAWALS
Prior to the earlier of the maturity date or the death of the contract
owner, the owner may withdraw all or a portion of the contract value upon
written request, complete with all necessary information to the Company's
Annuity Service Office. For certain qualified contracts, exercise of the
withdrawal right may require the consent of the qualified plan participant's
spouse under the Code and regulations promulgated by the Treasury Department. In
the case of a total withdrawal, the Company will pay the contract value as of
the date of receipt of the request at its Annuity Service Office, less the
annual $30 administration fee if applicable, any debt and any applicable
withdrawal charge, and the contract will be canceled. In the case of a partial
withdrawal, the Company will pay the amount requested and cancel that number of
accumulation units credited to each investment account necessary to equal the
amount withdrawn from each investment account plus any applicable withdrawal
charge deducted from such investment account (see "CHARGES AND DEDUCTIONS").
When making a partial withdrawal, the contract owner should specify the
investment options from which the withdrawal is to be made. The amount requested
from an investment option may not exceed the value of that investment option
less any applicable withdrawal charge. If the contract owner does not specify
the investment options from which a partial withdrawal is to be taken, a partial
withdrawal will be taken from the variable account investment options until
exhausted and then from the fixed account investment options, beginning with the
shortest guarantee period first and ending with the longest guarantee period
last. If the partial withdrawal is less than the total value in the variable
account investment options, the withdrawal will be taken pro rata from the
variable account investment options: taking from each such variable account
investment option an amount which bears the same relationship to the total
amount withdrawn as the value of such variable account investment option bears
to the total value of all the contract owner's investments in variable account
investment options.
For the rules governing the order and manner of withdrawals from the
fixed account investment options, see "FIXED ACCOUNT INVESTMENT OPTIONS."
There is no limit on the frequency of partial withdrawals; however, the
amount withdrawn must be at least $300 or, if less, the entire balance in the
investment option. If after the withdrawal (and deduction of any withdrawal
charge) the amount remaining in the investment option is less than $100, the
Company will treat the partial withdrawal as a withdrawal of the entire amount
held in the investment option. If a partial withdrawal plus any applicable
withdrawal charge would reduce the contract value to less than $300, the Company
will treat the partial withdrawal as a total withdrawal of the contract value.
The amount of any withdrawal from the variable account investment
options will be paid promptly, and in any event within seven days of receipt of
the request, complete with all necessary information at the Company's Annuity
Service Office, except that the Company reserves the right to defer the right of
withdrawal or postpone payments for any period when: (1) the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (2)
trading on the New York Stock Exchange is restricted, (3) an emergency exists as
a result of which disposal of securities held in the Variable Account is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Variable Account's net assets, or (4) the SEC, by order, so permits
for the protection of security holders; provided that applicable rules and
regulations of the SEC shall govern as to whether the conditions described in
(2) and (3) exist.
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Withdrawals from the contract may be subject to income tax and a 10%
penalty tax. Withdrawals are permitted from contracts issued in connection with
Section 403(b) qualified plans only under limited circumstances (see "FEDERAL
TAX MATTERS").
SPECIAL WITHDRAWAL SERVICES - THE INCOME PLAN
The Company administers an Income Plan ("IP") which enables a contract
owner to pre-authorize a periodic exercise of the contractual withdrawal rights
described above. Contract owners entering into an IP agreement instruct the
Company to withdraw a level dollar amount from specified investment options on a
periodic basis. The total of IP withdrawals in a contract year is limited to not
more than 10% of the purchase payments made to ensure that no withdrawal or
market value charge will ever apply to an IP withdrawal. If an additional
withdrawal is made from a contract participating in an IP, the IP will terminate
automatically and may be reinstated only on or after the next contract
anniversary pursuant to a new application. The IP is not available to contracts
participating in the dollar cost averaging program or for which purchase
payments are being automatically deducted from a bank account on a periodic
basis. IP withdrawals will be withdrawn without withdrawal and market value
charges. IP withdrawals may, however, be subject to income tax and a 10% penalty
tax (see "FEDERAL TAX MATTERS"). Contract owners interested in an IP may obtain
a separate application and full information concerning the program and its
restrictions from their securities dealer or the Annuity Service Office. There
is no fee charged for participation in the IP Service.
LOANS
The Company offers a loan privilege only to owners of contracts issued
in connection with Section 403(b) qualified plans that are not subject to Title
I of ERISA. Owners of such contracts may obtain loans using the contract as the
only security for the loan. Loans are subject to provisions of the Code and to
applicable retirement program rules (collectively, "loan rules"). Tax advisors
and retirement plan fiduciaries should be consulted prior to exercising loan
privileges.
Under the terms of the contract, the maximum loan value is equal to 80%
of the contract value, although loan rules may serve to reduce such maximum loan
value in some cases. The amount available for a loan at any given time is the
loan value less any outstanding debt. Debt equals the amount of any loans plus
accrued interest. Loans will be made only upon written request from the owner.
The Company will make loans within seven days of receiving a properly completed
loan application (applications are available from the Annuity Service Office),
subject to postponement under the same circumstances that payment of withdrawals
may be postponed (see "WITHDRAWALS").
When an owner requests a loan, the Company will reduce the owner's
investment in the investment accounts and transfer the amount of the loan to the
loan account, a part of the Company's general account. The owner may designate
the investment accounts from which the loan is to be withdrawn. Absent such a
designation, the amount of the loan will be withdrawn from the investment
accounts in accordance with the rules for making partial withdrawals (see
"WITHDRAWALS"). The contract provides that owners may repay contract debt at any
time. Under applicable loan rules, loans generally must be repaid within five
years, repayments must be made at least quarterly and repayments must be made in
substantially equal amounts. When a loan is repaid, the amount of the repayment
will be transferred from the loan account to the investment accounts. The owner
may designate the investment accounts to which a repayment is to be allocated.
Otherwise, the repayment will be allocated in the same manner as the owner's
most recent purchase payment. On each contract anniversary, the Company will
transfer from the investment accounts to the loan account the amount by which
the debt on the contract exceeds the balance in the loan account.
The Company charges interest of 6% per year on contract loans. Loan
interest is payable in arrears and, unless paid in cash, the accrued loan
interest is added to the amount of the debt and bears interest at 6% as well.
The Company credits interest with respect to amounts held in the loan account at
a rate of 4% per year. Consequently, the net cost of loans under the contract is
2%. If on any date debt under a contract exceeds the contract value, the
contract will be in default. In such case the owner will receive a notice
indicating the payment needed to bring the contract out of default and will have
a thirty-one day grace period within which to pay the default amount. If the
required payment is not made within the grace period, the contract may be
foreclosed (terminated without value).
The amount of any debt will be deducted from the death benefit (see
"DEATH BENEFIT BEFORE MATURITY DATE"). In addition, debt, whether or not repaid,
will have a permanent effect on the contract value because the investment
results of the investment accounts will apply only to the unborrowed portion of
the contract
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value. The longer debt is outstanding, the greater the effect is likely to be.
The effect could be favorable or unfavorable. If the investment results are
greater than the rate being credited on amounts held in the loan account while
the debt is outstanding, the contract value will not increase as rapidly as it
would have if no debt were outstanding. If investment results are below that
rate, the contract value will be higher than it would have been had no debt been
outstanding.
DEATH BENEFIT BEFORE MATURITY DATE
In General. The following discussion applies principally to contracts
that are not issued in connection with qualified plans, i.e., a "non-qualified
contract." The requirements of the tax law applicable to qualified plans, and
the tax treatment of amounts held and distributed under such plans, are quite
complex. Accordingly, a prospective purchaser of the contract to be used in
connection with a qualified plan should seek competent legal and tax advice
regarding the suitability of the contract for the situation involved and the
requirements governing the distribution of benefits, including death benefits,
from a contract used in the plan. In particular, a prospective purchaser who
intends to use the contract in connection with a qualified plan should consider
that the contract provides a death benefit (described below) that could be
characterized as an incidental death benefit. There are limits on the amount of
incidental benefits that may be provided under certain qualified plans and the
provision of such benefits may result in currently taxable income to plan
participants (see "FEDERAL TAX MATTERS").
Amount of Death Benefit. If any contract owner dies and the oldest
owner had an attained age of less than 81 years on the contract date, the death
benefit will be determined as follows: During the first contract year, the death
benefit will be the greater of: (a) the contract value or (b) the sum of all
purchase payments made, less any amounts deducted in connection with partial
withdrawals. During any subsequent contract year, the death benefit will be the
greater of: (a) the contract value or (b) the death benefit on the last day of
the previous contract year, plus any purchase payments made and less any amounts
deducted in connection with partial withdrawals since then. If any contract
owner dies on or after his or her 81st birthday, the death benefit will be the
greater of (a) contract value or (b) the death benefit on the last day of the
contract year ending just prior to the owner's 81st birthday, plus any payments
made, less amounts deducted in connection with partial withdrawals.
If any contract owner dies and the oldest owner had an attained age of
81 years or greater on the contract date, the death benefit will be the greater
of: (a) the contract value or (b) the excess of (i) the sum of all purchase
payments over (ii) the sum of any amounts deducted in connection with partial
withdrawals.
Determination of Death Benefit. The determination of the death benefit
will be made on the date written notice and proof of death, as well as all
required claims forms, are received at the Company's Annuity Service Office. No
person is entitled to the death benefit until this time. In addition, partial
withdrawals include amounts applied under an annuity option under the contract.
Also, amounts deducted in connection with partial withdrawals include charges
imposed on a partial withdrawal, but not amounts charged to the contract in
payment of the annual administration fee. If there is any debt under the
contract, the death benefit equals the death benefit, as described above, less
such debt.
Payment of Death Benefit. The Company will pay the death benefit
(which, as defined above, is net of any debt) to the beneficiary if any contract
owner dies before the maturity date. If there is a surviving contract owner,
that contract owner will be deemed to be the beneficiary. No death benefit is
payable on the death of any annuitant (who is not an owner), except that if any
contract owner is not a natural person, the death of any annuitant will be
treated as the death of an owner. On the death of the last surviving annuitant,
the contract owner, if a natural person, will become the annuitant unless the
contract owner designates another person as the annuitant.
The death benefit may be taken in the form of a lump sum immediately.
If not taken immediately, the contract will continue subject to the following:
(1) The beneficiary will become the contract owner. (2) Any excess of the death
benefit over the contract value will be allocated to the owner's investment
accounts in proportion to their relative values on the date of the Company's
receipt at its Annuity Service Office of due proof of the owner's death. (3) No
additional purchase payments may be made. (4) If the beneficiary is not the
deceased's owner spouse, distribution of the contract owner's entire interest in
the contract must be made within five years of the owner's death, or
alternatively, distribution may be made as an annuity, under one of the annuity
options described below, which begins within one year of the owner's death and
is payable over the life of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary. Upon the death of the
beneficiary, the death benefit will equal the contract value which must be
distributed immediately in a single sum. (5) If the owner's spouse is the
beneficiary, the spouse continues the contract as the new owner. In such a case,
the distribution rules described in "(4)" applicable when a contract owner dies
will
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apply when the spouse, as the owner, dies. In addition, a death benefit will be
paid upon the death of the spouse. For purposes of calculating the death benefit
payable upon the death of the spouse, the death benefit paid upon the first
owner's death will be treated as a purchase payment to the contract. In
addition, the death benefit won the last day of the previous contract year (or
the last day of the contract year ending just prior to the owner's 81st birthday
if applicable) shall be set to zero as of the date of the first owner's death.
(6) If any contract owner dies and the oldest owner had an attained age of less
than 81 on the contract date, withdrawal charges are not applied on payment of
the death benefit (whether taken through a partial or total withdrawal or
applied under an annuity option). If any contract owner dies and the oldest
owner had an attained age of 81 or greater on the contract date, withdrawal
charges will be assessed only upon payment of the death benefit (if such charges
are otherwise applicable), so that if the death benefit is paid in a subsequent
year, a lower withdrawal charge will be applicable.
If any annuitant is changed and any contract owner is not a natural
person, the entire interest in the contract must be distributed to the contract
owner within five years.
A substitution or addition of any contract owner may result in
resetting the death benefit to an amount equal to the contract value as of the
date of the change and treating such value as a payment made on that date for
purposes of computing the amount of the death benefit. In addition, all payments
made and all amounts deducted in connection with partial withdrawals prior to
the date of change will not be considered in the determination of the death
benefit. Furthermore, the death benefit on the last day of the previous contract
year will be set to zero as of the date of the change. No such change in death
benefit will be made if the individual whose death will cause the death benefit
to be paid is the same after the change in ownership or if ownership is
transferred to the owner's spouse.
Death benefits will be paid within seven days of the date the amount of
the death benefit is determined, as described above, subject to postponement
under the same circumstances that payment of withdrawals may be postponed (see
"WITHDRAWALS").
ANNUITY PROVISIONS
GENERAL
The proceeds of the contract payable on death, withdrawal or the
contract maturity date may be applied to the annuity options described below,
subject to the distribution of death benefits provisions (see "DEATH BENEFIT
BEFORE MATURITY DATE").
Generally, annuity benefits under the contract will begin on the
maturity date. The maturity date is the date specified on the contract
specifications page, unless changed. If no date is specified, the maturity date
is the maximum maturity date described below. The maximum maturity date is the
first day of the month following the 90th birthday of the annuitant. The
contract owner may specify a different maturity date at any time by written
request at least one month before both the previously specified and the new
maturity date. The new maturity date may not be later than the first day of the
month following the 90th birthday of the annuitant (see "FEDERAL TAX MATTERS -
Taxation of Annuities in General - Delayed Maturity Dates"). Distributions from
qualified contracts may be required before the maturity date (see "FEDERAL TAX
MATTERS - Qualified Retirement Plans").
The contract owner may select the frequency of annuity payments.
However, if the contract value at the maturity date is such that a monthly
payment would be less than $20, the Company may pay the contract value, less any
debt, in one lump sum to the annuitant on the maturity date.
ANNUITY OPTIONS
Annuity benefits are available under the contract on a fixed or
variable basis, or any combination of fixed and variable bases. Upon purchase of
the contract, and on or before the maturity date, the contract owner may select
one or more of the annuity options described below on a fixed and/or variable
basis (except Option 5 which is available on a fixed basis only) or choose an
alternate form of settlement acceptable to the Company. If an annuity option is
not selected, the Company will provide as a default option annuity payments on a
fixed, variable or combined fixed and variable basis in proportion to the
Investment Account Value of each investment option at the maturity date, such
payments to be made for a period certain of 10 years and continuing thereafter
during the lifetime of the annuitant. Treasury Department regulations may
preclude the availability of certain annuity options in connection with certain
qualified contracts.
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The following annuity options are guaranteed in the contract.
Option 1(a): Non-Refund Life Annuity - An annuity with payments during
the lifetime of the annuitant. No payments are due after the death of
the annuitant. Since there is no guarantee that any minimum number of
payments will be made, an annuitant may receive only one payment if the
annuitant dies prior to the date the second payment is due.
Option 1(b): Life Annuity with Payments Guaranteed for 10 Years - An
annuity with payments guaranteed for 10 years and continuing thereafter
during the lifetime of the annuitant. Since payments are guaranteed for
10 years, annuity payments will be made to the end of such period if
the annuitant dies prior to the end of the tenth year.
Option 2(a): Joint & Survivor Non-Refund Life Annuity - An annuity with
payments during the lifetimes of the annuitant and a designated
co-annuitant. No payments are due after the death of the last survivor
of the annuitant and co-annuitant. Since there is no guarantee that any
minimum number of payments will be made, an annuitant or co-annuitant
may receive only one payment if the annuitant and co-annuitant die
prior to the date the second payment is due.
Option 2(b): Joint & Survivor Life Annuity with Payments Guaranteed for
10 Years - An annuity with payments guaranteed for 10 years and
continuing thereafter during the lifetimes of the annuitant and a
designated co-annuitant. Since payments are guaranteed for 10 years,
annuity payments will be made to the end of such period if both the
annuitant and the co-annuitant die prior to the end of the tenth year.
In addition to the foregoing annuity options which the Company is
contractually obligated to offer at all times, the Company currently offers the
following annuity options. The Company may cease offering the following annuity
options at any time and may offer other annuity options in the future.
Option 3: Life annuity with Payments Guaranteed for 5, 15 or 20 Years -
An Annuity with payments guaranteed for 5, 15 or 20 years and
continuing thereafter during the lifetime of the annuitant. Since
payments are guaranteed for the specific number of years, annuity
payments will be made to the end of the last year of the 5, 15 or 20
year period.
Option 4: Joint & Two-Thirds Survivor Non-Refund Life Annuity - An
annuity with full payments during the joint lifetime of the annuitant
and a designated co-annuitant and two-thirds payments during the
lifetime of the survivor. Since there is no guarantee that any minimum
number of payments will be made, an annuitant or co-annuitant may
receive only one payment if the annuitant and co-annuitant die prior to
the date the second payment is due.
Option 5: Period Certain Only Annuity for 5, 10, 15 or 20 years - An
annuity with payments for a 5, 10, 15 or 20 year period and no payments
thereafter.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
The first variable annuity payment is determined by applying that
portion of the contract value used to purchase a variable annuity, measured as
of a date not more than ten business days prior to the maturity date (minus any
applicable premium taxes), to the annuity tables contained in the contract. The
rates contained in such tables depend upon the annuitant's sex and age (as
adjusted depending on the annuitant's year of birth) and the annuity option
selected. Under such tables, the longer the life expectancy of the annuitant
under any life annuity option or the duration of any period for which payments
are guaranteed under the option, the smaller amount will be the amount of the
first monthly variable annuity payment. The rates are based on the 1983 Table A
projected at Scale G, assume births in year 1942 and reflect an assumed interest
rate of 3% per year.
ANNUITY UNITS AND THE DETERMINATION OF SUBSEQUENT VARIABLE ANNUITY PAYMENTS
Variable annuity payments subsequent to the first will be based on the
investment performance of the sub-accounts selected. The amount of such
subsequent payments is determined by dividing the amount of the first annuity
payment from each sub-account by the annuity unit value of such sub-account (as
of the same date the contract value to effect the annuity was determined) to
establish the number of annuity units which will thereafter be used to determine
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payments. This number of annuity units for each sub-account is then multiplied
by the appropriate annuity unit value as of a uniformly applied date not more
than ten business days before the annuity payment is due, and the resulting
amounts for each sub-account are then totaled to arrive at the amount of the
payment to be made. The number of annuity units remains constant during the
annuity payment period. A pro-rata portion of the administration fee will be
deducted from each annuity payment.
The value of an annuity unit for each sub-account for any valuation
period is determined by multiplying the annuity unit value for the immediately
preceding valuation period by the net investment factor for that sub-account
(see "NET INVESTMENT FACTOR") for the valuation period for which the annuity
unit value is being calculated and by a factor to neutralize the assumed
interest rate.
A 3% assumed interest rate is built into the annuity tables in the
contract used to determine the first variable annuity payment. A higher
assumption would mean a larger first annuity payment, but more slowly rising
subsequent payments when actual investment performance exceeds the assumed rate,
and more rapidly falling subsequent payments when actual investment performance
is less than the assumed rate. A lower assumption would have the opposite
effect. The smallest annual rate of investment return which is required to be
earned on the assets of the separate account so that the dollar amount of
variable annuity payments will not decrease is 4.46%.
TRANSFERS AFTER MATURITY DATE
Once variable annuity payments have begun, the contract owner may
transfer all or part of the investment upon which such payments are based from
one sub-account to another. Transfers will be made upon notice to the Company at
least 30 days before the due date of the first annuity payment to which the
change will apply. Transfers after the maturity date will be made by converting
the number of annuity units being transferred to the number of annuity units of
the sub-account to which the transfer is made, so that the next annuity payment
if it were made at that time would be the same amount that it would have been
without the transfer. Thereafter, annuity payments will reflect changes in the
value of the new annuity units. The Company reserves the right to limit, upon
notice, the maximum number of transfers a contract owner may make per contract
year to four. Once annuity payments have commenced, no transfers may be made
from a fixed annuity option to a variable annuity option or from a variable
annuity option to a fixed annuity option. In addition, the Company reserves the
right to defer the transfer privilege at any time that the Company is unable to
purchase or redeem shares of the Trust portfolios. The Company also reserves the
right to modify or terminate the transfer privilege at any time in accordance
with applicable law.
DEATH BENEFIT ON OR AFTER MATURITY DATE
If annuity payments have been selected based on an annuity option
providing for payments for a guaranteed period, and the annuitant dies on or
after the maturity date, the Company will make the remaining guaranteed payments
to the beneficiary. Any remaining payments will be made as rapidly as under the
method of distribution being used as of the date of the annuitant's death. If no
beneficiary is living, the Company will commute any unpaid guaranteed payments
to a single sum (on the basis of the interest rate used in determining the
payments) and pay that single sum to the estate of the last to die of the
annuitant and the beneficiary.
OTHER CONTRACT PROVISIONS
TEN DAY RIGHT TO REVIEW
The contract owner may cancel the contract by returning it to the
Company's Annuity Service Office or agent at any time within 10 days after
receipt of the contract. Within 7 days of receipt of the contract by the
Company, the Company will pay the contract value, less any debt, computed at the
end of the valuation period during which the contract is received by the
Company, to the contract owner. When the contract is issued as an individual
retirement annuity under Sections 408 or 408A of the Code, during the first 7
days of the 10 day period, the Company will return all purchase payments if this
is greater than the amount otherwise payable.
No withdrawal charge is imposed upon return of the contract within the
ten day right to review period.
OWNERSHIP
The contract owner is the person entitled to exercise all rights under
the contract. Prior to the maturity date,
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the contract owner is the person designated in the contract specifications page
or as subsequently named. On and after the maturity date, the annuitant is the
contract owner. If amounts become payable to any beneficiary under the contract,
the beneficiary is the contract owner.
In the case of non-qualified contracts, ownership of the contract may
be changed or the contract may be collaterally assigned at any time prior to the
maturity date, subject to the rights of any irrevocable beneficiary. Assigning a
contract, or changing the ownership of a contract, may be treated as a
distribution of the contract value for Federal tax purposes (see "FEDERAL TAX
MATTERS"). A change of any contract owner may result in resetting the death
benefit to an amount equal to the contract value as of the date of the change
and treating such value as a purchase payment made on that date for purposes of
computing the amount of the death benefit (see "DEATH BENEFIT BEFORE MATURITY
DATE").
Any change of ownership or assignment must be made in writing. Any
change must be approved by the Company. Any assignment and any change, if
approved, will be effective as of the date the Company receives the request at
its Annuity Service Office. The Company assumes no liability for any payments
made or actions taken before a change is approved or an assignment is accepted
or responsibility for the validity or sufficiency of any assignment. An absolute
assignment will revoke the interest of any revocable beneficiary.
In the case of qualified contracts, ownership of the contract generally
may not be transferred except by the trustee of an exempt employees' trust which
is part of a retirement plan qualified under Section 401 of the Code or as
otherwise permitted by applicable IRS regulations. Subject to the foregoing, a
qualified contract may not be sold, assigned, transferred, discounted or pledged
as collateral for a loan or as security for the performance of an obligation or
for any other purpose to any person other than the Company.
BENEFICIARY
The beneficiary is the person, persons or entity designated in the
contract specifications page or as subsequently named. However, if there is a
surviving contract owner, that person will be treated as the beneficiary. The
beneficiary may be changed subject to the rights of any irrevocable beneficiary.
Any change must be made in writing, approved by the Company and if approved,
will be effective as of the date on which written. The Company assumes no
liability for any payments made or actions taken before the change is approved.
If no beneficiary is living, the contingent beneficiary will be the beneficiary.
The interest of any beneficiary is subject to that of any assignee. If no
beneficiary or contingent beneficiary is living, the beneficiary is the estate
of the deceased contract owner. In the case of certain qualified contracts,
regulations promulgated by the Treasury Department prescribe certain limitations
on the designation of a beneficiary.
ANNUITANT
The annuitant is any natural person or persons whose life is used to
determine the duration of annuity payments involving life contingencies. If the
contract owner names more than one person as an "annuitant," the second person
named shall be referred to as "co-annuitant." The annuitant is as specified in
the application, unless changed.
On the death of the annuitant, the co-annuitant, if living, becomes the
annuitant. If there is no living co-annuitant, the owner becomes the annuitant.
In the case of certain qualified contracts, there are limitations on the ability
to designate and change the annuitant and the co-annuitant.
MODIFICATION
The contract may not be modified by the Company without the consent of
the contract owner, except as may be required to make it conform to any law or
regulation or ruling issued by a governmental agency. The provisions of the
contract shall be interpreted so as to comply with the requirements of Section
72(s) of the Code.
COMPANY APPROVAL
The Company reserves the right to accept or reject any contract
application at its sole discretion.
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MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL
The Company may require proof of age, sex or survival of any person
upon whose age, sex or survival any payment depends. If the age or sex of the
annuitant has been misstated, the benefits will be those that would have been
provided for the annuitant's correct age and sex. If the Company has made
incorrect annuity payments, the amount of any underpayment will be paid
immediately and the amount of any overpayment will be deducted from future
annuity payments.
FIXED ACCOUNT INVESTMENT OPTIONS
Due to certain exemptive and exclusionary provisions, interests in the
fixed account investment options are not registered under the Securities Act of
1933 (the "1933 Act") and the Company's general account is not registered as an
investment company under the 1940 Act. Accordingly, neither interests in the
fixed account investment options nor the general account are subject to the
provisions or restrictions of the 1933 Act or the 1940 Act and the staff of the
SEC has not reviewed the disclosures in this Prospectus relating thereto.
Disclosures relating to interests in the fixed account investment options and
the general account, however, may be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy of statements
made in a registration statement.
Investment Options. Currently, there are five fixed account investment
options under the contract: one, three, five and seven year investment accounts
and a DCA fixed investment account which may be established under the DCA
program to make automatic transfers from a DCA fixed account to one or more
variable investment options (see "SPECIAL TRANSFER SERVICES - DOLLAR COST
AVERAGING"). The Company may offer additional fixed account investment options
for any yearly period from two to ten years. Fixed investment accounts provide
for the accumulation of interest on purchase payments at guaranteed rates for
the duration of the guarantee period. The guaranteed interest rates on new
amounts allocated or transferred to a fixed investment account are determined
from time-to-time by the Company in accordance with market conditions. In no
event will the guaranteed rate of interest be less than 3%. Once an interest
rate is guaranteed for a fixed investment account, it is guaranteed for the
duration of the guarantee period and may not be changed by the Company.
Investment Accounts. Contract owners may allocate purchase payments, or
make transfers from the variable investment options, to the fixed account
investment options at any time prior to the maturity date. The Company
establishes a separate investment account each time the contract owner allocates
or transfers amounts to a fixed account investment option, except that amounts
allocated or transferred to the same fixed account investment option on the same
day will establish a single investment account. Amounts may not be allocated to
a fixed account investment option that would extend the guarantee period beyond
the maturity date.
Renewals. At the end of a guarantee period, the contract owner may
establish a new investment account with the same guarantee period at the then
current interest rate, select a different fixed account investment option or
transfer the amounts to a variable account investment option, all without the
imposition of any charge. The contract owner may not select a guarantee period
that would extend beyond the maturity date. In the case of renewals within one
year of the maturity date, the only fixed account investment option available is
to have interest accrued up to the maturity date at the then current interest
rate for one year guarantee periods.
If the contract owner does not specify the renewal option desired, the
Company will select the same guarantee period as has just expired, so long as
such period does not extend beyond the maturity date. In the event a renewal
would extend beyond the maturity date, the Company will select the longest
period that will not extend beyond such date, except in the case of a renewal
within one year of the maturity date in which case the Company will credit
interest up to the maturity date at the then current interest rate for one year
guarantee periods.
Market Value Charge. Any amount withdrawn, transferred or borrowed from
an investment account prior to the end of the guarantee period may be subject to
a market value charge. A market value charge will be calculated separately for
each investment account affected by a transaction to which a market value charge
may apply. The market value charge for an investment account will be calculated
by multiplying the amount withdrawn or transferred from the investment account
by the adjustment factor described below.
The adjustment factor is determined by the following formula:
0.75x(B-A)xC/12 where:
A - The guaranteed interest rate on the investment account.
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B - The guaranteed interest rate available, on the date the request is
processed, for amounts allocated to a new investment account with the
same length of guarantee period as the investment account from which
the amounts are being withdrawn.
C - The number of complete months remaining to the end of the guarantee
period.
For purposes of applying this calculation, the maximum difference
between "B" and "A" will be 3%. The adjustment factor may never be less
than zero.
The total market value charge will be the sum of the market value
charges for each investment account being withdrawn. Where the guaranteed rate
available on the date of the request is less than the rate guaranteed on the
investment account from which the amounts are being withdrawn (B-A in the
adjustment factor is negative), there is no market value charge. There is only a
market value charge when interest rates have increased (B-A in the adjustment
factor is positive).
There will be no market value charge on withdrawals from the fixed
account investment options in the following situations: (a) death of the
contract owner; (b) amounts withdrawn to pay fees or charges; (c) amounts
applied at the maturity date to purchase an annuity at the guaranteed rates
provided in the contract; (d) amounts withdrawn from investment accounts within
one month prior to the end of the guarantee period; (e) amounts withdrawn from a
one-year fixed investment account; and (f) amounts withdrawn in any contract
year that do not exceed 10% of (i) total purchase payments less (ii) any prior
partial withdrawals in that year.
Notwithstanding application of the foregoing formula, in no event will
the market value charge (i) be greater than the amount by which the earnings
attributable to the amount withdrawn or transferred from an investment account
exceed an annual rate of 3%, (ii) together with any withdrawal charges for an
investment account be greater than 10% of the amount transferred or withdrawn,
or (iii) reduce the amount payable on withdrawal or transfer below the amount
required under the non-forfeiture laws of the state with jurisdiction over the
contract. The cumulative effect of the market value and withdrawal charges
could, however, result in a contract owner receiving total withdrawal proceeds
of less than the contract owner's investment in the contract.
Transfers. Prior to the maturity date, the contract owner may transfer
amounts among the fixed account investment options and from the fixed account
investment options to the variable account investment options, subject to the
following conditions. An amount in a fixed investment account may not be
transferred until held in such account for at least one year, except transfers
may be made pursuant to the Dollar Cost Averaging program. Consequently, except
as noted above, amounts in one year investment accounts effectively may not be
transferred prior to the end of the guarantee period. Amounts in any other
investment accounts may be transferred, after the one year holding period has
been satisfied, but the market value charge described above may apply to such a
transfer. The market value charge, if applicable, will be deducted from the
amount transferred.
The contract owner must specify the fixed account investment option
from or to which a transfer is to be made. Where there are multiple investment
accounts within a fixed account investment option, amounts must be withdrawn
from the fixed account investment options on a first-in-first-out basis.
Withdrawals. The contract owner may make total and partial withdrawals
of amounts held in fixed account investment options at any time prior to his or
her death. Withdrawals from fixed account investment options will be made in the
same manner and be subject to the same limitations as set forth under
"WITHDRAWALS" plus the following provisions also apply to withdrawals from fixed
account investment options: (1) the Company reserves the right to defer payment
of amounts withdrawn from fixed account investment options for up to six months
from the date it receives the written withdrawal request (if a withdrawal is
deferred for more than 10 days pursuant to this right, the Company will pay
interest on the amount deferred at a rate not less than 3% per year); (2) if
there are multiple investment accounts under a fixed account investment option,
amounts must be withdrawn from such accounts on a first-in-first-out basis; and
(3) the market value charge described above may apply to withdrawals from any
investment option except for a one year investment option. In the event a market
value charge applies to a withdrawal from a fixed investment account, it will be
calculated with respect to the full amount in the investment account and
deducted from the amount payable in the case of a total withdrawal. In the case
of a partial withdrawal, the market value charge will be calculated on the
amount requested and deducted, if applicable, from the remaining investment
account value.
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Where a contract owner requests a partial withdrawal from a contract in
excess of the amounts in the variable account investment options and does not
specify the fixed account investment options from which the withdrawal is to be
made, such withdrawal will be made from the investment options beginning with
the shortest guarantee period. Within such sequence, where there are multiple
investment accounts within a fixed account investment option, withdrawals will
be made on a first-in-first-out basis.
Withdrawals from the contract may be subject to income tax and a 10%
penalty tax. Withdrawals are permitted from contracts issued in connection with
Section 403(b) qualified plans only under limited circumstances (see "FEDERAL
TAX MATTERS").
Loans. The Company offers a loan privilege only to owners of contracts
issued in connection with Section 403(b) qualified plans that are not subject to
Title I of ERISA. Owners of such contracts may obtain loans using the contract
as the only security for the loan. Owners of such contracts may borrow amounts
allocated to fixed investment accounts in the same manner and subject to the
same limitations as set forth under "LOANS". The market value charge described
above may apply to amounts transferred from the fixed investment accounts to the
loan account in connection with such loans and, if applicable, will be deducted
from the amount so transferred.
Fixed Annuity Options. Subject to the distribution of death benefits
provisions (see "DEATH BENEFIT BEFORE MATURITY DATE"), on death, withdrawal or
the maturity date of the contract, the proceeds may be applied to a fixed
annuity option (see "ANNUITY OPTIONS"). The amount of each fixed annuity payment
is determined by applying the portion of the proceeds (less any applicable
premium taxes) applied to purchase the fixed annuity to the appropriate table in
the contract. If the table in use by the Company is more favorable to the
contract owner, the Company will substitute that table. In addition, at the time
of their commencement fixed annuity payments will not be less than those
provided by an amount applied to purchase a single consideration immediate
annuity to the same class of annuitants at that time. This amount will be the
greater of (a) the contract value less applicable withdrawal charges or (b) 95%
of the contract value. The Company guarantees the dollar amount of fixed annuity
payments.
CHARGES AND DEDUCTIONS
Charges and deductions under the contracts are assessed against
contract values or annuity payments. Currently, there are no deductions made
from purchase payments. In addition, there are deductions from and expenses paid
out of the assets of the Trust portfolios that are described in the accompanying
Prospectus of the Trust.
WITHDRAWAL CHARGES
If a withdrawal is made from the contract before the maturity date, a
withdrawal charge (contingent deferred sales charge) may be assessed against
amounts withdrawn attributable to purchase payments that have been in the
contract less than seven complete contract years. There is never a withdrawal
charge with respect to earnings accumulated in the contract, certain other
amounts available without withdrawal charges described below or purchase
payments that have been in the contract more than seven complete contract years.
In no event may the total withdrawal charges exceed 6% of the amount invested.
The amount of the withdrawal charge and when it is assessed is discussed below:
1. Each withdrawal from the contract is allocated first to the "amount
available without withdrawal charges" and second to "unliquidated purchase
payments". In any contract year, the amount available without withdrawal charges
for that year is the greater of (1) the excess of the contract value on the date
of withdrawal over the unliquidated purchase payments (the accumulated earnings
on the contract) or (2) the excess of (i) over (ii), where (i) is 10% of total
purchase payments and (ii) is all prior partial withdrawals in that year. The
amount withdrawn without withdrawal charges will be applied to a requested
withdrawal, first, to withdrawals from variable account investment options and
then to withdrawals from fixed account investment options beginning with those
with the shortest guarantee period first and the longest guarantee period last.
2. Withdrawals in excess of the amount available without withdrawal
charges may be subject to withdrawals charges. A withdrawal charge will be
assessed against purchase payments liquidated that have been in the contract for
less than seven years. Purchase payments will be liquidated on a first-in
first-out basis. On any withdrawal request, the Company will liquidate purchase
payments equal to the amount of the withdrawal request which exceeds the amount
available without withdrawal charges in the order such purchase payments were
made: the oldest unliquidated purchase
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payment first, the next purchase payment second, etc. until all purchase
payments have been liquidated.
3. Each purchase payment or portion thereof liquidated in connection
with a withdrawal request is subject to a withdrawal charge based on the length
of time the purchase payment has been in the contract. The amount of the
withdrawal charge is calculated by multiplying the amount of the purchase
payment being liquidated by the applicable withdrawal charge percentage obtained
from the table below.
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS WITHDRAWAL CHARGE
PURCHASE PAYMENT IN PERCENTAGE
CONTRACT
<S> <C>
0 6%
1 6%
2 5%
3 5%
4 4%
5 3%
6 2%
7+ 0%
</TABLE>
The total withdrawal charge will be the sum of the withdrawal charges
for the purchase payments being liquidated.
4. The withdrawal charge is deducted from the contract value remaining
after the contract owner is paid the amount requested, except in the case of a
complete withdrawal when it is deducted from the amount otherwise payable. In
the case of a partial withdrawal, the amount requested from an investment
account may not exceed the value of that investment account less any applicable
withdrawal charge.
5. There is generally no withdrawal charge on distributions made as a
result of the death of the contract owner or, if applicable, the annuitant (see
"DEATH BENEFIT BEFORE MATURITY DATE -- Amount of Death Benefit"), and no
withdrawal charges are imposed on the maturity date if the contract owner
annuitizes as provided in the contract.
The amount collected from the withdrawal charge will be used to
reimburse the Company for the compensation paid to cover selling concessions to
broker-dealers, preparation of sales literature and other expenses related to
sales activity.
For examples of calculation of the withdrawal charge, see Appendix A.
Withdrawals from the fixed account investment options may be subject to a market
value charge in addition to the withdrawal charge described above (see "FIXED
ACCOUNT INVESTMENT OPTIONS").
Withdrawal Charge Waiver in Connection with Clinton's Administration's
Fiscal Year 1999 Budget Proposal. The Clinton administration's Fiscal Year 1999
Budget proposal dated February 2, 1998 (the "1999 Budget Proposal") contains
proposals to change the taxation of non-qualified annuity contracts (see
"FEDERAL TAX MATTERS - Introduction"). While it is uncertain whether the 1999
Budget Proposal will become law, if the 1999 Budget Proposal is enacted
substantially as proposed, withdrawal charges will be waived on purchase
payments made on or after February 2, 1998, provided such amounts are withdrawn
within 60 days of the date that the 1999 Budget Proposal becomes law. The
Company reserves the right to terminate this withdrawal charge waiver at any
time. If the waiver is terminated, purchase payments made from February 2, 1998
to the termination date of the waiver will not be subject to withdrawal charge
as provided above. This waiver does not affect a contract owner's right to
cancel a contract within the ten day right to review period (see "OTHER CONTRACT
PROVISIONS - Ten Day Right to Review"). Withdrawals may be subject to income tax
to the extent of earnings under the contract and, if made prior to age 59-1/2,
generally will be subject to a 10% IRS penalty tax (see "FEDERAL TAX MATTERS -
Taxation of Partial and Full Withdrawals").
ADMINISTRATION FEES
Except as noted below, the Company will deduct each year an annual
administration fee of $30 as partial compensation for the cost of providing all
administrative services attributable to the contracts and the operations of the
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Variable Account and the Company in connection with the contracts. However, if
prior to the maturity date the contract value is equal to or greater than
$100,000 at the time of the fee's assessment, the fee will be waived. Prior to
the maturity date, this administration fee is deducted on the last day of each
contract year. It is withdrawn from each investment option in the same
proportion that the value of such investment option bears to the contract value.
If the entire contract is withdrawn on other than the last day of any contract
year, the $30 administration fee will be deducted from the amount paid. During
the annuity period, the fee is deducted on a pro-rata basis from each annuity
payment.
A daily charge in an amount equal to 0.15% of the value of each
variable investment account on an annual basis is also deducted from each
sub-account to reimburse the Company for administrative expenses. This asset
based administrative charge will not be deducted from the fixed account
investment options. The charge will be reflected in the contract value as a
proportionate reduction in the value of each variable investment account.
Because this portion of the administrative fee is a percentage of assets rather
than a flat amount, larger contracts will in effect pay a higher proportion of
this portion of the administrative expense than smaller contracts.
The Company does not expect to recover from such fees any amount in
excess of its accumulated administrative expenses. Even though administrative
expenses may increase, the Company guarantees that it will not increase the
amount of the administration fees. There is no necessary relationship between
the amount of the administrative charge imposed on a given contract and the
amount of the expense that may be attributed to that contract.
MORTALITY AND EXPENSE RISK CHARGE
The mortality risk assumed by the Company is the risk that annuitants
may live for a longer period of time than estimated. The Company assumes this
mortality risk by virtue of annuity rates incorporated into the contract which
cannot be changed. This assures each annuitant that his longevity will not have
an adverse effect on the amount of annuity payments. Also, the Company
guarantees that if the contract owner dies before the maturity date, it will pay
a death benefit (see "DEATH BENEFIT BEFORE MATURITY DATE"). The expense risk
assumed by the Company is the risk that the administration charges or withdrawal
charge may be insufficient to cover actual expenses.
To compensate it for assuming these risks, the Company deducts from
each of the sub-accounts a daily charge in an amount equal to 1.25% of the value
of the variable investment accounts on an annual basis, consisting of .8% for
the mortality risk and .45% for the expense risk. The charge will be reflected
in the contract value as a proportionate reduction in the value of each variable
investment account. The rate of the mortality and expense risk charge cannot be
increased. If the charge is insufficient to cover the actual cost of the
mortality and expense risks undertaken, the Company will bear the loss.
Conversely, if the charge proves more than sufficient, the excess will be profit
to the Company and will be available for any proper corporate purpose including,
among other things, payment of distribution expenses. The mortality and expense
risk charge is not assessed against the fixed account investment options.
TAXES
The Company reserves the right to charge, or provide for, certain taxes
against purchase payments, contract values or annuity payments. Such taxes may
include premium taxes or other taxes levied by any government entity which the
Company determines to have resulted from the (i) establishment or maintenance of
the Variable Account, (ii) receipt by the Company of purchase payments, (iii)
issuance of the contracts, or (iv) commencement or continuance of annuity
payments under the contracts. The State of New York does not currently assess a
premium tax. In the event New York does impose a premium tax, the Company
reserves the right to pass-through such tax to contract owners. For a discussion
on premium taxes which may be applicable to non-New York residents, see "STATE
PREMIUM TAXES" in the Statement of Additional Information. The Company will
withhold taxes to the extent required by applicable law.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion of the Federal income tax treatment of the
contract is not exhaustive, does not purport to cover all situations, and is not
intended as tax advice. A qualified tax advisor should always be consulted with
regard to the application of law to individual circumstances. This discussion is
based on the Code, Treasury Department regulations, and interpretations existing
on the date of this Prospectus. These authorities, however, are
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<PAGE> 35
subject to change by Congress, the Treasury Department, and judicial decisions.
The Clinton administration's Fiscal Year 1999 Budget proposal dated
February 2, 1998 (the "Budget Proposal") contains proposals to change the
taxation of non-qualified annuity contracts. See "FEDERAL TAX MATTERS -
Introduction." While it is uncertain whether the Budget Proposal will become
law, if the Budget Proposal is enacted substantially as proposed, withdrawal
charges will be waived on purchase payments made on or after February 2, 1998,
provided such amounts are withdrawn within 60 days of the date that the Budget
Proposal becomes law. The Company reserves the right to terminate this
withdrawal charge waiver at any time. If the waiver is terminated, purchase
payments made from February 2, 1998 to the termination date of the waiver will
not be subject to withdrawal charge as provided above. This waiver does not
affect a contract owner's right to cancel a contract within the ten day right to
review period. See "OTHER CONTRACT PROVISIONS -- Ten Day Right to Review."
Withdrawals may be subject to income tax to the extent of earnings under the
contract and, if made prior to age 59 1/2, generally will be subject to a 10%
IRS penalty tax. See "FEDERAL TAX MATTERS - Taxation of Partial and Full
Withdrawals."
This discussion does not address state or local tax consequences
associated with the purchase of a contract. In addition, THE COMPANY MAKES NO
GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE, OR LOCAL -- OF ANY
CONTRACT OR OF ANY TRANSACTION INVOLVING A CONTRACT.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under the Code. Since
the operations of the Variable Account are a part of, and are taxed with, the
operations of the Company, the Variable Account is not separately taxed as a
"regulated investment company" under the Code. Under existing Federal income tax
laws, investment income and capital gains of the Variable Account are not taxed
to the extent they are applied under a contract. The Company does not anticipate
that it will incur any Federal income tax liability attributable to such income
and gains of the Variable Account, and therefore the Company does not intend to
make provision for any such taxes. If the Company is taxed on investment income
or capital gains of the Variable Account, then the Company may impose a charge
against the Variable Account in order to make provision for such taxes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any
increase in the contract value is generally not taxable to the contract owner or
annuitant until received, either in the form of annuity payments, as
contemplated by the contract, or in some other form of distribution. However,
certain requirements must be satisfied in order for this general rule to apply,
including: (1) the contract must be owned by an individual (or treated as owned
by an individual), (2) the investments of the Variable Account must be
"adequately diversified" in accordance with Treasury Department regulations, (3)
the Company, rather than the owner, must be considered the owner of the assets
of the Variable Account for Federal tax purposes, and (4) the contract must
provide for appropriate amortization, through annuity payments, of the
contract's purchase payments and earnings, e.g., the maturity date must not
occur at too advanced an age.
Non-Natural Owners. As a general rule, deferred annuity contracts held
by "non-natural persons" such as a corporation, trust or other similar entity,
as opposed to a natural person, are not treated as annuity contracts for Federal
income tax purposes. The investment income on such contracts is taxed as
ordinary income that is received or accrued by the owner of the contract during
the taxable year. There are several exceptions to this general rule for
non-natural contract owners. First, contracts will generally be treated as held
by a natural person if the nominal owner is a trust or other entity which holds
the contract as an agent for a natural person. However, this special exception
will not apply in the case of any employer who is the nominal owner of an
annuity contract under a non-qualified deferred compensation arrangement for its
employees.
In addition, exceptions to the general rule for non-natural contract
owners will apply with respect to (1) contracts acquired by an estate of a
decedent by reason of the death of the decedent, (2) certain qualified
contracts, (3) certain contracts purchased by employers upon the termination of
certain qualified plans, (4) certain contracts used in connection with
structured settlement agreements, and (5) contracts purchased with a single
premium when
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the annuity starting date (as defined in the tax law) is no later than a year
from purchase of the annuity and substantially equal periodic payments are made,
not less frequently than annually, during the annuity period.
Loss of Interest Deduction Where Contracts are Held by or for the
Benefit of Certain Non-Natural Person. In the case of contracts issued after
June 8, 1997 to a non-natural taxpayer (such as a corporation or trust) or held
for the benefit of such an entity, recent changes in the tax law may result in
otherwise deductible interest no longer being deductible by the entity,
regardless of whether the interest relates to debt used to purchase or carry the
contract. However, this interest deduction disallowance does not affect
contracts where the income on such contracts is treated as ordinary income that
is received or accrued by the owner during the taxable year. Entities that are
considering purchasing the contract, or entities that will be beneficiaries
under a contract, should consult a tax advisor.
Diversification Requirements. For a contract to be treated as an
annuity for Federal income tax purposes, the investments of the Variable Account
must be "adequately diversified" in accordance with Treasury Department
Regulations. The Secretary of the Treasury has issued regulations which
prescribe standards for determining whether the investments of the Variable
Account are "adequately diversified." If the Variable Account failed to comply
with these diversification standards, a contract would not be treated as an
annuity contract for Federal income tax purposes and the contract owner would
generally be taxable currently on the excess of the contract value over the
premiums paid for the contract.
Although the Company does not control the investments of the Trust, it
expects that the Trust will comply with such regulations so that the Variable
Account will be considered "adequately diversified."
Ownership Treatment. In certain circumstances, a variable annuity
contract owner may be considered the owner, for Federal income tax purposes, of
the assets of the separate account used to support his or her contract. In those
circumstances, income and gains from such separate account assets would be
includible in the contract owner's gross income. The Internal Revenue Service
(the "IRS") has stated in published rulings that a variable contract owner will
be considered the owner of separate account assets if the owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. In addition, the Treasury Department
announced, in connection with the issuance of regulations concerning investment
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor, rather than the insurance company, to be treated
as the owner of the assets in the account." This announcement also stated that
guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular sub-accounts [of
a separate account] without being treated as owners of the underlying assets."
As of the date of this Prospectus, no such guidance has been issued.
The ownership rights under this contract are similar to, but different
in certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of this contract has the choice of many more investment
options to which to allocate premiums and contract values, and may be able to
transfer among investment options more frequently than in such rulings. These
differences could result in the contract owner being treated as the owner of the
assets of the Variable Account and thus subject to current taxation on the
income and gains from those assets. In addition, the Company does not know what
standards will be set forth in the regulations or rulings which the Treasury
Department has stated it expects to issue. The Company therefore reserves the
right to modify the contract as necessary to attempt to prevent the contract
owner from being considered the owner of the assets of the Variable Account.
Delayed Maturity Dates. If the contract's maturity date occurs (or is
scheduled to occur) at a time when the annuitant has reached an advanced age,
e.g., past age 85, it is possible that the contract would not be treated as an
annuity for Federal income tax purposes. In that event, the income and gains
under the contract could be currently includible in the owner's income.
The remainder of this discussion assumes that the contract will be
treated as an annuity contract for Federal income tax purposes and that the
Company will be treated as the owner of the Variable Account assets.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal, amounts received are includible in
income to the extent the contract
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<PAGE> 37
value before the withdrawal exceeds the "investment in the contract." In the
case of a full withdrawal, amounts received are includible in income to the
extent they exceed the "investment in the contract." For these purposes the
investment in the contract at any time equals the total of the purchase payments
made under the contract to that time (to the extent such payments were neither
deductible when made nor excludable from income as, for example, in the case of
certain employer contributions to qualified plans) less any amounts previously
received from the contract which were not included in income.
Other than in the case of certain qualified contracts, any amount
received as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) any portion of the contract value, is treated as a
withdrawal of such amount or portion. (Loans, assignments and pledges are
permitted only in limited circumstances under qualified contracts.) The
investment in the contract is increased by the amount includible in income with
respect to such assignment or pledge, though it is not affected by any other
aspect of the assignment or pledge (including its release). If an individual
transfers his or her interest in an annuity contract without adequate
consideration to a person other than the owner's spouse (or to a former spouse
incident to divorce), the owner will be taxed on the difference between the
"contract value" and the "investment in the contract" at the time of transfer.
In such case, the transferee's investment in the contract will be increased to
reflect the increase in the transferor's income.
The contract provides a death benefit that in certain circumstances may
exceed the greater of the purchase payments and the contract value. As described
elsewhere in this Prospectus, the Company imposes certain charges with respect
to the death benefit. It is possible that those charges (or some portion
thereof) could be treated for Federal income tax purposes as a partial
withdrawal from the contract.
There may be special income tax issues present in situations where the
owner and the annuitant are not the same person and are not married to one
another. A tax advisor should be consulted in those situations.
TAXATION OF ANNUITY PAYMENTS
Normally, the portion of each annuity payment taxable as ordinary
income is equal to the excess of the payment over the exclusion amount. In the
case of variable annuity payments, the exclusion amount is the "investment in
the contract" (defined above) allocated to the variable annuity option, adjusted
for any period certain or refund feature, when payments begin to be made divided
by the number of payments expected to be made (determined by Treasury Department
regulations which take into account the annuitant's life expectancy and the form
of annuity benefit selected). In the case of fixed annuity payments, the
exclusion amount is the amount determined by multiplying (1) the payment by (2)
the ratio of the investment in the contract allocated to the fixed annuity
option, adjusted for any period certain or refund feature, to the total expected
value of annuity payments for the term of the contract (determined under
Treasury Department regulations). A simplified method of determining the taxable
portion of annuity payments applies to contracts issued in connection with
certain qualified plans other than IRAs.
Once the total amount of the investment in the contract is excluded
using these ratios, annuity payments will be fully taxable. If annuity payments
cease because of the death of the annuitant and before the total amount of the
investment in the contract is recovered, the unrecovered amount generally will
be allowed as a deduction to the annuitant in his or her last taxable year.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a contract because of the death of an
owner or the annuitant. Prior to the maturity date, such death benefit proceeds
are includible in income as follows: (1) if distributed in a lump sum, they are
taxed in the same manner as a full withdrawal, as described above, or (2) if
distributed under an annuity option, they are taxed in the same manner as
annuity payments, as described above. After the maturity date, where a
guaranteed period exists under an annuity option and the annuitant dies before
the end of that period, payments made to the beneficiary for the remainder of
that period are includible in income as follows: (1) if received in a lump sum,
they are includible in income to the extent that they exceed the unrecovered
investment in the contract at that time, or (2) if distributed in accordance
with the existing annuity option selected, they are fully excludable from income
until the remaining investment in the contract is deemed to be recovered, and
all annuity payments thereafter are fully includible in income.
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<PAGE> 38
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any payment from a
non-qualified contract unless the payment is: (a) received on or after the
contract owner reaches age 59 1/2; (b) attributable to the contract owner's
becoming disabled (as defined in the tax law); (c) made to a beneficiary on or
after the death of the contract owner or, if the contract owner is not an
individual, on or after the death of the primary annuitant (as defined in the
tax law); (d) made as a series of substantially equal periodic payments (not
less frequently than annually) for the life (or life expectancy) of the
annuitant or for the joint lives (or joint life expectancies) of the annuitant
and designated beneficiary (as defined in the tax law); (e) made under an
annuity contract purchased with a single premium when the annuity starting date
(as defined in the tax law) is no later than a year from purchase of the annuity
and substantially equal periodic payments are made, not less frequently than
annually, during the annuity period; or (f) made with respect to certain
annuities issued in connection with structured settlement agreements. (A similar
penalty tax, applicable to distributions from certain qualified contracts, is
discussed below.)
AGGREGATION OF CONTRACTS
In certain circumstances, the amount of an annuity payment or a
withdrawal from a contract that is includible in income may be determined by
combining some or all of the non-qualified contracts owned by an individual. For
example, if a person purchases a contract offered by this Prospectus and also
purchases at approximately the same time an immediate annuity, the IRS may treat
the two contracts as one contract. In addition, if a person purchases two or
more deferred annuity contracts from the same insurance company (or its
affiliates) during any calendar year, all such contracts will be treated as one
contract. The effects of such aggregation are not clear; however, it could
affect the amount of a withdrawal or an annuity payment that is taxable and the
amount which might be subject to the penalty tax described above.
QUALIFIED RETIREMENT PLANS
The contracts are also designed for use in connection with certain
types of retirement plans which receive favorable treatment under the Code.
Numerous special tax rules apply to the participants in such qualified plans and
to the contracts used in connection with such qualified plans. Therefore, no
attempt is made in this Prospectus to provide more than general information
about use of the contract with the various types of qualified plans.
The tax rules applicable to qualified plans vary according to the type
of plan and the terms and conditions of the plan itself. For example, for both
withdrawals and annuity payments under certain qualified contracts, there may be
no "investment in the contract" and the total amount received may be taxable.
Also, loans from qualified contracts, where allowed, are subject to a variety of
limitations, including restrictions as to the amount that may be borrowed, the
duration of the loan, and the manner in which the loan must be repaid. (Owners
should always consult their tax advisors and retirement plan fiduciaries prior
to exercising their loan privileges.) Both the amount of the contribution that
may be made, and the tax deduction or exclusion that the owner may claim for
such contribution, are limited under qualified plans. If this contract is used
in connection with a qualified plan, the owner and annuitant must be the same
individual. If a co-annuitant is named, all distributions made while the
annuitant is alive must be made to the annuitant. Also, if a co-annuitant is
named who is not the annuitant's spouse, the annuity options which are available
may be limited, depending on the difference in ages between the annuitant and
co-annuitant. Furthermore, the length of any guarantee period may be limited in
some circumstances to satisfy certain minimum distribution requirements under
the Code.
In addition, special rules apply to the time at which distributions
must commence and the form in which the distributions must be paid. For example,
failure to comply with minimum distribution requirements applicable to qualified
plans will result in the imposition of an excise tax. This excise tax generally
equals 50% of the amount by which a minimum required distribution exceeds the
actual distribution from the qualified plan. In the case of IRAs, distributions
of minimum amounts (as specified in the tax law) must generally commence by
April 1 of the calendar year following the calendar year in which the owner
attains age 70 1/2. In the case of certain other qualified plans, distributions
of such minimum amounts must generally commence by the later of this date or
April 1 of the calendar year following the calendar year in which the employee
retires.
There is also a 10% penalty tax on the taxable amount of any payment
from certain qualified contracts. There are exceptions to this penalty tax which
vary depending on the type of qualified plan. In the case of an "Individual
Retirement Annuity" or an "IRA", exceptions provide that the penalty tax does
not apply to a
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<PAGE> 39
payment (a) received on or after the contract owner reaches age 59 1/2, (b)
received on or after the owner's death or because of the owner's disability (as
defined in the tax law), or (c) made as a series of substantially equal periodic
payments (not less frequently than annually) for the life (or life expectancy)
of the owner or for the joint lives (or joint life expectancies) of the owner
and designated beneficiary (as defined in the tax law). These exceptions, as
well as certain others not described herein, generally apply to taxable
distributions from other qualified plans (although, in the case of plans
qualified under Sections 401 and 403, exception "c" above for substantially
equal periodic payments applies only if the owner has separated from service).
In addition, the penalty tax does not apply to certain distributions from IRAs
taken after December 31, 1997 which are used for qualified first time home
purchasers or for higher education expenses. Special considerations must be met
to qualify for these two exceptions to the penalty tax. Owners wishing to take a
distribution from an IRA for these purposes should consult their tax advisor.
When issued in connection with a qualified plan, a contract will be
amended as generally necessary to conform to the requirements of the plan.
However, contract owners, annuitants, and beneficiaries are cautioned that the
rights of any person to any benefits under qualified plans may be subject to the
terms and conditions of the plans themselves, regardless of the terms and
conditions of the contract. In addition, the Company shall not be bound by terms
and conditions of qualified plans to the extent such terms and conditions
contradict the contract, unless the Company consents.
QUALIFIED PLAN TYPES
Following are brief descriptions of various types of qualified plans in
connection with which the Company may issue a contract.
Individual Retirement Annuities. Section 408 of the Code permits
eligible individuals to contribute to an individual retirement program known as
an "IRA." IRAs are subject to limits on the amounts that may be contributed, the
persons who may be eligible and on the time when distributions may commence.
Also, distributions from certain other types of qualified retirement plans may
be "rolled over" on a tax-deferred basis into an IRA. The contract may not,
however, be used in connection with an "Education IRA" under Section 530 of the
Code.
IRAs generally may not provide life insurance coverage, but they may
provide a death benefit that equals the greater of the premiums paid and the
contract value. The contract provides a death benefit that in certain
circumstances may exceed the greater of the purchase payments and the contract
value. It is possible that the contract's death benefit could be viewed as
providing life insurance coverage with the result that the contract would not be
viewed as satisfying the requirements of an IRA.
Simplified Employee Pensions (SEP-IRAs). Section 408(k) of the Code
allows employers to establish simplified employee pension plans for their
employees, using the employees' IRAs for such purposes, if certain criteria are
met. Under these plans the employer may, within specified limits, make
deductible contributions on behalf of the employees to IRAs. As discussed above
(see Individual Retirement Annuities), there is some uncertainty regarding the
treatment of the contract's death benefit for purposes of the tax rules
governing IRAs (which would include SEP-IRAs). Employers intending to use the
contract in connection with such plans should seek competent advice.
Corporate and Self-Employed ("H.R. 10" and "Keogh") Pension and
Profit-Sharing Plans. Sections 401(a) and 403(a) of the Code permit corporate
employers to establish various types of tax-favored retirement plans for
employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10" or "Keogh," permits self-employed
individuals also to establish such tax-favored retirement plans for themselves
and their employees. Such retirement plans may permit the purchase of the
contracts in order to provide benefits under the plans. The contract provides a
death benefit that in certain circumstances may exceed the greater of the
purchase payments and the contract value. It is possible that such death benefit
could be characterized as an incidental death benefit. There are limitations on
the amount of incidental benefits that may be provided under pension and profit
sharing plans. In addition, the provision of such benefits may result in current
taxable income to participants. Employers intending to use the contract in
connection with such plans should seek competent advice.
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<PAGE> 40
Tax-Sheltered Annuities. Section 403(b) of the Code permits public
school employees and employees of certain types of charitable, educational and
scientific organizations specified in Section 501(c)(3) of the Code to have
their employers purchase annuity contracts for them and, subject to certain
limitations, to exclude the amount of purchase payments from gross income for
tax purposes. These annuity contracts are commonly referred to as "tax-sheltered
annuities." Purchasers of the contracts for such purposes should seek competent
advice as to eligibility, limitations on permissible amounts of purchase
payments and other tax consequences associated with the contracts. In
particular, purchasers should consider that the contract provides a death
benefit that in certain circumstances may exceed the greater of the purchase
payments and the contract value. It is possible that such death benefit could be
characterized as an incidental death benefit. If the death benefit were so
characterized, this could result in currently taxable income to purchasers. In
addition, there are limitations on the amount of incidental benefits that may be
provided under a tax-sheltered annuity. Even if the death benefit under the
contract were characterized as an incidental death benefit, it is unlikely to
violate those limits unless the purchaser also purchases a life insurance
contract as part of his or her tax-sheltered annuity plan.
Tax-sheltered annuity contracts must contain restrictions on
withdrawals of (i) contributions made pursuant to a salary reduction agreement
in years beginning after December 31, 1988, (ii) earnings on those
contributions, and (iii) earnings after 1988 on amounts attributable to salary
reduction contributions (and earnings on those contributions) held as of the
last day of the year beginning before January 1, 1989. These amounts can be paid
only if the employee has reached age 59 1/2, separated from service, died, or
become disabled (within the meaning of the tax law), or in the case of hardship
(within the meaning of the tax law). Amounts permitted to be distributed in the
event of hardship are limited to actual contributions; earnings thereon cannot
be distributed on account of hardship. Amounts subject to the withdrawal
restrictions applicable to Section 403(b)(7) custodial accounts may be subject
to more stringent restrictions. (These limitations on withdrawals do not apply
to the extent the Company is directed to transfer some or all of the contract
value to the issuer of another tax-sheltered annuity or into a Section 403(b)(7)
custodial account.)
Roth IRAs. Recently enacted Section 408A of the Code permits eligible
individuals to contribute to a type of IRA known as a "Roth IRA." Roth IRAs
differ from other IRAs in several respects. Among the differences is that,
although contributions to a Roth IRA are not deductible, "qualified
distributions" from a Roth IRA will be excludable from income. Additionally, the
eligibility and mandatory distribution requirements for Roth IRAs differ from
non-Roth IRAs. Furthermore, a rollover may be made to a Roth IRA only if it is a
"qualified rollover contribution." A "qualified rollover contribution" is a
rollover contribution to a Roth IRA from another Roth IRA or from a non-Roth
IRA, but only if such rollover contribution meets the rollover requirements for
IRAs under section 408(d)(3) of the Code. In the case of a qualified rollover
contribution or a transfer from a non-Roth IRA to a Roth IRA, any portion of the
amount rolled over which would be includible in gross income were it not part of
a qualified rollover contribution or a nontaxable transfer will be includible in
gross income. However, the 10 percent penalty tax on premature distributions
generally will not apply.
All or part of amounts in a non-Roth IRA may be converted into a Roth
IRA. Such a conversion can be made without taking an actual distribution from
the IRA. For example, an individual may make a conversion by notifying the IRA
issuer or trustee, whichever is applicable. The conversion of an IRA to a Roth
IRA is a special type of qualified rollover distribution. Hence, the IRA
participant must be eligible to make a qualified rollover distribution in order
to convert an IRA to a Roth IRA. A conversion typically will result in the
inclusion of some or all of the IRA value in gross income, as described above.
Persons with adjusted gross incomes in excess of $100,000 or who are married and
file a separate return are not eligible to make a qualified rollover
contribution or a transfer in a taxable year from a non-Roth IRA to a Roth IRA.
Any "qualified distribution" from a Roth IRA is excludible from gross
income. A "qualified distribution" is a payment or distribution which satisfies
two requirements. First, the payment or distribution must be (a) made after the
Owner attains age 59-1/2, (b) made after the Owner's death, (c) attributable to
the Owner being disabled, or (d) a qualified first-time homebuyer distribution
within the meaning of section 72(t)(2)(F) of the Code. Second, the payment or
distribution must be made in a taxable year that is at least five years after
(a) the first taxable year for which a contribution was made to any Roth IRA
established for the Owner, or (b) in the case of a payment or distribution
properly allocable to a qualified rollover contribution from a non-Roth IRA (or
income allocable thereto), the taxable year in which the rollover contribution
was made. A distribution from a Roth IRA which is not a qualified distribution
is generally taxed in the same manner as a distribution from non-Roth IRAs.
Distributions from a Roth IRA need not commence at age 70-1/2.
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As described above (see Individual Retirement Annuities), there is some
uncertainty regarding the proper characterization of the Contract's death
benefit for purposes of the tax rules governing IRAs (which include Roth IRAs).
Persons intending to use the Contract in connection with a Roth IRA should seek
competent advice.
The state income tax treatment of a Roth IRA may differ from the
federal income tax treatment of a Roth IRA. A tax advisor should be consulted
regarding the state law treatment of a Roth IRA.
DIRECT ROLLOVERS
If the contract is used in connection with a retirement plan that is
qualified under Sections 401(a), 403(a), or 403(b) of the Code, any "eligible
rollover distribution" from the contract will be subject to "direct rollover"
and mandatory withholding requirements. An eligible rollover distribution
generally is any taxable distribution from such qualified plans, excluding
certain amounts such as (i) minimum distributions required under Section
401(a)(9) of the Code, and (ii) certain distributions for life, life expectancy,
or for 10 years or more which are part of a "series of substantially equal
periodic payments."
Under these requirements, Federal income tax equal to 20% of the
eligible rollover distribution will be withheld from the amount of the
distribution. Unlike withholding on certain other amounts distributed from the
contract, discussed below, the owner cannot elect out of withholding with
respect to an eligible rollover distribution. However, this 20% withholding will
not apply if, instead of receiving the eligible rollover distribution, the
distributee elects to have it directly transferred to certain qualified plans.
Prior to receiving an eligible rollover distribution, a notice will be provided
explaining generally the direct rollover and mandatory withholding requirements
and how to avoid the 20% withholding by electing a direct rollover.
FEDERAL INCOME TAX WITHHOLDING
The Company will withhold and remit to the U.S. Government a part of
the taxable portion of each distribution made under a contract unless the
distributee notifies the Company at or before the time of the distribution that
he or she elects not to have any amounts withheld. In certain circumstances, the
Company may be required to withhold tax. The withholding rates applicable to the
taxable portion of periodic annuity payments are the same as the withholding
rates generally applicable to payments of wages. In addition, the withholding
rate applicable to the taxable portion of non-periodic payments (including
withdrawals prior to the maturity date and rollovers from non-Roth IRAs to Roth
IRAs) is 10%. As discussed above, the withholding rate applicable to eligible
rollover distributions is 20%.
GENERAL MATTERS
TAX DEFERRAL
The status of the contract as an annuity generally allows all earnings
on the underlying investments to be tax-deferred until withdrawn or until
annuity payments begin (see "FEDERAL TAX MATTERS"). This tax deferred treatment
may be beneficial to contract owners in building assets in a long-term
investment program.
PERFORMANCE DATA
Each of the sub-accounts may in its advertising and sales materials
quote total return figures. The sub-accounts may advertise both "standardized"
and "non-standardized" total return figures, although standardized figures will
always accompany non-standardized figures. Non-standardized total return figures
may be quoted assuming both (i) redemption at the end of the time period and
(ii) not assuming redemption at the end of the time period. Standardized figures
include total return figures from: (i) the inception date of the sub-account of
the Variable Account which invests in the portfolio or (ii) ten years, whichever
period is shorter. Non-standardized figures include total return numbers from:
(i) inception date of the portfolio or (ii) ten year, whichever period is
shorter. Such figures will always include the average annual total return for
recent one year and, when applicable, five and ten year periods and, where less
than ten years, the inception date of the sub-account, in the case of
standardized returns, and the inception date of the portfolio, in the case of
non-standardized returns. Where the period since inception is less than one
year, the total return quoted will be the aggregate return for the period. The
average annual total return is the average annual compounded rate of return that
equates a purchase payment to the market value of such purchase payment on the
last day of the period for which such return is calculated. The aggregate total
return is the percentage change (not
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annualized) that equates a purchase payment to the market value of such purchase
payment on the last day of the period for which such return is calculated. For
purposes of the calculations it is assumed that an initial payment of $1,000 is
made on the first day of the period for which the return is calculated. For
total return figures quoted for periods prior to the commencement of the
offering of this contract, standardized performance data will be the historical
performance of the Trust portfolio from the date the applicable sub-account of
the Variable Account first became available for investment under other contracts
offered by the Company, adjusted to reflect current contract charges. In the
case of non-standardized performance, performance figures will be the historical
performance of the Trust portfolio from the inception date of the portfolio (or
in the case of the Trust portfolios created in connection with the merger of
Manulife Series Fund, Inc. into the Trust, the inception date of the applicable
predecessor Manulife Series Fund portfolio), adjusted to reflect current
contract charges. Past performance figures quoted are not intended to indicate
future performance of any sub-account. More detailed information on the
computations is set forth in the Statement of Additional Information.
FINANCIAL STATEMENTS
Financial Statements for the Variable Account and the Company are
contained in the Statement of Additional Information.
ASSET ALLOCATION AND TIMING SERVICES
The Company is aware that certain third parties may offer asset
allocation and timing services in connection with the contracts. In certain
cases the Company may have agreed to honor transfer instructions from such asset
allocation and timing services where it has received powers of attorney, in a
form acceptable to it, from the contract owners participating in the service.
THE COMPANY DOES NOT ENDORSE, APPROVE OR RECOMMEND SUCH SERVICES IN ANY WAY AND
CONTRACT OWNERS SHOULD BE AWARE THAT FEES PAID FOR SUCH SERVICES ARE SEPARATE
AND IN ADDITION TO FEES PAID UNDER THE CONTRACTS.
DISTRIBUTION OF CONTRACTS
MSS, located at 73 Tremont Street, Boston, Massachusetts 02108, a
Delaware limited liability company controlled by the parent of the Company, is
the principal underwriter of the contracts in addition to providing advisory
services to the Trust. MSS is a broker-dealer registered under the Securities
Exchange Act of 1934 (the "1934 Act") and a member of the National Association
of Securities Dealers, Inc. (the "NASD").
Sales of the contracts will be made by registered representatives of
broker-dealers authorized by MSS and the company to sell the contracts. Such
registered representatives will also be licensed insurance agents of the
Company. MSS will pay distribution compensation to selling brokers in varying
amounts which under normal circumstances are not expected to exceed 7% of
purchase payments or 6% of purchase payments plus 0.75% of the contract value
per year commencing one year after each purchase payment. MSS may from time to
time pay additional compensation pursuant to promotional contests. Additionally,
in some circumstances, MSS will be compensated for providing marketing support
for the distribution of the contracts.
CONTRACT OWNER INQUIRIES
All contract owner inquiries should be directed to the Company's
Annuity Service Office at Corporate Center at Rye, 555 Theodore Fremd Avenue,
Suite C-209, Rye, New York 10580-9966.
CONFIRMATION STATEMENTS
Owners will be sent confirmation statements for certain transactions in
their account. Owners should carefully review these statements to verify their
accuracy. Any mistakes should immediately be reported to the Company's Annuity
Service Office. If the owner fails to notify the Company's Annuity Service
Office of any mistake within 60 days of the mailing of the confirmation
statement, the owner will be deemed to have ratified the transaction.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party
or to which the assets of the Variable Account are subject. Neither the Company
nor MSS are involved in any litigation that is of material importance in
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relation to their total assets or that relates to the Variable Account.
OTHER INFORMATION
A registration statement has been filed with the SEC under the 1933 Act
with respect to the variable portion of the contracts discussed in this
Prospectus. Not all the information set forth in the registration statement,
amendments and exhibits thereto has been included in this Prospectus. Statements
contained in this Prospectus or the Statement of Additional Information
concerning the content of the contracts and other legal instruments are only
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the SEC.
YEAR 2000 ISSUES
Like other business organizations and individuals, the Company would be
adversely affected if its computer systems and those of its service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. The Company is completing an assessment of the Year 2000
impact on its systems and business processes. Management believes that the
Company will complete its Year 2000 project for all critical systems and
processes by September 30, 1998, prior to any anticipated impact on the critical
systems and processes.
The date on which the Company believes it will complete the Year 2000
project is based on management's best estimates, which were derived utilizing
numerous assumptions of future events. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer code, and
other similar uncertainties.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
General Information and History...................................... 3
Performance Data..................................................... 3
State Premium Taxes.................................................. 6
Services ............................................................ 6
Independent Auditors........................................ 6
Servicing Agent............................................. 7
Principal Underwriter....................................... 7
Cancellation of Contract............................................. 7
Appendix A - State Premium Taxes..................................... 8
Financial Statements................................................. 9
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APPENDIX A
EXAMPLES OF CALCULATION OF WITHDRAWAL CHARGE
Example 1 - Assume a single payment of $50,000 is made into the contract, no
transfers are made, no additional payments are made and there are no partial
withdrawals. The table below illustrates four examples of the withdrawal charges
that would be imposed if the contract is completely withdrawn, based on
hypothetical contract values.
<TABLE>
<CAPTION>
CONTRACT HYPOTHETICAL
YEAR CONTRACT WITHDRAWAL AMOUNT PAYMENTS
- ---- VALUE WITHOUT CHARGES LIQUIDATED WITHDRAWAL CHARGE
----- --------------- ---------- -----------------
PERCENT AMOUNT
<S> <C> <C> <C> <C> <C>
2 55,000 5,000(a) 50,000 6% 3,000
4 50,500 5,000(b) 45,500 5% 2,275
6 60,000 10,000(c) 50,000 3% 1,500
8 70,000 20,000(d) 50,000 0% 0
</TABLE>
(a) During any contract year the amount that may be withdrawn without
withdrawal charges is the greater of accumulated earnings, or 10% of
the total payments made under the contract less any prior partial
withdrawals in that contract year. In the second contract year the
earnings under the contract and 10% of payments both equal $5,000.
Consequently, on total withdrawal $5,000 is withdrawn without
withdrawal charges, the entire $50,000 payment is liquidated and the
withdrawal charge is assessed against such liquidated payment (contract
value less withdrawal amount without charges).
(b) In the example for the fourth contract year, the accumulated earnings
of $500 is less than 10% of payments, therefore the amount that may be
withdrawn without charges is equal to 10% of payments ($50,000 X 10% =
$5,000) and the withdrawal charge is only applied to payments
liquidated (contract value less withdrawal amount without charges).
(c) In the example for the sixth contract year, the accumulated earnings
of $10,000 is greater than 10% of payments ($5,000), therefore the
amount that may be withdrawn without charges is equal to the
accumulated earnings of $10,000 and the withdrawal charge is applied to
the payments liquidated (contract value less withdrawal amount without
charges).
(d) There is no withdrawal charge on any payments liquidated that have been
in the contract for at least 7 years.
Example 2 - Assume a single payment of $50,000 is made into the contract, no
transfers are made, no additional payments are made and there are a series of
four partial withdrawals made during the third contract year of $2,000, $5,000,
$7,000, and $8,000.
<TABLE>
<CAPTION>
HYPOTHETICAL
CONTRACT PARTIAL
VALUE WITHDRAWAL WITHDRAWAL AMOUNT PAYMENTS
- ----- REQUESTED WITHOUT CHARGES LIQUIDATED WITHDRAWAL CHARGE
--------- --------------- ---------- -----------------
PERCENT AMOUNT
<S> <C> <C> <C> <C> <C>
65,000 2,000 15,000(a) 0 5% 0
49,000 5,000 3,000(b) 2,000 5% 100
52,000 7,000 4,000(c) 3,000 5% 150
44,000 8,000 0(d) 8,000 5% 400
</TABLE>
(a) The amount that can be withdrawn without withdrawal charges during any
contract year is the greater of the contract value less the
unliquidated payments (accumulated earnings), or 10% of payments less
100% of all prior withdrawals in that contract year. For the first
example, accumulated earnings of $15,000 is the amount that can be
withdrawn without withdrawal charges since it is greater than 10% of
payments less prior withdrawals ($5,000-0). The amount requested
($2,000) is less than the amount that can be withdrawn without
withdrawal charges so no payments are liquidated and no withdrawal
charge applies.
40
<PAGE> 45
(b) The contract has negative accumulated earnings ($49,000-$50,000), so
the amount that can be withdrawn without withdrawal charges is limited
to 10% of payments less all prior withdrawals. Since $2,000 has already
been withdrawn in the current contract year, the remaining amount that
can be withdrawn without withdrawal charges withdrawal during the third
contract year is $3,000. The $5,000 partial withdrawal will consist of
$3,000 that can be withdrawn without withdrawal charges, and the
remaining $2,000 will be subject to a withdrawal charge and result in
payments being liquidated. The remaining unliquidated payments are
$48,000.
(c) The contract has increased in value to $52,000. The unliquidated
payments are $48,000 so the accumulated earnings are $4,000, which is
greater than 10% of payments less prior withdrawals
($5,000-$2,000-$5,000<0). Hence the amount that can be withdrawn
without withdrawal charges is $4,000. Therefore, $3,000 of the $7,000
partial withdrawal will be subject to a withdrawal charge and result in
payments being liquidated. The remaining unliquidated payments are
$45,000.
(d) The amount that can be withdrawn without withdrawal charges is zero
since the contract has negative accumulated earnings ($44,000-$45,000)
and the full 10% of payments ($5,000) has already been withdrawn. The
full amount of $8,000 will result in payments being liquidated subject
to a withdrawal charge. At the beginning of the next contract year the
full 10% of payments would be available again for withdrawal requests
during that year.
41
<PAGE> 46
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 47
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
THE MANUFACTURERS LIFE INSURANCE COMPANY OF
NEW YORK SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
of
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NEW YORK
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
This Statement of Additional Information is not a Prospectus. It
contains information in addition to that described in the Prospectus and should
be read in conjunction with the Prospectus dated the same date as this Statement
of Additional Information. The Prospectus may be obtained by writing The
Manufacturers Life Insurance Company of New York at the Annuity Service Office,
Corporate Center at Rye, 555 Theodore Fremd Avenue, Suite C-209, Rye, New York
10580-9966 or by telephoning (914) 921-1020.
The date of this Statement of Additional Information is May 1, 1998
2
<PAGE> 48
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
General Information and History..................................... 3
Performance Data.................................................... 3
State Premium Taxes................................................. 11
Services ........................................................... 11
Independent Auditors....................................... 11
Servicing Agent............................................ 11
Principal Underwriter...................................... 11
Cancellation of Contract............................................ 12
Appendix A - State Premium Taxes.................................... 13
Financial Statements................................................ 14
3
<PAGE> 49
GENERAL INFORMATION AND HISTORY
The Manufacturers Life Insurance Company of New York Separate Account
A, formerly the FNAL Variable Account (the "Variable Account") is a separate
investment account of The Manufacturers Life Insurance Company of New York (the
"Company"), a stock life insurance company organized under the laws of New York
in 1992. The Company is a wholly-owned subsidiary of The Manufacturers Life
Insurance Company of North America, formerly, North American Security Life
Insurance Company ("Manulife North America"), a stock life insurance company
established in 1979 in Delaware. The ultimate parent of Manulife North America
is The Manufacturers Life Insurance Company ("Manulife"), a Canadian mutual life
insurance Company based in Toronto, Canada. Prior to January 1, 1996, Manulife
North America was a wholly owned subsidiary of North American Life Assurance
Company ("NAL"), a Canadian mutual life insurance company. On January 1, 1996
NAL and Manulife merged with the combined company retaining the name Manulife.
PERFORMANCE DATA
Each of the sub-accounts may in its advertising and sales materials
quote total return figures. The sub-accounts may advertise both "standardized"
and "non-standardized" total return figures, although standardized figures will
always accompany non-standardized figures. Non-standardized total return figures
may be quoted assuming both (i) redemption at the end of the time period and
(ii) not assuming redemption at the end of the time period. Standardized figures
include total return figures from: (i) the inception date of the sub-account of
the Variable Account which invests in the portfolio or (ii) inception date of
the portfolio or (ii) ten years, whichever period is shorter. Such figures will
always include the average annual total return for recent one year and, when
applicable, five and ten year periods and, where less than ten years, the
inception date of the sub-account, in the case of standardized returns, and the
inception date of the portfolio, in the case of non-standardized returns. Where
the period since inception is less than one year, the total return quoted will
be the aggregate return for the period. The average annual total return is the
average annual compounded rate of return that equates a purchase payment to the
market value of such purchase payment on the last day of the period for which
such return is calculated. The aggregate total return is the percentage change
(not annualized) that equates a purchase payment to the market value of such
purchase payment on the last day of the period for which such return is
calculated. For purposes of the calculations it is assumed that an initial
payment of $1,000 is made on the first day of the period for which the return is
calculated.
In calculating standardized return figures, all recurring charges (all
asset charges (mortality and expense risk fees and administrative fees)) are
reflected and the asset charges are reflected in changes in unit values.
Standardized total return figures will be quoted assuming redemption at the end
of the period. Non-standardized total return figures reflecting redemption at
the end of the time period are calculated on the same basis as the standardized
returns. Non-standardized total return figures not reflecting redemption at the
end of the time period are calculated on the same basis as the standardized
returns except that the calculations assume no redemption at the end of the
period and do not reflect deduction of the annual contract fee. The Company
believes such non-standardized figures not reflecting redemptions at the end of
the time period are useful to contract owners who wish to assess the performance
of an ongoing contract of the size that is meaningful to the individual contract
owner.
For total return figures quoted for periods prior to the commencement
of the offering of this contract, standardized performance data will be the
historical performance of the Trust portfolio from the date the applicable
sub-account of the Variable Account first became available for investment under
other contracts offered by the Company, adjusted to reflect current contract
charges. In the case of non-standardized performance, performance figures will
be the historical performance of the Trust portfolio from the inception date of
the portfolio (or in the case of the Trust portfolios created in connection with
the merger of Manulife Series Fund, Inc. into the Trust, the inception date of
the applicable predecessor, Manulife Series Fund portfolio), adjusted to reflect
current contract charges.
4
<PAGE> 50
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION
OR 10 YEARS, DATE*
WHICHEVER SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets N/A N/A -37.94% 1/1/97
Science & Technology N/A N/A 3.17% 1/4/97
International Small Cap -6.04% N/A 0.72% 3/4/96
Emerging Growth N/A N/A 10.53% 1/1/97
Pilgrim Baxter Growth N/A N/A -6.76% 1/1/97
Small/Mid Cap 7.59% N/A 7.45% 3/4/96
International Stock N/A N/A -4.31% 1/1/97
Worldwide Growth N/A N/A 5.66% 1/1/97
Global Equity 13.06% 12.51% 12.96% 10/31/92
Equity 11.53% 16.67% 18.08% 10/31/92
Growth 17.55% N/A 19.40% 7/15/96
Quantitative Equity N/A N/A 22.79% 1/1/97
Blue Chip Growth 19.11% 10.96% 10.78% 12/11/92
Real Estate Securities N/A N/A 13.53% 1/1/97
Value N/A N/A 14.39% 1/1/97
International Growth and Income -6.84% N/A 3.33% 1/9/95
Growth and Income 24.92% 16.77% 17.27% 10/31/92
Equity-Income 21.84% N/A 15.35% 2/19/93
Balanced N/A N/A 10.82% 1/1/97
Aggressive Asset Allocation 11.38% 10.44% 10.86% 10/31/92
High Yield N/A N/A 5.06% 1/1/97
Moderate Asset Allocation 8.20% 8.57% 8.90% 10/31/92
Conservative Asset Allocation 3.84% 6.36% 6.61% 10/31/92
Strategic Bond 3.41% N/A 7.26% 2/19/93
Global Government Bond -4.03% 7.79% 7.48% 10/31/92
Capital Growth Bond N/A N/A 1.88% 1/1/97
Investment Quality Bond 2.77% 4.93% 5.17% 10/31/92
U.S. Government Securities 1.09% 4.41% 4.51% 10/31/92
</TABLE>
5
<PAGE> 51
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION
OR 10 YEARS, DATE*
WHICHEVER SHORTER
<S> <C> <C> <C> <C>
Money Market -1.99% 2.23% 2.37% 10/31/92
Lifestyle Aggressive 1000 N/A N/A 3.36% 1/7/97
Lifestyle Growth 820 N/A N/A 6.22% 1/7/97
Lifestyle Balanced 640 N/A N/A 6.49% 1/7/97
Lifestyle Moderate 460 N/A N/A 6.09% 1/7/97
Lifestyle Conservative 260 N/A N/A 4.56% 1/7/97
</TABLE>
* Inception date of the sub-account of the Variable Account which invests in the
portfolio.
6
<PAGE> 52
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION DATE
OR 10 YEARS, OF PORTFOLIO
WHICHEVER SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* -38.40% N/A -10.58% 10/4/94
Science & Technology N/A N/A 3.17% 1/1/97
International Small Cap -6.04% N/A 0.72% 3/4/96
Emerging Growth N/A N/A 10.53% 1/1/97
Pilgrim Baxter Growth N/A N/A -6.76% 1/1/97
Small/Mid Cap 7.59% N/A 7.45% 3/4/96
International Stock N/A N/A -4.31% 1/1/97
Worldwide Growth N/A N/A 5.66% 1/1/97
Global Equity 13.06% 12.51% 8.18% 3/18/88
Equity 11.53% 16.67% 13.50%+ 6/18/85
Growth 17.55% N/A 19.40% 7/15/96
Quantitative Equity* 21.97% 14.40% 13.48%+ 4/30/87
Blue Chip Growth 19.11% 10.96% 10.78% 12/11/92
Real Estate Securities* 10.70% 14.83% 14.22%+ 4/30/87
Value N/A N/A 14.39% 1/1/97
International Growth and Income -6.84% N/A 3.33% 1/9/95
Growth and Income 24.92% 16.77% 15.44% 4/23/91
Equity-Income 21.84% N/A 15.35% 2/19/93
Balanced N/A N/A 10.82% 1/1/97
Aggressive Asset Allocation 11.38% 10.44% 8.51% 8/3/89
High Yield N/A N/A 5.06% 1/1/97
Moderate Asset Allocation 8.20% 8.57% 7.51% 8/3/89
Conservative Asset Allocation 3.84% 6.36% 6.21% 8/3/89
Strategic Bond 3.41% N/A 7.26% 2/19/93
Global Government Bond -4.03% 7.79% 7.31% 3/18/88
</TABLE>
7
<PAGE> 53
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION DATE
OR 10 YEARS, OF PORTFOLIO
WHICHEVER SHORTER
<S> <C> <C> <C> <C>
Capital Growth Bond* 1.31% 4.99% 6.97%+ 6/26/84
Investment Quality Bond 2.27% 4.93% 5.42%+ 6/18/85
U.S. Government Securities 1.09% 4.41% 5.82% 3/18/88
Money Market -1.99% 2.23% 3.93%+ 6/18/85
Lifestyle Aggressive 1000 N/A N/A 3.36% 1/7/97
Lifestyle Growth 820 N/A N/A 6.22% 1/7/97
Lifestyle Balanced 640 N/A N/A 6.49% 1/7/97
Lifestyle Moderate 460 N/A N/A 6.09% 1/7/97
Lifestyle Conservative 260 N/A N/A 4.56% 1/7/97
</TABLE>
+ Ten year average annual return.
* Performance for each of these sub-accounts is based upon the performance of
the portfolio, adjusted to reflect current contract changes. On December 31,
1996, Manulife Series Fund, Inc. merged with the Trust. Performance for each of
these sub-accounts is based on the historical performance of the respective
predecessor Manulife Series Fund, Inc. portfolio for periods prior to December
31, 1996.
8
<PAGE> 54
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION DATE
OR 10 YEARS, OF PORTFOLIO
WHICHEVER SHORTER
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets* -35.04% N/A -9.28% 10/4/94
Science & Technology N/% N/A 9.18% 1/1/97
International Small Cap -0.62% N/A 3.92% 3/4/96
Emerging Growth N/A N/A 16.59% 1/1/97
Pilgrim Baxter Growth N/A N/A -1.38% 1/1/97
Small/Mid Cap 13.66% N/A 10.58% 3/4/96
International Stock N/A N/A 1.22% 1/1/97
Worldwide Growth N/A N/A 11.73% 1/1/97
Global Equity 19.12% 13.05% 8.23% 3/18/88
Equity 17.59% 17.15% 13.54%+ 6/18/85
Growth 23.61% N/A 23.23% 7/15/96
Quantitative Equity* 28.03% 14.92% 13.52% 4/30/87
Blue Chip Growth 25.17% 11.54% 11.23% 12/11/92
Real Estate Securities* 16.76% 15.34% 14.27%+ 4/30/87
Value N/A N/A 20.46% 1/1/97
International Growth and Income -1.47% N/A 4.94% 1/9/95
Growth and Income 30.99% 17.25% 15.62% 4/23/91
Equity-Income 27.90% N/A 15.87% 2/19/93
Balanced N/A N/A 16.88% 1/1/97
Aggressive Asset Allocation 17.44% 11.03% 8.57% 8/3/89
High Yield N/A N/A 11.12% 1/1/97
Moderate Asset Allocation 14.26% 9.20% 7.56% 8/3/89
Conservative Asset Allocation 9.89% 7.04% 6.26% 8/3/89
Strategic Bond 9.44% N/A 7.94% 2/19/93
Global Government Bond 1.52% 8.43% 7.36% 3/18/88
Capital Growth Bond* 7.20% 5.70% 7.02%+ 6/26/84
</TABLE>
9
<PAGE> 55
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION DATE
OR 10 YEARS, OF PORTFOLIO
WHICHEVER SHORTER
<S> <C> <C> <C> <C>
Investment Quality Bond 8.23% 5.64% 5.47%+ 6/18/85
U.S. Government Securities 6.97% 5.14% 5.87% 3/18/88
Money Market 3.69% 3.02% 3.98%+ 6/18/85
Lifestyle Aggressive 1000 N/A N/A 9.38% 1/7/97
Lifestyle Growth 820 N/A N/A 12.29% 1/7/97
Lifestyle Balanced 640 N/A N/A 12.55% 1/7/97
Lifestyle Moderate 460 N/A N/A 12.16% 1/7/97
Lifestyle Conservative 260 N/A N/A 10.62% 1/7/97
</TABLE>
+ Ten year average annual return.
* Performance for each of these sub-accounts is based upon the performance of
the portfolio, adjusted to reflect current contract changes. On December 31,
1996, Manulife Series Fund, Inc. merged with the Trust. Performance for each of
these sub-accounts is based on the historical performance of the respective
predecessor Manulife Series Fund, Inc. portfolio for periods prior to December
31, 1996.
* * * * *
In addition to the non-standardized returns quoted above, each of the
sub-accounts may from time to time quote aggregate non-standardized total
returns calculated in the same manner as set forth above for other time periods.
From time to time the Trust may include in its advertising and sales literature
general discussions of economic theories, including but not limited to,
discussions on how demographic and political trends can affect the financial
markets. Further, the Trust may also include in its advertising and sales
literature specific information on each of the Trust's subadvisers, including
but not limited to, research capabilities of a subadviser, assets under
management, information relating to other clients of a subadviser, and other
generalized information.
STATE PREMIUM TAXES
New York does not currently assess a premium tax. In the event New York
does impose a premium tax, the Company reserves the right to pass-through such
tax to contract owners.
SERVICES
INDEPENDENT AUDITORS
The financial statements of the Company and the Variable Account at
December 31, 1997 and 1996 and for the years then ended appearing in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
The consolidated statements of income, changes in shareholder's equity
and cash flows of the Company for the year ended December 31, 1995, appearing in
this Statement of Additional Information have been included elsewhere
10
<PAGE> 56
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The financial statements of the Company which are included in the
Statement of Additional Information should be considered only as bearing on the
ability of the Company to meet its obligations under the contracts. They should
not be considered as bearing on the investment performance of the assets held in
the Variable Account.
SERVICING AGENT
Computer Science Corporation Financial Services Group ("CSC FSG")
provides to the Company a computerized data processing recordkeeping system for
variable annuity administration. CSC FSG provides various daily, semimonthly,
monthly, semiannual and annual reports including: daily updates on accumulation
unit values, variable annuity participants and transactions, and agent
production and commissions; semimonthly commission statements; monthly summaries
of agent production and daily transaction reports; semiannual statements for
contract owners; and annual contract owner tax reports. CSC FSG receives
approximately $7.50 per policy per year, plus certain other fees paid by the
Company for the services provided.
PRINCIPAL UNDERWRITER
Manufacturers Securities Services, LLC ("MSS"), the successor to NASL
Financial Services, Inc., a wholly-owned subsidiary of Security Life, serves as
principal underwriter of the contracts. Contracts are offered on a continuous
basis. The aggregate dollar amount of underwriting commissions paid to MSS was
$3,222,530. The aggregate dollar amount of underwriting commissions paid to NASL
Financial Services Inc. in 1997, 1996 and 1995 respectively were $8,439,218,
$7,049,687, $5,659,896. MSS did not retain any of these amounts during such
periods.
CANCELLATION OF CONTRACT
The Company may, at its option, cancel a contract at the end of any
three consecutive contract years in which no purchase payments by or on behalf
of the contract owner have been made, if both (i) the total purchase payments
made for the contract, less any withdrawals, are less than $2,000; and (ii) the
contract value at the end of such three year period is less than $2,000. The
Company, as a matter of administrative practice, will attempt to notify a
contract owner prior to such cancellation in order to allow the contract owner
to make the necessary purchase payment to keep the contract in force.
11
<PAGE> 57
APPENDIX A
STATE PREMIUM TAXES
Premium taxes vary according to the state and are subject to change. In
many jurisdictions there is no tax at all. For current information, a tax
advisor should be consulted.
<TABLE>
<CAPTION>
TAX RATE
STATE QUALIFIED NON-QUALIFIED
CONTRACTS CONTRACTS
- -----------------------------------------------------------------------------------
<S> <C> <C>
CALIFORNIA .50% 2.35%
DISTRICT OF COLUMBIA 2.25% 2.25%
KENTUCKY 2.00% 2.00%
MAINE .00 2.00%
NEVADA .00 3.50%
PUERTO RICO 1.00% 1.00%
SOUTH DAKOTA* .00 1.25%
WEST VIRGINIA 1.00% 1.00%
WYOMING .00 1.00%
</TABLE>
* Premium tax paid upon receipt (no tax at annuitization if tax paid on premium
at issue)
12
<PAGE> 58
FINANCIAL STATEMENTS
13
<PAGE> 59
The Manufacturers Life Insurance Company of New York
Audited Financial Statements
Years ended December 31, 1997, 1996 and 1995
CONTENTS
Report of Independent Auditors........................................... 1
Audited Financial Statements
Balance Sheets........................................................... 3
Statements of Income..................................................... 4
Statements of Changes in Shareholder's Equity............................ 5
Statements of Cash Flows................................................. 6
Notes to Financial Statements............................................ 7
<PAGE> 60
Report of Independent Auditors
The Board of Directors and Shareholder
The Manufacturers Life Insurance Company of New York
We have audited the accompanying balance sheets of The Manufacturers Life
Insurance Company of New York (formerly First North American Life Assurance
Company and hereinafter referred to as the Company) as of December 31, 1997 and
1996, and the related statements of income, changes in shareholder's equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1997 and 1996 financial statements referred to above present
fairly, in all material respects, the financial position of The Manufacturers
Life Insurance Company of New York at December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Ernest & Young LLP
Boston, Massachusetts
February 18, 1998
1
<PAGE> 61
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholder of
The Manufacturers Life Insurance Company of New York:
We have audited the accompanying statements of income, changes in stockholder's
equity and cash flows of The Manufacturers Life Insurance Company of New York
(formerly First North American Life Assurance Company) for the year ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of The
Manufacturers Life Insurance Company of New York for the year ended December
31, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the Company adopted
Financial Accounting Standards Board Interpretation No. 40 (FIN 40) and
Statement of Financial Accounting Standards No. 120 (SFAS 120), which required
implementation of several accounting pronouncements not previously adopted. The
effects of adopting FIN 40 and SFAS 120 were retroactively applied to the
Company's previously issued financial statements, consistent with the
implementation guidance of those standards.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 22, 1998
2
<PAGE> 62
The Manufacturers Life Insurance Company of New York
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value $129,150,862 $ 83,466,225
Short-term investments 9,998,179 3,984,370
Policy loans 398,270 183,070
---------------------------
139,547,311 87,633,665
Cash and cash equivalents 1,431,114 4,104,731
Accrued investment income 2,401,173 1,528,000
Deferred policy acquisition costs 28,363,714 20,208,071
Other assets 231,211 152,140
Separate account assets 597,193,343 361,309,525
---------------------------
Total assets $769,167,866 $474,936,132
===========================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Policyholder funds $ 86,611,035 $ 80,033,667
Payable to affiliates 4,345,038 2,016,646
Deferred tax liability 2,269,418 1,935,001
Other liabilities 987,521 872,306
Separate account liabilities 597,193,343 361,309,525
---------------------------
Total liabilities 691,406,355 446,167,145
Shareholder's equity:
Common stock (shares authorized, issued and
outstanding: 2,000,000; par value $1) 2,000,000 2,000,000
Additional paid-in capital 72,530,624 24,800,000
Unrealized appreciation on available-for-sale securities 1,095,152 419,378
Retained earnings 2,135,735 1,549,609
---------------------------
Total shareholder's equity 77,761,511 28,768,987
---------------------------
Total liabilities and shareholder's equity $769,167,866 $474,936,132
===========================
</TABLE>
See accompanying notes.
3
<PAGE> 63
The Manufacturers Life Insurance Company of New York
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Revenues:
Fees from separate account and
policyholder funds $ 7,395,201 $ 4,761,702 $ 3,139,174
Net investment income 6,716,053 5,224,209 4,767,914
Net realized investment gain 769,361 88,772 466,164
-------------------------------------------
14,880,615 10,074,683 8,373,252
Benefits and expenses:
Benefits to policyholders 4,746,668 4,189,360 4,734,027
Amortization of deferred policy
acquisition costs 3,393,073 2,318,595 1,162,044
Other insurance expenses 5,845,047 1,191,984 1,193,232
-------------------------------------------
13,984,788 7,699,939 7,089,303
-------------------------------------------
Income before provision for income taxes
895,827 2,374,744 1,283,949
Provision for income taxes
Current 339,161 612,686 101,510
Deferred (29,460) 220,079 349,000
-------------------------------------------
309,701 832,765 450,510
-------------------------------------------
Net income $ 586,126 $ 1,541,979 $ 833,439
===========================================
</TABLE>
See accompanying notes.
4
<PAGE> 64
The Manufacturers Life Insurance Company of New York
Statements of Changes in Shareholder's Equity
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL ON AVAILABLE- RETAINED TOTAL
PAID-IN FOR-SALE EARNINGS SHAREHOLDER'S
COMMON STOCK CAPITAL SECURITIES (DEFICIT) EQUITY
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994, as
previously reported $ 2,000,000 $ 8,500,000 $ (2,396,360) $ 8,103,640
Cumulative effect of applying
new basis of accounting $(567,943) 1,570,551 1,002,608
----------------------------------------------------------------------------
Balance at January 1, 1995 2,000,000 8,500,000 (567,943) (825,809) 9,106,248
Capital contribution 3,000,000 3,000,000
Net income 833,439 833,439
Change in unrealized
appreciation of
available-for-sale
securities, net of tax and
adjustment for DPAC 2,272,070 2,272,070
----------------------------------------------------------------------------
Balance at December 31, 1995 2,000,000 11,500,000 1,704,127 7,630 15,211,757
Capital contribution 13,300,000 13,300,000
Net income 1,541,979 1,541,979
Change in unrealized
appreciation of available-for-
sale securities, net of tax and
adjustment for DPAC (1,284,749) (1,284,749)
----------------------------------------------------------------------------
Balance at December 31, 1996 2,000,000 24,800,000 419,378 1,549,609 28,768,987
Capital contribution 47,730,624 47,730,624
Net income 586,126 586,126
Change in unrealized
appreciation of available-for-
sale securities, net of tax and
adjustment for DPAC 675,774 675,774
----------------------------------------------------------------------------
Balance at December 31, 1997 $2,000,000 $72,530,624 $ 1,095,152 $ 2,135,735 $77,761,511
=============================================================================
</TABLE>
See accompanying notes.
<PAGE> 65
The Manufacturers Life Insurance Company of New York
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 586,126 $ 1,541,979 $ 833,439
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Amortization of bond discount and premium 333,012 141,447 46,319
Net realized investment gain (769,361) (88,772) (466,164)
Deferred income tax provision (29,460) 220,079 349,000
Amortization of deferred policy acquisition costs 3,393,073 2,318,595 1,162,044
Policy acquisition costs deferred (11,684,074) (7,224,022) (5,481,175)
Return credited to policyholders and other
benefits 4,746,668 4,189,360 4,734,027
Changes in assets and liabilities:
Accrued investment income (873,173) (6,987) (1,191,261)
Other assets (79,071) 195,420 68,994
Payable to affiliates 2,328,392 864,422 327,843
Other liabilities 115,215 (152,572) 580,171
-----------------------------------------------
Net cash (used) provided by operating activities (1,932,653) 1,998,949 963,237
INVESTING ACTIVITIES
Purchase of fixed maturities (103,382,988) (41,409,440) (69,601,388)
Proceeds from fixed maturities sold, matured or
repaid 59,307,170 31,658,755 18,834,870
Net change in short-term investments (6,011,270) (3,984,370)
Net change in policy loans (215,200) (115,747) (67,323)
-----------------------------------------------
Net cash used in investing activities (50,302,288) (13,850,802) (50,833,841)
FINANCING ACTIVITIES
Receipts credited to policyholder funds 17,212,556 18,408,172 40,048,872
Return of policyholder funds (15,381,856) (24,676,276) (1,915,371)
Change in notes payable (2,000,000) 2,000,000
Capital contribution 47,730,624 13,300,000 3,000,000
-----------------------------------------------
Net cash provided by financing activities 49,561,324 5,031,896 43,133,501
-----------------------------------------------
Net decrease in cash and cash equivalents (2,673,617) (6,819,957) (6,737,103)
Cash and cash equivalents at beginning of year 4,104,731 10,924,688 17,661,791
-----------------------------------------------
Cash and cash equivalents at end of year $ 1,431,114 $ 4,104,731 $ 10,924,688
===============================================
</TABLE>
See accompanying notes.
6
<PAGE> 66
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
The Manufacturers Life Insurance Company of New York (formerly First North
American Life Assurance Company and hereinafter referred to as the Company), a
stock life insurance company, was organized on February 10, 1992 under the laws
of the state of New York. Subsequently, on July 22, 1992, the Company was
granted a license by the New York State Insurance Department. The Company is a
wholly-owned subsidiary of The Manufacturers Life Insurance Company of North
America (formerly North American Security Life Insurance Company and hereinafter
referred to as MNA or the Parent).
On January 1, 1996, North American Life Assurance Company (NAL), the previous
owner of the Parent, merged with The Manufacturers Life Insurance Company (MLI).
The surviving company conducts business under the name "The Manufacturers Life
Insurance Company."
Concurrent with the merger, the Company's Parent went through a corporate
restructuring which resulted in the formation of a newly organized holding
corporation, Manulife Wood Logan Holding Company, Inc. (formerly NAWL Holding
Company, Inc. and hereinafter referred to as MWL). At that time, all of the
assets and liabilities of MNA and its subsidiaries, the Company and NASL
Financial Services, Inc. (NASL Financial), were transferred from MLI to MWL. In
addition, MLI's 20.2% ownership interest in Wood Logan Associates, Inc. (Wood
Logan) was transferred to MWL. In exchange, MLI received all Class A shares of
MWL common stock. On January 1, 1997, MLI contributed 62.5% of its 85% ownership
interest to its indirect wholly-owned subsidiary, The Manufacturers Life
Insurance Company (U.S.A.). Effective December 18, 1997, MLI transferred its
remaining 22.5% interest to MRL Holding, LLC, a newly formed Delaware limited
liability company.
Also effective January 1, 1996, as part of the restructuring, the remaining
79.8% of Wood Logan was purchased by MWL. In exchange for the remaining shares
of Wood Logan, certain employees and former owners of Wood Logan received Class
B voting shares of MWL representing a 15% ownership interest. Until October 1,
1997, Wood Logan was the promotional agent for the sale of the insurance
products of the Company and MNA.
7
<PAGE> 67
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (continued)
1. ORGANIZATION (CONTINUED)
On December 22, 1995, the New York State Insurance Department approved the
application submitted by MLI to acquire control of the Company subject to
commitment letters given to the Department by MNA and the Company. As part of
the agreement, MLI contributed $13,300,000 of additional surplus to the Company
in 1996.
On April 17, 1997, a revised plan of operation was submitted to the New York
State Insurance Department in connection with the Company's intention to expand
its product offerings. On October 21, 1997, the Company received approval of the
revised plan including modifications from the New York State Insurance
Department, and as part of the agreement, MNA contributed $47,730,624 in support
of the new plan of operations.
The Company issues variable annuity and individual life insurance contracts in
the State of New York. Amounts invested in the fixed portion of the contracts
are allocated to the general account of the Company. Amounts invested in the
variable portion of the contracts are allocated to the separate account of the
Company. The separate account assets are invested in shares of the Manufacturers
Investment Trust (formerly NASL Series Trust and hereinafter referred to as
MIT), a no-load, open-end management investment company organized as a
Massachusetts business trust.
Prior to October 1, 1997, NASL Financial acted as investment adviser to MIT and
as principal underwriter of the annuity contracts issued by the Company. NASL
Financial had an agreement with Wood Logan to act as the promotional agent for
the sale of the annuity contracts.
Effective October 1, 1997, Manufacturers Securities Services, LLC (MSS), an
affiliate of the Company, replaced NASL Financial as the investment advisor to
MIT and as the principal underwriter of the annuity contracts. Wood Logan
provides marketing services for the sale of annuity contracts under an
Administrative Services Agreement dated October 7, 1997, between the Company and
MLI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements of the Company have been prepared in
conformity with generally accepted accounting principles (GAAP).
8
<PAGE> 68
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Prior to 1996, the Company prepared its financial statements in conformity with
accounting practices prescribed or permitted by the New York Insurance
Department which practices were considered GAAP for mutual life insurance
companies. FASB Interpretation 40, Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and other Enterprises (FIN 40),
as amended, which is effective for 1996 annual financial statements, no longer
permits statutory-basis financial statements to be described as being prepared
in conformity with GAAP. Accordingly, the Company has adopted various accounting
pronouncements, principally Statement of Financial Accounting Standards No. 120,
Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts (SFAS No. 120),
which addresses the accounting for long-duration insurance contracts.
Pursuant to the requirements of the above pronouncements, the effect of the
changes in accounting have been applied retroactively and the previously issued
1995 financial statements have been restated for the change. The effect of the
change applicable to years prior to January 1, 1995 has been presented as a
restatement of shareholder's equity as of this date.
The adoption had the effect of increasing net income for 1995 by $1,412,338.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and the
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known, which could impact the amounts reported and
disclosed herein.
INVESTMENTS AND INVESTMENT INCOME
The Company accounts for its fixed maturities in accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities (SFAS 115). SFAS 115 requires that fixed maturities
be designated as either held-to-maturity, available-for-sale or trading at the
time of purchase. Held-to-maturity
9
<PAGE> 69
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
fixed maturities are reported at amortized cost and the remainder of fixed
maturities are reported at fair value with unrealized holding gains and losses
reported in income for those designated as trading and as a separate component
of shareholder's equity for those designated as available-for-sale.
The Company has classified all of its fixed maturities as available-for-sale. As
a result, these securities are reported in the accompanying financial statements
at fair value. Changes in fair values, after adjustment for deferred policy
acquisition costs (DPAC) and deferred income taxes, are reported as unrealized
appreciation or depreciation directly in shareholder's equity, and accordingly,
have no effect on net income. The DPAC offset to the unrealized appreciation or
depreciation represents valuation adjustments or reinstatements of DPAC that
would have been required as a charge or credit to operations had such unrealized
amounts been realized.
The cost of fixed maturities is adjusted for the amortization of premiums and
accretion of discounts using the interest method. This amortization or accretion
is included in net investment income.
For the mortgage-backed bond portion of the fixed maturities portfolio, the
Company recognizes amortization using a constant effective yield based on
anticipated prepayments and the estimated economic life of the securities. When
actual prepayments differ significantly from anticipated prepayments, the
effective yield is recalculated to reflect actual payments to date and
anticipated future payments. The net investment in the security is adjusted to
the amount that would have existed had the new effective yield been applied
since the acquisition of the security. That adjustment is included in net
investment income.
Short-term investments generally consist of instruments which have a maturity of
less than one year at the time of acquisition. Short-term investments are
reported at cost, which approximates fair value.
Policy loans are reported at unpaid balances, not in excess of the underlying
cash value of the policies.
Realized gains or losses on investments sold and declines in value judged to be
other-than-temporary are determined on the specific identification basis.
10
<PAGE> 70
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity date of three months or less to be cash equivalents. Cash
equivalents are stated at cost plus accrued interest, which approximates fair
value.
DEFERRED POLICY ACQUISITION COSTS
Commissions and other costs of acquiring new business that vary with and are
primarily related to the production of new business have been deferred. These
acquisition costs are being amortized generally in proportion to the present
value of expected gross profits from surrender charges and investment, mortality
and expense margins. That amortization is adjusted retrospectively when
estimates of current or future gross profits to be realized from a group of
products are revised.
SEPARATE ACCOUNT ASSETS AND LIABILITIES
Separate account assets and liabilities that are reported in the accompanying
balance sheets represent investments in MIT, which are mutual funds that are
separately administered for the exclusive benefit of the annuity policyholders
and are reported at fair value. Such policyholders, rather than the Company,
bear the investment risk. The operations of the separate accounts are not
included in the accompanying financial statements. Fees charged on separate
account policyholder funds are included in revenues.
POLICYHOLDER FUNDS AND BENEFITS TO POLICYHOLDERS
Policyholder funds for the fixed portion of variable annuity contracts are
computed under a retrospective deposit method and represent account balances
before applicable surrender charges. Benefits to policyholders include interest
credited to policyholders and other benefits that are charged to expense
including benefit claims incurred in the period in excess of the related
policyholder account balances. Interest crediting rates for the fixed portion of
annuity contracts range from 4.10% to 6.15% in 1997; 4.00% to 6.15% in 1996 and
4.20% to 7.00% in 1995.
11
<PAGE> 71
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECOGNITION OF REVENUES
Fees from separate accounts and policyholder funds represent fees assessed
against policyholder account balances, and include mortality and expense risk
charges, surrender charges and an annual administrative charge.
INCOME TAXES
Income taxes have been provided using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that likely
will be in effect when the differences are expected to reverse. The measurement
of deferred tax assets is reduced by a valuation allowance if, based upon the
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
3. INVESTMENTS
The major components of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
<S> <C> <C> <C>
Fixed maturities $ 6,342,800 $ 4,476,472 $ 4,436,994
Short-term investments 475,545 873,146 403,497
-----------------------------------------
6,818,345 5,349,618 4,840,491
Less investment expenses (102,292) (125,409) (72,577)
-----------------------------------------
Net investment income $ 6,716,053 $ 5,224,209 $ 4,767,914
=========================================
</TABLE>
12
<PAGE> 72
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (continued)
3. INVESTMENTS (CONTINUED)
The gross unrealized gains and losses for available-for-sale fixed maturities
held at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
DECEMBER 31, 1997 Fixed maturities:
U.S. Treasury securities and
obligations of U.S. Government
agencies $ 7,422 $ 284 $ 7,706
Corporate securities 108,682 1,879 $ 23 110,538
Mortgage-backed securities 5,016 69 5,085
States, territories and possessions 5,594 228 5,822
-----------------------------------------------------
Total $126,714 $2,460 $ 23 $129,151
=====================================================
DECEMBER 31, 1996
Fixed maturities:
U.S. Treasury securities and
obligations of U.S. Government
agencies $ 3,244 $ 193 $ 3,437
Corporate securities 73,366 1,082 $ 191 74,257
Mortgage-backed securities 1,017 5 1,012
States, territories and possessions 4,578 182 4,760
-----------------------------------------------------
Total $ 82,205 $1,457 $ 196 $ 83,466
=====================================================
</TABLE>
13
<PAGE> 73
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (continued)
3. INVESTMENTS (CONTINUED)
The amortized cost and fair value of fixed maturities at December 31, 1997, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers or lenders may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
-------------------------------------
(In Thousands)
<S> <C> <C>
FIXED MATURITIES AVAILABLE-FOR-SALE
Due in one year or less $ 12,618 $ 12,617
Due after one year through five years 59,514 60,938
Due after five years through ten years 28,353 28,627
Due after ten years through twenty years 1,921 1,967
Due after twenty years 19,292 19,917
Mortgage-backed securities 5,016 5,085
-------------------------------------
Total fixed maturities available-for-sale $126,714 $129,151
=====================================
</TABLE>
The proceeds from sales of available-for-sale fixed maturities for the year
ended December 31, 1997, 1996 and 1995 were $45,217,170, $6,558,755 and
$11,634,871, respectively. Gross gains of $772,361, $90,811 and $466,164 and
gross losses of $5,539, $2,039 and $0 were realized on these sales,
respectively.
Fixed maturities with a fair value of $414,100 at December 31, 1997 are in a
custody account on behalf of the New York State Insurance Department to satisfy
regulatory requirements. At December 31, 1996, the comparable amount was
$401,651.
4. FEDERAL INCOME TAXES
Beginning in 1996, the Company participates as a member of the MWL affiliated
group consolidated federal income tax return. In 1995, the Company participated
as a member of the MNA consolidated federal income tax return. The Company files
separate state income tax returns. The method of allocation between companies is
subject to a written tax sharing agreement. The tax liability is allocated to
each member on a pro rata basis based on the relationship that the member's tax
liability computed on a separate return
14
<PAGE> 74
The Manufacturers Life Insurance Company of New York
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
basis bears to the tax liability of the consolidated group. The tax charge to
the Company shall not be more than the Company would have paid on a separate
return basis. The Company settles its current income tax each year through an
intercompany account.
The Company's effective income tax rate varies from the statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
1997 1996 1995
------------------
<S> <C> <C> <C>
Statutory federal income tax rate applied to income
before federal income taxes 35% 35% 35%
Add (deduct):
Disallowed meals, entertainment 2
Nondeductible consulting fees 4
Reversal of deferred asset valuation allowance
(6)
------------------
Effective income tax rate 35% 35% 35%
==================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred tax liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
--------------------------
<S> <C> <C>
Deferred tax assets:
Investment amortization $ 92,345 $ 62,711
Reserves 117,558
--------------------------
Total deferred tax assets 92,345 180,269
--------------------------
Deferred tax liabilities:
Deferred policy acquisition costs (1,134,971) (1,283,150)
Reserves (3,683)
Unrealized gain on fixed maturities,
net of DPAC effect (589,696) (225,819)
Other (633,413) (606,301)
--------------------------
Total deferred tax liabilities (2,361,763) (2,115,270)
--------------------------
Net deferred tax liability $(2,269,418) $(1,935,001)
==========================
</TABLE>
15
<PAGE> 75
The Manufacturers Life Insurance Company of New York
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
In the opinion of management, it is more likely than not that the Company will
realize the benefit of the deferred tax assets and, therefore, no valuation
allowance has been established.
5. SHAREHOLDER'S EQUITY
The net assets of the Company available for the Parent as dividends are
generally limited to and cannot be made except from earned statutory-basis
profits. The maximum amount of dividends that may be paid by life insurance
companies without prior approval of the New York Insurance Commissioner is
subject to restrictions relating to statutory surplus and net gain from
operations on a statutory basis.
Net income (loss) and capital and surplus, as determined in accordance with
statutory accounting principles, for the Company were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) $ (1,562,544) $ 231,315 $ (578,899)
Net capital and surplus 68,336,238 22,265,070 8,821,782
</TABLE>
The components of the balance sheet caption "Unrealized appreciation on
available-for-sale securities" in shareholder's equity are summarized as
follows:
<TABLE>
DECEMBER 31
1997 1996
----------------------
(In Thousands)
<S> <C> <C>
Fair value of securities $ 129,151 $ 83,466
Amortized cost of securities 126,714 82,205
----------------------
Unrealized appreciation 2,437 1,261
Adjustment to deferred policy
acquisition costs (752) (616)
Deferred income taxes (590) (226)
----------------------
Unrealized appreciation on securities
available-for-sale $ 1,095 $ 419
======================
</TABLE>
16
<PAGE> 76
The Manufacturers Life Insurance Company of New York
Notes to Financial Statements (continued)
6. RELATED-PARTY TRANSACTIONS
The Company utilizes various services administered by its Parent and affiliates
such as legal, personnel, investment accounting and other corporate services. In
1995, NAL charged the Company approximately $456,000 and, in 1996, MLI and MNA
charged the Company approximately $661,000 for those services. At December 31,
1996, the Company had a net liability of $1,965,338 to MLI and MNA for these
charges. For the first nine months of 1997, MLI and MNA charged the Company
approximately $623,000. Effective October 1, 1997, pursuant to a new Plan of
Operations, all intercompany expenses were billed through MLI. For the fourth
quarter of 1997, MLI billed the Company expenses of $869,000. At December 31,
1997, the Company had a net liability to MLI of $2,977,176 for these services.
For the nine months ended September 30, 1997 and the two years ended December
31, 1996 and 1995, the Company paid underwriting commissions to NASL Financial
of $8,421,182, $7,049,687 and $5,348,500, respectively. NASL Financial then
reimbursed Wood Logan for promotional agent services. Effective October 1, 1997,
MSS replaced NASL Financial as underwriter. Thereafter, all commissions were
paid to MSS by the Company, and Wood Logan marketing services were paid by MLI
who was reimbursed by the Company. Underwriting commissions and marketing
services expense of $4,431,068 was incurred during the fourth quarter of 1997.
At December 31, 1997 and 1996, the Company had a net liability of $1,367,857 and
$51,308, respectively, for these services.
The financial statements have been prepared from the records maintained by the
Company and may not necessarily be indicative of the financial conditions or
results of operations that would have occurred if the Company had been operated
as an unaffiliated corporation (see also Notes 1, 4, 5 and 8 for additional
related-party transactions).
7. NOTES PAYABLE
The Company has an unsecured line of credit with State Street Bank and Trust in
the amount of $5,000,000, bearing interest at the bank's money market rate plus
50 basis points. There were no outstanding advancements under the line of credit
at December 31, 1997 and 1996.
17
<PAGE> 77
The Manufacturers Life Insurance Company of New York
Notes to Financial Statements (continued)
8. RETIREMENT PLANS
MLI, and formerly NAL prior to the merger, sponsors a defined benefit pension
plan (the Plan) covering substantially all of the Company's employees. The
benefits are based on years of service and the employee's compensation during
the last five years of employment. MLI's funding policy is to contribute
annually the normal cost up to the maximum amount that can be deducted for
federal income tax purposes and to charge each subsidiary for its allocable
share of such contributions based on a percentage of payroll. No pension costs
were allocated to the Company in 1997, 1996 or 1995, as the Plan was subject to
the full funding limitation under the Internal Revenue Code.
The Company participates in a defined contribution retirement plan sponsored by
the Parent pursuant to regulation 401(k) of the Internal Revenue Code. All
employees who are 21 years old are eligible after one year of service. The
Company contributes two percent of base pay plus fifty percent of the employee
savings contribution. The employee savings contribution is limited to six
percent of base pay.
9. LEASES
The Company leases office space under an operating lease agreement which expires
in 1999 and is subject to a renewal option at market rates prevailing at the
time of renewal. For the years ended December 31, 1997, 1996 and 1995, the
Company incurred rent expense of $83,809, $79,950 and $72,695, respectively. The
minimum lease payments associated with the office space are as follows:
<TABLE>
<CAPTION>
MINIMUM LEASE
PAYMENTS
--------------
<S> <C>
Year ended:
1998 $ 81,648
1999 61,236
--------------
Total $142,884
==============
</TABLE>
18
<PAGE> 78
The Manufacturers Life Insurance Company of New York
Notes to Financial Statements (continued)
10. FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS 107), Disclosures
About Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
consolidated balance sheet, for which it is practicable to estimate that value.
In cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
SFAS No. 107 also excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements and allows companies to forego the
disclosures when those estimates can only be made at excessive cost.
Accordingly, the aggregate fair value amounts presented herein are limited by
each of these factors and do not purport to represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in estimating the
fair value disclosures for financial instruments:
Fixed Maturities: Fair values for fixed maturities are obtained from an
independent pricing service.
Short-Term Investments and Cash and Cash Equivalents: The carrying amounts
reported in the accompanying balance sheet for short-term investments, cash
and cash equivalents approximate their fair values.
Policy Loans: The carrying amount in the balance sheet for policy loans
approximates the fair value.
Policyholder Funds: Fair values of the Company's liabilities under
contracts not involving significant mortality risk (deferred annuities) are
estimated to be the cash surrender value, or the cost the Company would
incur to extinguish the liability.
19
<PAGE> 79
The Manufacturers Life Insurance Company of New York
Notes to Financial Statements (continued)
10. FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Fixed maturities $129,150,862 $129,150,862 $83,466,225 $83,466,225
Short-term investments 9,998,179 9,998,179 3,984,370 3,984,370
Policy loans 398,270 398,270 183,070 183,070
Cash and cash equivalents 1,431,114 1,431,114 4,104,731 4,104,731
Liabilities:
Policyholder funds 86,611,035 81,715,263 80,033,667 74,985,163
</TABLE>
11. YEAR 2000 ISSUES (UNAUDITED)
Like other business organizations and individuals, the Company would be
adversely affected if its computer systems and those of its service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. The Company is completing an assessment of the Year 2000
impact on its systems and business processes. Management believes that the
Company will complete its Year 2000 project for all critical systems and
processes by September 30, 1998, prior to any anticipated impact on the critical
systems and processes.
The date on which the Company believes it will complete the Year 2000 project is
based on management's best estimates, which were derived utilizing numerous
assumptions of future events. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer code, and
other similar uncertainties.
20
<PAGE> 80
The Manufacturers Life Insurance Company of New York Separate
Account A (formerly FNAL Variable Account of First North American Life
Assurance Company)
Audited Statutory-Basis Financial Statements
Years ended December 31, 1997 and 1996
CONTENTS
Report of Independent Auditors................................................1
Audited Financial Statements
Statement of Assets, Liabilities and Contract Owners' Equity..................2
Statements of Operations and Changes in Contract Owners' Equity...............3
Notes to Financial Statements................................................15
<PAGE> 81
REPORT OF INDEPENDENT AUDITORS
To the Contract Owners of
The Manufacturers Life Insurance Company of
New York Separate Account A
We have audited the accompanying statement of assets, liabilities and contract
owners' equity of The Manufacturers Life Insurance Company of New York Separate
Account A (formerly FNAL Variable Account of First North American Life Assurance
Company) of the Manufacturers Life Insurance Company of New York (formerly First
North American Life Assurance Company and hereinafter referred to as the
Company) as of December 31, 1997, and the related statement of operations and
changes in contract owners' equity for each of the two years in the period then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Manufacturers Life
Insurance Company of New York Separate Account A at December 31, 1997, and the
results of its operations and the changes in its contract owners' equity for
each of the two years in the period then ended in conformity with generally
accepted accounting principles.
/s/ Ernst & Young, LLP
Boston, Massachusetts
February 5, 1998
1
<PAGE> 82
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statement of Assets, Liabilities and Contract Owners' Equity
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments at market value:
Sub-accounts:
Equity Portfolio - 3,582,006 Shares (Cost $67,468,793) $ 77,013,136
Investment Quality Bond Portfolio - 665,156 Shares (Cost $7,666,335) 8,068,338
Growth and Income Portfolio - 3,764,444 Shares (Cost $64,892,117) 89,932,572
Blue Chip Growth Portfolio - 2,688,521 Shares (Cost $33,194,006) 40,327,819
Money Market Portfolio - 2,667,971 Shares (Cost $26,679,706) 26,679,706
Global Equity Portfolio - 2,348,755 Shares (Cost $38,956,965) 45,518,863
Global Government Bond Portfolio - 615,787 Shares (Cost $8,264,231) 8,664,117
U.S. Government Securities Portfolio - 1,071,265 Shares (Cost $13,939,619) 14,462,083
Conservative Asset Allocation Portfolio - 573,567 Shares (Cost $6,332,487) 6,756,624
Moderate Asset Allocation Portfolio - 1,865,406 Shares (Cost $21,553,104) 24,157,010
Aggressive Asset Allocation Portfolio - 830,875 Shares (Cost $10,103,354) 11,931,366
Equity-Income Portfolio - 4,506,441 Shares (Cost $59,620,098) 77,691,038
Strategic Bond Portfolio - 2,649,051 Shares (Cost $30,163,970) 32,795,253
International Growth and Income Portfolio - 1,473,433 Shares (Cost $16,305,760) 16,222,499
Growth Portfolio - 420,287 Shares (Cost $6,492,244) 7,233,133
Small/Mid Cap Portfolio - 1,180,945 Shares (Cost $16,314,534) 18,198,366
International Small Cap Portfolio - 499,683 Shares (Cost $6,814,983) 6,845,654
Pacific Rim Emerging Markets Portfolio - 58,779 Shares (Cost $529,034) 420,856
Science & Technology Portfolio - 413,975 Shares (Cost $5,829,665) 5,638,339
Emerging Growth Portfolio - 125,159 Shares (Cost $2,772,729) 3,020,096
Pilgrim Baxter Growth Portfolio - 185,512 Shares (Cost $2,242,562) 2,318,897
International Stock Portfolio - 145,305 Shares (Cost $1,784,135) 1,666,646
Worldwide Growth Portfolio - 113,140 Shares (Cost $1,598,432) 1,588,485
Quantitative Equity Portfolio - 79,148 Shares (Cost $1,706,560) 1,780,838
Value Trust Portfolio - 267,176 Shares (Cost $3,918,143) 3,954,210
Real Estate Securities Portfolio - 113,299 Shares (Cost $2,090,032) 2,273,903
Balanced Portfolio - 44,099 Shares (Cost $820,074) 852,430
High Yield Portfolio - 288,456 Shares (Cost $3,851,398) 3,911,466
Capital Growth Bond Portfolio - 35,024 Shares (Cost $405,005) 415,039
Lifestyle Aggressive 1000 Portfolio - 364,008 Shares (Cost $4,749,944) 4,903,191
Lifestyle Growth 820 Portfolio - 1,670,751 Shares (Cost $22,267,358) 23,006,242
Lifestyle Balanced 640 Portfolio - 1,519,843 Shares (Cost $19,871,712) 20,609,066
Lifestyle Moderate 460 Portfolio - 488,488 Shares (Cost $6,284,358) 6,521,313
Lifestyle Conservative 280 Portfolio - 139,489 Shares (Cost $1,746,674) 1,814,749
------------
Total assets $597,193,343
============
LIABILITIES
Due to The Manufacturers Life Insurance Company of New York $ 61,009
------------
Total liabilities 61,009
CONTRACT OWNERS' EQUITY
Variable annuity contracts 597,132,334
------------
Total contract owners' equity 597,132,334
------------
Total liabilities and contract owners' equity $597,193,343
============
</TABLE>
See accompanying notes.
2
<PAGE> 83
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------------------------------------
EQUITY INVESTMENT QUALITY BOND GROWTH AND INCOME
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1997 1996 1997 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 12,486,387 $ 4,212,194 $ 466,752 $ 330,960 $ 4,210,169 $ 1,201,526
Expenses:
Mortality & expense risk and
administrative charges 973,089 696,214 98,931 81,731 1,011,442 554,839
-----------------------------------------------------------------------------------------------
Net investment income (loss) 11,513,298 3,515,980 367,821 249,229 3,198,727 646,687
Net realized gain (loss) 1,152,410 803,960 (39,663) (41,679) 1,459,961 699,979
Unrealized appreciation
(depreciation) during the
period (1,707,499) 4,001,154 243,636 (126,465) 13,568,863 6,590,316
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 10,958,209 8,321,094 571,794 81,085 18,227,551 7,936,982
-----------------------------------------------------------------------------------------------
Changes from principal
transactions:
Purchase payments 9,500,943 12,415,699 1,310,962 1,522,442 17,401,810 12,711,765
Transfers between sub-
accounts and the
Company (350,550) 6,970,084 28,925 143,185 4,249,654 5,146,931
Withdrawals (3,231,007) (2,484,007) (387,897) (305,464) (2,405,054) (1,647,121)
Annual contract fee (40,938) (31,168) (3,433) (2,952) (36,410) (22,473)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 5,878,448 16,870,608 948,557 1,357,211 19,210,000 16,189,102
-----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 16,836,657 25,191,702 1,520,351 1,438,296 37,437,551 24,126,084
Contract owners' equity at
beginning of period 60,176,479 34,984,777 6,547,987 5,109,691 52,495,021 28,368,937
-----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 77,013,136 $ 60,176,479 $ 8,068,338 $ 6,547,987 $ 89,932,572 $ 52,495,021
===============================================================================================
</TABLE>
See accompanying notes.
3
<PAGE> 84
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-------------------------------------------------------------------------------------------------
BLUE CHIP GROWTH MONEY MARKET GLOBAL EQUITY
-------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1997 1996 1997 1996
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 4,355,890 $ 49,244 $ 951,844 $ 666,610 $ 3,668,941 $ 508,320
Expenses:
Mortality & expense risk and
administrative charges 432,353 256,791 264,763 190,702 576,664 452,278
-------------------------------------------------------------------------------------------------
Net investment income (loss) 3,923,537 (207,547) 687,081 475,908 3,092,277 56,042
Net realized gain (loss) 800,939 1,130,363 (1,945) 0 838,480 328,529
Unrealized appreciation
(depreciation) during the
period 1,966,728 2,929,786 0 0 3,169,356 3,040,904
-------------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 6,691,204 3,852,602 685,136 475,908 7,100,113 3,425,475
-------------------------------------------------------------------------------------------------
Changes from principal
transactions:
Purchase payments 10,078,132 3,792,020 23,992,681 17,222,435 5,521,967 4,732,647
Transfers between sub-
accounts and the
Company 2,208,938 837,918 (14,589,991) (6,926,625) (1,298,656) 1,228,061
Withdrawals (861,115) (785,268) (1,875,345) (1,374,481) (1,526,906) (1,254,487)
Annual contract fee (15,363) (11,504) (5,681) (4,191) (23,902) (21,916)
-------------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 11,410,592 3,833,166 7,521,664 8,917,138 2,672,503 4,684,305
-------------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 18,101,796 7,685,768 8,206,800 9,393,046 9,772,616 8,109,780
Contract owners' equity at
beginning of period 22,226,023 14,540,255 18,472,906 9,079,860 35,746,247 27,636,467
-------------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 40,327,819 $ 22,226,023 $ 26,679,706 $ 18,472,906 $ 45,518,863 $ 35,746,247
=================================================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 85
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
---------------------------------------------------------------------------------------------
GLOBAL GOVERNMENT U.S. GOVERNMENT CONSERVATIVE ASSET
BOND SECURITIES ALLOCATION
---------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 783,380 $ 691,071 $ 834,686 $ 695,497 $ 563,780 $ 303,060
Expenses:
Mortality & expense risk and
administrative charges 125,157 117,412 187,607 180,392 91,137 74,150
---------------------------------------------------------------------------------------------
Net investment income (loss) 658,223 573,659 647,079 515,105 472,643 228,910
Net realized gain (loss) (18,110) 49,478 118,520 (90,826) 35,895 (5,915)
Unrealized appreciation
(depreciation) during the
period (505,617) 302,087 135,070 (161,555) 100,855 52,849
---------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 134,496 925,224 900,669 262,724 609,393 275,844
---------------------------------------------------------------------------------------------
Changes from principal
transactions:
Purchase payments 1,025,262 1,280,963 2,213,798 3,026,542 540,228 1,430,444
Transfers between sub-
accounts and the
Company (1,236,660) (173,816) (1,002,548) (487,892) (520,669) 479,988
Withdrawals (408,918) (299,284) (884,908) (760,893) (287,581) (157,409)
Annual contract fee (4,515) (4,601) (6,841) (6,466) (4,606) (3,929)
---------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions (624,831) 803,262 319,501 1,771,291 (272,628) 1,749,094
---------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity (490,335) 1,728,486 1,220,170 2,034,015 336,765 2,024,938
Contract owners' equity at
beginning of period 9,154,452 7,425,966 13,241,913 11,207,898 6,419,859 4,394,921
---------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 8,664,117 $ 9,154,452 $ 14,462,083 $ 13,241,913 $ 6,756,624 $ 6,419,859
=============================================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 86
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-------------------------------------------------------------------------------------------------
MODERATE ASSET AGGRESSIVE ASSET
ALLOCATION ALLOCATION EQUITY INCOME
-------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1997 1996 1997 1996
-------------------------------------------------------------------------------------------------
Income:
<S> <C> <C> <C> <C> <C> <C>
Dividends $ 2,264,586 $ 1,444,910 $ 1,038,315 $ 591,316 $ 7,869,988 $ 2,760,886
Expenses:
Mortality & expense risk and
administrative charges 321,851 260,204 155,411 123,166 920,557 626,800
-------------------------------------------------------------------------------------------------
Net investment income (loss) 1,942,735 1,184,706 882,904 468,150 6,949,431 2,134,086
Net realized gain (loss) 177,670 45,838 137,438 102,080 1,348,326 1,002,895
Unrealized appreciation
(depreciation) during the
period 932,989 302,322 738,123 399,926 7,719,775 4,397,254
-------------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 3,053,394 1,532,866 1,758,465 970,156 16,017,532 7,534,235
-------------------------------------------------------------------------------------------------
Changes from principal
transactions:
Purchase payments 1,602,078 4,663,584 869,661 2,011,845 9,213,615 9,586,456
Transfers between sub-
accounts and the
Company (1,158,960) 348,765 (488,660) 426,113 1,275,136 1,711,762
Withdrawals (866,466) (790,985) (225,655) (327,864) (2,621,838) (1,552,108)
Annual contract fee (13,414) (11,874) (7,970) (6,447) (36,208) (27,883)
-------------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions (436,762) 4,209,490 147,376 2,103,647 7,830,705 9,718,227
-------------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 2,616,632 5,742,356 1,905,841 3,073,803 23,848,237 17,252,462
Contract owners' equity at
beginning of period 21,540,378 15,798,022 10,025,525 6,951,722 53,842,801 36,590,339
-------------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 24,157,010 $ 21,540,378 $ 11,931,366 $ 10,025,525 $ 77,691,038 $ 53,842,801
=================================================================================================
</TABLE>
See accompanying notes.
6
<PAGE> 87
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------------------------------------
INTERNATIONAL
STRATEGIC BOND GROWTH AND INCOME GROWTH (1)
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
1997 1996 1997 1996 1997 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 1,679,486 $ 895,859 $ 885,754 $ 11,510 $ 87 $ 12,025
Expenses:
Mortality & expense risk and
administrative charges 388,062 211,859 212,232 121,381 64,976 5,889
-----------------------------------------------------------------------------------------------
Net investment income (loss) 1,291,424 684,000 673,522 (109,871) (64,889) 6,136
Net realized gain (loss) 390,907 92,972 253,795 115,386 147,916 11,692
Unrealized appreciation
(depreciation) during the
period 810,491 1,076,844 (1,196,179) 1,003,453 716,026 24,863
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity
from operations 2,492,822 1,853,816 (268,862) 1,008,968 799,053 42,691
-----------------------------------------------------------------------------------------------
Changes from principal
transactions:
Purchase payments 10,705,119 8,169,822 4,149,234 5,129,470 2,997,064 1,266,705
Transfers between sub-
accounts and the
Company (1,094,529) 2,164,565 256,352 2,564,247 1,662,952 621,477
Withdrawals (1,336,309) (434,689) (567,740) (460,411) (150,147) (4,637)
Annual contract fee (11,345) (6,859) (9,090) (5,629) (1,909) (116)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 8,262,936 9,892,839 3,828,756 7,227,677 4,507,960 1,883,429
-----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 10,755,758 11,746,655 3,559,894 8,236,645 5,307,013 1,926,120
Contract owners' equity at
beginning of period 22,039,495 10,292,840 12,662,605 4,425,960 1,926,120 0
-----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 32,795,253 $ 22,039,495 $ 16,222,499 $ 12,662,605 $ 7,233,133 $ 1,926,120
===============================================================================================
</TABLE>
(1) From commencement of operations July 15, 1996
See accompanying notes.
7
<PAGE> 88
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------------------------
PACIFIC RIM
INTERNATIONAL EMERGING MARKETS
SMALL/MID CAP (2) SMALL CAP (2) (3)
--------------------------------------------------------------------------------
YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income:
Dividends $ 0 $ 0 $ 3,321 $ 18,137 $ 1,220
Expenses:
Mortality & expense risk and
administrative charges 199,889 60,914 95,122 28,083 4,946
--------------------------------------------------------------------------------
Net investment income (loss) (199,889) (60,914) (91,801) (9,946) (3,726)
Net realized gain (loss) 275,484 (39,038) 142,993 27,193 (61,488)
Unrealized appreciation
(depreciation) during the
period 1,502,306 381,526 (156,452) 187,123 (108,178)
--------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity
from operations 1,577,901 281,574 (105,260) 204,370 (173,392)
--------------------------------------------------------------------------------
Changes from principal
transactions:
Purchase payments 4,904,177 6,512,107 1,883,923 3,155,015 408,285
Transfers between sub-
accounts and the
Company 2,325,955 3,214,790 364,530 1,665,228 186,610
Withdrawals (464,579) (145,116) (223,256) (94,862) (600)
Annual contract fee (7,535) (908) (3,550) (484) (47)
--------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 6,758,018 9,580,873 2,021,647 4,724,897 594,248
--------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 8,335,919 9,862,447 1,916,387 4,929,267 420,856
Contract owners' equity at
beginning of period 9,862,447 0 4,929,267 0 0
--------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 18,198,366 $ 9,862,447 $ 6,845,654 $ 4,929,267 $ 420,856
================================================================================
</TABLE>
(2) From commencement of operations on March 4, 1996.
(3) Denotes former Manulife Series Fund, Inc. which merged into Manufacturers
Investment Trust after the close of business on December 31, 1996.
See accompanying notes.
8
<PAGE> 89
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------
SCIENCE & EMERGING GROWTH PILGRIM
TECHNOLOGY (4) (3) BAXTER GROWTH (4)
-----------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1997
-----------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends $ 88,803 $ 0 $ 0
Expenses:
Mortality & expense risk and
administrative charges 40,948 21,107 16,862
-----------------------------------------------------
Net investment income (loss) 47,855 (21,107) (16,862)
Net realized gain (loss) 32,246 30,095 (4,782)
Unrealized appreciation (depreciation)
during the period (191,326) 247,367 76,335
-----------------------------------------------------
Net increase (decrease) in contract owners'
equity from operations (111,225) 256,355 54,691
-----------------------------------------------------
Changes from principal transactions:
Purchase payments 4,250,885 2,039,572 1,608,478
Transfers between sub-accounts and the
Company 1,544,783 820,149 692,632
Withdrawals (45,757) (95,697) (36,691)
Annual contract fee (347) (283) (213)
-----------------------------------------------------
Net increase (decrease) in contract owners'
equity from principal transactions 5,749,564 2,763,741 2,264,206
-----------------------------------------------------
Total increase (decrease) in contract
owners' equity 5,638,339 3,020,096 2,318,897
Contract owners' equity at beginning of
period 0 0 0
-----------------------------------------------------
Contract owners' equity at end of period $ 5,638,339 $ 3,020,096 $ 2,318,897
=====================================================
</TABLE>
(3) Denotes former Manulife Series Fund, Inc. which merged into Manufacturers
Investment Trust after the close of business on December 31, 1996.
(4) From commencement of operations January 1, 1997
See accompanying notes.
9
<PAGE> 90
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
----------------------------------------------------------
INTERNATIONAL STOCK WORLDWIDE GROWTH QUANTITATIVE
(3) (4) EQUITY (3)
----------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1997
----------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends $ 22,697 $ 13,596 $ 0
Expenses:
Mortality & expense risk and 11,181 11,839 9,581
administrative charges
----------------------------------------------------------
Net investment income (loss) 11,516 1,757 (9,581)
Net realized gain (loss) 15,045 37,872 24,157
Unrealized appreciation (depreciation)
during the period (117,489) (9,947) 74,278
----------------------------------------------------------
Net increase (decrease) in contract owners'
equity from operations (90,928) 29,682 88,854
----------------------------------------------------------
Changes from principal transactions:
Purchase payments 1,297,853 1,425,291 1,032,261
Transfers between sub-accounts and
the Company 481,899 151,565 668,825
Withdrawals (22,120) (17,954) (9,016)
Annual contract fee (58) (99) (86)
----------------------------------------------------------
Net increase (decrease) in contract owners'
equity from principal transactions 1,757,574 1,558,803 1,691,984
----------------------------------------------------------
Total increase (decrease) in contract
owners' equity 1,666,646 1,588,485 1,780,838
Contract owners' equity at beginning of
period 0 0 0
----------------------------------------------------------
Contract owners' equity at end of period $ 1,666,646 $ 1,588,485 $ 1,780,838
==========================================================
</TABLE>
(3) Denotes former Manulife Series Fund, Inc. which merged into Manufacturers
Investment Trust after the close of business on December 31, 1996.
(4) From commencement of operations January 1, 1997.
See accompanying notes.
10
<PAGE> 91
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
---------------------------------------------------
REAL ESTATE
VALUE TRUST (4) SECURITIES (3) BALANCED (3)
---------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1997
---------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends $ 121,213 $ 0 $ 0
Expenses:
Mortality & expense risk and
administrative charges 24,617 14,364 4,012
-------------------------------------------------
Net investment income (loss) 96,596 (14,364) (4,012)
Net realized gain (loss) 54,041 75,356 3,982
Unrealized appreciation (depreciation)
during the period 36,067 183,871 32,356
------------------------------------------------
Net increase (decrease) in contract owners'
equity from operations 186,704 244,863 32,326
------------------------------------------------
Changes from principal transactions:
Purchase payments 3,080,913 1,668,997 583,883
Transfers between sub-accounts and the
Company 711,554 369,754 237,500
Withdrawals (24,773) (9,622) (1,275)
Annual contract fee (188) (89) (4)
------------------------------------------------
Net increase (decrease) in contract owners'
equity from principal transactions 3,767,506 2,029,040 820,104
------------------------------------------------
Total increase (decrease) in contract
owners' equity 3,954,210 2,273,903 852,430
Contract owners' equity at beginning of
period 0 0 0
------------------------------------------------
Contract owners' equity at end of period $ 3,954,210 $ 2,273,903 $ 852,430
================================================
</TABLE>
(3) Denotes former Manulife Series Fund, Inc. which merged into Manufacturers
Investment Trust after the close of business on December 31, 1996.
(4) From commencement of operations January 1, 1997.
See accompanying notes.
11
<PAGE> 92
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
---------------------------------------------------------
CAPITAL LIFESTYLE
HIGH YIELD (4) GROWTH BOND (3) AGGRESSIVE 1000 (4)
---------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1997
---------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends $ 145,840 $ 0 $ 25,615
Expenses:
Mortality & expense risk and
administrative charges 29,216 2,231 31,492
---------------------------------------------------------
Net investment income (loss) 116,624 (2,231) (5,877)
Net realized gain (loss) 49,427 5,380 16,091
Unrealized appreciation (depreciation)
during the period 60,068 10,034 153,247
---------------------------------------------------------
Net increase (decrease) in contract owners'
equity from operations 226,119 13,183 163,461
---------------------------------------------------------
Changes from principal transactions:
Purchase payments 3,947,397 308,180 3,805,176
Transfers between sub-accounts and
the Company (234,593) 96,961 941,364
Withdrawals (27,399) (3,280) (6,907)
Annual contract fee (58) (5) (344)
---------------------------------------------------------
Net increase (decrease) in contract owners'
equity from principal transactions 3,685,347 401,856 4,739,289
---------------------------------------------------------
Total increase (decrease) in contract
owners' equity 3,911,466 415,039 4,902,750
Contract owners' equity at beginning of
period 0 0 0
---------------------------------------------------------
Contract owners' equity at end of period $ 3,911,466 $ 415,039 $ 4,902,750
=========================================================
</TABLE>
(3) Denotes former Manulife Series Fund, Inc. which merged into Manufacturers
Investment Trust after the close of business on December 31, 1996.
(4) From commencement of operations January 1, 1997.
See accompanying notes.
12
<PAGE> 93
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
----------------------------------------------------------
LIFESTYLE LIFESTYLE LIFESTYLE
GROWTH 820 (4) BALANCED 640 (4) MODERATE 460 (4)
----------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1997
----------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends $ 233,491 $ 295,156 $ 136,780
Expenses:
Mortality & expense risk and
administrative charges 142,644 132,309 45,898
----------------------------------------------------------
Net investment income (loss) 90,847 162,847 90,882
Net realized gain (loss) 21,224 30,037 469
Unrealized appreciation (depreciation)
during the period 738,884 737,354 236,955
----------------------------------------------------------
Net increase (decrease) in contract owners'
equity from operations 850,955 930,238 328,306
----------------------------------------------------------
Changes from principal transactions:
Purchase payments 17,308,083 16,773,691 4,527,287
Transfers between sub-accounts and
the Company 5,044,274 3,245,867 1,713,547
Withdrawals (220,725) (366,383) (56,284)
Annual contract fee (547) (440) (53)
----------------------------------------------------------
Net increase (decrease) in contract owners'
equity from principal transactions 22,131,085 19,652,735 6,184,497
----------------------------------------------------------
Total increase (decrease) in contract
owners' equity 22,982,040 20,582,973 6,512,803
Contract owners' equity at beginning
of period 0 0 0
----------------------------------------------------------
Contract owners' equity at end of period $ 22,982,040 $ 20,582,973 $ 6,512,803
==========================================================
</TABLE>
(4) From commencement of operations January 1, 1997.
See accompanying notes.
13
<PAGE> 94
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------
LIFESTYLE TOTAL
CONSERVATIVE 280 (4)
--------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31
1997 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends $ 42,545 $ 43,190,322 $ 14,393,125
Expenses:
Mortality & expense risk and
administrative charges 12,554 6,675,044 4,042,805
--------------------------------------------------------------
Net investment income (loss) 29,991 36,515,278 10,350,320
Net realized gain (loss) (8,788) 7,541,380 4,232,907
Unrealized appreciation (depreciation)
during the period 68,075 30,266,422 24,402,387
--------------------------------------------------------------
Net increase (decrease) in contract owners'
equity from operations 89,278 74,323,080 38,985,614
--------------------------------------------------------------
Changes from principal transactions:
Purchase payments 1,530,748 173,507,634 98,629,961
Transfers between sub-accounts and
the Company 205,923 7,509,833 19,934,781
Withdrawals (12,896) (19,282,100) (12,879,086)
Annual contract fee (67) (235,638) (169,401)
--------------------------------------------------------------
Net increase (decrease) in contract owners'
equity from principal transactions 1,723,708 161,499,729 105,516,255
--------------------------------------------------------------
Total increase (decrease) in contract
owners' equity 1,812,986 235,822,809 144,501,869
Contract owners' equity at beginning of
period 0 361,309,525 216,807,656
--------------------------------------------------------------
Contract owners' equity at end of period $ 1,812,986 $ 597,132,334 $ 361,309,525
==============================================================
</TABLE>
(4) From commencement of operations January 1, 1997.
See accompanying notes.
14
<PAGE> 95
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements
December 31, 1997
1. ORGANIZATION
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North American Life Assurance Company
and hereinafter referred to as the Account) is a separate account established by
The Manufacturers Life Insurance Company of New York (formerly First North
American Life Assurance Company and hereinafter referred to as the Company). The
Company established the Account on July 22, 1992 as a separate account under New
York law. The Account operates as a Unit Investment Trust under the Investment
Company Act of 1940, as amended, and invests in thirty-five subaccounts of
Manufacturers Investment Trust (formerly NASL Series Trust and hereinafter
referred to as the Trust). The Account is a funding vehicle for variable annuity
contracts (the "Contracts") issued by the Company. The account includes two
contracts, distinguished principally by the level of expenses and surrender
charges. These two contracts are Venture Variable Annuity 9 (VEN9) and Venture
Variable Annuity 10 (VEN10). The Company is a wholly-owned subsidiary of The
Manufacturers Life Insurance Company of North America (formerly North American
Security Life Insurance Company and hereinafter referred to as MNA). MNA is a
wholly-owned subsidiary of Manulife Wood Logan Holding Company, Inc. (formerly
NAWL Holding Company, Inc. And hereinafter referred to as MWL). MWL holds all
the outstanding shares of MNA and Wood Logan Associates, Inc. ("Wood Logan").
The Manufacturers Life Insurance Company ("MLI") owns all Class A shares of MWL,
representing 85% of the voting shares of MWL. Certain employees of Wood Logan
own all Class B shares, which represent the remaining 15% voting interest in
MWL.
Effective after the close of business on December 31, 1996, the portfolios of
the Manulife Series Funds, Inc. (a series trust of MLI) were merged with the
Trust. As a result of this merger, seven additional sub-accounts became
available as investment options to the contract owners of the Account and
include the Emerging Growth, Quantitative Equity, Balanced, Real Estate
Securities, Capital Growth, Pacific Rim Emerging Markets and International Stock
portfolios. Also effective after the close of business on December 31, 1996, ten
new portfolios became available as investment options to contract owners of the
Account and include the five Lifestyle portfolios and the Pilgrim Baxter Growth,
Science and Technology, Worldwide Growth, Value Trust and High Yield portfolios.
15
<PAGE> 96
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
On December 23, 1997, a new sub-account, Small Company Value, commenced
operations. Although the fund was available to contract owners in 1997, no
investments were made.
On March 4, 1996, two new sub-accounts, Small/Mid Cap and International Small
Cap, commenced operations. On July 15, 1996, the Growth sub-account commenced
operations.
2. SIGNIFICANT ACCOUNTING POLICIES
Investments are made in the portfolios of the Trust and are valued at the
reported net asset value of such portfolios. Transactions are recorded on the
trade date. Income from dividends is recorded on the ex-dividend date. Realized
gains and losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
In addition to the Account, a contract holder may also allocate funds to the
Fixed Account, which is part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933, and the Company's general
account has not been registered as an investment company under the Investment
Company act of 1940.
The operations of the Account are included in the federal income tax return of
the Company, which is taxed as a life insurance company under the provisions of
the Internal Revenue Code (the "Code"). Under the current provisions of the
Code, the Company does not expect to incur federal income taxes on the earnings
of the Account to the extent the earnings are credited under the contracts.
Based on this, no charge is being made currently to the Account for federal
income taxes. The Company will review periodically the status of such decision
based on changes in the tax law. Such a charge may be made in future years for
any federal income taxes that would be attributable to the contract.
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Such estimates and assumptions could change in the future as more information
becomes known, which could impact the amounts reported and disclosed herein.
16
<PAGE> 97
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements (continued)
3. AFFILIATED COMPANY TRANSACTIONS
Administrative services necessary for the operation of the Account are performed
by the Company. The Company had an underwriting agreement with its wholly-owned
subsidiary, NASL Financial Services, Inc. (NASL Financial). NASL Financial had
an agreement with Wood Logan to promote the sale of annuity contracts. On
October 1, 1997, NASL Financial ceased operations, and certain assets and
liabilities of NASL Financial were contributed to form a new company,
Manufacturers Securities Services LLC (MSS), for a 99.9% ownership interest. MSS
has an Administrative Services Agreement with Wood Logan for marketing services
for the sale of annuity contracts. Certain officers of the Account are officers
and directors of the Company or the Trust.
4. CONTRACT CHARGES
There are no deductions made from purchase payments for sales charges at the
time of purchase. In the event of a surrender, a contingent deferred sales
charge may be made by the Company to cover sales expenses. An annual
administrative fee of $30 is deducted from each contract owners' account on the
contract anniversary date to cover contract administration costs. This charge is
waived on certain contracts.
Deductions from each sub-account are made daily for administrative fees and for
the assumption of mortality and expense risk charges, equal to an effective
annual rate of 0.15% and 1.25% of the contract value, respectively.
17
<PAGE> 98
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements (continued)
5. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares purchased and proceeds from
sales of each sub-account for the year ended December 31, 1997.
<TABLE>
<CAPTION>
PURCHASES SALES
--------------------------------
<S> <C> <C>
Equity Portfolio $ 21,967,487 $ 4,575,741
Investment Quality Bond Portfolio 2,337,330 1,020,952
Growth and Income Portfolio 25,947,670 3,538,943
Blue Chip Growth Portfolio 17,849,737 2,515,608
Money Market Portfolio 36,858,199 28,649,454
Global Equity Portfolio 10,607,613 4,842,833
Global Government Bond Portfolio 2,011,356 1,977,964
U.S. Government Securities Portfolio 4,742,448 3,775,868
Conservative Asset Allocation Portfolio 1,320,533 1,120,518
Moderate Asset Allocation Portfolio 4,067,225 2,561,252
Aggressive Asset Allocation Portfolio 2,044,340 1,014,060
Equity-Income Portfolio 19,068,632 4,288,496
Strategic Bond Portfolio 13,600,499 4,046,139
International Growth and Income Portfolio 7,127,919 2,625,641
Growth Portfolio 5,174,014 730,943
Small/Mid Cap Portfolio 9,240,362 2,682,233
International Small Cap Portfolio 4,047,994 2,118,148
Pacific Rim Emerging Markets Portfolio 954,557 364,035
Science & Technology Portfolio 6,932,375 1,134,956
Emerging Growth Portfolio 3,400,723 658,089
Pilgrim Baxter Growth Portfolio 2,413,022 165,678
International Stock Portfolio 2,121,748 352,658
Worldwide Growth Portfolio 2,072,061 511,501
Quantitative Equity Portfolio 1,847,979 165,576
Value Trust Portfolio 4,401,205 537,103
Real Estate Securities Portfolio 2,858,292 843,616
Balanced Portfolio 863,770 47,678
High Yield Portfolio 4,568,906 766,935
Capital Growth Bond Portfolio 691,538 291,913
Lifestyle Aggressive 1000 Portfolio 4,938,717 204,864
Lifestyle Growth 820 Portfolio 22,531,589 285,455
Lifestyle Balanced 640 Portfolio 22,195,269 2,353,594
Lifestyle Moderate 460 Portfolio 6,407,993 124,104
Lifestyle Conservative 280 Portfolio 2,051,931 296,469
------------ -----------
Total $279,265,033 $81,189,017
============ ===========
</TABLE>
18
<PAGE> 99
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements (continued)
6. UNIT VALUES
A summary of the accumulation unit values at December 31, 1996 and 1997 and the
accumulation units and dollar value outstanding at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
1996 1997
---------- ------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
---------- ------------------------------------------------
<S> <C> <C> <C> <C>
Equity Sub-Account:
Ven 9 and Ven 10 Contracts $24.664354 $29.002593 2,655,388 $77,013,136
Investment Quality Bond Sub-Account:
Ven 9 and Ven 10 Contracts 16.943257 18.336912 440,005 8,068,338
Growth and Income Sub-Account:
Ven 9 and Ven 10 Contracts 20.178770 26.431239 3,402,511 89,932,572
Blue-Chip Growth Sub-Account:
Ven 9 and Ven 10 Contracts 13.688523 17.134232 2,353,640 40,327,819
Money Market Sub-Account:
Ven 9 and Ven 10 Contracts 14.699636 15.241915 1,750,417 26,679,706
Global Equity Sub-Account:
Ven 9 and Ven 10 Contracts 18.276450 21.770913 2,090,811 45,518,863
Global Government Bond Sub-Account:
Ven 9 and Ven 10 Contracts 19.803954 20.104158 430,961 8,664,117
U.S. Government Securities Sub-Account
Ven 9 and Ven 10 Contracts 16.393307 17.535478 824,733 14,462,083
Conservative Asset Allocation Sub-Account:
Ven 9 and Ven 10 Contracts 15.113142 16.607511 406,841 6,756,624
Moderate Asset Allocation Sub-Account:
Ven 9 and Ven 10 Contracts 15.995076 18.276161 1,321,777 24,157,010
</TABLE>
19
<PAGE> 100
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1996 1997
---------- -----------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
---------- -----------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Asset Allocation Sub-
Account:
Ven 9 and Ven 10 Contracts 16.701647 19.614359 608,298 $11,931,366
Equity-Income Sub-Account:
Ven 9 and Ven 10 Contracts 16.011513 20.479412 3,793,617 77,691,038
Strategic Bond Sub-Account:
Ven 9 and Ven 10 Contracts 13.250563 14.500997 2,261,586 32,795,253
International Growth and Income
Sub-Account:
Ven 9 and Ven 10 Contracts 11.718276 11.545714 1,405,067 16,222,499
Growth Sub-Account:
Ven 9 and Ven 10 Contracts 13.727312 16.968111 426,278 7,233,133
Small/Mid-Cap Sub-Account:
Ven 9 and Ven 10 Contracts 13.215952 15.020670 1,211,555 18,198,366
International Small-Cap Sub-
Account:
Ven 9 and Ven 10 Contracts 13.493094 13.410016 510,488 6,845,654
Pacific Rim Emerging Markets Sub-
Account:
Ven 9 and Ven 10 Contracts -- 8.180904 51,444 420,856
Science & Technology Sub-Account:
Ven 9 and Ven 10 Contracts -- 13.647195 413,150 5,638,339
Emerging Growth Sub-Account:
Ven 9 and Ven 10 Contracts -- 14.574077 207,224 3,020,096
Pilgrim Baxter Growth Sub-Account
Ven 9 and Ven 10 Contracts -- 12.327066 188,114 2,318,897
International Stock Sub-Account:
Ven 9 and Ven 10 Contracts -- 12.652231 131,727 1,666,646
</TABLE>
20
<PAGE> 101
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1996 1997
---------- -----------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
---------- -----------------------------------------------
<S> <C> <C> <C> <C>
Worldwide Growth Sub-Account:
Ven 9 and Ven 10 Contracts -- 13.965674 113,742 $ 1,588,485
Quantitative Equity Sub-Account:
Ven 9 and Ven 10 Contracts -- 16.107191 110,562 1,780,838
Value Trust Sub-Account:
Ven 9 and Ven 10 Contracts -- 15.057118 262,614 3,954,210
Real Estate Securities Sub-Account:
Ven 9 and Ven 10 Contracts -- 14.949140 152,109 2,273,903
Balanced Sub-Account:
Ven 9 and Ven 10 Contracts -- 14.609853 58,346 852,430
High-Yield Sub-Account:
Ven 9 and Ven 10 Contracts -- 13.890491 281,593 3,911,466
Capital Growth Bond Sub-Account:
Ven 9 and Ven 10 Contracts -- 13.475788 30,799 415,039
Lifestyle Aggressive 1000 Sub-
Account:
Ven 9 and Ven 10 Contracts -- 13.669625 358,660 4,902,750
Lifestyle Growth 820 Sub-Account:
Ven 9 and Ven 10 Contracts -- 14.033299 1,637,679 22,982,040
Lifestyle Balanced 640 Sub-Account:
Ven 9 and Ven 10 Contracts -- 14.066417 1,463,270 20,582,973
Lifestyle Moderate 460 Sub-Account:
Ven 9 and Ven 10 Contracts -- 14.016704 464,646 6,512,803
</TABLE>
21
<PAGE> 102
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1996 1997
---------- -----------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
---------- -----------------------------------------------
<S> <C> <C> <C> <C>
Lifestyle Conservative 280 Sub-
Account:
Ven 9 and Ven 10 Contracts -- 13.825120 131,137 $ 1,812,986
------------
Total Contract Owners' Equity $597,132,334
============
</TABLE>
7. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code, a variable
annuity contract other than a contract issued in connection with certain types
of employee benefits plans, will not be treated as an annuity contract for
federal tax purposes for any period for which the investments of the segregated
asset account on which the contract is based are not adequately diversified. The
Code provides that the "adequately diversified" requirement may be met if the
underlying investments satisfy either a statutory safe harbor test or
diversification requirements set forth in regulations issued by the Secretary of
Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of the
Code. The Company believes that the Account satisfies the current requirements
of the regulations, and it intends that the Account will continue to meet such
requirements.
8. YEAR 2000 ISSUES (UNAUDITED)
Like other investment funds, financial and business organizations and
individuals, the Account would be adversely affected if the computer systems
used by the Company and other service providers do not properly process and
calculate date-related information and data from and after January 1, 2000. The
Company is completing an assessment of the year 2000 impact on its systems and
business processes. Management believes that the Company will complete its Year
2000 project for all critical systems and processes by September 30, 1998, prior
to any anticipated impact on the critical systems and processes.
22
<PAGE> 103
The Manufacturers Life Insurance Company of New York Separate Account A
(formerly FNAL Variable Account of First North
American Life Assurance Company)
Notes to Financial Statements (continued)
8. YEAR 2000 ISSUES (UNAUDITED) (CONTINUED)
The date on which the Company believes it will complete the Year 2000 project is
based on management's best estimates, which were derived utilizing numerous
assumptions of future events. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer code, and
other similar uncertainties.
23
<PAGE> 104
PART C
OTHER INFORMATION
<PAGE> 105
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements of the Registrant, The
Manufacturers Life Insurance Company of New York
Separate Account A (Part B of the registration
statement).
(2) Financial Statements of the Depositor, The
Manufacturers Life Insurance Company of New York
(Part B of the registration statement).
(b) Exhibits
(1) (a) Resolution of the Board of Directors of
First North American Life Assurance Company
establishing the FNAL Variable Account -
incorporated by reference to Exhibit
(b)(1)(a) to Form N-4, File No. 33-46217
filed February 25, 1997.
(b) Resolution of the Board of Directors of
First North American Life Assurance Company
establishing the Fixed Separate Account -
incorporated by reference to Exhibit
(b)(1)(b) to Form N-4, File No. 33-46217
filed February 25, 1997.
(c) Resolution of the Board of Directors of
First North American Life Assurance Company
establishing The Manufacturers Life
Insurance Company of New York Separate
Account D and The Manufacturers Life
Insurance Company of New York Separate
Account E - incorporated by reference to
Exhibit (b)(1)(c) to Form N-4, File No.
33-46217 filed February 25, 1997.
(2) Agreements for custody of securities and similar
investments - Not Applicable.
(3) (a) Underwriting and Distribution Agreement
between The Manufacturers Life Insurance
Company of New York (Depositor) and
Manufacturers Securities Services, LLC.
(Underwriter) - incorporated by reference to
Exhibit (b)(3)(a) to Form N-4, File No.
33-46217 filed February 25, 1997.
(b) Selling Agreement between The Manufacturers
Life Insurance Company of New York,
Manufacturers Securities Services, LLC
(Underwriter), and General Agents -
incorporated by reference to Exhibit
(b)(3)(c) to Form N-4, File No. 33-46217
filed February 25, 1997.
(4) (a) Form of Specimen Flexible Purchase
Payment Individual Deferred Combination
Fixed and Variable Annuity Contract,
Non-Participating was previously filed as
Exhibit (b)(4)(a) to Registrant's
Registration Statement on Form N-4 File
No.33-79112 dated March 27, 1998.
(b) Specimen Endorsements to Contract - filed
herewith.
(5) Specimen Application for Flexible Purchase Payment
Individual Deferred Combination Fixed and Variable
Annuity Contract, Non-Participating - previously
filed as Exhibit (b)(5) to FNAL Variable Account
Registration Statement on Form N-4 File No. 33-79112,
dated May 18, 1994.
<PAGE> 106
(6) (a)(i) Declaration of Intention and Charter
of First North American Life Assurance
Company incorporated by reference to Exhibit
(b)(6)(a)(i) to Form N-4, File No. 33-46217
filed February 25, 1997.
(a)(ii) Certificate of Amendment of the Declaration
of Intention and Charter of First North
American Life Assurance Company -
incorporated by reference to Exhibit
(b)(6)(a)(ii) to Form N-4, File No. 33-46217
filed February 25, 1997.
(a)(iii) Certificate of Amendment of the Declaration
of Intention and Charter of The
Manufacturers Life Insurance Company of New
York - incorporated by reference to Exhibit
(b)(6)(a)(iii) to Form N-4, File No.
33-46217 filed February 25, 1997.
(b) By-laws of The Manufacturers Life Insurance
Company of New York - incorporated by
reference to Exhibit (b)(3)(c) to Form N-4,
File No. 33-46217 filed February 25, 1997.
(7) Contract of reinsurance in connection with the
variable annuity contracts being offered - Not
Applicable.
(8) Other material contracts not made in the ordinary
course of business which are to be performed in whole
or in part on or after the date the registration
statement is filed:
(a) Administrative Agreement between The
Manufacturers Life Insurance Company of New
York and The Manufacturers Life Insurance
Company - incorporated by reference to
Exhibit (b)(3)(c) to Form N-4, File No.
33-46217 filed February 25, 1997.
(b) Investment Services Agreement between The
Manufacturers Life Insurance Company and The
Manufacturers Life Insurance Company of New
York - incorporated by reference to Exhibit
1(A)(8)(c) to pre-effective amendment no. 1
to The Manufacturers Life Insurance Company
of New York Separate Account B Registration
Statement on Form S-6, filed March 16, 1998.
(c) License and Service Agreement between North
American Security Life Insurance Company,
First North American Life Assurance Company,
and Mentap Systems, Inc. - previously filed
as Exhibit (b)(5)(v) to Form N-4 filed on
April 28, 1995.
(9) Opinion of Counsel and consent to its use as to the
legality of the securities being registered -
previously filed as Exhibit (b)(9) to Form N-4 filed
on June 29, 1994.
(10) (a) Written consent of Ernst & Young LLP,
independent auditors is filed herewith.
(b) Written consent of Coopers & Lybrand L.L.P,
independent is filed herewith.
(11) All financial statements omitted from Item 23,
Financial Statements - Not Applicable.
(12) Agreements in consideration for providing initial
capital between or among Registrant, Depositor,
Underwriter or initial contract owners - Not
Applicable.
<PAGE> 107
(13) Schedule for computation of each performance
quotation provided in the Registration Statement in
response to Item 21 - previously filed as Exhibit
(b)(13) to FNAL Variable Account Registration
Statement on Form N-4 File No. 33-79112, dated May
18, 1994. An Additional schedule for computation was
previously filed as exhibit (13) to Form N-4 filed
April 30, 1996.
(14) (a) Power of Attorney - The Manufacturers Life
Insurance Company of New York Directors is
incorporated by reference to exhibit 7 to
pre-effective amendment no. 1 to The Manufacturers
Life Insurance Company of New York Separate Account B
Registration Statement on Form S-6, filed March 16,
1998.
(27) Financial Data Schedule- Not Applicable
<PAGE> 108
Item 25. Directors and Officers of the Depositor.
OFFICERS AND DIRECTORS OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
NAME AND PRINCIPAL BUSINESS POSITION WITH THE MANUFACTURERS
ADDRESS LIFE INSURANCE COMPANY OF
NEW YORK
John Richardson Director and Chairman
200 Bloor Street East
North Tower 11
Toronto, Ontario
Canada M4W-1E5
Bruce R. Gordon Director
200 Bloor Street East
North Tower 10
Toronto, Ontario
Canada M4W-1E5
A. Scott Logan President & Director
1455 East Putnam Avenue
Old Greenwich, CT 06870
David W. Libbey Treasurer
73 Tremont Street
Boston, MA 02108-3915
Theodore Kilkuskie Director
73 Tremont Street
Boston, MA 02108
John D. DesPrez III Director
73 Tremont Street
Boston, MA 02108
Robert C. Perez Director
715 North Avenue
New Rochelle, NY 01801
James K. Robinson Director
7 Summit Drive
Rochester, New York 14620-3127
Neil M. Merkl Esq. Director
35-35 161st Street
Flushing, New York 11358
<PAGE> 109
Bruce Avedon Director
6601 Hitching Post Lane
Cincinnati, OH 45230
Ruth Ann Fleming Director
205 Highland Avenue
Short Hills, NJ 07078
Tracy Anne Kane Secretary; Counsel
73 Tremont Street
Boston, MA 02108
Stephanie Elliman Vice President & Chief
Corporate Center at Rye Administrative Officer
555 Theodore Fremd Avenue
Rye, New York 10580
<PAGE> 110
Item 26. Persons Controlled by or Under Common Control with Depositor or
Registrant.
THE MANUFACTURERS LIFE INSURANCE COMPANY
Manulife Corporate Organization as at December 31, 1997
The Manufacturers Life Insurance Company (Canada)
<TABLE>
<S> <C>
1. Cantay Holdings Inc. - Ontario (100%)
2. 484551 Ontario Limited - Ontario (100%)
a. 911164 Ontario Inc. - Ontario (100%)
3. Churchill Lifestyles Corp. (100%)
4. 495603 Ontario Limited - Ontario (100%)
5. 1198183 Ontario Limited - Ontario (100%)
6. 1198184 Ontario Limited - Ontario (100%)
7. 1235434 Ontario Limited - Ontario (100%)
8. 576986 Ontario Inc. - Ontario (100%)
9. Balmoral Developments Inc. - Ontario (100%)
10. Manulife Bank of Canada - Canada (100%)
11. Manulife Securities International Ltd. - Canada (100%)
12. Family Realty First Corp. - Ontario (100%)
13. NAL Resources Limited - Alberta (100%)
14. Manulife International Capital Corporation Limited - Ontario (100%)
a. Regional Power Inc. - Ontario (100%)
i. La Regionale Power (Port Cartier) Inc. - Ontario (100%)
ii. La Regionale Power Angliers Inc. - Ontario (100%)
iii. Addalam Power Corporation - Philippines (100%)
15. Peel-de Maisonneuve Investments Ltd. - Canada (100%)
a. 2932121 Canada Inc. - Canada (100%)
16. FNA Financial Inc. - Canada (100%)
a. NAL Trustco Inc. - Ontario (100%)
b. First North American Insurance Company - Canada (100%)
c. Elliott & Page Limited - Ontario (100%)
d. Seamark Asset Management Ltd. - Canada (67.86%)
e. NAL Resources Management Limited - Canada (100%)
i. NAL Energy Inc. - Alberta (100%)
17. ManuCab Ltd. - Canada (100%)
a. Plazcab Service Limited - Newfoundland (100%)
18. Manufacturers Life Capital Corporation Inc. - Canada (100%)
19. The North American Group Inc. - Ontario (100%)
20. 994744 Ontario Inc. - Ontario (100%)
21. 1268337 Ontario Inc. - Ontario (100%)
22. 3426505 Canada Inc. - Canada (100%)
23. The Manufacturers Investment Corporation - Michigan (100%)
a. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
i. The Manufacturers Life Insurance Company (U.S.A.) - Michigan (100%)
(1) Dover Leasing Investments, LLC - Delaware (99%)
(2) The Manufacturers Life Insurance Company of America - Michigan (100%)
(a) Manulife Holding Corporation - Delaware (100%)
(i) Manufacturers Adviser Corporation - Colorado (100%)
</TABLE>
<PAGE> 111
<TABLE>
<S> <C>
(ii) Succession Plainning International, Inc. - Wisconsin (100%)
(iii) ManEquity, Inc. - Colorado (100%)
(iv) Manulife Property Management of Washington, D.C. Inc. - Washington, D.C. (100%)
(v) ManuLife Service Corporation - Colorado (100%)
(vi) Manulife Leasing Company, LLC - Delaware (80%)
(3) Capitol Bankers Life Insurance Company - Michigan (100%)
(4) Ennal, Inc. - Ohio (100%)
(5) Manulife-Wood Logan Holding Co. Inc. - Delaware (62.5%)
(a) Wood Logan Associates, Inc. - Connecticut (100%)
(i) Wood Logan Distributors, Inc. - Connecticut (100%)
(b) The Manufacturers Life Insurance Company of North America - Delaware (100%)
(i) Manufacturers Securities Services, LLC - Delaware (100%)
(ii) The Manufacturers Life Insurance Company of New York - New York (100%)
ii. Manulife Reinsurance Limited - Bermuda (100%)
(1) MRL Holding, LLC - Delaware (99%)
(a) Manulife-Wood Logan Holding Co. Inc. - Delaware (22.5%)
iii. MRL Holding, LLC - Delaware (1%)
24. Manulife International Investment Management Limited - U.K. (100%)
a. Manulife International Fund Management Limited - U.K. (100%)
25. WT(SW) Properties Ltd. - U.K. (100%)
26. Manulife Europe Ruckversicherungs-Aktiengesellschaft - Germany (100%)
27. Manulife International Holdings Limited - Bermuda (100%)
a. Manulife (International) Limited - Bermuda (100%)
i. Zhong Hong Life Insurance Co., Ltd. - China (51%)
ii. The Manufacturers (Pacific Asia) Insurance Company Limited - H.K. (100%)
iii. Newtime Consultants Limited - H.K. (100%)
28. Manulife (International) Reinsurance Limited - Bermuda (100%)
a. Manulife (International) P & C Limited - Bermuda (100%)
b. Manufacturers P & C Limited - Barbados (100%)
c. Manufacturers Life Reinsurance Limited - Barbados (100%)
29. Chinfon-Manulife Insurance Company Limited - Bermuda (100%)
30. Manulife (Malaysia) SDN. BHD. - Malaysia (100%)
31. Manulife (Thailand) Ltd. - Thailand (100%)
32. Young Poong Manulife Insurance Company - Korea (100%)
33. Manulife Data Services Inc. - Barbados (100%)
a. Manulife Funds Direct (Barbados) Limited - Barbados (100%)
i. Manulife Funds Direct (Hong Kong) Limited - H.K. (100%)
34. OUB Manulife Pte. Ltd. - Singapore (100%)
35. Manulife Holdings (Hong Kong) Limited - H.K. (100%)
36. ManuLife Financial Systems (Hong Kong) Limited - H.K. (100%)
37. P.T. Asuransi Jiwa Dhamala ManuLife - Indonesia (51%)
a. P.T. AMP Panin Life - Indonesia (100%)
</TABLE>
Item 27. Number of Contract Owners.
There are no contracts of the series offered hereby outstanding.
<PAGE> 112
Item 28. Indemnification.
Article 10 of the Charter of the Company provides as follows:
TENTH: No director of the Corporation shall be personally liable to the
Corporation or any of its shareholders for damages for any breach of duty as a
director; provided, however, the foregoing provision shall not eliminate or
limit (i) the liability of a director if a judgment or other final adjudication
adverse to such director established his or her such acts or omissions were in
bad faith or involved intentional misconduct or were acts or omissions (a) which
he or she knew or reasonably should have known violated the New York Insurance
Law or (b) which violated a specific standard of care imposed on directors
directly, and not by reference, by a provision of the New York Insurance Law (or
any regulations promulgated thereunder) or (c) which constituted a knowing
violation of any other law, or establishes that the director personally gained
in fact a financial profit or other advantage to which the director was not
legally entitled or (ii) the liability of a director for any act or omission
prior to the adoption of this Article by the shareholders of the Corporation.
Any repeal or modification of this Article by the shareholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
Article VII of the By-laws of the Company provides as follows:
Section VII.1. Indemnification of Directors and Officers. The Corporation may
indemnify any person made, or threatened to be made, a party to an action by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he or she, his or her testator, testatrix or intestate, is or was
a director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of any other corporation of any type or
kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him or her in connection with the defense or settlement of such
action, or in connection with an appeal therein, if such director or officer
acted, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interests of the Corporation, except that no indemnification under this
Section shall be made in respect of (1) a threatened action, or a pending action
which is settled or is otherwise disposed of, or (2) any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation, unless and only to the extent that the court in which the action
was brought, or , if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
The Corporation may indemnify any person made, or threatened to be made, a party
to an action or proceeding (other than one by or in the right of the Corporation
to procure a judgment in its favor), whether civil or criminal, including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he or
she, his or her testator, testatrix or intestate, was a director or officer of
the Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he or she reasonably believed to be in, or, in the
case of service for any
<PAGE> 113
other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise, not opposed to, the best interests of the Corporation
and, in criminal actions or proceedings, in addition, had no reasonable cause to
believe that his or her conduct was unlawful.
The termination of any such civil or criminal action or proceeding by judgment,
settlement, conviction or upon a plea of nolo contendere, of its equivalent,
shall not in itself create a presumption that any such director or officer did
not act, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interest of the Corporation or that he or she had reasonable cause to
believe that his or her conduct was unlawful.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
a. Name of Investment Company Capacity In which acting
Manufacturers Investment Trust Investment Adviser
The Manufacturers Life Insurance Principal Underwriter
<PAGE> 114
Company of North America Separate
Account A
The Manufacturers Life Insurance Principal Underwriter
Company of North America Separate
Account B
The Manufacturers Life Insurance Principal Underwriter
Company of New York Separate
Account A
b. The Manufacturers Life Insurance Company of North America is the managing
member of Manufacturers Securities Services, LLC and has sole power to act on
behalf of Manufacturers Securities Services, LLC. The officers and directors of
The Manufacturers Life Insurance Company of North America are set forth under
Item 25.
Name and Principal Position with The Manufacturers Life Insurance
Business Address Company of North America
John D. Richardson Director and Chairman of the Board of
200 Bloor Street East Directors
North Tower, 11th Floor
Toronto, Ontario
Canada M4W-1E5
Peter S. Hutchison Director
200 Bloor Street East
North Tower, 7th Floor
Toronto, Ontario
Canada M4W-1E5
John D. DesPrez III President & Director
73 Tremont Street
Boston, MA 02108
James Boyle Vice President, Administration and Chief
116 Huntington Avenue Administrative Officer
Boston, MA 02116
John G. Vrysen Vice President & Chief Actuary
73 Tremont Street
Boston, MA 02108
Hugh McHaffie Vice President, U.S. Annuities and Product
73 Tremont Street Development
Boston, MA 02108
Richard C. Hirtle Vice President, Strategic Development and
116 Huntington Avenue Accumulation Life Products
<PAGE> 115
Boston, MA 02116
James D. Gallagher Vice President, Secretary and General Counsel
73 Tremont Street
Boston, MA 02108
Janet Sweeney Vice President, Corporate Services
73 Tremont Street
Boston, MA 02108
Robert Boyda Vice President, Investment Management Services
73 Tremont Street
Boston, MA 01208
David W. Libbey Vice President, Treasurer & Chief
73 Tremont Street Financial Officer
Boston, MA 02108
c. None.
Item 30. Location of Accounts and Records.
All books and records are maintained at Corporate Center at Rye, 555 Theodore
Fremd Avenue, Rye, New York 10580.
Item 31. Management Services.
The Company has entered into an Administrative Services Agreement with The
Manufacturers Life Insurance Company ("Manulife"). This Agreement provides that
under the general supervision of the Board of Directors of the Company, and
subject to initiation, preparation and verification by the Chief Administrative
Officer of the Company, Manulife shall provide accounting services related to
the provision of a payroll support system, general ledger, accounts payable, tax
and auditing services.
Item 32. Undertakings.
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The Manufacturers Life Insurance Company of New York ("Company") hereby
represents that the fees and charges deducted under the contracts issued
pursuant to this registration statement, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by the Company
<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, The
Manufacturers Life Insurance Company of New York Separate Account A, had duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, and
Commonwealth of Massachusetts on the 28th day of April, 1998.
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NEW YORK SEPARATE ACCOUNT A
--------------------------------------
Registrant
By: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NEW YORK
---------------------------------
(Depositor)
By: /s/ A. Scott Logan
---------------------------------
A. Scott Logan
President
Attest:
/s/ Tracy Anne Kane
- ----------------------------
Tracy Anne Kane
Secretary
<PAGE> 117
As required by the Securities Act of 1933, this amended Registration
Statement has been signed by the following persons in the capacities with the
Depositor and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
* 4/28/98
- -------------------------- Director
John Richardson (Chairman)
/s/ A. Scott Logan
- -------------------------- Director; President 4/28/98
A. Scott Logan (Chief Executive Officer)
/s/ John D. DesPrez III
- -------------------------- Director 4/28/98
John D. DesPrez III
- -------------------------- Director 4/28/98
Theodore Kilkuski
*
- -------------------------- Director 4/28/98
Robert C. Perez
*
- -------------------------- Director 4/28/98
H. Bruce Gordon
*
- -------------------------- Director 4/28/98
James K. Robinson
*
- -------------------------- Director 4/28/98
Neil M. Merkl
*
- -------------------------- Director 4/28/98
Bruce Avedon
<PAGE> 118
*
- ---------------------------------
Ruth Ann Fleming Director [4/28/98]
*By: /s/ Tracy Anne Kane
------------------------ April 28, 1998
Tracy Anne Kane Date
Attorney-in-Fact
Pursuant to Powers
of Attorney
<PAGE> 119
EXHIBIT INDEX
Exhibit No. Description Page No.
(b)(4)(b) Specimen Endorsements to Contract
(b)(10)(a) Ernst & Young LLP Consent
(b)(10)(b) Coopers & Lybrand, L.L.P. Consent
<PAGE> 1
Exhibit (b)(4)(b)
ERISA TAX-SHELTERED ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) or an Employee of such an organization. If the Owner is an
organization described in IRC Section 403(b)(1)(A), the term "Employee"
as used in this Endorsement shall mean the individual Employee for
whose benefit the organization has established an annuity plan under
IRC Section 403(b). Such Employee shall be the Annuitant. If the Owner
is an Employee of an organization described in IRC Section
403(b)(1)(A), the Annuitant must be the same Employee.
If this Contract is used as a funding mechanism for a rollover under
IRC Sections 403(b) or 408(d)(3), the Owner must be one individual,
that same individual must be the Annuitant, and the term "Employee"
shall mean that individual.
The Annuitant cannot be changed. Prior to the Maturity Date, the
Co-Annuitant can be changed, but such change shall not require any
distributions to be made under the Contract.
NONTRANSFERABLE
2. The interest of the Employee in this Contract is non-transferable
within the meaning of IRC Section 401(g) and applicable regulations and
is nonforfeitable. In particular, the Contract may not be sold,
assigned, discounted, or pledged as collateral for a loan or as
security for the performance of any obligation or for any other
purpose, to any person other than Us.
PAYMENTS
3. Payments must be made by an organization described in IRC Section
403(b)(1)(A), except in the case of rollover contributions under IRC
Sections 403(b)(8) and 408(d)(3). The Employee must be an Employee of
such organization.
Payments made pursuant to a salary reduction agreement shall be limited
to the extent provided in IRC Section 402(g). Payments shall not exceed
the amount allowed by IRC Section 415.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in this Contract shall be distributed as
required under IRC Section 403(b)(10) and applicable regulations.
Except as otherwise provided by law, for years beginning after December
31, 1996, the term "required beginning date" means April 1 of the
calendar year following the later of (1) the calendar year in which the
Employee attains age 70-1/2, or (2) the calendar year in which the
Employee retires. However, to the extent required by law, the required
beginning date means April 1 of the calendar year following the
calendar year in which the Employee attains age 70-1/2 for an Employee
who:
(a) is a 5-percent owner (as defined in IRC Section 416) of the
organization described in Section 1 of this Endorsement with
respect to the plan year ending in the calendar year in which
the Employee attains age 70-1/2; and
(b) is not in a governmental plan or a church plan (as defined in
IRC Section 401(a)(9)(C)).
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
5. The Employee's entire interest shall be distributed no later than the
required beginning date, or shall be distributed, beginning no later
than the required beginning date, over (a) the life of the Employee or
the joint lives of the Employee and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the
Employee, or the joint life and last survivor expectancy of the
Employee and the designated beneficiary.
<PAGE> 2
If the Employee's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be made in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DEATH BENEFIT
6. If, in the event of the Employee's death prior to the Maturity Date,
the Death Benefit is not paid to the employer plan, it shall be paid to
(1) the surviving spouse of the Employee in the form required by
section 205 of the Employee Retirement Income Security Act of 1974
(ERISA), unless the spouse elects otherwise in accordance with the
requirements of such section 205 or applicable regulations; or (2) if
there is no surviving spouse, or if the surviving spouse has consented
in the manner required by section 205 of ERISA, or if the applicable
regulations otherwise permit, to the Beneficiary under the Contract.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, the first sentence of the paragraph "Death of Annuitant" is
deleted, and the second sentence is modified to read as follows: "If
any Owner is not an individual, the death of the Annuitant (but not of
the Co-Annuitant) is treated as the death of an Owner."
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
7. If an Employee dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Employee's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Employee's death.
If the Employee dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Employee's death, except that
(a) if the interest is payable to an individual who is the
Employee's designated beneficiary, the designated beneficiary
may elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the Employee
died, and
(ii) December 31 of the calendar year in which the
Employee would have attained age 70-1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Employee.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Employee's death. If no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Employee's death.
<PAGE> 3
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Contract, the distribution requirements of provisions
"(d)" and "(e)" are deleted. If, after the Employee's death, the
designated beneficiary dies before the Maturity Date, no Death Benefit
is payable.
LIFE EXPECTANCY CALCULATIONS
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to Us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Employee, or (b) for purposes of
distributions beginning after the Employee's death, by the surviving
spouse. Such an election shall be irrevocable as to the Employee or the
surviving spouse, and shall apply to all subsequent years. Where life
expectancy is not recalculated, benefit payments may cease before the
death of the individual whose life expectancy is used to determine
benefit payments (since such individual may live longer than his or her
life expectancy, determined at the time benefit payments are
calculated).
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
9. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by Us, only Annuity Options 1 and 2
shall be available to an Employee. All Annuity Options must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than Employees are incidental.
Annuity Option 1(b) is not available for an Employee whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b),
the designated Co-Annuitant must be the Employee's spouse. Annuity
Option 2(b) is not available for an Employee and his or her spouse
where the life expectancy of the Employee and such spouse is less than
10 years.
Except as hereinafter provided, only Annuity Option 2(a) is available
to a married Employee. A married Employee may elect another Annuity
Option, provided his or her spouse consents in accordance with the
requirements of section 205 of ERISA (and applicable regulations), or
provided such election is otherwise permitted under such applicable
regulations. An unmarried Employee will be deemed to have elected
annuity Option 1(a) unless he or she makes a different election in the
manner required under section 205 of ERISA (and applicable
regulations).
ELECTIONS AND CONSENTS
10. Elections and consents required by ERISA may be revoked in the form,
time, and manner prescribed in section 205 of ERISA (and applicable
regulations). All elections and consents required by ERISA shall adhere
to the requirements of the applicable regulations interpreting section
205 of ERISA (or any other applicable law), including the requirements
as to the timing of any elections or consents.
If a withdrawal is permitted by the employer's plan, no withdrawal,
partial or total, may be made without consent of the Employee and the
Employee's spouse in the manner required by section 205 of ERISA (and
applicable regulations), except to the extent that such consent is not
required under such applicable regulations. Any withdrawal made must be
made in the form required under section 205 of ERISA (and applicable
regulations), unless the Employee (and spouse, if applicable) makes an
election in the form and manner permitted under such regulations, to
receive the benefit in another form.
WITHDRAWAL OF SALARY REDUCTION CONTRIBUTIONS
11. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and
the earnings on such contributions and on amounts held as of December
31, 1988, shall not be
<PAGE> 4
paid unless the Employee has reached age 59-1/2, separated from
service, died, become disabled or incurred a hardship as determined by
the organization described in Section 3 of this Endorsement; provided,
that amounts permitted to be distributed in the event of hardship shall
be limited to actual salary deferral contributions (excluding earnings
thereon); and provided further that amounts may be distributed pursuant
to a qualified domestic relations order to the extent permitted by IRC
Section 414(p). Within the meaning of IRC Section 72(m)(7), disability
means the inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment
which can be expected to result in death or to be of long-continued and
indefinite duration. The permanence and degree of such impairment shall
be supported by medical evidence.
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
12. Payments made by a nontaxable transfer from a custodial account
qualifying under IRC Section 403(b)(7), and earnings of such amounts,
shall not be paid or made available before the Employee dies, attains
age 59-1/2, separates from service, becomes disabled or in the case of
such amounts attributable to contributions made under the custodial
account pursuant to a salary reduction agreement, encounters financial
hardship; provided, that such amounts permitted to be paid or made
available in the event of financial hardship shall be limited to
amounts attributable to actual salary deferral contributions made under
the custodial account (excluding earnings thereon); and provided
further that amounts may be distributed pursuant to a qualified
domestic relations order to the extent permitted by IRC Section 414(p).
Within the meaning of IRC Section 72(m)(7), disability means the
inability to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite
duration. The permanence and degree of such impairment shall be
supported by medical evidence.
MATURITY VALUE
13. If the Employee's Contract Value is greater than $3,500, as determined
on the first day of the month preceding the Maturity Date, in
accordance with section 205 of ERISA (and applicable regulations), we
will not exercise our right to pay the Contract Value to an Employee on
the Maturity Date in one lump sum in lieu of annuity benefits.
DIRECT ROLLOVERS
14. This Section 14 applies to distributions made on or after January 1,
1993. A distributee may elect, at the time and in the manner prescribed
by Us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (1) any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; (2) any distribution to the
extent such distribution is required under IRC Section 401(a)(9); and
(3) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an annuity described in IRC Section
403(b), an individual retirement account described in IRC Section
408(a), or an individual retirement annuity described in IRC Section
408(b), that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
A distributee includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternative payee
under a qualified domestic relations order, as defined in IRC Section
414(p), are distributees with regard to the interest of the spouse or
former spouse.
A direct rollover is a payment by the plan administrator or Us to the
eligible retirement plan specified by the distributee.
<PAGE> 5
IRC SECTION 72(S)
15. All references in the Contract to IRC Section 72(s) are deleted.
This endorsement may be amended by the Company as necessary to comply with any
changes in the Internal Revenue Code or other applicable law in order to
maintain the tax qualification of the contract. Any such amendment would be
subject to the New York Insurance Department's prior approval.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
/S/ A. SCOTT LOGAN
President
<PAGE> 6
TAX-SHELTERED ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) or an Employee of such an organization. If the Owner is an
organization described in IRC Section 403(b)(1)(A), the term "Employee"
as used in this Endorsement shall mean the individual Employee for
whose benefit the organization has established an annuity plan under
IRC Section 403(b). Such Employee shall be the Annuitant. If the Owner
is an Employee of an organization described in IRC Section
403(b)(1)(A), the Annuitant must be the same Employee.
If this Contract is used as a funding mechanism for a rollover under
IRC Sections 403(b) or 408(d)(3), the Owner must be one individual,
that same individual must be the Annuitant, and the term "Employee"
shall mean that individual.
The Annuitant cannot be changed. Prior to the Maturity Date, the
Co-Annuitant can be changed, but such change shall not require any
distributions to be made under the Contract. In the "Death Benefit
Before Maturity Date" section of part 4 of the Contract, the first
sentence of the paragraph "Death of Annuitant" is deleted, and the
second sentence is modified to read as follows: "If any Owner is not an
individual, the death of the Annuitant (but not of the Co-Annuitant) is
treated as the death of an Owner."
NONTRANSFERABLE
2. The interest of the Employee in this Contract is non-transferable
within the meaning of IRC Section 401(g) and applicable regulations and
is nonforfeitable. In particular, the Contract may not be sold,
assigned, discounted, or pledged as collateral for a loan or as
security for the performance of any obligation or for any other
purpose, to any person other than Us.
PAYMENTS
3. Payments must be made by an organization described in IRC Section
403(b)(1)(A), except in the case of rollover contributions under IRC
Sections 403(b)(8) and 408(d)(3). The Employee must be an Employee of
such organization. Payments made pursuant to a salary reduction
agreement shall be limited to the extent provided in IRC Section
402(g). Payments shall not exceed the amount allowed by IRC Section
415.
REQUIRED BEGINNING DATE
4. The Employee's entire interest in this Contract shall be distributed as
required under IRC Section 403(b)(10) and applicable regulations.
Except as otherwise provided by law, for years beginning after
December 31, 1996, the term "required beginning date" means
April 1 of the calendar year following the later of (1) the
calendar year in which the Employee attains age 70-1/2, or (2)
the calendar year in which the Employee retires. However, to
the extent required by law, the required beginning date means
April 1 of the calendar year following the calendar year in
which the Employee attains age 70-1/2 for an Employee who:
(a) is a 5-percent owner (as defined in IRC Section 416) of the
organization described in Section 1 of this Endorsement with
respect to the plan year ending in the calendar year in which
the Employee attains age 70-1/2; and
(b) is not in a governmental plan or a church plan (as defined in
IRC Section 401(a)(9)(C)).
DISTRIBUTIONS DURING EMPLOYEE'S LIFE
<PAGE> 7
5. The Employee's entire interest shall be distributed no later than the
required beginning date, or shall be distributed, beginning no later
than the required beginning date, over (a) the life of the Employee or
the joint lives of the Employee and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the
Employee, or the joint life and last survivor expectancy of the
Employee and the designated beneficiary.
If the Employee's interest is to be distributed over a period greater
than one year, then the amount to be distributed by December 31 of each
year (including the year in which the required beginning date occurs)
shall be made in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH
6. If an Employee dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Employee's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Employee's death.
If the Employee dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Employee's death, except that
(a) if the interest is payable to an individual who is the
Employee's designated beneficiary, the designated beneficiary
may elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Employee died; or
(b) if the designated beneficiary is the Employee's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the Employee
died, and
(ii) December 31 of the calendar year in which the
Employee would have attained age 70-1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Employee.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Employee's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Employee's death. If no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Employee's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Contract, the distribution requirements of provisions
"(d)" and "(e)" are deleted. If, after the Employee's death, the
designated beneficiary dies before the Maturity Date, no Death Benefit
is payable.
LIFE EXPECTANCY CALCULATIONS
7. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
<PAGE> 8
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to Us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Employee, or (b) for purposes of
distributions beginning after the Employee's death, by the surviving
spouse. Such an election shall be irrevocable as to the Employee or the
surviving spouse, and shall apply to all subsequent years. Where life
expectancy is not recalculated, benefit payments may cease before the
death of the individual whose life expectancy is used to determine
benefit payments (since such individual may live longer than his or her
life expectancy, determined at the time benefit payments are
calculated).
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by Us, only Annuity Options 1 and 2
shall be available to an Employee. All Annuity Options must meet the
requirements of IRC Section 403(b)(10), including the requirement that
payments to persons other than Employees are incidental.
Annuity Option 1(b) is not available for an Employee whose life
expectancy is less than 10 years. Under Annuity Options 2(a) and 2(b),
the designated Co-Annuitant must be the Employee's spouse. Annuity
Option 2(b) is not available for an Employee and his or her spouse
where the life expectancy of the Employee and such spouse is less than
10 years.
WITHDRAWAL OF SALARY REDUCTION CONTRIBUTIONS
9. Withdrawals and other distributions attributable to contributions made
pursuant to a salary reduction agreement after December 31, 1988, and
the earnings on such contributions and on amounts held as of December
31, 1988, shall not be paid unless the Employee has reached age 59-1/2,
separated from service, died, become disabled or incurred a hardship as
determined by the organization described in Section 3 of this
Endorsement; provided, that amounts permitted to be distributed in the
event of hardship shall be limited to actual salary deferral
contributions (excluding earnings thereon); and provided further that
amounts may be distributed pursuant to a qualified domestic relations
order to the extent permitted by IRC Section 414(p). Within the meaning
of IRC Section 72(m)(7)), disibility means the inability to engage in
any substantial gainful activity by reason of any medically
determinable phsyical or mental impairment which can be expected to
result in death or to be of long-contintued and indefinite duration.
The permanence and degree of such impairment shall be supported by
medical evidence.
WITHDRAWAL OF CUSTODIAL ACCOUNT CONTRIBUTIONS
10. Payments made by a nontaxable transfer from a custodial account
qualifying under IRC Section 403(b)(7), and earnings of such amounts,
shall not be paid or made available before the Employee dies, attains
age 59-1/2, separates from service, becomes disabled (within the
meaning of IRC Section 72(m)(7)) or in the case of such amounts
attributable to contributions made under the custodial account pursuant
to a salary reduction agreement, encounters financial hardship;
provided, that such amounts permitted to be paid or made available in
the event of financial hardship shall be limited to amounts
attributable to actual salary deferral contributions made under the
custodial account (excluding earnings thereon); and provided further
that amounts may be distributed pursuant to a qualified domestic
relations order to the extent permitted by IRC Section 414(p). Within
the meaning of IRC Section 72(m)(7)), disibility means the inability to
engage in any substantial gainful activity by reason of any medically
determinable phsyical or mental impairment which can be expected to
result in death or to be of long-contintued and indefinite duration.
The permanence and degree of such impairment shall be supported by
medical evidence.
LOANS
11. While this Contract is in force, an Employee may borrow using his or
her interest in this Contract as the sole security for the loan. We
will usually make a loan within seven days after We receive the
request, subject to suspension of payment as set forth in part 10 of
the Contract.
<PAGE> 9
The maximum loan value is 80% of the Contract Value for an Employee. An
Employee may borrow an amount up to the lesser of:
a. the maximum loan value less any existing Debt, or
b. An amount which, when added to any existing Debt, does not
exceed the lesser of:
i. $50,000 (reduced by any excess of the highest
outstanding Debt during the one year period ending on
the day before the date on which the current loan is
made, over the outstanding Debt on the date the
current loan is made), or
ii. $10,000 or, if greater, one-half of the Contract
Value.
An Employee's investment in each Investment Account will be reduced by
the amount withdrawn from that Investment Account in connection with
the loan and such amount will be transferred to the Loan Account.
Unless requested otherwise, We will withdraw the amount of the loan
from each Investment Account in the same manner as partial withdrawals.
If We withdraw part of the loan from an Employee's fixed Investment
Account, a Market Value Charge may be applied. On each Contract
Anniversary, the excess of the Debt over the amount in the Loan Account
will be transferred from the Investment Accounts to the Loan Account.
Any amounts in the Loan Account will earn interest at 4% per annum.
Since the amount of a loan is removed from the Investment Accounts, a
loan will have a permanent effect on the Contract Value. The longer the
loan is outstanding, the greater the effect is likely to be.
The loan interest rate will be 6% per annum. Interest will be payable
in arrears on each Contract Anniversary. Any interest not paid when due
will be added to the Debt and bear Interest in the same manner.
An Employee may repay any Debt in whole or in part while the Contract
is in force. An amount equal to the amount of the loan repayment will
be transferred from the Loan Account to the Investment Accounts in the
same proportion as Purchase Payments are currently allocated, unless
the Employee requests otherwise. Loans must be repaid within 5 years,
except for loans to acquire a principal residence for the Employee.
Repayment must be in level amounts made at least quarterly.
If, on any date, the Debt exceeds the Contract Value, then the Contract
will be in default. In such case We will send the Employee a notice of
default and tell him what payment is needed to cure the default. The
Employee will have a 31-day grace period from the date of mailing of
such notice during which to pay the default amount. If the required
payment is not paid within the grace period, the Contract may be
foreclosed (terminate without value).
DIRECT ROLLOVERS
12. This Section 12 applies to distributions made on or after January 1,
1993. A distributee may elect, at the time and in the manner prescribed
by Us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (1) any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; (2) any distribution to the
extent such distribution is required under IRC Section 401(a)(9); and
(3) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an annuity described in IRC Section
403(b), an individual retirement account described in IRC Section
408(a), or an individual retirement annuity described in IRC Section
408(b), that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
<PAGE> 10
A distributee includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternative payee
under a qualified domestic relations order, as defined in IRC Section
414(p), are distributees with regard to the interest of the spouse or
former spouse.
A direct rollover is a payment by the plan administrator or Us to the
eligible retirement plan specified by the distributee.
IRC SECTION 72(S)
13. All references in the Contract to IRC Section 72(s) are deleted.
This endorsement may be amended by the Company as necessary to comply with any
changes in the Internal Revenue Code or other applicable law in order to
maintain the tax qualification of the Contract. Any such amendment would be
subject to the New York Insurance Department's prior approval.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
/S/ A. SCOTT LOGAN
President
<PAGE> 11
QUALIFIED PLAN ENDORSEMENT SECTION 401 PLANS
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner of the Contract must be either a trustee of a qualified
retirement plan under IRC Sections 401(a) or 403(a) or an employee
covered by such a plan. If the Owner is a trustee, the term
"Participant" as used in this Endorsement shall mean the individual
employee for whose benefit the employer has established the plan. If
the Owner is an employee, the term "Participant" shall mean the
employee.
In all cases, the Annuitant shall be the Participant and the Annuitant
cannot be changed. Prior to the Maturity Date, the Co-Annuitant can be
changed, but such change shall not require any distributions under the
Contract.
NONTRANSFERABLE
2. Ownership of this Contract may not be transferred except: (1) to the
Participant; (2) to a trustee or successor trustee of a retirement plan
qualified under IRC Sections 401(a) or 403(a); or (3) as otherwise
permitted by applicable regulations of the Internal Revenue Service.
If the Contract is transferred to the Participant, the Participant
becomes the Owner of the Contract and thereafter may not assign, sell,
transfer, or discount the Contract, or pledge it as collateral for a
loan or as security for the performance of an obligation or for any
other purpose, other than to Us.
REQUIRED BEGINNING DATE
3. The Participant's entire interest in the Contract shall be distributed
as required by IRC Section 401(a)(9), and the regulations thereunder,
including the minimum distribution incidental benefit requirement of
Prop. Treas. Reg. Section 1.401(a)(9)-2.
Except as otherwise provided by law, for years beginning after December
31, 1996, the term "required beginning date" means April 1 of the
calendar year following the later of (1) the calendar year in which the
Employee attains age 70-1/2, or (2) the calendar year in which the
Employee retires. However, to the extent required by law, the required
beginning date means April 1 of the calendar year following the
calendar year in which the Employee attains age 70-1/2 for an Employee
who:
(a) is a 5-percent owner (as defined in IRC Section 416) of the
organization described in Section 1 of this Endorsement with
respect to the plan year ending in the calendar year in which
the Employee attains age 70-1/2; and
(b) is not in a governmental plan or a church plan (as defined in
IRC Section 401(a)(9)(C)).
The requirements of Sections 3,4, and 6 of this Endorsement do not
apply with respect to a benefit to which a proper designation is in
effect under section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982.
DISTRIBUTIONS DURING PARTICIPANT'S LIFE
4. The Participant's entire interest shall be distributed no later than
the required beginning date, or shall be distributed, beginning no
later than the required beginning date over (a) the life of the
Participant or the joint lives of the Participant and an individual who
is his or her designated beneficiary (within the meaning of IRC Section
401(a)(9)), or (b) a period not extending beyond the life expectancy of
the Participant, or the joint life and last survivor expectancy of the
Participant and the designated beneficiary.
If the Participant's interest is to be distributed over a period
greater than one year, then the amount to be distributed by December 31
of each year (including the year in which the required beginning date
occurs) shall be determined in accordance with the requirements of IRC
Section 401(a)(9), including the incidental death benefit requirements
of
<PAGE> 12
IRC Section 401(a)(9)(G), and the regulations thereunder, including
the minimum distribution incidental benefit requirements of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
DEATH BENEFIT
5. If, in the event of the Participant's death prior to the Maturity Date,
the Death Benefit is not paid to the trustee of a retirement plan
qualified under IRC Sections 401(a) or 403(a), it shall be paid to (1)
the surviving spouse of the Participant in the form required by IRC
Section 417(c), unless the spouse elects otherwise in accordance with
the requirements of IRC Section 417 or regulations promulgated
thereunder, or (2) if there is no surviving spouse, or if the surviving
spouse has consented in the manner required by IRC Section 417, or if
regulations promulgated by the Treasury Department under IRC Section
417 otherwise permit, to the Beneficiary under the Contract.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, the first sentence of the paragraph "Death of Annuitant" is
deleted, and the second sentence is modified to read as follows: "If
any Owner is not an individual, the death of the Annuitant (but not of
the Co-Annuitant) is treated as the death of an Owner."
DISTRIBUTIONS AFTER PARTICIPANT'S DEATH
6. If the Participant dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the
Participant's interest (if any) shall be distributed at least as
rapidly as under the method of distribution in effect as of the
Participant's death.
If the Participant dies before the required beginning date and an
irrevocable annuity distribution has not begun, the entire interest
shall be distributed by December 31 of the calendar year containing the
fifth anniversary of the Participant's death, except that
(a) if the interest is payable to an individual who is the
Participant's designated beneficiary, the designated
beneficiary may elect to receive the entire interest over the
life of the designated beneficiary or over a period not
extending beyond the life expectancy of the designated
beneficiary, commencing on or before December 31 of the
calendar year immediately following the calendar year in which
the Participant died; or
(b) if the designated beneficiary is the Participant's
surviving spouse, the surviving spouse may elect to receive
the entire interest over the life of the surviving spouse or
over a period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the Participant
died, and
(ii) December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the
Participant.
An irrevocable election of the method of distribution
by a designated beneficiary who is the surviving
spouse must be made no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Participant's death or the date
distributions are required to begin pursuant to this
provision (b). If no election is made, the entire
interest will be distributed in accordance with the
method of distribution in this provision (b).
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Participant's death. If no
election is made, the entire interest will be distributed by
December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
In the "Death of Owner" section of the "Death Benefit Before Maturity
Date" part of the Contract, the distribution requirements of provisions
"(d)" and "(e)" are deleted. If, after the Participant's death, the
designated beneficiary dies before the Maturity Date, no Death Benefit
is payable.
<PAGE> 13
LIFE EXPECTANCY CALCULATIONS
7. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to Us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Participant, or (b) for purposes of
distributions beginning after the Participant's death, by the surviving
spouse. Such an election shall be irrevocable as to the Participant or
the surviving spouse, and shall apply to all subsequent years. Where
life expectancy is not recalculated, benefit payments may cease before
the death of the individual whose life expectancy is used to determine
benefit payments (since such individual may live longer than his or her
life expectancy, determined at the time benefit payments are
calculated).
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life in which expectancy was first
calculated.
ANNUITY OPTIONS
8. Except to the extent Treasury regulations allow us to offer different
Annuity Options that are agreed to by Us and are stated in the
employer's plan, only Annuity Options 1 and 2 shall be available to the
Participant. All Annuity Options must meet the requirements of IRC
Section 401(a)(9), including the requirement of IRC Section
401(a)(9)(G) that payments to persons other than Participants are
incidental.
Annuity Option 1(b) is not available for a Participant whose life
expectancy is less than 10 years. Under Annuity Option 2(a) and 2(b)
the designated Co-Annuitant must be the Participant's spouse. Annuity
Option 2(b) is not available for a Participant and his or her spouse
where the joint life expectancy of the Participant and such spouse is
less than 10 years.
Except as hereinafter provided, only Annuity Option 2(a) is available
to a married Participant. A married Participant may elect another
Annuity Option, provided his or her spouse consents in accordance with
the requirements of IRC Section 417 or provided such election is
otherwise permitted under Treasury Regulations. An unmarried
Participant will be deemed to have elected Annuity Option 1(a) unless
he or she makes a different election in the manner required under IRC
Section 417 (and applicable regulations).
ELECTIONS AND CONSENTS
9. Elections and consents made pursuant to this Contract may be revoked in
the form, time, and manner prescribed in IRC Section 417 (and
applicable regulations). All elections and consents required by this
Contract shall adhere to the requirements of the applicable regulations
interpreting IRC Section 417 (or any other applicable law), including
the requirements as to the timing of any elections or consents.
No amount may be paid from the Contract in a lump sum unless such
payment is allowed under both the retirement plan with regard to which
the Contract is purchased and the Internal Revenue Code and related
regulations. A Participant who is married must have the consent of his
or her spouse to withdraw all or part of the Contract Value.
MATURITY VALUE
10. If the Contract Value is greater than $3,500, as determined on the
first day of the month preceding the Maturity Date, in accordance with
the requirements of IRC Sections 411(a)(11) and 417 (and applicable
regulations), we will not exercise our right to pay the Contract Value
on the Maturity Date in one lump sum in lieu of annuity benefits.
DIRECT ROLLOVERS
<PAGE> 14
11. This Section 11 applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Contract to the contrary
that would otherwise limit a distributee's election under this Section
11, a distributee may elect, at the time and in the manner prescribed
by Us, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in
a direct rollover.
An eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under IRC Section 401(a)(9); and the
portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
An eligible retirement plan is an individual retirement account
described in IRC Section 408(a), an individual retirement annuity
described in IRC Section 408(b), an annuity plan described in IRC
Section 403(a), or a qualified trust described in IRC Section 401(a),
that accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement account
or individual retirement annuity.
<PAGE> 15
A distributee includes a Participant. In addition, the Participant's
surviving spouse and the Participants's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in IRC Section 414(p), are distributees with regard to the
interest of the spouse or former spouse.
A direct rollover is a payment by us to the eligible retirement plan
specified by the distributee.
IRC SECTION 72(S)
12. All references in the Contract to IRC Section 72(s) are deleted from
the Contract.
This endorsement may be amended by the Company as necessary to comply with any
changes in the Internal Revenue Code or other applicable law in order to
maintain the tax qualification of the Contract. Any such amendment would be
subject to the New York Insurance Department's prior approval.
Endorsed on the Date of issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
/S/ A/ SCOTT LOGAN
President
1
<PAGE> 16
SIMPLE INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
The Contract to which this Endorsement is attached is issued to fund a savings
incentive match plan for employees individual retirement annuity ("SIMPLE IRA")
under Sections 408(b) and 408(p) of the Internal Revenue Code ("IRC").
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be one individual and the Annuitant. Neither the Owner
nor the Annuitant can be changed.
NONFORFEITABLE
2. The Contract is established for the exclusive benefit of the Owner or
his or her Beneficiaries and the interest of the Owner is
nonforfeitable.
NONTRANSFERABLE
3. The Owner may not assign, sell, transfer, discount or pledge this
Contract as collateral for a loan or as security for the performance of
any obligation or for any other purpose (other than a transfer incident
to a divorce or separation instrument in accordance with IRC Section
408(d)(6)) to any person other than us.
CONTRIBUTIONS
4. No contributions may be made to this Contract other than (1) cash
contributions under a qualified salary reduction arrangement (within
the meaning of IRC Sections 408(p)(1) and (2)), including matching or
nonelective employer contributions; and (2) transfers or rollovers from
other SIMPLE retirement accounts (within the meaning of IRC Section
408(p)(1)) of the Owner.
In all events, the maximum annual Payments shall not exceed amounts
permitted by IRC Section 408(p)(2).
To the extent necessary to preserve qualification under the Internal
Revenue Code, We may refund Payments. Any refund of Payments (other
than those attributable to excess contributions) will be applied,
before the close of the calendar year following the refund, toward
future Payments or the purchase of additional benefits.
DISTRIBUTIONS DURING OWNER'S LIFE
5. The Owner's entire interest in the Contract shall be distributed as
required under IRC Section 408(b)(3) and applicable regulations. Unless
deferral is otherwise permitted under applicable regulations, the
Owner's entire interest shall be distributed no later than the
"required beginning date," or shall be distributed beginning no later
than the "required beginning date" over (a) the life of the Owner or
the joint lives of the Owner and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the Owner,
or joint life and last survivor expectancy of the Owner and the
designated beneficiary.
The "required beginning date" shall mean April 1 of the calendar year
following the calendar year in which the Owner attains age 70-1/2.
If the Owner's interest is to be distributed over a period greater than
one year, then the amount to be distributed by December 31 of each year
(including the year in which the required beginning date occurs) shall
be determined in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
2
<PAGE> 17
ANNUITY OPTIONS
6. Only Annuity Options 1 and 2 shall be offered unless We consent to the
use of an additional option. Annuity Option 1(b) is not available for
an Owner whose life expectancy is less than 10 years. Under Annuity
Options 2(a) and 2(b) the designated Co-Annuitant must be the Owner's
spouse. Annuity Option 2(b) is not available for an Owner and his or
her spouse where the life expectancy of the Owner and such spouse is
less than 10 years.
DISTRIBUTIONS AFTER OWNER'S DEATH
7. If an Owner dies on or after the required beginning date after
distribution of the Owner's interest has begun (or if distributions
have begun before the required beginning date as irrevocable annuity
payments), the remaining portion of such interest (if any) shall be
distributed at least as rapidly as under the method of distribution in
effect as of the Owner's death.
If the Owner dies before the required beginning date and an irrevocable
annuity distribution has not begun, the entire interest shall be
distributed by December 31 of the calendar year containing the fifth
anniversary of the Owner's death, except that
(a) if the interest is payable to an individual who is
the Owner's designated beneficiary, the designated
beneficiary may elect to receive the entire interest
over the life of the designated beneficiary or over a
period not extending beyond the life expectancy of
the designated beneficiary, commencing on or before
December 31 of the calendar year immediately
following the calendar year in which the Owner died;
or
(b) if the designated beneficiary is the Owner's
surviving spouse, the surviving spouse may elect to
receive the entire interest over the life of the
surviving spouse or over a period not extending
beyond the life expectancy of the surviving spouse,
commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the
Owner died, and
(ii) December 31 of the calendar year in which
the Owner would have attained age 70-1/2.
If the surviving spouse dies before distributions begin, the
limitations of this section shall be applied as if the surviving spouse
were the Owner.
An irrevocable election of the method of distribution by a designated
beneficiary who is the surviving spouse must be made no later than the
earlier of December 31 of the calendar year containing the fifth
anniversary of the Owner's death or the date distributions are required
to begin pursuant to this provision (b).
If the designated beneficiary is the Owner's surviving spouse, the
spouse may irrevocably elect to treat the Contract as his or her own
individual retirement arrangement (IRA). This election will be deemed
to have been made if such surviving spouse (i) fails to elect that his
or her interest will be distributed in accordance with one of the
preceding provisions, or (ii) makes a rollover from the Contract.
An irrevocable election of the method of distribution by a designated
beneficiary who is not the surviving spouse must be made within one
year of the Owner's death, and if no election is made, the entire
interest will be distributed by December 31 of the calendar year
containing the fifth anniversary of the Owner's death.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, (a) the provision entitled "Death of Annuitant" is deleted;
and (b) in the "Death of Owner" provision, the distribution
requirements of provisions "(d)" and "(e)" are deleted. If, after the
Owner's death, the designated beneficiary dies before the Maturity
Date, no Death Benefit is payable.
3
<PAGE> 18
LIFE EXPECTANCY CALCULATIONS
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Owner, or (b) for purposes of
distributions beginning after the Owner's death, by the surviving
spouse. Such an election shall be irrevocable as to the Owner or the
surviving spouse, and shall apply to all subsequent years.
4
<PAGE> 19
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
CANCELLATION FOR NONPAYMENT
9. We may cancel the Contract for nonpayment of Payments and pay you the
Contract Value (measured as of the Valuation Period during which the
cancellation occurs), less the Administration Fee (if applicable), if
(a) prior to the Maturity Date, no Payments are made for two
consecutive Contract Years; (b) the total Payments made, less any
partial withdrawals, are less than $2,000; (c) the Contract Value at
the end of such two-year period is less than $2,000; and (d) the
paid-up annuity benefit at the Maturity Date at the end of such
two-year period would be less than $20 per month.
IRC SECTION 72(S)
10. All references in the Contract to IRC Section 72(s) are deleted.
SUMMARY DESCRIPTION
11. We agree to provide the Owner's employer the summary description
described in IRC Section 408(I)(2) unless this SIMPLE IRA is a transfer
SIMPLE IRA.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
/S/ A. SCOTT LOGAN
President
<PAGE> 20
UNISEX BENEFITS AND PAYMENTS
ENDORSEMENTS
The Contract to which this Endorsement is attached is amended as follows:
1. The sex of the annuitant, Co-Annuitant or other payee shall have no affect on
the benefits or any payments under this Contract, Any reference to this
Contract to the sex of the Annuitant, Co-Annuitant or other payee is deleted by
this Endorsement.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
/S/ A. Scott LOGAN
President
<PAGE> 21
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
Notwithstanding any provision contained therein to the contrary, the Contract to
which this Endorsement is attached is amended as follows:
OWNER AND ANNUITANT
1. The Owner must be one individual and the Annuitant. Neither the Owner
nor the Annuitant can be changed.
NONFORFEITABLE
2. The Contract is established for the exclusive benefit of the Owner or
his or her Beneficiaries and the interest of the Owner is
nonforfeitable.
NONTRANSFERABLE
3. The Owner may not assign, sell, transfer, discount or pledge this
Contract as collateral for a loan or as security for the performance of
any obligation or for any other purpose (other than a transfer incident
to a divorce or separation instrument in accordance with IRC Section
408(d)(6)) to any person other than Us.
MAXIMUM PAYMENTS
4. The maximum annual Payments shall not exceed the lesser of $2,000 or
100% of compensation unless (a) such Payment qualifies as a rollover
contribution described in IRC Sections 408(d)(3), 402(c), 403(a)(4) or
403(b)(8); or (b) such Payment qualifies as a contribution made in
accordance with a Simplified Employee Pension Program as described in
IRC Section 408(k).
To the extent necessary to preserve qualification under the Internal
Revenue Code, We may refund Payments. Any refund of Payments (other
than those attributable to excess contributions) will be applied,
before the close of the calendar year following the refund, toward
future Payments or the purchase of additional benefits.
DISTRIBUTIONS DURING OWNER'S LIFE
5. The Owner's entire interest in the Contract shall be distributed as
required under IRC Section 408(b)(3) and applicable regulations. Unless
deferral is otherwise permitted under applicable regulations, the
Owner's entire interest shall be distributed no later than the
"required beginning date," or shall be distributed beginning no later
than the "required beginning date" over (a) the life of the Owner or
the joint lives of the Owner and an individual who is his or her
designated beneficiary (within the meaning of IRC Section 401(a)(9)),
or (b) a period not extending beyond the life expectancy of the Owner,
or joint life and last survivor expectancy of the Owner and the
designated beneficiary.
The "required beginning date" shall mean April 1 of the calendar year
following the calendar year in which the Owner attains age 70-1/2.
If the Owner's interest is to be distributed over a period greater than
one year, then the amount to be distributed by December 31 of each year
(including the year in which the required beginning date occurs) shall
be determined in accordance with the requirements of IRC Section
401(a)(9), including the incidental death benefit requirements of IRC
Section 401(a)(9)(G), and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Proposed
Treasury Regulation Section 1.401(a)(9)-2.
ANNUITY OPTIONS
6. Only Annuity Options 1 and 2 shall be offered unless We consent to the
use of an additional option. Annuity Option 1(b) is not available for
an Owner whose life expectancy is less than 10 years. Under Annuity
Options 2(a) and 2(b) the designated Co-Annuitant must be the Owner's
spouse. Annuity Option 2(b) is not available for an Owner and his or
her spouse where the life expectancy of the Owner and such spouse is
less than 10 years.
<PAGE> 22
DISTRIBUTIONS AFTER OWNER'S DEATH
7. If an Owner dies on or after the required beginning date (or if
distributions have begun before the required beginning date as
irrevocable annuity payments), the remaining portion of the Owner's
interest (if any) shall be distributed at least as rapidly as under the
method of distribution in effect as of the Owner's death.
If the Owner dies before the required beginning date and an irrevocable
annuity distribution has not begun, the entire interest shall be
distributed by December 31 of the calendar year containing the fifth
anniversary of the Owner's death, except that
(a) if the interest is payable to an individual who is the
Owner's designated beneficiary, the designated beneficiary may
elect to receive the entire interest over the life of the
designated beneficiary or over a period not extending beyond
the life expectancy of the designated beneficiary, commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Owner died; or
(b) if the designated beneficiary is the Owner's surviving
spouse, the surviving spouse may elect to receive the entire
interest over the life of the surviving spouse or over a
period not extending beyond the life expectancy of the
surviving spouse, commencing at any date prior to the later of
(i) December 31 of the calendar year immediately
following the calendar year in which the Owner died,
and
(ii) December 31 of the calendar year in which the
Owner would have attained age 70-1/2.
If the surviving spouse dies before distributions
begin, the limitations of this section shall be
applied as if the surviving spouse were the Owner. An
irrevocable election of the method of distribution by
a designated beneficiary who is the surviving spouse
must be made no later than the earlier of December 31
of the calendar year containing the fifth anniversary
of the Owner's death or the date distributions are
required to begin pursuant to this provision (b).
If the designated beneficiary is the Owner's
surviving spouse, the spouse may irrevocably elect to
treat the Contract as his or her own individual
retirement arrangement (IRA). This election will be
deemed to have been made if such surviving spouse (i)
fails to elect that his or her interest will be
distributed in accordance with one of the preceding
provisions, or (ii) makes a rollover from the
Contract.
An irrevocable election of the method of distribution by a
designated beneficiary who is not the surviving spouse must be
made within one year of the Owner's death, and if no election
is made, the entire interest will be distributed by December
31 of the calendar year containing the fifth anniversary of
the Owner's death.
In the "Death Benefit Before Maturity Date" section of part 4 of the
Contract, (a) the provision entitled "Death of Annuitant" is deleted;
and (b) in the "Death of Owner" provision, the distribution
requirements of provisions "(d)" and "(e)" are deleted. If, after the
Owner's death, the designated beneficiary dies before the Maturity
Date, no Death Benefit is payable.
LIFE EXPECTANCY CALCULATIONS
8. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
If benefits under the Contract are payable in accordance with an
Annuity Option provided under the Contract, life expectancy shall not
be recalculated. If benefits are payable under an alternate form
acceptable to Us, life expectancies shall not be recalculated unless
annual recalculations are elected at the time distributions are
required to begin (a) by the Owner, or (b) for purposes of
distributions beginning after the Owner's death, by the surviving
spouse. Such an election
<PAGE> 23
shall be irrevocable as to the Owner or the surviving spouse, and shall
apply to all subsequent years. Where life expectancy is not
recalculated, benefit payments may cease before the death of the
individual whose life expectancy is used to determine benefit payments
(since such individual may live longer than his or her life expectancy,
determined at the time benefit payments are calculated).
The life expectancy of a non-spouse designated beneficiary (a) may not
be recalculated, and (b) shall be calculated using the attained age of
such designated beneficiary during the calendar year in which
distributions are required to begin pursuant to this Endorsement.
Payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
CANCELLATION FOR NONPAYMENT
9. We may cancel the Contract for nonpayment of Payments and pay you the
Contract Value (measured as of the Valuation Period during which the
cancellation occurs), less the Administration Fee (if applicable), if
(a) prior to the Maturity Date, no Payments are made for three
consecutive Contract Years; (b) the total Payments made, less any
partial withdrawals, are less than $2,000; (c) the Contract Value at
the end of such three-year period is less than $2,000; and (d) the
paid-up annuity benefit at the Maturity Date at the end of such
three-year period would be less than $20 per month.
IRC SECTION 72(S)
10. All references in the Contract to IRC Section 72(s) are deleted.
This endorsement may be amended by the Company as necessary to comply with any
changes in the Internal Revenue Code or other applicable law in order to
maintain the tax qualification of the Contract. Any such amendment would be
subject to the New York Insurance Department's prior approval.
Endorsed on the Date of Issue of this Contract.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
/S/ A. SCOTT LOGAN
President
<PAGE> 1
Exhibit (b)(10)(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated February 18, 1998 with respect to the
financial statements of The Manufacturers Life Insurance Company of New York and
February 5, 1998 with respect to the financial statements of The Manufacturers
Life Insurance Company of New York Separate Account A, in Post Effective
Amendment No. 5 to this Registration Statement (Form N-4 File No. 33-79112) in
the Statement of Additional Information of The Manufacturers Life Insurance
Company of New York Separate Account A.
Ernst & Young LLP
Boston, Massachusetts
April 27, 1998
<PAGE> 1
Exhibit (b)(10)(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post Effective Amendment No. 5 to this
Registration Statement under the Securities Act of 1933 on Form N-4 (File No.
33-79112) of our report which includes an explanatory paragraph, regarding the
adoption of Financial Accounting Standards Board Interpretation No. 40 and
Statement of Financial Accounting Standards No. 120, dated January 22, 1998, on
our audit of the financial statements of The Manufacturers Life Insurance
Company of New York (formerly First North American Life Assurance Company). We
also consent to the reference to our firm under the caption "Independent
Auditors."
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 27, 1998
