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PROSPECTUSES FOR
MANULIFE FINANCIAL'S GENERATION
A FLEXIBLE PREMIUM
SURVIVORSHIP VARIABLE LIFE
INSURANCE POLICY
ISSUED BY
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
AND FOR
MANULIFE SERIES FUND, INC.
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PROSPECTUS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
MANULIFE FINANCIAL'S GENERATION
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
This prospectus describes the Flexible Premium Survivorship Variable Life
Insurance Policy (the "Policy") issued by The Manufacturers Life Insurance
Company of America ("Manufacturers Life of America" or the "Company"), a stock
life insurance company that is an indirect wholly-owned subsidiary of The
Manufacturers Life Insurance Company ("Manufacturers Life"). The Policies are
designed to provide lifetime insurance protection together with flexibility as
to the timing and amount of premium payments, the investments underlying the
Policy Value and the amount of insurance coverage. This flexibility allows the
policyowner to pay premiums and adjust insurance coverage in light of his or her
current financial circumstances and insurance needs. In this prospectus the
term "policyowner" means one or more policyowners.
The Policies provide for: (1) a Net Cash Surrender Value that can be received by
partial withdrawals or surrender of the Policy; (2) Policy loans; and (3) an
insurance benefit payable at the last surviving life insured's death.
A Policy's Policy Value may be accumulated on a fixed basis or vary with the
investment performance of the sub-accounts of Manufacturers Life of America's
Separate Account Three (the "Separate Account") to which the policyowner
allocates net premiums. The assets of each sub-account will be used to purchase
shares of a particular portfolio ("Fund") of Manulife Series Fund, Inc. (the
"Series Fund"). The accompanying prospectus for the Series Fund and the Series
Fund's statement of additional information describe the investment objectives of
the Funds in which net premiums may be invested: the Emerging Growth Equity
Fund, the Common Stock Fund, the Real Estate Securities Fund, the Balanced
Assets Fund, the Capital Growth Bond Fund, the Money-Market Fund, the
International Fund, and the Pacific Rim Emerging Markets Fund. Other
sub-accounts and Funds may be added in the future.
Prospective purchasers should ask a Manulife Financial representative if
changing, or adding to, existing insurance coverage would be advantageous.
Prospective purchasers should note that it may not be advisable to purchase a
Policy as a replacement for existing insurance.
BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES IN THE EARLY YEARS,
THE POLICY IS NOT SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. A POLICYOWNER
CONTEMPLATING SURRENDER OF A POLICY SHOULD PAY SPECIAL ATTENTION TO THE SALES
CHARGE LIMITATION PROVISIONS DESCRIBED IN THIS PROSPECTUS, WHICH APPLY ONLY
DURING THE FIRST TWO YEARS FOLLOWING THE POLICY DATE OR FOLLOWING AN INCREASE IN
FACE AMOUNT.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR MANULIFE SERIES FUND,
INC.
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])
THE DATE OF THIS PROSPECTUS IS MAY 1, 1995.
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PROSPECTUS CONTENTS
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PAGE
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INTRODUCTION TO POLICIES.................................................... 1
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF
AMERICA, SEPARATE ACCOUNT THREE AND THE SERIES FUND..................... 7
Manufacturers Life of America and Manufacturers Life............ 7
Manufacturers Life of America's Separate Account Three.......... 7
Manulife Series Fund, Inc....................................... 7
Investment Objectives and Risks of the Funds............ 8
Selection of Sub-account(s)............................. 9
DETAILED INFORMATION ABOUT THE POLICIES..................................... 10
PREMIUM PROVISIONS...................................................... 10
Policy Issue and Initial Premium................................ 10
Premium Allocation.............................................. 11
Premium Limitations............................................. 11
Short-Term Cancellation Right and "Free Look" Provisions........ 11
INSURANCE BENEFIT....................................................... 12
The Insurance Benefit........................................... 12
No Lapse Guarantee.............................................. 12
Death Benefit Guarantee......................................... 13
Death Benefit Options........................................... 14
Death Benefit Option Changes.................................... 15
Face Amount Changes............................................. 15
POLICY VALUES........................................................... 16
Policy Value.................................................... 16
Transfers of Policy Value....................................... 17
Policy Loans.................................................... 18
Partial Withdrawals and Surrenders.............................. 20
CHARGES AND DEDUCTIONS.................................................. 21
Deductions from Premiums........................................ 21
Surrender Charges............................................... 21
Deferred Sales Charge........................................... 21
Monthly Deductions.............................................. 24
Other Charges................................................... 25
Special Provisions for Group or Sponsored Arrangements.......... 26
Special Provisions for Exchanges................................ 26
THE GENERAL ACCOUNT..................................................... 26
OTHER GENERAL POLICY PROVISIONS......................................... 27
Policy Default.................................................. 27
Policy Reinstatement............................................ 27
Miscellaneous Policy Provisions................................. 27
OTHER PROVISIONS........................................................ 28
Supplementary Benefits.......................................... 28
Payment of Proceeds............................................. 28
Reports to Policyowners......................................... 28
MISCELLANEOUS MATTERS................................................... 29
Fund Share Substitution......................................... 29
Federal Income Tax Considerations............................... 29
Tax Status of the Policy................................ 29
Tax Treatment of Policy Benefits........................ 30
The Company's Taxes..................................... 32
Distribution of the Policy...................................... 33
Responsibilities Assumed by Manufacturers Life.................. 32
Voting Rights................................................... 33
Executive Officers and Directors................................ 34
State Regulations............................................... 36
Pending Litigation.............................................. 36
Additional Information.......................................... 36
Legal Matters................................................... 36
Experts......................................................... 36
FINANCIAL STATEMENTS.................................................... 37
APPENDICES.............................................................. 63
A. Sample Illustrations of Policy Values, Cash Surrender
Values and Death Benefits....................................... 63
B. Definitions..................................................... 68
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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, THE PROSPECTUS OF THE SERIES FUND OR THE STATEMENT OF
ADDITIONAL INFORMATION OF THE SERIES FUND.
You are urged to examine this prospectus carefully. The INTRODUCTION TO POLICIES
will briefly describe the Flexible Premium Survivorship Variable Life Insurance
Policy. More detailed information will be found within.
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INTRODUCTION TO POLICIES
The following summary is intended to provide a general description of the most
important features of the Policy. It is not comprehensive and is qualified in
its entirety by the more detailed information contained in this prospectus.
Unless otherwise indicated or required by the context, the discussion throughout
this prospectus assumes that the Policy has not gone into default, there is no
outstanding Policy Debt, and the death benefit is not determined by the corridor
percentage test.
GENERAL
The Policy provides a death benefit, at the time of the death of the last
surviving life insured.
Premium payments may be made at any time and in any amount, subject to certain
limitations.
After certain deductions, premiums will be allocated, according to the
policyowner's instructions, to one or more of the general account and the
sub-accounts of Manufacturers Life of America's Separate Account Three. Assets
of the sub-accounts of Separate Account Three are invested in shares of a
particular Fund of the Series Fund. Allocation instructions may be changed at
any time and transfers among the accounts may be made, subject to certain
restrictions. If the Policy is owned by two or more persons, the Company will
require authorization from each policyowner before taking any action on the
Policy.
The Funds currently offered by the Series Fund are: the Emerging Growth Equity
Fund, the Common Stock Fund, the Real Estate Securities Fund, the Balanced
Assets Fund, the Capital Growth Bond Fund, the Money-Market Fund, the
International Fund, and the Pacific Rim Emerging Markets Fund.
The Policy has a Policy Value reflecting premiums paid, the investment
performance of the accounts to which the policyowner has allocated premiums, and
certain charges for expenses and cost of insurance. The policyowner may receive
a portion of the Policy Value by taking a Policy loan or a partial withdrawal,
or by full surrender of the Policy.
DEATH BENEFIT
DEATH BENEFIT OPTIONS. The policyowner elects to have the Policy's death
benefit determined under one of two options:
- a death benefit equal to the face amount of the Policy, or
- a death benefit equal to the face amount of the Policy plus the Policy Value.
Under either option, the death benefit may have to be increased to a multiple of
the Policy Value to satisfy the corridor percentage test under the definition of
life insurance in the Internal Revenue Code. See Detailed Information About the
Policies; Insurance Benefit-- "The Insurance Benefit" and "Death Benefit
Options."
THE POLICYOWNER MAY CHANGE THE DEATH BENEFIT OPTION. A change in the death
benefit option may be requested after the Policy has been in force for two
years. See Detailed Information About the Policies; Insurance Benefit-- "Death
Benefit Option Changes."
THE POLICYOWNER MAY INCREASE THE FACE AMOUNT. After the Policy has been in
force for two years, an increase in the face amount of the Policy may be
requested once per Policy Year. An increase in the face amount is subject to
satisfactory evidence of insurability and will usually result in the Policy's
being subject to new surrender charges. See Detailed Information About the
Policies; Insurance Benefit-- "Face Amount Changes."
THE POLICYOWNER MAY DECREASE THE FACE AMOUNT. A decrease in the face amount may
be requested once per Policy Year after the Policy has been in force for two
years, except during the two-year period following any increase in face amount.
In addition, during the two-year period following an increase in face amount,
the policyowner may elect at any time to cancel the increase, which will result
in certain surrender charges being deducted from the Policy Value. During the
two-year period following an increase, the deferred sales charge for the
increase is subject to the Policy's sales charge limitation provisions. A
decrease in face amount may result in certain surrender charges being deducted
from the Policy Value. See Detailed Information About the Policies; Insurance
Benefit-- "Face Amount Changes."
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DEATH BENEFIT GUARANTEE
As long as the Death Benefit Guarantee Cumulative Premium Test or, where
applicable, the Fund Value Test is satisfied, the Company guarantees that the
Policy will not go into default (i) prior to when the youngest life insured
attains or would have Attained Age 100, if Death Benefit Option 1 is maintained
through the life of the Policy, (ii) prior to when the youngest life insured
attains or would have Attained Age 85 if Death Benefit Option 2 is selected at
any time regardless of the investment performance of the Funds underlying the
Policy Value. See Detailed Information About the Policies; Premium Provisions--
"Death Benefit Guarantee."
NO LAPSE GUARANTEE
As long as the No Lapse Guarantee Cumulative Premium Test is satisfied, the
Company guarantees that the Policy will not go into default during the No Lapse
Guarantee Period. For lives insured with an average Issue Age of up to and
including age 70, the No Lapse Guarantee Period is 10 years. For lives insured
with an average Issue Age of 71 and older, the No Lapse Guarantee Period
decreases by one year for each year the average age exceeds 70, until average
age 77. From average age 77 to 85 the No Lapse Guarantee Period is fixed at
three years. The No Lapse Guarantee is not available to lives insured whose
average Issue Age exceeds 85. See Detailed Information About the Policies;
Premium Provisions-- "No Lapse Guarantee."
DOLLAR COST AVERAGING. Manufacturers Life of America will offer policyowners a
Dollar Cost Averaging program. Under the Dollar Cost Averaging program the
policyowner will designate an amount which will be transferred at predetermined
intervals from one Investment Account into any other Investment Account(s) or
the Guaranteed Interest Account.
Each transfer under the Dollar Cost Averaging program must be of a minimum
amount as set by Manufacturers Life of America. Once set, this minimum may be
changed at any time at the discretion of Manufacturers Life of America.
Currently, no charge will be made for this program if the Policy Value exceeds
$15,000 on the date of transfer. Otherwise, there will be a charge of $5 for
each transfer under this program. The charge will be deducted from the value of
the Investment Account out of which the transfer occurs. If insufficient funds
exist to effect a Dollar Cost Averaging transfer, including the charge, if
applicable, the transfer will not be effected and the policyowner will be so
notified.
Manufacturers Life of America reserves the right to cease to offer this program
as of 90 days after written notice is sent to the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS. Under the Asset Allocation Balancer
program the policyowner will designate an allocation of Policy Value among
Investment Accounts. On the Policy Anniversary, and at six-month intervals
thereafter, Manufacturers Life of America will move amounts among the Investment
Accounts as necessary to maintain the policyowner's chosen allocation.
Currently, the charge for this program is $15 per transfer or series of
transfers occurring on the same transfer date. This charge will be deducted
from all accounts affected by the Asset Allocation Balancer transfer in the same
proportion as the value in each account bears to the Policy Value immediately
after the transfer.
Manufacturers Life of America reserves the right to cease to offer this program
as of 90 days after written notice is sent to the policyowner.
PREMIUM PAYMENTS ARE FLEXIBLE
The policyowner may pay premiums at any time and in any amount, subject to
certain limitations. See Detailed Information About the Policies; Premium
Provisions-- "Policy Issue" and "Premium Limitations."
The policyowner must pay at least the Initial Premium to put the Policy in
force. See Detailed Information About the Policies; Premium Provisions--
"Policy Limitations," Insurance Benefit-- "No Lapse Guarantee" and "Death
Benefit Guarantee."
After the Initial Premium is paid there is no minimum premium required. However,
minimum premiums are required to maintain the Death Benefit Guarantee or the No
Lapse Guarantee. See Detailed Information About the Policies; Insurance
Benefit-- "Death Benefit Guarantee" and "No Lapse Guarantee." In addition,
certain premium payments may be required to keep the policy from lapsing. See
Detailed Information About the Policies; Other General Policy Provisions--
"Policy Default."
Certain maximum premium limitations apply to the Policy, to ensure that the
Policy qualifies as life insurance under rules defined in the Internal Revenue
Code. See Detailed Information About the Policies; Premium Provisions--
"Premium Limitations."
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<PAGE> 6
SUMMARY OF CHARGES AND DEDUCTIONS
Charges under the Policy are assessed as described below:
(1) Deductions from premiums
- 2.35% of all premiums paid, for state and local taxes, and
1.25% of all premiums paid, for federal taxes, to the end of
the tenth Policy Year. Currently, the Company expects this
deduction to cease after the end of the tenth Policy Year.
- a sales charge of 5.5% of the premiums paid, in the current
Policy Year, up to a maximum of the Target Premium for the
current Policy Year. This deduction is taken to the end of the
tenth Policy Year. See Detailed Information About the
Policies; Charges and Deductions -- "Deductions from Premiums."
(2) Surrender Charges
- upon surrender, partial withdrawal in excess of the Withdrawal
Tier Amount, decrease in face amount or lapse.
- deferred underwriting charge of $4 for each $1,000 of face
amount.
- deferred sales charge of a maximum of 100% of the lower of
first-year premium or the Target Premium. See Detailed
Information About the Policies; Charges and Deductions --
"Surrender Charges."
(3) Monthly Deductions
- administration charge of $.04 per $1,000 of face amount per
month until the later of the end of the fifteenth Policy Year,
or when the youngest life insured reaches Attained Age 55. The
administration charge is 0 thereafter. This charge has a
minimum of $30 per month and a maximum of $60 per month.
- cost of insurance charge.
- mortality and expense risks charge of .067% deducted monthly
through the later of the tenth Policy Year and the youngest
life insured's Attained Age 55. It is currently expected to be
.0125% thereafter.
- supplementary benefit(s) charge(s)
If the Policy is still in force when the youngest of the lives
insured reaches or would have reached Age 100 no further
monthly deductions will be taken from the Policy Value. See
Detailed Information About the Policies; Charges and Deductions
-- "Monthly Deductions."
(4) Other Charges
- investment management fee of .50% per annum assessed against
assets of the Series Fund invested in any or all of the
Emerging Growth Equity Fund, Common Stock Fund, Real Estate
Securities Fund, Balanced Assets Fund, Capital Growth Bond
Fund, and/or Money-Market Fund.
- investment management fee of (i) .85% per annum assessed
against the first $100 million of assets and (ii) .70% per
annum assessed against the assets over $100 million of each of
the International Fund and the Pacific Rim Emerging Markets
Fund.
- expenses of up to .50% and .65% per annum assessed against the
assets of the International Fund and the Pacific Rim Emerging
Markets Fund, respectively.
- transfer fee of $35 if the policyowner elects to exercise the
option to make a second transfer in any Policy Month (multiple
requests received at the same time are treated as a single
transfer).
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- transfer fee of $5 for each transfer under the Dollar Cost
Averaging program when Policy Value does not exceed $15,000.
- transfer fee of $15 for each transfer under the Asset
Allocation Balancer program.
Manufacturers Life of America reserves the right to charge or establish a
provision for any federal, state, or local taxes that may be attributable to the
Separate Account or the operations of the Company with respect to the Policies
in addition to the deductions for state, local, and federal taxes currently
being made. See Detailed Information About the Policies; Charges and Deductions
-- "Other Charges."
INVESTMENT OPTIONS
After deductions from premiums for federal, state and local taxes and the
premium charge, Net Premiums will be allocated, according to the policyowner's
instructions, to any combination of the general account or one or more of the
sub-accounts of Manufacturers Life of America's Separate Account Three.
Each sub-account of Separate Account Three invests its assets in the shares of a
particular Fund of the Series Fund. These Funds are:
- Emerging Growth Equity Fund
- Common Stock Fund
- Real Estate Securities Fund
- Balanced Assets Fund
- Capital Growth Bond Fund
- Money-Market Fund
- International Fund
- Pacific Rim Emerging Markets Fund
The policyowner may change the allocation of Net Premiums among the general
account and the sub-accounts at any time. See General Information About
Manufacturers Life of America, Separate Account Three and The Series Fund and
Detailed Information About the Policies; Premium Provisions -- "Premium
Allocation" and Policy Values -- "Policy Value."
THE POLICY VALUE
The Policy has a Policy Value which reflects the following: premium payments
made; investment performance of the sub-accounts to which amounts have been
allocated; interest credited by the Company to amounts allocated to the general
account; partial withdrawals; and deduction of charges described under "Charges
and Deductions."
The Policy Value is the sum of the values in the Investment Accounts, the
Guaranteed Interest Account and the Loan Account.
INVESTMENT ACCOUNT. An Investment Account is established under the Policy for
each sub-account of the Separate Account to which Net Premiums or transfer
amounts have been allocated. An Investment Account measures the interest of the
Policy in the corresponding sub-account.
The value of each Investment Account under the Policy varies each Business Day
and reflects the investment performance of the Fund shares held in the
corresponding sub-account. See Detailed Information About the Policies; Policy
Values--"Policy Value."
GUARANTEED INTEREST ACCOUNT. The Guaranteed Interest Account consists of that
portion of the Policy Value based on net premiums allocated to, and amounts
transferred to, the general account of the Company.
Manufacturers Life of America credits interest on amounts in the Guaranteed
Interest Account at an effective annual rate guaranteed to be at least 4%. See
Detailed Information About the Policies and The General Account.
LOAN ACCOUNT. When a Policy loan is made, Manufacturers Life of America will
establish a Loan Account under the Policy and will transfer an amount from the
Investment Accounts and the Guaranteed Interest Account to the Loan Account.
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The Company will credit interest to amounts in the Loan Account at an effective
annual rate of at least 4%. The actual rate credited on loan amounts will be
the rate charged on loan amounts less an interest rate differential. See
Detailed Information About the Policies; Policy Values-- "Policy Loans."
TRANSFERS ARE PERMITTED. A policyowner may make transfers among Investment
Accounts and the Guaranteed Interest Account, subject to certain restrictions.
One transfer per Policy Month may be made at no cost to the policyowner; a
second transfer in each Policy Month will be permitted at a cost of $35 per
transfer. All transfer requests received at the same time are treated as a
single transfer request. The minimum amount that may be transferred is the
lesser of $500 or the entire account value. The maximum that may be transferred
out of the Guaranteed Interest Account in any one Policy Year is the greater of
$500 or 15% of the value in the Guaranteed Interest Account as of the previous
Policy Anniversary.
Certain restrictions may apply to transfer requests. See Detailed Information
About the Policies; Policy Values-- "Policy Value."
USING THE POLICY VALUE
BORROWING AGAINST THE POLICY VALUE. The policyowner may borrow against the
Policy Value. In most states the minimum loan amount is $500.
Loan interest will be charged on a fixed basis at an effective annual rate of
5.75%. See Detailed Information About the Policies; Policy Values-- "Policy
Loans."
A POLICYOWNER MAY MAKE A PARTIAL WITHDRAWAL OF THE POLICY VALUE. After a Policy
has been in force for two years the policyowner may make a partial withdrawal of
the Policy Value. In most states the minimum withdrawal amount is $500. The
policyowner may specify that the withdrawal is to be made from a specific
Investment Account or the Guaranteed Interest Account.
A partial withdrawal may result in a reduction in the face amount of the Policy
and may also result in the assessment of a portion of the surrender charges to
which the Policy is subject. See Detailed Information About the Policies;
Policy Values-- "Partial Withdrawals and Surrenders" and Charges and
Deductions-- "Surrender Charges."
THE POLICY MAY BE SURRENDERED FOR ITS NET CASH SURRENDER VALUE. The Net Cash
Surrender Value is equal to the Policy Value less surrender charges, outstanding
monthly deductions due and the value of the Loan Account. Surrender of a Policy
during the Surrender Charge Period will usually result in assessment of
surrender charges. See Detailed Information About the Policies; Policy Values
-- "Partial Withdrawals and Surrenders" and Charges and Deductions -- "Surrender
Charges."
SUPPLEMENTARY BENEFITS
A policyowner may choose to add certain supplementary benefits to the Policy.
These supplementary benefits include an estate preservation rider and a policy
split option.
The cost of any supplementary benefits will be deducted from the Policy Value
monthly. See Detailed Information About the Policies; Other Provisions --
"Supplementary Benefits."
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DEFAULT
Unless the Death Benefit Guarantee or No Lapse Guarantee is in effect, the
Policy will go into default if the Net Cash Surrender Value at the beginning of
any Policy Month would go below zero after deducting the monthly charges then
due. The Policy will not go into default if the Policy qualifies for the Death
Benefit Guarantee or No Lapse Guarantee. The Company will notify the
policyowner in the event the Policy goes into default, and will allow a grace
period in which the policyowner may make a premium payment sufficient to bring
the Policy out of default. If the required premium is not paid during the grace
period the Policy will terminate. See Detailed Information About the Policies;
Premium Provisions -- "Policy Default."
REINSTATEMENT
A terminated policy may be reinstated by the policyowner within either the
21-day or five-year period following the date of termination, providing certain
conditions are met. See Detailed Information About the Policies; Premium
Provisions -- "Policy Reinstatement."
FREE LOOK
A Policy may be returned for a refund of premium within the latest of:
- 10 days after it is received
- 45 days after the application for the Policy is signed
- 10 days after Manufacturers Life of America mails or delivers a notice
of this right of withdrawal.
If a policyowner requests an increase in face amount which results in new
surrender charges, the "free look" provision will also apply to the increase.
See Detailed Information About the Policies; Premium Provisions -- "Short-Term
Cancellation Right" and "Free Look"' Provisions.
FEDERAL TAX MATTERS
Manufacturers Life of America believes that a Policy issued on a standard risk
class basis should meet the definition of a life insurance contract as set forth
in Section 7702 of the Internal Revenue Code of 1986. With respect to a Policy
issued on a substandard basis, there is less guidance available to determine if
such a Policy would satisfy the Section 7702 definition of a life insurance
contract, particularly if the policyowner pays the full amount of premiums
permitted under such a Policy.
Assuming that a Policy qualifies as a life insurance contract for federal income
tax payments, a policyowner should not be deemed to be in constructive receipt
of Policy Value under a Policy until there is a distribution from the Policy.
Moreover, death benefits payable under a Policy should be completely excludable
from the gross income of the beneficiary. As a result, the beneficiary
generally should not be taxed on these proceeds. See Miscellaneous Matters --
"Federal Income Tax Considerations" (Tax Status of the Policy).
Under certain circumstances, a Policy may be treated as a "Modified Endowment
Contract." If the Policy is a Modified Endowment Contract, then all pre-death
distributions, including Policy loans, will be treated first as a distribution
of taxable income and then as a return of investment in the Policy. In
addition, prior to age 59 1/2 any such distributions generally will be subject
to a 10% penalty tax. See Miscellaneous Matters -- "Federal Income Tax
Considerations" (Tax Treatment of Policy Benefits).
If the Policy is not a Modified Endowment Contract, distributions generally will
be treated first as a return of investment in the Policy and then a disbursement
of taxable income. Moreover, loans will not be treated as distributions. A
policyowner considering the use of systematic Policy loans as one element of a
comprehensive retirement income plan should consult his or her personal tax
adviser regarding the potential tax consequences if such loans were to so reduce
Policy Value that the Policy would lapse, in absence of additional payments. The
premium payment necessary to avert lapse would increase with the average age of
the lives insured. Finally, neither distributions nor loans under a Policy that
is not a Modified Endowment Contract are subject to the 10% penalty tax. See
Miscellaneous Matters -- "Federal Income Tax Considerations" (Distributions from
Policies Not Classified as Modified Endowment Contracts).
The United States Congress has in the past considered, is currently considering,
and in the future may consider legislation that, if enacted, could change the
tax treatment of life insurance policies. In addition, the Treasury Department
may amend existing regulations, or adopt new interpretations of existing laws,
state tax laws or, if the policyowner is not a United States resident, foreign
tax laws, may affect the tax consequences to him or her, the lives insured or
the beneficiary. These laws may change
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<PAGE> 10
from time to time without notice and, as a result, the tax consequences may be
altered. There is no way of predicting whether, when or in what form any such
change would be adopted. Any such change could have a retroactive effect
regardless of the date of enactment. The Company suggests that a tax adviser be
consulted.
ESTATE AND GENERATION-SKIPPING TAXES
The proceeds of this life insurance policy may be taxable under Estate and
Generation-Skipping Taxes. The policyowner should consult his or her tax
adviser regarding these taxes.
GENERAL INFORMATION ABOUT MANUFACTURERS
LIFE OF AMERICA, SEPARATE ACCOUNT THREE
AND THE SERIES FUND
MANUFACTURERS LIFE OF AMERICA AND
MANUFACTURERS LIFE
Manufacturers Life of America, a wholly-owned subsidiary of The Manufacturers
Life Insurance Company of Michigan, 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 of Michigan is a life insurance company
organized in 1983 under the laws of Michigan and 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 as measured by assets.
MANUFACTURERS LIFE OF AMERICA'S
SEPARATE ACCOUNT THREE
Manufacturers Life of America established its Separate Account Three on August
22, 1986 as a separate account under Pennsylvania law. Since December 9, 1992
the Separate Account has been operated under Michigan law. The Separate Account
holds assets that are segregated from all of Manufacturers Life of America's
other assets. The Separate Account is currently used only to support variable
life insurance policies.
Manufacturers Life of America is the legal owner of the assets in the Separate
Account. The income, gains and losses of the Separate Account, whether or not
realized, are, in accordance with applicable contracts, credited to or charged
against the Account without regard to the other income, gains or losses of
Manufacturers Life of America. Manufacturers Life of America will at all times
maintain assets in the Separate Account with a total market value at least equal
to the reserves and other liabilities relating to variable benefits under all
policies participating in the Separate Account. 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 Separate 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 Separate Account.
For state law purposes the Separate Account is treated as a part or division of
Manufacturers Life of America.
MANULIFE SERIES FUND, INC.
Each sub-account of the Separate Account will purchase shares only of a
particular Fund of the Series Fund. The Series Fund is registered under the
1940 Act as an open-end diversified management investment company. The Separate
Account will purchase and redeem shares of the Series Fund 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 or to the general account as requested by policyowners,
and for other purposes consistent with the Policies. Any dividend or capital
gain distribution received from a Fund will be reinvested immediately at net
asset value in shares of that Fund and retained as assets of the corresponding
sub-account.
Series Fund shares are issued to fund benefits under both variable annuity
contracts and variable life insurance policies issued by the Company. For a
description of the procedures for handling potential conflicts of interest
arising from the funding of such benefits see "Purchases and Redemptions of
Shares" in the attached Series Fund prospectus.
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The Series Fund receives investment management services from Manufacturers
Adviser Corporation. Manufacturers Adviser Corporation is a registered
investment adviser under the Investment Advisers Act of 1940. Certain expenses
are assessed against the assets of the Series Fund. These are:
(1) an investment management fee of (a) .50% per annum assessed against the
assets of the Emerging Growth Equity Fund, Common Stock Fund, Real
Estate Securities Fund, Balanced Assets Fund, Capital Growth Bond Fund
and Money-Market Fund; and (b) .85% per annum assessed against the
first $100 million of assets and .70% per annum assessed against the
assets over $100 million of each of the International Fund and the
Pacific Rim Emerging Markets Fund, and
(2) expenses of up to .50% and .65% per annum assessed against the assets
of the International Fund and the Pacific Rim Emerging Markets Fund,
respectively.
INVESTMENT OBJECTIVES AND RISKS OF THE FUNDS
The Funds are subject to varying degrees of financial and market risk. Financial
risk refers to the ability of an issuer of a debt security to pay principal and
interest on that security and to the earnings stability and overall financial
soundness of an issuer of an equity security; market risk refers to the
volatility of the reaction of the price of a security to changes in conditions
in the securities markets in general and, with particular reference to debt
securities, changes in the overall level of interest rates.
The investment objectives of the Funds available to policyowners through
allocation of Policy Values to corresponding sub-accounts are set forth below.
There is, of course, no assurance that these objectives will be met.
EMERGING GROWTH EQUITY FUND. The investment objective of the Emerging Growth
Equity Fund is to achieve growth of capital by investing primarily in equity
securities of companies believed to offer growth potential over both the
intermediate and the long term. Current income is not a significant
consideration. In selecting investments, emphasis will be placed on securities
of progressive companies with aggressive and competent managements. A
substantial portion of the Fund's assets may be invested in emerging growth
companies, which at the time of the Fund's investment may be paying no dividends
to their shareholders.
Emerging growth companies may have limited product lines, market or financial
resources, or they may be dependent upon a small management group. An
investment in the Emerging Growth Equity Fund may therefore involve greater
financial risk than is customarily associated with less aggressive companies. In
addition, the Fund may be subject to relatively high levels of market risk. The
securities of aggressive growth companies may be subject to more abrupt or
erratic market movements than other companies or the market averages in general.
Because shares of the Emerging Growth Equity Fund may experience above-average
fluctuations in net asset value, they should be considered long-term
investments.
COMMON STOCK FUND. The investment objective of the Common Stock Fund 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. In selecting investments, emphasis will be placed on companies
with good financial resources, strong balance sheet, satisfactory rate of return
on capital, good industry position, superior management skills, and earnings
that tend to grow consistently. The Fund's investments are not limited to any
particular type or size of company, but high-quality growth stocks are
emphasized. Investment in shares of the Common Stock Fund should involve less
financial and market risk than the Emerging Growth Equity Fund, but the Fund may
occasionally experience above-average fluctuations in net asset value, and
therefore should be considered a long-term investment.
REAL ESTATE SECURITIES FUND. The investment objective of the Real Estate
Securities Fund is to achieve a combination of long-term capital appreciation
and satisfactory current income by investing in real estate-related equity and
debt securities. In pursuit of its objective, the Real Estate Securities Fund
will invest principally in real estate investment trust equity and debt
securities and other securities issued by companies which invest in real estate
or interests therein. The Fund may also purchase the common stocks, preferred
stocks, convertible securities and bonds of companies operating in industry
groups relating to the real estate industry. This would include companies
engaged in the development of real estate, building and construction, and other
market segments related to real estate. The Fund will not invest directly in
real property, nor will it purchase mortgage notes directly. Under normal
circumstances, at least 65% of the value of the Fund's total assets will be
invested in real estate-related equity and debt securities. Because the Fund
considers current income in its investment objectives, an investment in the Real
Estate Securities Fund should involve less financial and market risk than the
Emerging Growth Equity Fund. However, the Fund's share value may experience
above-average fluctuation in periods of changing interest rates and therefore
the shares should be considered long-term investments.
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BALANCED ASSETS FUND. The investment objective of the Balanced Assets Fund is to
achieve intermediate and long-term growth through capital appreciation and
income by investing in both debt and equity securities. The Fund will maintain
at all times a balance between debt securities or preferred stocks, on the one
hand, and common stocks, on the other. At least 25% of the Fund's assets will
be invested in each of the two basic categories. Investment in shares of the
Balanced Assets Fund should involve less financial and market risk than an
investment in the Emerging Growth Equity Fund.
CAPITAL GROWTH BOND FUND. The investment objective of the Capital Growth Bond
Fund is to achieve growth of capital by investing in medium grade or better debt
securities with income as a secondary consideration. The Capital Growth Bond
Fund differs from most "bond" funds in that its primary objective is capital
appreciation, not income. The Fund will be carefully positioned in relation to
the term of debt obligations and the anticipated movement of interest rates.
Because of the Fund's emphasis on medium grade or better instruments, an
investment in the Capital Growth Bond Fund should result in less financial risk
than an investment in the Emerging Growth Equity Fund, Common Stock Fund, Real
Estate Securities Fund or Balanced Assets Fund. However, the Capital Growth Bond
Fund will be subject to substantial market risk arising from changes in the
level of prevailing interest rates and the Fund's active management in
anticipation of such changes.
MONEY-MARKET FUND. The investment objective of the Money-Market Fund is to
provide maximum current income consistent with capital preservation and
liquidity by investing in a portfolio of high-quality money market instruments.
Investment in shares of the Money-Market Fund should involve less market or
financial risk than an investment in any other Fund. However, the Fund's
performance will vary with changes in short-term interest rates.
INTERNATIONAL FUND. The investment objective of the International Fund is to
achieve long-term growth of capital by investing in a diversified portfolio that
is comprised primarily of common stocks and equity-related securities of
companies domiciled in countries other than the United States and Canada. It
invests primarily in the securities markets of western European countries,
Australia, the Far East, Mexico and South America. The Fund will, under normal
conditions, invest at least 65% of its net assets in common stocks and
equity-related securities of established larger-capitalization companies that
have attractive long-term prospects for growth of capital. Investments of this
type involve risks of political and economic instability in the country of the
issuer, the possibility of imposition of foreign exchange controls, confiscatory
taxation, and the restriction of capital repatriation. Such securities may be
subject to greater fluctuations in price than domestic securities and, under
certain market conditions, foreign securities may be less liquid than domestic
securities. The risk of currency fluctuations is present since it is
anticipated that, in general, the majority of securities in the Fund will not be
denominated in United States currency. Accordingly, investment in the shares of
the International Fund should involve more financial and market risk than any of
the domestic Funds. Because the shares of the International Fund may experience
above-average fluctuations in net asset value, they should be considered
long-term investments.
PACIFIC RIM EMERGING MARKETS FUND. The investment objective of the Pacific Rim
Emerging Markets Fund is to achieve long-term growth of capital by investing in
a diversified portfolio that is comprised primarily of common stocks and
equity-related securities of companies domiciled in the countries of the Pacific
Rim region. The Fund will, under normal conditions, invest at least 65% of its
net assets in common stocks and equity-related securities of established
larger-capitalization companies that have attractive long-term prospects for
growth of capital. Investments of this type involve risks of political and
economic instability in the country of the issuer, the possibility of imposition
of foreign exchange controls, confiscatory taxation, and the restriction of
capital repatriation. Such securities may be subject to greater fluctuations in
price than domestic securities and, under certain market conditions, foreign
securities may be less liquid than domestic securities. The risk of currency
fluctuations is present since it is anticipated that, in general, the majority
of securities in the Fund will not be denominated in United States currency.
Accordingly, investment in the shares of the Pacific Rim Emerging Markets Fund
should involve more financial and market risk than any of the domestic Funds.
Because the shares of the Pacific Rim Emerging Markets Fund may experience
above-average fluctuations in net asset value, they should be considered
long-term investments.
A full description of the Series Fund, its investment objectives, policies and
restrictions, the risks associated therewith, its expenses, and other aspects of
its operation is contained in the attached Series Fund prospectus, which should
be read together with this prospectus.
SELECTION OF SUB-ACCOUNT(S)
The basic purpose of the variable portion of the Policies is to accumulate
values through favorable investment results of the Funds corresponding to the
sub-accounts selected by the policyowner. The final decision on Fund(s)
selection must be made by the policyowner. Outlined below are a few points for
consideration.
MARKET RISK. The previous section discussed the investment objective of each
Fund and its associated market risk. Before selecting a Fund or combination of
Funds the policyowner should determine his or her comfort level with market
volatility, recognizing that the Policy is designed as a long-term contract.
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<PAGE> 13
FINANCIAL RISK. Each Fund differs with respect to financial risk of principal.
This variation also brings with it a divergent level of opportunity for
investment gain or loss. The policyowner should determine the financial risk he
or she is willing to accept in relation to the potential for investment gain or
loss.
HISTORICAL PERSPECTIVE OF FUND OBJECTIVES. The above risks should be considered
in conjunction with past general trends.
Historically, if investments were held over relatively long periods, the
investment performance of equities has generally been superior to that of long
or short-term debt securities, even though equities have been subject to more
dramatic changes in value over periods of time. Emerging growth equities have
also tended to have better long-term investment performance when compared with
the larger, more mature equities, even though emerging growth equities, in turn,
have been subject to more dramatic fluctuations in value. Accordingly, the
Emerging Growth Equity Fund may be the more desirable option for policyowners
who are focused on the long term and are willing to accept such short-term
risks.
Over the past few decades to the present, certain foreign economies have grown
faster than the United States economy, and the return on equity investments in
these markets has often been superior to similar investments in the United
States. The securities markets in different regions and countries have, at
times in the past, moved relatively independently of one another as a result of
different economic, political and financial factors. To the extent the various
markets move independently, total portfolio volatility tends to be reduced when
securities from the various markets are combined into a single portfolio. A low
correlation between movement in one market and the Fund's total assets may,
however, reduce the gains the Fund might otherwise derive from movements in that
market. Currency exchange rates frequently move independently of securities
markets in a particular country. As a result, gains or losses in a particular
securities market may be affected by changes in currency exchange rates.
Some policyowners may prefer somewhat greater protection against financial and
market risk than an investment in the Emerging Growth Equity Fund, the
International Fund, or the Pacific Rim Emerging Markets Fund provides. These
policyowners may then prefer the Common Stock Fund or, if more comfortable with
the long-term value of real estate, the Real Estate Securities Fund. Other
policyowners, being even more risk averse, may prefer the Balanced Assets Fund,
which maintains at all times a balance between debt securities or preferred
stocks, on the one hand, and common stocks, on the other.
Other policyowners may prefer less financial risk than that which comes with an
investment in the Emerging Growth Equity Fund, the Common Stock Fund, the Real
Estate Securities Fund, the Balanced Assets Fund, the International Fund or the
Pacific Rim Emerging Markets Fund. This is made possible by the Capital Growth
Bond Fund's emphasis on investment in debt instruments. However, the Capital
Growth Bond Fund will be subject to substantial market risk arising from changes
in the level of prevailing interest rates and the Fund's active management in
anticipation of such changes.
Those who desire the least market or financial risk of all the Funds may prefer
the Money-Market Fund, recognizing that the performance of this Fund will vary
with changes in short-term interest rates. Some policyowners may wish to divide
their net premiums among some or all of the sub-accounts. The policyowner must
make his or her own choice that takes into account how willing he or she is to
accept investment risks, the manner in which his or her other assets are
invested and his or her own predictions about what investment results are likely
to be in the future.
DETAILED INFORMATION ABOUT THE POLICIES
PREMIUM PROVISIONS
POLICY ISSUE AND INITIAL PREMIUM
To purchase a Policy, an applicant must submit a completed application.
Manufacturers Life of America will issue a Policy only if it has a face amount
of at least $250,000. A Policy will generally be issued to persons between ages
0 and 90. In certain circumstances the Company may at its sole discretion issue
a Policy to persons above age 90. Before issuing a Policy, Manufacturers Life
of America will require evidence of insurability satisfactory to it. Each life
insured will have a risk class of preferred/non-smoker, preferred/smoker,
standard/non-smoker or standard/smoker as determined by underwriting rules.
Persons failing to meet standard underwriting requirements may be eligible to
purchase a Policy provided an additional rating is assigned. Acceptance of an
application is subject to the Company's insurance underwriting rules.
Each Policy is issued with an Effective Date and a Policy Date. The Effective
Date is the date we become obligated under this Policy and when we take the
first Monthly Deductions, other than for backdated policies (which are described
below). It is the later of the date the Company's underwriters approve issuance
of the Policy, or the date at least the Initial Premium is received at the
Manufacturers of America Service Office. The lives insured may be covered under
the terms of a conditional insurance agreement between the Policy Date and the
Effective Date.
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Under certain circumstances a Policy may be issued with a backdated Policy Date.
A Policy will not be backdated more than six months (12 months where required by
state regulation) before the date of the application for the Policy. Monthly
deductions will be made for the period the Policy Date is backdated.
All premiums received for backdated Policies prior to the Effective Date of a
Policy will be credited with interest from the date of receipt at the rate of
return then being earned on amounts allocated to the Money-Market Fund. As of
the effective date, the premiums paid plus interest credited, net of deductions
for federal, state and local taxes, and the premium charge, will be allocated
among the Investment Accounts and/or the Guaranteed Interest Account in
accordance with the policyowner's instructions.
All premiums received on or after the Effective Date of the Policy will be
allocated among the Investment Accounts or the Guaranteed Interest Account as of
the date the premiums were received at the Manufacturers Life of America Service
Office.
The Policy Date is the date used to calculate the insurance age. It is the date
from which Policy Months, Policy Years, and Policy Anniversaries are all
determined. If the application accepted by the Company is accompanied by a
check for at least the Initial Premium, the Policy Date is the date the
application and check were received at the Manufacturers Life of America Service
Office. If the application accepted by the Company is not accompanied by a
check for at least the Initial Premium, the Policy Date is calculated as seven
days after issuance of the Policy (which is also the "Issue Date"). Monthly
deductions are made as of the Policy Date and at the beginning of each Policy
Month thereafter. However, if due prior to the Effective Date on a backdated
policy, they will be made as of the Effective Date instead of the dates they
were due, as described above.
The Initial Premium must be received within 60 days after the Policy Date;
however, the Initial Premium may be required within 30 days on Policies with
Additional Ratings. If the Initial Premium is not paid or if the application is
rejected, the Policy will be cancelled.
PREMIUM ALLOCATION
Net Premiums may be allocated to either the Guaranteed Interest Account for
accumulation at a rate of interest equal to at least 4% or to one or more of the
Investment Accounts for investment in the Fund shares held by the corresponding
sub-account of the Separate Account. Allocations among the Investment Accounts
and the Guaranteed Interest Account are made as a percentage of the Net Premium.
The percentage allocation to any account may be any whole number between zero
and 100, provided the total percentage allocations equal 100. A policyowner may
change the way in which Net Premiums are allocated at any time without charge.
The change will take effect as of the date a written or telephone request for
change, in a format which is satisfactory to the Company, is received at the
Manufacturers Life of America Service Office.
PREMIUM LIMITATIONS
After the payment of the Initial Premium, premiums may be paid at any time and
in any amount during the lifetime of any of the lives insured subject to certain
limitations. After the Initial Premium, all premiums must be paid to the
Manufacturers Life of America Service Office. Unlike traditional insurance,
premiums are not payable at specified intervals or in specified amounts. A
Policy will be issued with a Planned Premium which is based on the amount of
premium the policyowner wishes to pay. It is recommended that a premium amount
that will satisfy the requirements of the No Lapse Guarantee Cumulative Premium
Test or the Death Benefit Guarantee Cumulative Premium Test (see Insurance
Benefit -- "No Lapse Guarantee" and "Death Benefit Guarantee") be paid into the
Policy as the Planned Premium. Manufacturers Life of America will send notices
to the policyowner setting forth the Planned Premium at the payment interval
selected by the policyowner, unless payment is being made pursuant to a
pre-authorized payment plan. However, the policyowner is under no obligation to
make the indicated payment. See Premium Provisions -- "Policy Default."
Manufacturers Life of America will not accept any premium payment which is less
than $50, unless the premium is payable pursuant to a pre-authorized payment
plan. In that case the Company will accept a payment of as little as $10.
Manufacturers Life of America may change these minimums as of 90 days after
written notice is sent to the policyowner. The Policies also limit the sum of
the premiums that may be paid at any time, in order to preserve the
qualification of the Policies as life insurance for federal tax purposes. These
limitations are set forth in each Policy. Manufacturers Life of America
reserves the right to refuse or refund any premium payments that may cause the
Policy to fail to qualify as life insurance under applicable tax law.
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SHORT-TERM CANCELLATION RIGHT AND
"FREE LOOK" PROVISIONS
A Policy may be returned for a refund of the premium within 10 days after it is
received, within 45 days after the application for the Policy 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. Manufacturers Life of America reserves the right to
delay the refund of any premium paid by check until the check has cleared.
If a policyowner requests an increase in face amount which results in new
surrender charges, he or she will have the same rights as described above to
cancel the increase. If the increase is cancelled, the Policy Value and the
surrender charges will be recalculated to the amounts they would have been had
the increase not taken place. A policyowner may request a refund of all or any
portion of premiums paid during the free look period, and the Policy Value and
the surrender charges will be recalculated to the amounts they would have been
had the premiums not been paid.
INSURANCE BENEFIT
THE INSURANCE BENEFIT
If the Policy is in force at the time of the last surviving life insured's
death, Manufacturers Life of America will pay, upon receipt of due proof of
death, an insurance benefit based on the death benefit option selected by the
policyowner. The amount payable will be the death benefit under the selected
option, plus any amounts payable under any supplementary benefits added to the
Policy, less the value of the Loan Account at the date of death. The insurance
benefit will be paid in one sum unless another form of settlement option is
agreed to by the beneficiary and the Company. If the insurance benefit is paid
in one sum, Manufacturers Life of America will pay interest from the date of
death to the date of payment. If the last surviving life insured should die
after the Company's receipt of a request for surrender, no insurance benefit
will be payable, and Manufacturers Life of America will pay only the Net Cash
Surrender Value.
NO LAPSE GUARANTEE
In those states where it is permitted and if elected by the policyowner, as long
as the No Lapse Guarantee Cumulative Premium Test (see below) is satisfied
during the No Lapse Guarantee Period, as described below, Manufacturers Life of
America will guarantee that the Policy will not go into default (see Other
General Policy Provisions-- "Policy Default"), even if a combination of Policy
loans, adverse investment experience or other factors should cause the Policy's
Net Cash Surrender Value to be insufficient to meet the monthly deductions due
at the beginning of a Policy Month.
The No Lapse Guarantee Period is the first 10 Policy Years for lives insured
with an average issue age up to and including 70. For lives insured with an
average issue age of 71 and older, the No Lapse Guarantee Period decreases by
one year for each year the average issue age exceeds 70, until the average Issue
Age reaches 77. For lives insured with an average Issue Age between 77 and 85,
the No Lapse Guarantee Period is three years. The No Lapse Guarantee is not
offered to lives insured whose average Issue Age exceeds 85.
While the No Lapse Guarantee is in effect, Manufacturers Life of America will
determine at the beginning of each Policy Month whether the No Lapse Guarantee
Cumulative Premium Test, described below, has been met. If it has not been
satisfied, the Company will notify the policyowner of that fact and allow a
61-day grace period in which the policyowner may make a premium payment
sufficient to keep the No Lapse Guarantee in effect. This required payment, as
described in the notification to the policyowner, will be equal to the
outstanding premium requirement as of the date the No Lapse Guarantee was not
satisfied plus the Monthly No Lapse Guarantee Premium due for the next two
Policy Months. If the required payment is not received by the end of the grace
period, or if a death benefit option change occurs, the No Lapse Guarantee will
terminate, and the Policy may go into default. A death benefit option change
will also terminate the No Lapse Guarantee if it is in effect at the time of the
change. The No Lapse Guarantee cannot be reinstated after it has been
terminated. See Other General Policy Provisions-- "Policy Default," and
Insurance Benefit "Death Benefit Option Changes."
NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST
The No Lapse Guarantee Cumulative Premium Test is satisfied if, as of the
beginning of the Policy Month, the sum of all premiums paid to date less any
partial withdrawals and less any Policy Debt is at least equal to the sum of the
Monthly No Lapse Guarantee Premiums due since the Policy Date, as follows:
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