<PAGE> 1
Registration No.33-52310
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 9
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF l933
_______________________
SEPARATE ACCOUNT THREE
OF
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Exact name of trust)
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Name of depositor)
______________________
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of depositor's principal executive offices)
JAMES D. GALLAGHER
Secretary and General Counsel Notice to:
The Manufacturers Life Insurance W. Randolph Thompson, Esq., Of Counsel
Company of America Jones & Blouch L.L.P., Suite 405W
500 N. Woodward Avenue 1025 Thomas Jefferson Street, N.W.
Bloomfield Hills, Michigan 48304 Washington, D.C. 20007-0805
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on December 31, 1996 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on _________________ pursuant to paragraph (a)(1) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
Election Pursuant to Rule 24f-2
Registrant has registered, pursuant to Rule 24f-2 under the Investment Company
Act of 1940, an indefinite number of its variable life contracts for sale under
the Securities Act of 1933 and filed a Rule 24f-2 Notice on February 26, 1996
for its fiscal year ended December 31, 1995.
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PART I
PROSPECTUS
<PAGE> 3
SEPARATE ACCOUNT THREE
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
Registration Statement on Form S-6
Cross-Reference Sheet
Form
N-8B-2
Item No. Caption in Prospectus
1 ----- Cover Page; General Information About Manufacturers Life of America,
Separate Account Three, and NASL Series Trust (Manufacturers Life of
America's Separate Account Three)
2 ----- Cover Page; General Information About Manufacturers Life of America,
Separate Account Three, and NASL Series Trust (Manufacturers Life Of
America And Manufacturers Life)
3 ----- *
4 ----- Miscellaneous Matters (Distribution of the Policy)
5 ----- General Information About Manufacturers Life Of America, Separate
Account Three, and NASL Series Trust (Manufacturers Life of
America's Separate Account Three)
6 ----- General Information About Manufacturers Life of America, Separate
Account Three, and NASL Series Trust (Manufacturers Life of
America's Separate Account Three)
7 ----- *
8 ----- *
9 ----- Miscellaneous Matters (Pending Litigation)
10 ---- Detailed Information About The Policies
11 ----- General Information About Manufacturers Life Of America, Separate
Account Three, and NASL Series Trust (NASL Series Trust)
12 ----- General Information About Manufacturers Life Of America, Separate
Account Three, and NASL Series Trust (NASL Series Trust)
13 ----- Detailed Information About The Policies (Charges and Deductions)
14 ----- Detailed Information About the Policies (Premium Provisions --
Policy Issue and Initial Premium); Miscellaneous Matters
(Responsibilities Assumed By Manufacturers Life)
15 ----- Detailed Information About The Policies (Premium Provisions --
Policy Issue and Initial Premium)
16 ----- **
17 ----- Detailed Information About The Policies (Policy Values -- Partial
Withdrawals and Surrenders); Other Provisions -- Payment of
Proceeds)
_____________
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 4
Form
N-8B-2
Item No. Caption in Prospectus
18 ----- General Information About Manufacturers Life Of America, Separate
Account Three, and NASL Series Trust
19 ----- Detailed Information About The Policies (Other Provisions -- Reports
To Policyowners); Miscellaneous Matters (Responsibilities Assumed By
Manufacturers Life)
20 ----- *
21 ----- Detailed Information About The Policies
22 ----- *
23 ----- **
24 ----- Detailed Information About the Policies (Other General Policy
Provisions)
25 ----- General Information About Manufacturers Life Of America, Separate
Account Three, and NASL Series Trust (Manufacturers Life Of America
And Manufacturers Life)
26 ----- *
27 ----- **
28 ----- Miscellaneous Matters (The Directors And Officers Of Manufacturers
Life Of America)
29 ----- General Information About Manufacturers Life Of America, Separate
Account Three, and NASL Series Trust (Manufacturers Life Of America
And Manufacturers Life)
30 ----- *
31 ----- *
32 ----- *
33 ----- *
34 ----- *
35 ----- **
36 ----- *
37 ----- *
38 ----- Miscellaneous Matters (Distribution of the Policy; Responsibilities
Assumed By Manufacturers Life)
39 ----- Miscellaneous Matters (Distribution of the Policy)
40 ----- *
41 ----- **
42 ----- *
43 ----- *
44 ----- Detailed Information About The Policies (Policy Values -- Policy
Value)
45 ----- *
46 ----- Detailed Information About The Policies (Policy Values -- Partial
Withdrawals and Surrenders; Other Provisions -- Payment of Proceeds)
47 ----- General Information About Manufacturers Life Of America, Separate
Account Three, and NASL Series Trust (NASL Series Trust)
_____________
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 5
Form
N-8B-2
Item No. Caption in Prospectus
48 ----- *
49 ----- *
50 ----- General Information About Manufacturers Life Of America, Separate
Account Three, and NASL Series Trust (Manufacturers Life Of
America's Separate Account Three)
51 ----- Detailed Information About The Policies
52 ----- Detailed Information About The Policies (Miscellaneous Matters --
Portfolio Share Substitution)
53 ----- **
54 ----- *
55 ----- *
56 ----- *
57 ----- *
58 ----- *
59 ----- Financial Statements
______________
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 6
Prospectus for
VENTURE VUL
A Flexible Premium
Variable Life Insurance Policy
Issued by
The Manufacturers Life Insurance
Company of America
<PAGE> 7
Prospectus
The Manufacturers Life Insurance
Company of America
Separate Account Three
Venture VUL
Flexible Premium Variable Life Insurance Policy
This prospectus describes the flexible premium 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. The Policies provide for: (1) a Net Cash
Surrender Value that can be obtained by partial withdrawals or surrender of the
Policy; (2) policy loans; and (3) an insurance benefit payable at the life
insured's death.
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
investment portfolio ("Portfolio") of NASL Series Trust. The accompanying
prospectus for NASL Series Trust, and the corresponding statement of additional
information, describes the investment objectives of the Portfolios in which net
premiums may be invested. The Portfolios available for allocation of net
premiums are the following: the Emerging Growth Trust, the Balanced Trust, the
Capital Growth Bond Trust, the Money Market Trust, the Quantitative Equity Trust
(formerly Common Stock Fund), the Real Estate Securities Trust, the
International Stock Trust, the Pacific Rim Emerging Markets Trust, the Equity
Index Trust, the Equity-Income Trust, the U.S. Government Securities Trust, the
Growth and Income Trust, the Equity Trust, the Conservative Asset Allocation
Trust, the Moderate Asset Allocation Trust, the Aggressive Asset Allocation
Trust, the Blue Chip Growth Trust and the International Small Cap Trust
(collectively the "NASL Trusts"). Other sub-accounts and Portfolios 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.
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Because of the substantial nature of the surrender charges, 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 issuance of the Policy 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 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])
The date of this Prospectus is December 31, 1996.
<PAGE> 9
Prospectus Contents
Page
Introduction To Policies............................... 1
General Information About Manufacturers
Life of America
Separate Account Three and NASL Series Trust
Manufacturers Life of America And
Manufacturers Life......................... 12
Manufacturers Life of America's
Separate Account Three..................... 12
NASL Series Trust.............................. 13
Investment Objectives and Certain Policies
Of The Portfolios.......................... 15
Detailed Information About The Policies
PREMIUM PROVISIONS................................. 18
Policy Issue And Initial Premium............... 18
Premium Allocation............................. 19
Premium Limitations............................ 19
Short-Term Cancellation Right And
"Free Look" Provisions..................... 20
INSURANCE BENEFIT.................................. 20
The Insurance Benefit.......................... 20
No Lapse Guarantee............................. 21
No Lapse Guarantee Cumulative Premium Test..... 21
Death Benefit Guarantee........................ 22
Death Benefit Options.......................... 23
Death Benefit Option Changes................... 25
Face Amount Changes............................ 26
POLICY VALUES...................................... 27
Policy Value................................... 27
Transfers Of Policy Value...................... 28
Policy Loans................................... 31
Partial Withdrawals And Surrenders............. 34
CHARGES AND DEDUCTIONS............................. 35
Deductions From Premiums....................... 35
Surrender Charges.............................. 36
Monthly Deductions............................. 43
Administration Charge.......................... 44
Cost Of Insurance Charge....................... 44
Mortality And Expense Risks Charge............. 45
Other Charges.................................. 45
Special Provisions For Group Or
Sponsored Arrangements..................... 47
Special Provisions For Exchanges............... 48
THE GENERAL ACCOUNT................................ 48
OTHER GENERAL POLICY PROVISIONS.................... 49
Policy Default................................. 49
Policy Reinstatement........................... 49
Miscellaneous Policy Provisions................ 50
OTHER PROVISIONS................................... 51
Supplementary Benefits......................... 51
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Page
Payment Of Proceeds............................ 51
Reports To Policyowners........................ 51
MISCELLANEOUS MATTERS.............................. 52
Portfolio Share Substitution................... 52
Federal Income Tax Considerations.............. 52
Tax Status Of The Policy................... 53
Tax Treatment Of Policy Benefits........... 54
The Company's Taxes........................ 56
Distribution Of The Policy..................... 57
Responsibilities Assumed By
Manufacturers Life......................... 57
Voting Rights.................................. 58
Directors And Officers Of
Manufacturers Life of America.............. 58
State Regulations.............................. 62
Pending Litigation............................. 62
Additional Information......................... 62
Legal Matters.................................. 62
Experts........................................ 62
Financial Statements................................... 63
Appendices............................................. 65
A. Sample Illustrations Of Policy Values, Cash
Surrender Values And Death Benefits................ 65
B. Definitions......................................... 85
C. Deferred Sales Charge Tables........................ 91
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 NASL SERIES TRUST, OR THE STATEMENT OF
ADDITIONAL INFORMATION OF NASL SERIES TRUST.
You are urged to examine this prospectus carefully. The INTRODUCTION TO
POLICIES will briefly describe the Flexible Premium Variable Life Insurance
Policy. More detailed information will be found within.
<PAGE> 11
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 in the event of the death of the 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 Portfolio of NASL Series Trust. Allocation instructions may be
changed at any time and transfers among the accounts may be made subject to
certain restrictions.
The Portfolios currently offered are the: Emerging Growth Trust, Quantitative
Equity Trust (formerly Common Stock Fund), Real Estate Securities Trust,
Balanced Trust, Capital Growth Bond Trust, Money Market Trust, International
Stock Trust, Pacific Rim Emerging Markets Trust, Equity Index Trust,
Equity-Income Trust, U.S. Government Securities Trust, Growth and Income Trust,
Equity Trust, Conservative Asset Allocation Trust, Moderate Asset Allocation
Trust, Aggressive Asset Allocation Trust, Blue Chip Growth Trust and
International Small Cap Trust.
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 obtain
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:
- - death benefit equal to the face amount of the Policy, or
- - 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
1
<PAGE> 12
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. 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."
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" and "Death Benefit Guarantee."
After the Initial Premium is paid there is no minimum premium required. However,
by complying with the Cumulative Premium Test the policyowner can ensure the
Policy will not go into default for the first three policy years. For Policies
with a face amount of at least $250,000, the policyowner can ensure the Policy
will not go into default (i) prior to the life insured reaching age 100 if Death
Benefit Option 1 is maintained throughout the life of the Policy and (ii) prior
to the life insured reaching age 85 if Death Benefit Option 2 is selected at any
time, by satisfying the Cumulative Premium Test or the Fund Value Test. See
Detailed Information About The Policies; Premium Provisions -- "Death Benefit
Guarantee."
Certain maximum premium limitations apply to the Policy to ensure the Policy
qualifies as life insurance under rules defined in the Internal Revenue Code.
See Detailed Information About The Policies; Premium Provisions -- "Premium
Limitations."
2
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Summary Of Charges And Deductions.
Charges under the Policy are assessed as:
(1) deductions from premiums
- 2.35% state and local taxes
- 1.25% federal taxes
(2) surrender charges upon surrender, partial withdrawal in excess of the
Withdrawal Tier Amount, decrease in face amount or lapse
- deferred underwriting charge of $6 for each $1,000 of face amount
- deferred sales charge of a maximum of 50% of premiums paid up to a
maximum of 3.031 Target Premiums
(3) monthly deductions
- administration charge of $35 plus $.01 per $1,000 of face amount per
month until the first policy anniversary; thereafter, $10 plus $.01 per
$1,000 of face amount per month
- cost of insurance charge
- mortality and expense risks charge of .90% per annum through the later
of the tenth policy anniversary and the policyowner's attained age 60
and, thereafter, .45% per annum
- supplementary benefit(s) charge(s)
(4) Other Charges
Investment Management Fees and Expenses
Investment management fees paid by NASL Series Trust range from .25% to
1.10% of the assets of the Portfolios. Expenses range from .15% to .75% of
the assets of the Portfolios.
3
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Certain Transfers
- transfer fee of $25 per transfer in excess of twelve transfers in any
policy year.
- transfer fee of $5 for each transfer under the Dollar Cost Averaging
program when Policy Value does not exceed $15,000
For a complete discussion of charges and deductions see the heading Charges And
Deductions in this Introduction and the references therein, and see also the
heading Transfers Are Permitted in this Introduction and the references therein.
Investment Options.
After deductions for federal, state and local taxes totalling 3.60%, 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
one of the following portfolios:
- Emerging Growth Trust
- Quantitative Equity Trust (formerly Common Stock Fund)
- Real Estate Securities Trust
4
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- Balanced Trust
- Capital Growth Bond Trust
- Money Market Trust
- International Stock Trust
- Pacific Rim Emerging Markets Trust
- Equity Index Trust
- Equity-Income Trust
- U.S. Government Securities Trust
- Growth and Income Trust
- Equity Trust
- Conservative Asset Allocation Trust
- Moderate Asset Allocation Trust
- Aggressive Asset Allocation Trust
- Blue Chip Growth Trust
- International Small Cap Trust
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 NASL Series Trust 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" below.
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 Portfolio shares held in the
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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.
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, currently
1.75%, except on Select Loan Amounts where the interest rate differential,
subject to change in certain circumstances, is currently 0%. See Detailed
Information About the Policies; Policy Values -- "Policy Loans."
Transfers Are Permitted. A policyowner may make transfers among the
sub-accounts of Separate Account Three and the Company's general account,
subject to certain restrictions.
Twelve transfers per policy year may be made at no cost to the policyowner;
excess transfers will be permitted at a cost of $25 per transfer. All transfer
requests received at the same time are treated as a single transfer request.
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. 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. 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
6
<PAGE> 17
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."
Charges And Deductions.
1) Deductions From Premiums. Two deductions are made when premiums are paid:
- a charge of 2.35% for state and local taxes, and
- a charge of 1.25% for federal taxes.
2) Surrender Charges. Manufacturers Life of America will usually deduct a
deferred underwriting charge and a deferred sales charge if, during the
Surrender Charge Period:
- the Policy is surrendered for its Net Cash Surrender Value,
- a partial withdrawal in excess of the Withdrawal Tier Amount is made,
- a decrease in face amount is requested, or
- the Policy lapses.
The deferred underwriting charge is $6 for each $1,000 of face amount of life
insurance coverage initially or added by increase. In effect, the charge
applies only to the first $500,000 of face amount initially purchased or the
first $500,000 of each subsequent increase in face amount. Thus, the charge
made in connection with any one underwriting will not exceed $3,000.
The full amount of the deferred underwriting charge will be in effect for five
years following Policy issue. Beginning in the sixth year these charges grade
downward over a maximum ten-year period. See Detailed Information About the
Policies; Charges And Deductions -- "Surrender Charges."
The maximum deferred sales charge is 50% of premiums paid up to a maximum number
of Target Premiums that varies (from -0.180 to 3.031) according to the issue age
of the life insured, the face amount at issue and the amount of any increase.
Subject to compliance with the sales charge limitation provisions described
below, the maximum deferred sales charge will be in effect for at least the
first two years of the Surrender Charge Period. After that, the portion of the
deferred sales charge that remains in effect will grade down at a rate that also
varies according to the issue age of the life insured until, at the end of the
Surrender Charge Period there is no deferred sales charge. See Detailed
Information About the Policies -- "Charges And Deductions" --Surrender Charges.
In the event of a face amount increase, the surrender charges applicable to the
7
<PAGE> 18
increase will be those rates that would apply if a Policy were issued to the
life insured at his or her then attained age and based on the amount of the
increase.
Limitation Of Sales Charges. If the Policy is surrendered at any time during
the first two years following issuance or following an increase in face amount
or if the increase is cancelled during the two-year period following the
increase, then Manufacturers Life of America may forego deducting the maximum
deferred sales charge applicable to the Policy or the increase. See Detailed
Information About the Policies; Charges And Deductions -- "Surrender Charges."
If the Policy is surrendered after that two-year period, the full amount of the
applicable sales charge will apply.
3) Monthly Deductions. At the beginning of each policy month Manufacturers
Life of America deducts from the Policy Value:
- an administration charge of $35 plus $.01 per $1,000 of face amount
until the first policy anniversary and, thereafter, $10 plus $.01 per
$1,000 of face amount,
- a charge for the cost of insurance,
- a charge for mortality and expense risks of .90% per annum through the
later of the tenth policy anniversary and the policyowner's attained
age 60 and, thereafter, .45% per annum. This charge is assessed
against the value of the policyowner's investment accounts, and
- charge(s) for any supplementary benefit(s) added to the Policy.
The cost of insurance charge varies based on the net amount at risk under the
Policy and the applicable cost of insurance rate. Cost of insurance rates vary
according to issue age, the duration of the coverage, sex (unless unisex rates
are required by law), any additional ratings indicated in the policy, and risk
class of the life insured. The maximum cost of insurance rate that can be
charged is guaranteed not to exceed the 1980 Commissioners Standard Ordinary
Smoker/Nonsmoker Mortality Tables. However, any additional ratings as indicated
in the Policy will be added to the cost of insurance rate. See Detailed
Information About the Policies; Charges And Deductions -- "Monthly Deductions."
If the Policy is still in force when the life insured attains age 100, no
further monthly deductions will be taken from the Policy Value.
4) Other Charges. Charges will be imposed on certain transfers of Policy
Values, including a $25 charge for each transfer in excess of twelve per
policy year and a $5 charge for each Dollar Cost Averaging transfer if
Policy Value does not exceed $15,000. See Policy Values -- "Transfers Of
Policy Value."
Certain expenses are, or will be, assessed against the assets of the
Portfolios, as follows.
8
<PAGE> 19
Investment Management Fees
investment management fee of 1.05% assessed against the assets of the
Emerging Growth Trust
investment management fee of .70% assessed against the assets of the
Quantitative Equity Trust (formerly Common Stock Fund)*
investment management fee of .70% assessed against the assets of the Real
Estate Securities Trust*
investment management fee of .80% assessed against the assets of the
Balanced Trust
investment management fee of .65% assessed against the assets of the
Capital Growth Bond Trust*
investment management fee of .50% assessed against the assets of the
Money Market Trust
investment management fee of 1.05% assessed against the assets of the
International Stock Trust
investment management fee of .85% assessed against the assets of the
Pacific Rim Emerging Markets Trust
investment management fee of .25% assessed against the assets of the
Equity Index Trust
investment management fee of .925% assessed against the assets of the
Blue Chip Growth Trust
investment management fee of 1.10% assessed against the assets of the
International Small Cap Trust
investment management fee of .80% assessed against the assets of the
Equity-Income Trust
investment management fee of .65% assessed against the assets of the
U.S. Government Securities Trust
investment management fee of .75% assessed against the assets of the
Growth and Income Trust
investment management fee of .75% assessed against the assets of the
Equity Trust
investment management fee of .75% assessed against the assets of the
Conservative Asset Allocation Trust
investment management fee of .75% assessed against the assets of the
Moderate Asset Allocation Trust
investment management fee of .75% assessed against the assets of the
Aggressive Asset Allocation Trust
Expenses
expenses of up to .75% assessed against the assets of the Pacific Rim
Emerging Markets Trust and International Stock Trust
expenses of up to .15% assessed against the assets of the Equity Index
Trust
expenses of up to .50% assessed against the assets of all other 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 Quantitative Equity Trust (formerly
Common Stock Fund), Real Estate Securities Trust and Capital Growth Bond Trust
for such period from exceeding .50% of average net assets.
See Detailed Information About the Policies; Charges And Deductions -- "Other
Charges."
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.
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Supplementary Benefits.
A policyowner may choose to add certain supplementary benefits to the Policy.
These supplementary benefits include an accidental death benefit, life insurance
for additional insured persons, acceleration of benefits in the event of
terminal illness, term insurance option, a disability benefit to waive the cost
of monthly deductions and an option to ensure a guaranteed Policy Value.
The cost of any supplementary benefits will be deducted from the Policy Value
monthly. See Detailed Information About the Policies; Other Provisions --
"Supplementary Benefits."
Default.
Unless the Death Benefit 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. 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."
Death Benefit Guarantee.
Except in the state of New Jersey where the Death Benefit Guarantee is not
available, on Policies issued and maintained with a minimum face amount of
$250,000, as long as the 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 the life insured's attaining age 100 if Death Benefit
Option 1 is maintained throughout the life of the Policy and (ii) prior to the
life insured reaching age 85 if Death Benefit Option 2 is selected at any time,
regardless of the investment performance of the Funds underlying the Policy
Value. On Policies with face amounts of less than $250,000 there is no Death
Benefit Guarantee after the third policy anniversary. See Detailed Information
About the Policies; Premium Provisions -- "Death Benefit Guarantee."
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 later of:
- - 10 days after it is received
- - 45 days after the application for the Policy is signed
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<PAGE> 21
- - 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.
Select Loans may, however, be treated as taxable 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, absent additional payments. The premium payment
necessary to avert lapse would increase with the age of the 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, 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, which may
affect the tax consequences to him or her, the lives insured or the beneficiary.
These laws may change 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
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<PAGE> 22
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 Tax provisions of the Internal Revenue Code. The
policyowner should consult his or her tax adviser regarding these taxes.
General Information About Manufacturers
Life of America, Separate Account Three,
And NASL Series Trust
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. Manufacturers USA, 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+, A.M. Best Company - A++,
Duff & Phelps Credit Rating Co. - AAA, and Moody's Investors Service, Inc. -
Aa3. However, neither Manufacturers Life of America nor Manufacturers Life
guarantees the investment performance of the Separate Account.
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.
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<PAGE> 23
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.
NASL Series Trust
Each sub-account of the Separate Account will purchase shares only of a
particular NASL Trust. NASL Series Trust is registered under the 1940 Act as an
open-end management investment company. The Separate Account will purchase and
redeem shares of NASL Trusts 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 Portfolio
will be reinvested immediately at net asset value in shares of that Portfolio
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 the Company or life
insurance companies affiliated with the Company. Manufacturers Life of America
will 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:
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<PAGE> 24
PORTFOLIO SUBADVISER
Aggressive Growth Portfolios
Pacific Rim Emerging Markets Trust Manufacturers Adviser Corporation*
International Small Cap Trust Founders Asset Management, Inc.
Emerging Growth Trust Warburg, Pincus Counsellors, Inc.
International Stock Trust Rowe Price-Fleming International, Inc.
Equity Portfolios
Equity Trust Fidelity Management Trust Company
Quantitative Equity Trust (formerly Manufacturers Adviser Corporation*
Common Stock Fund)
Equity Index Trust Manufacturers Adviser Corporation*
Blue Chip Growth Trust T. Rowe Price Associates, Inc.
Growth and Income Trust Wellington Management Company
Equity-Income Trust T. Rowe Price Associates, Inc.
Real Estate Securities Trust Manufacturers Adviser Corporation*
Balanced Portfolios
Balanced Trust Founders Asset Management, Inc.
Aggressive Asset Allocation Trust Fidelity Management Trust Company
Moderate Asset Allocation Trust Fidelity Management Trust Company
Conservative Asset Allocation Trust Fidelity Management Trust Company
Bond Portfolios
Capital Growth Bond Trust Manufacturers Adviser Corporation*
U.S. Government Securities Trust Salomon Brothers Asset Management Inc
Money Market Portfolios
Money Market Trust Manufacturers Adviser Corporation*
*Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
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<PAGE> 25
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.
AGGRESSIVE GROWTH PORTFOLIOS
Pacific Rim Emerging Markets Trust. The investment objective of the Pacific Rim
Emerging Markets Trust is to achieve long-term growth of capital. Manufacturers
Adviser Corporation manages the Pacific Rim Emerging Markets Trust and seeks to
achieve this investment objective by investing in a diversified portfolio that
is comprised primarily of common stocks and equity-related securities of
corporations domiciled in countries of the Pacific Rim region.
International Small Cap Trust. The investment objective of the International
Small Cap Trust is to seek long term capital appreciation. Founders Asset
Management, Inc. manages the International Small Cap Trust and will pursue this
objective by investing primarily in securities issued by foreign companies which
have total market capitalizations or annual revenues of $1 billion or less.
These securities may represent companies in both established and emerging
economies throughout the world.
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 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.
International Stock Trust. The investment objective of the International Stock
Trust is to achieve long-term growth of capital. Rowe Price-Fleming
International, Inc. manages the International Stock Trust and seeks to obtain
this objective by investing primarily in common stocks of established, non-U.S.
companies.
EQUITY PORTFOLIOS
Equity Trust. The principal investment objective of the Equity Trust is growth
of capital. Current income is a secondary consideration although growth of
income may accompany growth of capital. Fidelity Management Trust Company
manages the Equity Trust and seeks to attain the foregoing objective by
investing primarily in common stocks of United States issuers or securities
convertible into or which carry the right to buy common stocks.
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
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<PAGE> 26
above-average rate of return. Manufacturers Adviser Corporation manages the
Quantitative Equity Trust.
Equity Index Trust. The investment objective of the Equity Index Trust is to
achieve investment results which approximate the total return of publicly
traded common stocks in the aggregate, as represented by the Standard & Poor's
500 Composite Stock Price Index. Manufacturers Adviser Corporation manages the
Equity Index Trust.
Blue Chip Growth Trust. The primary investment objective of the Blue Chip Growth
Trust is to provide long-term growth of capital. Current income is a secondary
objective, and many of the stocks in the Portfolio are expected to pay
dividends. T. Rowe Price Associates, Inc. manages the Blue Chip Growth Trust.
Growth and Income Trust. The investment objective of the Growth and Income
Trust is to provide long-term growth of capital and income consistent with
prudent investment risk. Wellington Management Company manages the Growth and
Income Trust and seeks to achieve the Trust's objective by investing primarily
in a diversified portfolio of common stocks of U.S. issuers which Wellington
Management Company believes are of high quality.
Equity-Income Trust. The investment objective of the Equity-Income Trust (prior
to December 31, 1996, the "Value Equity Trust") is to provide substantial
dividend income and also long term capital appreciation. T. Rowe Price
Associates, Inc. manages the Equity-Income Trust and seeks to attain this
objective by investing primarily in dividend-paying common stocks, particularly
of established companies with favorable prospects for both increasing dividends
and capital appreciation.
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 PORTFOLIOS
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.
Automatic Asset Allocation Trusts (Aggressive, Moderate and Conservative). The
investment objective of each of the Automatic Asset Allocation Trusts is to
realize the highest potential total return consistent with a specified level of
risk tolerance -- conservative, moderate or aggressive. The amount of each
Portfolio's assets invested in each category of securities -- debt, equity, and
money market -- is dependent upon the judgment of Fidelity Management Trust
Company as to what percentages of each Portfolio's assets in each category will
contribute to the limitation of risk and the achievement of its investment
objective.
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<PAGE> 27
BOND PORTFOLIOS
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.
U.S. Government Securities Trust. The investment objective of the U.S.
Government Securities Trust is to obtain a high level of current income
consistent with preservation of capital and maintenance of liquidity. Salomon
Brothers Asset Management Inc manages the U.S. Government Securities Trust and
seeks to attain its objective by investing a substantial portion of its assets
in debt obligations and mortgage-backed securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities and derivative securities
such as collateralized mortgage obligations backed by such securities.
MONEY MARKET PORTFOLIO
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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<PAGE> 28
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 $50,000 ($100,000 for preferred risk policies). 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. A 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 nonetheless 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 a policy date from which policy years, policy months and policy
anniversaries are all determined. Each Policy also has an effective date which
is the date the Company becomes obligated under the Policy and when the first
monthly deductions are taken. If an application is accompanied by a check for
at least the Initial Premium and the application is accepted, the policy date
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<PAGE> 29
will be the date the application and check were received at the Manufacturers
Life of America Service Office and the effective date will be the date
Manufacturers Life of America's underwriters approve issuance of the Policy. If
an application is accompanied by a check for at least the Initial Premium, the
life insured may be covered under the terms of a conditional insurance agreement
until the effective date. If an application accepted by the Company is not
accompanied by a check for at least the Initial Premium, the Policy will be
issued with a policy date which is seven days after issuance of the Policy (the
"issue date") and with an effective date which is the date the Service Office
receives at least the Initial Premium. In certain situations a different policy
date may be used. 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 issued with Additional Ratings. If the Initial Premium is not paid or
if the application is rejected, the Policy will be cancelled and any premiums
paid will be returned to the applicant.
Under certain circumstances a Policy may be issued with a backdated policy date.
A Policy will not be backdated more than six months (twelve 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 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 Trust. On the effective date, the
premiums paid plus interest credited, net of deductions for federal, state and
local taxes, will be allocated among the Investment Accounts 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. Monthly deductions are due on the policy date and at the beginning of
each policy month thereafter. However, if due prior to the effective date, they
will be taken on the effective date instead of the dates they were due.
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 Portfolio 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 on the date a written or
telephonic request for change, in a format 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 the life 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
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<PAGE> 30
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 the Planned
Premium be such that the Cumulative Premium Test (see Insurance Benefits --
"Death Benefit Guarantee") will be satisfied.
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.
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 on 90 days' written
notice. 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.
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 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 life insured's death, Manufacturers
Life of America will pay an insurance benefit based on the death benefit option
selected by the policyowner upon receipt of due proof of death. 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
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<PAGE> 31
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 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, on Policies issued with a face amount of
at least $250,000 (calculated as described below), the policyowner may elect the
No Lapse Guarantee (in Illinois this benefit is known as Minimum Premium
Guarantee). If elected, 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 PROVISIONS - "Policy Default"), even if a
combination of Policy loans, adverse investment experience and 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. For purposes of
determining the face amount at issue for the No Lapse Guarantee, the face amount
shall include any amounts purchased under the supplementary insurance option.
The No Lapse Guarantee Period is the first 5 Policy Years for life insureds with
an issue age up to and including 85. It is not offered to life insureds whose
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 satisfied. 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, the No Lapse Guarantee will terminate, and the Policy subsequently may
go into default if the Policy's Net Cash Surrender Value is insufficient to meet
the monthly deductions due at the beginning of a policy month. A death benefit
option change will also terminate the No Lapse Guarantee if it is in effect at
the time of the change as will a decrease in face amount below $250,000. 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
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<PAGE> 32
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:
The Policy will satisfy the No Lapse Guarantee Cumulative Premium Test if (a) is
greater than or equal to (b), where:
(a) is the sum of all premiums paid, less any partial withdrawals and
less any Policy Debt;
and
(b) is the sum of the Monthly No Lapse Guarantee Premiums due since the
policy date.
The Monthly No Lapse Guarantee Premium is one-twelfth of the No Lapse Guarantee
Premium. The No Lapse Guarantee Premium is set forth in the Policy. It is
subject to change if the face amount of the Policy is changed (see INSURANCE
BENEFIT - "Face Amount Changes"), or if there is any change in the supplementary
benefits added to the Policy or in the risk class of any life insured.
Death Benefit Guarantee
Policies With Face Amounts Of At Least $250,000. If permitted by state law and
elected by the policyowner, on policies issued and maintained with a minimum
face amount of $250,000, if the Cumulative Premium Test (see below) is
satisfied, 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.
If permitted by state law and elected by the policyowner, on Policies issued and
maintained with a minimum face amount of $250,000, if after the tenth policy
anniversary the Cumulative Premium Test is not satisfied but the Fund Value Test
(see below) is satisfied, Manufacturers Life of America will keep the Death
Benefit Guarantee in effect.
This Death Benefit Guarantee, which is not available in the state of New Jersey,
will expire at the end of a policy year specified in the Policy, currently (i)
the year in which the life insured reaches attained age 100 if Death Benefit
Option 1 is maintained throughout the life of the Policy and (ii) the year in
which the life insured reaches attained age 85 if Death Benefit Option 2 is
selected at any time. While the guarantee is in effect, Manufacturers Life of
America will determine at the beginning of each policy month whether the
Cumulative Premium Test or the Fund Value Test has been satisfied. If neither
has 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 Death Benefit Guarantee in effect. The required payment
will be equal to the outstanding premium required to meet the Cumulative Premium
Test at the date neither test was satisfied, plus the Monthly Death Benefit
Guarantee Premium due for the next two policy months. If the required payment
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<PAGE> 33
is not received by the end of the grace period, the Death Benefit Guarantee will
terminate. Once the Death Benefit Guarantee is terminated, it cannot be
reinstated.
Policies With Face Amounts Under $250,000. If permitted by state law and
elected by the policyowner, on Policies with a face amount less than $250,000 at
issue or after face amount decrease, if the Cumulative Premium Test is satisfied
in the first three years, Manufacturers Life of America will guarantee that the
Policy will not go into 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. After the third policy anniversary, there is no
Death Benefit Guarantee on (a) Policies issued with face amounts of less than
$250,000 or (b) Policies on which a face amount decrease has resulted in a face
amount of less than $250,000.
Cumulative Premium Test. The Policy provides for a Cumulative Premium Test.
The Cumulative Premium Test is satisfied if at the beginning of each policy
month the sum of all premiums paid to date less any partial withdrawals and any
Policy Debt is at least equal to the sum of the Monthly Death Benefit Guarantee
Premiums due since the policy date. The Death Benefit Guarantee Premium will
increase when the insured attains age 70. The Death Benefit Guarantee Premiums
for ages 0-69 and age 70 and above are set forth in the Policy. It is subject
to change if the face amount of the Policy or the death benefit option is
changed (see -- "Death Benefit Option Changes" and "Face Amount Changes") or
if there is any change in the supplementary benefits added to the Policy or in
the risk class of the life insured.
Fund Value Test. The Policy provides for a Fund Value Test. The Fund Value
Test is applicable after the tenth anniversary of the Policy. The Fund Value
Test is satisfied if at the beginning of each policy month the Net Policy Value
is greater than or equal to the Gross Single Premium.
Death Benefit Options
The Policy permits the policyowner to select one of two death benefit options --
Option 1 and Option 2. Under Option 1 the death benefit is the face amount of
the Policy at the date of death or, if greater, the Policy Value at the date of
death multiplied by the applicable percentage in the table set forth below.
Under Option 2 the death benefit is the face amount of the Policy plus the
Policy Value at the date of death or, if greater, the Policy Value at the date
of death multiplied by the applicable percentage in the following table:
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<PAGE> 34
<TABLE>
<CAPTION>
Attained Corridor
Age Percentage
- -------- ----------
<S> <C>
40 & below 250%
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
62 126
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75-90 105
91 104
92 103
93 102
94 101
95 & above 100
</TABLE>
Regardless of which death benefit option is in effect, the relationship of
Policy Value to death benefit will change whenever the "corridor percentages"
are used to determine the amount of the death benefit. This will occur whenever
multiplying the Policy Value by the applicable percentage set forth in the above
table results in a greater death benefit than would otherwise apply under the
selected option. For example, assume the life insured under a Policy with a
face amount of $100,000 has an attained age of 40. If Option 1 is in effect,
the
24
<PAGE> 35
corridor percentage will produce a greater death benefit whenever the Policy
Value exceeds $40,000 (250% X $40,000 = $100,000). If the Policy Value is less
than $40,000, an incremental change in Policy Value, up or down, will have no
effect on the death benefit. If the Policy Value is greater than $40,000, an
incremental change in Policy Value will result in a change in the death benefit
by a factor of 2.5. Thus, if the Policy Value were to increase to $40,010, the
death benefit would be increased to $100,025 (250% X $40,010 = $100,025).
If Option 2 were in effect in the above example, the corridor percentage would
produce a greater death benefit whenever the Policy Value exceeded $66,667 (250%
X 66,667 = 166,667). At that point the death benefit produced by multiplying
the Policy Value by 250% would result in a greater amount than adding the Policy
Value to the face amount of the Policy. If the Policy Value is less than
$66,667, an incremental change in Policy Value will have a dollar-for-dollar
effect on the death benefit. If the Policy Value is greater than $66,667, an
incremental change in Policy Value will result in a change in the death benefit
by a factor of 2.5 in the same manner as would be the case under Option 1 when
the corridor percentage determined the death benefit.
Death Benefit Option Changes
The death benefit option is selected initially by the policyowner in the
application. After the Policy has been in force for two years the death benefit
option may be changed effective as of the next policy anniversary following a
request. Written request for a change must be received by Manufacturers Life of
America at least 30 days prior to a policy anniversary in order to become
effective on that date. The Company reserves the right to limit a request for
change if the change would cause the Policy to fail to qualify as life insurance
for tax purposes.
A change in death benefit option will result in a change in the Policy's face
amount in order to avoid any change in the amount of the death benefit.
If the change in death benefit is from Option 1 to Option 2, the new face amount
will be equal to the face amount prior to the change minus the Policy Value on
the effective date of the change. A change to Option 2 will not be allowed if
it would cause the face amount of the Policy to go below the minimum face amount
of $50,000 ($100,000 for preferred risk policies). A change of death benefit
option to Option 2 will shorten the death benefit guarantee period to the year
in which the life insured reaches attained age 85.
A change in death benefit from Option 2 to Option 1 will be subject to
satisfactory evidence of insurability. If satisfactory evidence is provided,
the new face amount will be equal to the face amount prior to the change plus
the Policy Value on the effective date of the change. The increase in face
amount resulting from a change to Option 1 will not affect the amount of
surrender charges to which a Policy may be subject.
If satisfactory evidence of insurability is not provided, the policyowner may
still switch from Option 2 to Option 1; however, the face amount of the Policy
will remain at its previous level, thus reducing the death benefit. A
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<PAGE> 36
policyowner may elect at issue the ability to switch from Option 2 to Option 1
within six months of a date certain. No evidence of insurability will be
required if the policyowner exercises his or her ability to switch within six
months of the chosen date.
Policyowners who wish to have level insurance coverage should generally select
Option 1. Under Option 1, increases in Policy Value usually will reduce the
net amount of risk under a Policy which will reduce cost of insurance charges.
This means that favorable investment performance should result in a faster
increase in Policy Value than would occur under an identical Policy with Option
2 in effect. However, the larger Policy Value which may result under Option 1
will not affect the amount of the death benefit unless the corridor percentages
are used to determine the death benefit.
Policyowners who want to have the Policy Value reflected in the death benefit
so that any increases in Policy Value will increase the death benefit should
generally select Option 2. Under Option 2, the net amount at risk will remain
level unless the corridor percentages are used to determine death benefit, in
which case increases in Policy Value will increase the net amount at risk.
Face Amount Changes
Subject to certain limitations, a policyowner may, upon written request,
increase or decrease the face amount of the Policy. A change in face amount
may affect the Death Benefit Guarantee Premium, the monthly deductions and
surrender charges (see "Charges And Deductions"). Currently, each increase or
decrease (other than a decrease resulting from a partial withdrawal) in face
amount must be at least $50,000 ($100,000 for increases in preferred risk
policies and $10,000 for increases in connection with Policies purchased under
group or sponsored arrangements). Manufacturers Life of America reserves the
right to increase or decrease the minimum face amount change on 90 days' written
notice to the policyowner. The Company also reserves the right to limit a
change in face amount to the extent necessary to prevent the Policy from failing
to qualify as life insurance for tax purposes.
Increases. Increases in face amount are subject to satisfactory evidence of
insurability. Increases may be made only once per policy year and only after
the second policy anniversary. An increase will become effective at the
beginning of the next policy month following the date Manufacturers Life of
America approves the requested increase. The Company reserves the right to
refuse a requested increase if the life insured's age at the effective date of
the increase would be greater than the maximum issue age for new Policies at
that time.
An increase in face amount will usually result in the Policy's being subject to
new surrender charges. The new surrender charges will be computed as if a new
Policy were being purchased for the increase in face amount. For purposes of
determining the new deferred sales charge, a portion of the Policy Value at the
time of the increase, and a portion of the premiums paid on or subsequent to
the increase, will be deemed to be premiums attributable to the increase. See
Charges And Deductions -- "Surrender Charges." Any increase in face amount to a
level less than the highest face amount previously in effect will have no
effect on the surrender charges to which the Policy is subject, since surrender
charges, if applicable, will have been assessed in connection with the prior
decrease in
26
<PAGE> 37
face amount. The insurance coverage eliminated by the decrease of the oldest
face amount will be deemed to be restored first. As with the purchase of a
Policy, a policyowner will have free look and sales charge limitation rights
with respect to any increase resulting in new surrender charges.
No additional premium is required for a face amount increase. However, a
premium payment may be necessary to prevent the Policy from going into default,
since new surrender charges resulting from an increase would automatically
reduce the Net Cash Surrender Value of the Policy. Moreover, a new Death
Benefit Guarantee Premium will be determined.
Decreases. A decrease in the face amount may be requested only once per policy
year and only 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 and have the deferred sales charge for
the increase reduced by applicable limitations on sales charges attributable to
the increase. A decrease in face amount will become effective at the beginning
of the next policy month following the receipt of a properly executed request.
A decrease will not be allowed if it would cause the face amount to go below
the minimum face amount of $50,000 ($100,000 for preferred risk policies).
A decrease in face amount during the Surrender Charge Period will usually
result in surrender charges being deducted from the Policy Value. See Charges
And Deductions -- "Surrender Charges." For purposes of determining surrender
and cost of insurance charges, a decrease will reduce face amount in the
following order: (a) the face amount provided by the most recent increase, then
(b) the face amounts provided by the next most recent increases successively,
and finally (c) the initial face amount.
Policy Values
Policy Value
A Policy has a Policy Value, a portion of which is available to the policyowner
by making a policy loan or partial withdrawal or upon surrender of the Policy.
See "Policy Loans" and "Partial Withdrawals And Surrenders" below. The Policy
Value may also affect the amount of the death benefit. See Insurance Benefit
- -- "Death Benefit Options." The Policy Value at any time is equal to the sum of
the Values in the Investment Accounts, the Guaranteed Interest Account and the
Loan Account. The following discussion relates only to the Investment
Accounts. Policy loans are discussed under "Policy Loans" and the Guaranteed
Interest Account is discussed under "The General Account." The portion of the
Policy Value based on the Investment Accounts is not guaranteed and will vary
each Business Day with the investment performance of the underlying Portfolio.
An Investment Account is established under each Policy for each sub-account of
the Separate Account to which net premiums or transfer amounts have been
allocated. Each Investment Account under a Policy measures the interest of the
Policy in the corresponding sub-account. The value of the Investment Account
established for a particular sub-account is equal to the number of units of
that sub-account credited to the Policy times the value of such units.
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<PAGE> 38
Units of a particular sub-account are credited to a Policy when net premiums
are allocated to that sub-account or amounts are transferred to that
sub-account. Units of a sub-account are cancelled whenever amounts are
deducted, transferred or withdrawn from the sub-account. The number of units
credited or cancelled for a specific transaction is based on the dollar amount
of the transaction divided by the value of the unit at the end of the Business
Day on which the transaction occurs. The number of units credited with respect
to a premium payment will be based on the applicable unit values at the end of
the Business Day on which the premium is received at the Manufacturers Life of
America Service Office or other office or entity so designated by Manufacturers
Life of America.
Units are valued at the end of each Business Day. A Business Day is deemed to
end at the time of the determination of the net asset value of the Fund shares.
When an order involving the crediting or cancelling of units is received after
the end of a Business Day or on a day which is not a Business Day, the order
will be processed on the basis of unit values determined at the end of the next
Business Day. Similarly, any determination of Policy Value, Investment Account
value or death benefit to be made on a day which is not a Business Day will be
made at the end of the next Business Day.
The value of a unit of each sub-account was initially fixed at $10. For each
subsequent Business Day the unit value is determined by multiplying the unit
value for the preceding Business Day by the "net investment factor" for the
particular sub-account for such subsequent Business Day. The net investment
factor for a sub-account for any Business Day is equal to (a) divided by (b),
where:
(a) is the net asset value of the underlying Portfolio shares held by that
sub-account at the end of such Business Day before any policy transactions
are made on that day;
(b) is the net asset value of the underlying Portfolio shares held by that
sub-account at the end of the immediately preceding Business Day after all
policy transactions have been made for that day.
Manufacturers Life of America reserves the right to adjust the above formula
for any taxes determined by it to be attributable to the operations of the
sub-account.
Transfers Of Policy Value
A policyowner may change the extent to which his or her Policy Value is based
upon any specific sub-account of the Separate Account or the Company's general
account. Such changes are made by transferring amounts from one or more
Investment Accounts or the Company's general account to other Investment
Accounts or the Company's general account. A policyowner is permitted to make
twelve transfers each policy year free of charge. Additional transfers in each
policy year may be made at a cost of $25 per transfer. This charge will be
allocated among the Investment Accounts and the Guaranteed Interest Account in
the same
28
<PAGE> 39
proportion as the amount transferred from each bears to the total amount
transferred. For this purpose all transfer requests received by Manufacturers
Life of America on the same Business Day are treated as a single transfer
request.
The maximum amount that may be transferred from the Guaranteed Interest Account
in any one policy year is the greater of $500 or 15% of the Guaranteed Interest
Account value at the previous policy anniversary. Any transfer which involves a
transfer out of the Guaranteed Interest Account may not involve a transfer to
the Investment Account for the Money Market Trust.
Transfer requests must be in a format 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 resulting from 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.
The policyowner may effectively convert his or her Policy to a fixed benefit
policy by transferring the Policy Value in all of the Investment Accounts to
the Guaranteed Interest Account and by changing his or her allocation of net
premiums entirely to the Guaranteed Interest Account. As long as the entire
Policy Value is allocated to the Guaranteed Interest Account, the Policy Value,
other values based thereon and the death benefit will be determinable and
guaranteed. The Investment Account values to be transferred to the Guaranteed
Interest Account will be determined as of the Business Day on which
Manufacturers Life of America receives the request for conversion. There will
be no change in the issue age, risk class of the life insured or face amount as
a result of the conversion. A transfer of any or all of the Policy Value to
the Guaranteed Interest Account can be made at any time, even if a prior
transfer has been made during the policy month.
Limitations. To the extent that total surrenders, partial withdrawals and
transfers out of a sub-account exceed total net premium allocations and
transfers into that sub-account, portfolio securities of the underlying
Portfolio may have to be sold. Excessive sales of the investment portfolio
securities in such a situation could be detrimental to that Portfolio and to
policyowners with Policy Values allocated to sub-accounts investing in that
Portfolio. To protect the interests of all policyowners, the Policy's transfer
privilege is limited as described below.
So long as effecting net transfers out of a sub-account in a particular
Business Day would not reduce the number of shares of the underlying Portfolio
outstanding at the close of the prior Business Day by more than 5%, all such
transfers will
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<PAGE> 40
be effected. However, net transfers out of a sub-account greater than 5% would
be permitted only if, and to the extent that, in the judgment of Manufacturers
Adviser Corporation, they would not result in detriment to the underlying
Portfolio or to the interests of policyowners or others with assets allocated
to that Portfolio. If and when transfers must be limited to avoid such
detriment, some requests will not be effected. In determining which requests
will be effected, transfers pursuant to the Dollar Cost Averaging program will
be effected first, followed by Asset Allocation Balancer transfers, written
requests next and telephone requests last. Within each such group, requests
will be processed in the order received, to the extent possible. Policyowners
whose transfer requests are not effected will be so notified. Current S.E.C.
rules preclude the Company from processing at a later date those requests that
were not effected. Accordingly, a new transfer request would have to be
submitted in order to effect a transfer that was not effected because of the
limitations described in this paragraph. Manufacturers Life of America may be
permitted to limit transfers in certain other circumstances. See Other
Provisions -- "Payment Of Proceeds."
Dollar Cost Averaging. Manufacturers Life of America will offer policyowners a
Dollar Cost Averaging program. Under this program amounts will be
automatically transferred at predetermined intervals from one Investment
Account to any other Investment Account(s) or the Guaranteed Interest Account.
Under the Dollar Cost Averaging program the policyowner will designate an
amount to 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 on 90 days' written notice to the policyowner.
Asset Allocation Balancer Transfers. Manufacturers Life of America will also
offer policyowners the ability to have amounts automatically transferred among
stipulated Investment Accounts to maintain an allocated percentage in each
stipulated Investment Account.
Under the Asset Allocation Balancer program the policyowner will designate an
allocation of Policy Value among Investment Accounts. At six month intervals,
beginning six months after the policy date, Manufacturers Life of America will
move amounts among the Investment Accounts as necessary to maintain the
policyowner's chosen allocation. A change to the policyowner's premium
allocation instructions will automatically result in a change in Asset
Allocation Balancer instructions so that the two are identical unless the
policyowner either instructs Manufacturers Life of America differently or a
Dollar Cost
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<PAGE> 41
Averaging request is in effect. Currently, there is no charge for this program;
however, Manufacturers Life of America reserves the right to institute a charge
on 90 days' written notice to the policyowner.
Manufacturers Life of America reserves the right to cease to offer this program
on 90 days' written notice to the policyowner.
Policy Loans
While the Policy is in force, the policyowner may borrow against the Policy
Value of his or her Policy. The Policy serves as the only security for the
loan. The minimum amount of any loan is $500. The maximum loan amount is the
amount which would cause the Modified Policy Debt to equal the loan value of
the Policy on the date of the loan. The loan value is the Policy's Cash
Surrender Value less the monthly deductions due to the next policy anniversary.
The Modified Policy Debt as of any date is the Policy Debt (the aggregate
amount of policy loans, including borrowed interest, less any loan repayments)
plus the amount of interest to be charged to the next policy anniversary, all
discounted from the next policy anniversary to such date at an annual rate of
4%. An amount equal to the Modified Policy Debt is transferred to the Loan
Account to ensure that a sufficient amount will be available to pay interest on
the Policy Debt at the next policy anniversary.
For example, assume a Policy with a loan value of $5,000, no outstanding policy
loans and a loan interest rate of 5.75%. The maximum amount that can be
borrowed is an amount that will cause the Modified Policy Debt to equal $5,000.
If the loan is made on a policy anniversary, the maximum loan will be $4,917.
This amount at 5.75% interest will equal $5,200 one year later; $5,200
discounted to the date of the loan at 4% (the Modified Policy Debt) equals
$5,000. Because the minimum rate of interest credited to the Loan Account is
4%, $5,000 must be transferred to the Loan Account to ensure that $5,200 will
be available at the next policy anniversary to cover the interest accrued on
the Policy Debt.
When a loan is made, Manufacturers Life of America will deduct from the
Investment Accounts or the Guaranteed Interest Account, and transfer to the
Loan Account, an amount which will result in the Loan Account value being equal
to the Modified Policy Debt. The policyowner may designate how the amount to
be transferred to the Loan Account is allocated among the accounts from which
the transfer is to be made. In the absence of instructions, the amount to be
transferred will be allocated to each account in the same proportion as the
value in each Investment Account and the Guaranteed Interest Account bears to
the Net Policy Value. A transfer from an Investment Account will result in the
cancellation of units of the underlying sub-account equal in value to the
amount transferred from the Investment Account. However, since the Loan
Account is part of the Policy Value, transfers made in connection with a loan
will not change the Policy Value.
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<PAGE> 42
A policy loan may result in a Policy's failing to satisfy the Cumulative
Premium Test, since the Policy Debt is subtracted from the sum of the premiums
paid in determining whether the Cumulative Premium Test is satisfied. As a
result, the death benefit guarantee may terminate. See Insurance Benefit --
"Death Benefit Guarantee" and Other General Policy Provisions -- "Policy
Default." Moreover, if the death benefit guarantee is not in force, a policy
loan may cause a Policy to be more susceptible to going into default, since a
policy loan will be reflected in the Net Cash Surrender Value. See Other
General Policy Provisions -- "Policy Default." A policy loan will also affect
future Policy Values, since that portion of the Policy Value in the Loan
Account will increase in value at the crediting interest rate rather than
varying with the performance of the underlying Funds selected by the
policyowner or increasing in value at the rate of interest credited for amounts
allocated to the Guaranteed Interest Account. Policy loans may have tax
consequences. 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, absent additional
payments. The premium payment necessary to avert lapse would increase with the
age of the insured. See Miscellaneous Matters -- Federal Income Tax
Considerations (Tax Treatment of Policy Benefits). Finally, a policy loan will
affect the amount payable on the death of the life insured, since the death
benefit is reduced by the value of the Loan Account at the date of death in
arriving at the insurance benefit.
Interest Charged On Policy Loans. Interest on the Policy Debt will accrue
daily and be payable annually on the policy anniversary. The rate of interest
charged will be fixed at an effective annual rate of 5.75%. If the interest
due on a policy anniversary is not paid by the policyowner, the interest will
be borrowed against the Policy.
Interest Credited To The Loan Account. Manufacturers Life of America will
credit interest to any amount in the Loan Account at an effective annual rate
of at least 4%. The actual rate credited is:
- -- On amounts up to the Policy's Select Loan Amount, the rate of interest
charged on the policy loan less an interest rate differential, currently
0%; provided, however, if at some time in the future it is determined
that the current differential could cause the loan to be treated as a
taxable distribution under any applicable ruling, regulation or court
decision, Manufacturers Life of America has the right to increase the
differential on all subsequent Select Loan Amounts either (i) to an
amount that may be prescribed in such ruling, regulation or court
decision that would result in the transaction being treated as a loan
under federal tax law or (ii) if no amount is prescribed, to an amount
that Manufacturers Life of America considers to be more likely to result
in the transaction being treated as a loan under Federal tax law.
- -- On amounts in excess of the Select Loan Amount as described above, the
rate of interest charged on the policy loan less an interest rate
differential, currently 1.75%.
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<PAGE> 43
Prior to the later of the tenth policy anniversary and the anniversary
following attained age 55, the amount available as a Select Loan is zero; after
the later of the tenth policy anniversary and the policy anniversary following
attained age 55, the amount available annually as a Select Loan is equal to 12%
of the Policy's Net Cash Surrender Value at the previous policy anniversary.
The amount available as a Select Loan applies to existing and new loans. If,
at the time a policyowner is considering a Select Loan, interest due currently
on his or her outstanding loans equals or exceeds the Select Loan Amount, the
Select Loan feature could not be used to withdraw additional cash from Policy
Value. The total of all loans, including the Select Loan Amount, cannot exceed
the maximum loan amount as described above.
To illustrate the amount available as a Select Loan, assume that a Policy has
an issue age of 47 and a Net Cash Surrender Value on the eleventh policy
anniversary of $10,000. The Select Loan Amount available during the twelfth
policy year is $1,200 (12% X $10,000). Assume that at the beginning of the
twelfth policy year, a loan of $1,500 is taken. $1,200 of that amount is
considered the Select Loan Amount, $300 an ordinary policy loan.
At the end of the twelfth policy year, assume that the Net Cash Surrender Value
is $9,000. The Select Loan Amount available during the thirteenth policy year
is $1,080 (12% X $9,000). If not already repaid, the $300 from the prior
year's loan that was not considered a Select Loan is immediately converted to a
Select Loan, leaving $780 of the Select Loan Amount available for the
thirteenth policy year (provided that the sum of all outstanding loans does not
exceed the Policy's maximum loan amount). The amount of any unpaid interest on
the Select Loan and the ordinary policy loan from the twelfth policy year also
would be borrowed as a Select Loan up to the maximum Select Loan Amount and
thereby reduce by that amount the $780 available for borrowing as a Select Loan
during the remainder of the thirteenth policy year.
Loan Account Adjustments. When a loan is first taken out, and at specified
events thereafter, the value of the Loan Account is adjusted. Whenever the
Loan Account is adjusted, the difference between (i) the Loan Account before
any adjustment and (ii) the Modified Policy Debt at the time of adjustment, is
transferred between the Loan Account and the Investment Accounts or the
Guaranteed Interest Account. The amount transferred to or from the Loan
Account will be such that the value of the Loan Account is equal to the
Modified Policy Debt after the adjustment.
The specified events which cause an adjustment to the Loan Account are (i) a
policy anniversary, (ii) a partial or full loan repayment, (iii) a new loan
being taken out, or (iv) when an amount is needed to meet a monthly deduction.
A loan repayment may be implicit in that policy debt is effectively repaid upon
termination (i.e., upon death of the life insured, surrender or lapse of the
policy). In each of these instances, the Loan Account will be adjusted so that
any excess of the Loan Account over the Modified Policy Debt after the
repayment will be included in the termination proceeds.
Except as noted below in the Loan Repayments section, amounts transferred from
the Loan Account will be allocated to the Investment Accounts and the
Guaranteed Interest Account in the same proportion as the value in the
corresponding "loan
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<PAGE> 44
sub-account" bears to the value of the Loan Account. A "loan sub-account"
exists for each Investment Account and for the Guaranteed Interest Account.
Amounts transferred to the Loan Account are allocated to the appropriate loan
sub-account to reflect the account from which the transfer was made.
Loan Account Illustration. (Dollar amounts in this illustration have been
rounded to the nearest dollar.) The operation of the Loan Account may be
illustrated by consideration of a Policy with a loan value of $5,000, a loan
interest rate of 5.75%, and a maximum loan amount on a policy anniversary of
$4,917. For purposes of the illustration, assume that the Select Loan Amount
is zero. If a loan in the maximum amount of $4,917 is made, an amount equal to
the Modified Policy Debt, $5,000, is transferred to the Loan Account. At the
next policy anniversary the value of the Loan Account will have increased to
$5,200 ($5,000 X 1.04) reflecting interest credited at an effective annual rate
of 4.0%. At that time the loan will have accrued interest charges of $283
($4,917 X .0575), bringing the Policy Debt to $5,200.
If the accrued interest charges are paid on the policy anniversary, the Policy
Debt will continue to be $4,917, and the Modified Policy Debt, reflecting
interest for the next policy year and discounting the Policy Debt and such
interest at 4%, will be $5,000. An amount will be transferred from the Loan
Account to the Guaranteed Interest Account or the Investment Accounts so that
the Loan Account value will equal the Modified Policy Debt. Since the Loan
Account value was $5,200, a transfer of $200 will be required ($5,200 -
$5,000).
If, however, the accrued interest charges of $283 are borrowed, an amount will
be transferred from the Investment Accounts and the Guaranteed Interest Account
so that the Loan Account value will equal the Modified Policy Debt recomputed
at the policy anniversary. The new Modified Policy Debt is the Policy Debt,
$5,200, plus loan interest to be charged to the next policy anniversary, $299
($5,200 X .0575), discounted at 4%, which results in a figure of $5,288. Since
the value of the Loan Account was $5,200, a transfer of $88 will be required.
This amount is equivalent to the 1.75% interest rate differential on the $5,000
transferred to the Loan Account on the previous policy anniversary.
Loan Repayments. Policy Debt may be repaid in whole or in part at any time
prior to the death of the life insured provided the Policy is in force. When a
repayment is made, the amount is credited to the Loan Account and a transfer is
made to the Guaranteed Interest Account or the Investment Accounts so that the
Loan Account at that time equals the Modified Policy Debt. Loan repayments
will first be allocated to the Guaranteed Interest Account until the associated
loan sub-account is reduced to zero. Loan repayments will then be allocated to
each Investment Account in the same proportion as the value in the
corresponding loan sub-account bears to the value of the Loan Account. Amounts
paid to the Company not specifically designated in writing as loan repayments
will be treated as premiums.
Partial Withdrawals And Surrenders
After a Policy has been in force for two policy years, the policyowner may make
a partial withdrawal of the Net Cash Surrender Value. The minimum amount that
may be withdrawn is $500. The policyowner should specify the portion of the
34
<PAGE> 45
withdrawal to be taken from each Investment Account and the Guaranteed Interest
Account. In the absence of instructions the withdrawal will be allocated among
such accounts in the same proportion as the Policy Value in each account bears
to the Net Policy Value. No more than one partial withdrawal may be made in
any one policy month.
A partial withdrawal made during the Surrender Charge Period will usually
result in the assessment of a portion of the surrender charges to which the
Policy is subject (see Charges And Deductions -- "Surrender Charges") if the
withdrawal is in excess of the Withdrawal Tier Amount. The Withdrawal Tier
Amount is equal to 10% of the Net Cash Surrender Value determined as of the
previous policy anniversary. The portion of a partial withdrawal that is
considered to be in excess of the Withdrawal Tier Amount includes all previous
partial withdrawals that have occurred in the current policy year. If the
Option 1 death benefit is in effect under a Policy from which a partial
withdrawal is made, the face amount of the Policy will be reduced. See Charges
And Deductions -- Surrender Charges (Charges On Partial Withdrawals).
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the
Policy Value less any surrender charges and outstanding monthly deductions due
(the "Cash Surrender Value") minus the value of the Loan Account. The Net Cash
Surrender Value will be determined at the end of the Business Day on which
Manufacturers Life of America receives the Policy and a written request for
surrender at its Service Office. After a Policy is surrendered, the insurance
coverage and all other benefits under the Policy will terminate. Surrender of
a Policy during the Surrender Charge Period will usually result in the
assessment by Manufacturers Life of America of surrender charges. See Charges
And Deductions -- "Surrender Charges."
Charges And Deductions
Charges under the Policy are assessed as (i) deductions from premiums, (ii)
surrender charges upon surrender, partial withdrawals, decreases in face amount
or lapse, (iii) monthly deductions, and (iv) other charges. These charges are
described below.
Deductions From Premiums
Manufacturers Life of America deducts a charge of 2.35% of each premium payment
for state and local taxes. State and local taxes differ from state to state.
The 2.35% rate is expected to be sufficient, on average, to pay state and local
taxes where required. Manufacturers Life of America also deducts a charge of
1.25% of each premium payment for federal taxes, an amount which is also
expected to be sufficient to pay federal taxes. However, if Manufacturers Life
of America incurs higher charges for state, local or federal taxes, or any
other taxes are incurred, it may make a charge for those taxes in addition to
the deductions for federal, state or local taxes currently being made from
premium payments.
35
<PAGE> 46
Surrender Charges
Manufacturers Life of America will assess surrender charges upon surrender, a
partial withdrawal of Policy Value in excess of the Withdrawal Tier Amount, a
requested decrease in face amount, or lapse. The charges will usually be
assessed if any of the above transactions occurs within the Surrender Charge
Period unless the charges have been previously deducted. There are two
surrender charges -- a deferred underwriting charge and a deferred sales
charge.
Deferred Underwriting Charge. The deferred underwriting charge is $6 for each
$1,000 of face amount of life insurance coverage initially purchased or added
by increase. In effect, the charge applies only to the first $500,000 of face
amount initially purchased or the first $500,000 of each subsequent increase in
face amount. Thus, the charge made in connection with any one underwriting
will not exceed $3,000. The amount of the charge remains level for five years.
Following the fifth year after issuance of the Policy or a face amount
increase, the charge applicable to the initial face amount or increase will
decrease each month by varying rates depending upon the life insured's issue
age until the charge has decreased to zero. The applicable percentage of the
deferred underwriting charges to which the Policy is subject is illustrated by
the following table:
Table 1: Deferred Underwriting Charges
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Transaction Occurs After
Monthly Deduction Taken
for Last Month Preceding Percent of Deferred Underwriting Charges by Issue Age*
End of Month* Age
Month 0-50 51 52 53 54 55+
12 100% 100% 100% 100% 100% 100%
24 100% 100% 100% 100% 100% 100%
36 100% 100% 100% 100% 100% 100%
48 100% 100% 100% 100% 100% 100%
60 100% 100% 100% 100% 100% 100%
72 90% 88.89% 87.50% 85.71% 83.33% 80.00%
84 80% 77.78% 75.00% 71.43% 66.67% 60.00%
96 70% 66.67% 62.50% 57.14% 50.00% 40.00%
108 60% 55.56% 50.00% 42.86% 33.33% 20.00%
120 50% 44.44% 37.50% 28.57% 16.67% 0%
132 40% 33.33% 25.00% 14.28% 0%
144 30% 22.22% 12.50% 0%
156 20% 11.11% 0%
168 10% 0%
180 0%
</TABLE>
* Months not shown may be calculated by interpolation.
The deferred underwriting charge is designed to cover the administrative
expenses associated with underwriting and policy issue, including the costs of
processing applications, conducting medical examinations, determining the life
insured's risk class and establishing policy records. Manufacturers Life of
America does
36
<PAGE> 47
not expect to recover from the deferred underwriting charge any amount in
excess of its expenses associated with underwriting and policy issue.
Deferred Sales Charge. The maximum deferred sales charge is 50% of premiums
paid up to a maximum number of Target Premiums that varies (from -0.180 to
3.031) according to the issue age of the life insured, the face amount at issue
and the amount of any increase. This charge compensates the Company for some
of the expenses of selling and distributing the Policies, including agents'
commissions, advertising, agent training and the printing of prospectuses and
sales literature.
The deferred sales charge deducted in any policy year is not specifically
related to sales expenses incurred in that year. Instead, the Company expects
that the major portion of the sales expenses attributable to a Policy will be
incurred during the first policy year, although the deferred sales charge might
be deducted up to fifteen years later. Manufacturers Life of America
anticipates that the aggregate amounts received under the Policies for sales
charges will be insufficient to cover aggregate sales expenses. To the extent
that sales expenses exceed sales charges, Manufacturers Life of America will
pay the excess from its other assets or surplus, including amounts derived from
the mortality and expense risks charge described below. Manufacturers Life of
America may forego deducting a portion of the deferred sales charge if the
Policy is surrendered for its Net Cash Surrender Value at any time during the
first two years following issuance or following an increase in face amount or
if the increase is cancelled during the two-year period following the increase.
See Surrender Charges (Sales Charge Limitation) below.
The Target Premium for the initial face amount is specified in the Policy. A
Target Premium will be computed for each increase in face amount above the
highest face amount of coverage previously in effect, and the policyowner will
be advised of each new Target Premium. Target Premiums depend upon the face
amount of insurance provided at issue or by an increase and the issue age and
sex (unless unisex rates are required by law) of the life insured. The maximum
number of Target Premiums subject to the deferred sales charge varies, based on
the issue age of the life insured, the face amount at issue and the amount of
any increase, according to the following tables:
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<PAGE> 48
Table 2: Number of Target Premiums Subject to Deferred Sales Charge for
Policies Issued prior to July 10, 1995
(Applicable to the Initial Face Amount and Increases)
<TABLE>
<CAPTION>
$250,000 Under $250,000 Under $250,000 Under
Age or More $250,000 Age or More $250,000 Age or More $250,000
--- -------- -------- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
*0 -0.031 -0.039 30 1.319 1.648 60 2.356 2.945
*1 -0.144 -0.180 31 1.366 1.707 61 2.375 2.968
*2 -0.081 -0.102 32 1.415 1.768 62 2.399 2.998
*3 -0.020 -0.025 33 1.459 1.823 63 2.425 3.031
4 0.037 0.046 34 1.503 1.878 64 2.380 2.975
5 0.096 0.120 35 1.542 1.927 65 2.269 2.836
6 0.166 0.207 36 1.590 1.987 66 2.124 2.655
7 0.221 0.276 37 1.633 2.041 67 2.006 2.507
8 0.281 0.351 38 1.672 2.090 68 1.888 2.360
9 0.340 0.425 39 1.718 2.147 69 1.787 2.233
10 0.391 0.488 40 1.756 2.195 70 1.691 2.113
11 0.453 0.566 41 1.790 2.237 71 1.592 1.990
12 0.514 0.642 42 1.832 2.290 72 1.494 1.867
13 0.560 0.700 43 1.869 2.336 73 1.396 1.745
14 0.614 0.767 44 1.904 2.380 74 1.317 1.646
15 0.560 0.700 45 1.937 2.421 75 1.241 1.551
16 0.606 0.757 46 1.969 2.461 76 1.162 1.452
17 0.658 0.822 47 2.000 2.500 77 1.084 1.355
18 0.718 0.897 48 2.032 2.540 78 1.010 1.262
19 0.767 0.958 49 2.062 2.577 79 0.946 1.182
20 0.817 1.021 50 2.093 2.616 80 0.887 1.108
21 0.870 1.087 51 2.123 2.653 81 0.831 1.038
22 0.924 1.155 52 2.154 2.692 82 0.779 0.973
23 0.973 1.216 53 2.182 2.727 83 0.733 0.916
24 1.026 1.282 54 2.211 2.763 84 0.688 0.860
25 1.075 1.343 55 2.234 2.792 85 0.646 0.807
26 1.125 1.406 56 2.259 2.823 86 0.606 0.757
27 1.177 1.471 57 2.284 2.855 87 0.567 0.708
28 1.228 1.535 58 2.307 2.883 88 0.530 0.662
29 1.274 1.592 59 2.333 2.916 89 0.493 0.616
90 0.484 0.605
</TABLE>
*A negative number of Target Premiums produces a negative deferred sales
charge. When combined with the deferred underwriting charge, a negative
deferred sales charge reduces the total surrender charge.
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<PAGE> 49
Table 3: Number of Target Premiums Subject to Deferred Sales Charge for
Policies Issued on or after July 10, 1995 (Applicable to the Initial Face Amount
and Increases)
<TABLE>
<CAPTION>
$250,000 Under $250,000 Under $250,000 Under
Age or More $250,000 Age or More $250,000 Age or More $250,000
--- -------- -------- --- -------- -------- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
*0 -0.031 -0.039 30 1.319 1.648 60 2.356 2.945
*1 -0.144 -0.180 31 1.366 1.707 61 2.375 2.968
*2 -0.081 -0.102 32 1.415 1.768 62 2.399 2.998
*3 -0.020 -0.025 33 1.459 1.823 63 2.425 3.031
4 0.037 0.046 34 1.503 1.878 64 2.367 2.959
5 0.096 0.120 35 1.542 1.927 65 2.259 2.824
6 0.166 0.207 36 1.590 1.987 66 2.113 2.641
7 0.221 0.276 37 1.633 2.041 67 1.992 2.490
8 0.281 0.351 38 1.672 2.090 68 1.875 2.344
9 0.340 0.425 39 1.718 2.147 69 1.777 2.222
10 0.391 0.488 40 1.756 2.195 70 1.679 2.099
11 0.453 0.566 41 1.790 2.237 71 1.583 1.979
12 0.514 0.642 42 1.832 2.290 72 1.486 1.857
13 0.560 0.700 43 1.869 2.336 73 1.392 1.740
14 0.614 0.767 44 1.904 2.380 74 1.315 1.644
15 0.560 0.700 45 1.937 2.421 75 1.238 1.547
16 0.606 0.757 46 1.969 2.461 76 1.161 1.451
17 0.658 0.822 47 2.000 2.500 77 1.083 1.354
18 0.718 0.897 48 2.032 2.540 78 1.007 1.259
19 0.767 0.958 49 2.062 2.577 79 0.945 1.182
20 0.817 1.021 50 2.093 2.616 80 0.885 1.106
21 0.870 1.087 51 2.123 2.653 81 0.829 1.037
22 0.924 1.155 52 2.154 2.692 82 0.779 0.973
23 0.973 1.216 53 2.182 2.727 83 0.732 0.915
24 1.026 1.282 54 2.211 2.763 84 0.687 0.859
25 1.075 1.343 55 2.234 2.792 85 0.644 0.806
26 1.125 1.406 56 2.259 2.823 86 0.604 0.755
27 1.177 1.471 57 2.284 2.855 87 0.566 0.708
28 1.228 1.535 58 2.307 2.883 88 0.529 0.661
29 1.274 1.592 59 2.333 2.916 89 0.493 0.616
90 0.484 0.605
</TABLE>
*A negative number of Target Premiums produces a negative deferred sales
charge. When combined with the deferred underwriting charge, a negative
deferred sales charge reduces the total surrender charge.
39
<PAGE> 50
Except for surrenders to which the sales charge limitation provisions described
below apply, the maximum deferred sales charge will be in effect for at least
the first two years of the Surrender Charge Period. After that, the portion of
the deferred sales charge that remains in effect will grade down at a rate that
also varies according to the issue age of the life insured until, at the end of
the Surrender Charge Period, there is no deferred sales charge. The tables to
be used to reduce the applicable deferred sales charge during the Surrender
Charge Period are set forth in Appendix C to this Prospectus. The applicable
table will be set forth in each Policy and the policyowner will be informed of
the table to be used in connection with sales charges on increases in face
amount.
In order to determine the deferred sales charge applicable to a face amount
increase, Manufacturers Life of America will treat a portion of the Policy
Value on the date of increase as a premium attributable to the increase. In
addition, a portion of each premium paid on or subsequent to the increase will
be attributed to the increase. In each case, the portion attributable to the
increase will be the ratio of the "guideline annual premium" for the increase
to the sum of the guideline annual premiums for the initial face amount and all
increases including the requested increase.
A "guideline annual premium" is a hypothetical amount based on S.E.C. rules
that is used to measure the maximum amount of the deferred sales charge that
may be imposed upon surrender, partial withdrawal, a decrease in face amount or
lapse during the first two years after issuance or after an increase in face
amount.
The following example illustrates how deferred underwriting and deferred sales
charges are calculated using data from Tables 1, 2 and 3 above and from the
tables in Appendix C.
Assume a 36-year-old male (standard risk) whose Policy was issued prior to July
10, 1995, at age 30, and who has paid $9,000 in premiums under a Policy with a
Target Premium of $1,500 and a face amount of $100,000 surrenders his Policy
during the last month of the sixth policy year.
A deferred underwriting charge of $540 would be assessed. The maximum deferred
underwriting charge of $600 ($6 per $1,000 of face amount X 100) would be
multiplied by the 90% listed in Table 1 as applicable to surrenders during the
last month of the sixth policy year [90% X ($6 X 100) = $540].
A deferred sales charge of $1,192.74 would also be assessed. According to
Table 2, the maximum number of Target Premiums subject to the deferred sales
charge for a person who was 30 years old when his or her Policy with a face
amount less than $250,000 was issued would be 1.648. Thus $2,472 (1.648 X
$1,500) would be the maximum amount of premiums subject to the 50% sales
charge, producing a maximum sales charge of $1,236 (50% X $2,472 = $1,236).
Because the surrender occurs during the last month of the sixth policy year,
only 96.50% (from the table in Appendix C for issue age 30) of the maximum
sales charge remains applicable [96.50% X (.50 X 1.648 X $1,500) = $1,192.74].
Sales Charge Limitation.If a Policy is surrendered or its face amount decreased
at any time during the first two years after issuance or after an increase in
face amount, Manufacturers Life of America will forego taking that part of the
40
<PAGE> 51
deferred sales charge with respect to "premiums" paid for the initial face
amount or such increase (including the portion of Policy Value treated as
premiums for the increase, as described above), whichever is applicable, which
exceeds the sum of (i) 30% of the premiums paid up to the lesser of one
guideline annual premium or the maximum amount of premiums subject to the
deferred sales charge plus (ii) 10% of the premiums paid in excess of one
guideline annual premium, up to the lesser of two guideline annual premiums or
the maximum amount of premiums subject to the deferred sales charge, plus (iii)
9% of the premiums paid in excess of two guideline annual premiums up to the
maximum amount of premiums subject to the deferred sales charge.
The operation of the sales charge limitation for Policies issued prior to July
10, 1995 is illustrated by the following example. A 67-year-old male
non-smoker purchased a Policy with a face amount in excess of $250,000 when he
was age 65. He has paid $30,000 in premiums under the Policy and it has a
guideline annual premium (GAP) of $15,997 and a Target Premium (TP) of $11,835.
He surrenders his policy during the second policy year. In the absence of the
sales charge limitation, the maximum deferred sales charge would be 50% of the
lesser of premiums paid ($30,000) or the maximum amount of premiums subject to
the deferred sales charge (TP X Maximum Number of TP's = $11,835 X 2.269 =
$26,854), which results in 50% of $26,854 (the "Maximum Chargeable Amount" or
"MCA") or $13,427 as the maximum deferred sales charge. However, under the
formula described above, the maximum sales charge allowable would be $5,885.
This is calculated as the sum of:
(i) 30% of one GAP, or $4,799 [.30 X $15,997 = $4,799], because one GAP
($15,997) is less than premiums paid ($30,000) and less than the MCA
($26,854);
plus
(ii) 10% of the MCA in excess of one GAP, or $1,086 (.10 X $10,857 = $1,086)
because the MCA in excess of one GAP ($26,854 - $15,997 = $10,857) is less
than premiums paid in excess of one GAP ($30,000 - $15,997 = $14,003) and
less than the amount of a second GAP ($15,997);
plus
(iii) $0, because no premiums in excess of two GAPs were paid and would not
have been chargeable in any event, as the MCA was less than two GAPs.
Thus, (i) $4,799 plus (ii) $1,086 plus (iii) $0 equals $5,885, the maximum
sales charge allowable.
If the Policy in the foregoing example were issued on or after July 10, 1995,
the maximum sales charge allowable would be $5,873 because the maximum amount
of Target Premiums subject to the deferred sales charge would be 2.259 (from
Table 3) instead of 2.269 (from Table 2).
Since a deferred sales charge is deducted when a Policy terminates for failure
to make the required payment following the Policy's going into default, the
sales charge limitation will apply if the termination occurs during the
two-year period
41
<PAGE> 52
following issuance or any increase in face amount. If the Policy terminates
during the two years after a face amount increase, the sales charge limitation
will relate only to the sales charges applicable to the increase.
Charges On Partial Withdrawals. Whenever a portion of the surrender charges is
deducted as a result of a partial withdrawal of Policy Value in excess of the
Withdrawal Tier Amount, the Policy's remaining surrender charges will be
reduced by the amount of the charges taken. The surrender charges not assessed
as a result of the 10% free withdrawal provision remain in effect under the
Policy and may be assessed upon surrender or lapse, other partial withdrawals,
or a requested decrease in face amount. The portion of the surrender charges
assessed will be based on the ratio of the amount of the withdrawal in excess
of the Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy
less the Withdrawal Tier Amount immediately prior to the withdrawal. The
surrender charges will be deducted from each Investment Account and the
Guaranteed Interest Account in the same proportion as the amount of the
withdrawal taken from such account bears to the total amount of the withdrawal.
If the amount in the account is insufficient to pay the portion of the
surrender charges allocated to that account, then the portion of the withdrawal
allocated to that account will be reduced so that the withdrawal plus the
portion of the surrender charges allocated to that account equal the value of
that account. Units equal to the amount of the partial withdrawal taken, and
surrender charges deducted, from each Investment Account will be cancelled
based on the value of such units determined at the end of the Business Day on
which Manufacturers Life of America receives a written request for withdrawal
at its Service Office.
If the Option 1 death benefit is in effect under a Policy from which a partial
withdrawal is made, the face amount of the Policy will be reduced. If the
death benefit is equal to the face amount at the time of withdrawal, the face
amount will be reduced by the amount of the withdrawal plus the portion of the
surrender charges assessed. If the death benefit is based upon the Policy
Value times the applicable percentage set forth under Insurance Benefit --
"Death Benefit Options" above, the face amount will be reduced only to the
extent that the amount of the withdrawal plus the portion of the surrender
charges assessed exceeds the difference between the death benefit and the face
amount. Reductions in face amount resulting from partial withdrawals will not
incur any surrender charges above the surrender charges applicable to the
withdrawal. When the face amount of a Policy is based on one or more increases
subsequent to issuance of the Policy, a reduction resulting from a partial
withdrawal will be applied in the same manner as a requested decrease in face
amount, i.e., against the face amount provided by the most recent increase,
then against the next most recent increases successively and finally against
the initial face amount.
Charges On Decreases In Face Amount. As with partial withdrawals, a portion of
a Policy's surrender charges will be deducted upon a decrease, or a
cancellation of an increase, in face amount requested by the policyowner.
Since surrender charges are determined separately for the initial face amount
and each face amount increase, and since a decrease in face amount will have a
different impact on each level of insurance coverage, the portion of the
surrender charges to be deducted with respect to each level of insurance
coverage will be determined separately. Such portion will be the same as the
ratio of the amount of the reduction in such coverage to the amount of such
coverage prior to the reduction.
42
<PAGE> 53
As noted under Insurance Benefit -- "Face Amount Changes," decreases are
applied to the most recent increase first and thereafter to the next most
recent increases successively. The charges will be deducted from the Policy
Value, and the amount so deducted will be allocated among the Investment
Accounts and the Guaranteed Interest Account in the same proportion as the
Policy Value in each bears to the Net Policy Value. Whenever a portion of the
surrender charges is deducted as a result of a decrease in face amount, the
Policy's remaining surrender charges will be reduced by the amount of the
charges taken.
Charges Remaining After Face Amount Decreases Or Partial Withdrawals. Each
time a pro-rata deferred underwriting charge or a pro-rata deferred sales
charge for a face amount decrease or for a partial withdrawal is deducted, the
remaining deferred underwriting charge and deferred sales charge will be
reduced proportionately.
The remaining deferred underwriting charge will be calculated using Table 1
above. The actual remaining charge will be the result of (a) divided by (b),
multiplied by (c), where:
(a) is the grading percentage applicable to the life insured's issue age and
Policy duration;
(b) is the grading percentage applicable to the life insured's issued age at
the time of the last face amount decrease or partial withdrawal; and
(c) is the remaining deferred sales charge prior to the last face amount
decrease or partial withdrawal less the deferred underwriting charge
deducted for that face amount decrease or partial withdrawal.
The remaining deferred sales charge will be calculated using Table 2 above and
Appendix C. The actual remaining charge will be the result of (a) divided by
(b), multiplied by (c), where:
(a) is the grading percentage applicable to the Policy duration;
(b) is the grading percentage at the time of the last face amount decrease or
partial withdrawal; and
(c) is the remaining deferred sales charge prior to the last face amount
decrease or partial withdrawal less the deferred sales charge deducted for
that face amount decrease or partial withdrawal.
Until the sum of premiums paid equals or exceeds the number of Target Premiums
subject to deferred sales charge multiplied by the Target Premium, subsequent
premium payments will increase the remaining deferred sales charge.
Monthly Deductions
Each month a deduction consisting of an administration charge, a charge for the
cost of insurance, a charge for mortality and expense risks, and charge(s) for
any supplementary benefit(s) (see Other Provisions -- "Supplementary Benefits")
is deducted from Policy Value. The monthly deduction will be allocated among
the
43
<PAGE> 54
Investment Accounts and (other than the mortality and expense risks charge) the
Guaranteed Interest Account in the same proportion as the Policy Value in each
bears to the Net Policy Value. Monthly deductions due prior to the effective
date will be taken on the effective date instead of the dates they were due.
If the Policy is still in force when the life insured attains age 100, no
further monthly deductions will be taken from the Policy Value.
Administration Charge
The monthly administration charge is $35 plus $.01 per $1,000 of face amount
until the first anniversary and, thereafter, $10 plus $.01 per $1,000 of face
amount. The charge is designed to cover certain administrative expenses
associated with the Policy, including maintaining policy records, collecting
premiums and processing death claims, surrender and withdrawal requests and
various changes permitted under a Policy. Manufacturers Life of America does
not expect to recover from the monthly administration charge any amount in
excess of its accumulated administrative expenses relating to the Policies and
the Separate Account.
Cost Of Insurance Charge
The monthly charge for the cost of insurance is determined by multiplying the
applicable cost of insurance rate times the net amount at risk at the beginning
of each policy month. The cost of insurance rate is based on the life insured's
issue age, the duration of the coverage, sex (unless unisex rates are required
by law), risk class, and, in the case of certain Policies issued in group or
sponsored arrangements providing for reduction in cost of insurance charges (see
"Special Provisions For Group Or Sponsored Arrangements"), the face amount of
the Policy. See Miscellaneous Matters -- "Legal Considerations." The rate is
determined separately for the initial face amount and for each increase in face
amount. Cost of insurance rates will generally increase with the life insured's
age. Any additional ratings as indicated in the Policy will be added to the
cost of insurance rate.
The cost of insurance rates used by Manufacturers Life of America reflect its
expectations as to future mortality experience as based on current experience.
The rates may be changed from time to time on a basis which does not unfairly
discriminate within the class of life insureds. In no event will the cost of
insurance rate exceed the guaranteed rate set forth in the Policy except to the
extent that an extra rate is imposed because of an additional rating applicable
to the life insured or if simplified underwriting is granted in a group or
sponsored arrangement (see "Special Provisions For Group Or Sponsored
Arrangements"). The guaranteed rates are based on the 1980 Commissioners
Standard Ordinary Smoker/Nonsmoker Mortality Tables.
If requested by the applicant, Manufacturers Life of America may offer the
Policy with provisions based on actuarial tables that do not differentiate on
the basis of sex to such prospective purchasers in states where the unisex
version of the Policy has been approved.
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The State of Montana currently prohibits the issuance of policies with
assumptions that distinguish between men and women in determining premiums and
policy benefits for policies issued on the life of any of its residents.
The net amount at risk to which the cost of insurance rate is applied is the
difference between the death benefit, divided by 1.0032737 (a factor which
reduces the net amount at risk for cost of insurance charge purposes by taking
into account assumed monthly earnings at an annual rate of 4%), and the Policy
Value. Because different cost of insurance rates may apply to different levels
of insurance coverage, the net amount at risk will be calculated separately for
each level of insurance coverage. When the Option 1 death benefit is in
effect, for purposes of determining the net amount at risk applicable to each
level of insurance coverage, the Policy Value is attributed first to the
initial face amount and then, if the Policy Value is greater than the initial
face amount, to each increase in face amount in the order made.
Because the calculation of the net amount at risk is different under the death
benefit options when more than one level of insurance coverage is in effect, a
change in the death benefit option may result in a different net amount at risk
for each level of insurance coverage than would have occurred had the death
benefit option not been changed. Since the cost of insurance is calculated
separately for each level of insurance coverage, any change in the net amount
at risk for a level of insurance coverage resulting from a change in the death
benefit option may affect the amount of the charge for the cost of insurance.
Partial withdrawals and decreases in face amount will also affect the manner in
which the net amount at risk for each level of insurance coverage is
calculated.
Mortality And Expense Risks Charge
Manufacturers Life of America deducts a monthly charge from the Policy Value
for the mortality and expense risks it assumes under the Policies. This charge
is made at the beginning of each policy month at an annual rate of .90% through
the later of the tenth anniversary of the Policy and the policyowner's attained
age of 60 and, thereafter, .45%. It is assessed against the value of the
policyowner's Investment Accounts by cancellation of units in the same
proportion as the value of each Investment Account bears to the total value of
the Investment Accounts. The mortality risk assumed is that lives insured may
live for a shorter period of time than the Company estimated. The expense risk
assumed is that expenses incurred in issuing and administering the Policies
will be greater than the Company 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.
Other Charges
Currently, Manufacturers Life of America makes no charge against the Separate
Account for federal, state or local taxes that may be attributable to the
Separate 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 therefor, in addition to the deductions for federal, state or
local taxes currently being made from premium payments.
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Charges will be imposed on certain transfers of Policy Values, including a $25
charge for each transfer in excess of twelve in a policy year and a $5 charge
for each Dollar Cost Averaging transfer when Policy Value does not exceed
$15,000. See Policy Values -- "Transfers Of Policy Value."
The Separate Account purchases shares of Portfolios at net asset value. The
net asset value of those shares reflects:
(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 Common Stock Fund)*
(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) an investment management fee of 1.05% assessed against the assets of the
International Stock Trust
(viii) an investment management fee of .85% assessed against the assets of the
Pacific Rim Emerging Markets Trust
(ix) an investment management fee of .25% assessed against the assets of the
Equity Index Trust
(x) an investment management fee of .925% assessed against the assets of the
Blue Chip Growth Trust
(xi) an investment management fee of 1.10% assessed against the assets of the
International Small Cap Trust
(xii) an investment management fee of .80% assessed against the assets of
the Equity-Income Trust;
(xiii) an investment management fee of .65% assessed against the assets of the
U.S. Government Securities Trust;
(xiv) an investment management fee of .75% assessed against the assets of the
Growth and Income Trust;
(xv) an investment management fee of .75% assessed against assets of the
Equity Trust;
(xvi) an investment management fee of .75% assessed against the assets of the
Conservative Asset Allocation Trust;
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(xvii) investment management fee of .75% assessed against the assets of the
Moderate Asset Allocation Trust;
(xviii) investment management fee of .75% assessed against the assets of the
Aggressive Asset Allocation Trust; and
(xix) expenses of up to .75% assessed against the assets of the Pacific Rim
Emerging Markets Trust and International Stock Trust
(xx) expenses of up to .15% assessed against the assets of the Equity Index
Trust
(xxi) expenses of up to .50% assessed against the assets of all other Trusts*
(xxii) other expenses already deducted from the assets of the NASL 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 Quantitative Equity Trust, Real Estate Securities
Trust and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets.
Detailed information concerning such fees and expenses is set forth under the
caption "Management Of The Funds" in the Prospectus for the Manulife Series
Fund that accompanies this Prospectus and under the caption "Management of The
Trust" in the Prospectus for the NASL Series Trust that accompanies this
Prospectus.
Special Provisions For 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. In
California all participants of group arrangements will be individually
underwritten. 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 charges and deductions described above may be reduced for Policies issued
in connection with group or sponsored arrangements. Such arrangements may
include sales without withdrawal charges and deductions to employees, officers,
directors, agents, immediate family members of the foregoing, and employees of
agents of Manufacturers Life and its subsidiaries. Manufacturers Life of
America will reduce the above charges and deductions 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 of the group, expected number of
participants and anticipated premium payments from the group. Generally, the
sales contacts and effort, administrative costs and mortality cost per Policy
vary based on such factors as the size of the group or sponsored arrangements,
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
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
Separate Account.
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In addition, groups and persons purchasing under a sponsored arrangement may
apply for simplified underwriting. If simplified underwriting is granted, the
cost of insurance charge may increase as a result of higher anticipated
mortality experience. In addition, groups or persons purchasing under a
sponsored arrangement may request increases or decreases in face amount at any
time after issue and decreases in face amount at any time after an increase in
face amount.
Special Provisions For Exchanges
Manufacturers Life of America will permit owners of certain life insurance
policies issued either by the Company or Manufacturers Life to exchange their
policies for the Policies described in this prospectus. Charges under the
policies being exchanged or the Policies issued in exchange therefor may be
reduced or eliminated. Owners of certain policies may be entitled to convert
their policies to the Policies described in this prospectus. If they elect to
convert, they may receive a credit upon conversion in an amount up to their
first-year premium. Policy loans made under policies being exchanged may, in
some circumstances, be carried over to the new Policies without repayment at
the time of exchange. Policyowners considering an exchange should consult
their tax advisers as to the tax consequences of an exchange.
The General Account
By virtue of exclusionary provisions, interests in the general account of
Manufacturers Life of America have not been registered under the Securities Act
of 1933 and the general account has not been registered as an investment
company under the Investment Company Act of 1940. Accordingly, neither the
general account nor any interests therein are subject to the provisions of
these acts, and as a result the staff of the Securities and Exchange Commission
has not reviewed the disclosures in this prospectus relating to the general
account. Disclosures regarding the general account may, however, be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in a prospectus.
The general account of Manufacturers Life of America consists of all assets
owned by the Company other than those in its separate accounts. Subject to
applicable law, Manufacturers Life of America has sole discretion over the
investment of the assets of the general account.
A policyowner may elect to allocate net premiums to the Guaranteed Interest
Account or to transfer all or a portion of the Policy Value to the Guaranteed
Interest Account from the Investment Accounts. Transfers from the Guaranteed
Interest Account to the Investment Accounts are subject to restrictions. See
Policy Values -- "Transfers Of Policy Value" and "Policy Value." Manufacturers
Life of America will hold the reserves required for any portion of the Policy
Value allocated to the Guaranteed Interest Account in its general account.
However, an allocation of Policy Value to the Guaranteed Interest Account does
not entitle the policyowner to share in the investment experience of the
general account. Instead, Manufacturers Life of America guarantees that the
Policy Value in the Guaranteed Interest Account will accrue interest daily at
an effective annual rate of at least 4%, without regard to the actual
investment experience of the general account. The Company may, at its sole
discretion, credit a higher
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rate of interest, although it is not obligated to do so. The policyowner
assumes the risk that interest credited may not exceed the guaranteed minimum
rate of 4% per year.
Other General Policy Provisions
Policy Default
Unless the Death Benefit Guarantee is in effect, a Policy will go into default
if the Policy's Net Cash Surrender Value at the beginning of any policy month
would go below zero after deducting the monthly deductions then due.
Manufacturers Life of America will notify the policyowner of the default and
will allow a 61-day grace period in which the policyowner may make a premium
payment sufficient to bring the Policy out of default. The required payment
will be equal to the amount necessary to bring the Net Cash Surrender Value to
zero, if it was less than zero at the date of default, plus the monthly
deductions due at the date of default and at the beginning of each of the two
policy months thereafter, based on the Policy Value at the date of default. If
the required payment is not received by the end of the grace period, the Policy
will terminate and the Net Cash Surrender Value (subject to any applicable
limitation on surrender charges; see Charges And Deductions -- "Surrender
Charges") as of the date of default less the monthly deductions then due will
be paid to the policyowner. If the life insured should die during the grace
period following a Policy's going into default, the Policy Value used in the
calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit payable will be reduced by any outstanding
monthly deductions due at the time of death.
Policy Reinstatement
A policyowner can reinstate a Policy which has terminated after going into
default at any time within 21 days following the date of termination without
furnishing evidence of insurability, subject to the following conditions:
(a) The life insured's risk class is standard or preferred.
(b) The life insured's attained age is less than 46.
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the five-year period following the date of
termination subject to the following conditions:
(a) The Policy must not have been surrendered for its Net Cash Surrender
Value at the request of the policyowner;
(b) Evidence of the life insured's insurability satisfactory to Manufacturers
Life of America is furnished to it;
(c) A premium equal to the payment required during the 61-day grace period
following default to keep the Policy in force is paid to Manufacturers
Life of America; and
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(d) An amount equal to any amounts paid by Manufacturers Life of America in
connection with the termination of the Policy is repaid to Manufacturers
Life of America.
If the reinstatement is approved, the date of reinstatement will be the later
of the date of the policyowner's written request or the date the required
payment is received at the Manufacturers Life of America Service Office.
Miscellaneous 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
unless an irrevocable designation has been elected. 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. If a
beneficiary dies before the seventh day after the death of the life insured,
the Company will pay the insurance benefit as if the beneficiary had died
before the life insured.
Incontestability. Manufacturers Life of America will not contest the validity
of a Policy after it has been in force during the life insured's lifetime for
two years from the issue date. It will not contest the validity of an increase
in face amount or the addition of a supplementary benefit after such increase
or addition has been in force during the life insured's lifetime for two years.
If a Policy has been reinstated and been in force for less than two years from
the reinstatement date, the Company can contest any misrepresentation of a fact
material to the reinstatement.
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 face
amount of insurance so that the death benefit will be that which the most
recent monthly charge for the cost of insurance would have bought for the
correct age and sex (unless unisex rates are required by law).
Suicide Exclusion. If the life insured, whether sane or insane, dies by
suicide within two years from the issue date, Manufacturers Life of America
will pay only the premiums paid less any partial withdrawals of the Net Cash
Surrender Value and any amount in the Loan Account. If the life insured should
die by suicide within two years after a face amount increase, the death benefit
for the increase will be limited to the monthly deduction for the increase.
Assignment. Manufacturers Life of America will not be bound by an assignment
until 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.
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Other Provisions
Supplementary Benefits
Subject to certain requirements, one or more supplementary benefits may be
added to a Policy, including those providing term insurance for additional
insureds, providing term insurance options, providing accidental death
coverage, waiving monthly deductions upon disability, guaranteeing the Policy
Value, accelerating benefits in the event of terminal illness, and, in the case
of corporate-owned Policies, permitting a change of the life insured. More
detailed information concerning supplementary benefits may be obtained from an
authorized agent of the Company. The cost of any supplementary benefits will
be deducted as part of the monthly deduction. See Charges And Deductions --
"Monthly Deductions."
Payment Of Proceeds
As long as the Policy is in force, Manufacturers Life of America will ordinarily
pay any policy loans, partial withdrawals, Net Cash Surrender Value or any
insurance benefit within seven days after receipt at the Manufacturers Life of
America Service Office of all the documents required for such a payment.
The Company may delay the payment of any policy loans, partial withdrawals, Net
Cash Surrender Value or the portion of any insurance benefit that depends on
the Guaranteed Interest Account value for up to six months; otherwise the
Company may delay payment for any period during which (i) the New York Stock
Exchange is closed for trading (except for normal holiday closings) or trading
on the Exchange is otherwise restricted; or (ii) an emergency exists as defined
by the S.E.C. or the S.E.C. requires that trading be restricted; or (iii) the
S.E.C. permits a delay for the protection of policyowners. Also, transfers
may be denied under the circumstances stated in clauses (i), (ii) and (iii)
above and under the circumstances previously set forth. See Policy Values --
"Transfers Of Policy Value."
Reports To Policyowners
Within 30 days after each policy anniversary, Manufacturers Life of America
will send the policyowner a statement showing, among other things, the amount
of the death benefit, the Policy Value and its allocation among the Investment
Accounts, the Guaranteed Interest Account and the Loan Account, the value of
the units in each Investment Account to which the Policy Value is allocated,
any Loan Account balance and any interest charged since the last statement, the
premiums paid and policy transactions made during the period since the last
statement and any other information required by law.
Within 10 days after any transaction involving purchase, sale, or transfer of
units of Investment Accounts, a confirmation statement will be sent.
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.
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Miscellaneous Matters
Portfolio Share Substitution
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 Funds may
become unsuitable for investment by the Separate Account because of a change in
investment policy or a change in the applicable laws or regulations, 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 Fund 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 Separate Account, to establish additional sub-accounts within
the Separate Account, to operate the Separate Account as a management investment
company or other form permitted by law, to transfer assets from this Separate
Account to another separate account and from another separate account to this
Separate Account, and to de-register the Separate Account under the 1940 Act.
Any such change would be made only if permissible under applicable federal and
state law.
The investment objectives of the Separate Account will not be changed materially
without first filing the change with the Insurance Commissioner of the State of
Michigan. Policyowners will be advised of any such change at the time it is
made.
Federal Income Tax Considerations
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete
or to cover all situations. This discussion is not intended as tax advice.
Counsel or other competent tax advisers should be consulted for more complete
information. This discussion is based upon the Company's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present federal income tax laws or of the
current interpretations by the Service. WE DO NOT MAKE ANY GUARANTEE REGARDING
THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION REGARDING THE POLICIES.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the use of such
Policies in any such arrangement, the value of which depends in part on its tax
consequences, is contemplated, a qualified tax adviser should be consulted for
advice on the tax attributes of the particular arrangement.
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Tax Status Of The Policy
Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code") sets
forth a definition of a life insurance contract for federal tax purposes. The
Secretary of Treasury (the "Treasury") is authorized to prescribe regulations
implementing Section 7702. However, while proposed regulations and other
interim guidance have been issued, final regulations have not been adopted and
guidance as to how Section 7702 is to be applied is limited. If a Policy were
determined not to be a life insurance contract for purposes of Section 7702,
such Policy would not provide the tax advantages normally provided by a life
insurance policy.
With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
mortality charge regulations under Section 7702, issued on July 5, 1991) that
such a Policy should meet the Section 7702 definition of a life insurance
contract.
With respect to a Policy that is issued on a substandard basis (i.e., a premium
class involving higher-than-standard mortality risk), there is less guidance,
in particular as to how mortality and other expense requirements of Section
7702 are to be applied in determining whether such a Policy meets the Section
7702 definition of a life insurance contract. Thus, it is not clear whether or
not such a Policy would satisfy Section 7702, particularly if the policyowner
pays the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company may take whatever steps are appropriate and reasonable to attempt
to cause such a Policy to comply with Section 7702. For these reasons, the
Company reserves the right to restrict Policy transactions as necessary to
attempt to qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
Code (discussed above). The Separate Account, through NASL Series Trust,
intends to comply with the diversification requirements prescribed in Treas.
Reg. Sec. 1.817-5, which affect how NASL Series Trust's assets are to be
invested. The Company believes that the Separate Account will thus meet the
diversification requirement, and the Company will monitor continued compliance
with the requirement.
In certain circumstances, owners of variable life insurance Policies may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their Policies. In those circumstances,
income and gains from the separate account assets would be includible in the
variable policyowner's gross income. The IRS has stated in published rulings
that a variable policyowner will be considered the owner of separate account
assets if the policyowner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the
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circumstances in which investor control of the investments of a segregated
asset account may cause the investor (i.e., the policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyowners may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
owner has additional flexibility in allocating premium payments and Policy
Values. These differences could result in an owner being treated as the owner
of a pro rata portion of the assets of the Separate Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
Tax Treatment Of Policy Benefits
In General. The Company believes that the proceeds and cash value increases of
a Policy should be treated in a manner consistent with a fixed-benefit life
insurance policy for federal income tax purposes. Thus, the death benefit
under the Policy should be excludable from the gross income of the beneficiary
under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, a change of insured, the addition of an accelerated death
benefit rider, or an assignment of the Policy may have federal income tax
consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each policyowner or beneficiary.
Generally, the policyowner will not be deemed to be in constructive receipt of
the Policy Value, including increments thereof, until there is a distribution.
The tax consequences of distributions from, and loans taken from or secured by,
a Policy depend on whether the Policy is classified as a "Modified Endowment
Contract." Upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax, regardless of whether
the Policy is or is not a Modified Endowment Contract.
Modified Endowment Contracts. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts," which applies
to Policies entered into or materially changed after June 20, 1988.
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Because of the Policy's flexibility, classification as a Modified Endowment
Contract will depend on the individual circumstances of each Policy. In
general, a Policy will be a Modified Endowment Contract if the accumulated
premiums paid at any time during the first seven policy years exceed the sum of
the net level premiums which would have been paid on or before such time if the
Policy provided for paid-up future benefits after the payment of seven level
annual premiums. The determination of whether a Policy will be a Modified
Endowment Contract after a material change generally depends upon the
relationship of the death benefit and Policy Value at the time of such change
and the additional premiums paid in the seven years following the material
change. If a premium is received which would cause the Policy to become a
Modified Endowment Contract (MEC) within 23 days of the next policy anniversary,
the Company will not apply the portion of the premium which would cause MEC
status (excess premium) to the Policy when received. The excess premium will be
placed in a suspense account until the next anniversary date, at which point the
excess premium along with interest, earned on the excess premium at a rate of
3.5% from the date the premium was received, will be applied to the Policy. The
policyowner will be advised of this action and will be offered the opportunity
to have the premium credited as of the original date received or to have the
premium returned. If the policyowner does not respond, the premium and interest
will be applied to the Policy as of the first day of the next anniversary.
If a premium is received which would cause the Policy to become a MEC more than
23 days prior to the next policy anniversary, the Company will refund any
excess premium to the policyowner. The portion of the premium which is not
excess will be applied as of the date received. The policyowner will be advised
of this action and will be offered the opportunity to return the premium and
have it credited to the account as of the original date received.
If, in connection with the application or issue of the Policy, the policyowner
acknowledges that the Policy is or will become a MEC, excess premiums that
would cause MEC status will be credited as of the date received.
Further, if a transaction occurs which reduces the face amount of the Policy
during the first seven years, the Policy will be retested retroactive to the
date of purchase to determine compliance with the seven pay test based on the
lower face amount. As well, if a reduction of the face amount occurs within
seven years of a material change, the Policy will be retested for compliance
retroactive to the date of the material change. Failure to comply would result
in classification as a Modified Endowment Contract regardless of any efforts by
the Company to provide a payment schedule that will not violate the seven pay
test.
The rules relating to whether a Policy will be treated as a Modified Endowment
Contract are extremely complex and cannot be adequately described in the
limited confines of this summary. Therefore, a current or prospective
policyowner should consult with a competent adviser to determine whether a
transaction will cause the Policy to be treated as a Modified Endowment
Contract.
Distributions From Policies Classified As Modified Endowment Contracts.
Policies classified as Modified Endowment Contracts will be subject to the
following tax rules: First, all partial withdrawals from such a Policy are
treated as ordinary income subject to tax up to the amount equal to the excess
(if any) of the Policy Value immediately before the distribution over the
investment in the Policy (described below) at such time. Second, loans taken
from or secured by such a Policy are treated as partial withdrawals from the
Policy and taxed accordingly. Past-due loan interest that is added to the loan
amount is treated as a loan. Third, a 10% additional income tax is imposed on
the portion of any distribution (including distributions upon surrender) from,
or loans taken from or secured by, such a Policy that is included in income
except where the distribution or loan is made on or after the policyowner
attains age 59 1/2, is attributable to the policyowner's becoming disabled, or
is part of a series of substantially equal periodic payments for the life (or
life expectancy) of the policyowner or the joint lives (or joint life
expectancies) of the policyowner and the policyowner's beneficiary.
Distributions From Policies Not Classified As Modified Endowment Contracts. A
distribution from a Policy that is not a Modified Endowment Contract is
generally treated as a tax-free recovery by the policyowner of the investment
in the Policy
55
<PAGE> 66
(described below) to the extent of such investment in the Policy, and as a
distribution of taxable income only to the extent the distribution exceeds the
investment in the Policy. An exception to this general rule occurs in the case
of a decrease in the Policy's death benefit or any other change that reduces
benefits under the Policy in the first 15 years after the Policy is issued and
that results in a cash distribution to the policyowner in order for the Policy
to continue complying with the Section 7702 definitional limits. Such a cash
distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as
indebtedness of the policyowner. Select Loans may, however, be treated as a
distribution.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10% additional tax.
Policy Loan Interest. Generally, personal interest paid on any loan under a
Policy which is owned by an individual is not deductible. In addition, interest
on any loan under a Policy owned by a taxpayer and covering the life of any
individual who is an officer or employee of or is financially interested in the
business carried on by that taxpayer will not be tax deductible to the extent
the aggregate amount of such loans with respect to contracts covering such
individual exceeds $50,000. The deduction of interest on Policy loans may also
be subject to other restrictions under Section 264 of the Code.
Investment In The Policy. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which has been excluded from gross
income of the policyowner (except that the amount of any loan from, or secured
by, a Policy that is a Modified Endowment Contract, to the extent such amount
has been excluded from gross income, will be disregarded), plus (iii) the
amount of any loan from, or secured by, a Policy that is a Modified Endowment
Contract to the extent that such amount has been included in the gross income
of the policyowner.
Multiple Policies. All Modified Endowment Contracts that are issued by the
Company (or its affiliates) to the same policyowner during any calendar year
are treated as one Modified Endowment Contract for purposes of determining the
amount includible in the gross income under Section 72(e) of the Code.
The Company's Taxes
As a result of the Omnibus Budget Reconciliation Act of 1990, insurance
companies are generally required to capitalize and amortize certain policy
acquisition expenses over a 10-year period rather than currently deducting such
expenses. This treatment applies to the deferred acquisition expenses of a
Policy and results in a significantly higher corporate income tax liability for
the Company. The Company makes a charge to premiums to compensate it for the
anticipated higher corporate income taxes.
56
<PAGE> 67
At the present time, the Company makes no charge to the Separate Account for
any federal, state or local taxes that the Company incurs that may be
attributable to such Account or to the Policies. The Company, however,
reserves the right in the future to make a charge for any such tax or other
economic burden resulting from the application of the tax laws that it
determines to be properly attributable to the Separate Account or to the
Policies.
Distribution Of The Policy
ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life,
will act as the principal underwriter of, and continuously offer, the Policies
pursuant to a Distribution 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 first-year commissions not to exceed 50%
of premiums paid up to the Target Premium, commissions of 2% of premiums in
excess thereof and, after the third anniversary, 0.15% of the Policy Value per
annum. In addition representatives will be eligible for bonuses of up to 90%
of first-year commissions. Representatives who meet certain standards with
regard to the sale of the Policies and certain other policies issued by
Manufacturers Life of America or Manufacturers Life will be eligible for
additional compensation.
Responsibilities Assumed By Manufacturers Life
Manufacturers Life and Manufacturers USA have entered into an agreement with
ManEquity, Inc. pursuant to which Manufacturers Life or Manufacturers USA, on
behalf of ManEquity, Inc., will pay the sales commissions in respect of the
Policies and certain other policies issued by Manufacturers Life of America,
prepare and maintain all books and records required to be prepared and
maintained by ManEquity, Inc. with respect to the Policies and such other
policies, and send all confirmations required to be sent by ManEquity, Inc. with
respect to the Policies and such other policies. ManEquity, Inc. will promptly
reimburse Manufacturers Life or Manufacturers USA for all sales commissions paid
by Manufacturers Life and will pay Manufacturers Life 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 or 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 a Stoploss Reinsurance Agreement
with Manufacturers Life of America under which Manufacturers USA reinsures all
aggregate claims in excess of 110% of the expected claims for all flexible
premium variable life insurance policies issued by Manufacturers Life of
America. Under the agreement Manufacturers Life of America will automatically
reinsure the risk for any one life up to a maximum of $7,500,000, except in the
case of aviation risks where the maximum will be $5,000,000. However,
Manufacturers Life
57
<PAGE> 68
of America may also consider reinsuring any non-aviation risks in excess of
$7,500,000 and any aviation risk in excess of $5,000,000.
Voting Rights
As stated above, all of the assets held in the sub-accounts of the Separate
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 matters that may be voted upon at a shareholders' meeting. However,
Manufacturers Life of America will vote shares held in the sub-accounts in
accordance with instructions received from policyowners having an interest in
such sub-accounts.
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 Separate Account in its own right, it may
elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyowner is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding NASL Trust. The number will be determined as of a date chosen by
Manufacturers Life of America, but not more than 90 days before the
shareholders' meeting. Fractional votes are counted. Voting instructions will
be solicited in writing at least 14 days prior to the shareholders' meeting.
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 Portfolios, or to approve or disapprove an investment
management contract. In addition, Manufacturers Life of America itself may
disregard voting instructions that would require changes in the investment
policies or investment adviser, 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 communication to policyowners.
Directors and Officers of Manufacturers Life of America
The Directors and Officers of Manufacturers Life of America, together with
their principal occupations during the past few years, are as follows:
58
<PAGE> 69
<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
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
</TABLE>
59
<PAGE> 70
<TABLE>
<CAPTION>
Position With
Manufacturers Life
Name of America Principal Occupation
- ------------------ -------------------- --------------------------------
<S> <C> <C>
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, Metropolitan
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
Chairman and CFO -- 1989-1991,
Canada Trust
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
</TABLE>
60
<PAGE> 71
<TABLE>
<CAPTION>
Position With
Manufacturers Life
Name of America Principal Occupation
- ------------------ -------------------- --------------------------------
<S> <C> <C>
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>
61
<PAGE> 72
State Regulations
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.
Pending Litigation
No litigation is pending that would have a material effect upon the Separate
Account or NASL Series Trust.
Additional Information
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 from 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 page
of this prospectus.
Legal Matters
The legal validity of the policies has been passed on by James D. Gallagher,
Esq., Secretary and General Counsel of Manufacturers Life of America. Jones &
Blouch L.L.P., Washington, D.C., has passed on certain matters relating to the
federal securities laws.
Experts
The financial statements for the period ended December 31, 1995 of The
Manufacturers Life Insurance Company of America and Separate Account Three of
The Manufacturers Life Insurance Company of America appearing in this prospectus
have been audited by Ernst & Young, independent auditors, to the extent
indicated in their reports thereon also appearing elsewhere herein. Such
financial statements have been included herein in reliance upon such reports
given upon the authority of such firm as experts in auditing and accounting.
62
<PAGE> 73
THE FOLLOWING FINANCIAL STATEMENTS OF SEPARATE ACCOUNT THREE OF THE
MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA AND THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA FOR THE PERIOD ENDED SEPTEMBER 30, 1996 ARE
UNAUDITED.
63
<PAGE> 74
SEPARATE ACCOUNT THREE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
MANULIFE SERIES FUND INC
-------------------------------------------------------------------------------------
EMERGING GROWTH REAL ESTATE BALANCED CAPITAL GROWTH
EQUITY COMMON STOCK SECURITIES ASSETS BOND MONEY-MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment in Manulife Series Fund, Inc.
at market value
Emerging Growth Equity Fund, $47,939,490
2,279,998 shares (cost $48,423,350)
Common Stock Fund, $25,119,781
1,317,870 shares (cost $20,913,546)
Real Estate Securities Fund, $13,516,354
844,657 shares (cost $12,145,299)
Balanced Assets Fund, $30,351,786
1,737,128 shares (cost $27,368,879)
Capital Growth Bond Fund, $13,710,082
1,221,007 shares (cost $13,500,879)
Money Market Fund, $16,913,522
1,585,607 shares (cost $17,517,647)
International Fund,
687,791 shares (cost $7,432,197)
Pacific Rim Emerging Markets Fund,
444,092 shares (cost $4,736,296)
Equity Index Fund,
240,592 shares (cost $2,486,917)
Investment in NASL Series Trust
at market value
Equity Trust
239,487 shares (cost $4,973,862)
Value Equity Trust
228,181 shares (cost $3,180,788)
Growth and Income Trust
186,771 shares (cost $3,255,123)
U.S. Government Securities Trust
93,147 shares (cost $1,210,093)
Conservative Asset Allocation Trust
22,539 shares (cost $263,758)
Moderate Asset Allocation Trust
29,852 shares (cost $363,308)
Aggressive Asset Allocation Trust
44,487 shares (cost $558,510)
----------- ----------- ----------- ----------- ----------- -----------
47,939,490 25,119,781 13,516,354 30,351,786 13,710,082 16,913,522
Receivable for Policy -related
Transactions 46,495 35,692 2,876 27,102 (27,540) (2,213)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS $47,985,985 $25,155,473 $13,519,230 $30,378,888 $13,682,542 $16,911,309
=========== =========== =========== =========== =========== ===========
Units Outstanding 1,351,174 1,004,921 488,284 1,423,606 724,147 1,033,118
=========== =========== =========== =========== =========== ===========
Net asset value per unit $35.51 $25.03 $27.69 $21.34 $18.89 $16.37
=========== =========== =========== =========== =========== ===========
<CAPTION>
MANULIFE SERIES FUND INC NASL SERIES TRUST
-------------------------------------------- -------------------------------------
PACIFIC RIM *VALUE *GROWTH
INTERNATIONAL EMERGING MARKETS *EQUITY INDEX *EQUITY EQUITY AND INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ---------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment in Manulife Series Fund, Inc.
at market value
Emerging Growth Equity Fund,
2,279,998 shares (cost $48,423,350)
Common Stock Fund,
1,317,870 shares (cost $20,913,546)
Real Estate Securities Fund,
844,657 shares (cost $12,145,299)
Balanced Assets Fund,
1,737,128 shares (cost $27,368,879)
Capital Growth Bond Fund,
1,221,007 shares (cost $13,500,879)
Money Market Fund,
1,585,607 shares (cost $17,517,647)
International Fund, $7,754,426
687,791 shares (cost $7,432,197)
Pacific Rim Emerging Markets Fund, $4,974,177
444,092 shares (cost $4,736,296)
Equity Index Fund, $2,558,579
240,592 shares (cost $2,486,917)
Investment in NASL Series Trust
at market value
Equity Trust $5,115,939
239,487 shares (cost $4,973,862)
Value Equity Trust $3,296,739
228,181 shares (cost $3,180,788)
Growth and Income Trust $3,335,078
186,771 shares (cost $3,255,123)
U.S. Government Securities Trust
93,147 shares (cost $1,210,093)
Conservative Asset Allocation Trust
22,539 shares (cost $263,758)
Moderate Asset Allocation Trust
29,852 shares (cost $363,308)
Aggressive Asset Allocation Trust
44,487 shares (cost $558,510)
---------- ---------- ---------- ---------- ---------- ----------
7,754,426 4,974,177 2,558,579 5,115,939 3,296,739 3,335,078
Receivable for Policy -related
Transactions 25,624 3,627 98,363 1,902 11,890 644
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS $7,780,050 $4,977,804 $2,656,942 $5,117,841 $3,308,629 $3,335,722
========== ========== ========== ========== ========== ==========
Units Outstanding 676,732 435,816 249,872 476,513 309,524 308,161
========== ========== ========== ========== ========== ==========
Net asset value per unit $11.50 $11.42 $10.63 $10.74 $10.69 $10.82
========== ========== ========== ========== ========== ==========
<CAPTION>
NASL SERIES TRUST
-------------------------------------------------------------------------
*U.S. GOVERNMENT CONSERVATIVE *MODERATE *AGGRESSIVE
SECURITIES ASSET ALLOCATION ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
---------------- ---------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Investment in Manulife Series Fund, Inc.
at market value
Emerging Growth Equity Fund, $47,939,490
2,279,998 shares (cost $48,423,350)
Common Stock Fund, 25,119,781
1,317,870 shares (cost $20,913,546)
Real Estate Securities Fund, 13,516,354
844,657 shares (cost $12,145,299)
Balanced Assets Fund, 30,351,786
1,737,128 shares (cost $27,368,879)
Capital Growth Bond Fund, 13,710,082
1,221,007 shares (cost $13,500,879)
Money Market Fund, 16,913,522
1,585,607 shares (cost $17,517,647)
International Fund, 7,754,426
687,791 shares (cost $7,432,197)
Pacific Rim Emerging Markets Fund, 4,974,177
444,092 shares (cost $4,736,296)
Equity Index Fund, 2,558,579
240,592 shares (cost $2,486,917)
Investment in NASL Series Trust
at market value
Equity Trust 5,115,939
239,487 shares (cost $4,973,862)
Value Equity Trust 3,296,739
228,181 shares (cost $3,180,788)
Growth and Income Trust 3,335,078
186,771 shares (cost $3,255,123)
U.S. Government Securities Trust $1,209,333 1,209,333
93,147 shares (cost $1,210,093)
Conservative Asset Allocation Trust $253,814 253,814
22,539 shares (cost $263,758)
Moderate Asset Allocation Trust $357,740 357,740
29,852 shares (cost $363,308)
Aggressive Asset Allocation Trust $568,803 568,803
44,487 shares (cost $558,510)
---------- -------- -------- -------- ------------
1,209,333 253,814 357,740 568,803 176,975,643
Receivable for Policy -related
Transactions (290) (23) 185 1,075 225,409
---------- -------- -------- -------- ------------
NET ASSETS $1,209,043 $253,791 $357,925 $569,878 $177,201,052
========== ======== ======== ======== ============
Units Outstanding 121,159 24,935 34,838 54,768
========== ======== ======== ========
Net asset value per unit $9.98 $10.18 $10.27 $10.41
========== ======== ======== ========
</TABLE>
* Reflects the period from commencement of operations February 14, 1996 through
September 30, 1996
See accompanying notes.
64
<PAGE> 75
SEPARATE ACCOUNT THREE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS
PERIOD ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MANULIFE SERIES FUND INC
-------------------------------------------------------------------------
EMERGING REAL ESTATE
GROWTH EQUITY COMMON STOCK SECURITIES BALANCED ASSETS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Net Investment Income: Dividends $ 4,762,788 $ 255,191 $ 726,499 $ 1,124,361
Realized and unrealized gain (loss)
from security transactions:
Proceeds from sales 3,285,457 697,397 573,619 1,694,589
Cost of securities sold 2,771,946 575,375 553,549 1,549,853
----------- ----------- ----------- -----------
Net realized gain (loss) 513,511 122,022 20,070 144,736
----------- ----------- ----------- -----------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 4,794,911 2,295,941 748,034 2,693,376
End of Period (483,860) 4,206,235 1,371,055 2,982,907
----------- ----------- ----------- -----------
Net unrealized depreciation
during the period (5,278,771) 1,910,294 623,021 289,531
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments (4,765,260) 2,032,316 643,091 434,267
----------- ----------- ----------- -----------
Net increase (decrease) in net
assets derived from operations $ (2,472) $ 2,287,507 $ 1,369,590 $ 1,558,628
=========== =========== =========== ===========
<CAPTION>
CAPITAL PACIFIC RIM
GROWTH BOND MONEY-MARKET INTERNATIONAL EMERGING MARKETS *EQUITY INDEX
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C>
Net Investment Income: Dividends $ 498 $ 676,573 $ 17,405 $ 5,570 $ 0
Realized and unrealized gain (loss)
from security transactions:
Proceeds from sales 1,142,148 14,068,931 253,088 358,693 142,025
Cost of securities sold 1,214,395 13,357,768 220,322 303,239 138,134
----------- ----------- ----------- ----------- ---------
Net realized gain (loss) (72,247) 711,163 32,766 55,454 3,891
----------- ----------- ----------- ----------- ---------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 153,798 233,720 99,777 88,856 0
End of Period 209,203 (604,125) 322,229 237,881 71,662
----------- ----------- ----------- ----------- ---------
Net unrealized depreciation
during the period 55,405 (837,845) 222,452 149,025 71,662
----------- ----------- ----------- ----------- ---------
Net realized and unrealized gain (loss)
on investments (16,842) (126,682) 255,218 204,479 75,553
----------- ----------- ----------- ----------- ---------
Net increase (decrease) in net
assets derived from operations $ (16,344) $ 549,891 $ 272,623 $ 210,049 $ 75,553
=========== =========== =========== =========== =========
<CAPTION>
NASL SERIES TRUST
-------------------------------------------------------------------------
*VALUE *GROWTH *U.S. GOVERNMENT
*EQUITY EQUITY AND INCOME SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Net Investment Income: Dividends $ 26,181 $ 8,790 $ 1,952 $ 26,995
Realized and unrealized gain (loss)
from security transactions:
Proceeds from sales 21,177 156,834 34,273 88,792
Cost of securities sold 21,417 134,296 9,306 92,449
----------- ----------- ----------- -----------
Net realized gain (loss) (240) 22,538 24,967 (3,657)
----------- ----------- ----------- -----------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 0 0 0 0
End of Period 142,077 115,951 79,955 (760)
----------- ----------- ----------- -----------
Net unrealized depreciation
during the period 142,077 115,951 79,955 (760)
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 141,837 138,489 104,922 (4,417)
Net increase (decrease) in net
assets derived from operations $ 168,018 $ 147,279 $ 106,874 $ 22,578
=========== =========== =========== ===========
<CAPTION>
*CONSERVATIVE *MODERATE *AGGRESSIVE
ASSET ALLOCATION ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net Investment Income: Dividends $ 8,660 $ 2,105 $ 11,072 $ 7,654,640
Realized and unrealized gain (loss)
from security transactions:
Proceeds from sales 18,218 16,323 52,562 22,604,126
Cost of securities sold 11,494 2,140 52,251 21,007,934
----------- ----------- ----------- -----------
Net realized gain (loss) 6,724 14,183 311 1,596,192
----------- ----------- ----------- -----------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 0 0 0 11,108,413
End of Period (9,944) (5,568) 10,293 8,645,191
----------- ----------- ----------- -----------
Net unrealized depreciation
during the period (9,944) (5,568) 10,293 (2,463,222)
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments (3,220) 8,615 10,604 (867,030)
----------- ----------- ----------- -----------
Net increase (decrease) in net
assets derived from operations $ 5,440 $ 10,720 $ 21,676 $ 6,787,610
=========== =========== =========== ===========
</TABLE>
* Reflects the period from commencement of operations February 14, 1996 through
September 30, 1996.
65
<PAGE> 76
SEPARATE ACCOUNT THREE 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>
MANULIFE SERIES FUND INC
------------------------------------------------------------------------------
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) $ 4,762,788 $ 721,489 $ 255,191 $ 0
Net realized gain (loss) 513,511 206,155 122,022 (6,193)
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations (5,278,771) 4,716,823 1,910,294 2,734,230
----------- ----------- ----------- -----------
(2,472) 5,644,467 2,287,507 2,728,037
----------- ----------- ----------- -----------
FROM CAPTIAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 16,984,332 15,025,111 7,299,290 6,620,667
Transfer on death 0 (202,957) 0 0
Transfer of terminations (3,386,826) (3,281,049) (1,622,836) (1,485,111)
Transfer of policy loans (501,398) (390,119) (93,992) (349,518)
Net interfund transfers 45,826 3,663,152 1,622,756 2,202,823
----------- ----------- ----------- -----------
13,141,934 14,814,138 7,205,218 6,988,861
----------- ----------- ----------- -----------
Net increase in net assets 13,139,462 20,458,605 9,492,725 9,716,898
NET ASSETS
Beginning of Year 34,846,523 14,387,918 15,662,748 5,945,850
----------- ----------- ----------- -----------
End of Period $47,985,985 $34,846,523 $25,155,473 $15,662,748
=========== =========== =========== ===========
<CAPTION>
MANULIFE SERIES FUND INC
------------------------------------------------------------------------------
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) $ 726,499 $ 142,066 $ 1,124,361 $ 24,806
Net realized gain (loss) 20,070 (18,103) 144,736 (29,726)
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 623,021 1,028,578 289,531 3,757,506
----------- ----------- ----------- -----------
1,369,590 1,152,541 1,558,628 3,752,586
----------- ----------- ----------- -----------
FROM CAPTIAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 3,402,476 4,344,151 8,219,368 7,806,794
Transfer on death 0 0 0 0
Transfer of terminations (984,300) (1,139,201) (1,913,420) (1,853,986)
Transfer of policy loans (45,916) (80,626) (201,490) (304,332)
Net interfund transfers 219,930 42,920 (417,936) 1,681,177
----------- ----------- ----------- -----------
2,592,190 3,167,244 5,686,522 7,329,653
----------- ----------- ----------- -----------
Net increase in net assets 3,961,780 4,319,785 7,245,150 11,082,239
NET ASSETS
Beginning of Year 9,557,450 5,237,665 23,133,738 12,051,499
----------- ----------- ----------- -----------
End of Period $13,519,230 $ 9,557,450 $30,378,888 $23,133,738
=========== =========== =========== ===========
<CAPTION>
MANULIFE SERIES FUND INC
------------------------------------------------------------------------------
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) $ 498 $ 726,517 $ 676,573 $ 468
Net realized gain (loss) (72,247) (31,655) 711,163 215,301
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 55,405 696,780 (837,845) 308,730
----------- ----------- ----------- -----------
(16,344) 1,391,642 549,891 524,499
----------- ----------- ----------- -----------
FROM CAPTIAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 3,714,654 3,332,849 18,870,472 17,598,898
Transfer on death 0 0
Transfer of terminations (891,643) (716,686) (2,010,894) (1,962,294)
Transfer of policy loans (21,166) (159,472) (34,762) (66,223)
Net interfund transfers 422,889 1,564,644 (13,488,785) (10,196,735)
----------- ----------- ----------- -----------
3,224,734 4,021,335 3,336,031 5,373,646
----------- ----------- ----------- -----------
Net increase in net assets 3,208,390 5,412,977 3,885,922 5,898,145
<CAPTION>
MANULIFE SERIES FUND INC
------------------------------------------------------------------------------
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>
NET ASSETS
Beginning of Year 10,474,152 5,061,175 13,025,387 7,127,242
----------- ----------- ----------- -----------
End of Period $13,682,542 $10,474,152 $16,911,309 $13,025,387
=========== =========== =========== ===========
<CAPTION>
MANULIFE SERIES FUND INC
----------------------------------------------------------------------------------------
PACIFIC RIM
INTERNATIONAL EMERGING MARKETS *EQUITY INDEX
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------------------- ------------------------------- -------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/96 DEC. 31/95 SEPT. 30/96 DEC. 31/95 SEPT. 30/96
------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 17,405 $ 59,169 $ 5,570 $ 19,281 $ 0
Net realized gain (loss) 32,766 9,897 55,454 6,582 3,891
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 222,452 103,183 149,025 97,489 71,662
----------- ----------- ----------- ----------- -----------
272,623 172,249 210,049 123,352 75,553
----------- ----------- ----------- ----------- -----------
FROM CAPTIAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 3,064,951 1,353,292 1,915,966 812,122 1,949,583
Transfer on death 0 0 0
Transfer of terminations (363,237) (180,239) (231,746) (131,282) (67,724)
Transfer of policy loans (24,975) (2,743) (31,059) (3,509) 0
Net interfund transfers 2,296,320 863,795 1,446,837 622,581 699,530
----------- ----------- ----------- ----------- -----------
4,973,059 2,034,105 3,099,998 1,299,912 2,581,389
----------- ----------- ----------- ----------- -----------
Net increase in net assets 5,245,682 2,206,354 3,310,047 1,423,264 2,656,942
NET ASSETS
Beginning of Year 2,534,368 328,014 1,667,757 244,493 0
----------- ----------- ----------- ----------- -----------
End of Period $ 7,780,050 $ 2,534,368 $ 4,977,804 $ 1,667,757 $2,656,942
=========== =========== =========== =========== ===========
<CAPTION>
NASL SERIES TRUST
--------------------------------------------------------------------------------
*VALUE *GROWTH *U.S. GOVERNMENT
*EQUITY EQUITY AND INCOME SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ ----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/96 SEPT. 30/96 SEPT. 30/96 SEPT. 30/96
------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 26,181 $ 8,790 $ 1,952 $ 26,995
Net realized gain (loss) (240) 22,538 24,967 (3,657)
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 142,077 115,951 79,955 (760)
----------- ----------- ----------- -----------
168,018 147,279 106,874 22,578
----------- ----------- ----------- -----------
FROM CAPTIAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 2,585,524 1,793,203 982,709 451,282
Transfer on death 0 0 0 0
Transfer of terminations (125,831) (70,356) (41,719) (19,545)
Transfer of policy loans (20,491) (1,735) 0 (30,576)
Net interfund transfers 2,510,621 1,440,238 2,287,858 785,304
----------- ----------- ----------- -----------
4,949,823 3,161,350 3,228,848 1,186,465
----------- ----------- ----------- -----------
Net increase in net assets 5,117,841 3,308,629 3,335,722 1,209,043
NET ASSETS
Beginning of Year 0 0 0 0
----------- ----------- ----------- -----------
End of Period $ 5,117,841 $ 3,308,629 $ 3,335,722 $ 1,209,043
=========== =========== =========== ===========
<CAPTION>
NASL SERIES TRUST
-----------------------------------------------------------
*CONSERVATIVE *MODERATE *AGGRESSIVE
ASSET ALLOCATION ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/96 SEPT. 30/96 SEPT. 30/96
---------------- --------------- ----------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 8,660 $ 2,105 $ 11,072
Net realized gain (loss) 6,724 14,183 311
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations (9,944) (5,568) 10,293
----------- ----------- -----------
5,440 10,720 21,676
----------- ----------- -----------
<CAPTION>
NASL SERIES TRUST
-----------------------------------------------------------
*CONSERVATIVE *MODERATE *AGGRESSIVE
ASSET ALLOCATION ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/96 SEPT. 30/96 SEPT. 30/96
---------------- --------------- ----------------
<S> <C> <C> <C>
FROM CAPTIAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 126,544 223,819 282,023
Transfer on death 0 0 0
Transfer of terminations (22,387) (12,150) (34,611)
Transfer of policy loans 0 0 0
Net interfund transfers 144,194 135,536 300,790
----------- ----------- -----------
248,351 347,205 548,202
----------- ----------- -----------
Net increase in net assets 253,791 357,925 569,878
NET ASSETS
Beginning of Year 0 0 0
----------- ----------- -----------
End of Period $ 253,791 $ 357,925 $ 569,878
=========== =========== ===========
<CAPTION>
TOTAL
----------------------------------
PERIOD ENDED YEAR ENDED
SEPT. 30/96 DEC. 31/95
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 7,654,640 $ 1,693,796
Net realized gain (loss) $ 1,596,192 352,258
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations $ (2,463,222) 13,443,319
------------- ------------
$ 6,787,610 15,489,373
------------- ------------
FROM CAPTIAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums $ 71,866,196 56,893,884
Transfer on death $ 0 (202,957)
Transfer of terminations $ (11,799,225) (10,749,848)
Transfer of policy loans $ (1,007,560) (1,356,542)
Net interfund transfers $ 451,908 444,357
------------- ------------
$ 59,511,319 45,028,894
------------- ------------
Net increase in net assets $ 66,298,929 60,518,267
NET ASSETS
Beginning of Year $ 110,902,123 50,383,856
------------- ------------
End of Period $ 177,201,052 $110,902,123
============= ============
</TABLE>
* Reflects the period from commencement of operations February 14, 1996 through
September 30, 1996.
66
<PAGE> 77
Separate Account Three of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
September 30, 1996
1. ORGANIZATION
Separate Account Three 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 sixteen investment sub-accounts, nine investment sub-accounts for
Manulife Series Fund, Inc., and seven investment sub-accounts for NASL Series
Trust, available for allocation of net premiums under certain variable life
insurance 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 February 6, 1987. 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 Accounts are the property of The 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 The 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.
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 nine Funds of
Manulife Series Fund, Inc. and among the seven Funds of the NASL Series
Trust 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.
67
<PAGE> 78
Separate Account Three of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
3. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges for state, local, and
federal taxes from the gross premium before placing the remaining net premiums
in the sub-accounts.
4. 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 $91,413,758 and $22,604,126
respectively, and for the year ended December 31, 1995 were $58,905,751 and
$13,953,509.
5. 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.
68
<PAGE> 79
THE FOLLOWING FINANCIAL STATEMENTS OF SEPARATE ACCOUNT THREE OF THE
MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA FOR THE PERIOD ENDED
DECEMBER 31, 1995 ARE AUDITED.
79
<PAGE> 80
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 Three of The Manufacturers Life Insurance Company of America
(comprising, respectively, the 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, International
Sub-Account and Pacific Rim Emerging Markets 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 Three of The
Manufacturers Life Insurance Company of America at December 31, 1995, 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.
Ernst & Young LLP
February 2, 1996 ERNST & YOUNG LLP
Philadelphia, Pennsylvania
80
<PAGE> 81
Separate Account Three of
The Manufacturers Life Insurance Company of America
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
REAL ESTATE
EMERGING GROWTH COMMON STOCK SECURITIES BALANCED ASSETS
EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------ ----------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investment in Manulife Series Fund, Inc.--
at market value:
Emerging Growth Equity Fund,
1,503,318 shares (cost $29,944,573) $34,739,484
Common Stock Fund,
899,788 shares (cost $13,242,646) $15,538,587
Real Estate Securities Fund,
632,442 shares (cost $8,803,902) $9,551,936
Balanced Assets Fund,
1,347,671 shares (cost $20,423,372) $23,116,748
Capital Growth Bond Fund,
925,335 shares (cost $10,299,253)
Money Market Fund,
1,065,704 shares (cost $11,317,951)
International Fund,
232,902 shares (cost $2,384,926)
Pacific Rim Emerging Markets Fund,
154,166 shares (cost $1,507,605)
----------- ----------- ---------- -----------
34,739,484 15,538,587 9,551,936 23,116,748
Receivable for policy-related
transactions 107,039 124,161 5,514 16,990
----------- ----------- ---------- -----------
Net assets $34,846,523 $15,662,748 $9,557,450 $23,133,738
=========== =========== ========== ===========
Units outstanding 994,478 697,983 386,785 1,147,507
=========== =========== ========== ===========
Net asset value per unit $ 35.04 $ 22.44 $ 24.71 $ 20.16
=========== =========== ========== ===========
</TABLE>
See accompanying notes.
81
<PAGE> 82
<TABLE>
<CAPTION>
PACIFIC RIM
CAPITAL GROWTH MONEY MARKET INTERNATIONAL EMERGING MARKETS
BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
---------------- ------------ ------------- ---------------- -----
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Manulife Series Fund, Inc.--
at market value:
Emerging Growth Equity Fund,
1,503,318 shares (cost $29,944,573) $34,739,484
Common Stock Fund,
899,788 shares (cost $13,242,646) 15,538,587
Real Estate Securities Fund,
632,442 shares (cost $8,803,902) 9,551,936
Balanced Assets Fund,
1,347,671 shares (cost $20,423,372) 23,116,748
Capital Growth Bond Fund,
925,335 shares (cost $10,299,253) $10,453,051 10,453,051
Money Market Fund,
1,065,704 shares (cost $11,317,951) $11,551,671 11,551,671
International Fund,
232,902 shares (cost $2,384,926) $2,484,703 2,484,703
Pacific Rim Emerging Markets Fund,
154,166 shares (cost $1,507,605) $1,596,461 1,596,461
----------- ----------- ---------- ---------- ------------
10,453,051 11,551,671 2,484,703 1,596,461 109,032,641
Receivable for policy-related
transactions 21,101 1,473,716 49,665 71,296 1,869,482
----------- ----------- ---------- ---------- ------------
Net assets $10,474,152 $13,025,387 $2,534,368 $1,667,757 $110,902,123
=========== =========== ========== ========== ============
Units outstanding 550,981 825,436 233,582 158,081
=========== =========== ========== ==========
Net asset value per unit $ 19.01 $ 15.78 $ 10.85 $ 10.55
</TABLE>
82
<PAGE> 83
Separate Account Three of
The Manufacturers Life Insurance Company of America
Statement of Operations
Year ended December 31, 1995
<TABLE>
<CAPTION>
EMERGING GROWTH COMMON STOCK REAL ESTATE SECURITIES BALANCED ASSETS
EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------ ---------------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Dividend income $ 721,489 $ -- $ 142,066 $ 24,806
---------- ---------- ---------- ----------
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) from
security transactions:
Proceeds from sales 1,274,886 798,694 812,232 739,327
Cost of securities sold 1,068,731 804,887 830,335 769,053
---------- ---------- ---------- ----------
Net realized gain (loss) 206,155 (6,193) (18,103) (29,726)
---------- ---------- ---------- ----------
Unrealized appreciation (depreciation)
of investments:
Beginning of year 78,088 (438,289) (280,544) (1,064,130)
End of year 4,794,911 2,295,941 748,034 2,693,376
---------- ---------- ---------- ----------
Net unrealized appreciation during the year 4,716,823 2,734,230 1,028,578 3,757,506
---------- ---------- ---------- ----------
Net realized and unrealized gain
on investments 4,922,978 2,728,037 1,010,475 3,727,780
---------- ---------- ---------- ----------
Net increase in net assets derived
from operations $5,644,467 $2,728,037 $1,152,541 $3,752,586
========== ========== ========== ==========
</TABLE>
See accompanying notes.
83
<PAGE> 84
<TABLE>
<CAPTION>
PACIFIC RIM
CAPITAL GROWTH MONEY MARKET INTERNATIONAL EMERGING MARKETS
BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
---------------- ------------ ------------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 726,517 $ 468 $ 59,169 $ 19,281 $ 1,693,796
---------- --------- -------- --------- -----------
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) from
security transactions:
Proceeds from sales 798,441 8,849,535 344,439 335,955 13,953,509
Cost of securities sold 830,096 8,634,234 334,542 329,373 13,601,251
---------- --------- -------- --------- -----------
Net realized gain (loss) (31,655) 215,301 9,897 6,582 352,258
---------- --------- -------- --------- -----------
Unrealized appreciation (depreciation)
of investments:
Beginning of year (542,982) (75,010) (3,406) (8,633) (2,334,906)
End of year 153,798 233,720 99,777 88,856 11,108,413
---------- --------- -------- --------- -----------
Net unrealized appreciation during the year 696,780 308,730 103,183 97,489 13,443,319
---------- --------- -------- --------- -----------
Net realized and unrealized gain
on investments 665,125 524,031 113,080 104,071 13,795,577
---------- --------- -------- --------- -----------
Net increase in net assets derived
from operations $1,391,642 $ 524,499 $172,249 $ 123,352 $15,489,373
========== ========= ======== ========= ===========
</TABLE>
84
<PAGE> 85
Separate Account Three of
The Manufacturers Life Insurance Company of America
Statements of Changes in Net Assets
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
EMERGING GROWTH COMMON STOCK REAL ESTATE SECURITIES
EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------ ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income $ 721,489 $ 43,907 $ -- $ 267,928 $ 142,066 $ 75,896
Net realized gain (loss) 206,155 211,186 (6,193) (341) (18,103) 31,029
Unrealized appreciation
(depreciation) of invest-
ments during the year 4,716,823 (255,344) 2,734,230 (435,910) 1,028,578 (305,376)
----------- ----------- ----------- ---------- ---------- ----------
Increase (decrease) in net
assets derived from
operations 5,644,467 (251) 2,728,037 (168,323) 1,152,541 (198,451)
----------- ----------- ----------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS
Additions (deductions)
from:
Transfer of net premiums 15,025,111 12,590,008 6,620,667 5,554,746 4,344,151 4,874,992
Transfer on death (202,957) -- -- -- -- --
Transfer of terminations (3,281,049) (1,565,370) (1,485,111) (649,516) (1,139,201) (663,869)
Transfer of policy loans (390,119) (86,018) (349,518) (36,417) (80,626) (6,117)
Net interfund transfers 3,663,152 823,390 2,202,823 421,280 42,920 318,546
----------- ----------- ----------- ---------- ---------- ----------
14,814,138 11,762,010 6,988,861 5,290,093 3,167,244 4,523,552
----------- ----------- ----------- ---------- ---------- ----------
Net increase in net assets 20,458,605 11,761,759 9,716,898 5,121,770 4,319,785 4,325,101
NET ASSETS
Beginning of year 14,387,918 2,626,159 5,945,850 824,080 5,237,665 912,564
----------- ----------- ----------- ---------- ---------- ----------
End of year $34,846,523 $14,387,918 $15,662,748 $5,945,850 $9,557,450 $5,237,665
=========== =========== =========== ========== ========== ==========
</TABLE>
See accompanying notes.
85
<PAGE> 86
<TABLE>
<CAPTION>
BALANCED ASSETS CAPITAL GROWTH MONEY MARKET
SUB-ACCOUNT BOND SUB-ACCOUNT SUB-ACCOUNT
--------------- ---------------- ------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income $ 24,806 $ 603,014 $ 726,517 $ 311,297 $ 468 $ 186,610
Net realized gain (loss) (29,726) (1,270) (31,655) 8,755 215,301 12,880
Unrealized appreciation
(depreciation) of invest-
ments during the year 3,757,506 (954,131) 696,780 (497,582) 308,730 (50,726)
----------- ----------- ----------- ---------- ----------- ----------
Increase (decrease) in net
assets derived from
operations 3,752,586 (352,387) 1,391,642 (177,530) 524,499 148,764
----------- ----------- ----------- ---------- ----------- ----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 7,806,794 9,721,164 3,332,849 3,709,555 17,598,898 9,185,855
Transfer on death -- -- -- -- -- --
Transfer of terminations (1,853,986) (1,044,780) (716,686) (306,914) (1,962,294) (1,053,809)
Transfer of policy loans (304,332) (153,402) (159,472) (57,452) (66,223) (110)
Net interfund transfers 1,681,177 150,911 1,564,644 (184,732) (10,196,735) (1,923,048)
----------- ----------- ----------- ---------- ----------- ----------
7,329,653 8,673,893 4,021,335 3,160,457 5,373,646 6,208,888
----------- ----------- ----------- ---------- ----------- ----------
Net increase in net assets 11,082,239 8,321,506 5,412,977 2,982,927 5,898,145 6,357,652
NET ASSETS
Beginning of year 12,051,499 3,729,993 5,061,175 2,078,248 7,127,242 769,590
----------- ----------- ----------- ---------- ----------- ----------
End of year $23,133,738 $12,051,499 $10,474,152 $5,061,175 $13,025,387 $7,127,242
=========== =========== =========== ========== =========== ==========
</TABLE>
86
<PAGE> 87
Separate Account Three of
The Manufacturers Life Insurance Company of America
Statements of Changes in Net Assets (continued)
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
PACIFIC RIM
INTERNATIONAL EMERGING MARKETS
SUB-ACCOUNT SUB-ACCOUNT TOTAL
---------------------------- --------------------------- ------------------------
YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED YEAR ENDED
DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94
---------- ------------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Investment income $ 59,169 $ 851 $ 19,281 $ 871 $ 1,693,796 $ 1,490,374
Net realized gain (loss) 9,897 (2) 6,582 (57) 352,258 262,180
Unrealized appreciation
(depreciation) of
invest-ments during the
year 103,183 (3,406) 97,489 (8,633) 13,443,319 (2,511,108)
---------- -------- ---------- -------- ------------ -----------
Increase (decrease) in net
assets derived from
operations 172,249 (2,557) 123,352 (7,819) 15,489,373 (758,554)
---------- -------- ---------- -------- ------------ -----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 1,353,292 73,368 812,122 41,337 56,893,884 45,751,025
Transfer on death -- -- -- -- (202,957) -
Transfer of terminations (180,239) (4,461) (131,282) (2,998) (10,749,848) (5,291,717)
Transfer of policy loans (2,743) (768) (3,509) (768) (1,356,542) (341,052)
Net interfund transfers 863,795 262,432 622,581 214,741 444,357 83,520
---------- -------- ---------- -------- ------------ -----------
2,034,105 330,571 1,299,912 252,312 45,028,894 40,201,776
---------- -------- ---------- -------- ------------ -----------
Net increase in net assets 2,206,354 328,014 1,423,264 244,493 60,518,267 39,443,222
NET ASSETS
Beginning of year 328,014 -- 244,493 -- 50,383,856 10,940,634
---------- -------- ---------- -------- ------------ -----------
End of year $2,534,368 $328,014 $1,667,757 $244,493 $110,902,123 $50,383,856
========== ======== ========== ======== ============ ===========
</TABLE>
*Reflects the period from commencement of operations October 4, 1994 through
December 31, 1994.
See accompanying notes.
87
<PAGE> 88
Separate Account Three of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION
Separate Account Three 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 eight investment sub-accounts, one for each series of shares of
Manulife Series Fund, Inc., available for allocation of net premiums under
single premium 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.) ("MRC"), as
a separate investment account on February 6, 1987. MRC 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 Accounts 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.
88
<PAGE> 89
Separate Account Three 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 eight 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.
89
<PAGE> 90
Separate Account Three of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges for state, local, and
federal taxes from the gross premium before placing the remaining net premiums
in the sub-accounts.
4. 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 $58,905,751 and $13,953,509,
respectively, and for the year ended December 31, 1994 were $47,012,777 and
$5,377,813, respectively.
5. 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.
90
<PAGE> 91
THE FOLLOWING FINANCIAL STATEMENTS OF THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA FOR THE PERIOD ENDED SEPTEMBER 30, 1996 ARE UNAUDITED.
91
<PAGE> 92
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>
92
<PAGE> 93
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>
93
<PAGE> 94
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>
94
<PAGE> 95
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>
95
<PAGE> 96
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.
96
<PAGE> 97
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.
97
<PAGE> 98
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>
98
<PAGE> 99
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.
99
<PAGE> 100
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.
100
<PAGE> 101
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.
101
<PAGE> 102
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..
102
<PAGE> 103
THE FOLLOWING FINANCIAL STATEMENTS OF THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA FOR THE PERIOD ENDED DECEMBER 31, 1995 ARE AUDITED.
103
<PAGE> 104
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
104
<PAGE> 105
The Manufacturers Life Insurance Company of America
Balance Sheets
<TABLE>
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.
105
<PAGE> 106
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.
106
<PAGE> 107
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.
107
<PAGE> 108
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.
108
<PAGE> 109
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.
109
<PAGE> 110
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.
110
<PAGE> 111
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.
111
<PAGE> 112
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.
112
<PAGE> 113
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.
113
<PAGE> 114
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>
114
<PAGE> 115
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.
115
<PAGE> 116
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.
116
<PAGE> 117
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>
117
<PAGE> 118
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.
118
<PAGE> 119
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.
119
<PAGE> 120
APPENDIX A
Sample Illustrations Of Policy Values, Cash Surrender Values And Death Benefits
The following tables have been prepared to help show how values under the Policy
change with investment performance. The tables include both Policy Values and
Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of
the values in the Investment Accounts, as the tables assume no values in the
Guaranteed Interest Account or Loan Account. The Cash Surrender Value is the
Policy Value less any applicable surrender charges. The tables illustrate how
Policy Values and Cash Surrender Values, which reflect all applicable charges
and deductions, and Death Benefits of the Policy on an insured of a given age
would vary over time if the return on the assets of the Portfolio was a uniform,
gross, after-tax, annual rate of 0%, 6% or 12%. The Policy Values, Death
Benefits and Cash Surrender Values would be different from those shown if the
returns averaged 0%, 6% or 12%, but fluctuated over and under those averages
throughout the years. The charges reflected in the tables include those for:
deductions from premiums for state, local and federal taxes, deferred
underwriting and sales charges, and monthly deductions for administration, cost
of insurance and mortality and expense risks.
The amounts shown for the Policy Value, Death Benefit and Cash Surrender 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 expenses and fees borne by the Portfolios are deducted from the
gross return. The illustrations reflect an average of the Trusts' expenses,
which is approximately 0.90% (for current charges) and 1.27% (for guaranteed
charges) on an annual basis. The gross annual rates of return of 0%, 6% and 12%
correspond to approximate net annual rates of return of 0.89%, 5.05% and 11.00%
(with current charges) and -1.27%, 4.66% and 10.58% (with guaranteed charges).
The tables assume that no premiums have been allocated to the Guaranteed
Interest Account, that planned premiums are paid on the policy anniversary and
that no transfers, partial withdrawals, policy loans, changes in death benefit
options or changes in face amount have been made. The tables reflect the fact
that no charges for federal, state or local taxes are currently made against
the Separate Account. If such a charge is made in the future, it would take a
higher gross rate of return to produce after-tax returns of 0%, 6% and 12% than
it does now.
There are two tables shown for each combination of age and death benefit option
for male non-smokers, one based on current cost of insurance charges assessed by
the Company and the other based on the maximum cost of insurance charges based
on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables.
Current cost of insurance charges are not guaranteed and may be changed. Upon
request, Manufacturers Life of America will furnish a comparable illustration
based on the proposed life insured's age, sex (unless unisex rates are required
by law) and risk class, any additional ratings and the death benefit option,
face amount and planned premium requested. Illustrations for smokers would show
less favorable results than the illustrations shown below.
120
<PAGE> 121
From time to time, in advertisements or sales literature for the Policies that
quote performance data of one or more of the Portfolios, the Company may include
cash surrender values and death benefit figures computed using the same
methodology as that used in the following illustrations, but with the average
annual total return of the Portfolios for which performance data is shown in the
advertisement replacing the hypothetical rates of return shown in the following
tables. This information may be shown in the form of graphs, charts, tables and
examples.
The Policies have been offered to the public only since September 10, 1993.
However, total return data may be advertised for as long a period of time as the
underlying Portfolio has been in existence. The results for any period prior to
the Policies' being offered would be calculated as if the Policies had been
offered during that period of time, with all charges assumed to be those
applicable to the Policies.
121
<PAGE> 122
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$500,000 Face Amount Death Benefit Option 1
$5,960 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $6,258 $4,346 $ 0 $500,000
2 12,829 8,878 4,056 500,000
3 19,728 13,286 6,764 500,000
4 26,973 17,566 11,097 500,000
5 34,579 21,711 15,290 500,000
6 42,566 25,745 19,625 500,000
7 50,953 29,633 23,813 500,000
8 59,758 33,378 27,857 500,000
9 69,004 36,972 31,969 500,000
10 78,712 40,420 36,357 500,000
15 135,039 55,213 55,213 500,000
20 206,927 65,151 65,151 500,000
25 298,676 69,246 69,246 500,000
30 415,774 64,553 64,553 500,000
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $6,258 $4,643 $ 0 $500,000
2 12,829 9,750 4,928 500,000
3 19,728 15,024 8,502 500,000
4 26,973 20,465 13,996 500,000
5 34,579 26,072 19,652 500,000
6 42,566 31,877 25,756 500,000
7 50,953 37,848 32,028 500,000
8 59,758 43,996 38,476 500,000
9 69,004 50,320 45,317 500,000
10 78,712 56,830 52,768 500,000
15 135,039 92,204 92,204 500,000
20 206,927 132,392 132,392 500,000
25 298,676 178,188 178,188 500,000
30 415,774 233,865 233,865 500,000
</TABLE>
122
<PAGE> 123
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $6,258 $4,941 $235 $500,000
2 12,829 10,659 5,836 500,000
3 19,728 16,905 10,383 500,000
4 26,973 23,729 17,260 500,000
5 34,579 31,179 24,759 500,000
6 42,566 39,345 33,225 500,000
7 50,953 48,263 42,443 500,000
8 59,758 58,013 52,493 500,000
9 69,004 68,673 63,669 500,000
10 78,712 80,341 76,279 500,000
15 135,039 157,728 157,728 500,000
20 206,927 281,446 281,446 500,000
25 298,676 482,242 482,242 646,204
30 415,774 818,982 818,982 999,158
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid after
the initial premium are received on the policy anniversary, (b) no policy
loan has been made, (c) no partial withdrawal of the Cash Surrender Value
has been made and (d) no premiums have been allocated to the Guaranteed
Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative Premium
Test or the Fund Value Test has been and continues to be met, the Death
Benefit Guarantee will keep the Policy in force on all policies for the
first three years and until age 100 on Policies issued and maintained with
a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on
policies issued and maintained with a face amount of at least $250,000 and
if Death benefit Option 2 is selected at any time.
(5) Cash Surrender Values for first two years reflect sales charge
limitations imposed by the S.E.C.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT
THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS
123
<PAGE> 124
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT
RETURNS FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF
YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
124
<PAGE> 125
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$500,000 Face Amount Death Benefit Option 1
$5,960 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $6,258 $4,327 $ 0 $500,000
2 12,829 8,822 4,000 500,000
3 19,728 13,176 6,654 500,000
4 26,973 17,387 10,917 500,000
5 34,579 21,449 15,029 500,000
6 42,566 25,362 19,242 500,000
7 50,953 29,117 23,297 500,000
8 59,758 32,717 27,197 500,000
9 69,004 36,153 31,150 500,000
10 78,712 39,430 35,367 500,000
15 135,039 53,123 53,123 500,000
20 206,927 61,392 61,392 500,000
25 298,676 61,419 61,419 500,000
30 415,774 49,780 49,780 500,000
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $6,258 $4,623 $ 0 $500,000
2 12,829 9,688 4,866 500,000
3 19,728 14,897 8,375 500,000
4 26,973 20,251 13,782 500,000
5 34,579 25,748 19,328 500,000
6 42,566 31,390 25,270 500,000
7 50,953 37,170 31,350 500,000
8 59,758 43,097 37,577 500,000
9 69,004 49,163 44,160 500,000
10 78,712 55,379 51,316 500,000
15 135,039 88,547 88,547 500,000
20 206,927 124,820 124,820 500,000
25 298,676 162,586 162,586 500,000
30 415,774 204,304 204,304 500,000
</TABLE>
125
<PAGE> 126
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $ 6,258 $ 4,920 $ 214 $500,000
2 12,829 10,591 5,768 500,000
3 19,728 16,761 10,239 500,000
4 26,973 23,476 17,007 500,000
5 34,579 30,780 24,360 500,000
6 42,566 38,729 32,609 500,000
7 50,953 47,375 41,555 500,000
8 59,758 56,789 51,269 500,000
9 69,004 67,038 62,035 500,000
10 78,712 78,208 74,146 500,000
15 135,039 151,194 151,194 500,000
20 206,927 265,129 265,129 500,000
25 298,676 445,962 445,962 597,589
30 415,774 743,817 743,817 907,457
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid after
the initial premium are received on the policy anniversary, (b) no policy
loan has been made, (c) no partial withdrawal of the Cash Surrender Value
has been made and (d) no premiums have been allocated to the Guaranteed
Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative Premium
Test or the Fund Value Test has been and continues to be met, the Death
Benefit Guarantee will keep the Policy in force on all policies for the
first three years and until age 100 on Policies issued and maintained with
a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on
policies issued and maintained with a face amount of at least $250,000 and
if Death benefit Option 2 is selected at any time.
(4) Cash Surrender Values for first two years reflect sales charge
limitations imposed by the S.E.C.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT
THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT
RETURNS FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF
YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
126
<PAGE> 127
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$500,000 Face Amount Death Benefit Option 2
$7,450 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $ 7,823 $ 5,748 $ 611 $505,748
2 16,036 11,650 6,513 511,650
3 24,660 17,393 10,871 517,393
4 33,716 22,975 16,506 522,975
5 43,224 28,386 21,966 528,386
6 53,208 33,654 27,534 533,654
7 63,691 38,739 32,918 538,739
8 74,698 43,644 38,123 543,644
9 86,255 48,361 43,357 548,361
10 98,391 52,893 48,831 552,893
15 168,798 72,488 72,488 572,488
20 258,658 86,036 86,036 586,036
25 373,345 92,383 92,383 592,383
30 519,718 88,667 88,667 588,667
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $ 7,823 $ 6,130 $ 993 $506,130
2 16,036 12,776 7,638 512,776
3 24,660 19,639 13,117 519,639
4 33,716 26,725 20,256 526,725
5 43,224 34,028 27,607 534,028
6 53,208 41,582 35,462 541,582
7 63,691 49,355 43,535 549,355
8 74,698 57,356 51,836 557,356
9 86,255 65,583 60,579 565,583
10 98,391 74,043 69,980 574,043
15 168,798 119,765 119,765 619,765
20 258,658 170,667 170,667 670,667
25 373,345 226,037 226,037 726,037
30 519,718 286,887 286,887 786,887
</TABLE>
127
<PAGE> 128
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $ 7,823 $ 6,512 $ 1,375 $ 506,512
2 16,036 13,947 8,810 513,947
3 24,660 22,070 15,547 522,070
4 33,716 30,942 24,473 530,942
5 43,224 40,626 34,206 540,626
6 53,208 51,229 45,108 551,229
7 63,691 62,798 56,977 562,798
8 74,698 75,430 69,909 575,430
9 86,255 89,218 84,215 589,218
10 98,391 104,279 100,217 604,279
15 168,798 203,115 203,115 703,115
20 258,658 356,547 356,547 856,547
25 373,345 595,842 595,842 1,095,842
30 519,718 988,029 988,029 1,488,029
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid after
the initial premium are received on the policy anniversary, (b) no policy
loan has been made, (c) no partial withdrawal of the Cash Surrender Value
has been made and (d) no premiums have been allocated to the Guaranteed
Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative Premium
Test or the Fund Value Test has been and continues to be met, the Death
Benefit Guarantee will keep the Policy in force on all policies for the
first three years and until age 100 on Policies issued and maintained with
a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on
policies issued and maintained with a face amount of at least $250,000 and
if Death benefit Option 2 is selected at any time.
(5) Cash Surrender Values for first two years reflect sales charge
limitations imposed by the S.E.C.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT
THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
128
<PAGE> 129
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT
RETURNS FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF
YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
129
<PAGE> 130
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$500,000 Face Amount Death Benefit Option 2
$7,450 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $7,823 $5,725 $ 587 $505,725
2 16,036 11,578 6,441 511,578
3 24,660 17,252 10,730 517,252
4 33,716 22,745 16,276 522,745
5 43,224 28,051 21,630 528,051
6 53,208 33,168 27,048 533,168
7 63,691 38,087 32,267 538,087
8 74,698 42,811 37,291 542,811
9 86,255 47,330 42,327 547,330
10 98,391 51,649 47,586 551,649
15 168,798 69,888 69,888 569,888
20 258,658 81,445 81,455 581,445
25 373,345 83,185 83,185 583,185
30 519,718 72,140 72,140 572,140
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $7,823 $6,104 $ 967 $506,104
2 16,036 12,696 7,559 512,696
3 24,660 19,478 12,956 519,478
4 33,716 26,451 19,982 526,451
5 43,224 33,612 27,192 533,612
6 53,208 40,963 34,843 540,963
7 63,691 48,496 42,676 548,496
8 74,698 56,218 50,697 556,218
9 86,255 64,120 59,116 564,120
10 98,391 72,209 68,147 572,209
15 168,798 115,177 115,177 615,177
20 258,658 161,257 161,257 661,257
25 373,345 206,676 206,676 706,676
30 519,718 250,476 250,476 750,476
</TABLE>
130
<PAGE> 131
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $7,823 $6,485 $1,348 $506,485
2 16,036 13,860 8,723 513,860
3 24,660 21,886 15,364 521,886
4 33,716 30,618 24,149 530,618
5 43,224 40,115 33,694 540,115
6 53,208 50,443 44,323 550,443
7 63,691 61,668 55,848 561,668
8 74,698 73,875 68,355 573,875
9 86,255 87,143 82,140 587,143
10 98,391 101,574 97,512 601,574
15 168,798 194,872 194,872 694,872
20 258,658 336,075 336,075 836,075
25 373,345 547,956 547,956 1,047,956
30 519,718 883,920 883,920 1,383,920
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have been
rounded to the nearest dollar, and assume that (a) premiums paid after the
initial premium are received on the policy anniversary, (b) no policy loan
has been made, (c) no partial withdrawal of the Cash Surrender Value has
been made and (d) no premiums have been allocated to the Guaranteed
Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative Premium
Test or the Fund Value Test has been and continues to be met, the Death
Benefit Guarantee will keep the Policy in force on all policies for the
first three years and until age 100 on Policies issued and maintained with
a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on
policies issued and maintained with a face amount of at least $250,000 and
if Death benefit Option 2 is selected at any time.
(4) Cash Surrender Values for first two years reflect sales charge limitations
imposed by the S.E.C.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT
THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT
RETURNS FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD
OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
131
<PAGE> 132
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 55 (Standard)
$500,000 Face Amount Death Benefit Option 1
$15,095 Annual Planned Premium*
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $15,850 $10,127 $2,627 $500,000
2 32,492 20,154 11,517 500,000
3 49,966 29,744 13,829 500,000
4 68,314 39,177 23,592 500,000
5 87,580 48,474 33,236 500,000
6 107,809 57,613 43,873 500,000
7 129,049 66,433 56,127 500,000
8 151,351 74,866 67,995 500,000
9 174,768 82,962 79,527 500,000
10 199,356 90,721 90,721 500,000
15 342,015 128,840 128,840 500,000
20 530,730 152,378 152,378 500,000
25 771,584 112,375 112,375 500,000
30 1,078,982 0(6) 0(6) 500,000(6)
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $15,850 $10,854 $3,354 $500,000
2 32,492 22,245 13,608 500,000
3 49,966 33,855 17,941 500,000
4 68,314 45,979 30,394 500,000
5 87,580 58,664 43,426 500,000
6 107,809 71,915 58,175 500,000
7 129,049 85,603 75,297 500,000
8 151,351 99,687 92,817 500,000
9 174,768 114,244 110,809 500,000
10 199,356 129,304 129,304 500,000
15 342,015 219,992 219,992 500,000
20 530,730 334,731 334,731 500,000
25 771,584 478,212 478,212 502,123
30 1,078,982 671,314 671,314 704,880
</TABLE>
132
<PAGE> 133
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $15,850 $11,583 $4,083 $500,000
2 32,492 24,428 15,791 500,000
3 49,966 38,319 22,405 500,000
4 68,314 53,665 38,080 500,000
5 87,580 70,647 55,408 500,000
6 107,809 89,424 75,683 500,000
7 129,049 110,041 99,735 500,000
8 151,351 132,654 125,783 500,000
9 174,768 157,551 154,116 500,000
10 199,356 185,014 185,014 500,000
15 342,015 383,505 383,505 500,000
20 530,730 727,797 727,797 778,743
25 771,584 1,285,510 1,285,510 1,349,785
30 1,078,982 2,171,227 2,171,227 2,279,789
</TABLE>
*Note that the second tier Death Benefit Guarantee Premium level of $16,240
is paid from age 70.
(1) All values shown are as of the end of the policy year indicated, have been
rounded to the nearest dollar, and assume that (a) premiums paid after the
initial premium are received on the policy anniversary, (b) no policy loan
has been made, (c) no partial withdrawal of the Cash Surrender Value has
been made and (d) no premiums have been allocated to the Guaranteed
Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative Premium
Test or the Fund Value Test has been and continues to be met, the Death
Benefit Guarantee will keep the Policy in force on all policies for the
first three years and until age 100 on Policies issued and maintained with
a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on
policies issued and maintained with a face amount of at least $250,000 and
if Death benefit Option 2 is selected at any time.
(5) Cash Surrender Values for first two years reflect sales charge
limitations imposed by the S.E.C.
(6) In the absence of additional premium payments, the Policy will lapse,
unless the Death Benefit Guarantee is in effect.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT
THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
133
<PAGE> 134
DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT
RETURNS FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF
YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
134
<PAGE> 135
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 55 (Standard)
$500,000 Face Amount Death Benefit Option 1
$15,095 Annual Planned Premium*
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $ 15,850 $10,082 $ 2,581 $500,000
2 32,492 19,861 11,223 500,000
3 49,966 29,113 13,198 500,000
4 68,314 37,829 22,244 500,000
5 87,580 45,978 30,739 500,000
6 107,809 53,529 39,789 500,000
7 129,049 60,450 50,144 500,000
8 151,351 66,686 59,816 500,000
9 174,768 72,172 68,737 500,000
10 199,356 76,837 76,837 500,000
15 342,015 87,833 87,833 500,000
20 530,730 69,039 69,039 500,000
25 771,584 0(5) 0(5) 500,000(5)
30 1,078,982 0(5) 0(5) 500,000(5)
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $ 15,850 $ 10,806 $ 3,305 $500,000
2 32,492 21,934 13,296 500,000
3 49,966 33,166 17,251 500,000
4 68,314 44,496 28,911 500,000
5 87,580 55,895 40,656 500,000
6 107,809 67,338 53,597 500,000
7 129,049 78,798 68,492 500,000
8 151,351 90,232 83,362 500,000
9 174,768 101,588 98,153 500,000
10 199,356 112,813 112,813 500,000
15 342,015 169,785 169,785 500,000
20 530,730 226,893 226,893 500,000
25 771,584 270,671 270,671 500,000
30 1,078,982 289,246 289,246 500,000
</TABLE>
135
<PAGE> 136
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $ 15,850 $ 11,532 $ 4,031 $ 500,000
2 32,492 24,097 15,460 500,000
3 49,966 37,568 21,654 500,000
4 68,314 52,033 36,448 500,000
5 87,580 67,571 52,333 500,000
6 107,809 84,282 70,541 500,000
7 129,049 102,279 91,973 500,000
8 151,351 121,683 114,813 500,000
9 174,768 142,634 139,199 500,000
10 199,356 165,305 165,305 500,000
15 342,015 322,011 322,011 500,000
20 530,730 603,659 603,659 645,915
25 771,584 1,061,612 1,061,612 1,114,693
30 1,078,982 1,770,625 1,770,625 1,859,156
</TABLE>
* Note that the second tier Death Benefit Guarantee Premium level of $16,240
is paid from age 70.
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid after
the initial premium are received on the policy anniversary, (b) no policy
loan has been made, (c) no partial withdrawal of the Cash Surrender Value
has been made and (d) no premiums have been allocated to the Guaranteed
Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years.
Provided the Cumulative Premium Test or the Fund Value Test has been and
continues to be met, the Death Benefit Guarantee will keep the Policy in
force on all policies for the first three years and until age 100 on
Policies issued and maintained with a minimum face amount of $250,000 and
Death Benefit Option 1; to age 85 on policies issued and maintained with a
face amount of at least $250,000 and if Death benefit Option 2 is selected
at any time.
(4) Cash Surrender Values for first two years reflect sales charge limitations
imposed by the S.E.C.
(5) In the absence of additional premium payments, the Policy will lapse,
unless the Death Benefit Guarantee is in effect.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT
THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT
RETURNS FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF
YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
136
<PAGE> 137
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 55 (Standard)
$500,000 Face Amount Death Benefit Option 2
$17,920 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $ 18,816 $ 12,710 $ 4,334 $512,710
2 38,573 25,183 14,244 525,183
3 59,317 37,072 21,157 537,072
4 81,099 48,672 33,087 548,672
5 103,970 60,006 44,768 560,006
6 127,985 71,050 57,310 571,050
7 153,200 81,618 71,312 581,618
8 179,676 91,625 84,754 591,625
9 207,476 101,121 97,686 601,121
10 236,666 110,099 110,099 610,099
15 406,022 152,234 152,234 652,234
20 622,169 163,253 163,253 663,253
25 898,033 88,414 88,414 588,414
30 1,250,113 0(6) 0(6) 500,000(6)
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $ 18,816 $ 13,591 $ 5,215 $513,591
2 38,573 27,730 16,792 527,730
3 59,317 42,078 26,163 542,078
4 81,099 56,935 41,350 557,935
5 103,970 72,343 57,104 572,343
6 127,985 88,292 74,552 588,292
7 153,200 104,610 94,303 604,610
8 179,676 121,213 114,342 621,213
9 207,476 138,156 134,721 638,156
10 236,666 155,435 155,435 655,435
15 406,022 254,609 254,609 754,609
20 622,169 346,943 346,943 846,943
25 898,033 364,111 364,111 864,111
30 1,250,113 285,259 285,259 785,259
</TABLE>
137
<PAGE> 138
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3)(4)(5) Benefit
<S> <C> <C> <C> <C>
1 $18,816 $14,475 $6,099 $514,475
2 38,573 30,387 19,448 530,387
3 59,317 47,506 31,591 547,506
4 81,099 66,256 50,671 566,256
5 103,970 86,819 71,580 586,819
6 127,985 109,344 95,604 609,344
7 153,200 133,828 123,522 633,828
8 179,676 160,363 153,493 660,363
9 207,476 189,201 185,766 689,201
10 236,666 220,552 220,552 720,552
15 406,022 436,307 436,307 936,307
20 622,169 756,277 756,277 1,256,277
25 898,033 1,170,055 1,170,055 1,670,055
30 1,250,113 1,736,356 1,736,356 2,236,356
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid after
the initial premium are received on the policy anniversary, (b) no policy
loan has been made, (c) no partial withdrawal of the Cash Surrender Value
has been made and (d) no premiums have been allocated to the Guaranteed
Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative Premium
Test or the Fund Value Test has been and continues to be met, the Death
Benefit Guarantee will keep the Policy in force on all policies for the
first three years and until age 100 on Policies issued and maintained with
a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on
policies issued and maintained with a face amount of at least $250,000 and
if Death benefit Option 2 is selected at any time.
(5) Cash Surrender Values for first two years reflect sales charge
limitations imposed by the S.E.C.
(6) Provided the Death Benefit Guarantee has been in effect, the Policy will
have been kept in force until the end of the policy year in which the life
insured reached attained age 85, at which time the Death Benefit Guarantee
will expire and in the absence of additional premium payments, the Policy
will lapse.
138
<PAGE> 139
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT
THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT
RETURNS FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD
OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
139
<PAGE> 140
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 55 (Standard)
$500,000 Face Amount Death Benefit Option 2
$17,920 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $18,816 $12,655 $4,279 $512,655
2 38,573 24,855 13,916 524,855
3 59,317 36,368 20,453 536,368
4 81,099 47,175 31,590 547,175
5 103,970 57,233 41,994 557,233
6 127,985 66,497 52,757 566,497
7 153,200 74,922 64,615 574,922
8 179,676 82,435 75,564 582,435
9 207,476 88,954 85,519 588,954
10 236,666 94,391 94,391 594,391
15 406,022 105,388 105,388 605,388
20 622,169 74,457 74,457 574,457
25 898,033 0(5) 0(5) 500,000(5)
30 1,250,113 0(5) 0(5) 0(5)
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $18,816 $13,533 $5,157 $513,533
2 38,573 27,380 16,442 527,380
3 59,317 41,305 25,390 541,305
4 81,099 55,275 39,690 555,275
5 103,970 69,230 53,992 569,230
6 127,985 83,110 69,370 583,110
7 153,200 96,845 86,538 596,845
8 179,676 110,337 103,466 610,337
9 207,476 123,472 120,037 623,472
10 236,666 136,124 136,124 636,124
15 406,022 192,345 192,345 692,345
20 622,169 214,381 214,381 714,381
25 898,033 162,197 162,197 662,197
30 1,250,113 0 0 500,000
</TABLE>
140
<PAGE> 141
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3)(4) Benefit
<S> <C> <C> <C> <C>
1 $18,816 $14,413 $6,037 $514,413
2 38,573 30,014 19,075 530,014
3 59,317 46,660 30,745 546,660
4 81,099 64,415 48,830 564,415
5 103,970 83,322 68,084 583,322
6 127,985 103,430 89,690 603,430
7 153,200 124,785 114,479 624,785
8 179,676 147,413 140,542 647,413
9 207,476 171,324 167,889 671,324
10 236,666 196,528 196,528 696,528
15 406,022 350,754 350,754 850,754
20 622,169 546,342 546,342 1,046,342
25 898,033 771,479 771,479 1,271,479
30 1,250,113 1,003,611 1,003,611 1,503,611
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid after
the initial premium are received on the policy anniversary, (b) no policy
loan has been made, (c) no partial withdrawal of the Cash Surrender Value
has been made and (d) no premiums have been allocated to the Guaranteed
Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 5 Policy Years. Provided the Cumulative Premium
Test or the Fund Value Test has been and continues to be met, the Death
Benefit Guarantee will keep the Policy in force on all policies for the
first three years and until age 100 on Policies issued and maintained with
a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on
policies issued and maintained with a face amount of at least $250,000 and
if Death benefit Option 2 is selected at any time.
(4) Cash Surrender Values for first two years reflect sales charge
limitations imposed by the S.E.C.
(5) Provided the Death Benefit Guarantee has been in effect, the Policy will
have been kept in force until the end of the policy year in which the life
insured reached attained age 85, at which time the Death Benefit Guarantee
will expire and in the absence of additional premium payments, the Policy
will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT
THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT
RETURNS FOR THE FUNDS OF NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER
VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD
OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
141
<PAGE> 142
APPENDIX B
Definitions
The following terms have the following meanings when used in this Prospectus:
Additional Rating -- an addition to the cost of insurance rate for insureds who
do not meet at least the underwriting requirements of the standard risk class.
Business Day -- any day that the New York Stock Exchange is open for trading
and trading is not restricted. The net asset value of the underlying shares of
a sub-account of the Separate Account will be determined at the end of each
Business Day.
Cash Surrender Value -- the Policy Value less the deferred sales charge, the
deferred underwriting charge and any outstanding monthly deductions due.
Cumulative Premium Test -- a test that, if satisfied in the first three policy
years and, where applicable, if satisfied in subsequent policy years, will
maintain the Death Benefit Guarantee. To satisfy the Cumulative Premium Test,
the sum of premiums paid, less withdrawals, and less policy loans, must equal
or exceed the sum of Death Benefit Guarantee Premiums since issue as at the
beginning of each policy month.
Death Benefit Guarantee -- Manufacturers Life of America's guarantee that the
Policy will not go into 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.
Death Benefit Guarantee Premium -- a measure of premium used in determining
compliance with the Cumulative Premium Test. The Death Benefit Guarantee
Premium as an annual amount is established by the Company based on issue age,
sex (unless unisex rates are required by law), risk class, death benefit
option, supplementary benefits and additional ratings. The Death Benefit
Guarantee Premium, which is set forth in the Policy, will increase, when the
policyowner reaches attained age 70, to an amount as specified in the Policy.
Effective Date -- the date that Manufacturers Life of America becomes obligated
under the Policy and when the first monthly deductions are taken.
Fund Value Test -- a test which, if satisfied in applicable policy years will
maintain the Death Benefit Guarantee feature. To satisfy the Fund Value Test,
the Gross Single Premium at the beginning of any applicable policy month must
not be greater than the Net Policy Value.
Gross Single Premium -- the amount of premium needed to endow the Policy to the
expiration of the Death Benefit Guarantee assuming 4% interest and current
charges.
142
<PAGE> 143
Guaranteed Interest Account -- that part of the Policy Value which reflects the
value the policyowner has in the general account of Manufacturers Life of
America.
Guideline Annual Premium -- an amount defined by S.E.C. regulation. It is
used to determine maximum sales charges that may be deducted during the first
two years following issuance of a Policy.
Initial Premium -- at least 1/12 of the Target Premium. The Initial Premium
must be received within 60 days after the policy date.
Investment Account -- that part of the Policy Value which reflects the value
the policyowner has in one of the sub-accounts of the Separate Account.
Issue Age - the age on the nearest birthday, at policy date, as shown in the
Policy.
Loan Account -- that part of the Policy Value which reflects the value the
policyowner has transferred from the Guaranteed Interest Account or the
Investment Accounts as collateral for a policy loan.
Modified Policy Debt -- as of any date, the Policy Debt plus the amount of
interest to be charged to the next policy anniversary, all discounted from the
next policy anniversary to such date at an annual rate of 4%.
Monthly Death Benefit Guarantee Premium -- 1/12 of the Death Benefit Guarantee
Premium.
Monthly No Lapse Guarantee Premium - 1/12 of the No Lapse Guarantee Premium.
Net Cash Surrender Value -- the Cash Surrender Value less Policy Debt.
Net Policy Value -- the Policy Value less the value in the Loan Account.
Net Premium -- amount of premium allocated to the Investment Accounts or
Guaranteed Interest Account. It equals gross premiums less the deduction for
state, local and federal taxes.
No Lapse Guarantee - Manufacturers Life of America guarantees that the Policy
will not go into default even if a combination of Policy loans, adverse
investment experience and 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. In Illinois this benefit is known as the Minimum
Premium Guarantee.
No Lapse Guarantee Cumulative Premium Test - a test that, if satisfied in the
No Lapse Guarantee Period, will maintain the No Lapse Guarantee. To satisfy
the No Lapse Guarantee Cumulative Premium Test, the sum of premiums paid, less
withdrawals, and less Policy loans must equal or exceed the sum of No Lapse
Guarantee Premiums since issue as at the beginning of each policy month.
143
<PAGE> 144
No Lapse Guarantee Period - is the first 5 policy years for life insureds with
an issue age up to and including 85. It is not offered to life insureds whose
Issue Age exceeds 85.
No Lapse Guarantee Premium - is a measure of premium used in determining
compliance with the No Lapse Guarantee Cumulative Premium Test. The No Lapse
Guarantee premium for each policyowner is set forth in the Policy.
Planned Premium -- The premium the policyowner plans to pay periodically.
Subject to certain requirements of law, the Planned Premium may be changed at
any time.
Policy Date -- The date from which policy years, policy months and policy
anniversaries are determined. Monthly deductions are due on the policy date.
If a check for at least the Initial Premium accompanies the application, the
policy date is the date the application and check are received at the Service
office. If an application accepted by the Company is not accompanied by a
check for the Initial Premium, the policy will be issued with a policy date
which is 7 days after issuance of the policy.
Policy Debt -- as of any date, the aggregate amount of policy loans, including
borrowed interest, less any loan repayments.
Policy Value -- the sum of the values in the Loan Account, the Guaranteed
Interest Account and the Investment Accounts.
Select Loan -- A loan on which the differential between the interest credited
and the interest charged is currently 0%; provided, however, if at some time in
the future it is determined that the current differential could cause the loan
to be treated as a taxable distribution under any applicable ruling, regulation
or court decision, Manufacturers Life of America has the right to increase the
differential on all subsequent Select Loans either (i) to an amount that may be
presented in such ruling, regulation or court decision that would result in the
transaction being treated as a loan under federal tax law or (ii) if no amount
is prescribed, to an amount that Manufacturers Life of America feels would be
more likely to result in the transaction being treated as a loan under Federal
tax law.
Select Loan Amount -- the amount of any Select Loan.
Service Office -- the office designated to service the Policies, which is shown
on the cover page of this prospectus.
Surrender Charge Period -- the period (usually 15 years) following issuance of
the Policy or any increase in face amount during which surrender charges may be
assessed if the Policy is surrendered or lapsed, the face amount is decreased
or a partial withdrawal takes place.
Target Premium -- a premium amount used to measure the maximum deferred sales
charge under a Policy. The Target Premium for the initial face amount is set
forth in the Policy. The policyowner will be advised of the Target Premium for
any increase in face amount.
144
<PAGE> 145
Withdrawal Tier Amount -- as of any date, the net Cash Surrender Value at the
previous anniversary multiplied by 10%.
145
<PAGE> 146
APPENDIX C
The maximum deferred sales charge is 50% of premiums received up to a specified
number of Target Premiums that varies (from
- -0.180 to 3.031) with the issue age of the life insured, the face amount of the
Policy and the amount of any increase. Beginning after two policy years, that
maximum deferred sales charge decreases over time according to a pattern that
varies with the issue age of the life insured. In all cases, the deferred
sales charge is eliminated entirely by the last month of the 15th policy year.
The same pattern applies to sales charges occasioned by face amount increases,
with time periods and issue age computed using the date of the increase in face
amount rather than the Policy Date.
The following tables show the percentage of the maximum sales charge that would
be applicable in the last month of the years shown. The percentages for other
months would be derived by interpolation.
146
<PAGE> 147
APPENDIX C
If the transaction occurs in the last month of
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 0 1 2 3 4 5 6 7
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9666 0.9500 0.9642 0.9444 0.9555 0.9811 0.9843 0.9866
4 0.9666 0.9500 0.9285 0.9444 0.9555 0.9622 0.9687 0.9600
5 0.9333 0.9000 0.8928 0.9166 0.9111 0.9433 0.9531 0.9466
6 0.9333 0.9000 0.8928 0.9166 0.9111 0.9433 0.9531 0.9466
7 0.9333 0.9000 0.8928 0.9166 0.9111 0.9433 0.9531 0.9466
8 0.9333 0.9000 0.8928 0.9166 0.9111 0.9433 0.9531 0.9466
9 0.8503 0.8503 0.8503 0.8503 0.8503 0.8503 0.8503 0.8503
10 0.6803 0.6803 0.6803 0.6803 0.6803 0.6803 0.6803 0.6803
11 0.5442 0.5442 0.5442 0.5442 0.5442 0.5442 0.5442 0.5442
12 0.4082 0.4082 0.4082 0.4082 0.4082 0.4082 0.4082 0.4082
13 0.2721 0.2721 0.2721 0.2721 0.2721 0.2721 0.2721 0.2721
14 0.1361 0.1361 0.1361 0.1361 0.1361 0.1361 0.1361 0.1361
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 8 9 10 11 12 13 14 15
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9885 0.9861 0.9873 0.9885 0.9895 0.9875 0.9940 0.9898
4 0.9655 0.9696 0.9734 0.9765 0.9722 0.9751 0.9831 0.9796
5 0.9540 0.9595 0.9646 0.9609 0.9652 0.9689 0.9719 0.9695
6 0.9540 0.9595 0.9646 0.9609 0.9652 0.9689 0.9719 0.9695
7 0.9540 0.9595 0.9646 0.9609 0.9652 0.9689 0.9719 0.9695
8 0.9540 0.9595 0.9646 0.9609 0.9652 0.9689 0.9719 0.9695
9 0.8503 0.8503 0.8503 0.8503 0.8503 0.8503 0.8503 0.8503
10 0.6803 0.6803 0.6803 0.6803 0.6803 0.6803 0.6803 0.6803
11 0.5442 0.5442 0.5442 0.5442 0.5442 0.5442 0.5442 0.5442
12 0.4082 0.4082 0.4082 0.4082 0.4082 0.4082 0.4082 0.4082
</TABLE>
147
<PAGE> 148
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
13 0.2721 0.2721 0.2721 0.2721 0.2721 0.2721 0.2721 0.2721
14 0.1361 0.1361 0.1361 0.1361 0.1361 0.1361 0.1361 0.1361
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
148
<PAGE> 149
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 16 17 18 19 20 21 22 23
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9912 0.9872 0.9884 0.9842 0.9903 0.9867 0.9878 0.9887
4 0.9788 0.9795 0.9768 0.9789 0.9806 0.9778 0.9796 0.9804
5 0.9718 0.9681 0.9653 0.9631 0.9661 0.9646 0.9674 0.9699
6 0.9667 0.9667 0.9653 0.9631 0.9661 0.9646 0.9674 0.9699
7 0.9333 0.9333 0.9333 0.9333 0.9333 0.9396 0.9396 0.9396
8 0.9000 0.9000 0.9000 0.9000 0.9000 0.9060 0.9060 0.9060
9 0.8333 0.8333 0.8333 0.8333 0.8333 0.8389 0.8389 0.8389
10 0.6667 0.6667 0.6667 0.6667 0.6667 0.6711 0.6711 0.6711
11 0.5333 0.5333 0.5333 0.5333 0.5333 0.5369 0.5369 0.5369
12 0.4000 0.4000 0.4000 0.4000 0.4000 0.4027 0.4027 0.4027
13 0.2667 0.2667 0.2667 0.2667 0.2667 0.2685 0.2685 0.2685
14 0.1330 0.1330 0.1330 0.1330 0.1330 0.1342 0.1342 0.1342
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
*Months not shown may be calculated by interpolation.
149
<PAGE> 150
If the transaction occurs in the last month of
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 24 25 26 27 28 29 30 31
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9896 0.9901 0.9885 0.9889 0.9897 0.9887 0.9889 0.9885
4 0.9792 0.9803 0.9793 0.9779 0.9770 0.9757 0.9772 0.9771
5 0.9688 0.9679 0.9678 0.9678 0.9659 0.9644 0.9650 0.9624
6 0.9688 0.9679 0.9678 0.9678 0.9659 0.9644 0.9650 0.9624
7 0.9396 0.9396 0.9432 0.9469 0.9507 0.9545 0.9583 0.9622
8 0.9060 0.9060 0.9122 0.9184 0.9247 0.9310 0.9375 0.9441
9 0.8389 0.8389 0.8446 0.8503 0.8562 0.8621 0.8681 0.8741
10 0.6711 0.6711 0.6757 0.6803 0.6849 0.6897 0.6944 0.6993
11 0.5369 0.5369 0.5405 0.5442 0.5479 0.5517 0.5556 0.5594
12 0.4027 0.4027 0.4054 0.4082 0.4110 0.4138 0.4167 0.4196
13 0.2685 0.2685 0.2703 0.2721 0.2740 0.2759 0.2778 0.2797
14 0.1342 0.1342 0.1351 0.1361 0.1370 0.1379 0.1389 0.1399
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 32 33 34 35 36 37 38 39
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9878 0.9886 0.9883 0.9888 0.9860 0.9859 0.9868 0.9858
4 0.9741 0.9758 0.9751 0.9739 0.9733 0.9728 0.9725 0.9714
5 0.9634 0.9630 0.9614 0.9602 0.9593 0.9577 0.9573 0.9572
6 0.9634 0.9630 0.9614 0.9602 0.9593 0.9577 0.9573 0.9572
7 0.9634 0.9630 0.9614 0.9602 0.9593 0.9577 0.9573 0.9572
8 0.9507 0.9574 0.9614 0.9602 0.9593 0.9577 0.9573 0.9572
9 0.8803 0.8865 0.8929 0.8993 0.8999 0.9006 0.9012 0.9019
10 0.7042 0.7092 0.7143 0.7194 0.7199 0.7205 0.7210 0.7215
11 0.5634 0.5674 0.5714 0.5755 0.5760 0.5764 0.5768 0.5772
12 0.4225 0.4255 0.4286 0.4317 0.4320 0.4323 0.4326 0.4329
13 0.2817 0.2837 0.2857 0.2878 0.2880 0.2882 0.2884 0.2886
</TABLE>
150
<PAGE> 151
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
14 0.1408 0.1418 0.1429 0.1439 0.1440 0.1441 0.1442 0.1443
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
151
<PAGE> 152
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 40 41 42 43 44 45 46 47
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9849 0.9850 0.9828 0.9839 0.9822 0.9833 0.9819 0.9808
4 0.9706 0.9692 0.9680 0.9664 0.9651 0.9659 0.9639 0.9627
5 0.9529 0.9526 0.9501 0.9496 0.9480 0.9473 0.9446 0.9425
6 0.9529 0.9526 0.9501 0.9496 0.9480 0.9473 0.9446 0.9425
7 0.9529 0.9526 0.9501 0.9496 0.9480 0.9473 0.9190 0.9176
8 0.9529 0.9526 0.9501 0.9496 0.9480 0.9473 0.9117 0.9104
9 0.9025 0.9032 0.9038 0.9045 0.9051 0.9058 0.9045 0.9032
10 0.7220 0.7225 0.7231 0.7236 0.7241 0.7246 0.7236 0.7225
11 0.5776 0.5780 0.5785 0.5789 0.5793 0.5797 0.5789 0.5780
12 0.4332 0.4335 0.4338 0.4342 0.4345 0.4348 0.4342 0.4335
13 0.2888 0.2890 0.2892 0.2894 0.2896 0.2899 0.2894 0.2890
14 0.1444 0.1445 0.1446 0.1447 0.1448 0.1449 0.1447 0.1445
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
*Months not shown may be calculated by interpolation.
152
<PAGE> 153
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 48 49 50 51 52 53 54 55
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9809 0.9796 0.9786 0.9795 0.9779 0.9770 0.9763 0.9761
4 0.9619 0.9598 0.9577 0.9573 0.9563 0.9541 0.9523 0.9512
5 0.9418 0.9385 0.9354 0.9351 0.9330 0.9300 0.9268 0.9250
6 0.9365 0.9251 0.9137 0.9023 0.8910 0.8797 0.8684 0.8571
7 0.9163 0.9150 0.9101 0.8567 0.8032 0.7498 0.6963 0.6429
8 0.9091 0.9078 0.9029 0.8080 0.7132 0.6183 0.5235 0.4286
9 0.9019 0.9006 0.8993 0.7623 0.6253 0.4883 0.3513 0.2143
10 0.7215 0.7205 0.7194 0.5755 0.4316 0.2878 0.1439 0.0000
11 0.5772 0.5764 0.5755 0.4316 0.2876 0.1439 0.0000 0.0000
12 0.4329 0.4323 0.4317 0.2878 0.1439 0.0000 0.0000 0.0000
13 0.2886 0.2882 0.2878 0.1439 0.0000 0.0000 0.0000 0.0000
14 0.1443 0.1441 0.1439 0.0000 0.0000 0.0000 0.0000 0.0000
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 56 57 58 59 60 61 62 63
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9738 0.9731 0.9720 0.9707 0.9711 0.9700 0.9690 0.9678
4 0.9477 0.9460 0.9441 0.9417 0.9410 0.9389 0.9367 0.9341
5 0.9207 0.9192 0.9160 0.9128 0.9109 0.9078 0.9044 0.9006
6 0.8689 0.8811 0.8939 0.9071 0.9087 0.9039 0.8986 0.8937
7 0.6517 0.6608 0.6704 0.6803 0.6907 0.7015 0.7128 0.7247
8 0.4345 0.4406 0.4469 0.4536 0.4605 0.4677 0.4752 0.4831
9 0.2172 0.2203 0.2235 0.2268 0.2302 0.2338 0.2376 0.2416
10 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
11 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
12 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
13 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
14 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
153
<PAGE> 154
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 64 65 66 67 68 69 70 71
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9650 0.9638 0.9637 0.9612 0.9597 0.9573 0.9572 0.9559
4 0.9315 0.9277 0.9261 0.9224 0.9196 0.9158 0.9144 0.9129
5 0.8966 0.8916 0.8874 0.8836 0.8796 0.8745 0.8727 0.8700
6 0.8872 0.8823 0.8769 0.8719 0.8665 0.8612 0.8582 0.8554
7 0.7370 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500
8 0.4914 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000
9 0.2457 0.2500 0.2500 0.2500 0.2500 0.2500 0.2500 0.2500
10 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
11 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
12 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
13 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
14 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
*Months not shown may be calculated by interpolation.
154
<PAGE> 155
If the transaction occurs in the last month of
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 72 73 74 75 76 77 78 79
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9555 0.9532 0.9518 0.9504 0.9491 0.9464 0.9436 0.9422
4 0.9113 0.9078 0.9050 0.9021 0.8982 0.8939 0.8885 0.8856
5 0.8676 0.8623 0.8581 0.8526 0.8472 0.8404 0.8347 0.8301
6 0.8520 0.8441 0.8387 0.8317 0.8239 0.8170 0.8099 0.8054
7 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500
8 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000
9 0.2500 0.2500 0.2500 0.2500 0.2500 0.2500 0.2500 0.2500
10 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
11 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
12 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
13 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
14 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 80 81 82 83 84 85 86 87
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
2 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
3 0.9405 0.9388 0.9375 0.9362 0.9360 0.9345 0.9320 0.9303
4 0.8824 0.8806 0.8777 0.8762 0.8747 0.8705 0.8663 0.8608
5 0.8267 0.8235 0.8204 0.8176 0.8145 0.8079 0.8009 0.7899
6 0.8016 0.7971 0.7940 0.7897 0.7842 0.7749 0.7627 0.7451
7 0.7500 0.7500 0.7500 0.7500 0.7500 0.7405 0.7232 0.6964
8 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000
9 0.2500 0.2500 0.2500 0.2500 0.2500 0.2500 0.2500 0.2500
10 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
11 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
12 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
13 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
155
<PAGE> 156
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
14 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
156
<PAGE> 157
<TABLE>
<CAPTION>
POLICY ISSUE AGE
YEAR* 88 89 90 91 92 93 94 95
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.0000 1.0000 1.0000 0.0000 0.0000 0.0000 0.0000 0.0000
2 1.0000 1.0000 1.0000 0.0000 0.0000 0.0000 0.0000 0.0000
3 0.9261 0.9191 0.9115 0.0000 0.0000 0.0000 0.0000 0.0000
4 0.8510 0.8357 0.8165 0.0000 0.0000 0.0000 0.0000 0.0000
5 0.7732 0.7483 0.7136 0.0000 0.0000 0.0000 0.0000 0.0000
6 0.7192 0.6822 0.6308 0.0000 0.0000 0.0000 0.0000 0.0000
7 0.6597 0.6068 0.5399 0.0000 0.0000 0.0000 0.0000 0.0000
8 0.5000 0.5000 0.4439 0.0000 0.0000 0.0000 0.0000 0.0000
9 0.2500 0.2500 0.2500 0.0000 0.0000 0.0000 0.0000 0.0000
10 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
11 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
12 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
13 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
14 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
</TABLE>
*Months not shown may be calculated by interpolation.
157
<PAGE> 158
PART II
OTHER INFORMATION
Undertaking to File Reports
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940.
The Manufacturers Life Insurance Company of America hereby represents that the
fees and charges deducted under the contracts issued pursuant to this
registration statement, as amended from time to time, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company.
158
<PAGE> 159
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The Prospectus, consisting of _____ pages;
Undertaking required by Section 15(d) of the Securities Exchange Act of 1934;
The Undertaking pursuant to Rule 484;
Representations pursuant to Rule 6e-3(T);
The signatures;
Written consents of the following persons:
Jones & Blouch L.L.P.
Ernst & Young LLP
James D. Gallagher
John R. Ostler
The following exhibits are filed as part of this Registration Statement:
1. Copies of all exhibits required by paragraph A of the instructions as to
exhibits in Form N-8B-2 are set forth below under designations based on
such instructions:
A(1) Resolutions of Board of Directors of The Manufacturers Life
Insurance Company of America establishing Separate Account
Three. Previously filed as Exhibit A(1) to the Registration
Statement on Form S-6 filed by The Manufacturers Life
Insurance Company of America on September 23, 1992 (file No.
33-52310).
A(3)(a)(i) Distribution Agreement between The Manufacturers Life
Insurance Company of America and ManEquity, Inc. Previously
filed as Exhibit A(3)(a)(i) to the Registration Statement on
Form S-6 filed by The Manufacturers Life Insurance Company of
America on September 23, 1992 (file No. 33-52310).
A(3)(a)(ii) Amendment to Distribution Agreement. Previously filed as
Exhibit A(3)(a)(ii) to the Registration Statement on Form S-6
filed by The Manufacturers Life Insurance Company of America
on September 23, 1992 (file No. 33-52310).
159
<PAGE> 160
A(3)(b)(i) Specimen agreement between ManEquity, Inc. and registered
representatives. Previously filed as Exhibit A(3)(b)(i) to
the Registration Statement on Form S-6 filed by The
Manufacturers Life Insurance Company of America on September
23, 1992 (file No. 33-52310).
A(3)(b)(ii) Specimen agreement between ManEquity, Inc. and dealers.
Previously filed as Exhibit A(3)(b)(ii) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-6
filed by The Manufacturers Life Insurance Company of America
on June 21, 1993 (file No. 33-52310).
A(3)(c) Schedule of Sales Commissions. Previously filed as Exhibit
A(3)(c) to Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6 filed by The Manufacturers Life
Insurance Company of America on June 21, 1993 (file No.
33-52310).
A(5)(a) Form of Flexible Premium Variable Life Insurance Policy.
Previously filed as Exhibit A(5)(a) to the Pre-Effective
Amendment No. 2 to the Registration Statement on Form S-6
filed by The Manufacturers Life Insurance Company of America
on September 10, 1993 (file No. 33-52310).
A(6)(a) Articles of Incorporation of The Manufacturers Life Insurance
Company of America. Previously filed as Exhibit (A)(6)(a) to
Post-Effective Amendment No. 7 on Form S-6 filed by The
Manufacturers Life Insurance Company of America on April 26,
1996 (file No. 33-52310).**
A(6)(b) By-Laws of The Manufacturers Life Insurance Company of
America. Previously filed as Exhibit (A)(6)(b) to
Post-Effective Amendment No. 7 on Form S-6 filed by The
Manufacturers Life Insurance Company of America on April 26,
1996 (file No. 33-52310).**
A(8)(a) Service Agreement between The Manufacturers Life Insurance
Company of America and The Manufacturers Life Insurance
Company. Previously filed as Exhibit A(8)(a) to the
Registration Statement on Form S-6 filed by The Manufacturers
Life Insurance Company of America on September 23, 1992 (file
No. 33-52310).
** Filed electronically
160
<PAGE> 161
A(8)(a)(i) Amendment to Service Agreement (re redomestication).
Previously filed as Exhibit A(3)(a)(i) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-6
filed by The Manufacturers Life Insurance Company of America
on June 21, 1993 (file No. 33-52310).
A(8)(a)(ii) Amendment to Service Agreement (re extension of term).
Previously filed as Exhibit A(8)(a)(ii) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-6
filed by The Manufacturers Life Insurance Company of America
on June 21, 1993 (file No. 33-52310).
A(8)(a)(iii) Amendment to Service Agreement (re Miscellaneous). Previously
filed as Exhibit A(8)(a)(iii) to Pre-Effective Amendment No. 2
to the Registration Statement on Form S-6 filed by The
Manufacturers Life Insurance Company of America on September
10, 1993 (file No. 33-52310).
A(8)(b) Stoploss Reinsurance Agreement between The Manufacturers Life
Insurance Company of America and The Manufacturers Life
Insurance Company. Previously filed as Exhibit A(8)(b) to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form S-6 filed by The Manufacturers Life Insurance Company of
America on June 21, 1993 (file No. 33-52310).
A(8)(c) Service Agreement between The Manufacturers Life Insurance
Company and ManEquity, Inc. dated January 2, 1991 as amended
March 1, 1994. Previously filed as Exhibit A(8)(c) to
Post-Effective Amendment No. 2 to the Registration Statement
on Form S-6 filed by The Manufacturers Life Insurance Company
of America on April 26, 1994 (file No. 33-52310).
161
<PAGE> 162
A(10) Form of Application for Flexible Premium Variable Life
Insurance Policy. Previously filed as Exhibit (A)(10) to
Post-Effective Amendment No. 7 on Form S-6 filed by The
Manufacturers Life Insurance Company of America on April 26,
1996 (file No. 33-52310).**
A(10)(a) Form of Application Supplement for Flexible Premium Variable
Life Insurance Policy.**
2. See Exhibit A(5).
3. Opinion and consent of James D. Gallagher, Esq., General Counsel of The
Manufacturers Life Insurance Company of America.**
4. No financial statements are omitted from the prospectus pursuant to
instruction 1(b) or (c) of Part I.
5. Not applicable.
6. Opinion and consent of John R. Ostler, Vice-President, Treasurer and
Chief Actuary of The Manufacturers Life Insurance Company of America.**
7. Form of notice of withdrawal right ("free look" notice). Previously
filed as Exhibit 7 to the Registration Statement on Form S-6 filed by The
Manufacturers Life Insurance Company of America on September 23, 1992
(file No. 33-52310).
8(a). Form of notice of right of surrender while sales charge limitation
applies (initial purchase). Previously filed as Exhibit 8(a) to the
Registration Statement on Form S-6 filed by The Manufacturers Life
Insurance Company of America on September 23, 1992 (file No. 33-52310).
8(b). Form of notice of cancellation right (face amount increase). Previously
filed as Exhibit 8(b) to the Registration Statement on Form S-6 filed by
The Manufacturers Life Insurance Company of America on September 23, 1992
(file No. 33-52310).
8(c). Form of notice of right of surrender while sales charge limitation
applies (default). Previously filed as Exhibit 8(c) to the Registration
Statement on Form S-6 filed by The Manufacturers Life Insurance Company of
America on September 23, 1992 (file No. 33-52310).
** Filed electronically
162
<PAGE> 163
9. Memorandum Regarding Issuance, Face Amount Increase, Redemption
and Transfer Procedures for the Policies. Previously filed as
Exhibit 9 to Post Effective Amendment No. 8 on form S-6 filed by
the Manufacturers Life Insurance Company of America on December 1, 1996
(file no. 33-52310).**
10. Consent of Ernst & Young LLP.
11. Consent of Jones & Blouch L.L.P.
27. Financial Data Schedules.
** Filed electronically.
163
<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the registrant,
SEPARATE ACCOUNT THREE OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA,
and the depositor, THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA, certify
that the registrant meets all of the requirements for effectiveness of this
amended registration statement pursuant to Rule 485(b) under the Securities Act
of 1933 and have duly caused this amendment to the registration statement to be
signed on their behalf by the undersigned thereunto duly authorized, and the
seal of the depositor to be hereunto affixed and attested, all in the City of
Toronto, Province of Ontario, Canada, on the 9th day of December, 1996.
<TABLE>
<S> <C>
[SEAL] SEPARATE ACCOUNT THREE OF THE
MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
----------------------------------------
(Registrant)
By: THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
------------------------------------
(Depositor)
By: /s/ Donald A. Guloien
------------------------------------
DONALD A. GULOIEN
President
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Donald A. Guloien
------------------------------------
DONALD A. GULOIEN
President
</TABLE>
Attest
/s/ Sheri L. Kocen
- -----------------------
(0)SA3-486(b)(HORIZON)
164
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
----------- ------- ------
<S> <C> <C>
/s/ Donald A. Guloien President and Director December 9, 1996
---------------------- ----------------
DONALD A. GULOIEN (Principal Executive Officer)
---------------------- Director ----------------
SANDRA M. COTTER
/s/ James D. Gallagher Director, Secretary December 9, 1996
---------------------- ----------------
JAMES D. GALLAGHER
/s/ Bruce Gordon Director December 9, 1996
---------------------- ----------------
BRUCE GORDON
---------------------- Director ----------------
THEODORE KILKUSKIE, JR.
/s/ Joseph J. Pietroski Director December 9, 1996
----------------------- ----------------
JOSEPH J. PIETROSKI
/s/ John D. Richardson Director and Chairman December 9, 1996
---------------------- ----------------
JOHN D. RICHARDSON
/s/ Douglas H. Myers Vice President, Finance December 9, 1996
---------------------- ----------------
DOUGLAS H. MYERS (Principal Financial Officer)
</TABLE>
165
<PAGE> 166
<TABLE>
<CAPTION>
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ----------- ------------------
<S> <C> <C>
27. Financial Data Schedules.
99.A(1) Resolutions of Board Previously filed as
of Directors of The Exhibit A(1) to the
Manufacturers Life Registration Statement
Insurance Company of on Form S-6 filed by
America establishing The Manufacturers Life
Separate Account Three Insurance Company of
America on September 23,
1992 (file No. 33-52310).
99.A(3)(a)(i) Distribution Agreement Previously filed as
between The Manufacturers Exhibit A(3)(a)(i) to
Life Insurance Company of the Registration State-
America and ManEquity, Inc. ment on Form S-6 filed
by The Manufacturers
Life Insurance Company
of America on September
23, 1992 (file No. 33-52310).
99.A(3)(a)(ii) Amendment to Distribution Previously filed as
Agreement Exhibit A(3)(a)(ii) to
the Registration State-
ment on Form S-6 filed
by The Manufacturers
Life Insurance Company
of America on September 23,
1992 (file No. 33-52310).
99.A(3)(b)(i) Specimen agreement Previously filed as
between ManEquity, Inc. Exhibit A(3)(b)(i) to
and registered repre- the Registration
sentatives. Statement on Form S-6
filed by The Manufacturers
Life Insurance Company of
America on September 23,
1992 (file No. 33-52310).
99.A(3)(b)(ii) Specimen agreement Previously filed as
between ManEquity, Inc. Exhibit A(3)(b)(ii) to
and dealers. Pre-Effective Amendment
No. 1 to the Registration
Statement on Form S-6 filed
by The Manufacturers Life
Insurance Company of America
on June 21, 1993 (file No.
33-52310).
</TABLE>
166
<PAGE> 167
<TABLE>
<CAPTION>
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ----------- ------------------
<S> <C> <C>
99.A(3)(c) Schedule of Sales Previously filed as
Commissions. Exhibit A(3)(b)(ii) to
Pre-Effective Amendment
No. 1 to the Registra-
tion Statement on Form
S-6 filed by The Manu-
facturers Life Insurance
Company of America on
June 21, 1993 (file
No. 33-52310).
99.A(5)(a) Form of Flexible Premium Previously filed as
Variable Life Insurance Exhibit A(5)(a) to Pre-
Policy. Effective Amendment No.2
to the Registration
Statement on Form S-6
filed by The Manufacturers
Life Insurance Company of
America on September 10,
1993 (file No. 33-52310).
99.A(6)(a) Articles of Incor- Previously filed as
poration of The Manu- Exhibit A(6)(a) to Post-
facturers Life Insurance Effective Amendment No. 7
Company of America.** on Form S-6 filed by The
Manufacturers Life Insurance
Company of America on April 26,
1996 (file No. 33-52310)
99.A(6)(b) By-Laws of The Manu- Previously filed as
facturers Life Insurance Exhibit A(6)b) to Post-
Company of America.** Effective Amendment No. 7 on
Form S-6 filed by The
Manufacturers Life Insurance
Company of America on April 26,
1996 (file No. 33-52310).
</TABLE>
** Filed electronically
167
<PAGE> 168
<TABLE>
<CAPTION>
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ----------- ------------------
<S> <C> <C>
99.A(8)(a) Service Agreement between Previously filed as
The Manufacturers Life Exhibit A(8)(a) to the
Insurance Company of Registration Statement
America and The Manu- on Form S-6 filed by The
facturers Life Insurance Manufacturers Life
Company. Insurance Company of
America on September 23,
1992 (file No.
33-52310).
99.A(8)(a)(i) Amendment to Service Previously filed as
Agreement (re Exhibit A(8)(a)(i) to
redomestication). Pre-Effective Amendment
No. 1 to the Registra-
tion Statement on Form
S-6 filed by The Manu-
facturers Life Insurance
Company America on June
21, 1993 (file No.
33-52310).
99.A(8)(a)(ii) Amendment to Service Previously filed as
Agreement (re extension Exhibit A(8)(a)(ii) to
of term). Pre-Effective Amendment
No. 1 to the Registra-
tion Statement on Form
S-6 filed by The Manu-
facturers Life Insurance
Company America on June 21,
1993 (file No. 33-52310).
99.A(8)(a)(iii) Amendment to Service Previously filed as
Agreement (re miscellaneous). Exhibit A(8)(a)(iii) to
Pre-Effective Amendment
No. 2 to the Registra-
tion Statement on Form
S-6 filed by The Manu-
facturers Life Insurance
Company America on
September 21, 1993
(file No. 33-52310).
</TABLE>
168
<PAGE> 169
<TABLE>
<CAPTION>
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ----------- ------------------
<S> <C> <C>
99.A(8)(c) Service Agreement Previously filed as
between The Manufacturers Exhibit A(8)(c) to Post-
Life Insurance Company Effective Amendment No.3
and ManEquity, Inc. dated to the Registration
January 2, 1991 as amended Statement on Form S-6
March 1, 1994. filed by The Manufac-
turers Life Insurance
Company of America on
April 26, 1994
(file No. 52310).
99.A(8)(b) Stoploss Reinsurance Previously filed as
Agreement between The Exhibit A(8)(b) to Pre-
Manufacturers Life Effective Amendment
Insurance Company of No. 1 to the Registra-
America and The Manu- tion Statement on Form
facturers Life Insurance S-6 filed by The Manu-
Company. facturers Life Insurance
Company of America on
June 21, 1993 (file No.
33-52310).
99.A(10) Form of Application for Previously filed as
Flexible Premium Variable Exhibit A(10) to Pre-
Life Insurance Policy. Effective Amendment No.1
to the Registration
Statement on Form S-6
filed by The Manufacturers
Life Insurance Company
America on June 21, 1993
(file No. 33-52310).
99.A(10)(a) Form of Application
Supplement for Flexible
Premium Variable Life
Insurance Policy.**
</TABLE>
** Filed electronically
169
<PAGE> 170
<TABLE>
<CAPTION>
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ---------- ----------- ------------------
<S> <C> <C>
99.2. See Exhibit A(5).
99.3. Opinion and consent of
James D. Gallagher, Esq.,
General Counsel of The
Manufacturers Life Insurance
Company of America.
99.4. No financial statements
are omitted from the
prospectus pursuant to
instruction 1(b) or (c)
of Part I.
99.5. Not applicable.
99.6. Opinion and consent of
John R. Ostler, Vice-
President, Treasurer and
Chief Actuary of The Manu-
facturers Life Insurance
Company of America.**
99.7. Form of notice of withdrawal Previously filed as
right ("free look" notice). Exhibit 7 to the
Registration Statement
on Form S-6 filed by The
Manufacturers Life
Insurance Company of
America on September 23,
1992 (file No.33-52310).
</TABLE>
** Filed electronically
170
<PAGE> 171
<TABLE>
<CAPTION>
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ----------- -------------------
<S> <C> <C>
99.8(a). Form of notice of right of Previously filed as
surrender while sales charge Exhibit 8(a) to the
limitation applies (initial Registration Statement
purchase). on Form S-6 filed by The
Manufacturers Life
Insurance Company of
America on September 23,
1992 (file No.33-52310)
99.8(b). Form of notice of Previously filed as
cancellation right Exhibit 8(b) to the
(face amount increase). Registration Statement
on Form S-6 filed by The
Manufacturers Life
Insurance Company of
America on September 23,
1992 (file No.33-52310)
99.8(c). Form of notice of right Previously filed as
of surrender while sales Exhibit 8(c) to the
charge limitation applies Registration Statement
(default). on Form S-6 filed by The
Manufacturers Life
Insurance Company of
America on September 23,
1992 (file No.33-52310)
99.9. Memorandum Regarding Previously filed as
Issuance, Face Amount Exhibit 9 to Post
Increase, Redemption Effective Amendment No.
and Transfer Procedures 8 on Form S-6 filed by
for the Policies.** The Manufactureres Life
Insurance Company of
America on November 1,
1996 (file No.33-55310).
99.C1 Consent of Ernst &
Young LLP.
99.C6 Consent of Jones &
Blouch L.L.P.
</TABLE>
** Filed electronically
171
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> EMERGING GROWTH EQUITY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 48,423,350
<INVESTMENTS-AT-VALUE> 47,939,490
<RECEIVABLES> 46,495
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 47,985,985
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,522,848
<SHARES-COMMON-STOCK> 1,351,174
<SHARES-COMMON-PRIOR> 994,478
<ACCUMULATED-NII-CURRENT> 6,099,584
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 847,413
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (483,860)
<NET-ASSETS> 47,985,985
<DIVIDEND-INCOME> 4,762,788
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 4,762,788
<REALIZED-GAINS-CURRENT> 513,511
<APPREC-INCREASE-CURRENT> (5,278,771)
<NET-CHANGE-FROM-OPS> (2,472)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 356,696
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13,139,462
<ACCUMULATED-NII-PRIOR> 1,336,796
<ACCUMULATED-GAINS-PRIOR> 333,902
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> COMMON STOCK
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 20,913,546
<INVESTMENTS-AT-VALUE> 25,119,781
<RECEIVABLES> 35,692
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,155,473
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,129,170
<SHARES-COMMON-STOCK> 1,004,921
<SHARES-COMMON-PRIOR> 697,983
<ACCUMULATED-NII-CURRENT> 599,481
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 220,587
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,206,235
<NET-ASSETS> 25,155,473
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 255,191
<REALIZED-GAINS-CURRENT> 122,022
<APPREC-INCREASE-CURRENT> 1,910,294
<NET-CHANGE-FROM-OPS> 2,287,507
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 306,938
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,492,725
<ACCUMULATED-NII-PRIOR> 344,290
<ACCUMULATED-GAINS-PRIOR> 98,566
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> REAL ESTATE
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 12,145,299
<INVESTMENTS-AT-VALUE> 13,516,354
<RECEIVABLES> 2,876
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,519,230
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,043,303
<SHARES-COMMON-STOCK> 488,284
<SHARES-COMMON-PRIOR> 386,785
<ACCUMULATED-NII-CURRENT> 1,063,188
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 41,684
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,371,055
<NET-ASSETS> 13,519,230
<DIVIDEND-INCOME> 726,499
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 726,499
<REALIZED-GAINS-CURRENT> 20,070
<APPREC-INCREASE-CURRENT> 623,021
<NET-CHANGE-FROM-OPS> 1,369,590
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 101,499
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,961,780
<ACCUMULATED-NII-PRIOR> 336,689
<ACCUMULATED-GAINS-PRIOR> 21,614
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> BALANCED ASSETS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 27,368,879
<INVESTMENTS-AT-VALUE> 30,351,786
<RECEIVABLES> 27,102
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,378,888
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,717,445
<SHARES-COMMON-STOCK> 1,423,606
<SHARES-COMMON-PRIOR> 1,147,507
<ACCUMULATED-NII-CURRENT> 2,771,169
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 92,633
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,982,907
<NET-ASSETS> 30,378,888
<DIVIDEND-INCOME> 1,124,361
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 1,124,361
<REALIZED-GAINS-CURRENT> 144,736
<APPREC-INCREASE-CURRENT> 289,531
<NET-CHANGE-FROM-OPS> 1,558,628
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 276,099
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,245,150
<ACCUMULATED-NII-PRIOR> 1,646,808
<ACCUMULATED-GAINS-PRIOR> (237,369)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> CAPITAL GROWTH BOND
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 13,500,879
<INVESTMENTS-AT-VALUE> 13,710,082
<RECEIVABLES> (27,540)
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,682,542
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,125,058
<SHARES-COMMON-STOCK> 724,147
<SHARES-COMMON-PRIOR> 550,981
<ACCUMULATED-NII-CURRENT> 1,503,383
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (155,102)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 209,203
<NET-ASSETS> 13,682,542
<DIVIDEND-INCOME> 498
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 498
<REALIZED-GAINS-CURRENT> (72,247)
<APPREC-INCREASE-CURRENT> 55,405
<NET-CHANGE-FROM-OPS> (16,344)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 173,166
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,208,390
<ACCUMULATED-NII-PRIOR> 1,502,885
<ACCUMULATED-GAINS-PRIOR> (82,855)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 17,517,647
<INVESTMENTS-AT-VALUE> 16,913,522
<RECEIVABLES> (2,213)
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,911,309
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,508,365
<SHARES-COMMON-STOCK> 1,033,118
<SHARES-COMMON-PRIOR> 825,436
<ACCUMULATED-NII-CURRENT> 1,042,563
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 964,506
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (604,125)
<NET-ASSETS> 16,911,309
<DIVIDEND-INCOME> 676,573
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 676,573
<REALIZED-GAINS-CURRENT> 711,163
<APPREC-INCREASE-CURRENT> (837,845)
<NET-CHANGE-FROM-OPS> 549,891
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 207,682
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,885,922
<ACCUMULATED-NII-PRIOR> 365,990
<ACCUMULATED-GAINS-PRIOR> 253,343
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 7,432,197
<INVESTMENTS-AT-VALUE> 7,754,426
<RECEIVABLES> 25,624
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,780,050
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,337,735
<SHARES-COMMON-STOCK> 676,732
<SHARES-COMMON-PRIOR> 233,582
<ACCUMULATED-NII-CURRENT> 77,425
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 42,661
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 322,229
<NET-ASSETS> 7,780,050
<DIVIDEND-INCOME> 17,405
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 17,405
<REALIZED-GAINS-CURRENT> 32,766
<APPREC-INCREASE-CURRENT> 222,452
<NET-CHANGE-FROM-OPS> 272,623
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 443,150
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,245,682
<ACCUMULATED-NII-PRIOR> 60,020
<ACCUMULATED-GAINS-PRIOR> 9,895
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> PACIFIC RIM
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 4,736,296
<INVESTMENTS-AT-VALUE> 4,974,177
<RECEIVABLES> 3,627
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,977,804
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,652,222
<SHARES-COMMON-STOCK> 435,816
<SHARES-COMMON-PRIOR> 158,081
<ACCUMULATED-NII-CURRENT> 25,722
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 61,979
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 237,881
<NET-ASSETS> 4,977,804
<DIVIDEND-INCOME> 5,570
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 5,570
<REALIZED-GAINS-CURRENT> 55,454
<APPREC-INCREASE-CURRENT> 149,025
<NET-CHANGE-FROM-OPS> 210,049
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 277,735
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,310,047
<ACCUMULATED-NII-PRIOR> 20,152
<ACCUMULATED-GAINS-PRIOR> 6,525
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> EQUITY INDEX
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 2,486,917
<INVESTMENTS-AT-VALUE> 2,558,579
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,656,942
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,581,389
<SHARES-COMMON-STOCK> 249,872
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,891
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 71,662
<NET-ASSETS> 2,656,942
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 3,891
<APPREC-INCREASE-CURRENT> 71,662
<NET-CHANGE-FROM-OPS> 75,553
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 249,872
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,656,942
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> NASL EQUITY
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 4,973,862
<INVESTMENTS-AT-VALUE> 5,115,939
<RECEIVABLES> 1,902
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,117,841
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,949,823
<SHARES-COMMON-STOCK> 476,513
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 26,181
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (240)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 142,077
<NET-ASSETS> 5,117,841
<DIVIDEND-INCOME> 26,181
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 26,181
<REALIZED-GAINS-CURRENT> (240)
<APPREC-INCREASE-CURRENT> 142,077
<NET-CHANGE-FROM-OPS> 168,018
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 476,513
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,117,841
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> NASL VALUE EQUITY
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 3,180,788
<INVESTMENTS-AT-VALUE> 3,296,739
<RECEIVABLES> 11,890
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,308,629
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,161,350
<SHARES-COMMON-STOCK> 309,524
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,790
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22,538
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 115,951
<NET-ASSETS> 3,308,629
<DIVIDEND-INCOME> 8,790
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 8,790
<REALIZED-GAINS-CURRENT> 22,538
<APPREC-INCREASE-CURRENT> 115,951
<NET-CHANGE-FROM-OPS> 147,279
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 309,524
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,308,629
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> NASL GROWTH AND INCOME
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 3,255,123
<INVESTMENTS-AT-VALUE> 3,335,078
<RECEIVABLES> 644
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,335,722
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,228,848
<SHARES-COMMON-STOCK> 308,161
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,952
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 24,967
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 79,955
<NET-ASSETS> 3,335,722
<DIVIDEND-INCOME> 1,952
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 1,952
<REALIZED-GAINS-CURRENT> 24,967
<APPREC-INCREASE-CURRENT> 79,955
<NET-CHANGE-FROM-OPS> 106,874
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 308,161
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,335,722
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> NASL U.S. GOVERNMENT SECURITIES
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 1,210,093
<INVESTMENTS-AT-VALUE> 1,209,333
<RECEIVABLES> (290)
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,209,043
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,186,465
<SHARES-COMMON-STOCK> 121,159
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 26,995
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,657)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (760)
<NET-ASSETS> 1,209,043
<DIVIDEND-INCOME> 26,995
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 26,995
<REALIZED-GAINS-CURRENT> (3,657)
<APPREC-INCREASE-CURRENT> (760)
<NET-CHANGE-FROM-OPS> 22,578
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 121,159
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,209,043
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> NASL CONSERVATIVE ASSET ALLOCATION
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 263,758
<INVESTMENTS-AT-VALUE> 253,814
<RECEIVABLES> (23)
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 253,791
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 248,351
<SHARES-COMMON-STOCK> 24,935
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,660
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,724
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,944)
<NET-ASSETS> 253,791
<DIVIDEND-INCOME> 8,660
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 8,660
<REALIZED-GAINS-CURRENT> 6,724
<APPREC-INCREASE-CURRENT> (9,944)
<NET-CHANGE-FROM-OPS> 5,440
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24,935
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 253,791
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> NASL MODERATE ASSET ALLOCATION
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 363,308
<INVESTMENTS-AT-VALUE> 357,740
<RECEIVABLES> 185
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 357,925
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 347,205
<SHARES-COMMON-STOCK> 34,838
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,105
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,183
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,568)
<NET-ASSETS> 357,925
<DIVIDEND-INCOME> 2,105
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 2,105
<REALIZED-GAINS-CURRENT> 14,183
<APPREC-INCREASE-CURRENT> (5,568)
<NET-CHANGE-FROM-OPS> 10,720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,838
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 357,925
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> NASL AGGRESSIVE ASSET ALLOCATION
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 558,510
<INVESTMENTS-AT-VALUE> 568,803
<RECEIVABLES> 1,075
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 569,878
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 548,202
<SHARES-COMMON-STOCK> 54,768
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 11,072
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 311
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,293
<NET-ASSETS> 569,878
<DIVIDEND-INCOME> 11,072
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 11,072
<REALIZED-GAINS-CURRENT> 311
<APPREC-INCREASE-CURRENT> 10,293
<NET-CHANGE-FROM-OPS> 21,676
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,768
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 569,878
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
Application Supplement for
Investment Allocation and Investor Suitability
The Manufacturers Life Insurance Company of America
(hereinafter referred to as The Company)
Required with all Applications for Flexible Premium Variable Life Insurance.
Please print and use black ink. Any changes must be initialled by the Owner.
A signature is required on the reverse side. This Application Supplement is
deemed to be part of Application No.
Investment Allocation of Net Premiums
Choose one or more of the accounts listed below by indicating percentages of
net premium. There are no minimum percentages, but allocation percentages must
be whole numbers. Total must be 100%.
<TABLE>
<S> <C>
VARIABLE ACCOUNTS
AGGRESSIVE GROWTH PORTFOLIOS:
Pacific Rim Emerging Markets Trust %
International Small Cap Trust %
Emerging Growth Trust %
International Stock Trust %
EQUITY PORTFOLIOS:
Equity Trust %
Quantitative Equity Trust %
Equity Index Trust %
Blue Chip Growth Trust %
Growth and Income Trust %
Equity-Income Trust %
Real Estate Securities Trust %
BALANCED PORTFOLIOS:
Balanced Trust %
Aggressive Asset Allocation Trust:
Aggressive %
Moderate %
Conservative %
BOND PORTFOLIOS:
Capital Growth Bond Trust %
U.S. Government Securities Trust %
MONEY MARKET PORTFOLIOS:
Money Market Trust %
GUARANTEED ACCOUNT
Guaranteed Interest Account %
</TABLE>
(See Over)
Manulife Financial and the block design are registered service marks of The
Manufacturers Life Insurance Company and are used by it and its subsidiaries.
Form NB0031UA (0197)
<PAGE> 2
Investor Suitability
These questions apply to the OWNER of the policy.
All questions must be answered.
1. Have you received a current prospectus for the policy applied for? Y/N
Date prospectus Date of supplement
2. DO YOU UNDERSTAND THAT UNDER THE POLICY APPLIED FOR:
(a) The amount of the insurance benefits, or the duration of the
insurance coverage, or both, may be variable or fixed? Y/N
(b) The amount of the insurance benefits, the duration of the insurance
coverage, and your policy value, may increase or decrease depending on the
investment experience of the chosen investment accounts and are not
guaranteed as to dollar amount? Y/N
3. With that in mind, is the policy in accord with your insurance
objectives and your anticipated financial needs? Y/N
4. PURPOSE OF INSURANCE
<TABLE>
<S> <C> <C> <C>
PERSONAL: Estate creation Estate conservation
BUSINESS: Buy-sell Deferred compensation Keyman
Pension trust Other:
</TABLE>
5. ANNUAL INCOME OF OWNER
<TABLE>
<S> <C> <C>
$ 250,000 plus $ 35,000 to $ 49,999 $ 15,000 to $ 19,999
$ 100,000 to $ 249,999 $ 25,000 to $ 34,999 $ 10,000 to $ 14,999
$ 50,000 to $ 99,999 $ 20,000 to $ 24,999 under $ 10,000
</TABLE>
6. NET WORTH OF OWNER
<TABLE>
<S> <C>
$ 1,000,000 plus $ 100,000 to $ 249,999
$ 500,000 to $ 999,999 Under $ 100,000
$ 250,000 to $ 499,999
</TABLE>
If answers are not given to the above questions on income and net worth,
The Company will assume that the Owner has carefully considered the
investment objectives of the chosen Investment Accounts and has decided
that those objectives are suitable for his/her situation(s).
I decline to provide answers to questions related to income and net worth.
Signatures
Signed at this day of 19
(X) Witness (Registered Representative)
(X) Signature of Owner
(X) Name of Registered Representative (PRINT NAME)
Form NB0031UA (0197)
<PAGE> 1
The Manufacturers Life Insurance Company of America
500 North Woodward Avenue
Bloomfield Hills, Michigan 48304
Re: Separate Account Three - Venture VUL (fka Horizon)
Dear Sirs:
In my capacity as General Counsel of The Manufacturers Life Insurance
Company of America ("Manufacturers Life of America" or the "Company"), I
am familiar with the establishment of Separate Account Three of
Manufacturers Life of America (the "Separate Account"), a separate
account initially established by Manufacturers Life of America under
Title 31, Chapter 2, Section 406.2 of the Pennsylvania Code and currently
being operated under Michigan law further to Manufacturers Life of
America's redomestication to Michigan in 1992. I am also familiar with
the registration statement on Form S-6 filed by Manufacturers Life of
America and the Separate Account under the Securities Act of 1933 (the
"Registration Statement") with respect to Flexible Premium Variable Life
Insurance Policies (the "Policies").
I have made such examination of law and reviewed such records and
documents as in my judgment are necessary or appropriate to enable me to
render the opinion expressed below. Based on the foregoing, I am of the
following opinion:
1. In the first instance Manufacturers Life of America was duly
organized under the laws of the Commonwealth of Pennsylvania and on
December 16, 1992, the Company was duly redomesticated under the
laws of the State of Michigan. The Company is a validly existing
corporation.
2. The Separate Account is a separate account of Manufacturers Life of
America duly created under Pennsylvania law initially and currently
validly existing pursuant to Michigan law.
3. The portion of the assets to be held in the Separate Account equal
to the reserves and other liabilities under the Policies is not
chargeable with liabilities arising out of any other business
Manufacturers Life of America may conduct.
(ss#7169-Exhibit for Horizon)
<PAGE> 2
- 2 -
4. The Policies, when issued in accordance with the Registration
Statement and upon compliance with applicable local law, will be
legally issued and binding obligations of Manufacturers Life of
America in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the prospectuses contained in the Registration Statement.
Very truly yours,
James D. Gallagher
Secretary and General Counsel
<PAGE> 1
The Manufacturers Life Insurance
Company of America
500 N. Woodward Avenue
Suite 250
Bloomfield Hills Michigan 48304
U.S.A.
Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 9 to Registration Statement No. 33-52310 on Form S-6
("Registration Statement") which covers premiums expected to be received
under Flexible Premium Variable Life Insurance Policies ("Policies") to
be offered by The Manufacturers Life Insurance Company of America
("Company"). The prospectus included in the Registration Statement
describes Policies which will be offered by the Company in each State
where they have been approved by appropriate State insurance authorities.
The Policy form was prepared under my direction, and I am familiar with
the amended Registration Statement and Exhibits thereto. In my opinion:
(l) The table of corridor percentages shown under the caption "Death
Benefit Options" is consistent with the Policy's provisions.
(2) The illustrations of death benefits based on Policy Value multiplied
by corridor percentage shown under the caption "Death Benefit
Options", based on the assumptions stated in the illustrations, are
consistent with the provisions of the Policy.
(3) The illustration of Modified Policy Debt shown in the second
paragraph under the caption "Policy Loans", based on the assumptions
stated in the illustration, is consistent with the Policy's
provisions.
(4) The illustration of an application of the loan tier amount shown
under the sub-caption "Interest Credited to the Loan Account" of the
caption "Policy Loans", based on the assumptions stated in the
illustration, is consistent with the provisions of the Policy.
(5) The Loan Account illustration shown as a sub-caption under the
caption "Policy Loans", based on the assumption stated in the
illustration, is consistent with the Policy's provisions.
<PAGE> 2
- 2 -
(6) The table under the sub-caption "Deferred Underwriting Charge" of the
caption "Surrender Charges" showing, on an annual basis, the
surrender charge applied to the Policy five years or more after
issuance of the Policy or a face amount increase, is consistent with
the provisions of the Policy.
(7) The two illustrations of the operation of the maximum sales charge
shown under the sub-caption "Sales Charge Limitation" of the caption
"Surrender Charges", based on the assumptions stated in the
illustration, are consistent with the Policy's sales charge
structure.
(8) The illustrations of Policy Values, Cash Surrender Values, and Death
Benefits for the Policy shown in the Appendix under the caption
"Sample Illustrations Of Policy Values, Cash Surrender Values and
Death Benefits", based on the assumptions stated in the
illustrations, are consistent with the provisions of the Policy. The
rate structure of the Policy has not been designed so as to make the
relationship between premiums and benefits, as shown in these
illustrations, appear to be correspondingly more favorable to a
prospective purchaser of the Policy for male ages 35 and 55, than to
prospective purchasers of the Policy for females or males at other
ages.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
Prospectus.
Very truly yours,
John R. Ostler
Vice President, Treasurer and Chief Actuary
<PAGE> 1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 2, 1996 accompanying the financial
statements of The Manufacturers Life Insurance Company of America and to the
use of our report dated February 2, 1996 accompanying the financial statements
of Separate Account Three of The Manufacturers Life Insurance Company of
America, in post-effective amendment No. 9 to the Registration Statement No.
33-52310 on Form S-6 and related prospectus of Separate Account Three of The
Manufacturers Life Insurance Company of America.
Ernst & Young LLP
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
December 23, 1996
<PAGE> 1
Jones & Blouch L.L.P.
1025 THOMAS JEFFERSON STREET, N.W.
WASHINGTON, D.C. 20007-0805
(202) 223-3500
December 20, 1996
The Board of Directors
The Manufacturers Life Insurance
Company of America
500 N. Woodward Avenue
Bloomfield Hills, MI 48304
Dear Sirs:
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the prospectus contained in post-effective amendment No. 9 to the
registration statement on Form S-6 of Separate Account Three of The
Manufacturers Life Insurance company of America, File No. 33-52310, to be filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933.
Very truly yours,
Jones & Blouch L.L.P.
Jones & Blouch L.L.P.
