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________________________________________________________________________________
PROSPECTUS
________________________________________________________________________________
DIRECTOR 2000
PROSPECTUSES FOR
VARIABLE LIFE INSURANCE
ISSUED BY
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
AND FOR
NASL SERIES TRUST
The Manufacturers Life
Insurance Company of America [ART WORK]
NOTE: The prospectus for Variable Life Insurance issued by The Manufacturers
Life Insurance Company of America and the prospectus for NASL Series Trust,
Inc. when used in conjunction with the Variable Life Insurance Prospectus is
intended for the information only of existing Variable Life Insurance
Policyowners and not for the solicitation of additional Policy purchases.
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PROSPECTUS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
SEPARATE ACCOUNT ONE
VARIABLE LIFE INSURANCE POLICY
This prospectus describes the variable life insurance policy (the "Policy")
issued by The Manufacturers Life Insurance Company of America ("Manufacturers
Life of America"), a stock life insurance company that is an indirect
wholly-owned subsidiary of The Manufacturers Life Insurance Company
("Manufacturers Life"). These Policies provide whole-life insurance protection.
That is, they provide lifetime insurance coverage, as long as premiums are
paid. They also provide a cash value for the Policyowner if the Policy is
terminated during the life insured's lifetime. A Policy's death benefit varies
with the investment performance of the sub-accounts of Manufacturers Life of
America's Separate Account One (the "Account") to which the Policyowner
allocates the net premiums. Whatever the investment performance, however, it
will not cause the death benefit to be less than the face amount specified in
the Policy. The cash value of a Policy varies daily. There is no guaranteed
minimum cash value.
A Policy's net premiums and earnings on those premiums will be held in one or
more of the sub-accounts of the Account. The assets of each sub-account will be
used to purchase shares of a particular portfolio ("Portfolio") of NASL Series
Trust. The accompanying prospectus for the NASL Series Trust describes the
investment objectives of the Trust in which net premiums may be invested: the
Emerging Growth Trust, the Balanced Trust, the Capital Growth Bond Trust, the
Money Market Trust, the Quantitative Equity Trust (formerly, the Common Stock
Fund), and the Real Estate Securities Trust (collectively, the "NASL Trusts").
Other sub-accounts and Portfolios may be added in the future.
This product is no longer being offered for sale.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR NASL SERIES TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Manufacturers Life Insurance
Company of America
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
Service Office:
200 Bloor Street East
Toronto, Ontario, Canada
M4W 1E5
Telephone: 1(800)827-4546
1(800) VARILIN(E)
(i)
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THE DATE OF THIS PROSPECTUS IS DECEMBER 31, 1996.
(ii)
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PROSPECTUS CONTENTS
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PAGE
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INTRODUCTION TO POLICIES .................................................... 1
What Is Variable Life Insurance? ............................................ 1
How are Premiums Invested? .................................................. 1
What Amounts Are Deducted From Premiums? .................................... 2
What Other Policy Charges Are Made? ......................................... 2
How Often Do The Death Benefit And Cash Value Change? ....................... 2
What Is The Minimum Face Amount For Which A Policy Will Be Issued? .......... 2
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, SEPARATE ACCOUNT
ONE AND NASL SERIES TRUST ................................................. 3
Who Are Manufacturers Life of America And Manufacturers Life? ............... 3
What Is Manufacturers Life of America's Separate Account One? ............... 3
What Is NASL Series Trust? .................................................. 4
What Are The Investment Objectives and Certain Policies Of The Portfolios? .. 4
DETAILED INFORMATION ABOUT THE POLICY AND MANUFACTURERS LIFE OF AMERICA ..... 6
What Are The Requirements For Issuance Of A Policy? ......................... 6
Is There A Short-Term Cancellation Right, Or "Free Look"? ................... 6
How Are Premiums Payable? ................................................... 6
How Do Premium Amounts Vary? ................................................ 6
What Happens If A Premium Is Not Paid When Due? ............................. 7
Is There Any Premium Adjustment On Death? ................................... 7
When Are Net Premiums Allocated? ............................................ 7
Are Transfers Between Sub-accounts Allowed? ................................. 8
How Will Charges And Expenses Be Deducted? .................................. 9
How Will A Policy's Death Benefit Vary? ..................................... 12
How Will A Policy's Cash Value Vary? ........................................ 14
How Does The Surrender Of A Policy For Its Net Cash Value Work? ............. 16
When Are Proceeds Paid? ..................................................... 16
What Are Some Illustrations Of Cash Values And Death Benefits? .............. 17
Under What Conditions Are Loans Available? .................................. 21
What Interest Is Charged On A Policy Loan? .................................. 21
How Are Loans And Loan Repayments Administered? ............................. 22
What Are The Exchange Privileges Of The Policy? ............................. 23
Who Sells The Policies And What Are The Sales Commissions? .................. 24
What Responsibilities Has Manufacturers Life Assumed? ....................... 24
What Is The Tax Treatment Of Policy Benefits? ............................... 25
What Are The Options On Lapse? .............................................. 26
What Are The Reinstatement Rules? ........................................... 27
What Are The Other General Policy Provisions? ............................... 27
What Are The Voting Rights? ................................................. 28
Who Are The Directors and Officers Of Manufacturers Life of America? ........ 29
Under What Circumstances May Fund Shares Be Substituted? .................... 31
What Reports Will Be Sent To Policyowners? .................................. 31
What State Regulations Apply? ............................................... 32
Is There Any Litigation Pending? ............................................ 32
</TABLE>
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<TABLE>
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PAGE
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Where Can Further Information Be Found? ..................................... 32
Legal Matters ............................................................... 32
Experts ..................................................................... 32
APPENDIX A .................................................................. 33
APPENDIX B .................................................................. 36
APPENDIX C .................................................................. 42
APPENDIX D .................................................................. 43
FINANCIAL STATEMENTS ........................................................ 46
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND THE PROSPECTUS OF NASL SERIES TRUST OR THE STATEMENT OF
ADDITIONAL INFORMATION OF NASL SERIES TRUST.
THE PURPOSE OF THE POLICIES IS TO PROVIDE INSURANCE PROTECTION FOR THE
BENEFICIARY NAMED IN A POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN ANY
WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
You are urged to examine this prospectus carefully. Except as otherwise stated,
the discussion assumes all premiums are paid when due and there is no
outstanding Policy loan.
The INTRODUCTION TO POLICIES will briefly describe the Variable Life Insurance
Policy. More detailed information will be found later in the prospectus.
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INTRODUCTION TO POLICIES
WHAT IS VARIABLE LIFE INSURANCE?
The variable life insurance offered by Manufacturers Life of America is, in
many respects, similar to traditional "fixed-benefit" whole life insurance. In
other respects, it is quite different.
- -- The main similarities are:
- -- The Policyowner pays a level premium for a Policy that provides a death
benefit which is payable to the beneficiary upon the life insured's death.
- -- A minimum death benefit, the face amount, is guaranteed.
- -- The Policy has a cash value that the Policyowner may borrow against by
taking a Policy loan or may obtain by surrendering the Policy.
The main differences are:
- -- The Policyowner may allocate the Policy's premiums, after certain deductions
have been made, among one or more of the investment sub-accounts of
Manufacturers Life of America's Separate Account One. Each sub-account invests
in the shares of a particular Portfolio of NASL Series Trust. These Portfolios
are the Emerging Growth Portfolio, the Balanced Portfolio, the Capital Growth
Bond Portfolio, the Money Market Portfolio, the Quantitative Equity Portfolio
(formerly, the Common Stock Portfolio), and the Real Estate Securities
Portfolio.
- -- The death benefit under a Policy can increase or decrease depending on the
investment performance of the Portfolios underlying the sub-accounts to which
the Policy's net premiums are allocated; but the death benefit will never
decrease below the initial face amount of the Policy if the premiums are paid
when due and there is no outstanding Policy loan.
- -- The Policy offers the opportunity for appreciation of its cash value based
upon investment results. The cash value may increase or decrease each Business
Day. The Policyowner bears the risk of decreases in the cash value, since no
minimum amount is guaranteed.
HOW ARE PREMIUMS INVESTED?
Net premiums are allocated to the Account and invested in shares of NASL Series
Trust. NASL Series Trust has several Portfolios. The Portfolios currently
offered are the Emerging Growth Trust, Quantitative Equity Trust (formerly, the
Common Stock Fund), Real Estate Securities Trust, Balanced Trust, Capital Growth
Bond Trust and Money Market Trust. There are six sub-accounts of the Account,
each of which invests in a particular Portfolio of NASL Series Trust. The
Policyowner chooses the sub-account(s) of the Account into which the net
premiums will be placed.
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WHAT AMOUNTS ARE DEDUCTED FROM PREMIUMS?
Manufacturers Life of America deducts certain charges from each premium payment
before placing any amount in the sub-account(s). These are for administrative
and sales expenses and state premium taxes, as well as for assuming certain
insurance risks, including the risk that the life insured will die when the
guaranteed face amount is more than would have been payable in the absence of
that guarantee. To compensate for sales expenses, there is deducted a sales
load of not more than 30% of the basic premium in the first Policy year, 10% of
the basic premium in the second through fourth years, and 7.5% thereafter. To
compensate for administrative expenses, there is a first year charge of not
more than $9 for each $1,000 of guaranteed face amount and an annual fee of
$30, provided premiums are payable on an annual basis. Also deducted are a
charge equal to 2% of each basic premium to pay state premium taxes and a
charge of not more than $1 per $1,000 of face amount, provided premiums are
payable on an annual basis, for the guarantee to pay not less than the face
amount of the Policy. In addition, a surcharge of not more than $7.30 per
$1,000 of face amount, provided premiums are payable on an annual basis, is
made for Policies issued to smokers, and an additional deduction of $1.50 per
$1,000 of face amount, provided premiums are payable on an annual basis, is
made for Policies issued with a face amount of less than $25,000. Finally,
additional premiums may be assessed for optional insurance benefits or extra
mortality risks. (See "How Will Charges and Expenses Be Deducted?").
WHAT OTHER POLICY CHARGES ARE MADE?
Manufacturers Life of America deducts from the assets of the Account a daily
charge equivalent to an annual rate of 0.10% of the average net value of the
Account's assets for mortality and expense risks. In addition, Manufacturers
Life of America deducts from assets in the Account relating to a Policy on each
premium due date for that Policy the cost of insurance attributable to the
period elapsed since the previous due date. When a Policy loan is made, a loan
administration fee not to exceed 0.20% per year is also deducted. Finally,
Manufacturers Life of America reserves the right to make a charge or other
provision for certain taxes. See "How Will Charges And Expenses Be Deducted?",
and "How Are Loans And Loan Repayments Administered?".
HOW OFTEN DO THE DEATH BENEFIT AND CASH VALUE CHANGE?
The death benefit is adjusted on each premium due date (but not below the face
amount) depending on the investment results of the Funds underlying the
sub-account(s) in which the Policy participates. It does not change simply
because a premium is paid. The cash value also changes at a rate that depends on
the investment results of the underlying Funds, but these changes take place on
each Business Day. For more detailed information about how the death benefit and
cash value change, see "How Will A Policy's Death Benefit Vary?" and "How Will A
Policy's Cash Value Vary?".
A Business Day is any day on which the New York Stock Exchange is open for
trading or any other day as of which the net asset value of a Fund is
determined. Currently, a Business Day ends at 4:00 P.M., Eastern Time. When a
Policy value or amount is to be determined after the end of a Business Day or
on a day which is not a Business Day, it will be determined on the next day
which is a Business Day. A Policy value or amount determined on a Business Day
will be determined as of the end of such day.
WHAT IS THE MINIMUM FACE AMOUNT FOR WHICH A POLICY WILL BE ISSUED?
Manufacturers Life of America will issue a Policy only if it has a face amount
of not less than $25,000, except for Policies purchased under group or
sponsored arrangements in which case the minimum face amount is $10,000.
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For a limited time, a Policy may be returned for a refund in accordance with
the terms of its "free look" provision. (See "Is There A Short-Term
Cancellation Right, Or "Free Look"?".)
Each Policyowner should retain a copy of the Policy. The Policy, together with
the attached application, constitutes the entire agreement between the
Policyowner and Manufacturers Life of America.
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, SEPARATE ACCOUNT ONE
AND THE SERIES FUND
WHO ARE MANUFACTURERS LIFE OF AMERICA AND MANUFACTURERS LIFE? Manufacturers Life
of America, a wholly-owned subsidiary of The Manufacturers Life Insurance
Company (U.S.A.) ("Manufacturers USA"), is a stock life insurance company
organized under the laws of Pennsylvania on April 11, 1977 and redomesticated
under the laws of Michigan on December 9, 1992. It is a licensed life insurance
company in the District of Columbia and all states of the United States except
New York. The Manufacturers Life Insurance Company (U.S.A.), a life insurance
company organized in 1955 under the laws of Maine and redomesticated under the
laws of Michigan on December 30, 1992, is a wholly-owned subsidiary of Manulife
Reinsurance Corporation (U.S.A.), a life insurance company organized in 1983
under the laws of Michigan which in turn is a wholly-owned subsidiary of
Manufacturers Life, a mutual life insurance company based in Toronto, Canada.
Manufacturers Life and its subsidiaries, together, constitute one of the largest
life insurance companies in North America and ranks among the 60 largest life
insurers in the world as measured by assets. Manufacturers Life and
Manufacturers Life of America have received the following ratings from
independent rating agencies: Standard and Poor's Insurance Rating Service -- AA+
(for claims paying ability), A.M. Best Company -- A++ (for financial strength),
Duff & Phelps Credit Rating Co. -- AAA (for claims paying ability), and Moody's
Investors Service, Inc. -- Aa3 (for financial strength). However, neither
Manufacturers Life of America nor Manufacturers Life guarantees the investment
performance of the Separate Account.
WHAT IS MANUFACTURERS LIFE OF AMERICA'S SEPARATE ACCOUNT ONE?
Manufacturers Life of America established its Separate Account One on May 25,
1983 as a separate account under Pennsylvania law. It is currently being
operated under Michigan Law. The Account holds assets that are segregated from
all of Manufacturers Life of America's other assets. The Account is currently
used only to support variable life insurance policies.
Manufacturers Life of America is the legal owner of the assets in the Account.
Manufacturers Life of America will at all times maintain assets in the Account
with a total market value at least equal to the reserves and other liabilities
relating to variable life insurance benefits under all the Policies
participating in the Account less the aggregate amount of Policy debts. These
assets may not be charged with liabilities which arise from any other business
Manufacturers Life of America conducts. However, all obligations under the
variable life insurance policies are general corporate obligations of
Manufacturers Life of America.
The Account is registered with the Securities and Exchange Commission
("S.E.C.") under the Investment Company Act of 1940 ("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, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the S.E.C.
of the management or investment policies or practices of the Account. For state
law purposes the Account is treated as a part or division of Manufacturers Life
of America.
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WHAT IS NASL SERIES TRUST?
Each sub-account of the Account will purchase shares only of a particular
Portfolio of NASL Series Trust. NASL Series Trust is registered under the
1940 Act as an open-end management investment company. The Account will
purchase and redeem shares of NASL Series Trust at net asset value. Shares will
be redeemed to the extent necessary for Manufacturers Life of America to
provide benefits under the Policies, to transfer assets from one sub-account to
another as requested by Policyowners, and for other purposes not inconsistent
with the Policies. Any dividend or capital gain distribution received from a
Portfolio will be reinvested immediately at net asset value in shares of that
Portfolio with respect to the Policies and retained as assets of the
corresponding sub-account. NASL Series Trust shares are issued to fund
benefits under both variable annuity contracts and variable life insurance
policies issued by Manufacturers Life of America or life insurance companies
affiliated with Manufacturers Life of America. Manufacturers Life of America
will also purchase shares through its general account for certain limited
purposes including initial Portfolio seed money. For a description of the
procedures for handling potential conflicts of interest arising from the
funding of such benefits, see the accompanying NASL Series Trust prospectus.
NASL Series Trust receives investment advisory services from NASL Financial
Services, Inc. NASL Financial Services, Inc. is a registered investment
adviser under the Investment Advisers Act of 1940. NASL Series Trust also
employs subadvisers. The following subadvisers provide investment subadvisory
services to the indicated portfolios:
<TABLE>
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FUND SUBADVISER
<S> <C>
Emerging Growth Trust Warburg, Pincus Counsellors, Inc.
Quantitative Equity Trust
(formerly, Common Stock Fund) Manufacturers Adviser Corporation*
Real Estate Securities Trust Manufacturers Adviser Corporation*
Balanced Trust Founders Asset Management, Inc.
Capital Growth Bond Trust Manufacturers Adviser Corporation*
Money Market Trust Manufacturers Adviser Corporation*
</TABLE>
WHAT ARE THE INVESTMENT OBJECTIVES AND CERTAIN POLICIES OF THE PORTFOLIOS?
The investment objectives and certain policies of the Portfolios currently
available to policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met.
Emerging Growth Trust. The investment objective of the Emerging Growth Trust is
maximum capital appreciation. Warburg, Pincus Counsellors, Inc. manages the
Emerging Growth Trust and will pursue this objective by
* Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
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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.
Quantitative Equity Trust (formerly, Common Stock Fund). The investment
objective of the Quantitative Equity Trust is 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. Manufacturers
Adviser Corporation manages the Quantitative Equity Trust.
Real Estate Securities Trust. The investment objective of the Real Estate
Securities Trust is to achieve a combination of long-term capital appreciation
and satisfactory current income by investing in real estate related equity and
debt securities. Manufacturers Adviser Corporation manages the Real Estate
Securities Trust.
Balanced Trust. The investment objective of the Balanced Trust is current
income and capital appreciation. Founders Asset Management, Inc. Is the
manager of the Balanced Trust and seeks to attain this objective by investing
in a balanced portfolio of common stocks, U.S. and foreign government
obligations and a variety of corporate fixed-income securities.
Capital Growth Bond Trust. The investment objective of the Capital Growth Bond
Trust is to achieve growth of capital by investing in medium-grade or better
debt securities, with income as a secondary consideration. Manufacturers
Adviser Corporation manages the Capital Growth Bond Trust. The Capital Growth
Bond Trust differs from most "bond" funds in that its primary objective is
capital appreciation, not income.
Money Market Trust. The investment objective of the Money Market Trust is to
obtain maximum current income consistent with preservation of principal and
liquidity. Manufacturers Adviser Corporation manages the Money Market Trust
and seeks to achieve this objective by investing in high quality, U.S. dollar
denominated money market instruments.
A full description of the NASL Series Trust, its investment objectives,
policies and restrictions, the risks associated therewith, its expenses, and
other aspects of its operation is contained in the accompanying NASL Series
Trust prospectus, which should be read together with this prospectus.
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DETAILED INFORMATION ABOUT THE POLICY AND MANUFACTURERS LIFE OF AMERICA
WHAT ARE THE REQUIREMENTS FOR ISSUANCE OF A POLICY?
Manufacturers Life of America will issue a Policy only if it has a face amount
of not less than $25,000, except for Policies purchased under group or
sponsored arrangements in which case the minimum face amount is $10,000. A
Policy may be issued on lives between the ages of 0 and 80. Before issuing any
Policy, Manufacturers Life of America will require evidence of insurability
satisfactory to it. Non-smokers who meet standard underwriting requirements are
offered a discount in computing the premium payable. A higher premium is
charged if an extra mortality risk is involved.
IS THERE A SHORT-TERM CANCELLATION RIGHT,
OR "FREE LOOK"?
A Policy may be returned for a full refund within 10 days after it is received,
within 45 days after the application for insurance is signed, or within 10 days
after Manufacturers Life of America mails or delivers a notice of right of
withdrawal, whichever is latest. The Policy can be mailed or delivered to the
Manufacturers Life of America agent who sold it or to the Manufacturers Life of
America Service Office. Immediately on such delivery or mailing, the Policy
shall be deemed void from the beginning. Within seven days after receipt of the
returned Policy at its Service Office, Manufacturers Life of America will
refund any premium paid.
HOW ARE PREMIUMS PAYABLE?
Premiums on the Policy are level, fixed, and payable in advance during the life
insured's lifetime on an annual, semiannual, quarterly or monthly basis. If
paid more often than annually, an extra fee will be charged. A Policyowner may
change the mode of payment originally selected, such change to be effective at
the next Policy Anniversary. A change in the mode of payment will change the
frequency of the determination of the death benefit.
HOW DO PREMIUM AMOUNTS VARY?
The premium amount depends on the Policy's face amount, the life insured's age
at issue, the frequency of premium payments, the life insured's risk
classification including whether he or she is a standard risk or a non-smoker,
whether the Policy is purchased under group or sponsored arrangement, and,
except in the case of Policies issued under an employer sponsored plan, the
life insured's sex. Additional premiums are charged if optional insurance
benefits are added by rider. Policyowners who pay premiums other than on a
monthly basis will have a notice that a premium is due mailed at least 15
calendar days prior to the due date.
The following table shows representative standard and non-smoker annual premium
amounts for various face amounts:
<TABLE>
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$25,000 FACE AMOUNT $100,000 FACE AMOUNT
----------------------------- ------------------------------
STANDARD NON-SMOKER STANDARD NON-SMOKER
-------- ---------- --------- ----------
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Male, age 25 at issue $298.75 $270.75 $1,009.00 $903.00
Male, age 35 at issue $438.50 $369.00 $1,568.00 $1,299.00
Male, age 40 at issue $546.75 $442.00 $1,986.00 $1,584.00
</TABLE>
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The following table compares annual and monthly premiums for life insureds who
are non-smokers:
<TABLE>
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$25,000 FACE AMOUNT $100,000 FACE AMOUNT
---------------------------------- --------------------------------
MONTHLY MONTHLY
(MANUMATIC*) ANNUAL (MANUMATIC) ANNUAL
------------ ------- ----------- ---------
<S> <C> <C> <C> <C>
Male, age 25 at issue $23.50 $270.75 $77.00 $903.00
Male, age 35 at issue $31.75 $369.00 $111.00 $1,299.00
Male, age 40 at issue $38.00 $442.00 $135.00 $1,584.00
</TABLE>
__________
* See definition under "How Will Charges And Expenses Be Deducted?"
WHAT HAPPENS IF A PREMIUM IS NOT PAID WHEN DUE?
There is a grace period of 31 days for each premium payment except the first
one. During the grace period, the Policy will continue in effect. A Policy will
lapse if a premium has not been paid by the end of the grace period by the
Policyowner or by the automatic premium loan option described on page 20. Upon
lapse, a notice will be sent to the Policyowner stating that the Policy has
lapsed and advising that the Policyowner will have several options provided the
Policy has a net cash value. These may include continuing the face amount of
insurance coverage, less any Policy debt, for a fixed period, continuing a
lesser amount of insurance for the lifetime of the life insured, or surrender
of the Policy for its net cash value. (See "What Are The Options On Lapse?".)
IS THERE ANY PREMIUM ADJUSTMENT ON DEATH?
If the life insured dies during the grace period before the premium is paid,
the portion of the unpaid premium that covers the period from the due date to
the end of the month in which death occurs will be deducted from the death
benefit. If the life insured dies while no premium is in default, Manufacturers
Life of America will increase the death benefit by the portion of the last
premium that covers the period subsequent to the end of the month in which
death occurs.
WHEN ARE NET PREMIUMS ALLOCATED?
Except in the case of a backdated Policy, the initial net premium -- that is,
the amount of the premium less the deductions described below under "How Will
Charges And Expenses Be Deducted?", page 10 -- will be allocated on the Policy
Date to one or more sub-accounts as directed by the Policyowner. The Policy
Date is the earlier of the date the Manufacturers Life of America Service
Office receives a completed application with the full first premium for the
Policy and the date Manufacturers Life of America's underwriters approve
issuance of the Policy. A backdated Policy is one for which the Policy Date is
deemed earlier than both the date the Service Office receives a completed
application with the full first premium and the date Manufacturers Life of
America's underwriters approve issuance of the Policy. For a backdated Policy,
the net premiums payable prior to the date Manufacturers Life of America's
underwriters approve issuance of the Policy, plus interest on such net premiums
at 4 1/2% per annum, minus accumulated cost of insurance deductions (See "How
Will Charges And Expenses Be Deducted?"), plus any net premium then due will be
allocated to the appropriate sub-account(s) on the date Manufacturers Life of
America's underwriters approve issuance of the Policy.
A Policy issued on the basis of a completed application without the full first
premium will be cancelled and any partial premiums paid will be returned to the
Policyowner if the full first premium is not received by the Service Office
within 31 days after the Issue Date. The Issue Date is the date 7 days after
Manufacturers Life of America's underwriters approve issuance of the Policy.
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Subsequent net premiums are allocated to the appropriate sub-account(s) when
due (not when received).
Between the date Manufacturers Life of America receives an initial premium for
the Policy, either a full first premium or a partial premium, and the date
insurance coverage commences under the Policy, the life insured may be covered
under the terms of a conditional insurance agreement.
The Policyowner may change the way in which premiums are allocated, beginning
on the next premium due date, by giving not less than seven days' written
notice to the Manufacturers Life of America Service Office. Within seven days
of receiving such notice, Manufacturers Life of America will send the
Policyowner a statement setting forth the revised allocation. There is no
charge for reallocating future net premiums among sub-accounts. Any percentage
allocation of a net premium to a particular sub-account must be at least 10%,
and all percentage allocations must be in whole numbers. For example, 33% can
be selected but 33 1/3% cannot. An allocation can be expressed as a
dollar-amount, provided the amount is applicable to one sub-account only.
Within seven days of each Policy Anniversary, a statement will be mailed to the
Policyowner showing the amount of the death benefit, the net cash value, and
any Policy debt (including interest charged for the preceding Policy year) as
of the Policy Anniversary. The statement will also show the amount of the cash
value derived from each sub-account. As a reminder to the Policyowner, the
statement will also show how future premiums will be allocated among
sub-accounts.
ARE TRANSFERS BETWEEN SUB-ACCOUNTS ALLOWED?
The Policyowner may, up to eight times in each Policy year, transfer amounts
from one sub-account to another without charge. Currently, the Company will
permit additional transfers subject to a charge of $25 which will be billed
separately. All or a portion of the amount credited to a sub-account may be
transferred.
Transfer requests must be satisfactory to Manufacturers Life of America and in
writing, or by telephone if a currently valid telephone transfer authorization
form is on file. Although failure to follow reasonable procedures may result in
Manufacturers Life of America's liability for any losses due to unauthorized or
fraudulent telephone transfers, Manufacturers Life of America will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. Manufacturers Life of America will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Such procedures shall consist of confirming a valid telephone authorization
form is on file, tape recording all telephone transactions and providing
written confirmation thereof.
Transfers will take effect on the Business Day on which a proper request is
received at the Manufacturers Life of America Service Office. The request may
be in terms of dollars, such as a request to transfer $10,000 from one
sub-account to another, or may be in terms of a percentage reallocation among
sub-accounts. In the latter case, as with premium reallocations, the
percentages must be in whole numbers. Within seven days of receipt of a proper
request by the Manufacturers Life of America Service Office, a statement will
be sent to the Policyowner showing the amount allocated to each sub-account
before and after the transfer.
8
<PAGE> 14
HOW WILL CHARGES AND EXPENSES BE DEDUCTED?
PREMIUM DEDUCTIONS
The portion of each premium which may be allocated among the sub-accounts is
equal to the premium payable, adjusted for the smokers surcharge or non-smokers
discount described below, less the charges Manufacturers Life of America
deducts from the premium for certain risks and expenses it incurs in connection
with the Policy.
ANNUAL ADMINISTRATION FEE. If premiums are paid annually, there is an annual
administration fee of $30 for administrative expenses incurred for, among other
things, billing, collecting premiums, processing claims, paying cash values,
making Policy changes, keeping records, and communicating with Policyowners. If
premiums are paid more frequently, the annual administration fee will be higher
to reflect the additional expense incurred in collecting and processing more
frequent premiums. The fee will be $36 if premiums are paid semiannually, $42
if premiums are paid quarterly, and $54 if premiums are paid monthly. If
monthly premiums are paid by pre-authorized check ("ManuMatic"), the fee is
$36. Unless otherwise agreed to by Manufacturers Life of America, monthly
premiums must be paid by ManuMatic. A separate application for the ManuMatic
pre-authorized check service is available from a Manufacturers Life of America
agent.
FIRST-YEAR ADMINISTRATION CHARGE. There is a onetime administration charge in
the first Policy year which will not be more than $9 for each $1,000 of the
guaranteed face amount. This charge is designed to cover the cost of processing
applications, conducting medical examinations, determining insurability and the
life insured's risk class, and establishing Policy records.
SALES LOAD. There is a charge designed to compensate Manufacturers Life of
America for the cost of selling the Policy. The cost includes agents'
commissions, advertising, agent training, and the printing of prospectuses and
sales literature. The charge is generally called the "sales load". It is not
more than 30% of the basic premium (defined below) in the first Policy year,
not more than 10% of the basic premium in the second through fourth years, and
not more than 7.5% thereafter. Also, the sales charge will not exceed 9% of the
sum of the basic premiums to be paid during the period equal to the lesser of
(i) 20 years or (ii) the anticipated life expectancy of the life insured based
on the 1958 Commissioners Standard Ordinary Mortality Table. Moreover, the
sales charge is never more in any year than in a prior year. The basic premium
is the gross annual premium for the Policy less the annual administration fee
and the additional charge applicable to Policies with a face amount of less
than $25,000 described below. It does not include the premium for any optional
insurance benefits that may be chosen or any additional premium amounts for
extra mortality risks. The amount of the sales load in a Policy year is not
specifically related to sales expenses for that year. Manufacturers Life of
America expects to recover its total sales expenses over the periods the
Policies are in force. To the extent that sales expenses are more than the
sales load in any year, Manufacturers Life of America will pay them from its
other assets or surplus which may include any profits derived from the
mortality and expense risks charge.
PREMIUM TAX CHARGE. There is a charge equal to 2% of each basic premium to pay
state premium taxes. These taxes differ from state to state. The 2% rate is
expected to be enough, on average, to pay taxes in all states.
MINIMUM DEATH BENEFIT CHARGE. There is a charge of not more than $1 per $1,000
of face amount, if premiums are payable annually, to compensate Manufacturers
Life of America for the risk that a life insured may die at a time when the
death benefit exceeds the benefit that would have been payable in the absence
of a face amount guarantee.
9
<PAGE> 15
SMOKERS SURCHARGE AND NON-SMOKERS DISCOUNT. For issue ages over 15, there is a
smokers surcharge of not more than $7.30 per $1,000 face amount and a non-
smokers discount of not more than $3.65 per $1,000 face amount, if premiums are
payable annually, reflecting the assumption made by Manufacturers Life of
America that smokers will suffer higher mortality than non-smokers.
WHERE PREMIUMS ARE PAYABLE MORE FREQUENTLY THAN ANNUALLY, THE ABOVE TWO CHARGES
AND THE FIRST-YEAR ADMINISTRATION CHARGE ARE PRORATED AGAINST PREMIUMS AND ARE
INCREASED USING AN ANNUAL INTEREST RATE OF 4 1/2% TO REFLECT THE FACT THAT THE
PREMIUMS ARE PAID THROUGHOUT THE YEAR RATHER THAN AT THE BEGINNING.
GROUP OR SPONSORED ARRANGEMENTS
Where permitted by state insurance laws, Policies may be purchased under group
or sponsored arrangements, as well as on an individual basis. A "group
arrangement" includes a program under which a trustee, employer or similar
entity purchases Policies covering a group of individuals on a group basis. A
"sponsored arrangement" includes a program under which an employer permits
group solicitation of its employees or an association permits group
solicitation of its members for the purchase of Policies on an individual
basis.
The sales load described above may be reduced for Policies issued in connection
with group or sponsored arrangements. Manufacturers Life of America will reduce
the sales load in accordance with its rules in effect as of the date an
application for a Policy is approved. To qualify for such a reduction, a group
or sponsored arrangement must satisfy certain criteria as to, for example, size
and number of years in existence. Generally, the sales contracts and effort,
administrative costs and mortality cost per Policy vary based on such factors
as the size of the group or sponsored arrangement, its stability as indicated
by its term of existence, the purposes for which Policies are purchased and
certain characteristics of its members. The amount of reduction and the
criteria for qualification will reflect the reduced sales effort and
administrative costs resulting from, and, for Policies having a face amount of
$25,000 or above, the different mortality experience expected as a result of,
sales to qualifying groups and sponsored arrangements.
Manufacturers Life of America may modify from time to time on a uniform basis,
both the amounts of reductions and the criteria for qualification. Reductions
in these charges will not be unfairly discriminatory against any person,
including the affected Policyowners and all other Policyowners funded by the
Account.
SMALL POLICY PREMIUM. In group or sponsored arrangements, Manufacturers Life
of America will issue Policies with a face amount of less than $25,000 but not
less than $10,000. Policies issued with a face amount of less than $25,000 will
be subject to an additional premium deduction equal to $1.50 per $1,000 face
amount if premiums are payable annually (increased using an annual interest
rate of 4 1/2% if premiums are payable more frequently than annually). This
additional deduction is designed to cover the anticipated higher mortality
rates for the smaller Policies where less stringent underwriting rules apply.
In 1983 the United States Supreme Court held that certain insurance policies,
the benefits under which vary based on sex, may not be offered pursuant to
certain employer-sponsored benefit plans and fringe benefit programs. In group
or sponsored arrangements where sex-based premiums and benefits may not be
used, Manufacturers Life of America will issue the Policies described herein
for male life insureds to all members of the group, male and female, with
appropriate changes made by endorsement where the life insured is female.
Manufacturers Life of America recommends that any employer proposing to offer
the Policies to employees under a group or sponsored arrangement consult his or
her attorney before doing so.
10
<PAGE> 16
ACCOUNT CHARGES
MORTALITY AND EXPENSE RISKS CHARGE. Apart from the deductions from gross
premiums just described, there is also a daily charge to the Account for the
mortality and expense risks that Manufacturers Life of America assumes. This
charge is made daily at an annual rate of 0.10% of the average net value of the
Account's assets. The mortality risk assumed is that life insureds may live for
a shorter period of time than Manufacturers Life of America estimated. The
expense risk assumed is that expenses incurred in issuing and administering the
Policies will be greater than Manufacturers Life of America estimated.
Manufacturers Life of America will realize a gain from this charge to the
extent it is not needed to provide benefits and pay expenses under the
Policies. Where Account assets have been reduced as a result of a Policy loan,
the mortality and expense risks charge will be assessed against the Policy loan
account in addition to a loan administration fee. (See "How Are Loans And Loan
Repayments Administered?", page 21.)
COST OF INSURANCE. On each premium due date, Manufacturers Life of America
deducts from the assets in the Account relating to the Policy the cost of
insurance attributable to the period elapsed since the previous premium due
date. Such charge is based upon the 1958 Commissioners Standard Ordinary
Mortality Table. If premiums are payable annually, the cost of insurance will
be equal to an amount determined by multiplying the mortality rate set forth in
the table based on the age of the life insured by the difference between the
Policy's variable death benefit and the Policy's cash value. Any determination
of the cash value of the Policy, regardless of when made, will also reflect the
cost of insurance for the current premium period. A Policyowner may request in
the application for the Policy that the cost of insurance be deducted, to the
extent possible, against the assets in a single sub-account relating to the
Policy, or alternatively, that assets in a single sub-account be immunized, to
the extent possible, from any deduction for the cost of insurance. If no such
request is made, the cost of insurance will be deducted from all sub-accounts
in which the Policy participates in proportion to the value of the assets
relating to the Policy held in each sub-account.
The deductions and charges described above will not be increased by
Manufacturers Life of America with respect to any Policy in effect regardless
of any changes in longevity or increases in expenses.
PROVISION FOR TAXES. Currently, Manufacturers Life of America makes no charge
against the Account for federal, state or local taxes that may be attributable
to the Account or to the operations of the Company with respect to the
Policies. However, if Manufacturers Life of America incurs any such taxes, it
may make a charge or establish a provision for those taxes.
NASL SERIES TRUST CHARGES. The Account purchases shares of NASL Series Trust
at net asset value. The net asset value of those shares reflects investment
management fees equivalent to an annual rate as set forth below and expenses
already deducted from the assets of NASL Series Trust. In addition detailed
information concerning such fees and expenses is set forth in the prospectus
for NASL Series Trust that accompanies this prospectus.
Investment management fees and expenses associated with the Portfolios of NASL
Series Trust are as follows:
(i) an investment management fee of 1.05% assessed against the assets of the
Emerging Growth Trust
(ii) an investment management fee of .70% assessed against the assets of
the Quantitative Equity Trust (formerly, the Common Stock Fund)*
11
<PAGE> 17
(iii) an investment management fee of .70% assessed against the assets of
the Real Estate Securities Trust*
(iv) an investment management fee of .80% assessed against the assets of
the Balanced Trust
(v) an investment management fee of .65% assessed against the assets of
the Capital Growth Bond Trust *
(vi) an investment management fee of .50% assessed against the assets of
the Money Market Trust
(vii) expenses of up to .50% assessed against the assets of all the Trusts *
* NASL Financial Services, Inc. has voluntarily agreed to waive fees
payable to it and/or to reimburse expenses for a period of one year
beginning the effective date of this prospectus to the extent necessary to
prevent the total of advisory fees and expenses for the Common Stock
Trust, Real Estate Securities Trust and Capital Growth Bond Trust for such
period from exceeding .50% of average net assets.
HOW WILL A POLICY'S DEATH BENEFIT VARY?
Although a Policy's death benefit can never be less than the Policy's face
amount (assuming no outstanding Policy debt or premium in default), it will
vary each premium due date by an amount that depends on the investment
performance of the sub-accounts in which the Policy participates and with the
net interest earned on Policy loans. The first "premium period" starts on the
"Policy Date". Each succeeding premium period starts on the premium due date
and ends on the day before the next premium due date.
To simplify the following discussion, it is assumed that there is no Policy
debt, that no premium is in default and that all of the net premiums under a
Policy have been allocated to a single sub-account. If the value of the assets
relating to the Policy held in the sub-account has increased due to investment
performance during the premium period at greater than a net annual effective
rate of 4 1/2%, the Policy's death benefit will increase on the premium due
date; if the value of these assets decreases, or increases at less than a net
annual effective rate of 4 1/2%, the death benefit will decrease (but not below
the face amount). The reason the assets of the sub-account relating to a Policy
must increase from one premium due date to the next at a net annual effective
rate of more than 4 1/2% in order for the death benefit to increase is that
Manufacturers Life of America, in determining the premiums for the Policy, has
assumed that the value of the assets will increase due to investment performance
at a net annual effective rate of 4 1/2%.
The exact amount by which the death benefit changes is determined by an
actuarial computation that is based, among other things, upon the age of the
life insured and the number of years the Policy has been in effect, as well as
by the investment results of the sub-account in which the Policy participates
and interest charged for any Policy loan.
12
<PAGE> 18
On each premium due date, Manufacturers Life of America determines the extent
to which the value of the assets relating to the Policy and the net interest
earned on any Policy loan differ from the amount which would have been earned
at the assumed annual rate of 4 1/2%. The difference, if positive, is applied
as a net single premium to buy "paid-up additions" at rates contained in the
Policy. If negative, the difference results in a reduction in the amount of
paid-up additions. Although a Policy may have negative paid-up additions, the
death benefit is never less than the face amount, assuming all premiums are
paid when due and there is no Policy loan. For an illustration of the manner in
which the death benefit is determined, see Appendix C.
A variation of a sub-account's net investment performance from the assumed
annual rate of 4 1/2% will tend to produce a larger change in the death benefit
for a younger life insured than for an older life insured. This is due to the
fact that the net single premium rates used to buy paid-up additions rise as
the life insured grows older. Because the assets relating to a Policy tend to
increase as net premiums are paid, the dollar change in the death benefit will
tend to be greater for a Policy that has been in effect for a long time than
for one that has been in effect for a short time, despite the fact that the
life insured is older. The following examples show what the amount of the
change in the death benefit would be under the facts assumed for purposes of
illustration. In these examples the changes are slightly greater for the Policy
issued on the older life insured because the premiums for a $100,000 Policy
issued at age 40 are greater than those for one issued at age 25, and the
dollar amount of the increase resulting from a 6.57% compounded net return upon
the assets in the Account relating to the Policy on the older life insured is
therefore larger. The changes in the death benefit are greater even though the
increase or decrease in the death benefit resulting from a $1.00 change in the
assets relating to the Policy is greater for a younger life insured.
EXAMPLE NO. 1. Non-smoker Policy with $100,000 face amount and annual premiums
in effect for 10 years, during which the value of the assets in the sub-account
increased due to investment performance at a uniform net annual rate of 6.57%.
<TABLE>
<CAPTION>
DEATH BENEFIT DEATH BENEFIT DOLLAR
INSURED END OF YEAR 9 END OF YEAR 10 CHANGE
- --------------------- ------------- -------------- ------
<S> <C> <C> <C>
Male, age 25 at issue $102,983 $103,703 $ 720
Male, age 40 at issue $103,532 $104,357 $ 825
</TABLE>
(Above figures derived from tables on pages 18 and 19.)
EXAMPLE NO. 2. Same assumptions as in Example No. 1 except that the value of
the assets increases by a uniform net annual rate of 1.64% in the 10th year.
<TABLE>
<CAPTION>
DEATH BENEFIT DEATH BENEFIT DOLLAR
INSURED END OF YEAR 9 END OF YEAR 10 CHANGE
- --------------------- ------------- -------------- ------
<S> <C> <C> <C>
Male, age 25 at issue $102,983 $101,988 -$ 995
Male, age 40 at issue $103,532 $102,391 -$1,141
</TABLE>
The following examples show how the same investment results affect the death
benefit more significantly for a younger life insured.
EXAMPLE NO. 3. Non-smoker Policy with a $1,500 annual premium, in effect for
10 years, during which the value of the assets in the sub-account increased due
to investment performance at a uniform net rate of 6.57% per year.
13
<PAGE> 19
<TABLE>
<CAPTION>
DEATH DEATH
BENEFIT BENEFIT
FACE END OF END OF DOLLAR
INSURED AMOUNT YEAR 9 YEAR 10 CHANGE
----------------------- -------- -------- -------- ------
<S> <C> <C> <C> <C>
Female, age 25 at issue $179,927 $185,295 $186,590 $1,295
Female, age 40 at issue $102,654 $106,280 $107,126 $ 846
</TABLE>
EXAMPLE NO. 4. Same assumptions as Example No. 3 except that the value of the
assets increases by a uniform net rate of 1.64% in the 10th year.
<TABLE>
<CAPTION>
DEATH DEATH
BENEFIT BENEFIT
FACE END OF END OF DOLLAR
INSURED AMOUNT YEAR 9 YEAR 10 CHANGE
----------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Female, age 25 at issue $179,927 $185,295 $183,503 -$1,792
Female, age 40 at issue $102,654 $106,280 $105,108 -$1,172
</TABLE>
If the assets in the sub-account in which the Policy participates have earned
less than a net annual effective rate of 4 1/2%, and the death benefit
accordingly equals the guaranteed face amount, Manufacturers Life of America
will keep a record of what the death benefit would have been had there not been
a guaranteed minimum (namely, a record of the negative paid-up additions). If
later investment results are favorable, that is if the value of the assets in
the sub-account later increases at a net annual effective rate greater than 4
1/2% a year, the death benefit will not become more than the guaranteed face
amount until the earlier unfavorable investment results have been offset (in
other words, until the negative paid-up additions are offset in full by
positive paid-up additions). For example, suppose in the case of the female age
25 set forth in Example No. 3 above the value of the assets in the sub-account
increases due to investment performance at a gross annual rate of 2% for the
first three years. The death benefit will nevertheless remain at the guaranteed
face amount. If the value of the assets increases at a gross annual rate of
8.9% (i.e., 8.25% net annual rate) in the fourth year, this would be sufficient
to offset the earlier unfavorable investment results and the death benefit
would increase to $179,935.
For further information, see the tables under the caption "How will A Policy's
Death Benefit Vary?". They show for various life insureds how a Policy's death
benefit and cash value will change if the gross investment return is 0%, 4%, or
8%. Comparable information based on gross investment returns of 0%, 6% and 12%
is contained in Appendix A. Certain additional illustrations for females are
set forth in Appendix B.
HOW WILL A POLICY'S CASH VALUE VARY?
A Policy has a net cash value which the Policyowner may get by surrender of the
Policy while the life insured is living. Unlike traditional fixed-benefit whole
life insurance, however, a Policy's cash value is not known in advance even if
it is assumed that premiums are paid when due, because it varies daily with the
investment performance of the sub-account(s) in which the Policy participates
and with the net interest earned on Policy loans.
A Policy's value upon surrender is its "net cash value", which is the cash
value less any outstanding Policy debt. (See "Under What Conditions Are Loans
Available?", page 20.) The following discussion of cash values assumes that
there is no Policy debt, that no premium is in default, and that the net
premiums have all been allocated to a single sub-account.
During the first Policy year, the cash value will be very small or zero because
of the charges made in connection with issuance of the Policy. The cash value
on each premium due date will be equal to the cash
14
<PAGE> 20
value on the preceding premium due date plus the net amount of the premium due
on such previous premium due date, increased or decreased by the change in the
value of the assets relating to the Policy, less the cost of insurance for the
period between the two dates. If a premium is not paid before the end of the
grace period and the Policy is surrendered before then, the cash value is
adjusted downward to take into account the failure to pay the premium on the
due date. For an illustration of the manner in which the cash value is
determined, see Appendix D.
An increase in the value of the assets in the Account at a specific net annual
rate will not result in an increase in Policy cash values at the same net
annual rate. Moreover, an increase over a premium period will not result in the
same end-of-period cash value for Policies having the same cash value at the
beginning of the premium period if the Policies are for life insureds of
different ages. This is because the cash value reflects the deduction of the
cost of insurance, which is different for life insureds of different ages.
The following examples show what the amount of the change in the cash value
will be under the stated assumptions.
EXAMPLE NO. 5. Non-smoker Policy with $100,000 face amount and annual premiums
in effect for 10 years, during which the value of the assets in the sub-account
increased at a uniform net annual rate of 6.57%.
<TABLE>
<CAPTION>
CASH CASH
VALUE VALUE
END OF END OF DOLLAR
INSURED YEAR 9 YEAR 10 CHANGE
--------------------- ------- ------- ------
<S> <C> <C> <C>
Male, age 25 at issue $7,131 $8,300 $1,169
Male, age 40 at issue $13,647 $15,707 $2,060
</TABLE>
(Above figures derived from tables on pages 18 and 19.)
EXAMPLE NO. 6. Same assumptions as in Example No. 5 except that the value of
the assets increases by a net annual rate of 1.64% in the 10th year.
<TABLE>
<CAPTION>
CASH CASH
VALUE VALUE
END OF END OF DOLLAR
INSURED YEAR 9 YEAR 10 CHANGE
--------------------- ------- ------- ------
<S> <C> <C> <C>
Male, age 25 at issue $7,131 $7,905 $774
Male, age 40 at issue $13,647 $14,949 $1,302
</TABLE>
The changes are greater for the older life insured because the premiums (and
hence the assets in the Account relating to the Policy on that life insured)
are greater and the same rate of increase therefore produces a greater dollar
amount change.
EXAMPLE NO. 7. Non-smoker Policy with a $1,500 annual premium, in effect for
10 years, during which time the value of the assets in the sub-account
increased at a uniform net annual rate of 6.57%.
<TABLE>
<CAPTION>
CASH CASH
VALUE VALUE
FACE END OF END OF DOLLAR
INSURED AMOUNT YEAR 9 YEAR 10 CHANGE
----------------------- -------- ------- ------- ------
<S> <C> <C> <C> <C>
Female, age 25 at issue $179,927 $12,831 $14,934 $2,103
Female, age 40 at issue $102,654 $14,010 $16,124 $2,114
</TABLE>
15
<PAGE> 21
EXAMPLE NO. 8. Same assumptions as in Example No. 7 except that the value of
the assets increases by a net annual rate of 1.64% in the 10th year.
<TABLE>
<CAPTION>
CASH CASH
VALUE VALUE
FACE END OF END OF DOLLAR
INSURED AMOUNT YEAR 9 YEAR 10 CHANGE
----------------------- -------- ------- ------- ------
<S> <C> <C> <C> <C>
Female, age 25 at issue $179,927 $12,831 $14,224 $1,393
Female, age 40 at issue $102,654 $14,010 $15,346 $1,336
</TABLE>
In Example No. 8, the change is smaller for the older life insured
notwithstanding the higher cash value at the end of year 9 because the cost of
insurance is higher for the older life insured. The last two examples might be
compared with examples 3 and 4 on page 14. Note that while the same premium
results in a larger death benefit for the younger life insured, the cash values
for the younger and older lives insured are quite similar. Note also that, in
this example, while the death benefit decreases if the investment return is at
a net annual rate of 1.39%, the cash value increases. The death benefit does
not increase because the death benefit provisions assume a 4 1/2% net annual
growth.
Because a part of each premium is used to provide life insurance protection,
the cash values cannot meaningfully be compared with the amounts that would
have been available had the gross premiums been invested without obtaining life
insurance protection.
HOW DOES THE SURRENDER OF A POLICY FOR ITS NET CASH VALUE WORK?
A Policy may be surrendered in whole or in part for its net cash value while the
life insured is living. Surrendering a Policy in part involves splitting the
Policy into two Policies. One is surrendered for its net cash value; the other
is continued in force. The Policy continued must have a face amount of at least
$25,000 (or $10,000 for group or sponsored arrangements), and its premium will
be based on the new face amount and the original issue age.
To surrender a Policy in whole or in part, the Policyowner must deliver or mail
it, together with a written request in a form acceptable to Manufacturers Life
of America, to the Manufacturers Life of America Service Office. The net cash
value of a surrendered Policy will be determined as of the Business Day such
notice and the Policy are received at the Service Office, and thereafter the
Policyowner will have no further rights under the Policy or portion thereof
surrendered. No portion of any charges or expenses previously deducted will be
refunded as a result of a surrender in whole or in part.
WHEN ARE PROCEEDS PAID?
As long as the Policy is in force, other than as extended term or reduced
paid-up insurance (see "What Are The Options On Lapse?", page 25),
Manufacturers Life of America will ordinarily pay any death benefit, net cash
value, or Policy loan proceeds within seven days after receipt at the
Manufacturers Life of America Service Office of all the documents required for
such a payment. However, except as noted below, Manufacturers Life of America
may delay payment of any net cash value, Policy loan proceeds or death benefit
in excess of the guaranteed face amount for any period during which the New
York Stock Exchange is closed for trading (except for normal holiday closings)
or when the S.E.C. has determined that a state of emergency exists which may
make such payment impractical.
If a Policy is in force as extended term or reduced paid-up insurance for a
fixed amount, Manufacturers Life of America expects to pay any cash value
promptly. However, it has the right to delay payment of the cash value of such
insurance for up to six months. Manufacturers Life of America will pay interest
if it delays such a payment for more than 30 days.
16
<PAGE> 22
WHAT ARE SOME ILLUSTRATIONS OF CASH VALUES AND DEATH BENEFITS?
The following tables have been prepared to help show how values under the
Policy change with investment performance. The tables illustrate how cash
values and death benefits of Policies with a given premium and face amount
issued on a life insured of a given age would vary over time if the return on
the assets held in the Funds was a uniform, gross, after-tax, annual rate of
0%, 4%, or 8%. The death benefits and cash values would be different from those
shown if the returns averaged 0%, 4%, or 8%, but fluctuated over and under
those averages throughout the years.
The amounts shown for the death benefit and cash value as of each Policy year
reflect the fact that the net investment return on the assets held in the
sub-accounts is lower than the gross, after-tax return. This is because the
daily investment management fees and expenses incurred by NASL Series Trust, as
well as the daily charge to the Account for assuming mortality and expense
risks, which is equivalent to an annual charge of 0.10%, are deducted from the
gross return. For purposes of illustration the deduction of the investment
management fee has been set at 1.23% per annum (guaranteed charges). Gross
annual rates of return of 0%, 4% and 8% correspond to approximate net annual
rates of return of -1.32%, 2.62% and 6.57%.
The tables reflect the fact that no charges for federal, state or local taxes
are currently made against the Account. If such a charge is made in the future,
it will take a higher gross rate of return to produce after-tax returns of 0%,
4% and 8% than it does now.
Upon request, Manufacturers Life of America will furnish a comparable
illustration based on the proposed life insured's age and sex and on the face
amount or premium amount requested. Such an illustration will assume that the
life insured is a standard (or, on request, a non-smoker) risk and that the
premium will be paid on an annual basis.
17
<PAGE> 23
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 25
$100,000 FACE AMOUNT
$903.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- ---- -------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 939 $100,000 $100,000 $100,019 $ 0 $ 0 $ 0
2 1,916 100,000 100,000 100,116 595 633 671
3 2,932 100,000 100,000 100,291 1,225 1,321 1,419
4 3,988 100,000 100,000 100,543 1,846 2,024 2,214
5 5,087 100,000 100,000 100,875 2,481 2,770 3,084
6 6,229 100,000 100,000 101,285 3,106 3,532 4,008
7 7,417 100,000 100,000 101,774 3,721 4,311 4,989
8 8,653 100,000 100,000 102,340 4,326 5,108 6,029
9 9,939 100,000 100,000 102,983 4,921 5,922 7,131
10 11,275 100,000 100,000 103,703 5,506 6,754 8,300
15 18,805 100,000 100,000 108,429 8,220 11,111 15,199
20 27,965 100,000 100,000 114,978 10,467 15,644 24,028
25 39,111 100,000 100,000 123,291 12,192 20,207 35,127
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$459.00 semiannually, $232.50 quarterly, $78.50 monthly, or $77.00 monthly
ManuMatic. The death benefits and cash values would be slightly different
for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
18
<PAGE> 24
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 40
$100,000 FACE AMOUNT
$1,584.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- ---- -------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,647 $100,000 $100,000 $100,032 $ 80 $ 97 $ 114
2 3,361 100,000 100,000 100,157 1,350 1,436 1,524
3 5,142 100,000 100,000 100,373 2,577 2,784 3,000
4 6,995 100,000 100,000 100,679 3,762 4,140 4,544
5 8,923 100,000 100,000 101,075 4,952 5,553 6,210
6 10,927 100,000 100,000 101,560 6,098 6,972 7,952
7 13,011 100,000 100,000 102,132 7,199 8,394 9,771
8 15,179 100,000 100,000 102,790 8,254 9,819 11,669
9 17,434 100,000 100,000 103,532 9,262 11,242 13,647
10 19,778 100,000 100,000 104,357 10,221 12,662 15,707
15 32,986 100,000 100,000 109,681 14,280 19,631 27,276
20 49,055 100,000 100,000 116,921 17,107 26,177 41,083
25 68,606 100,000 100,000 126,006 18,694 31,965 57,143
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$804.00 semiannually, $405.50 quarterly, $136.50 monthly, or $135.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
19
<PAGE> 25
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$100,000 FACE AMOUNT
$3,278.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- ---- -------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,409 $100,000 $100,000 $100,089 $ 668 $ 746 $ 825
2 6,955 100,000 100,000 100,280 2,807 3,054 3,306
3 10,642 100,000 100,000 100,571 4,831 5,331 5,858
4 14,477 100,000 100,000 100,959 6,738 7,574 8,478
5 18,465 100,000 100,000 101,445 8,623 9,877 11,267
6 22,613 100,000 100,000 102,028 10,391 12,139 14,129
7 26,926 100,000 100,000 102,705 12,042 14,358 17,064
8 31,412 100,000 100,000 103,475 13,578 16,529 20,071
9 36,078 100,000 100,000 104,334 14,999 18,647 23,147
10 40,930 100,000 100,000 105,283 16,304 20,708 26,289
15 68,263 100,000 100,000 111,303 21,080 29,931 42,819
20 101,517 100,000 100,000 119,326 23,254 37,147 60,511
25 141,976 100,000 100,000 129,261 23,719 42,719 79,760
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$1,660.00 semiannually, $835.50 quarterly, $280.50 monthly, or $279.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
________________________________________________________________________________
20
<PAGE> 26
UNDER WHAT CONDITIONS ARE LOANS AVAILABLE?
A Policyowner may borrow against the cash value of his or her Policy in an
amount not to exceed the "loan value" of the Policy reduced by any premium due
and any existing Policy debt. The loan value is 90% of the cash value, except
that if the Policy has been changed to extended term insurance, see "What Are
The Options On Lapse?", it has no loan value.
Manufacturers Life of America can postpone making the loan, unless it is used
to pay a premium, for any period during which the New York Stock Exchange is
closed for trading (except for normal holiday closings) or when the Securities
and Exchange Commission has determined that a state of emergency exists which
may make such payment impractical.
Manufacturers Life of America will automatically grant a loan to pay all or
part of an unpaid premium if:
(a) the premium is still unpaid at the end of the grace period;
(b) this loan option was requested in the application, or Manufacturers Life of
America receives the Policyowner's signed request for it before the end of the
grace period; and
(c) the cash value exceeds the Policy debt.
Manufacturers Life of America will loan the whole premium if at the end of the
premium period the Policy debt will not exceed the cash value. If loaning the
whole premium would make the Policy debt at the end of the premium period
greater than the cash value, Manufacturers Life of America will loan only a
part of the premium. The amount Manufacturers Life of America loans will keep
the Policy in force from the due date of the premium until the Policy debt
equals the cash value. Then, if the balance of the premium is still unpaid, the
Policy will terminate.
WHAT INTEREST IS CHARGED ON A POLICY LOAN?
A Policy will be issued with a loan provision providing for loan interest at
either a fixed rate or, if permitted in the state in which the Policy is
issued, a variable rate as selected in the application. Not all states have
laws permitting variable policy loan interest rates. Some states permit
variable rates but set maximums, and there are other variations from state to
state. For details about the policy loan interest rate laws in your state,
contact your registered representative or the Manufacturers Life of America
Service Office. Where permitted, either the fixed rate provisions or variable
rate provisions as follows will apply.
FIXED RATE PROVISIONS. Interest on all loans, including automatic premium
loans, under Policies containing the fixed rate provision will be at an annual
rate of 8%. At the end of each premium period any unpaid interest will be added
to the Policy debt to bear interest at the same rate.
VARIABLE RATE PROVISIONS. Interest on all loans under Policies containing the
variable rate provision will be determined by Manufacturers Life of America
when a Policy loan is made and the rate so determined will be effective until
the next Policy Anniversary at which time it will be recalculated. A Policy
Anniversary is the anniversary of the "Policy Date" set forth in the Policy.
The variable rate will not exceed the greater of 5.5% per year or the Moody's
Corporate Bond Yield Average--Monthly Average Corporates for the calendar month
ending two months before the date Manufacturers Life of America determines the
policy loan interest rate. On each Policy Anniversary, the annual rate of
interest may be adjusted up or down depending on changes in the Moody's
Average, but no downward adjustment is required unless such Average for the
month ending two months before the date of determination is at least one-half
of one percent less than the rate in effect for the year then ending. At the
end of each premium period any unpaid interest will be added to the Policy debt
to bear interest at the same rate.
21
<PAGE> 27
HOW ARE LOANS AND LOAN REPAYMENTS ADMINISTERED?
When a loan is made, Manufacturers Life of America will deduct the amount of
the loan from the sub-accounts designated by the Policyowner or, in the absence
of such designation, from all sub-accounts in proportion to the allocation to
such sub-accounts of the assets in the Account relating to the Policy.
Manufacturers Life of America will also establish a loan account under the
Policy to reflect Policy indebtedness, interest accrued thereon, and certain
charges. Any net interest (accrued interest less a loan administration fee not
to exceed .20% per year and the mortality and expense risks charge of.10%) in
excess of the assumed rate of 4 1/2% will be combined with the aggregate net
investment performance of the sub-accounts in excess of the 4 1/2% rate, and
the resulting amount on each premium due date will be used to buy paid-up
additions and, after a deduction to reflect the cost of insurance, will be
added to the cash value of the Policy. For an illustration of the manner in
which the cash value varies in relation to net interest on the loan account,
see Appendix D.
When a loan repayment is made, Manufacturers Life of America will deduct an
equal amount from the loan account balance and credit the sub-account or sub-
accounts specified by the Policyowner. If no particular sub-accounts are
specified, Manufacturers Life of America will allocate the repayment in
proportion to the allocation to such sub-accounts of the assets in the Account
relating to the Policy.
If, as a result of poor investment performance of the sub-accounts to which the
net premiums of a Policy are allocated, the compounding effect of interest
charges, or any other reason, the Policy debt should equal or exceed the cash
value of the Policy, the Policy will then terminate. However, at least 31 days
prior to the termination, Manufacturers Life of America will mail a notice to
the Policyowner at his or her last known address and to any assignee of the
Policy known to Manufacturers Life of America of its intent to cancel the
Policy if the excess indebtedness is not repaid.
A loan, whether repaid or not, will have a permanent effect on the cash value
and amount of any paid-up additions, but will have no effect on the amount of
premiums.
22
<PAGE> 28
WHAT ARE THE EXCHANGE PRIVILEGES OF THE POLICY?
THREE YEAR CONVERSION RIGHT. The Policy may be exchanged for a fixed benefit
insurance policy on the life of the life insured within 36 months after the
date of issue. No evidence of insurability will be required. However, in order
to exchange, all premiums due on the Policy must have been paid, and any Policy
debt must have been repaid in full. The date of exchange will be the date the
Policy is received by Manufacturers Life of America at its Service Office
together with a signed request for such an exchange. The exchange will be
subject to an equitable adjustment to reflect variances, if any, in the
premiums and cash values under the Policy and the new policy. The Policyowner
will receive the benefit of any amount due the Policyowner as a result of the
adjustment. If the adjustment results in an amount due Manufacturers Life of
America, Manufacturers Life of America must have received by the exchange date
the first premium on the new policy and an amount equal to the greater of (i)
the difference between the premiums which would have been paid on the new
policy and those actually paid on the Policy, plus interest on the difference
at 8% per year, and (ii) the difference between the cash values of the new
policy and the Policy.
The new policy will be a whole life policy offered by The Manufacturers Life
Insurance Company at the time the exchange is requested. The new policy will
have a face amount equal to the initial face amount of the Policy. It will have
the same policy date as the Policy, and premiums for the new policy will be
based on Manufacturers Life's rates in effect on the policy date for this same
class of risk as under the Policy. Any riders in the Policy will be included in
the new policy only if Manufacturers Life was offering them with the new policy
as of its date of issue.
CONVERSION RIGHT UPON MATERIAL CHANGE IN INVESTMENT OBJECTIVE. The Policy may
also be exchanged for a fixed benefit whole life insurance policy issued by
Manufacturers Life of America on the life of the life insured within six months
after the Policyowner receives notice of a material change in the investment
objective of the Account or within six months of the effective date of the
change, whichever is later. The Michigan Insurance Commissioner determines
whether a change in investment objective is material. No evidence of
insurability will be required.
If the Policy is in force on a premium paying basis when exchanged (i.e., if
there has been no lapse), the new policy will be issued, at the election of the
Policyowner, either:
(a) as of the original issue age of the life insured based on Manufacturers
Life of America's premium rates for fixed benefit insurance policies at the
original issue age, for a face amount not exceeding the death benefit of the
Policy on the date of exchange; or
(b) as of the attained age of the life insured for a face amount not exceeding
the excess of the death benefit of the Policy on the date of exchange over:
(i) its net cash value on the date of exchange if the Policyowner elects to
surrender the Policy for its net cash value; or
(ii) the death benefit payable under the paid-up insurance option if the
Policyowner elects such option under the Policy.
If the Policy is in force as paid-up insurance as a result of a Policy lapse,
the exchange will be a paid-up fixed benefit insurance policy for a face amount
not exceeding the death benefit of the Policy on the date of exchange.
A premium or net cash value adjustment will be made for exchanges under (a) or
(b) taking appropriate account of the premiums or net cash values under the
Policy and the new policy. Upon written request
23
<PAGE> 29
received at Manufacturers Life of America's Service Office a detailed statement
of the method of computing this adjustment will be provided. This statement is
also on file with the Pennsylvania Insurance Commissioner.
WHO SELLS THE POLICIES AND WHAT ARE THE SALES COMMISSIONS?
ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life,
will act as the principal underwriter of the Policies pursuant to an
Underwriting Agreement with Manufacturers Life of America. ManEquity, Inc. is
registered as a broker-dealer under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers. The Policies will
be sold by registered representatives of either ManEquity, Inc. or other
broker-dealers having distribution agreements with ManEquity, Inc. who are also
authorized by state insurance departments to do so. A registered representative
will receive commissions not to exceed the percentage of premiums and dollar
limits for each Policy year set forth in the following schedule:
<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM $ PER
PERCENTAGE OF $1,000
POLICY YEAR PREMIUMS PAID FACE AMOUNT
- ----------- ------------- -----------
<S> <C> <C>
1 55% $50.00
2 5% $15.00
3-10 5% $7.50
11 and later 2% $7.50
</TABLE>
Additional commissions are paid with respect to benefits provided by rider.
Representatives who meet certain productivity and persistency standards with
regard to the sale of the Policies will be eligible for additional
compensation.
WHAT RESPONSIBILITIES HAS MANUFACTURERS LIFE ASSUMED?
Manufacturers Life and Manufacturers USA have entered into an agreement with
ManEquity, Inc. pursuant to which Manufacturers Life and Manufacturers USA, on
behalf of ManEquity, Inc., will pay the sales commissions in respect of the
Policies, prepare and maintain all books and records required to be prepared and
maintained by ManEquity, Inc. with respect to the Policies, and send all
confirmations required to be sent by ManEquity, Inc. with respect to the
Policies. ManEquity, Inc. will promptly reimburse Manufacturers Life and
Manufacturers USA for all sales commissions paid by Manufacturers Life and
Manufacturers USA and will pay Manufacturers Life and Manufacturers USA for its
other services under the agreement in such amounts and at such times as agreed
to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and recordkeeping functions on behalf of
Manufacturers Life of America with respect to all of its insurance policies
including the Policies.
Finally, Manufacturers USA has entered into an Automatic Reinsurance Agreement
with Manufacturers Life of America pursuant to which Manufacturers USA will
automatically reinsure any risk under a Policy where the net amount at risk
under any such Policy is in excess of $25,000 up to a maximum of $15,000,000.
Under the reinsurance agreement, Manufacturers Life may also consider reinsuring
any risk in excess of $15,000,000. Except for its obligations to Manufacturers
Life of America under the reinsurance agreement, Manufacturers USA has no
financial obligation for any Policy benefits.
24
<PAGE> 30
WHAT IS THE TAX TREATMENT OF POLICY BENEFITS?
The Policy should receive the same federal income tax treatment as fixed
benefit life insurance. Section 7702 of the Internal Revenue Code of 1986 (the
"Code") provides that if certain tests are met, life insurance policies such as
this Policy will be treated as life insurance for tax purposes. This means that
(1) the death benefit should be excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and (2) the Policyowner should
not be taxed on any part of the Account's assets attributable to the Policy,
including additions attributable to interest, dividends or appreciation, until
actual surrender of the Policy.
In certain circumstances, distributions from the Policy prior to payment of the
death benefit under the Policy will be subject to adverse tax consequences.
Section 7702A of the Code provides that any life insurance policy failing to
satisfy a "7-pay" test will become a modified endowment contract. Under this
test, the cumulative premiums paid under a life insurance policy at any time
during the first seven policy years may not exceed the sum of the net level
premiums that would have been paid had the policy provided for paid-up future
benefits after the payment of seven level annual premiums. A "material change"
in the benefits under the Policy may subject the Policy to a re-test under the
"7-pay" test. A "material change" is defined to include any increase in the
death benefit under the Policy or any increase in, or addition of, a qualified
additional benefit under the Policy, excluding (1) any increase which is
attributable to the payment of premiums necessary to fund the lowest level of
the death benefit and qualified additional benefits during the first seven
Policy years and (2) certain cost-of-living increases based on an established
broad-based index.
Most withdrawals under a life insurance policy that becomes a modified
endowment contract will be taxed on an "income first" basis. Amounts received
by the owner of such a policy either directly or indirectly (including loans,
certain dividends, surrenders, partial withdrawals, or the pledge or assignment
of any portion of such a policy's value) will be includible in the owner's
gross income to a certain extent. In the case of a Policy offered by this
Prospectus becoming a modified endowment contract, amounts received will be
includible in a Policyowner's gross income to the extent that the Policy Value
exceeds gross premiums paid. Also, an additional 10% tax penalty will be
imposed on withdrawals includible in gross income, except in certain
circumstances. This penalty will not apply to withdrawals that are: (a)
received after the Policyowner has reached age 59 1/2; (b) attributable to the
Policyowner's becoming disabled; or (c) one of a series of substantially equal
periodic payments made at least annually for the life of the policyowner or
over the joint lives of the Policyowner and a designated beneficiary.
For purposes of determining the portion of an amount received upon a withdrawal
under the Policy that is includible in the Policyowner's gross income, all
modified endowment policies issued by the Company to the same Policyowner
during a calendar year will be aggregated with the Policy and treated as a
single policy.
In general, life insurance policies purchased before June 21, 1988 remain
subject to the provisions regarding withdrawals, such as loans and surrenders,
set forth in the next two paragraphs of this prospectus. However, in certain
circumstances, a Policy issued before June 21, 1988 may also become subject to
the "material change" rules and thus to the "7-pay" test. These circumstances
include the following:
(a) where on or after June 21, 1988, the death benefit under a policy is
increased and before June 21, 1988 the policyowner did not have a unilateral
right under a policy to obtain such an increase without providing additional
evidence of insurability; and
(b) where the death benefit under a policy increases by more than $150,000 over
the death benefit under a policy in effect on October 20, 1988. If a life
insurance policy, as of June 21, 1988, required at least 7 level annual
premiums and the owner of the policy makes at least seven level annual
payments, this provision
25
<PAGE> 31
will not apply.
Loans received under a Policy that is not a modified endowment contract should
be treated as indebtedness of the owner, and no part of any loan under the
Policy should be income to the Policyowner when received under current tax law.
However, interest charged on policy loans, whether paid by the policyowner or
added to the amount of the loan, may not be tax deductible.
A surrender of a Policy that is not a modified endowment contract may have
other tax consequences. Upon any such surrender under current tax law, the
Policyowner will not be taxed on the cash value except for the amount, if any,
that exceeds the cost basis of the Policy, i.e., the gross premiums paid less
non-taxable withdrawals in previous years. A partial withdrawal will be treated
as a partial surrender subject to the cost recovery rules discussed above. Any
unpaid policy loan will be treated upon surrender as forgiveness of the loan
for tax purposes and thus taken into account in determining the extent, if any,
to which the Policyowner has received amounts in excess of his or her
investment that must be reported as taxable income.
Policyowners should consult with their tax advisers before making a policy loan
or surrendering.
In connection with the issuance of regulations relating to diversification
requirements for separate accounts or funds underlying variable life and
annuity policies, the Treasury Department has announced that such regulations
do not provide guidance concerning the extent to which Policyowners may direct
their investments to particular sub-accounts of the Account. Regulations in
this regard are expected in the future. It is not clear what these regulations
will provide or whether they will be prospective only. It is possible that when
regulations are issued, the Policy may need to be modified to comply with such
regulations.
The individual situation of each Policyowner or beneficiary will determine the
federal estate taxes and the state and local estate, inheritance and other
taxes due if the owner or life insured dies.
WHAT ARE THE OPTIONS ON LAPSE?
If a premium is not paid within the grace period of 31 days after the date it
was due and the Policy has a net cash value, a "guaranteed option" can be
chosen instead of resuming premium payments. The guaranteed options are (a),
(b), (c) and (d) below. If the Policy is in a special premium class, as
indicated in the Policy, option (a) is not available.
If a guaranteed option is not chosen before the end of the grace period and the
automatic premium loan option has not been requested, Manufacturers Life of
America will apply option (a) or, if (a) is not available, option (b). In
either case the Policyowner can choose instead any other available guaranteed
option; Manufacturers Life of America must receive a signed request for this
change no later than 60 days after the due date of the unpaid premium.
(a) Extended Term Insurance. The Policy can be continued as term insurance
for a fixed amount. That amount will be the face amount less any Policy
debt.
The term insurance will begin on the due date of the unpaid premium.
Manufacturers Life of America will use the cash value of the Policy on the
due date, less any Policy debt, as a net single premium on the due date to
compute the period of coverage. After that period no insurance will be in
force. Extended term insurance has a cash value but no loan value.
(b) Paid-up Whole Life Insurance (Fixed Amount). The Policy can be continued
as paid-up whole life insurance for a fixed amount, if it has a cash value
sufficient to provide at least $300 of such
26
<PAGE> 32
insurance. Manufacturers Life of America will use the cash value of the
Policy on the due date, less any Policy debt, as a net single premium on
the due date to compute the amount of insurance. Paid-up whole life
insurance, whether for a fixed or variable amount, has a cash value and a
loan value.
(c) Paid-up Whole Life Insurance (Variable Amount). The Policy can be
continued as paid-up whole life insurance for an amount which can vary, if
it has a cash value sufficient to provide an initial amount of at least
$300 of such insurance. The initial amount will be calculated as in (b).
The assets relating to the Policy will remain in the Account. The amount
of insurance may then change on any subsequent Policy Anniversary,
depending on the investment performance of the Funds. There is no
guaranteed minimum death benefit.
(d) Surrender For Cash. The Policy can be surrendered for its net cash
value. If Manufacturers Life of America receives a request for surrender
within 60 days after the due date of the unpaid premium, the net cash
value will be the cash value on the due date increased or decreased by the
change in the value of the assets relating to the Policy since the due
date, less the Policy debt, if any. If the request is received after 60
days, the net cash value is the cash value of any extended term insurance
or paid-up insurance then in force less any Policy debt.
WHAT ARE THE REINSTATEMENT RULES?
If the policy terminates or is changed to extended term or paid-up insurance,
it can be reinstated within 7 years if:
(1) It has not been surrendered for cash;
(2) Manufacturers Life of America receives evidence of insurability
satisfactory to it; and
(3) Manufacturers Life of America receives payment of the larger of: (i) the
sum of all overdue premiums with interest at 6% per year compounded
annually or (ii) 110% of the increase in net cash value resulting from
reinstatement.
Upon reinstatement, the Policy will have the same cash value and death benefit
as if the termination or change had not occurred and a Policy debt equal to any
Policy debt in effect on the date any guaranteed option became effective, plus
interest thereon, and any loan arising after any guaranteed option became
effective, plus interest thereon.
WHAT ARE THE OTHER GENERAL POLICY PROVISIONS?
BENEFICIARY. One or more beneficiaries of the Policy may be appointed by the
Policyowner by naming them in the application. Beneficiaries may be appointed
in three classes -- primary, secondary and final. Thereafter the beneficiary
may be changed by the Policyowner during the life insured's lifetime by giving
written notice to Manufacturers Life of America in a form satisfactory to it.
If the life insured dies and there is no surviving beneficiary, the
Policyowner, or the Policyowner's estate if the Policyowner is the life
insured, will be the beneficiary.
INCONTESTABILITY. Manufacturers Life of America will not contest the Policy
after it has been in force during the life insured's lifetime for two years
from the Policy date, except for non-payment of premiums or as to certain
matters following reinstatement of the Policy after lapse. However, it may
contest at any time the validity of any rider adding a "total disability
waiver" benefit.
27
<PAGE> 33
MISSTATEMENT OF AGE OR SEX. If the life insured's stated age or sex or both in
the Policy are incorrect, Manufacturers Life of America will change the
benefits payable to those which the premium would have bought for the correct
age and sex.
SUICIDE EXCLUSION. If the life insured, whether sane or insane, dies by
suicide within one year from the date the Policy is issued, Manufacturers Life
of America will pay only the sum of the premiums paid less any Policy debt.
ASSIGNMENT. Manufacturers Life of America will not be deemed to know of or be
bound by an assignment unless it receives a copy of it at its Service Office.
Manufacturers Life of America assumes no responsibility for the validity or
effects of any assignment. In the event of the Policy's assignment for
collateral purposes, Manufacturers Life of America may require the written
consent of the Policyowner as well as the collateral assignee of the Policy
before treating as complete any request for a partial or full withdrawal of the
Policy's net cash value or a loan against the Policy's cash value.
SETTLEMENT OPTIONS. The Policy grants to most Policyowners, or to the
beneficiary, five optional ways of receiving Policy proceeds, other than in a
lump sum. The proceeds may be payable (i) in equal installments for a specified
period of not less than five years and not more than 30, (ii) in equal
installments for the life of the annuitant with the guarantee that if the
annuitant does not survive for a period of either 10 or 20 years or for a
period when the total payments made equal the proceeds payable, payments will
continue for the remainder of such period, (iii) in installments of a specified
amount together with interest until the proceeds are exhausted, (iv) in equal
installments for the joint lives of two annuitants with a guarantee that
payments will continue for at least 10 years, and (v) by leaving the proceeds
on deposit at interest with withdrawals permitted not more frequently than
monthly by the payee until the proceeds are exhausted. Any Manufacturers Life
of America agent authorized to sell the Policy can explain these options upon
request.
RIDERS. When the Policy is first issued, the Policyowner may be able to obtain
extra fixed benefits for an additional premium. These benefits will be
described in what is known as a "rider" to the Policy. The amounts of these
benefits are fully guaranteed at issue; they do not depend on the performance
of the Account. Certain restrictions may apply; they are described in the
applicable rider. Any Manufacturers Life of America agent authorized to sell
the Policy can explain these extra benefits further. Samples of the provisions
are available from Manufacturers Life of America upon written request.
WHAT ARE THE VOTING RIGHTS?
As stated above, all of the assets held in the sub-accounts of the Account will
be invested in shares of a particular Portfolio of NASL Series Trust.
Manufacturers Life of America is the legal owner of those shares and as such
has the right to vote upon matters that are required by the 1940 Act to be
approved or ratified by the shareholders of a mutual fund and to vote upon any
other matter that may be voted upon at a shareholders' meeting. However,
Manufacturers Life of America will vote shares of NASL Series Trust held in the
Account in accordance with instructions received from Policyowners. Portfolio
shares held in each sub-account for which no timely instructions from
Policyowners are received, including shares not attributable to Policies, will
be voted by Manufacturers Life of America in the same proportion as those
shares in that sub-account for which instructions are received. Should the
applicable federal securities laws or regulations change so as to permit
Manufacturers Life of America to vote shares held in the Account in its own
right, it may elect to do so.
28
<PAGE> 34
The number of Portfolio shares in each sub-account for which instructions may
be given by a Policyowner is determined by dividing the portion of that
Policy's net cash value derived from participation in that sub-account, if any,
by the value of one share of the corresponding Portfolio. The number will be
determined as of a date chosen by Manufacturers Life of America, but not more
than 90 days before the meeting of shareholders. Fractional votes are counted.
Voting instructions will be solicited in writing at least 14 days prior to the
meeting of the Series Fund.
Manufacturers Life of America may, if required by state insurance officials,
disregard voting instructions if such instructions would require shares to be
voted so as to cause a change in the sub-classification or investment policies
of one or more of the Funds, or to approve or disapprove an investment
management contract for the Series Fund. In addition, Manufacturers Life of
America itself may disregard voting instructions that would require changes in
the investment policies or investment adviser of one or more of the Funds,
provided that Manufacturers Life of America reasonably disapproves such changes
in accordance with applicable federal regulations. If Manufacturers Life of
America does disregard voting instructions, it will advise Policyowners of that
action and its reasons for such action in the next semi-annual report to
Policyowners.
WHO ARE THE DIRECTORS AND OFFICERS OF MANUFACTURERS LIFE OF AMERICA?
The directors and executive officers of Manufacturers Life of America, together
with their principal occupations during the past five years, are as follows:
<TABLE>
<CAPTION>
Position With
Manufacturers Life
Name of America Principal Occupation
<S> <C> <C>
Sandra M. Cotter Director Attorney 1989-present, Dykema
(34) Gossett
James D. Gallagher Director, Secretary, Vice President, Legal Services
(42) and General Counsel --January 1996-present, The
Manufacturers Life Insurance
Company; Vice President,
Secretary and General Counsel--
1994-present, North American
Security Life; Vice President
and Associate General Counsel--
1991-1994, The Prudential
Insurance Company of America
</TABLE>
29
<PAGE> 35
<TABLE>
<CAPTION>
Position With
Manufacturers Life
Name of America Principal Occupation
<S> <C> <C>
Bruce Gordon Director Vice President, U.S. Operations
(53) - Pensions -- 1990-present, The
Manufacturers Life Insurance
Company
Donald A. Guloien Director and President Senior Vice President, Business
(39) Development 1994-present, The
Manufacturers Life Insurance
Company; Vice President, U.S.
Individual Business -- 1990-1994,
The Manufacturers Life Insurance
Company
Theodore Kilkuskie, Director Vice President, U.S. Individual
Jr. (41) Insurance -- June 1995-present,
The Manufacturers Life Insurance
Company; Executive Vice President,
Mutual Funds -- January 1995-May 1995,
State Street Research; Vice President,
Mutual Funds -- 1987-1994, Metro-
politan Life Insurance Company
Joseph J. Pietroski Director Senior Vice President, General
(58) Counsel and Corporate Secretary --
1988-present, The Manufacturers
Life Insurance Company
John D. Richardson Chairman and Director Senior Vice President and General
(58) Manager, U.S. Operations
1995-present, The Manufacturers
Life Insurance Company; Senior
Vice President and General
Manager, Canadian Operations
1992-1994, The Manufacturers Life
Insurance Company; Senior Vice
President, Financial Services
1992, The Manufacturers Life
Insurance Company; Executive Vice
Chairman and CFO -- 1989-1991,
Canada Trust
</TABLE>
30
<PAGE> 36
<TABLE>
<CAPTION>
Position With
Manufacturers Life
Name of America Principal Occupation
<S> <C> <C>
John R. Ostler Vice President, Chief Financial Vice President -- 1992-
(43) Actuary and Treasurer present, The Manufacturers Life
Insurance Company; Vice President,
Insurance Products -- 1990-1992,
The Manufacturers Life Insurance
Company
Douglas H. Myers Vice President, Assistant Vice President and
(42) Finance and Compliance Controller, U.S. Operations --
Controller 1988-present, The Manufacturers
Life Insurance Company
Hugh McHaffie Vice President Vice President & Product Actuary --
(37) June 1990-present, North American
Security Life
</TABLE>
UNDER WHAT CIRCUMSTANCES MAY FUND SHARES BE SUBSTITUTED?
Although Manufacturers Life of America believes it to be highly unlikely, it is
possible that in the judgment of its management, one or more of the Portfolios
may become unsuitable for investment by the Account because of a change in
investment policy or a change in the tax laws, because the shares are no longer
available for investment, or for some other reason. In that event Manufacturers
Life of America may seek to substitute the shares of another Portfolio or of an
entirely different mutual fund. Before this can be done, the approval of the
S.E.C. and one or more state insurance departments may be required.
Manufacturers Life of America also reserves the right to combine other separate
accounts with the Account, to establish additional sub-accounts within the
Account, to operate the Account as a management investment company or other
form permitted by law, and to deregister the Account under the 1940 Act. Any
such change would be made only if permissible under applicable federal and
state law.
WHAT REPORTS WILL BE SENT TO POLICYOWNERS?
Once each Policy year (except where the Policy is in force as extended term
insurance or reduced paid-up insurance) Policyowners will be sent statements
showing the amount of the death benefit, the net cash value, and any Policy
debt (and interest charged for the preceding Policy year) as of the Policy
Anniversary. The statement will also show the amount of the cash value derived
from participation in each sub-account.
Each Policyowner will also be sent an annual and a semi-annual report for NASL
Series Trust which will include a list of the securities held in each Portfolio
as required by the 1940 Act.
31
<PAGE> 37
WHAT STATE REGULATIONS APPLY?
Manufacturers Life of America is subject to regulation and supervision by the
Michigan Department of Insurance, which periodically examines its financial
condition and operations. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business. The
Policies have been filed with insurance officials and meet all standards set by
law in each jurisdiction where they are sold.
Manufacturers Life of America is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business for the purposes of determining
solvency and compliance with local insurance laws and regulations.
IS THERE ANY LITIGATION PENDING?
No litigation is pending that would have a material effect upon the Account or
NASL Series Trust.
WHERE CAN FURTHER INFORMATION BE FOUND?
A registration statement under the Securities Act of 1933 has been filed with
the S.E.C. relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. The omitted information may be obtained at the S.E.C.'s principal
office in Washington, D.C. upon payment of the prescribed fee.
For further information you may also contact Manufacturers Life of America's
Service Office, the address and telephone number of which are on the cover of
this prospectus.
LEGAL MATTERS
The legal validity of the Policies has been passed on by James D. Gallagher,
Esq., General Counsel of Manufacturers Life of America. Jones & Blouch L.L.P.,
Washington, D.C., has passed on matters relating to the federal securities
laws.
EXPERTS
The financial statements of The Manufacturers Life Insurance Company of America
and of Separate Account One of The Manufacturers Life Insurance Company of
America appearing in this prospectus for the period ended December 31, 1995,
have been audited by Ernst & Young LLP, independent auditors, to the extent
indicated in their reports thereon appearing elsewhere herein. Such financial
statements have been included herein in reliance upon such report given upon the
authority of such firm as experts in auditing and accounting.
32
<PAGE> 38
APPENDIX A
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 25
$100,000 FACE AMOUNT
$903.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- ---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 948 $100,000 $100,001 $100,054 $ 0 $ 0 $ 0
2 1,944 100,000 100,005 100,338 595 652 709
3 2,989 100,000 100,013 100,860 1,225 1,369 1,521
4 4,087 100,000 100,025 101,626 1,846 2,118 2,415
5 5,239 100,000 100,040 102,653 2,481 2,924 3,427
6 6,449 100,000 100,058 103,950 3,106 3,764 4,540
7 7,720 100,000 100,080 105,526 3,721 4,639 5,764
8 9,054 100,000 100,105 107,390 4,326 5,550 7,110
9 10,455 100,000 100,132 109,553 4,921 6,498 8,590
10 11,926 100,000 100,163 112,026 5,506 7,485 10,216
15 20,460 100,000 100,359 129,496 8,220 12,977 20,999
20 31,351 100,000 100,615 156,863 10,467 19,328 37,737
25 45,252 100,000 100,920 196,602 12,192 26,499 63,400
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$459.00 semi-annually, $232.50 quarterly, $78.50 monthly, or $77.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
33
<PAGE> 39
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 40
$100,000 FACE AMOUNT
$1,584.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- ---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,663 $100,000 $100,001 $100,092 $ 80 $ 106 $ 132
2 3,410 100,000 100,007 100,460 1,350 1,480 1,614
3 5,243 100,000 100,017 101,106 2,577 2,891 3,224
4 7,169 100,000 100,031 102,037 3,762 4,339 4,973
5 9,190 100,000 100,049 103,268 4,952 5,874 6,928
6 11,313 100,000 100,071 104,805 6,098 7,448 9,050
7 13,542 100,000 100,096 106,657 7,199 9,058 11,354
8 15,882 100,000 100,124 108,833 8,254 10,705 13,854
9 18,339 100,000 100,156 111,342 9,262 12,387 16,564
10 20,920 100,000 100,192 114,195 10,221 14,101 19,501
15 35,889 100,000 100,411 134,059 14,280 23,112 38,228
20 54,995 100,000 100,692 164,746 17,107 32,700 65,787
25 79,380 100,000 101,023 209,007 18,694 42,527 105,702
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$804.00 semi-annually, $405.50 quarterly, $136.50 monthly, or $135.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
34
<PAGE> 40
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$100,000 FACE AMOUNT
$3,278.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- ---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,442 $100,000 $100,004 $100,258 $ 668 $ 785 $ 903
2 7,056 100,000 100,013 100,824 2,807 3,179 3,565
3 10,851 100,000 100,026 101,701 4,831 5,591 6,411
4 14,835 100,000 100,044 102,895 6,738 8,017 9,451
5 19,019 100,000 100,066 104,423 8,623 10,554 12,805
6 23,412 100,000 100,091 106,292 10,391 13,102 16,390
7 28,024 100,000 100,121 108,510 12,042 15,659 20,222
8 32,867 100,000 100,154 111,087 13,578 18,219 24,316
9 37,952 100,000 100,191 114,034 14,999 20,779 28,688
10 43,292 100,000 100,231 117,361 16,304 23,334 33,355
15 74,271 100,000 100,478 140,195 21,080 35,768 61,636
20 113,810 100,000 100,786 174,952 23,254 47,305 100,131
25 164,272 100,000 101,142 224,675 23,719 58,135 153,139
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$1,660.00 semi-annually, $835.50 quarterly, $280.50 monthly, or $279.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
35
<PAGE> 41
APPENDIX B
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 25
$118,727 FACE AMOUNT
$1,000 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- ---- -------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,040 $118,727 $118,727 $118,749 $ 0 $ 0 $ 0
2 2,122 118,727 118,727 118,864 706 751 796
3 3,246 118,727 118,727 119,072 1,455 1,568 1,685
4 4,416 118,727 118,727 119,372 2,192 2,403 2,628
5 5,633 118,727 118,727 119,765 2,946 3,288 3,662
6 6,898 118,727 118,727 120,253 3,688 4,194 4,759
7 8,214 118,727 118,727 120,833 4,418 5,119 5,923
8 9,583 118,727 118,727 121,505 5,136 6,065 7,158
9 11,006 118,727 118,727 122,269 5,843 7,031 8,467
10 12,486 118,727 118,727 123,124 6,537 8,018 9,854
15 20,825 118,727 118,727 128,734 9,760 13,191 18,045
20 30,969 118,727 118,727 136,510 12,427 18,574 28,528
25 43,312 118,727 118,727 146,380 14,476 23,991 41,705
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$508.34 semi-annually, $257.45 quarterly, $86.42 monthly, or $84.92
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
36
<PAGE> 42
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 25
$118,727 FACE AMOUNT
$1,000 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- ---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,050 $118,727 $118,728 $118,791 $ 0 $ 0 $ 0
2 2,153 118,727 118,733 119,128 706 774 842
3 3,310 118,727 118,743 119,748 1,455 1,626 1,806
4 4,526 118,727 118,757 120,658 2,192 2,514 2,867
5 5,802 118,727 118,774 121,877 2,946 3,471 4,068
6 7,142 118,727 118,796 123,417 3,688 4,469 5,390
7 8,549 118,727 118,822 125,288 4,418 5,507 6,843
8 10,027 118,727 118,851 127,501 5,136 6,589 8,442
9 11,578 118,727 118,884 130,069 5,843 7,715 10,198
10 13,207 118,727 118,921 133,005 6,537 8,887 12,129
15 22,657 118,727 119,153 153,746 9,760 15,407 24,931
20 34,719 118,727 119,457 186,239 12,427 22,947 44,804
25 50,113 118,727 119,820 233,420 14,476 31,461 75,272
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$508.34 semi-annually, $257.45 quarterly, $86.42 monthly, or $84.92
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
37
<PAGE> 43
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 40
$102,654 FACE AMOUNT
$1,500 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- ---- -------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,560 $102,654 $102,654 $102,687 $ 82 $ 100 $ 117
2 3,182 102,654 102,654 102,815 1,385 1,474 1,565
3 4,870 102,654 102,654 103,037 2,646 2,858 3,080
4 6,625 102,654 102,654 103,351 3,862 4,250 4,664
5 8,449 102,654 102,654 103,758 5,083 5,700 6,375
6 10,347 102,654 102,654 104,255 6,260 7,157 8,163
7 12,321 102,654 102,654 104,843 7,390 8,617 10,030
8 14,374 102,654 102,654 105,518 8,473 10,079 11,979
9 16,509 102,654 102,654 106,280 9,507 11,541 14,010
10 18,730 102,654 102,654 107,126 10,492 12,998 16,124
15 31,237 102,654 102,654 112,592 14,659 20,152 28,000
20 46,454 102,654 102,654 120,024 17,561 26,872 42,174
25 64,968 102,654 102,654 129,350 19,191 32,814 58,660
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$761.21 semi-annually, $384.16 quarterly, $129.74 monthly, or $128.24
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
38
<PAGE> 44
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 40
$102,654 FACE AMOUNT
$1,500 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- ---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,575 $102,654 $102,656 $102,749 $ 82 $ 109 $ 135
2 3,229 102,654 102,661 103,126 1,385 1,520 1,657
3 4,965 102,654 102,672 103,790 2,646 2,968 3,310
4 6,788 102,654 102,686 104,746 3,862 4,454 5,105
5 8,703 102,654 102,704 106,009 5,083 6,030 7,111
6 10,713 102,654 102,726 107,587 6,260 7,645 9,290
7 12,824 102,654 102,752 109,488 7,390 9,299 11,656
8 15,040 102,654 102,782 111,721 8,473 10,989 14,222
9 17,367 102,654 102,815 114,297 9,507 12,715 17,004
10 19,810 102,654 102,851 117,225 10,492 14,475 20,019
15 33,986 102,654 103,076 137,617 14,659 23,725 39,243
20 52,079 102,654 103,364 169,119 17,561 33,568 67,533
25 75,170 102,654 103,704 214,554 19,191 43,656 108,507
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$761.21 semi-annually, $384.16 quarterly, $129.74 monthly, or $128.24
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
39
<PAGE> 45
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 55
$101,227 FACE AMOUNT
$3,000 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- ---- -------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,120 $101,227 $101,227 $101,317 $ 676 $ 755 $ 835
2 6,365 101,227 101,227 101,510 2,842 3,091 3,347
3 9,739 101,227 101,227 101,805 4,890 5,397 5,930
4 13,249 101,227 101,227 102,198 6,821 7,667 8,582
5 16,899 101,227 101,227 102,690 8,729 9,998 11,405
6 20,695 101,227 101,227 103,280 10,518 12,288 14,303
7 24,643 101,227 101,227 103,965 12,190 14,534 17,274
8 28,748 101,227 101,227 104,744 13,744 16,731 20,317
9 33,018 101,227 101,227 105,615 15,183 18,876 23,431
10 37,459 101,227 101,227 106,575 16,504 20,962 26,612
15 62,474 101,227 101,227 112,669 21,339 30,298 43,344
20 92,908 101,227 101,227 120,790 23,540 37,603 61,254
25 129,935 101,227 101,227 130,848 24,010 43,243 80,739
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$1,519.20 semi-annually, $765.65 quarterly, $256.56 monthly, or $255.06
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
40
<PAGE> 46
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 55
$101,227 FACE AMOUNT
$3,000 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- ---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 $101,227 $101,231 $101,488 $ 676 $ 795 $ 914
2 6,458 101,227 101,240 102,061 2,842 3,218 3,609
3 9,930 101,227 101,254 102,949 4,890 5,660 6,489
4 13,577 101,227 101,271 104,158 6,821 8,116 9,567
5 17,406 101,227 101,293 105,704 8,729 10,684 12,962
6 21,426 101,227 101,319 107,596 10,518 13,263 16,591
7 25,647 101,227 101,350 109,841 12,190 15,851 20,470
8 30,080 101,227 101,383 112,450 13,744 18,443 24,614
9 34,734 101,227 101,421 115,433 15,183 21,034 29,040
10 39,620 101,227 101,461 118,801 16,504 23,620 33,765
15 67,972 101,227 101,710 141,916 21,339 36,207 62,392
20 104,158 101,227 102,022 177,098 23,540 47,886 101,360
25 150,340 101,227 102,383 227,432 24,010 58,849 155,018
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$1,519.20 semi-annually, $765.65 quarterly, $256.56 monthly, or $255.06
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
41
<PAGE> 47
APPENDIX C
ILLUSTRATION OF COMPUTATION OF DEATH BENEFIT
Manufacturers Life of America determines a Policy's death benefit on each
premium due date by calculating the Policy's net return for the period since
the previous premium due date (herein referred to as the "premium period"). The
net return is the difference between the total investment base and assumed base
on the premium due date. The total investment base is the sum of the value of
the assets in the Account relating to the Policy plus the amount of the loan
account. The assumed base is what the total investment base would be on the
premium due date if it increased during the premium period at a net annual
effective rate of 4 1/2%. At the beginning of each premium period, the assumed
base is equal to the total investment base, so that the net return at the end
of the period reflects only the variations from the assumed base for that
period.
In order to determine the change in death benefit, the net return for the
premium period just ended, which may be either positive or negative, is divided
by a factor which is the net single premium for one dollar of paid-up
additions, which factor is based on the life insured's current age and the 1958
Commissioners Standard Ordinary Mortality Table. Such factors at representative
ages as of a Policy Anniversary are shown below:
<TABLE>
<CAPTION>
NET SINGLE PREMIUM
PER DOLLAR OF
ATTAINED AGE PAID-UP ADDITIONS
- ------------ -----------------
<S> <C>
25 .16162
30 .19245
35 .23014
40 .27531
45 .32729
50 .38566
55 .44926
60 .51654
65 .58504
</TABLE>
The figure resulting from the division of the net return by the net single
premium factor is the amount of paid-up additions credited to the Policy on the
premium due date. It is added to any paid-up additions previously credited, and
the total paid-up additions are added to the face amount to give the current
death benefit.
Assume, for example, a Policy with a face amount of $100,000 and premiums
payable annually issued to a person at age 40 whose attained age is 45 with no
Policy debt and all net premiums allocated to a single sub-account. Assume also
that on the preceding premium due date there were no additional paid-up
additions. If the total investment base on the premium due date is $6,200.00
and the assumed base is $5,859.00, the difference, $341.00, is the net return,
which is divided by .32729 to give $1,041.89 of paid-up additions. Since there
are no prior paid-up additions, the total death benefit is the face amount,
$100,000, plus the paid-up additions, $1,041.89, or $101,041.89.
Assume further that on the next premium due date the total investment base is
$7,400.00 and the assumed base is $7,777.65. The net return, - $377.65, is
divided by the net single premium factor for age 46, .33847, which results in -
$1,115.76 of paid-up additions. In the absence of the minimum death benefit
guarantee, the new death benefit would be $99,926.13 ($101,041.89 - $1,115.76).
However, the death benefit can never be less than the $100,000 face amount,
provided all premiums are paid when due and there are no Policy loans.
42
<PAGE> 48
APPENDIX D
ILLUSTRATION OF COMPUTATION OF CHANGES
IN TOTAL INVESTMENT BASE AND RELATION
THEREOF TO CASH VALUE
On each premium due date, a Policy's total investment base is the Policy's cash
value on that date plus the current net premium. On Business Days that are not
premium due dates the total investment base will exceed the cash value, because
the cash value reflects the cost of insurance applicable to the premium period,
while the total investment base is adjusted for the cost of insurance only at
the end of a premium period. The total investment base is also credited with a
net premium on a premium due date, while the net cash value will reflect the
fact that a premium has not been paid when due.
The total investment base is calculated on each Business Day. To compute the
total investment base on a Business Day, Manufacturers Life of America first
determines the net investment return for each sub-account in which the Policy
participates and for the loan account for that Business Day. For a Policy with
net premiums invested in one sub-account and no Policy loan, the net investment
return is equal to (i) the income and realized and unrealized capital gains and
losses of the sub-account since the preceding Business Day, less (ii) the
charge for the period since the preceding Business Day for mortality and
expense risks at an annual rate of 0.1% of the average net value of the assets
of the sub-account, less (iii) any charge against the sub-account for taxes or
as a provision for taxes since the preceding Business Day (currently no such
charge is made). A net rate of return for the sub-account is then computed by
dividing the net investment return by an amount equal to (i) the value of the
assets of the sub-account at the end of the current Business Day less (ii) the
net investment return calculated for that day less (iii) the amount of the tax
provision, if any, maintained in the sub-account at the end of the previous
Business Day. Manufacturers Life of America then multiplies the investment base
in that sub-account for the previous Business Day, with adjustments for any
premiums due, or loans, loan repayments or sub-account transfers made, on such
previous day, by a factor which is one plus the net rate of return for the
current Business Day. If the current Business Day is the first Business Day
following a premium due date, the cost of insurance for the premium period just
ended is deducted from the investment base for the previous Business Day before
multiplying the base by the factor to obtain the current investment base. In
addition, if there is any Policy debt, the investment base for the previous
Business Day is adjusted downward to offset an upward adjustment made
concurrently to the investment base in the loan account described below.
Assume, for example, that on the Business Day coinciding with a premium due
date the value of the assets of the sub-account in which the Policy
participates was $5,000,000, that there were no transfers into or out of the
sub-account on that Business Day, that on the first Business Day following the
premium due date ("current Business Day") the sub-account received no dividends
or distributions on the Fund shares held by the sub-account and that no gain or
loss was realized on such shares, that on the current Business Day there was an
unrealized gain on Fund shares of $2,000, and that the charge for mortality and
expense risks for the period ending on the current Business Day was $13.69
($5,000,000 X .001/365). Assume also that the Policy's investment base in that
sub-account for the previous Business Day was $1,000, that the net premium then
due was $400, that no loans, loan repayments or sub-account transfers were made
on that Business Day, and that the cost of insurance for the premium period
then ended was $20. The investment base for the current Business Day is
computed as follows:
(1) The net investment return is the unrealized gain on Fund shares, $2,000,
minus the mortality and expense risks charge, $13.69, or $1,986.31 ($2,000
- $13.69).
(2) The net rate of return is the net investment return, $1,986.31, divided
by an amount equal to (i) the current value of the sub-account's assets,
$5,001,986.31 ($5,000,000 + $1,986.31), minus (ii) the net investment
return, $1,986.31, or 0.000397 ($1,986.31 / $5,000,000).
43
<PAGE> 49
(3) The investment base for the current Business Day is the investment base
for the preceding Business Day, $1,000, adjusted by the addition of the
net premium then due, $400, and the subtraction of the cost of insurance
for the premium period then ended, $20, multiplied by one (1) plus the net
rate of return, 1.000397, or $1,380.55 ($1,380 X 1.000397).
The total investment base is the sum of the investment base held in each
sub-account and in the loan account. The loan account investment base for a
given Business Day is computed on the basis of the net rate of return for the
loan account. The net rate of return is derived from the net investment return,
which, on the assumption that there are no charges or provisions for taxes, is
equal to (i) the loan interest accrued on the Policy debt since the previous
Business Day less (ii) a charge for loan administration expenses for the period
since the preceding Business Day at an annual rate of 0.2% of the average
Policy debt, less (iii) the mortality and expense risks charge for the period
since the preceding Business Day at an annual rate of 0.1% of the average
Policy debt. The net rate of return is the net investment return divided by an
amount equal to the value of the loan account at the end of the current
Business Day less the net investment return calculated for that day. To obtain
the loan account investment base for a given Business Day, Manufacturers Life
of America multiplies the loan account investment base for the previous
Business Day, with adjustments for any loans or loan repayments made on such
previous Business Day, by a factor which is one plus the net rate of return for
the current Business Day. If the current Business Day is the first Business Day
following a premium due date, the loan account investment base for the prior
Business Day is increased so that it will be equal to the amount of the Policy
debt plus interest. The amount by which the loan account investment base is
increased is concurrently deducted from the Policy's investment bases in the
Account, which has the effect of transferring all loan account charges to the
investment base in each sub-account.
Assume, for example, that the amount of the Policy loan on the Business Day
preceding the current Business Day was $1,000, that such preceding day was not
a premium due date, that loan interest since such preceding day at an 8% annual
rate was $.21, that the loan administration and mortality and expense risks
charges for the period ending on the current Business Day were $.01, and that
the Policy's investment base in the loan account for the previous Business Day
was $1,003. The investment base for the current Business Day is computed as
follows:
(1) The net investment return is the loan interest, $.21, minus the loan
administration and mortality and expense risk charges, $.01, or $.20 ($.21
- $.01).
(2) The net rate of return is the net investment return, $.20, divided by an
amount equal to (i) the current value of the loan account, $1,003.20
($1,003 + $.20), minus (ii) the net investment return, $.20 or 0.0001994
($.20 / $1,003).
(3) The investment base for the current Business Day is the investment base
for the preceding Business Day, $1,003, multiplied by one (1) plus the net
rate of return, 1.0001994, or $1,003.20 ($1,003 X 1.0001994).
44
<PAGE> 50
(This Page Intentionally Left Blank)
45
<PAGE> 51
FINANCIAL STATEMENTS
The financial statements of Manufacturers Life of America included herein
should be distinguished from the financial statements of the Account and should
be considered only as bearing upon the ability of Manufacturers Life of America
to meet its obligations under the Policies.
46
<PAGE> 52
THE FOLLOWING FINANCIAL STATEMENTS OF SEPARATE ACCOUNT ONE OF THE MANUFACTURERS
LIFE INSURANCE COMPANY OF AMERICA FOR THE PERIOD ENDED SEPTEMBER 30, 1996 ARE
UNAUDITED.
47
<PAGE> 53
SEPARATE ACCOUNT ONE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Emerging Growth Common Stock Real Estate Securities
Equity Sub-Account Sub-Account Sub-Account
------------------ ------------ ----------------------
<S> <C> <C> <C>
Investment in Manulife Series Fund, Inc.
at market value
Emerging Growth Equity Fund, $327,987
15,599 shares (cost $298,552)
Common Stock Fund, $45,844
2,405 shares (cost $35,897)
Real Estate Securities Fund, $22,540
1,409 shares (cost $21,430
Balanced Assets Fund,
30,770 shares (cost $476,164)
Capital Growth Bond Fund,
17,995 shares (cost $208,677)
Money Market Fund,
1,324 shares (cost $14,568)
-------- ------- -------
327,987 45,844 22,540
Receivable for Policy-related
Transactions 0 0 63
-------- ------- -------
NET ASSETS $327,987 $45,844 $22,603
======== ======= =======
Units Outstanding 6,297 1,832 811
Net asset value per unit $52.09 $25.02 $27.86
======== ======= =======
<CAPTION>
Balanced Assets Capital Growth Money-Market
Sub-Account Bond Sub-Account Sub-Account Total
------------------ ----------------- ------------ ------
<S> <C> <C> <C> <C>
Investment in Manulife Series Fund, Inc.
at market value
Emerging Growth Equity Fund, $327,987
15,599 shares (cost $298,552)
Common Stock Fund, $45,844
2,405 shares (cost $35,897)
Real Estate Securities Fund, $22,540
1,409 shares (cost $21,430)
Balanced Assets Fund, $537,616 $537,616
30,770 shares (cost $476,164)
Capital Growth Bond Fund, $203,200 $203,200
17,995 shares (cost $208,677)
Money Market Fund, $14,341 $14,341
1,324 shares (cost $14,568) -------- -------- ------- ----------
537,616 203,200 14,341 1,151,528
Receivable for Policy-related Transactions 37 179 5 284
-------- -------- ------- ----------
NET ASSETS $537,653 $203,379 $14,346 $1,151,812
======== ======== ======= ==========
Units Outstanding 13,113 5,859 715
Net asset value per unit $41.00 $34.71 $20.06
======== ======== =======
</TABLE>
48
<PAGE> 54
SEPARATE ACCOUNT ONE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS
PERIOD ENDED SEPTEMBER 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Real Estate Balanced
Emerging Growth Common Stock Securities Assets
Equity Sub-Account Sub-Account Sub-Account Sub-Account
------------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment income:
Dividend Income $ 33,121 $ 470 $ 637 $20,167
Expenses
Mortality and expense risk charge 362 47 13 564
-------- ------ ------ -------
Net investment income (loss) 32,759 423 624 19,603
-------- ------ ------ -------
Realized and unrealized gain (loss) from
security transactions:
Proceeds from sales 29,197 152 2,154 13,018
Cost of securities sold 21,003 53 1,925 12,061
-------- ------ ------ -------
Net realized gain (loss) 8,194 99 229 957
-------- ------ ------ -------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 64,740 5,737 476 53,874
End of Period 29,435 9,947 1,110 61,452
-------- ------ ------ -------
Net unrealized depreciation
during the year (35,305) 4,210 634 7,578
-------- ------ ------ -------
Net realized and unrealized gain (loss)
on investments (27,111) 4,309 863 8,535
-------- ------ ------ -------
Net increase (decrease) in net
assets derived from operations $ 5,648 $4,732 $1,487 $28,138
======== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
Capital Growth Money-Market
Bond Sub-Account Sub-Account Total
---------------- ------------ -----
<S> <C> <C> <C>
Investment income:
Dividend Income $ 7 $ 915 $ 55,317
Expenses
Mortality and expense risk charge 221 21 1,228
------- ------- --------
Net investment income (loss) (214) 894 54,089
------- ------- --------
Realized and unrealized gain (loss) from
security transactions:
Proceeds from sales 7,243 12,187 63,951
Cost of securities sold 7,874 11,697 54,613
------- ------- --------
Net realized gain (loss) (631) 490 9,338
------- ------- --------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year (4,967) 552 120,412
End of Period (5,477) (227) 96,240
------- ------- --------
Net unrealized depreciation
during the year (510) (779) (24,172)
------- ------- --------
Net realized and unrealized gain (loss)
on investments (1,141) (289) (14,834)
------- ------- --------
Net increase (decrease) in net
assets derived from operations $(1,355) $ 605 $ 39,255
======= ======= ========
</TABLE>
49
<PAGE> 55
SEPARATE ACCOUNT ONE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED SEPTEMBER 30, 1996 and DECEMBER 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Emerging Growth Common Stock
Equity Sub-Account Sub-Account
-------------------------------- --------------------------------
Period Ended Year Ended Period Ended Year Ended
Sept. 30/96 Dec. 31/95 Sept. 30/96 Dec. 31/95
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 32,759 $ 9,002 $ 423 $ (33)
Net realized gain (loss) 8,194 22,926 99 149
Unrealized appreciation (depreciation)
of investments during the period (35,305) 51,323 4,210 8,483
-------- -------- -------- --------
Increase (decrease) in net assets
derived from operations 5,648 83,251 4,732 8,599
-------- -------- -------- --------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 17,382 21,167 4,108 4,454
Transfer on terminations (7,573) (69,367) (1,703) (2,794)
Transfer on policy loans (15,813) (14,067) 20 748
Net interfund transfers (8,344) (711) 0 1,799
-------- -------- -------- --------
(14,348) (62,978) 2,425 4,207
-------- -------- -------- --------
Net increase in net assets (8,700) 20,273 7,157 12,806
NET ASSETS
Beginning of Year 336,687 316,414 38,687 25,881
-------- -------- -------- --------
End of Year $327,987 $336,687 $ 45,844 $ 38,687
======== ======== ======== ========
<CAPTION>
Real Estate Securities Balanced Assets
Sub-Account Sub-Account
-------------------------------- --------------------------------
Period Ended Year Ended Period Ended Year Ended
Sept. 30/96 Dec. 31/95 Sept. 30/96 Dec. 31/95
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 624 $ 190 $19,603 $ 174
Net realized gain (loss) 229 (355) 957 7,100
Unrealized appreciation (depreciation)
of investments during the period 633 1,648 7,578 95,586
-------- -------- -------- --------
Increase (decrease) in net assets
derived from operations 1,486 1,483 28,138 102,860
-------- -------- -------- --------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 1,347 2,155 46,172 63,489
Transfer on terminations (253) (4,207) (16,422) (88,882)
Transfer on policy loans (90) 33 (7,194) (12,302)
Net interfund transfers 8,800 509 (47) (3,896)
-------- -------- -------- --------
9,804 (1,510) 22,509 (41,591)
-------- -------- -------- --------
Net increase in net assets 11,290 (27) 50,647 61,269
NET ASSETS
Beginning of Year 11,312 11,339 487,006 425,737
-------- -------- -------- --------
End of Year $ 22,602 $ 11,312 $537,653 $487,006
======== ======== ======== ========
<CAPTION>
Capital Growth Money-Market
Bond Sub-Account Sub-Account
-------------------------------- --------------------------------
Period Ended Year Ended Period Ended Year Ended
Sept. 30/96 Dec. 31/95 Sept. 30/96 Dec. 31/95
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (214) $ 13,682 $ 894 $ (22)
Net realized gain (loss) (631) (498) 490 573
Unrealized appreciation (depreciation)
of investments during the period (510) 19,382 (779) 692
-------- -------- -------- --------
Increase (decrease) in net assets
derived from operations (1,355) 32,566 605 1 ,243
-------- -------- -------- --------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 15,086 20,284 79 106
Transfer on terminations (4,996) (7,568) (328) (25,407)
Transfer on policy loans (4,528) (4,068) 149 (8,358)
Net interfund transfers 20 408 (53) (4)
-------- -------- -------- --------
5,582 9,056 (153) (33,663)
-------- -------- -------- --------
Net increase in net assets 4,227 41,622 452 (32,420)
NET ASSETS
Beginning of Year 199,152 157,530 13,894 46,314
-------- -------- -------- --------
End of Year $203,379 $199,152 $ 14,346 $ 13,894
======== ======== ======== ========
<CAPTION>
Total
--------------------------------
Period Ended Year Ended
Sept. 30/96 Dec. 31/95
------------ ----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 54,089 $ 22,993
Net realized gain (loss) 9,338 29,895
Unrealized appreciation (depreciation)
of investments during the period (24,173) 177,114
---------- ----------
Increase (decrease) in net assets
derived from operations 39,254 230,002
---------- ----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 84,174 111,655
Transfer on terminations (31,275) (198,225)
Transfer on policy loans (27,456) (38,014)
Net interfund transfers 376 (1,895)
---------- ----------
25,819 (126,479)
---------- ----------
Net increase in net assets 65,073 103,523
NET ASSETS
Beginning of Year 1,086,738 983,215
---------- ----------
End of Year $1,151,811 $1,086,738
========== ==========
</TABLE>
50
<PAGE> 56
Separate Account One of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
September 30, 1996
1. ORGANIZATION
Separate Account One of The Manufacturers Life Insurance Company of America
(the "Separate Account") is a unit investment trust registered under the
Investment Company Act of 1940, as amended. The Separate Account is currently
comprised of six investment sub-accounts, one for each series of shares of
Manulife Series Fund, Inc., available for allocation of net premiums under
variable life insurance policies (the "Policies") issued by The Manufacturers
Life Insurance Company of America ("Manufacturers Life of America").
The Separate Account was established by Manufacturers Life of America, a
wholly-owned subsidiary of Manulife Reinsurance Corporation (U.S.A.)(the
Parent), (formerly The Manufacturers Life Insurance Company of Michigan), as a
separate investment account on May 25, 1983. The Parent is a wholly-owned
subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"),
a mutual life insurance company based in Toronto, Canada.
The assets of the Separate Account are the property of Manufacturers Life of
America. The portion of the Separate Account's assets applicable to the
Policies will not be chargeable with liabilities arising out of any other
business Manufacturers Life of America may conduct.
The net assets may not be less than the amount required under state insurance
law to provide for death (without regard to the minimum death benefit
guarantee) and other Policy benefits.
Additional assets are held in Manufacturers Life of America's general account
to cover the contingency that the guaranteed minimum death benefit might exceed
the death benefit which would have been payable in the absence of such
guarantee.
Currently Manufacturers Life of America is not marketing any life insurance
products through Separate Account One.
51
<PAGE> 57
Separate Account One of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Separate Account in preparation of its financial statements:
a. Valuation of Investments - Investments are made among the six Funds of
Manulife Series Fund, Inc. and are valued at the reported net asset values
of these Funds. Transactions are recorded on the trade date. Net
investment income and net realized and unrealized gain (loss) on
investments in Manulife Series Fund, Inc. are reinvested.
b. Realized gains and losses on the sale of investments are computed on the
first-in, first-out basis.
c. Dividend income is recorded on the ex-dividend date.
d. Federal Income Taxes - Manufacturers Life of America, the Separate
Account's sponsor, is taxed as a "life insurance company" under the
Internal Revenue Code. Under these provisions of the Code, the operations
of the Separate Account form part of the sponsor's total operations and
are not taxed separately.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The current year's operations of the Separate Account are not expected to
affect the sponsor's tax liabilities and, accordingly, no charges were made
against the Separate Account for federal, state and local taxes. However, in
the future, should the sponsor incur significant tax liabilities related to
Separate Account operations, it intends to make a charge or establish a
provision within the Separate Account for such taxes.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. MORTALITY AND EXPENSE RISKS CHARGE
Manufacturers Life of America deducts from the assets of the Separate Account a
daily charge equivalent to an annual rate of 0.10% of the average net value of
the Separate Account's assets for mortality and expense risks.
52
<PAGE> 58
Separate Account One of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
4. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges from each premium payment
before placing any amounts in the sub-accounts. The deductions are for (1)
sales load, (2) administrative expenses, (3) state premium taxes, (4) certain
insurance risks including a risk charge for the guaranteed minimum death
benefit, (5) a surcharge for Policies issued to smokers, (6) premiums for
optional benefits, and (7) additional premiums for extra mortality risks.
5. PURCHASES AND SALES OF MANULIFE SERIES FUND, INC. SHARES
Purchases and sales of the shares of common stock of Manulife Series Fund, Inc.
for the period ended September 30, 1996 were $142,355 and $63,951 respectively,
and for the year ended December 31, 1995 were $121,525 and $223,972.
6. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly-owned
subsidiary of Manulife Financial, acts as the principal underwriter of the
Policies pursuant to a Distribution Agreement with Manufacturers Life of
America. Registered representatives of either ManEquity, Inc. or other
broker-dealers having distribution agreements with ManEquity, Inc. who are also
authorized as variable life insurance agents under applicable state insurance
laws, sell the Policies. Registered representatives are compensated on a
commission basis.
Manufacturers Life of America has a formal service agreement with its
affiliates, Manulife Financial, which can be terminated by either party upon
two months' notice. Under this Agreement, Manufacturers Life of America pays
for legal, actuarial, investment and certain other administrative services.
53
<PAGE> 59
The following financial statements of
Separate Account One of The Manufacturers
Life Insurance Company of America for the
period ended December 31, 1995 are audited.
54
<PAGE> 60
Report of Independent Auditors
To the Board of Directors
The Manufacturers Life Insurance
Company of America
We have audited the accompanying statement of assets and liabilities of Separate
Account One of The Manufacturers Life Insurance Company of America (comprising,
respectively, Emerging Growth Equity Sub-Account, Common Stock Sub-Account, Real
Estate Securities Sub-Account, Balanced Assets Sub-Account, Capital Growth Bond
Sub-Account, Money Market Sub-Account) as of December 31, 1995 and the related
statement of operations for the year then ended, and the statements of changes
in net assets for each of the periods presented herein. These financial
statements are the responsibility of The Manufacturers Life Insurance Company of
America'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 Separate Account One of The
Manufacturers Life Insurance Company of America at December 31, 1995, and the
results of its operations for the year then ended and the changes in its net
assets for each of the periods presented herein, in conformity with generally
accepted accounting principles.
Philadelphia, Pennsylvania ERNST & YOUNG LLP
February 2, 1996
55
<PAGE> 61
Separate Account One of
The Manufacturers Life Insurance Company of America
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
Emerging Real Capital
Growth Common Estate Balanced Growth Money
Equity Stock Securities Assets Bond Market
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Total
----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Manulife Series
Fund, Inc. -- at market value:
Emerging Growth Equity Fund,
14,579 shares (cost $272,153) $336,893 $ 336,893
Common Stock Fund,
2,240 shares (cost $32,950) $38,687 38,687
Real Estate Securities Fund,
749 shares (cost $10,837) $11,313 11,313
Balanced Assets Fund,
28,449 shares (cost $434,115) $487,989 487,989
Capital Growth Bond Fund,
17,635 shares (cost $204,178) $199,211 199,211
Money Market Fund,
1,279 shares (cost $13,313) $13,865 13,865
----------- ----------- ----------- ----------- ----------- ----------- ----------
336,893 38,687 11,313 487,989 199,211 13,865 1,087,958
(Payable) receivable for
policy-related transactions (206) -- (1) (983) (59) 29 (1,220)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net assets $336,687 $38,687 $11,312 $487,006 $199,152 13,894 $1,086,738
=========== =========== =========== =========== =========== =========== ==========
Units outstanding 6,547 1,723 454 12,565 5,698 718
=========== =========== =========== =========== =========== ===========
Net asset value per unit $ 51.43 $ 22.45 $ 24.92 $ 38.76 $ 34.95 $ 19.35
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
56
<PAGE> 62
SEPARATE ACCOUNT ONE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Real Estate Balanced
Emerging Growth Common Stock Securities Assets
Equity Sub-Account Sub-Account Sub-Account Sub-Account
------------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment income:
Dividend Income $ 9,338 $ -- $ 201 $ 640
Expenses:
Mortality and expense risk charge (336) (33) (11) (466)
------- ------- ------- --------
Net investment income (loss) 9,002 (33) 190 174
------- ------- ------- --------
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) from security
transactions:
Proceeds from sales 90,870 1,276 3,981 86,800
Cost of securities sold 67,944 1,127 4,336 79,700
------- ------- ------- --------
Net realized gain (loss) 22,926 149 (355) 7,100
------- ------- ------- --------
Unrealized appreciation (depreciation)
of investments:
Beginning of period 13,417 (2,746) (1,172) (41,712)
End of period 64,740 5,737 476 53,874
------- ------- ------- --------
Net unrealized appreciation
during the period 51,323 8,483 1,648 95,586
------- ------- ------- --------
Net realized and unrealized gain
on investments 74,249 8,632 1,293 102,686
------- ------- ------- --------
Net increase in net assets derived
from operations $83,251 $ 8,599 $ 1,483 $102,860
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Capital Growth Money-Market
Bond Sub-Account Sub-Account Total
---------------- ------------ -----
<S> <C> <C> <C>
Investment income:
Dividend Income $ 13,861 $ 1 $ 24,041
Expenses:
Mortality and expense risk charge (179) (23) (1,048)
-------- ------- --------
Net investment income (loss) 13,682 (22) 22,993
-------- ------- --------
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) from security
transactions:
Proceeds from sales 7,279 33,766 223,972
Cost of securities sold 7,777 33,193 194,077
-------- ------- --------
Net realized gain (loss) (498) 573 29,895
-------- ------- --------
Unrealized appreciation (depreciation)
of investments:
Beginning of period (24,349) (140) (56,702)
End of Period (4,967) 552 120,412
-------- ------- --------
Net unrealized appreciation
during the period 19,382 692 177,114
-------- ------- --------
Net realized and unrealized gain
on investments 18,884 1,265 207,009
-------- ------- --------
Net increase in net assets derived
from operations $ 32,566 $ 1,243 $230,002
======== ======= ========
</TABLE>
See accompanying notes.
57
<PAGE> 63
SEPARATE ACCOUNT ONE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Emerging Growth Common Stock
Equity Sub-Account Sub-Account
-------------------------------- --------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31/95 Dec. 31/94 Dec. 31/95 Dec. 31/94
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 9,002 $ 893 $ (33) $ 1,311
Net realized gain/(loss) 22,926 3,457 149 (70)
Unrealized appreciation (depreciation)
of investments during the year 51,323 (18,752) 8,483 (2,498)
-------- -------- -------- --------
Increase (decrease) in net assets
derived from operations 83,251 (14,402) 8,599 (1,257)
-------- -------- -------- --------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 21,167 36,451 4,454 4,564
Transfer on terminations (69,367) (16,151) (2,794) (1,468)
Transfer on policy loans (14,067) (50,736) 748 (1,811)
Net interfund transfers (711) 44,748 1,799 4
-------- -------- -------- --------
(62,978) 14,312 4,207 1,289
-------- -------- -------- --------
Net increase (decrease) in net assets 20,273 (90) 12,806 32
NET ASSETS
Beginning of year 316,414 316,504 25,881 25,849
-------- -------- -------- --------
End of year $336,687 $316,414 $ 38,687 $ 25,881
======== ======== ======== ========
<CAPTION>
Real Estate Securities Balanced Assets
Sub-Account Sub-Account
-------------------------------- --------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31/95 Dec. 31/94 Dec. 31/95 Dec. 31/94
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 190 $ 515 $ 174 $23,048
Net realized gain/(loss) (355) (1,093) 7,100 (597)
Unrealized appreciation (depreciation)
of investments during the year 1,648 204 95,586 (43,592)
-------- -------- -------- --------
Increase (decrease) in net assets
derived from operations 1,483 (374) 102,860 (21,141)
-------- -------- -------- --------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 2,155 2,495 63,489 64,097
Transfer on terminations (4,207) (24,660) (88,882) (52,520)
Transfer on policy loans 33 (1,944) (12,302) (14,858)
Net interfund transfers 509 -- (3,896) (38,938)
-------- -------- -------- --------
(1,510) (24,109) (41,591) (42,219)
-------- -------- -------- --------
Net increase (decrease) in net assets (27) (24,483) 61,269 (63,360)
NET ASSETS
Beginning of year 11,339 35,822 425,737 489,097
-------- -------- -------- --------
End of year $ 11,312 $ 11,339 $487,006 $425,737
======== ======== ======== ========
<CAPTION>
Capital Growth Money-Market
Bond Sub-Account Sub-Account
-------------------------------- --------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31/95 Dec. 31/94 Dec. 31/95 Dec. 31/94
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 13,682 $ 10,490 $ (22) $ 1,480
Net realized gain/(loss) (498) (1,761) 573 47
Unrealized appreciation (depreciation)
of investments during the year 19,382 (16,344) 692 (81)
-------- -------- -------- --------
Increase (decrease) in net assets
derived from operations 32,566 (7,615) 1,243 1 ,446
-------- -------- -------- --------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 20,284 21,117 106 (446)
Transfer on terminations (7,568) (6,235) (25,407) (1,165)
Transfer on policy loans (4,068) (9,252) (8,358) (39)
Net interfund transfers 408 (8,939) (4) 7,533
-------- -------- -------- --------
9,056 (3,309) (33,663) 5,883
-------- -------- -------- --------
Net increase (decrease) in net assets 41,622 (10,924) (32,420) 7,329
NET ASSETS
Beginning of year 157,530 168,454 46,314 38,985
-------- -------- -------- --------
End of year $199,152 $157,530 $ 13,894 $ 46,314
======== ======== ======== ========
<CAPTION>
Total
--------------------------------
Year Ended Year Ended
Dec. 31/95 Dec. 31/94
------------ ----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 22,993 $ 37,737
Net realized gain/(loss) 29,895 (17)
Unrealized appreciation (depreciation)
of investments during the year 177,114 (81,063)
---------- ----------
Increase (decrease) in net assets
derived from operations 230,002 (43,343)
---------- ----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 111,655 128,278
Transfer on terminations (198,225) (102,199)
Transfer on policy loans (38,014) (78,640)
Net interfund transfers 1,895 4,408
---------- ----------
(126,479) (48,153)
---------- ----------
Net increase (decrease) in net assets 103,523 (91,496)
NET ASSETS
Beginning of year 983,215 1,074,711
---------- ----------
End of year $1,086,738 $ 983,215
========== ==========
</TABLE>
See accompanying notes.
58
<PAGE> 64
Separate Account One of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION
Separate Account One of The Manufacturers Life Insurance Company of America
(the "Separate Account") is a unit investment trust registered under the
Investment Company Act of 1940, as amended. The Separate Account is currently
comprised of six investment sub-accounts, one for each series of shares of
Manulife Series Fund, Inc., available for allocation of net premiums under
variable life insurance policies (the "Policies") issued by The Manufacturers
Life Insurance Company of America ("Manufacturers Life of America").
The Separate Account was established by Manufacturers Life of America, a
wholly-owned subsidiary of The Manufacturers Life Insurance Company of Michigan
("MLIM"), as a separate investment account on May 25, 1983. MLIM is a life
insurance holding company organized in 1983 under Michigan law and a
wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manulife
Financial"), a mutual life insurance company based in Toronto, Canada.
The assets of the Separate Account are the property of Manufacturers Life of
America. The portion of the Separate Account's assets applicable to the
Policies will not be charged with liabilities arising out of any other
business Manufacturers Life of America may conduct.
The net assets may not be less than the amount required under state insurance
law to provide for death (without regard to the minimum death benefit
guarantee) and other Policy benefits.
Additional assets are held in Manufacturers Life of America's general account
to cover the contingency that the guaranteed minimum death benefit might exceed
the death benefit which would have been payable in the absence of such
guarantee.
Currently Manufacturers Life of America is not marketing any life insurance
products through Separate Account One.
59
<PAGE> 65
Separate Account One of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Separate Account in preparation of its financial statements:
a. Valuation of Investments - Investments are made among the six Funds of
Manulife Series Fund, Inc. and are valued at the reported net asset values
of these Funds. Transactions are recorded on the trade date. Net
investment income and net realized and unrealized gain (loss) on
investments in Manulife Series Fund, Inc. are reinvested.
b. Realized gains and losses on the sale of investments are computed on the
first-in, first-out basis.
c. Dividend income is recorded on the ex-dividend date.
d. Federal Income Taxes - Manufacturers Life of America, the Separate
Account's sponsor, is taxed as a "life insurance company" under the
Internal Revenue Code. Under these provisions of the Code, the operations
of the Separate Account form part of the sponsor's total operations and
are not taxed separately.
The current year's operations of the Separate Account are not expected to
affect the sponsor's tax liabilities and, accordingly, no charges were made
against the Separate Account for federal, state and local taxes. However,
in the future, should the sponsor incur significant tax liabilities related
to Separate Account operations, it intends to make a charge or establish a
provision within the Separate Account for such taxes.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
60
<PAGE> 66
Separate Account One of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. MORTALITY AND EXPENSE RISKS CHARGE
Manufacturers Life of America deducts from the assets of the Separate Account a
daily charge equivalent to an annual rate of 0.10% of the average net value of
the Separate Account's assets for mortality and expense risks.
4. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges from each premium payment
before placing any amounts in the sub-accounts. The deductions are for (1)
sales load, (2) administrative expenses, (3) state premium taxes, (4) certain
insurance risks including a risk charge for the guaranteed minimum death
benefit, (5) a surcharge for Policies issued to smokers, (6) premiums for
optional benefits, and (7) additional premiums for extra mortality risks.
5. PURCHASES AND SALES OF MANULIFE SERIES FUND, INC. SHARES
Purchases and sales of the shares of common stock of Manulife Series Fund, Inc.
for the year ended December 31, 1995 were $121,525 and $223,972, respectively,
and for the year ended December 31, 1994 were $169,837 and $182,603,
respectively.
6. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly-owned
subsidiary of Manulife Financial, acts as the principal underwriter of the
Policies pursuant to a Distribution Agreement with Manufacturers Life of
America. Registered representatives of either ManEquity, Inc. or other
broker-dealers having distribution agreements with ManEquity, Inc. who are also
authorized as variable life insurance agents under applicable state insurance
laws, sell the Policies. Registered representatives are compensated on a
commission basis.
Manufacturers Life of America has a formal service agreement with its
affiliate, Manulife Financial, which can be terminated by either party upon
two months' notice. Under this Agreement, Manufacturers Life of America pays
for legal, actuarial, investment and certain other administrative services.
61
<PAGE> 67
The following financial statements of
The Manufacturers Life Insurance Company
of America for the period ended
September 30, 1995 are unaudited.
62
<PAGE> 68
The Manufacturers Life Insurance Company of America
Balance Sheet
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Bonds, at amortized cost (market $58,250,725 -- 1996
and $66,046,733 -- 1995) $57,763,786 $62,757,202
Stocks 19,658,787 22,584,259
Short-term investments 1,666,000 0
Policy loans 8,633,442 6,955,292
------------ ------------
Total investments 87,722,015 92,296,753
Cash on hand and on deposit 7,118,793 9,674,362
Insurance premiums deferred and uncollected 1,329,534 504,818
Accrued investment income 1,050,518 1,059,536
Separate account assets 603,572,134 480,404,450
Funds receivable on reinsurance ceded 74,035 73,300
Receivable for undelivered securities 1,864,999 146,328
Taxes recoverable 8,926,316 3,308,316
Investment in subsidiary 1,590,846 1,080,184
Other assets 199,392 193,715
------------ ------------
$713,448,582 $588,741,762
============ ============
Liabilities, capital and surplus
Aggregate policy reserves $69,370,778 $63,426,096
Contract deposit funds 6,044,164 6,462,516
Amounts due from separate accounts (52,800,170) (39,799,129)
Interest maintenance and asset valuation reserves 5,503,906 4,742,400
Policy and contract claims 294,457 582,853
Provision for policyholder dividends payable 1,792,087 2,346,258
Amounts due to affiliates 11,529,256 9,049,217
Accrued liabilities 5,361,074 5,147,865
Amounts payable for undelivered securities 1,666,000 80,821
Separate account liablilities 603,572,134 480,404,450
------------ ------------
Total liabilities 652,333,686 532,443,347
Capital and surplus:
Common shares, par value $1.00; authorized,
5,000,000 shares; issued and outstanding shares
(4,501,858 -- 1996, 4,501,857 -- 1995) 4,501,858 4,501,857
Preferred shared, par value $100; authorized,
5,000,000 shares; issued and outstanding shares
(105,000 -- 1996 and 1995) 10,500,000 10,500,000
Surplus note 8,500,000 8,500,000
Capital paid in excess of par value 78,500,179 63,500,180
Surplus (40,887,141) (30,703,622)
------------ ------------
Total capital and surplus 61,114,896 56,298,415
------------ ------------
Total liablilities, capital, and surplus $713,448,582 $588,741,762
============ ============
</TABLE>
63
<PAGE> 69
The Manufacturers Life Insurance Company of America
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Life premiums $37,441,887 $26,917,056 $115,841,149 $82,246,124
Annuity deposits 9,109,896 9,176,744 27,904,066 29,606,973
Life premiums, reinsurance assumed (831,831) (372,238) 1,101,533 5,540,618
Investment income, net of investment expenses 1,437,890 1,197,939 4,188,644 3,854,192
Amortization of interest maintenance reserve 6,169 8,353 23,309 14,172
Commission and expense allowances on
reinsurance ceded 43,397 0 147,093
Foreign exchange gain (loss) (1,451) (329,945) 40,625 (329,662)
Other revenue (19,985) 37,106 68,843 92,821
----------- ----------- ------------ -----------
Total revenues 47,185,972 36,635,015 149,315,262 121,025,238
Benefits paid or provided:
Increase (decrease) in aggregate policy reserves (2,507,208) 412,750 5,944,682 10,575,029
Increase (decrease) in liability for deposit funds 531,581 (381,781) (418,352) (223,494)
Transfers to separate accounts, net 26,345,507 19,094,364 83,952,586 65,495,626
Death benefits (68,162) 694,831 2,782,394 2,163,196
Annuity benefits 66,181 (506,892) 401,929 30,802
Disability benefits 46,294 0 151,750
Surrender benefits 8,169,058 6,683,913 17,953,597 12,938,150
----------- ----------- ------------ -----------
32,583,251 25,997,185 110,768,586 90,979,309
Insurance expenses:
Management fee 6,587,000 5,289,000 16,820,000 16,764,000
Commissions 6,896,707 4,471,643 20,718,353 13,449,277
General expenses 3,908,813 4,665,024 15,695,580 9,470,575
Commission and expense allowances
on reinsurance assumed 55,942 13,329 386,701 942,979
Interest expense 142,375 0 427,125 0
----------- ----------- ------------ -----------
17,590,837 14,438,996 54,047,759 40,626,831
----------- ----------- ------------ -----------
Loss before policyholder's dividends
and federal income tax (2,988,116) (3,801,166) (15,501,083) (10,580,902)
Dividends to policyholders 45,402 263,345 569,900 2,172,621
----------- ----------- ------------ -----------
Loss before federal income tax (3,033,518) (4,064,511) (16,070,983) (12,753,523)
Federal income tax benefit (1,009,802) 0 (5,388,798) 0
----------- ----------- ------------ -----------
Net loss from operations after policyholders'
dividends and federal income tax (2,023,716) (4,064,511) (10,682,185) (12,753,523)
Net realized capital loss 48,859 38,348 (90,480) 630,788
----------- ----------- ------------ -----------
Net loss from operations ($1,974,857) ($4,026,163) ($10,772,665) ($12,122,735)
=========== =========== ============ ===========
</TABLE>
64
<PAGE> 70
The Manufacturers Life Insurance Company of America
Statement of Changes in Capital and Surplus
(Unaudited)
<TABLE>
<CAPTION>
Capital
Paid in
Excess of
Capital Par Value Surplus Total
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $23,501,857 $63,500,180 ($30,703,622) $56,298,415
Net loss from operations (10,772,665) (10,772,665)
Issuance of common shares 1 14,999,999 15,000,000
Increase in asset valuation reserve (1,118,541) (1,118,541)
Increase in nonadmitted assets 58,854 58,854
Change in net unrealized capital
gains 1,754,077 1,754,077
Change in liability for reinsurance
in unauthorized companies (105,244) (105,244)
----------- ----------- ------------ -----------
Balance, September 30, 1996 $23,501,858 $78,500,179 ($40,887,141) $61,114,896
=========== =========== ============ ===========
</TABLE>
65
<PAGE> 71
The Manufacturers Life Insurance Company of America
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1996 1995
------------ ------------
<S> <C> <C>
Operating activities:
Premiums collected, net $144,041,813 $117,159,968
Policy benefits paid, net (21,547,307) (15,137,221)
Commissions and other expenses paid (51,399,430) (43,854,220)
Net investment income 4,116,058 3,569,190
Other income and expenses (2,402,311) (1,351,829)
Transfers to separate accounts, net (96,953,627) (72,596,690)
------------ ------------
Net cash (used in) provided by
operating activities (24,144,804) (12,210,802)
Investing activities
Sale, maturity, or repayment of investments 85,756,967 62,744,420
Purchase of investments (77,501,732) (67,892,880)
------------ ------------
Net cash used in investing activities 8,255,235 (5,148,460)
Financing activities
Issuance of stock 15,000,000 5,150,000
------------ ------------
Net cash provided by financing activities 15,000,000 5,150,000
------------ ------------
Net increase in cash and short-term
investments (889,569) (12,209,262)
Cash and short-term investments
at beginning of year 9,674,362 15,983,758
------------ ------------
Cash and short-term investments
at end of year $ 8,784,793 $ 3,774,496
============ ============
</TABLE>
66
<PAGE> 72
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
September 30, 1996
1. ORGANIZATION
ORGANIZATION
The Manufacturers Life Insurance Company of America (Manufacturers Life of
America or the Company) is a wholly-owned subsidiary of Manulife Reinsurance
Corporation (USA) (The Parent), (formerly Manufacturers Life Insurance Company
of Michigan), which is in turn a wholly-owned subsidiary of The Manufacturers
Life Insurance Company (Manulife Financial), a Canadian-based mutual life
insurance company (Notes 4 and 5).
The Company issues and sells variable universal life and variable annuity
products in the United States. The Company also has a branch operation in
Taiwan to develop and market traditional insurance for the Taiwanese market. At
September 30, 1996 the Company had assets of $16,056,539 and liabilities of
$10,333,710 in the Taiwan branch.
During the nine months ended September 30, 1996, the Company received a capital
contribution of $15,000,000 from the Parent in return for one share of common
stock (par value $1).
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements of The Manufacturers Life
Insurance Company of America have been prepared in accordance with accounting
practices for interim financial information and with the instructions to Form
10-Q and Article 10 of regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in conjunction
with the financial statements and footnotes thereto included in the Annual
Report on Form 10-K of the Company the year ended December 31, 1995. In the
opinion of management, all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of the financial statements for
these interim periods have been included. The results of interim periods are
not necessarily indicative of the results to be obtained for a full fiscal
year.
67
<PAGE> 73
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
In April 1993, the Financial Accounting Standard Board issued Interpretation
40, "Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises." The Interpretation as amended is effective
for 1996 annual financial statements and thereafter, will no longer allow
statutory financial statements to be described as being prepared in conformity
with generally accepted accounting principles (GAAP). Upon the effective date
of the Interpretation, in order for financial statements to be described as
being prepared in accordance with GAAP, life insurance companies will be
required to adopt all applicable standards promulgated by the FASB in any
general purpose financial statements such companies may issue. While GAAP
standards have recently been developed for mutual life insurance companies, the
Company has not yet completed the complex and extensive historical calculations
and thus is unable to quantify the effects of the Interpretation on its
financial statements. Thus the accompanying financial statements are presented
in accordance with statutory accounting practices prescribed by the Insurance
Department of the State of Michigan.
All amounts presented are expressed in U.S. Dollars.
STOCKS
Stocks are carried at market value.
BONDS
Bonds not backed by other loans are carried at amortized cost as computed using
the interest method. Loan backed bonds and other structured securities are
valued at amortized cost using the interest method including anticipated
prepayments. Prepayment assumptions are updated periodically and are accounted
for using the prospective method. Gains and losses on sales of bonds are
calculated on the specific identification method and recognized into income
based on NAIC prescribed formulas. Short-term investments include investments
with maturities of less than one year at the date of acquisition. Market
values disclosed are based on NAIC quoted values.
POLICY LOANS
Policy loans are reported at unpaid principal balances which approximate fair
value.
ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
The Asset Valuation Reserve and Interest Maintenance Reserve were determined by
NAIC prescribed formulas and are reported as liabilities rather than as
valuation allowances or appropriations of surplus.
POLICY AND CONTRACT CLAIMS
Policy and contract claims are determined on an individual case basis for
reported losses. Estimates of incurred but not reported losses are developed
on the basis of past experience.
68
<PAGE> 74
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
Separate account assets and liabilities reported in the accompanying financial
statements represent funds that are separately administered, principally for
variable annuity and variable life contracts. For the majority of these
contracts the contractholder, rather than the Company, bears the investment
risk. Separate account assets are recorded at market value. Operations of the
separate accounts are not included in the accompanying financial statements.
REVENUE RECOGNITION
Both premium and investment income are recorded when due.
REINSURANCE
Reinsurance premiums and claims are accounted for on a basis consistent with
that used in accounting for the original policies issued and the terms of the
reinsurance contracts. Premiums and claims are reported net of reinsured
amounts.
POLICY RESERVES
Certain policy reserves are calculated based on statutorily required interest
and mortality assumptions.
3. INVESTMENTS AND INVESTMENT INCOME
The amortized cost and market value of investments in fixed maturities (bonds)
as of September 30, 1996 is summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZE MARKET
COST GAINS LOSSES VALUE
----------- ----------- ----------- -----------
<S> <C <C> <C> <C>
U.S. Government $23,574,727 $432,425 $(199,428) $23,807,724
Foreign Government 9,258,320 75,039 (43,707) 9,289,652
Corporate 24,930,739 558,435 (335,825) 25,153,349
----------- ---------- ---------- -----------
$57,763,786 $1,065,899 $(578,960) $58,250,725
=========== ========== ========== ===========
</TABLE>
69
<PAGE> 75
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
Proceeds from sales of investments in debt securities during 1996 were
$81,149,600. Gross gains of $1,101,200 and gross losses of $1,615,209 were
realized on those sales.
The amortized cost and market value of investments in fixed maturities (bonds)
as of December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
United States Government $15,145,033 $ 681,032 $(57,916) $15,768,149
Foreign Government 6,071,376 157,635 -- 6,229,011
Corporate 31,046,219 2,508,780 -- 33,554,999
Mortgage-backed securities:
U.S. Government agencies 9,522,771 -- -- 9,522,771
Corporate 971,803 -- -- 971,803
----------- ---------- -------- -----------
$62,757,202 $3,347,447 $(57,916) $66,046,733
=========== ========== ======== ===========
</TABLE>
The amortized cost and market value of fixed maturities at September 30, 1996
by contractual maturities, are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
YEARS TO MATURITY AMORTIZED COST MARKET VALUE
----------------- -------------- ------------
<S> <C> <C>
One year or less $ 3,370,562 $ 3,370,561
Greater than 1; up to 5 years 3,177,517 3,207,447
Greater than 5; up to 10 years 27,522,948 27,717,746
Due after 10 years 23,692,759 23,954,971
----------- -----------
$57,763,786 $58,250,725
=========== ===========
</TABLE>
At September 30, 1996, $10,644,347 of bonds at amortized cost were on deposit
with government insurance departments to satisfy regulatory regulations.
70
<PAGE> 76
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
Major categories of net investment income for the first nine months were as
follows:
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
1996 1995
--------- ----------
<S> <C> <C>
Gross investment income:
Bond Income $3,285,074 $3,190,652
Policy Loans 434,845 296,205
Short-term investments 645,903 624,593
Dividend Income 95,983 7,848
---------- ----------
4,461,805 4,119,298
Investment Expenses (273,161) (265,106)
---------- ----------
Net investment income $4,188,644 $3,854,192
========== ==========
</TABLE>
4. RELATED PARTY TRANSACTIONS
Manufacturers Life of America has a formal service agreement with Manulife
Financial which can be terminated by either party upon two months' notice.
Under the Agreement, Manufacturers Life of America will pay direct operating
expenses incurred each year by Manulife Financial on behalf of Manufacturers
Life of America. Services provided under the Agreement include legal,
actuarial, investment, data processing and certain other administrative
services. Costs incurred under this Agreement were $17,090,426 in the first
nine months of 1996, and $17,029,106 in 1995. In addition, there was
$4,916,476 agents' bonuses in 1996 and $3,697,487 in 1995 which were allocated
to the Company and are included in commissions.
In addition, the Company has several reinsurance agreements with Manulife
Financial which may be terminated upon the specified notice by either party.
These agreements are summarized as follows:
(a) The Company assumes two blocks of insurance from Manulife Financial under
coinsurance treaties. The Company's risk is limited to $100,000 of
initial face amount per claim plus a pro-rata share of any increase in
face amount.
(b) The Company cedes the risk in excess of $25,000 per life to Manulife
Financial under the terms of an automatic reinsurance agreement.
(c) The Company cedes a substantial portion of its risk on its Flexible
Premium Variable Life policies to Manulife Financial under the terms of a
stop loss reinsurance agreement.
71
<PAGE> 77
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
(d) Under the terms of an automatic coinsurance agreement, the Company cedes
its risk on structured settlements to Manulife Financial.
Selected amounts relating to the above treaties reflected in the financial
statements are as follows:
<TABLE>
<CAPTION>
1996 1995
__________ __________
<S> <C> <C>
Life and annuity premiums assumed $ 1,101,533 $ 5,540,618
Other life and annuity
consideration ceded (371,518) (431,357)
Commissions and expense allowances
on reinsurance assumed (386,701) (942,979)
Policy reserves assumed 45,019,396 47,386,235
Policy reserves ceded 3,853,375 3,833,247
</TABLE>
5. FEDERAL INCOME TAX
The Company joins the Parent, The Manufacturers Life Insurance Co. (USA) and
Manulife Reinsurance Limited in filing a U.S. consolidated income tax return as
a life insurance group under provisions of the Internal Revenue Code. In
accordance with an income tax-sharing agreement dated December 29, 1983, the
Company's income tax provision (or benefit) is computed as if the Company filed
a separate income tax return. The Company receives no surtax exemption. Tax
benefits from operating losses are provided at the U.S. statutory rate plus any
tax credits attributable to the Company, provided the consolidated group
utilizes such benefits currently. Taxes recoverable in the financial
statements represent tax-related amounts receivable from affiliates.
72
<PAGE> 78
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
6. STATUTORY RESTRICTIONS ON DIVIDENDS
The Company is subject to statutory limitations on the payment of dividends to
its Parent. The Company cannot pay dividends during 1996 without the prior
approval of insurance regulatory authorities.
7. INVESTMENT IN SEPARATE ACCOUNTS
The Company markets variable life insurance and variable annuity products
through Separate Accounts which use Manulife Series Fund, Inc. as an
investment vehicle.
Common stock in the amount of $19,658,787 represents the Company's seed money
investment in Manulife Series Fund, Inc..
73
<PAGE> 79
The following financial statements of
The Manufacturers Life Insurance Company
of America for the period ended
December 31, 1995 are audited.
74
<PAGE> 80
Report of Independent Auditors
The Board of Directors
The Manufacturers Life Insurance
Company of America
We have audited the accompanying balance sheets of The Manufacturers Life
Insurance Company of America as of December 31, 1995 and 1994, and the related
statements of operations, changes in capital and surplus, and cash flows for
each of the three years in the period 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 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 America at December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles and with reporting practices prescribed or permitted by the
Insurance Department of the State of Michigan.
Philadelphia, Pennsylvania ERNST & YOUNG LLP
February 2, 1996
75
<PAGE> 81
The Manufacturers Life Insurance Company of America
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
-----------------------------
<S> <C> <C>
ASSETS
Bonds, at amortized cost (market $66,046,733--
1995 and $51,082,395--1994) $ 62,757,202 $ 52,149,080
Stocks 22,584,259 25,629,580
Short-term investments -- 10,914,561
Policy loans 6,955,292 4,494,390
------------ ------------
Total investments 92,296,753 93,187,611
Cash 9,674,362 5,069,197
Life insurance premiums deferred and uncollected 504,818 13,646
Accrued investment income 1,059,536 796,333
Separate account assets 480,404,450 302,736,198
Funds receivable on reinsurance assumed -- 880,284
Receivable for undelivered securities 146,328 69,003
Taxes recoverable 3,308,316 --
Investment in subsidiary 1,080,184 --
Other assets 267,015 333,651
------------ ------------
Total assets $588,741,762 $403,085,923
============ ============
LIABILITIES, CAPITAL AND SURPLUS
Aggregate policy reserves $26,683,090 $29,761,174
Other contract deposits 1,238,943 3,938,425
Interest maintenance and asset valuation reserves 4,742,400 111,566
Policy and contract claims 582,853 94,346
Provision for policyholder dividends payable 2,346,258 1,385,409
Amounts due to affiliates 9,049,217 7,377,108
Payable for undelivered securities 80,821 3,512,459
Accrued liabilities 7,315,315 4,773,565
Separate account liabilities 480,404,450 302,736,198
------------ ------------
Total liabilities 532,443,347 353,690,250
Capital and surplus:
Common shares, par value $1.00; authorized,
5,000,000 shares; issued and outstanding
4,501,857 shares (4,501,855 shares in 1994) 4,501,857 4,501,855
Preferred shares, par value $100; authorized
5,000,000 shares; issued and outstanding
105,000 shares 10,500,000 10,500,000
Surplus note 8,500,000 --
Capital paid in excess of par value 63,500,180 49,849,998
Deficit (30,703,622) (15,456,180)
------------ ------------
Total capital and surplus 56,298,415 49,395,673
------------ ------------
Total liabilities, capital and surplus $588,741,762 $403,085,923
============ ============
</TABLE>
See accompanying notes.
76
<PAGE> 82
The Manufacturers Life Insurance Company of America
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Revenues:
Life and annuity premiums, principally
reinsurance assumed $ 5,956,997 $ 25,385,628 $ 12,745,981
Other life and annuity considerations 153,859,957 168,075,003 113,332,974
Investment income, net of investment
expenses 5,840,560 3,588,629 3,323,962
Amortization of interest maintenance reserve 23,975 19,527 32,866
Commission and expense allowance
on reinsurance ceded 147,109 187,694 --
Foreign exchange (loss) gain (284,127) 114,728 (197,971)
Other revenue 211,191 54,763 33,935
------------ ------------ ------------
Total revenues 165,755,662 197,425,972 129,271,747
Benefits paid or provided:
(Decrease) increase in aggregate policy reserves (3,078,084) 16,741,569 5,168,484
(Decrease) increase in liability for deposit funds (2,699,482) 654,214 2,820,520
Transfers to separate accounts, net 99,807,392 136,896,150 98,601,141
Death benefits 3,981,377 640,875 582,534
Disability benefits 123,786 -- --
Maturity benefits 207,719 580,615 79,253
Surrender benefits 22,028,224 3,701,591 2,319,926
------------ ------------ ------------
120,370,932 159,215,014 109,571,858
Insurance expenses:
Management fee 22,864,000 21,222,310 12,378,288
Commissions 21,411,198 23,416,110 14,742,130
General expenses 15,475,621 8,260,467 5,108,104
Commissions and expense allowances
on reinsurance assumed 1,014,163 810,252 329,634
------------ ------------ ------------
60,764,982 53,709,139 32,558,156
------------ ------------ ------------
Loss before policyholders' dividends
and federal income tax (15,380,252) (15,498,181) (12,858,267)
Dividends to policyholders 2,367,002 1,149,719 837,454
------------ ------------ ------------
Loss before federal income tax (17,747,254) (16,647,900) (13,695,721)
Federal income tax benefit (4,115,770) -- (324,643)
------------ ------------ ------------
Net loss from operations after policyholders'
dividends and federal income tax (13,631,484) (16,647,900) (13,371,078)
Net realized capital gains (net of capital
gains tax of $807,453 in 1995; $0 in 1994,
and $236,415 in 1993, and $1,567,770 in
1995, $(554,000) in 1994, and $347,292 in
1993 transferred (from) to the interest
maintenance reserve) (73,343) (3,012,485) 93,618
------------ ------------ ------------
Net loss from operations $(13,704,827) $(19,660,385) $(13,277,460)
============ ============ ============
</TABLE>
See accompanying notes.
77
<PAGE> 83
The Manufacturers Life Insurance Company of America
Statements of Changes in Capital and Surplus
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF SURPLUS
CAPITAL PAR VALUE (DEFICIT) TOTAL
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992 $35,001,853 $4,000,000 $16,542,195 $55,544,048
Net loss from operations (13,277,460) (13,277,460)
Issuance of preferred shares 1 5,849,999 5,850,000
Increase in asset valuation reserve (13,076) (13,076)
Increase in nonadmitted assets (133,575) (133,575)
Change in net unrealized capital
losses (1,592,242) (1,592,242)
Change in liability for reinsurance
in unauthorized companies (29,905) (29,905)
Company's share of increase in
separate account assets, net 4,308,148 4,308,148
----------- ----------- ------------ -----------
Balance, December 31, 1993 35,001,854 9,849,999 5,804,085 50,655,938
Net loss from operations (19,660,385) (19,660,385)
Issuance of common stocks 1 19,999,999 20,000,000
Capital restructuring of preference
shares (20,000,000) 20,000,000 --
Increase in asset valuation reserve (55,286) (55,286)
Increase in nonadmitted assets (1,021,357) (1,021,357)
Change in net unrealized capital
losses (425,082) (425,082)
Change in liability for reinsurance
in unauthorized companies (98,155) (98,155)
----------- ----------- ------------ -----------
Balance, December 31, 1994 15,001,855 49,849,998 (15,456,180) 49,395,673
Net loss from operations (13,704,827) (13,704,827)
Issuance of common shares 2 12,569,998 12,570,000
Issuance of surplus note 8,500,000 8,500,000
Contribution of Manufacturers
Adviser Corporation 1,080,184 1,080,184
Increase in asset valuation reserve (3,285,208) (3,285,208)
Increase in nonadmitted assets (1,053,124) (1,053,124)
Change in net unrealized capital
losses 2,921,742 2,921,742
Change in liability for reinsurance
in unauthorized companies (126,025) (126,025)
----------- ----------- ------------ -----------
Balance, December 31, 1995 $23,501,857 $63,500,180 $(30,703,622) $56,298,415
=========== =========== ============ ===========
</TABLE>
See accompanying notes.
78
<PAGE> 84
The Manufacturers Life Insurance Company of America
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums collected, net $159,337,079 $193,478,637 $126,075,035
Policy benefits paid, net (25,827,767) (4,982,444) (2,829,812)
Commissions and other expenses paid (62,302,890) (48,141,400) (35,203,997)
Net investment income 5,570,951 3,343,515 3,197,892
Other income and expenses (3,607,415) (1,946,063) (1,592,957)
Transfers to separate accounts, net (98,031,353) (136,950,482) (98,220,292)
Net cash (used in) provided by ------------ ------------ ------------
operating activities (24,861,395) 4,801,763 (8,574,131)
INVESTING ACTIVITIES
Sale, maturity, or repayment of investments 74,009,501 73,187,733 28,248,633
Purchase of investments (77,607,686) (91,063,874) (73,688,735)
------------ ------------ ------------
Net cash used in investing activities (3,598,185) (17,876,141) (45,440,102)
FINANCING ACTIVITIES
Issuance of shares 12,570,000 20,000,000 5,850,000
Contribution of Manufacturers Adviser
Corporation 1,080,184 -- --
Issuance of surplus notes 8,500,000 -- --
Surplus withdrawn from separate account -- -- 48,701,076
------------ ------------ ------------
Net cash provided by financing activities 22,150,184 20,000,000 54,551,076
------------ ------------ ------------
Net (decrease) increase in cash and
short-term investments (6,309,396) 6,925,622 536,843
Cash and short-term investments
at beginning of year 15,983,758 9,058,136 8,521,293
------------ ----------- ------------
Cash and short-term investments
at end of year $ 9,674,362 $15,983,758 $ 9,058,136
============ =========== ============
</TABLE>
See accompanying notes.
79
<PAGE> 85
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION
ORGANIZATION
The Manufacturers Life Insurance Company of America (Manufacturers Life of
America or the Company) is a wholly-owned subsidiary of Manulife Reinsurance
Corporation (U.S.A.) (the Parent), (formerly Manufacturers Life Insurance
Company of Michigan), which is in turn a wholly-owned subsidiary of The
Manufacturers Life Insurance Company (Manulife Financial), a Canadian-based
mutual life insurance company (Notes 4 and 5).
The Company issues and sells variable universal life and variable annuity
products in the United States. The Company also has a branch operation in Taiwan
to develop and market traditional insurance for the Taiwanese market. At
December 31, 1995 the Company had assets of $11,234,000 and liabilities of
$5,696,000 in the Taiwan branch.
During 1995, the Company's parent contributed $12,570,000 of capital in return
for 2 shares of the Company's common stock par value $1 with the remaining
$12,569,998 being recorded as contributed surplus. During 1995, the Company's
parent transferred 100% of the outstanding stock of Manufacturers Adviser
Corporation to the Company which was recorded at book values as contributed
surplus. During 1995, the Company's parent also contributed $8,500,000 in return
for a 10-year surplus note bearing interest at 6.625%.
Subsequent to the year end, the Parent contributed $15,000,000 capital in return
for 1 share of the Company's common stock par value $1 with the remaining
$14,999,999 being recorded as contributed surplus.
During 1994, the Company's parent contributed $20,000,000 of capital in return
for 1 share of the Company's common stock par value $1 with the remaining
$19,999,999 being recorded as contributed surplus. During 1994, the Company
restructured its capital by exchanging 230,000 shares of preferred stock with a
par value of $23,000,000 for 3,000,000 shares of common stock par value
$3,000,000 with the remaining $20,000,000 being recorded as contributed surplus.
The Parent contributed $5,850,000 in capital in return for 1 share of common
stock during 1993.
80
<PAGE> 86
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements of Manufacturers Life of America have been
prepared in accordance with accounting practices prescribed or permitted by the
Insurance Department of Michigan, which are considered generally accepted
accounting principles for mutual life insurance companies and their wholly-owned
direct and indirect subsidiaries. Such practices differ in certain respects from
generally accepted accounting principles followed by stock life insurance
companies in determining financial position and results of operations. In
general, the differences are: (1) commissions and other costs of acquiring and
writing policies are charged to expense in the year incurred rather than being
amortized over the related policy term; (2) certain non-admitted assets are
excluded from the balance sheet; (3) deferred income taxes are not provided for
timing differences in recording certain items for financial statement and tax
purposes; (4) certain transactions are reflected directly to surplus rather than
reflected in net income from operations (for example, certain transactions
related to the separate accounts); and (5) debt securities are carried at
amortized cost.
In April 1993, the Financial Accounting Standards Board issued Interpretation
No. 40, "Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises." The Interpretation as amended is
effective for 1996 annual financial statements and thereafter, and will no
longer allow statutory financial statements to be described as being prepared in
conformity with generally accepted accounting principles (GAAP). Upon the
effective date of the Interpretation, in order for financial statements to be
described as being prepared in accordance with GAAP, life insurance companies
will be required to adopt all applicable standards promulgated by the FASB in
any general purpose financial statements such companies may issue. While GAAP
standards have recently been developed for mutual life insurance companies, the
Company has not yet completed the complex and extensive historical calculations
and thus is unable to quantify the effects of the Interpretation on its
financial statements.
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect 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.
All amounts presented are expressed in U.S. Dollars. Certain amounts from prior
periods have been reclassified to conform with current-period presentation.
81
<PAGE> 87
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCKS
Stocks are carried at market value.
BONDS
Bonds not backed by other loans are carried at amortized cost as computed using
the interest method. Loan backed bonds and other structured securities are
valued at amortized cost using the interest method including anticipated
prepayments. Prepayment assumptions are updated periodically and are accounted
for using the prospective method. Gains and losses on sales of bonds are
calculated on the specific identification method and recognized into income
based on NAIC prescribed formulas. Short-term investments include investments
with maturities of less than one year at the date of acquisition. Market values
disclosed are based on NAIC quoted values.
POLICY LOANS
Policy loans are reported at unpaid principal balances which approximate fair
value.
ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
The Asset Valuation Reserve and Interest Maintenance Reserve were determined by
NAIC prescribed formulas and are reported as liabilities rather than as
valuation allowances or appropriations of surplus.
POLICY AND CONTRACT CLAIMS
Policy and contract claims are determined on an individual case basis for
reported losses. Estimates of incurred but not reported losses are developed on
the basis of past experience.
82
<PAGE> 88
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
Separate account assets and liabilities reported in the accompanying financial
statements represent funds that are separately administered, principally for
variable annuity and variable life contracts. For the majority of these
contracts the contractholder, rather than the Company, bears the investment
risk. Separate account assets are recorded at market value. Operations of the
separate accounts are not included in the accompanying financial statements.
REVENUE RECOGNITION
Both premium and investment income are recorded when due.
INVESTMENT IN SUBSIDIARIES
The investment in Manufacturers Adviser Corporation ("MAC") is carried at net
equity of MAC as computed under generally accepted accounting principles.
Undistributed income and loss is treated as a component of unrealized gains and
losses and applies directly to capital and surplus.
REINSURANCE
Reinsurance premiums and claims are accounted for on a basis consistent with
that used in accounting for the original policies issued and the terms of the
reinsurance contracts. Premiums and claims are reported net of reinsured
amounts.
POLICY RESERVES
Certain policy reserves are calculated based on statutorily required interest
and mortality assumptions.
83
<PAGE> 89
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME
The amortized cost and market value of investments in fixed maturities (bonds)
as of December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
NAME OF PERSON COST GAINS LOSSES VALUE
- -------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Government $15,145,033 $681,032 $ (57,916) $15,768,149
Foreign governments 6,071,376 157,635 -- 6,229,011
Corporate 31,046,219 2,508,780 -- 33,554,999
Mortgage-backed securities:
U.S. Government agencies 9,522,771 -- -- 9,522,771
Corporate 971,803 -- -- 971,803
----------- ---------- ---------- -----------
$62,757,202 $3,347,447 $ (57,916) $66,046,733
=========== ========== ========== ===========
</TABLE>
Proceeds from sales of investments in debt securities during 1995 were
$67,506,660. Gross gains of $2,630,790 and gross losses of $218,778 were
realized on those sales.
The amortized cost and market value of investments in fixed maturities (bonds)
as of December 31, 1994 is summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
NAME OF PERSON COST GAINS LOSSES VALUE
- -------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Government $31,784,581 $ 243,971 $(441,592) $31,586,960
Foreign governments 7,388,458 -- (294,385) 7,094,073
Corporate 9,986,244 2,457 (577,136) 9,411,565
Mortgage-backed securities:
U.S. Government agencies 2,480,571 -- -- 2,480,571
Corporate 509,226 -- -- 509,226
----------- --------- ----------- -----------
$52,149,080 $ 246,428 $(1,313,113) $51,082,395
=========== ========= =========== ===========
</TABLE>
Proceeds from sales of investments in debt securities during 1994 were
$43,175,845. Gross gains of $167,738 and gross losses of $1,006,702 were
realized on those sales.
84
<PAGE> 90
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
The amortized cost and market value of fixed maturities at December 31, 1995 by
contractual maturities, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
YEARS TO MATURITY AMORTIZED COST MARKET VALUE
- ------------------------------ -------------- ------------
<S> <C> <C>
One year or less $564,857 $564,857
Greater than 1; up to 5 years 4,079,679 4,181,361
Greater than 5; up to 10 years 14,786,283 15,858,075
Due after 10 years 32,831,809 34,947,866
Mortgage-backed securities 10,494,574 10,494,574
----------- -----------
$62,757,202 $66,046,733
=========== ===========
</TABLE>
At December 31, 1995, $6,617,749 of bonds at amortized cost were on deposit
with government insurance departments to satisfy regulatory regulations.
Major categories of net investment income for each year were as follows:
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Dividends; Manulife Series Fund,
Inc. (Note 9) $645,908 $1,244,794 $1,440,392
Bond income 4,430,236 1,712,294 1,422,064
Policy loans 360,406 236,972 166,514
Short-term investments 754,346 501,477 384,178
---------- ---------- ----------
6,190,896 3,695,537 3,413,148
Investment expenses (350,336) (106,908) (89,186)
---------- ---------- ----------
Net investment income $5,840,560 $3,588,629 $3,323,962
========== ========== ==========
</TABLE>
85
<PAGE> 91
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS
Manufacturers Life of America has a formal service agreement with Manulife
Financial which can be terminated by either party upon two months' notice. Under
the Agreement, Manufacturers Life of America will pay direct operating expenses
incurred each year by Manulife Financial on behalf of Manufacturers Life of
America. Services provided under the Agreement include legal, actuarial,
investment, data processing and certain other administrative services. Costs
incurred under this Agreement were $23,211,484 in 1995, $21,326,446 in 1994, and
$12,467,474 in 1993. In addition, there were $5,052,062 agents' bonuses in 1995,
$7,795,184 in 1994, and $5,363,558 in 1993 which were allocated to the Company
and are included in commissions.
In addition, the Company has several reinsurance agreements with Manulife
Financial which may be terminated upon the specified notice by either party.
These agreements are summarized as follows:
(a) The Company assumes two blocks of insurance from Manulife Financial under
coinsurance treaties. The Company's risk is limited to $100,000 of initial
face amount per claim plus a pro-rata share of any increase in face amount.
(b) The Company cedes the risk in excess of $25,000 per life to Manulife
Financial under the terms of an automatic reinsurance agreement.
(c) The Company cedes a substantial portion of its risk on its Flexible Premium
Variable Life policies to Manulife Financial under the terms of a stop loss
reinsurance agreement.
(d) Under the terms of an automatic coinsurance agreement, the Company cedes
its risk on structured settlements to Manulife Financial.
86
<PAGE> 92
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
Selected amounts relating to the above treaties reflected in the financial
statements are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Life and annuity premiums
assumed $5,956,997 $25,385,628 $12,745,981
Other life and annuity
considerations ceded (598,330) (437,650) (201,685)
Commissions and expense
allowances
on reinsurance assumed (1,014,163) (810,252) (329,634)
Policy reserves assumed 48,714,791 47,672,591 23,070,952
Policy reserves ceded 3,833,247 3,786,647 3,782,156
</TABLE>
During 1993, the Company assumed the first $50,000 of initial face amount on
two blocks of business. This resulted in transfers of $10,837,000 to establish
the initial reserves. In 1994 the treaties were amended to assume the first
$100,000 of initial face amount for the same blocks of business. This resulted
in a transfer of $21,477,000 to establish the additional reserve. Commissions
equal to 17% are charged for all renewed premiums related to these contracts.
During 1994, the Company terminated another treaty resulting in a premium to
Manulife Financial to transfer the reserve of $799,874.
Manulife Financial provides a claims paying guarantee to all U.S. policyholders.
5. FEDERAL INCOME TAX
The Company joins the Parent, The Manufacturers Life Insurance Co. (U.S.A.) and
Manufacturers Reinsurance Limited in filing a U.S. consolidated income tax
return as a life insurance group under provisions of the Internal Revenue Code.
In accordance with an income tax-sharing agreement dated December 29, 1983, the
Company's income tax provision (or benefit) is computed as if the Company filed
a separate income tax return. The Company receives no surtax exemption. Tax
benefits from operating losses are provided at the U.S. statutory rate plus any
tax credits attributable to the Company, provided the consolidated group
utilizes such benefits currently. Taxes recoverable in the financial statements
represent tax-related amounts receivable from affiliates.
87
<PAGE> 93
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
5. FEDERAL INCOME TAX
The Company, Parent and The Manufacturers Life Insurance Co. (U.S.A.) have
available consolidated net operating losses of approximately $51,400,000 which
will expire in the year 2009 and capital loss carryforwards of approximately
$102,800,000 which will expire in 1999. The losses of the Company, Parent and
the Manufacturers Life Insurance Co. (U.S.A.) may be used to offset the
ordinary and capital gain income of Manufacturers Reinsurance Limited.
6. STATUTORY RESTRICTIONS ON DIVIDENDS
The Company is subject to statutory limitations on the payment of dividends to
its Parent. The Company cannot pay dividends during 1995 without the prior
approval of insurance regulatory authorities.
7. REINSURANCE
The Company cedes reinsurance as a party to several reinsurance treaties with
major unrelated insurance companies. The Company remains obligated for amounts
ceded in the event reinsurers do not meet their obligations.
Summary financial information related to these reinsurance activities is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Life insurance premiums ceded $275,145 $218,767 $130,913
</TABLE>
88
<PAGE> 94
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
8. RESERVES
Aggregate policy reserves for life policies including variable life, are based
on statutory mortality tables and interest assumptions using either the net
level or commissioners' reserve valuation method. The composition of the
aggregate policy reserves at December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
MORTALITY INTEREST
AGGREGATE RESERVES TABLE RATES
------------------ ----- --------
1995 1994
---- ----
<S> <C> <C> <C>
$25,561,456 $28,553,885 1980 CSO 4%
(173,768) (189,080) Reinsurance ceded
1,295,402 1,396,369 Miscellaneous
- ----------- -----------
$26,683,090 $29,761,174
=========== ===========
</TABLE>
At December 31, 1995 the Company's annuity reserves and deposit fund liabilities
are comprised as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------ -------
(in 000's)
<S> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $222,994 97.8%
At book value less current surrender charge 1,239 .5%
Not subject to discretionary withdrawal 3,863 1.7%
-------- -----
Total gross annuity actuarial reserves and
deposit fund liabilities $228,096 100%
======== =====
</TABLE>
9. INVESTMENT IN SEPARATE ACCOUNTS
During 1984, the Company initiated plans to market variable life insurance
products through Separate Account One of The Manufacturers Life Insurance
Company of America ("Separate Account One") using Manulife Series Fund, Inc. as
its investment vehicle. Initial capitalization was $15,000,000. Through 1988,
the Company provided an additional capitalization of $6,000,000.
89
<PAGE> 95
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
9. INVESTMENT IN SEPARATE ACCOUNTS (CONTINUED)
In December 1993, the Company transferred all of its shares, related to seed
money, in Manulife Series Fund, Inc. out of Separate Account One to the General
Account. At December 31, 1995, the $22,584,259 common stock represents the
Company's seed money investment in Manulife Series Fund, Inc.
During 1995, 1994, and 1993, the following dividends were received from Manulife
Series Fund, Inc.:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Separate Account One $24,041 $38,732 $1,610,693
Separate Account Two 3,520,461 4,574,620 7,377,861
Separate Account Three 1,693,796 1,490,374 666,141
Separate Account Four 2,445,127 3,072,376 4,966,559
General Account 645,908 1,244,794 1,440,392
</TABLE>
Dividends have been reinvested by the Company in Manulife Series Fund, Inc.
During 1993, the Company withdrew $8,000,000 of its seed money and accumulated
earnings from Separate Account One and the Manulife Series Fund, Inc. and
utilized these funds to pay down its intercompany debt.
During 1994, the Company withdrew $13,011,137 of its seed money and accumulated
earnings from the Manulife Series Fund, Inc. and utilized these funds to pay
down its intercompany debt.
During 1995, the Company withdrew $6,500,000 of its seed money and accumulated
earnings from the Manulife Series Fund, Inc. and utilized these funds to pay
down its intercompany debt.
90
<PAGE> 96
(This Page Intentionally Left Blank)
91
<PAGE> 97
Manulife Financial and the block design are registered
service marks of The Manufacturers Life Insurance
Company and are used by it and its subsidiaries.
92
