<PAGE> 1
As filed with the Securities and Exchange Commission on October 29, 1998.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SEPARATE ACCOUNT THREE OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
(Exact name of Registrant)
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
Vice President, Secretary
and General Counsel
The Manufacturers Life Insurance Company
of America
73 Tremont Street
Boston, MA 02108
(Name and Address of Agent for Service)
Copy to:
J. Sumner Jones, Esq.
Jones & Blouch L.L.P.
1025 Thomas Jefferson Street, NW
Washington, DC 20007
Title of Securities Being Registered: Variable Life Insurance Contracts
Approximate date of commencement of proposed public offering: As soon after the
effective date of this Registration Statement as is practicable.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
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 (Separate Account
Three)
2 Cover Page; General Information About Manufacturers (Manufacturers
Life of America)
3 *
4 Other Information (Distribution of the Policy)
5 General Information About Manufacturers Life (Separate Account Three)
6 General Information About Manufacturers (Separate Account Three)
7 *
8 *
9 Other Information (Litigation)
10 Death Benefits; Premium Payments; Charges and Deductions; Policy
Value; Policy Loans; Policy Surrender and Partial Withdrawals; Lapse
and Reinstatement; Other Provisions of the Policy; Other Information
11 General Information About Manufacturers (Manufacturers Investment
Trust)
12 General Information About Manufacturers (Manufacturers Investment
Trust)
13 Charges and Deductions
14 Issuing A Policy; Other Information (Responsibilities Assumed By
Manufacturers Life)
15 Issuing A Policy
16 **
17 Policy Surrender and Partial Withdrawals
18 General Information About Manufacturers
19 Other Information (Reports to Policyholders; Responsibilities Assumed
By Manufacturers Life)
20 *
21 Policy Loans
<PAGE> 3
22 *
23 **
24 Other Provisions of the Policy
25 General Information About Manufacturers (Manufacturers Life of
America)
26 *
27 **
28 Other Information (Officers and Directors)
29 General Information About Manufacturers (Manufacturers Life of
America)
30 *
31 *
32 *
33 *
34 *
35 **
36 *
37 *
38 Other Information (Distribution of the Policies; Responsibilities of
Manufacturers Life)
39 Other Information (Distribution of the Policies)
40 *
41 **
42 *
43 *
44 Policy Values --Determination of Policy Value; Units and Unit Values)
45 *
46 Policy Surrender and Partial Withdrawals; Other Information --
Payment of Proceeds)
47 General Information About Manufacturers (Manufacturers Investment
Trust)
48 *
<PAGE> 4
49 *
50 General Information About Manufacturers
51 Issuing a Policy; Death Benefits; Premium Payments; Charges and
Deductions; Policy Value; Policy Loans; Policy Surrender and Partial
Withdrawals; Lapse and Reinstatement; Other Policy Provisions
52 Other Information (Substitution of Portfolio Shares)
53 **
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 5
COVER PAGE
This prospectus describes Survivorship VUL, a flexible premium survivorship
variable universal life insurance policy (the "Policy") offered by The
Manufacturers Life Insurance Company of America (the "Company" or "Manufacturers
Life Of America"), a stock life insurance company that is an indirect
wholly-owned subsidiary of The Manufacturers Life Insurance Company
("Manufacturers Life").
The Policy is 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 Policy provides for:
(1) a Net Cash Surrender Value that can be obtained by surrendering the Policy;
(2) policy loans and partial withdrawals; and
(3) an insurance benefit payable at the death of the last-to-die of the Lives
Insured.
Unless the No-Lapse Guarantee is in effect, the Policy will remain in force so
long as the Net Cash Surrender Value is sufficient to cover charges assessed
against the Policy. If the No-Lapse Guarantee is in effect, the Policy will
remain in force as long as the No-Lapse Guarantee Cumulative Premium Test has
been met.
Policy Value may be accumulated on a fixed basis or vary with the investment
performance of the sub-accounts of Manufacturer 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 (a "Portfolio") of Manufacturers Investment
Trust (the "Trust"). The accompanying prospectus for the Trust, and the
corresponding statement of additional information, describe the investment
objectives of the Portfolios. The Portfolios available for allocation of Net
Premiums are shown in the Policy Summary under "Investment Options and
Investment Advisers." Other sub-accounts and Portfolios may be added in the
future.
BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT
SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. ALSO, PROSPECTIVE PURCHASERS SHOULD
NOTE THAT IT MAY NOT BE ADVISABLE TO PURCHASE A POLICY AS A REPLACEMENT FOR
EXISTING INSURANCE.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE TRUST.
THESE POLICIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC. NEITHER THE SEC
NOR ANY STATE HAS DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Manufacturers Life Insurance Company of America
500 North Woodward Avenue
Bloomfield Hills, Michigan 48304
The date of this Prospectus is _____, 1998.
<PAGE> 6
TABLE OF CONTENTS
Cover Page......................................................................
Table of Contents...............................................................
Definitions.....................................................................
Policy Summary..................................................................
General......................................................................
Death Benefits...............................................................
Premiums.....................................................................
Policy Value.................................................................
Policy Loans.................................................................
Surrender and Partial Withdrawals............................................
Lapse and Reinstatement......................................................
Charges and Deductions.......................................................
Investment Options and Investment Advisers...................................
Table of Charges and Deductions..............................................
Table of Investment Management Fees and Expenses.............................
Table of Investment Options and Investment Advisers..........................
General Information about Manufacturers.........................................
Manufacturers Life of
America......................................................................
Separate Account Three.......................................................
Manufacturers Investment Trust...............................................
Investment Objectives of the Portfolios......................................
Issuing A Policy................................................................
Requirements.................................................................
Temporary Insurance Agreement................................................
Underwriting.................................................................
Right to Examine the Policy..................................................
Death Benefits..................................................................
Life Insurance Qualification.................................................
Death Benefit Options........................................................
Changing the Face Amount.....................................................
Premium Payments................................................................
Initial Premiums.............................................................
Subsequent Premiums..........................................................
Maximum Premium Limitation...................................................
Premium Allocation...........................................................
Charges and Deductions..........................................................
Premium Load.................................................................
Surrender Charges............................................................
Monthly Charges..............................................................
Charges Assessed Against Assets of the Investment Accounts...................
Charges for Transfers........................................................
Reduction in Charges.........................................................
Special Provisions for Exchanges................................................
Company Tax Considerations......................................................
Policy Value....................................................................
Determination of the Policy Value............................................
Units and Unit Values........................................................
Transfers of Policy Value....................................................
Policy Loans....................................................................
Effect of Policy Loan........................................................
Interest Charged on Policy Loans.............................................
Loan Account.................................................................
2
<PAGE> 7
Policy Surrender and Partial Withdrawals........................................
Policy Surrender.............................................................
Partial Withdrawals..........................................................
Lapse and Reinstatement.........................................................
Lapse........................................................................
No Lapse Guarantee...........................................................
No-Lapse Guarantee Cumulative Premium Test...................................
Reinstatement................................................................
The General Account.............................................................
Guaranteed Interest Account..................................................
Other Provisions of the Policy..................................................
Policyowner Rights...........................................................
Beneficiary..................................................................
Incontestability.............................................................
Misstatement of Age or Sex...................................................
Suicide Exclusion............................................................
Supplementary Benefits.......................................................
Tax Treatment of the Policy.....................................................
Life Insurance Qualification.................................................
Tax Treatment of Policy Benefits.............................................
Alternate Minimum Tax........................................................
Income Tax Reporting.........................................................
Other Information...............................................................
Payment of Proceeds..........................................................
Reports to Policyowners......................................................
Distribution of the Policies.................................................
Responsibilities of Manufacturers Life.......................................
Voting Rights................................................................
Substitution of Portfolio Shares.............................................
Records and Accounts.........................................................
State Regulations............................................................
Litigation...................................................................
Accountants..................................................................
Further Information..........................................................
Officers and Directors.......................................................
Impact of Year 2000..........................................................
Illustrations................................................................
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 MANUFACTURERS INVESTMENT TRUST, OR THE
STATEMENT OF ADDITIONAL INFORMATION OF MANUFACTURERS INVESTMENT TRUST.
Examine this prospectus carefully. The Policy Summary will briefly describe the
Policy. More detailed information will be found further in the prospectus.
3
<PAGE> 8
DEFINITIONS
Additional Rating
is an increase to the Cost of Insurance Rate for any of the Lives Insured who do
not meet, at a minimum, the Company's underwriting requirements for the standard
Risk Classification.
Age
on any date is each of the Lives Insured's age on their birthday closest to the
policy date.
Attained Age
is the Age plus the number of whole years that have elapsed since the Policy
Date.
Business Day
is 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
will be determined as of the end of each Business Day. The Company will deem
each Business Day to end at the close of regularly scheduled trading of the New
York Stock Exchange (currently 4:00 Eastern Time) on that day.
Cash Surrender Value
is the Policy Value less the Surrender Charge and any outstanding Monthly
Deductions due.
Effective Date
is the date the Company becomes obligated under the Policy. It is the date the
underwriters approve issuance of the policy. If the policy is approved without
the initial premium, the Effective Date will be the date the Company receives at
least the minimum initial premium at our Service Office. In either case, the
Company will take the first Monthly Deduction on the Effective Date.
Gross Withdrawal
is the amount of partial Net Cash Surrender Value the policyowner requests plus
any Surrender Charge applicable to the withdrawal.
Guaranteed Interest Account
is that part of the Policy Value which reflects the value the policyowner has in
the general account of the Company.
Investment Account
is that part of the Policy Value which reflects the value the policyowner has in
one of the sub-accounts of the Separate Account.
Issue Date
is the date the Company issued the Policy. The Issue Date is also the date from
which the Suicide and Validity provisions of the Policy are measured.
Life Insured
is the last-to-die of the Lives Insured.
4
<PAGE> 9
Lives Insured
are the persons whose lives are insured under this policy. References to the
youngest of the Lives Insured means the youngest person insured under this
policy when it is first issued.
Loan Account
is that part of the Policy Value which reflects the value transferred from the
Guaranteed Interest Account or the Investment Accounts as collateral for a
policy loan.
Net Cash Surrender Value
is the Cash Surrender Value less the Policy Debt.
Net Policy Value
is the Policy Value less the value in the Loan Account.
Net Premium
is the gross premium paid less the Premium Load. It is the amount of premium
allocated to the Guaranteed Interest Account and/or Investment Accounts.
No-Lapse Guarantee
When the Policy is in the No-Lapse Guarantee Period, as long as the No-Lapse
Guarantee Cumulative Premium Test is met, the Policy will not lapse, even when
the Net Cash Surrender Value falls to or below zero.
No-Lapse Guarantee Period
is set at issue and is fixed at ten years.
No-Lapse Guarantee Premium
is set at issue and is recalculated whenever there is a policy change.
No-Lapse Guarantee Cumulative Premium
is the minimum amount due to satisfy the No-Lapse Guarantee Cumulative Premium
Test. This amount will change if any of the following changes occur under the
Policy:
- - the face amount of insurance changes.
- - a Supplementary Benefit is added, changed or terminated.
- - the risk classification of any of the Lives Insured changes because of a
change in smoking status.
- - a temporary Additional Rating is added (due to a face amount increase), or
terminated.
- - the Death Benefit Option Changes.
No-Lapse Guarantee Cumulative Premium Test
is a test that is satisfied if the sum of all premiums paid, less any gross
partial withdrawals and less any Policy Debt, is greater than or equal to the
sum of the monthly No-Lapse Guarantee Premiums due since the Policy Date.
Policy Date
is the date from which charges for the first monthly deduction are calculated,
and the date from which Policy Years, Policy Months, and Policy Anniversaries
are determined.
Policy Debt
as of any date equals (a) plus (b) plus (c) minus (d), where:
(a) is the total amount of loans borrowed as of such date;
5
<PAGE> 10
(b) is the total amount of any unpaid loan interest charges which have been
borrowed against the policy on a Policy Anniversary;
(c) is any interest charges accrued from the last Policy Anniversary to the
current date; and
(d) is the total amount of loan repayments as of such date.
Policy Value
is the sum of the values in the Loan Account, the Guaranteed Interest Account,
and the Investment Accounts.
Service Office Address
is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
Surrender Charge Period
is the period following the Issue Date or following any increase in Face Amount
during which the Company will assess surrender charges. Surrender charges will
apply during this period if the policy terminates due to default, if the
policyowner surrenders the policy or makes a partial withdrawal.
Written Request
is the policyowner's request to the Company which must be in a form satisfactory
to the Company, signed and dated by the policyowner, and received at the Service
Office.
POLICY SUMMARY
GENERAL
The Policy is a flexible premium survivorship variable universal life insurance
policy. 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 minimum death benefit percentage. The Policy's provisions may
vary in some states.
DEATH BENEFITS
The Policy provides a death benefit in the event of the death of the last-to-die
of the Lives Insured. There are two death benefit options. Under Option 1 the
death benefit is the Face Amount of the Policy at the date of death or, if
greater, the Minimum Death Benefit. Under Option 2 the death benefit is the Face
Amount plus the Policy Value of the Policy at the date of death or, if greater,
the Minimum Death Benefit. The policyowner may change the death benefit option
and increase or decrease the Face Amount.
PREMIUMS
Premium payments may be made at any time and in any amount, subject to certain
limitations as described under "Premium Payments Subsequent Premiums." Net
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. Allocation instructions may be changed at any
time and transfers among the accounts may be made.
6
<PAGE> 11
POLICY VALUE
The Policy has a Policy Value reflecting premiums paid, certain charges for
expenses and cost of insurance, and the investment performance of the accounts
to which the policyowner has allocated premiums. 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.
POLICY LOANS
The policyowner may borrow against the Cash Surrender Value of the Policy. Loan
interest at a rate of 5.75% is due and payable in arrears on each Policy
Anniversary. All outstanding Policy Debt will be deducted from proceeds payable
at the insured's death, or upon surrender.
SURRENDER AND PARTIAL WITHDRAWALS
The policyowner may make a partial withdrawal of the Policy Value. A partial
withdrawal may result in a reduction in the Face Amount of the Policy and an
assessment of a portion of the surrender charges to which the Policy is subject.
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 Surrender Charges and outstanding Monthly Deductions due minus the
Policy Debt.
LAPSE AND REINSTATEMENT
Unless the No-Lapse Guarantee is in effect, a Policy will lapse (and terminate
without value) when the Net Cash Surrender Value is insufficient to pay the next
monthly deduction and a grace period of 61 days expires without an adequate
payment being made by the policyowner. If the No-Lapse Guarantee is in effect,
the Policy will lapse if the No-Lapse Guarantee Cumulative Premium Test (see
definition) has not been met.
The Policies, therefore, differ in two important respects from conventional life
insurance policies. First, the failure to make planned premium payments will not
itself cause a Policy to lapse. Second, a Policy can lapse even if planned
premiums have been paid.
A lapsed Policy may be reinstated by the policyowner at any time within the five
year period following lapse provided none of the Lives Insured dies after the
policy termination and the Policy was not surrendered for its Net Cash Surrender
Value. Evidence of insurability is required, along with a certain amount of
premium as described under "Reinstatement."
CHARGES AND DEDUCTIONS
The Company assesses certain charges and deductions in connection with the
Policy. These include: (i) charges assessed monthly for mortality and expense
risks, cost of insurance, administration expenses, (ii) loads deducted from
premiums paid (iii) and charges assessed on surrender or lapse. These charges
are summarized in the Table of Charges and Deductions.
In addition, there are charges deducted from each Portfolio of the Trust. These
charges are summarized in the Table of Investment Management Fees and Expenses.
INVESTMENT OPTIONS AND INVESTMENT ADVISERS
Net Premiums may be allocated to the general account or to one or more of the
sub-accounts of Manufacturers Life of America's Separate Account Three. Each of
the sub-accounts invests in the shares of one of the Portfolios of the Trust.
The Trust receives investment advisory services from Manufacturers Securities
Services, LLC ("MSS"). MSS is a registered investment adviser under the
Investment Advisers Act of 1940. The Trust also employs subadvisers. The Table
of Investment
7
<PAGE> 12
Options and Investment Advisers shows the subadvisers that provide investment
subadvisory services to the indicated Portfolios.
INVESTMENT MANAGEMENT FEES AND EXPENSES
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects investment management fees and certain
expenses. The fees and expenses for each Portfolio for the Trust's last fiscal
year are shown in the Table of Investment Management Fees and Expenses. These
fees and expenses are described in detail in the accompanying Trust prospectus
to which reference should be made.
8
<PAGE> 13
TABLE OF CHARGES AND DEDUCTIONS
Premium Load 7.50% of each premium paid.
Surrender Charges A Surrender Charge is applicable during the first 15
Policy Years. The Surrender Charge is determined by the
following formula:
Surrender Charge = (Surrender Charge Rate)x (Face Amount
of the Policy at the Time of Surrender)x(Grading
Percentage)
The Grading Percentage is based on the issue age of the
youngest insured and the policy year in which the
transaction causing the assessment of the charge occurs
and is set forth in the table under "Surrender Charges."
The Surrender Charge Rate is calculated as follows:
Surrender Charge Rate = (8.75 / 1000) +
(82.5%)x(Surrender Charge Premium)
The Surrender Charge Premium is the lesser of:
(a) the premiums paid during the first policy year,
and
(b) the Target Commission Premium specified in the
Policy divided by 1000.
A portion of this charge may be assessed on a partial
withdrawal.
Monthly Deductions An administration charge of $30 plus $0.08 per $1,000 of
current face amount per policy month will be deducted in
the first policy year. In subsequent years, the
administration charge will not exceed $15 plus $0.02 per
$1,000 of current Face Amount per policy month.
The cost of insurance charge
Any additional charges for supplementary benefits.
A mortality and expense risks charge. This charge varies
by Policy Year as follows:
Current Monthly Mortality and
Policy Years Expense Risks Charge
(guaranteed monthly charge)
1-20 0.063%
(0.067%)
21+ 0.033%
(0.033%)
All of the above charges are deducted from the Net
Policy Value.
9
<PAGE> 14
Loan Charges A fixed loan interest rate of 5.75%.
Interest credited to amounts in the Loan Account will be
equal to the 5.75% rate charged to the loan less the
current loan spread of 1.25% (guaranteed maximum loan
spread is 1.75%)
Transfer Charge A charge of $25 per transfer for each transfer in excess
of 12 in a Policy Year.
10
<PAGE> 15
TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES
ANNUAL EXPENSES OF EACH PORTFOLIO
(as a percentage of a Portfolio's average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
PORTFOLIO FEES REIMBURSEMENT)*** ANNUAL EXPENSES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth
Pacific Rim Emerging Markets..... 0.850% 0.570% 1.420%
Science & Technology............. 1.100% 0.160% 1.260%
International Small Cap.......... 1.100% 0.210% 1.310%
Emerging Small Company........... 1.050% 0.060% 1.110%
Pilgrim Baxter Growth............ 1.050% 0.130% 1.180%
Small/Mid Cap.................... 1.000% 0.050% 1.050%
International Stock.............. 1.050% 0.330% 1.380%
Growth
Worldwide Growth................. 1.000% 0.320% 1.320%
Global Equity.................... 0.900% 0.110% 1.010%
Small Company Value.............. 1.050% 0.100%* 1.150%
Equity........................... 0.750% 0.050% 0.800%
Growth........................... 0.850% 0.100% 0.950%
Quantitative Equity.............. 0.700% 0.070% 0.770%***
Blue Chip Growth................. 0.925% 0.050% 0.975%
Equity Index..................... 0.250% 0.15%**** 0.40%****
Real Estate Securities........... 0.700% 0.070% 0.770%***
Value............................ 0.800% 0.160% 0.960%
International Growth and Income.. 0.950% 0.170% 1.120%
Growth and Income
Growth and Income................ 0.750% 0.040% 0.790%
Equity-Income.................... 0.800% 0.050% 0.850%
Balanced
Balanced......................... 0.800% 0.080% 0.880%
Aggressive Asset Allocation...... 0.750% 0.150% 0.900%
Bond
High Yield....................... 0.775% 0.110% 0.885%
Moderate Asset Allocation........ 0.750% 0.100% 0.850%
Conservative Asset Allocation.... 0.750% 0.140% 0.890%
Strategic Bond................... 0.775% 0.100% 0.875%
Global Government Bond........... 0.800% 0.130% 0.930%
Capital Growth Bond.............. 0.650% 0.080% 0.730%***
Investment Quality Bond.......... 0.650% 0.090% 0.740%
U.S. Government Securities....... 0.650% 0.070% 0.720%
Money Market
Money Market..................... 0.500% 0.040% 0.540%
Lifestyle
Lifestyle Aggressive 1000#....... 0% 1.116%** 1.116%
Lifestyle Growth 820#............ 0% 1.048%** 1.048%
Lifestyle Balanced 640#.......... 0% 0.944%** 0.944%
Lifestyle Moderate 460#.......... 0% 0.850%** 0.850%
Lifestyle Conservative 280#...... 0% 0.708%** 0.708%
</TABLE>
11
<PAGE> 16
#Each Lifestyle Trust will invest in shares of the Underlying Portfolios.
Therefore, each Lifestyle Trust will bear its pro rata share of the fees and
expenses incurred by the Underlying Portfolios and the investment return of each
Lifestyle Trust will be net of the Underlying Portfolio expenses. Each Lifestyle
Portfolio must also bear its own expenses. However, the Adviser is currently
paying these expenses as described in footnote ** below.
*Based on estimates of payments to be made during the current fiscal year.
** Reflects expenses of the other portfolios of the Trust in which the Lifestyle
Trust invests ("Underlying Portfolios"). MSS has voluntarily agreed to pay the
expenses of each Lifestyle Trust (excluding the expenses of the Underlying
Portfolios). This voluntary expense reimbursement may be terminated at any time.
If such expense reimbursement was not in effect, Total Trust Annual Expenses
would be .04% higher (based on expenses of the Lifestyle Trusts for the fiscal
year ended December 31, 1997) as noted in the chart below:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Aggressive 1000........ 0% 1.156% 1.156%
Lifestyle Growth 820............. 0% 1.088% 1.088%
Lifestyle Balanced 640........... 0% 0.984% 0.984%
Lifestyle Moderate 460........... 0% 0.890% 0.890%
Lifestyle Conservative 280....... 0% 0.748% 0.748%
</TABLE>
***During the one year period ended December 31, 1997, MSS voluntarily waived
fees payable to it and/or reimbursed expenses to the extent necessary to prevent
"Total Trust Annual Expenses" for the Quantitative Equity, Real Estate and
Capital Growth Bond Trusts from exceeding .50% of the Trust's average net
assets. This voluntary fee waiver was terminated effective January 1, 1998.
Expenses shown in the table for these three Trusts do not reflect the fee
waiver.
****Under the Advisory Agreement, MSS has agreed to reduce its advisory fee or
reimburse the Equity Index Trust if the total of all expenses (excluding
advisory fees, taxes, portfolio brokerage commissions, interest, litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Trust's business) exceed an annual rate of 0.15% of the
average annual net assets of the Equity Index Trust. The expense limitation will
continue in effect from year to year unless otherwise terminated at any year end
by MSS on 30 days' notice to the Trust. If this expense reimbursement had not
been in effect, Total Trust Annual Expenses would have been 0.57%, and Other
Expenses would have been 0.32%, of the average annual net assets of the Equity
Index Trust.
12
<PAGE> 17
TABLE OF INVESTMENT OPTIONS AND INVESTMENT ADVISERS
<TABLE>
<CAPTION>
Portfolio Subadviser
<S> <C>
Aggressive Growth
Pacific Rim Emerging Market Trust Manufacturers Adviser Corporation*
Science and Technology Trust T. Rowe Price Associates, Inc.
International Small Cap Trust Founders Asset Management, Inc.
Emerging Small Company Trust Warburg, Pincus Counsellors, Inc.
Pilgrim Baxter Growth Trust Pilgrim, Baxter & Associates, Ltd.
Small/Mid Cap Trust Fred Alger Management, Inc.
International Stock Trust Rowe Price-Fleming International, Inc.
Growth
Worldwide Growth Trust Founders Asset Management LLC
Global Equity Trust Morgan Stanley Asset Management, Inc.
Small Company Value Trust Rosenberg Institutional Equity Management
Equity Trust Fidelity Management Trust Company
Growth Trust Founders Asset Management, Inc.
Quantitative Equity Trust Manufacturers Adviser Corporation*
Equity Index Trust Manufacturers Adviser Corporation*
Blue Chip Growth Trust T. Rowe Price Associates, Inc.
Real Estate Securities Trust Manufacturers Adviser Corporation*
Growth and Income
Value Trust Miller Anderson & Sherrerd, LLP
International Growth and Income Trust J.P. Morgan Investment Management, Inc.
Growth and Income Trust Wellington Management Company
Equity Income Trust T. Rowe Price Associates, Inc.
Balanced
Balanced Trust Founders Asset Management LLC
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
High Yield Trust Miller Anderson & Sherrerd, LLP
Strategic Bond Trust Salomon Brothers Asset Management, Inc.
Global Government Bond Trust Oechsle International Advisors, LLC
Capital Growth Bond Trust Manufacturers Adviser Corporation*
Investment Quality Bond Trust Wellington Management Company
U.S. Government Securities Trust Salomon Brothers Asset Management, Inc.
Money Market
Money Market Trust Manufacturers Adviser Corporation*
Lifestyle
Lifestyle Aggressive Growth 1000 Trust Manufacturers Adviser Corporation*
Lifestyle Growth 820 Trust Manufacturers Adviser Corporation*
Lifestyle Balanced 640 Trust Manufacturers Adviser Corporation*
Lifestyle Moderate 460 Trust Manufacturers Adviser Corporation*
Lifestyle Conservative 280 Trust Manufacturers Adviser Corporation*
</TABLE>
*Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
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<PAGE> 18
GENERAL INFORMATION ABOUT MANUFACTURERS
MANUFACTURERS LIFE OF AMERICA
Manufacturers Life of America, a wholly-owned subsidiary of The Manufacturers
Life Insurance Company (U.S.A.) ("Manufacturers USA") is a stock life insurance
company organized under the laws of Pennsylvania on April 11, 1977 and
redomesticated under the laws of Michigan on December 9, 1992. It is a licensed
life insurance company in the District of Columbia and all states of the United
States except New York. The ultimate parent of Manufacturers Life of America and
Manufacturers USA is 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 rank
among the 60 largest life insurers in the world as measured by assets. However,
neither Manufacturers Life of America nor Manufacturers Life guarantees the
investment performance of the Separate Account.
On January 20, 1998, the Board of Directors of Manufacturers Life asked the
management of Manufacturers Life to prepare a plan for conversion of
Manufacturers Life from a mutual life insurance company to an investor owned,
publicly traded stock company. Any demutualization plan for Manufacturers Life
is subject to the approval of the ManuLife Board of Directors and policyowners
as well as regulatory approval.
RATINGS
Manufacturers Life and Manufacturers Life of America have received the following
ratings from independent rating agencies:
Standard and Poor's Insurance Ratings Service: AA+ (for claims paying ability)
A.M.Best Company: A++ (for financial strength)
Duff & Phelps Credit Rating Co.: AAA (for claims paying ability)
Moody's Investors Service, Inc.: Aa2 (for financial strength)
These ratings, which are current as of the date of this prospectus and are
subject to change, are assigned to The Manufacturers Life Insurance Company of
America as a measure of the Company's ability to honor the death benefit and
life annuitization guarantees but not specifically to its products, the
performance (return) of these products, the value of any investment in these
products upon withdrawal or to individual securities held in any portfolio.
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,
it 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.
ASSETS OF THE SEPARATE ACCOUNT
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> 19
REGISTRATION
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.
MANUFACTURERS INVESTMENT TRUST
Each sub-account of the Separate Account will purchase shares only of a
particular Portfolio. The Trust is registered under the 1940 Act as an open-end
management investment company. The Separate Account will purchase and redeem
shares of the Portfolios 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 not inconsistent
with the Policies. Any dividend or capital gain distribution received from a
Portfolio with respect to the Policies will be reinvested immediately at net
asset value in shares of that Portfolio and retained as assets of the
corresponding sub-account.
The 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
may also purchase shares through its general account for certain limited
purposes including initial portfolio seed money. For a description of the
procedures for handling potential conflicts of interest arising from the funding
of such benefits see the accompanying Trust prospectus.
INVESTMENT OBJECTIVES 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. A
full description of the Trust, its investment objectives, policies and
restrictions, the risks associated therewith, its expenses, and other aspects of
its operation is contained in the accompanying Trust prospectus, which should be
read together with this prospectus.
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 ("MAC") 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.
SCIENCE & TECHNOLOGY TRUST
The investment objective of the Science and Technology Trust is long-term growth
of capital. Current income is incidental to the portfolio's objective. T. Rowe
Price Associates, Inc. manages the Science & Technology Trust.
INTERNATIONAL SMALL CAP TRUST
The investment objective of the International Small Cap Trust is to seek
long-term capital appreciation. Founders Asset Management LLC ("Founders")
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.
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<PAGE> 20
EMERGING SMALL COMPANY TRUST
The investment objective of the Emerging Small Company Trust (prior to
November 2, 1998, the "Emerging Growth Trust") is maximum capital appreciation.
Warburg, Pincus Counsellors, Inc. manages the Emerging Small Company Trust and
will pursue this objective by investing primarily in a portfolio of equity
securities of domestic companies. The Emerging Small Company Trust ordinarily
will invest at least 65% of its total assets in common stocks or warrants of
emerging small companies that represent attractive opportunities for maximum
capital appreciation.
PILGRIM BAXTER GROWTH TRUST
The investment objective of the Pilgrim Baxter Growth Trust is capital
appreciation. Pilgrim, Baxter & Associates, Ltd. ("PBHG") manages the Pilgrim
Baxter Growth Trust and seeks to achieve its objective by investing in companies
believed by PBHG to have an outlook for strong earnings growth and potential for
significant capital appreciation.
SMALL/MID CAP TRUST
The investment objective of the Small/Mid Cap Trust is to seek long-term capital
appreciation. Fred Alger Management, Inc. manages the Small/Mid Cap Trust and
will pursue this objective by investing at least 65% of the portfolio's total
assets (except during temporary defensive periods) in small/mid cap equity
securities.
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.
GROWTH PORTFOLIOS
WORLDWIDE GROWTH TRUST
The investment objective of the Worldwide Growth Trust is long-term growth of
capital. Founders manages the Worldwide Growth Trust and seeks to attain this
objective by normally investing at least 65% of its total assets in equity
securities of growth companies in a variety of markets throughout the world.
GLOBAL EQUITY TRUST
The investment objective of the Global Equity Trust is long-term capital
appreciation. Morgan Stanley Asset Management Inc. manages the Global Equity
Trust and intends to pursue this objective by investing primarily in equity
securities throughout the world, including U.S. issuers.
SMALL COMPANY VALUE TRUST
The investment objective of the Small Company Value Trust is to seek long-term
growth of capital. Rosenberg Institutional Equity Management ("Rosenberg")
manages the Small Company Value Trust and intends to pursue this objective by
investing in equity securities of smaller companies which are traded principally
in the markets of the United States.
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.
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<PAGE> 21
GROWTH TRUST
The investment objective of the Growth Trust is to seek long-term growth of
capital. Founders manages the Growth Trust and will pursue this objective by
investing, under normal market conditions, at least 65% of its total assets in
common stocks of well-established, high-quality growth companies that Founders
believes have the potential to increase earnings faster than the rest of the
market.
QUANTITATIVE EQUITY TRUST
The investment objective of the Quantitative Equity Trust (formerly the "Common
Stock Fund") is to achieve intermediate and long-term growth through capital
appreciation and current income by investing in common stocks and other equity
securities of well established companies with promising prospects for providing
an above-average rate of return. MAC 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. MAC 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.
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. MAC manages the
Real Estate Securities Trust.
GROWTH & INCOME PORTFOLIOS
VALUE TRUST
The investment objective of the Value Trust is to realize an above-average total
return over a market cycle of three to five years, consistent with reasonable
risk. Miller Anderson & Sherrerd, LLP ("MAS") manages the Value Trust and seeks
to attain this objective by investing primarily in common and preferred stocks,
convertible securities, rights and warrants to purchase common stocks, ADRs and
other equity securities of companies with equity capitalizations usually greater
than $300 million.
INTERNATIONAL GROWTH AND INCOME TRUST
The investment objective of the International Growth and Income Trust is to seek
long-term growth of capital and income. The portfolio is designed for investors
with a long-term investment horizon who want to take advantage of investment
opportunities outside the United States. J.P. Morgan Investment Management Inc.
manages the International Growth and Income 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
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<PAGE> 22
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.
BALANCED PORTFOLIOS
BALANCED TRUST
The investment objective of the Balanced Trust is current income and capital
appreciation. Founders 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.
BOND PORTFOLIOS
HIGH YIELD TRUST
The investment objective of High Yield Trust is to realize an above-average
total return over a market cycle of three to five years, consistent with
reasonable risk. MAS manages the High Yield Trust and seeks to attain this
objective by investing primarily in high yield debt securities, including
corporate bonds and other fixed-income securities.
STRATEGIC BOND TRUST
The investment objective of the Strategic Bond Trust is to seek a high level of
total return consistent with preservation of capital. The Strategic Bond Trust
seeks to achieve its objective by giving its Subadviser, Salomon Brothers Asset
Management Inc ("SBAM") broad discretion to deploy the Strategic Bond Trust's
assets among certain segments of the fixed-income market as SBAM believes will
best contribute to the achievement of the portfolio's objective.
GLOBAL GOVERNMENT BOND TRUST
The investment objective of the Global Government Bond Trust is to seek a high
level of total return by placing primary emphasis on high current income and the
preservation of capital. Oechsle International Advisors, LLC manages the Global
Government Bond Trust and intends to pursue this objective by investing
primarily in a selected global portfolio of high-quality, fixed-income
securities of foreign and U.S. governmental entities and supranational issuers.
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. MAC 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.
INVESTMENT QUALITY BOND TRUST
The investment objective of the Investment Quality Bond Trust is to provide a
high level of current income consistent with the maintenance of principal and
liquidity. Wellington Management Company manages the Investment Quality Bond
Trust and seeks to achieve the Trust's objective by investing
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<PAGE> 23
primarily in a diversified portfolio of investment grade corporate bonds and
U.S. Government bonds with intermediate to longer term maturities.
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. SBAM 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. MAC manages the
Money Market Trust and seeks to achieve this objective by investing in high
quality, U.S. dollar denominated money market instruments.
LIFESTYLE PORTFOLIOS
LIFESTYLE AGGRESSIVE 1000 TRUST
The investment objective of the Lifestyle Aggressive 1000 Trust is to provide
long-term growth of capital. Current income is not a consideration. MAC manages
the Lifestyle Aggressive 1000 Trust and seeks to achieve this objective by
investing approximately 100% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in equity securities.
LIFESTYLE GROWTH 820 TRUST
The investment objective of the Lifestyle Growth 820 Trust is to provide
long-term growth of capital with consideration also given to current income. MAC
manages the Lifestyle Growth 820 Trust and seeks to achieve this objective by
investing approximately 20% of the Lifestyle Trust's assets in Underlying
Portfolios which invest primarily in fixed-income securities and approximately
80% of the assets in Underlying Portfolios which invest primarily in equity
securities.
LIFESTYLE BALANCED 640 TRUST
The investment objective of the Lifestyle Balanced 640 Trust is to provide a
balance between high level of current income and growth of capital with a
greater emphasis given to capital growth. MAC manages the Lifestyle Balanced 640
Trust and seeks to achieve this objective by investing approximately 40% of the
Lifestyle Trust's assets in Underlying Portfolios which invest primarily in
fixed-income securities and approximately 60% of its assets in Underlying
Portfolios which invest primarily in equity securities.
LIFESTYLE MODERATE 460 TRUST
The investment objective of the Lifestyle Moderate 460 Trust is to provide a
balance between high level of current income and growth of capital with a
greater emphasis given to high income. MAC manages the Lifestyle Moderate 460
Trust and seeks to achieve this objective by investing approximately 60% of the
Lifestyle Trust's assets in Underlying Portfolios which invest primarily in
fixed-income securities and approximately 40% of its assets in Underlying
Portfolios which invest primarily in equity securities.
LIFESTYLE CONSERVATIVE 280 TRUST
The investment objective of the Lifestyle Conservative 280 Trust is to provide a
high level of current income with some consideration also given to growth of
capital. MAC manages the Lifestyle Conservative 280 Trust and seeks to achieve
this objective by investing approximately 80% of the
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Lifestyle Trust's assets in Underlying Portfolios which invest primarily in
fixed-income securities and approximately 20% of its assets in Underlying
Portfolios which invest primarily in equity securities.
ISSUING A POLICY
USE OF THE POLICY
REQUIREMENTS
To purchase a Policy, an applicant must submit a completed application. A Policy
will not be issued until the underwriting process has been completed to the
Company's satisfaction.
Policies may be issued on a basis which does not distinguish between the
insured's sex and/or smoking status, with prior approval from the Company. A
Policy will generally be issued only on the lives of insureds from ages 0
through 90.
Each Policy is issued with a Policy Date, an Effective Date and an Issue Date
(see Definitions).
If an application is accompanied by a check for the initial premium and the
application is accepted:
(i) the Policy Date will be the date the application and check were received
at the Service Office (unless a special Policy Date is requested (See
"Backdating a Policy" below));
(ii) the Effective Date will be the date the Company's underwriters approve
issuance of the Policy; and
(iii) the Issue Date will be the date the Company issues the Policy.
If an application accepted by the Company is not accompanied by a check for the
initial premium:
(i) the Policy Date will be the date the Company issues the Policy (unless a
special Policy Date is requested (See "Backdating a Policy" below);
(ii) the Effective Date will be the date the Service Office receives the
initial premium; and
(iii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Policy Date. If
the premium is not paid or if the application is rejected, the Policy will be
canceled and any partial premiums paid will be returned to the applicant.
MINIMUM INITIAL FACE AMOUNT
Manufacturers Life of America will generally issue a Policy only if it has a
Face Amount of at least $250,000.
BACKDATING A POLICY
Under limited circumstances, the Company may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
However, in no event will a Policy be backdated earlier than the earliest date
allowed by state law, which is generally three months to one year prior to the
date of application for the Policy. Monthly deductions will be made for the
period the Policy Date is backdated. Regardless of whether or not a policy is
backdated, Net 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 portfolio.
TEMPORARY INSURANCE AGREEMENT
In accordance with the Company's underwriting practices, temporary insurance
coverage may be provided under the terms of a Temporary Insurance Agreement.
Generally, temporary life insurance
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<PAGE> 25
may not exceed $5,000,000 and may not be in effect for more than 90 days. This
temporary insurance coverage will be issued on a conditional receipt basis,
which means that any benefits under such temporary coverage will only be paid if
the Lives Insured meet the Company's usual and customary underwriting standards
for the coverage applied for.
The acceptance of an application is subject to the Company's underwriting rules,
and the Company reserves the right to request additional information or to
reject an application for any reason.
Persons failing to meet standard underwriting classification may be eligible for
a Policy with an additional rating assigned to it.
RIGHT TO EXAMINE THE POLICY
A Policy may be returned for a refund within 10 days after it is received. Some
states provide a longer period of time to exercise this right. The Policy will
indicate if a longer time period applies. The Policy can be mailed or delivered
to the Manufacturers Life of America agent who sold it or to the 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, the Company will refund in full the payment made.
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 canceled, 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.
The Company reserves the right to delay the refund of any premium paid by check
until the check has cleared.
DEATH BENEFITS
If the Policy is in force at the time of the death of the last-to-die of the
Lives Insured, the Company will pay an insurance benefit. The amount payable
will be the death benefit under the selected death benefit option, plus any
amounts payable under any supplementary benefits added to the Policy, less the
Policy Debt and less any outstanding monthly deductions due. The insurance
benefit will be paid in one lump 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, the Company 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 the Company will pay
only the Net Cash Surrender Value.
LIFE INSURANCE QUALIFICATION
This product uses the Guideline Premium Test to qualify as a life insurance
contract for purposes of Section 7702 of the Internal Revenue Code of 1986, as
amended.
GUIDELINE PREMIUM TEST
The Guideline Premium Test restricts the maximum premiums that may be paid into
a life insurance policy for a given death benefit. The policy's death benefit
must also be at least equal to the Minimum Death Benefit (described below).
Changes to the Policy may affect the maximum amount of premiums, such as:
- - A change in the policy's Face Amount.
- - A change in the death benefit option.
- - Partial Withdrawals.
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<PAGE> 26
- - Addition or deletion of supplementary benefits.
Any of the above changes could cause the total premiums paid to exceed the new
maximum limit. In this situation, the Company will require the policyowner to
take a partial withdrawal. In addition, these changes could reduce the future
premium limitations.
MINIMUM DEATH BENEFIT
The Guideline Premium Test requires a life insurance policy to meet minimum
ratios of life insurance coverage to policy value. This is achieved by ensuring
that the death benefit is at all times at least equal to the Minimum Death
Benefit. The Minimum Death Benefit on any date is defined as the Policy Value on
that date times the applicable Minimum Death Benefit Percentage for the Attained
Age of the youngest of the Lives Insured would have reached if living. The
Minimum Death Benefit Percentages are shown in the Table of Minimum Death
Benefit Percentages.
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
-------------------------------------------
Attained Age Applicable Percentage
-------------------------------------------
40 and under 250%
45 215%
50 185%
55 150%
60 130%
65 120%
70 115%
75 105%
90 105%
95 and above 100%
To determine the Applicable Percentage in the above table, use the Attained Age
of the youngest of the Lives Insured, or the Attained Age such person would have
reached if living. For ages not shown, the Applicable Percentage can be found by
reducing the values proportionately
DEATH BENEFIT OPTIONS
There are two death benefit options, described below.
DEATH BENEFIT OPTION 1
Under Option 1 the death benefit is the Face Amount of the Policy at the date of
death or, if greater, the Minimum Death Benefit.
DEATH BENEFIT OPTION 2
Under Option 2 the death benefit is the Face Amount plus the Policy Value of the
Policy at the date of death or, if greater, the Minimum Death Benefit.
CHANGING THE DEATH BENEFIT OPTION
The death benefit option may be changed on the first day of any policy month
once each Policy Year after the first Policy Year. The change will occur on the
first day of the next Policy Month after a written request for a change is
received at the Service Office. The Company reserves the right to limit a
request for a change if the change would cause the Policy to fail to qualify as
life insurance for tax purposes.
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A change in the 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, as
follows:
CHANGE 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 as of the date of the change. The Policy will not be assessed a
Surrender Charge for a reduction in Face Amount solely due to a change in the
death benefit option.
CHANGE FROM OPTION 2 TO OPTION 1
The new Face Amount will be equal to the Face Amount prior to the change plus
the Policy Value as of the date of the change. No new Surrender Charges will
apply to an increase in Face Amount solely due to a change in the death benefit
option.
CHANGING THE FACE AMOUNT
Subject to the limitations stated in this Prospectus, a policyowner may, upon
written request, increase or decrease the Face Amount of the Policy. The Company
reserves the right to limit a change in Face Amount so as to prevent the Policy
from failing to qualify as life insurance for tax purposes.
INCREASE IN FACE AMOUNT
Increases in Face Amount may be made once each Policy Year after the first
Policy Year. Any increase in Face Amount must be at least $50,000. An increase
will become effective at the beginning of the policy month following the date
Manufacturers Life of America approves the requested increase. Increases in Face
Amount are subject to satisfactory evidence of insurability. The Company
reserves the right to refuse a requested increase if any of the Lives Insureds'
Attained Age at the effective date of the increase would be greater than the
maximum issue age for new Policies at that time.
NEW SURRENDER CHARGES FOR AN INCREASE
An increase in face amount will usually result in the Policy 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. There will be no
new surrender charges associated with restoration of a prior decrease in Face
Amount. As with the purchase of a Policy, a policyowner will have free look
right with respect to any increase resulting in new surrender charges.
An additional premium may be required for a face amount increase, and a new
No-Lapse Guarantee Premium will be determined, if the No-Lapse Guarantee is in
effect at the time of the face amount increase.
INCREASE WITH PRIOR DECREASES
If, at the time of the increase, there have been prior decreases in Face Amount,
these prior decreases will be restored first. The insurance coverage eliminated
by the decrease of the oldest face amount will be deemed to be restored first.
DECREASE IN FACE AMOUNT
Decreases in Face Amount may be made once each Policy Year after the first
Policy Year. Any decrease in Face Amount must be at least $50,000. A written
request from a policy owner for a decrease in the Face Amount will be effective
at the beginning of the Policy Month following the date Manufacturers Life of
America approves the requested decrease. If there have been previous increases
in Face Amount, the decrease will be applied to the most recent increase first
and thereafter to the next most recent increases successively.
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PREMIUM PAYMENTS
INITIAL PREMIUMS
No premiums will be accepted prior to receipt of a completed application by the
Company. All premiums received prior to the Effective Date of the Policy will be
held in the general account and credited with interest from the date of receipt
at the rate of return then being earned on amounts allocated to the Money Market
Trust.
The minimum initial premium is one-twelfth of the No-Lapse Guarantee Premium.
On the Effective Date, the Net Premiums paid plus interest credited will be
allocated among the Investment Accounts or the Guaranteed Interest Account in
accordance with the policyowner's instructions.
SUBSEQUENT PREMIUMS
After the payment of the initial premium, premiums may be paid at any time and
in any amount until the youngest of the Lives Insured reached or would have
reached Attained Age 100, subject to the limitations on premium amount described
below.
A Policy will be issued with a planned premium, which is based on the amount of
premium the policyowner wishes to pay. Manufacturers Life of America will send
notices to the policyowner setting forth the planned premium at the payment
interval selected by the policyowner. However, the policyowner is under no
obligation to make the indicated payment.
The Company may refuse any premium payment that would cause the Policy to fail
to qualify as life insurance under the Internal Revenue Code. The Company also
reserves the right to request evidence of insurability if a premium payment
would result in an increase in the Death Benefit that is greater than the
increase in Policy Value.
Payment of premiums will not guarantee that the Policy will stay in force.
Conversely, failure to pay premiums will not necessarily cause the Policy to
lapse.
All Net Premiums received on or after the Effective Date will be allocated among
Investment Accounts or the Guaranteed Interest Account as of the Business Day
the premiums were received at the 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.
MAXIMUM PREMIUM LIMITATION
In no event may the total of all premiums paid exceed the then current maximum
premium limitations established by federal income tax law for a Policy to
qualify as life insurance.
If, at any time, a premium is paid which would result in total premiums
exceeding the above maximum premium limitation, the Company will only accept
that portion of the premium which will make the total premiums equal to the
maximum. Any part of the premium in excess of that amount will be returned and
no further premiums will be accepted until allowed by the then current maximum
premium limitation.
PREMIUM ALLOCATION
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
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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 premium. The percentage allocation to any
account may be any number between zero and 100, provided the total allocation
equals 100. A policyowner may change the way in which premiums are allocated at
any time without charge. The change will take effect on the date a written
request for change satisfactory to the Company is received at the Service
Office.
CHARGES AND DEDUCTIONS
PREMIUM LOAD
Manufacturers Life of America deducts a premium load from each premium payment,
equal to 7.50% of the premium.
SURRENDER CHARGES
The Company will deduct a Surrender Charge if during the first 15 years
following the Policy Date, or the effective date of a Face Amount increase:
- - the Policy is surrendered for its Net Cash Surrender Value,
- - a partial withdrawal is made in excess of the Withdrawal Tier Amount (see
below for a description of this amount),
- - An increase in Face Amount is canceled within two years of the increase or
- - the Policy lapses.
SURRENDER CHARGE CALCULATION
The Surrender Charge is determined by the following formula (the calculation is
also described in words below):
Surrender Charge = (Surrender Charge Rate)x (Face Amount of the Policy at the
Time of Surrender / 1000)x(Grading Percentage)
DEFINITIONS OF THE FORMULA FACTORS ABOVE
Face Amount of the Policy at the Time of Surrender
The Face Amount at the Time of Surrender of the Policy may be higher or lower
than the initial Face Amount. The Face Amount may be increased or decreased as
described under "Changing the Face Amount" above.
Surrender Charge Rate (the calculation is also described in words below)
Surrender Charge Rate = (Factor) + (82.5%)x(Surrender Charge Premium)
The FACTOR is set forth in the following chart:
ISSUE AGE FACTOR
--------- ------
38 or younger 3.75
39 4.25
40 4.75
41 5.25
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42 5.75
43 6.25
44 6.75
45 7.25
46 7.75
47 8.25
48 or older 8.75
The SURRENDER CHARGE PREMIUM is the lesser of:
(a) the premiums paid during the first policy year per 1000 of Face Amount,
and
(b) the Target Commission Premium specified in the Policy per 1000 of Face
Amount.
Grading Percentage
The grading percentage is based on the issue age of the youngest insured and the
policy year in which the transaction causing the assessment of the charge occurs
as set forth in the table below:
SURRENDER CHARGE GRADING PERCENTAGE*
ISSUE AGES OF YOUNGER INSURED 0-75 76 77 78 79 80+
- ------------------------------------------------------------------------
AT ISSUE 100% 100% 100% 100% 100% 100%
POLICY YEAR 1 93% 93% 92% 92% 91% 90%
POLICY YEAR 2 87% 86% 85% 83% 82% 80%
POLICY YEAR 3 80% 79% 77% 75% 73% 70%
POLICY YEAR 4 73% 71% 69% 67% 64% 60%
POLICY YEAR 5 67% 64% 62% 58% 55% 50%
POLICY YEAR 6 60% 57% 54% 50% 45% 40%
POLICY YEAR 7 53% 50% 46% 42% 36% 30%
POLICY YEAR 8 47% 43% 38% 33% 27% 20%
POLICY YEAR 9 40% 36% 31% 25% 18% 10%
POLICY YEAR 10 33% 29% 23% 17% 9% 0%
POLICY YEAR 11 27% 21% 15% 8% 0%
POLICY YEAR 12 20% 14% 8% 0%
POLICY YEAR 13 13% 7% 0%
POLICY YEAR 14 7% 0%
POLICY YEAR 15 0%
*Grading Percentages are rounded to the nearest percent.
FORMULAS DESCRIBED IN WORDS
Surrender Charge
The Surrender Charge is determined by multiplying the Surrender Charge Rate by
the Face Amount of the Policy at the time of surrender divided by 1000. The
amount obtained is then multiplied by the Grading Percentage, a percent which
starts at 100% and grades down each policy year to zero over a period not to
exceed 15 years.
Surrender Charge Rate
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<PAGE> 31
The Surrender Charge Rate is equal to the sum of (a) plus (b) where (a) equals
the Factor divided by 1000 and (b) equals 82.5% times the Surrender Charge
Premium.
ILLUSTRATION OF SURRENDER CHARGE CALCULATION
Assumptions
- - 50 year old male and 40 year old female (standard risks and nonsmoker status)
- - Policy issued 7 years ago
- - $904 in premiums have been paid on the Policy in equal annual installments
over the 7 year period - Target Commission Premium for the Policy is $2,188
- - Face Amount of the Policy is $250,000
- - Policy is surrendered during the last month of the seventh policy year
Surrender Charge
The Surrender Charge to be assessed would be $1,031 determined as follows:
First, the Surrender Charge Rate is determined by applying the Surrender Charge
Rate formula as set forth below.
Surrender Charge Rate = (4.75) + (82.5%)x(Surrender Charge Premium)
$7.733 = (4.75) + (82.5%) x (3.616 )
The Surrender Charge Rate is equal to $7.733.
Second, the Surrender Charge Rate is entered into the Surrender Charge formula
and the Surrender Charge is determined as set forth below.
Surrender Charge = (Surrender Charge Rate)x (Face Amount of the Policy at
the Time of Surrender / 1000)x(Grading Percentage)
$1,025 = (7.733)x ($250,000 / 1000) x (53%)
The Surrender Charge is equal to $1,025.
Manufacturers Life of America may reduce the surrender charge as described above
on policies where the anticipated annual premium is $100,000 or greater and the
Policy is issued as part of an employer sponsored split dollar or keyman
arrangement; 80% of the Surrender Charge will be waived during the first year of
the Policy, 60% during the second year and 40% during the third year. The full
Surrender Charge will be imposed if the surrender takes place in a fourth or
subsequent Policy Year.
SURRENDER CHARGES ON A PARTIAL WITHDRAWAL
A partial withdrawal will result in the assessment of a portion of the Surrender
Charges to which the Policy is subject. The portion of the Surrender Charges
assessed will be based on the ratio of the amount of the withdrawal which
exceeds the Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy
immediately prior to the withdrawal. The Surrender Charges will be deducted from
the Policy Value at the time of the partial withdrawal on a pro-rata basis from
each of the Investment Accounts and the Guaranteed Interest Account. If the
amount in the accounts is not sufficient to pay the Surrender Charges assessed,
then the amount of the withdrawal will be reduced.
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<PAGE> 32
Whenever a portion of the surrender charges is deducted as a result of a partial
withdrawal, the Policy's remaining surrender charges will be reduced in the same
proportion that the surrender charge deducted bears to the total surrender
charge immediately before the partial withdrawal.
WITHDRAWAL TIER AMOUNT
The Withdrawal Tier Amount is equal to 10% of the Net Cash Surrender Value as at
the last Policy Anniversary. In determining what, if any, portion of a partial
withdrawal is in excess of the Withdrawal Tier Amount, all previous partial
withdrawals that have occurred in the current Policy Year are included.
MONTHLY CHARGES
On the Policy Date and at the beginning of each Policy Month, a deduction is due
from the Net Policy Value to cover certain charges in connection with the Policy
until the Policy Anniversary when the youngest of the Lives Insured reaches, or
would have reached, Attained Age 100, if living. If there is a Policy Debt under
the Policy, loan interest and principal will continue to be payable at the
beginning of each Policy Month. Monthly deductions due prior to the Effective
Date will be taken on the Effective Date instead of the dates they were due. The
charges consist of:
(i) a monthly administration charge;
(ii) a monthly charge for the cost of insurance;
(iii) a monthly mortality and expense risk charge;
(iv) a monthly charge for any supplementary benefits added to the Policy.
Unless otherwise allowed by the Company and specified by the policyowner, the
Monthly Deduction 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.
ADMINISTRATION CHARGE
This charge will be equal to $30 plus $0.08 per $1,000 of current face amount
per Policy Month in the first Policy Year. For all subsequent Policy Years, the
administration charge will not exceed $15 plus $0.02 per $1,000 of current face
amount per Policy Month. 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 the Policy.
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 and the net amount at risk are
determined separately for the initial Face Amount and for each increase in Face
Amount. In determining the net amount at risk, if there have been increases in
the Face Amount, the Policy Value shall first be considered a part of the
initial Face Amount. If the Policy Value exceeds the initial Face Amount, it
shall then be considered a part of the additional increases in Face Amount
resulting from the increases, in the order the increases occurred.
The net amount at risk is equal to the greater of zero, or the result of (a)
minus (b) where:
(a) is the death benefit as of the first day of the Policy Month, divided by
1.0032737; and
(b) is the Policy Value as of the first day of the Policy Month prior to
deduction of monthly cost of insurance.
The rates for the cost of insurance are blended and based upon the Attained Age,
sex, and Risk Classification of the Lives Insured.
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<PAGE> 33
Cost of insurance rates will generally increase with the age of each of the
Lives Insured. The first year cost of insurance rate is guaranteed.
The cost of insurance rates reflect the Company's expectations as to future
mortality experience. The rates may be re-determined from time to time on a
basis which does not unfairly discriminate within the class of Lives Insured. In
no event will the cost of insurance rates exceed the guaranteed rates set forth
in the Policy except to the extent that an extra charge is imposed because of an
additional rating applicable to the Lives Insured. After the first Policy Year,
the cost of insurance will generally increase on each Policy Anniversary. The
guaranteed rates are based on the 1980 Commissioners Smoker/Non-Smoker Mortality
Tables.
CHARGES FOR SUPPLEMENTARY BENEFITS
If the Policy includes Supplementary Benefits, a charge will be made applicable
to such Supplementary Benefit.
MORTALITY AND EXPENSE RISK CHARGE
A monthly charge is assessed against the Policy Value equal to a percentage of
the Policy Value. This charge is to compensate the Company for the mortality and
expense risks it assumes under the Policy. 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 Policy will be greater than the Company estimated. The Company will realize
a gain from this charge to the extent it is not needed to provide benefits and
pay expenses under the Policy.
The charge varies by Policy Year as follows:
Equivalent Annual
Current Monthly Mortality and Mortality and Expense
Policy Year Expense Risks Charge Risks Charge
(guaranteed monthly charge) (guaranteed monthly charge)
1-20 0.063% 0.75%
(0.067%) (0.80%)
21+ 0.033% 0.40%
(0.033%) (0.40%)
CHARGES FOR TRANSFERS
A charge of $25 will be imposed on each transfer in excess of twelve in a Policy
Year.
REDUCTION IN CHARGES
The Policy is available for purchase by corporations and other groups or
sponsoring organizations. Group or sponsored arrangements may include reduction
or elimination of withdrawal charges and deductions for employees, officers,
directors, agents, immediate family members of the foregoing, and employees or
agents of Manufacturers Life and its subsidiaries. Manufacturers Life of America
reserves the right to reduce any of the Policy's loads or charges on certain
cases where it is expected that the amount or nature of such cases will result
in savings of sales, underwriting, administrative, commissions or other costs.
Eligibility for these reductions and the amount of reductions will be determined
by a number of factors, including the number of lives to be insured, the total
premiums expected to be paid, total assets under management for the policyowner,
the nature of the relationship among the insured individuals, the purpose for
which the policies are being purchased, expected persistency of the individual
policies, and any other circumstances which Manufacturers Life of America
believes to be relevant to the expected reduction of its expenses. Some of these
reductions may be guaranteed and
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<PAGE> 34
others may be subject to withdrawal or modification, on a uniform case basis.
Reductions in charges will not be unfairly discriminatory to any policyowners.
Manufacturers Life of America may modify from time to time, on a uniform basis,
both the amounts of reductions and the criteria for qualification.
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.
SPECIAL PROVISIONS FOR EXCHANGES
The Company will permit owners of certain fixed life insurance policies issued
either by the Company or Manufacturers Life Insurance Company (U.S.A.) to
exchange their policies for the Policies described in this prospectus (and
likewise, owners of policies described in this Prospectus may also exchange
their Policies for certain fixed policies issued either by the Company or by
Manufacturers Life Insurance Company (U.S.A)). Policyowners considering an
exchange should consult their tax advisers as to the tax consequences of an
exchange.
COMPANY TAX CONSIDERATIONS
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.
POLICY VALUE
DETERMINATION OF THE 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.
The Policy Value may also affect the amount of the death benefit. 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.
INVESTMENT ACCOUNTS
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.
GUARANTEED INTEREST ACCOUNT
Amounts in the Guaranteed Interest Account do not vary with the investment
performance of any sub-account. Instead, these amounts are credited with
interest at a rate determined by Manufacturers Life of America. For a detailed
description of the Guaranteed Interest Account, see "The General Account -
Guaranteed Interest Account".
LOAN ACCOUNT
Amounts borrowed from the Policy are transferred to the Loan Account. Amounts in
the Loan Account do not vary with the investment performance of any sub-account.
Instead, these amounts are credited with interest at a rate which is equal to
the amount charged on the outstanding Policy Debt less the Loan Spread. For a
detailed description of the Loan Account, see "Policy Loans - Loan Account".
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<PAGE> 35
UNITS AND UNIT VALUES
CREDITING AND CANCELING UNITS
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 canceled whenever amounts are deducted, transferred
or withdrawn from the sub-account. The number of units credited or canceled for
a specific transaction is based on the dollar amount of the transaction divided
by the value of the unit on 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 for the Business Day on which the premium is received
at the Service Office, except for any premiums received before the Effective
Date. For premiums received before the Effective Date, the values will be
determined on the Effective Date.
Units are valued at the end of each Business Day. 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 on 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 on the next Business Day.
UNIT VALUES
The value of a unit of each sub-account was initially fixed at $10.00. For each
subsequent Business Day the unit value for that sub-account is determined by
multiplying the unit value for the immediately preceding Business Day by the net
investment factor for the that sub-account on such subsequent Business Day.
The net investment factor for a sub-account on 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 as of the end of such Business Day before any policy transactions
are made on that day; and
(b) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of the immediately preceding Business Day after all
policy transactions were made for that day;
The value of a unit may increase, decrease, or remain the same, depending on the
investment performance of a sub-account from one Business Day to the next.
TRANSFERS OF POLICY VALUE
At any time, a policyowner may transfer Policy Value from one sub-account to
another or to the Guaranteed Interest Account. Transfer requests must be in
writing in a format satisfactory to the Company, or by telephone if a currently
valid telephone transfer authorization form is on file.
The Company reserves the right to impose limitations on transfers, including the
maximum amount that may be transferred. In addition, transfer privileges are
subject to any restrictions that may be imposed by the Trust.
While the Policy is in force, the policyowner may transfer the Policy Value from
any of the Investment Accounts to the Guaranteed Interest Account without
incurring transfer charges:
(a) within eighteen months after the Issue Date; or
(b) within 60 days of the effective date of a material change in the investment
objectives of any of the sub-accounts or within 60 days of the date of
notification of such change, whichever is later.
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<PAGE> 36
TRANSFER CHARGES
A policyowner may make up to 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 deducted from the Investment Account or the
Guaranteed Interest Account to which the transfer is being made. All transfer
requests received by the Company on the same Business Day are treated as a
single transfer request.
TRANSFERS INVOLVING GUARANTEED INTEREST ACCOUNT
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.
TELEPHONE TRANSFERS
Although failure to follow reasonable procedures may result in the Company being
liable 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 the Company reasonably believes to
be genuine. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures shall
consist of confirming that a valid telephone authorization form is on file, tape
recording of all telephone transactions and providing written confirmation
thereof.
DOLLAR COST AVERAGING
The Company will offer policyowners a Dollar Cost Averaging program. Under the
Dollar Cost Averaging program the policyowner will designate an amount which
will be transferred at predetermined intervals from one Investment Account into
any other Investment Account(s) or the Guaranteed Interest Account. Currently,
no charge will be made for this program. If insufficient funds exist to effect a
Dollar Cost Averaging transfer, the transfer will not be effected and the
policyowner will be so notified.
The Company reserves the right to cease to offer this program as of 90 days
after written notice is sent to the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS
Under the Asset Allocation Balancer program the policyowner will designate an
allocation of Policy Value among Investment Accounts. At six-month intervals
beginning six months after the Policy Date, the Company will move amounts among
the Investment Accounts as necessary to maintain the policyowner's chosen
allocation. A change to the policyowner 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
of America otherwise or has elected the Dollar Cost Averaging program.
Currently, there is no charge for this program; however, the Company reserves
the right to institute a charge on 90 days' written notice to the policyowner.
The Company reserves the right to cease to offer this program as of 90 days
after written notice is sent to the policyowner.
POLICY LOANS
At any time while this Policy is in force, a policyowner may borrow against the
Policy Value of the Policy. The Policy serves as the only security for the loan.
Policy loans may have tax consequences, see "Tax Treatment of Policy Benefits -
Policy Loan Interest."
LOAN VALUE
The Loan Value is equal to the Policy's Net Cash Surrender Value less the
monthly deductions due to the next Policy Anniversary.
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<PAGE> 37
EFFECT OF POLICY LOAN
A policy loan will have an effect on 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
Portfolios or increasing in value at the rate of interest credited for amounts
allocated to the Guaranteed Interest Account. 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 "Lapse and Reinstatement." In
addition, a policy loan may result in a Policy's failing to satisfy the No-Lapse
Guarantee Cumulative Premium Test since the Policy Debt is subtracted from the
sum of the premiums paid in determining whether this test are satisfied.
Finally, a policy loan will affect the amount payable on the death of the
last-to-die of the Lives Insured, since the death benefit is reduced by the
Policy Debt 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 Month. The rate of interest charged will be 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 on the Policy Debt will continue to be charged if there is an
outstanding loan when monthly deductions and premium payments cease when the
youngest of the Lives Insured reaches age 100. The Policy will go into default
at any time the Policy Debt exceeds the Policy Value. At least 61 days prior to
termination, the Company will send the policyowner a notice of the pending
termination. Payment of interest on the Policy Debt during the 61 day grace
period will bring the policy out of default.
LOAN ACCOUNT
When a loan is made, an amount equal to the loan will be deducted from the
Investment Accounts or the Guaranteed Interest Account and transferred to the
Loan Account. 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.
INTEREST CREDITED TO THE LOAN ACCOUNT
Interest will be credited to amounts in the Loan Account at an effective annual
rate of at least 4.00%. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Interest Credited
Differential, which is currently 1.25%, and is guaranteed not to exceed 1.75%.
LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the death of
the last-to-die of the Lives Insured, provided that the Policy is in force. When
a repayment is made, the amount is credited to the Loan Account and transferred
to the Guaranteed Interest Account or the Investment Accounts. Loan repayments
will be allocated first to the Guaranteed Interest Account until the associated
Loan sub-account is reduced to zero and then 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.
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<PAGE> 38
POLICY SURRENDER AND PARTIAL WITHDRAWALS
POLICY SURRENDER
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 Policy Debt. If there have been any prior Face
Amount increases, the Surrender Charge will be the sum of the Surrender Charge
for the Initial Face Amount plus the Surrender Charge for each increase. The Net
Cash Surrender Value will be determined as of 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.
PARTIAL WITHDRAWALS
A policyowner may make a partial withdrawal of the Net Cash Surrender Value once
each Policy Month after the first Policy Anniversary. The policyowner may
specify the portion of the 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. For information on
Surrender Charges on a Partial Withdrawal see "Charges and Deductions -
Surrender Charges."
REDUCTION IN FACE AMOUNT DUE TO A PARTIAL WITHDRAWAL
If Death Benefit Option 1 is in effect when a partial withdrawal is made, the
Face Amount of the Policy will be reduced by the amount of the withdrawal plus
any applicable Surrender Charges.
If the death benefit is based upon the Policy Value times the minimum death
benefit percentage set forth under "Death Benefit Minimum Death Benefit," the
Face Amount will be reduced only to the extent that the amount of the withdrawal
plus the portion of the Surrender Charge assessed exceeds the difference between
the death benefit and the Face Amount. 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.
LAPSE AND REINSTATEMENT
LAPSE
Unless the No-Lapse Guarantee is in effect, a Policy will go into default if at
the beginning of any Policy Month the Policy's Net Cash Surrender Value would be
zero or below after deducting the monthly deduction then due. Therefore, a
Policy could lapse eventually if increases in Policy Value (prior to deduction
of Policy charges) are not sufficient to cover Policy charges. A lapse could
have adverse tax consequences as described under "Tax Treatment of the Policy -
Tax Treatment of Policy Benefits - Surrender or Lapse." 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 on the date of default, plus the monthly deductions due at the date of
default and payable at the beginning of each of the two Policy Months
thereafter, plus any applicable premium load. If the required payment is not
received by the end of the grace period, the Policy will terminate with no
value.
NO-LAPSE GUARANTEE
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<PAGE> 39
In those states where it is permitted, as long as the No-Lapse Guarantee
Cumulative Premium Test is satisfied during the No-Lapse Guarantee Period, as
described below, the Company will guarantee that the Policy will not go into
default , even if adverse investment experience or other factors should cause
the Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deductions due at the beginning of a Policy Month.
The Monthly No-Lapse Guarantee Premium is one-twelfth of the No-Lapse Guarantee
Premium.
The No-Lapse Guarantee Premium is set at issue and reflects any Additional
Rating and Supplementary Benefits, if applicable. It is subject to change if the
face amount of the Policy is changed, if there is a Death Benefit Option change,
or if there is any change in the supplementary benefits added to the Policy or
in the risk classification of any Lives Insured because of a change in smoking
status.
The No-Lapse Guarantee Period is fixed at ten years.
While the No-Lapse Guarantee is in effect, the Company will determine at the
beginning of the Policy Month that your policy would otherwise be in default,
whether the No-Lapse Guarantee Cumulative Premium Test, described below, has
been met. If it has not been satisfied, the Company will notify the policyowner
of that fact and allow a 61-day grace period in which the policyowner may make a
premium payment sufficient to keep the policy from going into default. This
required payment, as described in the notification to the policyowner, will be
equal to the lesser of:
(a) the outstanding premium requirement to satisfy the No-Lapse Guarantee
Cumulative Premium Test at the date of default, plus the Monthly No-Lapse
Guarantee Premium due for the next two Policy Months, or
(b) the amount necessary to bring the Net Cash Surrender Value to zero plus the
monthly deductions due, plus the next two monthly deductions plus the
applicable premium load.
If the required payment is not received by the end of the grace period, the
No-Lapse Guarantee and the Policy will terminate.
NO-LAPSE GUARANTEE CUMULATIVE PREMIUM TEST
The No-Lapse Guarantee Cumulative Premium Test is satisfied if, as of the
beginning of the Policy Month that your policy would otherwise be in default,
the sum of all premiums paid to date less any gross withdrawals and less any
policy debt, is at least equal to the sum of the Monthly No-Lapse Guarantee
Premiums due from the Policy Date to the date of the test.
DEATH DURING GRACE PERIOD
If the Life Insured should die during the grace period, 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 will be reduced by any outstanding Monthly
Deductions due at the time of death.
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) All Lives Insured's risk classifications are standard or preferred, and
(b) All Lives Insured's Attained Ages are less than 46.
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the
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five-year period following the date of termination subject to the following
conditions:
(a) Evidence of all Lives Insured's insurability, or on the survivor(s) who were
insured at the end of the grace period, satisfactory to the Company is provided
to the Company;
(b) A premium equal to the amount that was required to bring the Policy out of
default immediately prior to termination, plus the amount needed to keep the
Policy in force to the next scheduled date for payment of the Planned Premium;
(c) The Policy cannot be reinstated if any of the Lives Insured die after the
Policy has terminated.
If the reinstatement is approved, the date of reinstatement will be the later of
the date the Company approves the policyowner's request or the date the required
payment is received at the Company's Service Office. In addition, any surrender
charges will be reinstated to the amount they were at the date of default. The
Policy Value on the date of reinstatement, prior to the crediting of any Net
Premium paid on the reinstatement, will be equal to the Policy Value on the date
the Policy terminated.
THE GENERAL ACCOUNT
The general account of Manufacturers Life of America consists of all assets
owned by the Company other than those in the Separate Account and other separate
accounts of the Company. Subject to applicable law, Manufacturers Life of
America has sole discretion over the investment of the assets of 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 S.E.C. 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.
GUARANTEED INTEREST 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. 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. Transfers from the
Guaranteed Interest Account to the Investment Accounts are subject to
restrictions.
POLICY VALUE IN THE GUARANTEED INTEREST ACCOUNT
The Policy Value in the Guaranteed Interest Account is equal to:
(a) the portion of the net premiums allocated to it; plus
(b) any amounts transferred to it; plus
(c) interest credited to it; less
(d) any charges deducted from it; less
(e) any partial withdrawals from it; less
(f) any amounts transferred from it.
INTEREST ON THE GUARANTEED INTEREST ACCOUNT
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
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<PAGE> 41
effective annual rate of at least 4%, without regard to the actual investment
experience of the general account. Consequently, if a policyowner pays the
planned premiums, allocates all net premiums only to the general account and
makes no transfers, partial withdrawals, or policy loans, the minimum amount and
duration of the death benefit of the Policy will be determinable and guaranteed.
OTHER PROVISIONS OF THE POLICY
POLICYOWNER RIGHTS
Unless otherwise restricted by a separate agreement, the policyowner may:
- - Vary the premiums paid under the Policy.
- - Change the death benefit option.
- - Change the premium allocation for future premiums.
- - Transfer amounts between sub-accounts.
- - Take loans and/or partial withdrawals.
- - Surrender the contract.
- - Transfer ownership to a new owner.
- - Name a contingent owner that will automatically become owner if the
policyowner dies before the insured.
- - Change or revoke a contingent owner.
- - Change or revoke a beneficiary.
ASSIGNMENT OF RIGHTS
Manufacturers Life of America will not be bound by an assignment until it
receives a copy of the assignment at its Service Office. Manufacturers Life of
America assumes no responsibility for the validity or effects of any assignment.
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. Beneficiaries may also be revocable or
irrevocable. Unless an irrevocable designation has been elected, the beneficiary
may be changed by the policyowner during the Lives Insured lifetime by giving
written notice to Manufacturers Life of America in a form satisfactory to the
Company. The change will take effect as of the date such notice is signed. 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 any Lives Insured's lifetime for two years from the
Issue Date. It will not contest the validity of an increase in Face Amount,
after such increase or addition has been in force during the lifetime of the
Lives Insured for two years. If a Policy has been reinstated and been in force
during the lifetime of the Lives Insured 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 stated age or sex or both of any of the Lives Insured in the Policy are
incorrect, Manufacturers Life of America will change the Face Amount so that the
death benefit will be that which the most recent monthly charge for the cost of
insurance would have purchased for the correct age and sex.
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SUICIDE EXCLUSION
If any of the Lives Insured dies by suicide within two years after the Issue
Date, the Policy will terminate and the Company will pay only the premiums paid
less any partial Net Cash Surrender Value withdrawal and less any Policy Debt.
If any of the Lives Insured dies by suicide within two years after the effective
date of an increase in Face Amount, the Company will credit the amount of any
Monthly Deductions taken for the increase and reduce the Face Amount to what it
was prior to the increase. If the last death is by suicide, the Death Benefit
for that increase will be limited to the Monthly Deductions taken for the
increase.
The Company reserve the right to obtain evidence of the manner and cause of
death of the Lives Insured.
SUPPLEMENTARY BENEFITS
Subject to certain requirements, one or more supplementary benefits may be added
to a Policy, including the Estate Preservation Rider which provides additional
term insurance at no extra charge during the first four Policy Years to protect
against application of the "three year contemplation of death" rule and an
option to split the Policy into two individual policies upon divorce, or certain
federal tax law changes without evidence of insurability (the "Policy Split
Option"). More detailed information concerning these 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.
TAX TREATMENT OF THE POLICY
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 nor of the
current interpretations by the Service. MANUFACTURERS LIFE OF AMERICA DOES 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 continuation 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 the tax
consequences, is contemplated, a qualified tax adviser should be consulted for
advice on the tax attributes of the particular arrangement.
LIFE INSURANCE QUALIFICATION
There are several requirements that must be met for a Policy to be considered a
Life Insurance Contract under the Internal Revenue Code, and thereby to enjoy
the tax benefits of such a contract:
1. The Policy must satisfy the definition of life insurance under Section 7702
of the Internal Revenue Code of 1986 (the "Code").
2. The investments of the Separate Account must be "adequately diversified" in
accordance with Section 817(h) of the Code and Treasury Regulations.
3. The Policy must be a valid life insurance contract under applicable state
law.
4. The Policyowner must not possess "incidents of ownership" in the assets of
the Separate Account.
These four items are discussed in detail below.
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DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. For a Policy to be a life insurance contract, it must
satisfy either the Cash Value Accumulation Test or the Guideline Premium Test.
The Cash Value Accumulation Test requires a minimum death benefit for a given
Policy Value. The Guideline Premium Test also requires a minimum death benefit,
but in addition limits the total premiums that can be paid into a Policy for a
given amount of death benefit.
With respect to a Policy which is 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 rate
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.
The Secretary of the 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 a Policy would not provide the tax advantages normally provided by a
life insurance 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.
DIVERSIFICATION
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 the Trust, intends to
comply with the diversification requirements prescribed in Treas. Reg. Sec.
1.817-5, which affect how the 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.
STATE LAW
State regulations require that the policyowner have appropriate insurable
interest in the Life Insured. Failure to establish an insurable interest may
result in the Policy not qualifying as a life insurance contract for federal tax
purposes.
INVESTOR CONTROL
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
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the
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<PAGE> 44
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 sub-accounts without being treated as
owners of the underlying assets". As of the date of this prospectus, no such
guidance has been issued.
The ownership rights under 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
policyowner 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.
TAX TREATMENT OF POLICY BENEFITS
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes. 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.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, partial withdrawal, surrender,
change in ownership, 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.
DEATH BENEFIT
The death benefit under the Policy should be excludible from the gross income of
the beneficiary under Section 101(a)(1) of the Code.
CASH VALUES
Generally, the policyowner will not be deemed to be in constructive receipt of
the Policy Value until there is a distribution. This includes additions
attributable to interest, dividends, appreciation or gains realized on transfers
among sub-accounts.
INVESTMENT IN THE POLICY
Investment in the Policy means:
(a) the aggregate amount of any premiums or other consideration paid for a
Policy; minus
(b) the aggregate amount, other than loan amounts, received under the Policy
which has been excluded from the gross income of the policyowner (except
that the amount of any loan from, or secured by, a Policy that is a MEC, to
the extent such amount has been excluded from gross income, will be
disregarded); plus
(c) the amount of any loan from, or secured by a Policy that is a MEC to the
extent that such amount has been included in the gross income of the
policyowner.
The repayment of a policy loan, or the payment of interest on a loan, does not
affect the Investment in the Policy.
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SURRENDER OR LAPSE
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 Policy Debt
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
If, at the time of lapse, a Policy has a loan, the loan is extinguished and the
amount of the loan is a deemed payment to the policyholder. If the amount of
this deemed payment exceeds the investment in the contract, the excess is
taxable income and is subject to Internal Revenue Service reporting
requirements."
DISTRIBUTIONS
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" or "MEC".
DISTRIBUTIONS FROM NON-MEC'S
A distribution from a non-MEC is generally treated as a tax-free recovery by the
policyowner of the Investment in the Policy 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. Loans from, or secured by, a
non-MEC are not treated as distributions. Instead, such loans are treated as
indebtedness of the policyowner.
Force Outs
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 to
comply 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.
Changes include partial withdrawals and death benefit option changes.
DISTRIBUTIONS FROM MEC'S
Policies classified as MEC's will be subject to the following tax rules:
(a) 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 at such time.
(b) 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.
(c) Third, a 10% additional income tax is imposed on the portion of any
distribution (including distributions on surrender) from, or loan taken from
or secured by, such a policy that is included in income except where the
distribution or loan:
(i) is made on or after the policyowner attains age 59 1/2;
(ii) is attributable to the policyowner becoming disabled; or
(iii) 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.
These exceptions are not likely to apply in situations where the Policy is not
owned by an individual.
Definition of 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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<PAGE> 46
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
"seven-pay premium limit". The seven-pay premium limit on any date is equal to
the sum of the net level premiums that would have been paid on or before such
date if the policy provided for paid-up future benefits after the payment of
seven level annual premiums (the "seven-pay premium").
The rules relating to whether a Policy will be treated as a MEC 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 MEC.
Material Changes
A policy that is not a MEC may become a MEC if it is "materially changed". If
there is a material change to the policy, the seven year testing period for MEC
status is restarted. The material change rules for determining whether a Policy
is a MEC are complex. In general, however, the determination of whether a Policy
will be a MEC after a material change generally depends upon the relationship
among the death benefit of the Policy at the time of such change, the Policy
Value at the time of the change, and the additional premiums paid into the
Policy during the seven years starting with the date on which the material
change occurs.
Reductions in Face Amount
If there is a reduction in benefits during any Policy Year, the seven-pay
premium limit is recalculated as if the policy had been originally issued at the
reduced benefit level. Failure to comply would result in classification as a MEC
regardless of any efforts by the Company to provide a payment schedule that will
not violate the seven pay test.
Exchanges
A life insurance contract received in exchange for a MEC will also be treated as
a MEC.
Processing of Premiums
If a premium is received which would cause the Policy to become a 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.
Multiple Policies
All MEC's that are issued by a Company (or its affiliates) to the same
policyowner during any calendar year are treated as one MEC for purposes of
determining the amount includible in gross income under Section 72(e) of the
Code.
POLICY LOAN INTEREST
Generally, personal interest paid on any loan under a Policy which is owned by
an individual is not deductible. For policies purchased on or after January 1,
1996, interest on any loan under a Policy
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<PAGE> 47
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 the
taxpayer will not be tax deductible unless the employee is a key person within
the meaning of Section 264 of the Code. A deduction will not be permitted for
interest on a loan under a Policy held on the life of a key person to the extent
the aggregate of such loans with respect to contracts covering the key person
exceed $50,000. The number of employees who can qualify as key persons depends
in part on the size of the employer but cannot exceed 20 individuals.
Furthermore, if a non-natural person owns a Policy, or is the direct or indirect
beneficiary under a Policy, section 264(f) of the Code disallows a pro-rata
portion of the taxpayer's interest expense allocable to unborrowed Policy cash
values attributable to insurance held on the lives of individuals who are not
20% (or more) owners of the taxpayer-entity, officers, employees, or former
employees of the taxpayer.
The portion of the interest expense that is allocable to unborrowed Policy cash
values is an amount that bears the same ratio to that interest expense as the
taxpayer's average unborrowed Policy cash values under such life insurance
policies bear to the average adjusted bases for all assets of the taxpayer.
If the taxpayer is not the Policyowner, but is the direct or indirect
beneficiary under the Policy, then the amount of unborrowed cash value of the
Policy taken into account in computing the portion of the taxpayer's interest
expense allocable to unborrowed Policy cash values cannot exceed the benefit to
which the taxpayer is directly or indirectly entitled under the Policy.
POLICY EXCHANGES
A policyowner generally will not recognize gain upon the exchange of a Policy
for another life insurance policy issued by the Company or another insurance
company, except to the extent that the policyowner receives cash in the exchange
or is relieved of Policy indebtedness as a result of the exchange. In no event
will the gain recognized exceed the amount by which the Policy Value (including
any unpaid loans) exceeds the policyowner's Investment in the Policy.
OTHER TRANSACTIONS
A transfer of the Policy, a change in the owner, a change in the beneficiary,
and certain other changes to the Policy, as well as particular uses of the
Policy (including use in a so called "split-dollar" arrangement) may have tax
consequences depending upon the particular circumstances and should not be
undertaken prior to consulting with a qualified tax adviser. For instance, if
the owner transfers the Policy or designates a new owner in return for valuable
consideration (or, in some cases, if the transferor is relieved of a liability
as a result of the transfer), then the Death Benefit payable upon the death of
the Insured may in certain circumstances be includible in taxable income to the
extent that the Death Benefit exceeds the prior consideration paid for the
transfer and any premiums or other amounts subsequently paid by the transferee.
Further, in such a case, if the consideration received exceeds the transferor's
Investment in the Policy, the difference will be taxed to the transferor as
ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the individual
circumstances of each policyowner and beneficiary.
ALTERNATE MINIMUM TAX
Corporate owners may be subject to Alternate Minimum Tax on the annual increases
in Cash Surrender Values and on the Death Benefit proceeds.
INCOME TAX REPORTING
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income tax
purposes, one or more of the following:
(a) the value each year of the life insurance protection provided;
(b) an amount equal to any employer-paid premiums; or
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<PAGE> 48
(c) some or all of the amount by which the current value exceeds the employer's
interest in the Policy.
Participants should consult with their tax adviser to determine the tax
consequences of these arrangements.
OTHER INFORMATION
PAYMENT OF PROCEEDS
As long as the Policy is in force, Manufacturers Life of America will ordinarily
pay any policy loans, surrenders, partial withdrawals or insurance benefit
within seven days after receipt at its Service Office of all the documents
required for such a payment. The Company may delay for up to six months the
payment from the Guaranteed Interest Account of any policy loans, surrenders,
partial withdrawals, or insurance benefit. In the case of any such payments from
any Investment Account, the Company may delay payment during any period during
which (i) the New York Stock Exchange is closed for trading (except for normal
weekend and holiday closings), (ii) trading on the New York Stock Exchange is
restricted, (iii) an emergency exists as a result of which disposal of
securities held in the Separate Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Separate Account's net
assets or (iv) the SEC, by order, so permits for the protection of security
holders; provided that applicable rules and regulations of the SEC shall govern
as to whether the conditions described in (2) and (3) exist.
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 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;
- - the Policy Debt and any loan interest charged since the last report;
- - the premiums paid and other Policy transactions made during the period since
the last report; and
- - any other information required by law.
Each policyowner will also be sent an annual and a semi-annual report for
the Trust which will include a list of the securities held in each Portfolio as
required by the 1940 Act.
DISTRIBUTION OF THE POLICIES
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.
ManEquity, Inc. is located at 200 Bloor Street East, Toronto, Ontario, Canada,
M4W 1ES and was organized under the laws of Colorado on May 4, 1970. The
directors of ManEquity, Inc. are: John Richardson, Roy Bubbs, Bruce Gordon, Gary
Buchanan and Douglas Myers. The officers of ManEquity, Inc. are: (i) Douglas
Myers - President, (ii) Gary Buchanan - Vice President, Compliance, (iii) Thomas
Reives - Treasurer, (iv) Brian Buckley - Secretary and General Counsel. The
Policies will be sold by registered representatives of either ManEquity or other
broker-dealers having distribution agreements with ManEquity who are also
authorized by state insurance departments to do so.
A registered representative will receive commissions not to exceed 105% of
premiums in the first year, 2% of all premiums paid in the second year and
after, and after the second anniversary 0.15% of the Policy Value per year.
Representatives who meet certain productivity standards with regard to the sale
of
44
<PAGE> 49
the Policies and certain other policies issued by Manufacturers Life of America
or Manufacturers Life will be eligible for additional compensation.
RESPONSIBILITIES OF 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 or Manufacturers USA and will pay Manufacturers Life or
Manufacturers USA for its other services under the agreement in such amounts and
at such times as agreed to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and recordkeeping functions on behalf of
Manufacturers Life of America with respect to all of its insurance policies
including the Policies.
Finally, Manufacturers USA has entered into a Stoploss Reinsurance Agreement
with Manufacturers Life of America under which Manufacturers Life (or
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 USA 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 USA may also consider reinsuring any non-aviation risk in
excess of $7,500,000 and any aviation risk in excess of $5,000,000.
VOTING RIGHTS
As stated previously, all of the assets held in the sub-accounts of the Separate
Account will be invested in shares of a particular Portfolio of the Trust.
Manufacturers Life of America is the legal owner of those shares and as such has
the right to vote upon certain 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 the 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 Portfolio. 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 meeting.
Manufacturers Life of America may, if required by state 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, the Company 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
45
<PAGE> 50
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.
SUBSTITUTION OF PORTFOLIO SHARES
It is possible that in the judgment of the management of Manufacturers Life of
America, one or more of the Portfolios may become unsuitable for investment by
the Separate Account because of a change in investment policy or a change in the
applicable laws or regulation, because the shares are no longer available for
investment, or for some other reason. In that event, Manufacturers Life of
America may seek to substitute the shares of another Portfolio or of an entirely
different mutual fund. Before this can be done, the approval of the S.E.C. and
one or more state insurance departments may be required.
Manufacturers Life of America also reserves the right (i) to combine other
separate accounts with the Separate Account, (ii) to create new separate
accounts, (iii) to establish additional sub-accounts within the Separate Account
to invest in additional portfolios of the Trust or another management investment
company, (iv) to eliminate existing sub-accounts and to stop accepting new
allocations and transfers into the corresponding portfolio, (v) to combine
sub-accounts or to transfer assets in one sub-account to another sub-account or
(vi) to transfer assets from the Separate Account to another separate account
and from another separate account to the Separate Account. The Company also
reserves the right to operate the Separate Account as a management investment
company or other form permitted by law, 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.
RECORDS AND ACCOUNTS
The Service Office will perform administrative functions, such as decreases,
increases, surrenders and partial withdrawals, and fund transfers on behalf of
the Company.
All records and accounts relating to the Separate Account and the Portfolios
will be maintained by the Company. All financial transactions will be handled by
the Company. All reports required to be made and information required to be
given will be provided by the Company.
STATE REGULATIONS
Manufacturers Life of America is subject to the 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.
LITIGATION
No litigation is pending that would have a material effect upon the Separate
Account or the Trust.
ACCOUNTANTS
The financial statements of The Manufacturers Life Insurance Company of America
and Separate Account Three of The Manufacturers Life Insurance Company of
America at December 31, 1997 and for the year then ended appearing in this
prospectus have been audited by Ernst & Young L.L.P., 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 firms as experts in auditing and
accounting.
46
<PAGE> 51
FURTHER 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. The Commission
also maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission which is located at http://www.sec.gov.
For further information you may also contact Manufacturers Life of America's
Home Office, the address and telephone number of which are on the first page of
the prospectus.
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Position with
Manufacturers Life
Name of America Principal Occupation
<S> <C> <C>
Sandra M. Cotter (35) Director Attorney 1989 - present, Dykema Gosset
(since December 1992)
James D. Gallagher (43) Director, Secretary and Vice President, Secretary and General Counsel
General Counsel (since May 1996) - January 1997- present, ManUSA; Vice
President, Legal Services U.S. Operations -
January 1996 - present, The Manufacturers Life
Insurance Company; Vice President, Secretary
and General Counsel - 1994 - present, The
Manufacturers Life Insurance Company of North
America; Vice President and Associate General
Counsel - 1991 - 1994, The Prudential
Insurance Company of America
Bruce Gordon (54) Director Vice President, U.S. Operations - Pensions -
(since May 1996) 1990 - present, The Manufacturers Life
Insurance Company
Donald A. Guloien (41) Director and President Senior Vice President, Business Development -
(since August 1990) 1994 - present, The Manufacturers Life
Insurance Company; Vice President, U.S.
Individual Business - 1990 - 1994, The
Manufacturers Life Insurance Company
Theodore Kilkuskie, Jr. (42) Director, Vice President U.S. Vice President, U.S. Individual Insurance -
Individual Insurance January 1997 - present, ManUSA; Vice
President, U.S. Individual 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 (59) Director (since July 1992) Senior Vice President, General Counsel and
Corporate Secretary - 1988 - present, The
Manufacturers Life Insurance Company
John D. Richardson (60) Chairman and Director Executive Vice President and General Manager,
(since January 1995) U.S. Operations - 1995 - present, The
Manufacturers Life Insurance Company; Senior
Vice President and General Manager, Canadian
Operations 1992 - 1994.
John R. Ostler (45) Vice President Financial Vice President - 1992 - present, The
and Treasurer Manufacturers Life Insurance Company.
Douglas H. Myers (43) Vice President, Finance and Assistant Vice President and Controller, U.S.
Compliance Controller Operations - 1988 - present, The Manufacturers
Life Insurance Company
Victor Apps (49) Senior Vice President, Asia Senior Vice President and General Manager,
Greater China Division - 1995 - present, The
Manufacturers Life Insurance Company; Vice
President and General Manager, Greater China
Division - 1993 - 1995, The Manufacturers Life
Insurance Company; International Vice
President - 1988 - 1993, Asia Pacific
Division, The Manufacturers Life Insurance
Company.
</TABLE>
47
<PAGE> 52
<TABLE>
<CAPTION>
<S> <C> <C>
Robert A. Cook (43) Vice President, Marketing Vice President, Product Management - 1996 -
present, The Manufacturers Life Insurance
Company; Sales and Marketing Director, U.S.
Division - 1994 - 1995, The Manufacturers Life
Insurance Company; Vice President, Corporation
Strategic Review - 1992 - 1993, The
Manufacturers Life Insurance Company
Felix Chee (51) Vice President, Investments Executive Vice President--1997 to present, The
Manufacturers Life Insurance Company; Chief
Investment Officer--1997 to present, The
Manufacturers Life Insurance Company; Senior
Vice President and Treasurer--1993-1994, The
Manufacturers Life Insurance Company; Senior
Vice President, Corporate Finance--April 1993
to September 1993, Ontario Hydro
Hugh C. McHaffie (39) Vice President Vice President, U.S. Annuities and Product
Development--1996 to present, The
Manufacturers Life Insurance Company; Vice
President U.S. Annuities and Development--1994
to present, The Manufacturers Life Insurance
Company of North America; Product Development
Executive--1990 to 1994, The Manufacturers
Life Insurance Company of North America
John G. Vrysen (42) Vice President, Appointed Actuary Vice President and Chief Financial Officer,
U.S. Operations--1996 to present, The
Manufacturers Life Insurance Company; Vice
President and Chief Actuary--1996 to present,
The Manufacturers Life Insurance Company of
North America
</TABLE>
48
<PAGE> 53
IMPACT OF YEAR 2000
Preparing computer systems to deal with the Year 2000 risk has become a
major issue for businesses throughout the world. Within Manufacturers Life, a
group-wide program has been underway since 1996 to make all critical systems
compliant by the end of 1998 and other systems compliant by the end of 1999.
Included in this program are all systems applicable to and shared by the Company
with Manufacturers Life. Based on a detailed assessment, Manufacturers Life
determined that a portion of its software needs to be modified or replaced so
that its computer systems will function properly into the Year 2000 and beyond.
Like most companies, the Year 2000 issue represents a significant challenge for
Manufacturers Life and extensive resources have been dedicated to modifying
existing software and to converting to new software. However, there can be no
assurances that Manufacturers Life's systems, nor those of other companies on
which Manufacturers Life relies, will be fully converted on a timely basis and
therefore that all adverse effects on the Company due to the Year 2000 risk will
be avoided. Manufacturers Life is presently consulting with vendors, customers,
subsidiaries, third-parties and other businesses with which it deals to ensure
that no material aspect of its, or the Company's, operations will be hindered by
the Year 2000 risk.
The costs of the project and the date on which Manufacturers Life plans
to complete the modifications are based on management's best estimates and are
subject to some uncertainty. Manufacturers Life is using both internal and
external resources to reprogram, or replace, and test the software for Year 2000
modifications. The total cost of this program to Manufacturers Life is estimated
to be $64 million, comprised of $55 million for specifically budgeted programs
and $9 million for general contingencies. Manufacturers Life has incurred $15
million as at December 31, 1997 of which the Company will receive an allocation
due to its shared systems. The costs allocated are not expected to have a
material effect on the net operating income of the Company.
ILLUSTRATIONS
The following tables illustrate the way in which a Policy's Death Benefit,
Policy Value, and Cash Surrender Value could vary over an extended period of
time.
[To Be Provided by Amendment]
<PAGE> 54
PART II. OTHER INFORMATION
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 in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
Cross-Reference Sheet;
The Prospectus, consisting of 49 pages;
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The signatures;
Written consents of the following persons:
A. James D. Gallagher, Esq., Secretary and General Counsel of The
Manufacturers Life Insurance Company of America [To be filed by
amendment]
B. John Vrysen, Vice-President and Chief Actuary of The Manufacturers Life
Insurance Company of America [To be filed by amendment]
C. Ernst & Young LLP [To be filed by amendment]
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. Filed herewith.
A(3)(a)(i) Distribution Agreement between The Manufacturers Life
Insurance Company of America and ManEquity, Inc. dated
December 23, 1986. Filed herewith.
A(3)(a)(ii) Amendment to Distribution Agreement between The Manufacturers
Life Insurance Company of America and ManEquity, Inc. dated
May 30, 1992. Filed herewith.
A(3)(a)(iii) Amendment to Distribution Agreement between The Manufacturers
Life Insurance Company of America and ManEquity, Inc. dated
February 23, 1994. Filed herewith.
A(3)(b)(i) Specimen Agreement between ManEquity, Inc. and registered
representatives. Incorporated by reference to Exhibit
A(3)(b)(i) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(3)(b)(ii) Specimen agreement between The Manufacturers Life Insurance
Company of America and registered representatives.
Incorporated by reference to Exhibit A(3)(b)(ii) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
A(3)(b)(iii) Specimen Agreement between ManEquity, Inc. and dealers.
Incorporated by reference to Exhibit A(3)(b)(iii) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
<PAGE> 55
A(3)(b)(iv) Specimen agreement between The Manufacturers Life Insurance
Company of America and dealers. Incorporated by reference to
Exhibit A(3)(b)(iv) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(3)(c) Schedule of Sales Commissions. [To be filed by amendment]
A(5)(a) Specimen Flexible Premium Variable Life Insurance Policy -
Filed herewith.
A(6)(a) Restated Articles of Redomestication of The Manufacturers
Life Insurance Company of America. Incorporated by reference
to Exhibit A(6)(a) to post-effective amendment no. 20 to the
registration statement on Form S-6, file number 33-13774,
filed April 26, 1996.
A(6)(b) By-Laws of The Manufacturers Life Insurance Company of
America. Incorporated by reference to Exhibit A(6)(b) to
post-effective amendment no. 20 to the registration statement
on Form S-6, file number 33-13774, filed April 26, 1996.
A(8)(a)(i) Service Agreement between The Manufacturers Life Insurance
Company and The Manufacturers Life Insurance Company of
America dated June 1, 1988. Incorporated by reference to
Exhibit A(8)(a)(i) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(ii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance
Company of America dated December 31, 1992. Incorporated by
reference to Exhibit A(8)(a)(ii) to pre-effective amendment
no. 1 to the registration statement on Form S-6, file number
333-51293 filed August 28, 1998.
A(8)(a)(iii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance
Company of America dated May 31, 1993. Incorporated by
reference to Exhibit A(8)(a)(iii) to pre-effective amendment
no. 1 to the registration statement on Form S-6, file number
333-51293 filed August 28, 1998.
A(8)(a)(iv) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance
Company of America dated June 30, 1993. Incorporated by
reference to Exhibit A(8)(a)(iv) to pre-effective amendment
no. 1 to the registration statement on Form S-6, file number
333-51293 filed August 28, 1998.
A(8)(a)(v) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance
Company of America dated December 31, 1996. Incorporated by
reference to Exhibit A(8)(a)(v) to pre-effective amendment
no. 1 to the registration statement on Form S-6, file number
333-51293 filed August 28, 1998.
A(8)(a)(vi) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance
Company of America dated May 31, 1998. Incorporated by
reference to Exhibit A(8)(a)(vi) to pre-effective amendment
no. 1 to the registration statement on Form S-6, file number
333-51293 filed August 28, 1998.
A(8)(b) Specimen Stoploss Reinsurance Agreement between The
Manufacturers Life Insurance Company of America and The
Manufacturers Life Insurance Company. Filed herewith.
<PAGE> 56
A(8)(c)(i) Service Agreement between The Manufacturers Life Insurance
Company and ManEquity, Inc. dated January 2, 1991.
Incorporated by reference to Exhibit A(8)(c)(i) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
A(8)(c)(ii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and ManEquity, Inc. dated March 1, 1994.
Incorporated by reference to Exhibit A(8)(c)(ii) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
A(10)(a) Specimen Application for Flexible Premium Variable Life
Insurance Policy. Incorporated by reference to Exhibit A(10)
to post effective amendment no. 3 to the registration
statement on Form S-6, file number 33-77256, filed April 26,
1996.
A(10)(b) Specimen Application Supplement for Flexible Premium Variable
Life Insurance Policy. Incorporated by reference to Exhibit
A(10)(a) to post effective amendment no. 5 to the
registration statement on Form S-6, file number 33-77256,
filed December 23, 1996.
2. Consents of the following:
A. Opinion and consent of James D. Gallagher, Esq., Secretary and General
Counsel of The Manufacturers Life Insurance Company of America - [To be
filed by amendment]
B. Opinion and consent of John Vrysen, Vice-President and Chief Actuary of
The Manufacturers Life Insurance Company of America - [To be filed by
amendment]
C. Consent of Ernst & Young LLP- [To be filed by amendment]
3. No financial statements are omitted from the prospectus pursuant to
instruction 1(b) or (c) of Part I.
4. Not applicable.
6. Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer
Procedures for the Policies. [To be filed by amendment]
7. Power of Attorney. Incorporated by reference to Exhibit 12 to post effective
amendment no. 10 to the registration statement on Form S-6, file number
33-52310, filed February 28, 1997.
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant and the Depositor have caused this Registration Statement to be
signed on their behalf in the City of Toronto, Province of Ontario, Canada, on
this 29th day of October, 1998.
SEPARATE ACCOUNT THREE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
(Depositor)
By: Donald A. Guloien
--------------------------------
DONALD A. GULOIEN
President
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
By: Donald A. Guloien
--------------------------------
DONALD A. GULOIEN
President
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 29th day of October, 1998.
Signature Title
- --------- -----
*
________________________ Chairman and Director
JOHN D. RICHARDSON
*
________________________ President and Director
DONALD A. GULOIEN (Principal Executive Officer)
*
________________________ Director
SANDRA M. COTTER
James D. Gallagher Director
- ------------------------
JAMES D. GALLAGHER
*
________________________ Director
BRUCE GORDON
*
________________________ Director
JOSEPH J. PIETROSKI
*
________________________ Director
THEODORE KILKUSKIE, JR.
*
________________________ Vice President, Finance
DOUGLAS H. MYERS (Principal Financial and
Accounting Officer)
*James D. Gallagher
- ------------------------
JAMES D. GALLAGHER
Pursuant to Power of Attorney
<PAGE> 59
EXHIBIT INDEX
Item No. Description
A(1) Resolutions of Board of Directors of The Manufacturers Life
Insurance Company of America establishing Separate Account
Three
A(3)(a)(i) Distribution Agreement between The Manufacturers Life
Insurance Company of America and ManEquity, Inc. dated
December 23, 1986
A(3)(a)(ii) Amendment to Distribution Agreement between The Manufacturers
Life Insurance Company of America and ManEquity, Inc. dated
May 30, 1992
A(3)(a)(iii) Amendment to Distribution Agreement between The Manufacturers
Life Insurance Company of America and ManEquity, Inc. dated
February 23, 1994
A(5)(a) Specimen Flexible Premium Variable Life Insurance Policy
A(8)(b) Specimen Stoploss Reinsurance Agreement between The
Manufacturers Life Insurance Company of America and The
Manufacturers Life Insurance Company
<PAGE> 1
Exhibit A(1)
CERTIFICATE OF SECRETARY
I, Sheri L. Kocen, hereby certify that I am the Assistant Secretary of
The Manufacturers Life Insurance Company of America; that I have charge, custody
and control of the record books of The Manufacturers Life Insurance Company of
America; and that the attached are true and correct copies of resolutions
unanimously adopted by the duly constituted and authorized Board of Directors of
The Manufacturers Life Insurance Company of America by unanimous written consent
thereof on August 22, 1986 and May 27, 1992.
I hereby certify that the attached resolutions have not been modified,
amended or rescinded (except as the August 22, 1986 resolution has been amended
by the resolution dated May 27, 1992), and continue in full force and effect.
AUGUST 22, 1986
RESOLVED, That a Separate Account designated "Separate Account Three" be,
and it is hereby established, in accordance with the provisions of Section
406.2, Chapter 2, Title 31, of the Pennsylvania Code, for the purpose of
providing a funding medium to support reserves under single premium
variable life insurance policies as may be issued by the Company and as the
Officers may designate for such purpose. The Officers may, from time to
time, change the designation of "Separate Account Three" to such other
designations as they may deem necessary and appropriate.
FURTHER RESOLVED, That the income, gains and losses (whether or not
realized) from assets allocated to Separate Account Three shall, in
accordance with any single premium variable life insurance policies issued
by the Company, be credited to or charged against such Separate Account
without regard to the other income gains or losses of the Company.
FURTHER RESOLVED, That the fundamental investment policy of Separate
Account Three shall be to invest or reinvest the assets of Separate Account
Three in securities issued by an investment company or investment companies
registered under the Investment Company Act of 1940, as amended, as the
Officers may designate pursuant to the provisions of the single premium
variable life insurance policies issued by the Company.
FURTHER RESOLVED, That the Officers are hereby authorized and directed to
take all actions necessary to register Separate Account Three as a unit
investment trust under the Investment Company Act of 1940, as amended, and
to take such related actions as they deem necessary and appropriate to
carry out the foregoing.
FURTHER RESOLVED, That the Officers are authorized to establish criteria by
which the Company shall institute procedures to provide for a pass-through
of voting rights to the owners of any single premium variable life
insurance policies issued by the Company as required by applicable laws
with respect to the shares of any investment companies which are held in
Separate Account Three.
FURTHER RESOLVED, That Stephen C. Nesbitt, Secretary and General Counsel of
this Company, be and is hereby constituted and appointed agent for service
of process for this Company to receive notices and communications from the
Securities and Exchange Commission with respect to such registration
statements as may be filed on behalf of the Company concerning Separate
Account Three and to exercise the power given to such agent in the rules
and regulations of the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
<PAGE> 2
FURTHER RESOLVED, That the Officers be, and they are hereby authorized to
do or cause to be done all things necessary or desirable, as may be advised
by counsel to comply with, or obtain exemptions from, Federal and State
laws and regulations that may be applicable to the issuance and sale of
single premium variable life insurance by the Company.
FURTHER RESOLVED, That in order that a suitable custodian may be designated
to hold the assets allocated to Separate Account Three in connection with
the issuance of any single premium variable life insurance policies by the
Company, the Officers are authorized in their discretion either to:
1. Enter into such agreements as may be necessary in order to obtain
regulatory approval for the Company or the Company's parent, The
Manufacturers Life Insurance Company, to serve as custodian for the
assets of Separate Account Three pursuant to the Investment Company Act
of 1940, as amended; or
2. Enter into an agreement with a banking institution, which the Officers
find to be suitable, whereby such bank will act as custodian and
depository for assets allocated to Separate Account Three:
all of such terms are subject to the conditions as the officers deem necessary
or appropriate to effectuate the foregoing.
FURTHER RESOLVED, That the Officers are authorized to do all things as they
deem necessary and appropriate to carry out any of the foregoing resolutions.
MAY 27, 1992
RESOLVED, that the resolution adopted by unanimous action of the Board on
August 22, 1986 shall be deemed to be amended by deleting the phrase "single
premium variable life insurance policies" each time it appears and inserting in
lieu thereof the phrase "single premium and flexible premium variable life
insurance policies".
IN WITNESS WHEREOF, I have hereunto set my hand this 30TH day of MARCH,
1994.
/s/ SHERI L. KOCEN
------------------------
Assistant Secretary
<PAGE> 1
Exhibit A(3)(a)(i)
DISTRIBUTION AGREEMENT
AGREEMENT made this 23rd day of December, 1986 between The
Manufacturers Life Insurance Company of America ("ManuLife America") a stock
life insurance company domiciled in the Commonwealth of Pennsylvania, on its own
behalf and on behalf of Separate Account Three ("Account") of ManuLife America
and ManEquity, Inc., ("ManEquity"), a Colorado corporation;
WITNESSETH
WHEREAS, the Account is an account established and maintained by
ManuLife America pursuant to the laws of the Commonwealth of Pennsylvania for
single premium variable life insurance policies issued by ManuLife America (the
"Policies"), under which income, gains and losses, whether or not realized, from
assets allocated to such account, are, in accordance with the Policies, credited
to or charged against such account without regard to other income, gains, or
losses of ManuLife America;
WHEREAS, ManuLife America has filed a registration statement for the
Account as a unit investment trust under the Investment Company Act of 1940 (the
"Investment Company Act");
WHEREAS, ManEquity is registered as a broker-dealer under the
Securities Exchange Act of 1934 ("Securities Exchange Act") and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, ManuLife America has filed a registration statement for the
policies under the Securities Act of 1933 (the "Securities Act") and proposes to
issue and sell the Policies through the Account to the public through ManEquity
acting as principal underwriter for the Account;
NOW, THEREFORE in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
parties do hereby agree as follows:
SECTION 1. PRINCIPAL UNDERWRITER
(a) APPOINTMENT.
ManuLife America grants to ManEquity the exclusive right during the
term of this Agreement, subject to the registration requirements of the
Securities Act and the Investment Company Act and the provisions of the
Securities Exchange Act, to be the distributor and principal underwriter of the
Policies issued through the Account in each state or other jurisdiction where
the Policies may legally be sold, including any riders which ManuLife America
may make available in connection therewith. ManEquity shall offer the Policies
for sale and distribution at premium rates to be set by ManuLife America.
(b) RESPONSIBILITIES.
ManEquity will assume full responsibility for the securities activities
of, and for securities law compliance by, its associated persons, (as that term
is defined in Section 3(a)(18) of the Securities Exchange Act) including, as
applicable, compliance with the NASD Rules of Fair
<PAGE> 2
Practice and Federal and State Laws and Regulations. ManEquity, directly or
through ManuLife America as its agent, will:
(i) make timely filings with the SEC, NASD, and other regulatory
authorities, of any sales literature or materials relating to the Account, as
required by law to be filed; and
(ii) make available to ManuLife America copies of any agreements or
plans intended for use in connection with the sale of the Policies in sufficient
number and in adequate time for clearance by the appropriate regulatory
authorities before they are used, and it is agreed that the parties will use
their best efforts to obtain such clearance by the appropriate regulatory
authorities before they are used and that the parties will use their best
efforts to obtain such clearance as expeditiously as reasonably possible.
ManEquity will train the associated persons, use its best efforts to
prepare them to complete satisfactorily any and all applicable NASD and state
qualification examinations, register the associated persons as its registered
representatives before they engage in securities activities, and supervise and
control them in the performance of such activities.
ManEquity shall be under no obligation to effectuate any particular
amount of sales of Policies or to promote or make sales, except to the extent
ManEquity deems advisable or to the extent otherwise mutually agreed to by
ManEquity and ManuLife America.
SECTION 2. SALES AGREEMENTS.
(a) AUTHORITY
ManEquity is hereby authorized to enter into separate written
agreements, on such terms and conditions as ManEquity may determine not
inconsistent with this Agreement, with organizations which agree to participate
in the distribution of the Policies and to use their best efforts to solicit
applications for the Policies. Such organizations and their agents or
representatives soliciting applications for Policies shall be duly and
appropriately licensed, registered or otherwise qualified for the sale of such
Policies (and the riders and other policies offered in connection therewith)
under the Insurance Laws and any applicable Blue Sky Laws of each state or other
jurisdiction in which such Policies may be lawfully sold and in which ManuLife
America is licensed to sell the Policies. Each such organization shall be both
registered as a broker/dealer under the Securities Exchange Act and a member of
the NASD, or if not so registered or not such a member, then the agents and
representatives of such organization soliciting applications for the Policies
shall be agents and registered representatives of a broker/dealer and NASD
member which is the parent of such organization and which maintains full
responsibility for the training, supervision, and control of the agents or
representatives selling the Policies.
(b) RESPONSIBILITIES.
ManEquity shall have the responsibility for the supervision of all such
organizations to the extent required by law and shall assume any legal
responsibilities of ManuLife America for the acts, commissions, or defalcations
of any such organizations. Applications for the Policies solicited by such
organizations through their agents or representatives shall be forwarded to
ManEquity. All payments for the Policies shall be made by cheque to ManuLife
America and remitted promptly by such organizations to ManEquity.
<PAGE> 3
SECTION 3. PAYMENTS AND COSTS.
In connection with the sale of the Policies, ManEquity is responsible
for all amounts (including the sales commissions described in the prospectus for
the Policies) due to the sales representatives or to broker/dealers who have
entered into sales agreements with ManEquity.
(b) As between ManuLife America and ManEquity, ManuLife America will
bear the cost of all services and expenses, including legal services and
expenses and registration, filing and other fees, in connection with:
(i) registering and qualifying the Account, the Policies and (to the
extent requested by ManEquity) the associated persons with Federal and state
regulatory authorities and the NASD, and
(ii) printing and distributing all registration statements and
prospectuses (including amendments), Policies, notices, periodic reports, proxy
solicitation material, sales literature and advertising filed or distributed in
connection with the sale of the Policies.
SECTION 4. LIFE INSURANCE AGENTS.
(a) ManEquity is authorized to appoint the organizations described in
Section 2(a) above as independent general agents of ManuLife America for the
sale of the Policies and any riders or policies in connection therewith.
ManuLife America will undertake to apply for life insurance agent licenses in
the appropriate states or jurisdictions of the designated agents or
representatives of those organizations so appointed by ManEquity; provided that
ManuLife America reserves the right to refuse to appoint any proposed agent, or
once appointed to terminate the same.
(b) ManuLife America retains the right to appoint and discharge any
life insurance agents, general agents or organizations appointed by ManuLife
America.
(c) Anyone or any party selling the Policies must be duly licensed
insurance producers. ManuLife America shall have the responsibility for
arranging for such licenses.
(d) All premium funds collected by ManEquity or any organization
appointed by ManEquity pursuant to Section 2(a) above, or their representatives,
shall be held at all times in a fiduciary capacity and promptly be forwarded to
ManuLife America. ManEquity will advise ManuLife America of the amount of gross
premium received.
SECTION 5. SUITABILITY.
(a) ManuLife America wishes to ensure that the Policies distributed
by ManEquity will be issued to purchasers for whom the Policy will be suitable.
ManEquity shall take reasonable steps to ensure that the various agents
appointed by it or by organizations appointed by ManEquity pursuant to 2(a)
above shall not make recommendations to an applicant to purchase a Policy and
shall not issue a Policy in the absence of reasonable grounds to believe that
the purchase of the Policy is suitable for such applicant. ManEquity shall
adhere to the STANDARDS OF SUITABILITY for the Policy adopted by ManuLife
America. The Standards of Suitability are set forth in Schedule
<PAGE> 4
A, which schedule is incorporated herein. While not limited to the following, a
determination of suitability shall be based on information furnished to an agent
after reasonable inquiry of such applicant concerning the applicant's insurance
and investment objectives, financial situation and needs, and the likelihood
that the applicant will persist with the Policy for such a period of time that
ManuLife America's acquisition costs are amortized over a reasonable period of
time.
(b) ManuLife America, however, retains the ultimate right of control
over and responsibility for, marketing the Policies.
(c) ManuLife America also retains the right to reject applications
for the Policies and maintains responsibility for all insurance underwriting
aspects in connection with such applications.
SECTION 6. PROMOTION MATERIALS.
ManEquity shall have the responsibility for consulting with respect to
the design and the drafting and legal review and filing of sales promotion
materials, and for the preparation of individual sales proposals related to the
sale of the Policies. All sales and promotional materials for the Policies must
first be reviewed and approved by ManuLife America. ManEquity and any
organization appointed by ManEquity pursuant to Section 2(a) above shall not
give any information or make any representations concerning any aspect of the
Policies or ManuLife America's operations to any person or entity unless such
information or representations are contained in the prospectuses for the
Policies, or are contained in sales or promotional materials approved by
ManuLife America.
SECTION 7. REPORTS.
ManEquity shall have the responsibility for: maintaining the records of
agents licensed, registered and otherwise qualified to sell the Policies;
calculating and furnishing periodic reports to ManuLife America of the
commissions and service fees payable to agents, brokers, general agents and
sales managers of ManuLife America and its affiliates; and for furnishing
periodic reports to ManuLife America as to the sale of Policies made pursuant to
this Agreement.
SECTION 8. RECORDS.
ManEquity shall maintain and preserve such accounts, books, and other
documents as are required of it by applicable laws and regulations. The books,
accounts and records of ManuLife America, the Account and ManEquity as to all
transactions hereunder shall be maintained so as to clearly and accurately
disclose the nature and details of the transactions, including such accounting
information as necessary to support the reasonableness of the amounts to be paid
by ManuLife America hereunder. Without limiting the foregoing, ManEquity will:
(a) maintain and preserve in accordance with Rules 17a-3 and 17a-4
under the Securities Exchange Act all books and records required to be
maintained in connection with the offer and sale of the Policies, which books
and records shall remain the property of ManEquity and shall be subject to
inspection by the Securities and Exchange Commission ("SEC") in accordance with
Section 17(a) of the Securities Exchange Act; and
<PAGE> 5
(b) before or upon completion of each transaction for which a
confirmation is legally required, send a written confirmation for each such
transaction reflecting the facts of the transaction.
SECTION 9. COMPENSATION.
For the services rendered, expenses assumed and the continuing
obligations set forth herein, ManEquity shall receive from ManuLife America such
amounts and at such times as may from time to time be agreed upon by ManEquity
and ManuLife America.
SECTION 10. LIABILITY FOR OTHER PARTY.
Neither party to this Agreement shall be liable to the other for any
action taken or omitted by it, or any of its officers, agents or employees, in
performing their responsibilities under this Agreement in good faith and without
gross negligence, willful misfeasance or reckless disregard of such
responsibilities, unless otherwise mutually agreed in writing.
SECTION 11. NOTIFICATION OF PARTIES.
Both parties to this Agreement shall advise the other promptly of:
(a) any action of the SEC or any authorities of any state or other
jurisdiction, of which it has knowledge, affecting registration or qualification
of the Account or the Policies, or the right to offer the Policies for sale; and
(b) the happening of any event which makes untrue any statement, or
which requires the making of any change, in the registration statements or
prospectuses in order to make the statements therein not misleading.
SECTION 12. INVESTIGATION AND PROCEEDINGS.
(a) ManEquity and ManuLife America agree to cooperate fully in any
insurance regulatory investigation or proceeding or judicial
proceeding arising in connection with the Policies distributed
under this Agreement. ManEquity and ManuLife America further agree
to cooperate fully in any securities regulatory investigation or
proceeding or judicial proceeding with respect to ManuLife America,
ManEquity, their affiliates and their agents or representatives to
the extent that such investigation or proceeding is in connection
with Policies distributed under this Agreement. Without limiting
the foregoing:
(i) ManEquity will be notified promptly of any customer
complaint or notice of any regulatory investigation or
proceeding or judicial proceeding received by ManuLife
America with respect to ManEquity or any agent or
representative or which may affect ManuLife America's
issuance of any Policy marketed under this Agreement;
(ii) ManEquity will promptly notify ManuLife America of any
customer complaint or notice of any regulatory investigation
or proceeding received by ManEquity or its affiliates with
respect to
<PAGE> 6
ManEquity or any agent or representative in connection with
any Policy distributed under this Agreement or any activity
in connection with any such Policy.
(b) In the case of a customer complaint, ManEquity and ManuLife
America will cooperate in investigating such complaint and any response to such
complaint will be sent to the other party to this Agreement for approval not
less than five business days prior to its being sent to the customer or
regulatory authority, except that if a more prompt response is required, the
proposed response shall be communicated by telephone or fax.
SECTION 13. GUARANTEE.
ManuLife America undertakes to guarantee the performance of any
obligations ManEquity may have pursuant to Section 27(f) of the Investment
Company Act, as amended, and paragraph (b) of Rule 27d-2 adopted by the
Securities and Exchange Commission, to make refunds of charges required of the
principal underwriter of Policies issued in connection with the Account.
SECTION 14. TERMINATION.
This Agreement shall terminate automatically if it shall be assigned.
This Agreement may be terminated at any time by either party hereto on 60 days'
written notice to the other party hereto, without the payment of any penalty.
Upon termination of this Agreement all authorizations, rights and obligations
shall cease except:
(a) the obligation to settle accounts hereunder, including
commissions on premiums subsequently received for Policies in effect at the time
of termination; and
(b) the agreements contained in paragraphs 11 and 12 hereof.
SECTION 15. REGULATION.
This Agreement shall be subject to the provisions of the Investment
Company Act and the Securities Exchange Act and the rules, regulations, and
rulings thereunder and of the NASD, from time to time in effect, including such
exemptions from the Investment Company Act as the SEC may grant, and the terms
hereof shall be interpreted and construed in accordance therewith.
ManEquity shall submit to all regulatory and administrative bodies
having jurisdiction over the operations of the Account, present or future, any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
SECTION 16. SEVERABILITY.
Should any portion of this Agreement for any reason be held to be void
in law or in equity, the Agreement shall be construed, insofar as is possible,
as if such portion had never been contained therein.
SECTION 17. GOVERNING LAW.
<PAGE> 7
This Agreement shall be construed in accordance with, and governed by,
the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized officers as of the date first
mentioned above.
Attest: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
_______________________________ By: _______________________________
Its:
Attest: MANEQUITY, INC.
_______________________________ By: _______________________________
Its:
<PAGE> 1
Exhibit A(3)(a)(ii)
AMENDMENT TO DISTRIBUTION AGREEMENT
This Amendment made this 30TH day of MAY, 1992 to the Distribution
Agreement between the Manufacturers Life Insurance Company of America ("Manulife
America") on its own behalf and on behalf of Separate Account Three (the
"Account") of Manulife America and ManEquity, Inc. ("ManEquity") dated December
23, 1986 (the "Agreement").
Manulife America and ManEquity agree to amend the Agreement as follows:
The first paragraph of the Witnesseth Section shall be amended to read
as follows:
"WHEREAS, the Account is an account established and maintained by
Manulife America pursuant to the laws of the Commonwealth of
Pennsylvania for variable life insurance policies issued by Manulife
America (the "Policies"), under which income, gains and losses, whether
or not realized, from assets allocated to such account, are, in
accordance with the Policies, credited to or charged against such
account without regard to other income, gains, or losses of Manulife
America;"
All other terms and conditions of the Agreement shall remain unchanged
and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized officers as of the date first
above-mentioned.
Attest: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
_______________________________ By: _______________________________
Its: ______________________________
Attest: MANEQUITY, INC.
_______________________________ By: _______________________________
Its: ______________________________
<PAGE> 1
Exhibit A(3)(a)(iii)
AMENDMENT TO DISTRIBUTION AGREEMENT
This Amendment made the 23RD day of FEB., 1994 to the Distribution
Agreement between the Manufacturers Life Insurance Company of America ("Manulife
America") on its own behalf and on behalf of Separate Account Three (the
"Account") of Manulife America and ManEquity, Inc. ("ManEquity") dated
December 23, 1986 (the "Agreement").
Manulife America and ManEquity agree to amend the Agreement as follows:
The first paragraph of the Witnesseth Section shall be amended to read
as follows:
"WHEREAS, the Account is an account established and maintained by
Manulife America pursuant to the laws of the State of Michigan for
variable life insurance policies issued by Manulife America (the
"Policies"), under which income, gains and losses, whether or not
realized, from assets allocated to such account, are, in accordance
with the Policies, credited to or charged against such account without
regard to other income, gains, or losses of Manulife America;"
All other terms and conditions of the Agreement shall remain unchanged
and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized officers as of the date first
above-mentioned.
Attest: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
_______________________________ By: _______________________________
Its: ______________________________
Attest: MANEQUITY, INC.
_______________________________ By: _______________________________
Its: ______________________________
<PAGE> 1
Exhibit A(5)(a)
- --------------------------------------------------------------------------------
LIVES INSURED JOHN M. DOE
MARY C. DOE
POLICY NUMBER 12 345 678
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM SURVIVORSHIP CASH SURRENDER VALUES AND BENEFITS
VARIABLE LIFE INSURANCE POLICY. FOR A PORTION OF THE POLICY VALUES
PAYABLE ON DEATH OF THE LAST-TO-DIE ALLOCATED TO AN INVESTMENT ACCOUNT
OF THE LIVES INSURED. REFLECT THE INVESTMENT EXPERIENCE OF
ADJUSTABLE DEATH BENEFIT. THE UNDERLYING SUB-ACCOUNTS.
FLEXIBLE PREMIUMS PAYABLE UNTIL THE INVESTMENT OPTIONS ARE DESCRIBED IN
EARLIER OF LAST DEATH, OR THE POLICY THE "POLICY VALUE COMPOSITION" AND
ANNIVERSARY WHEN THE YOUNGEST OF THE THE "INVESTMENT OPTIONS" PROVISIONS.
LIVES INSURED REACHES ATTAINED AGE NON-PARTICIPATING (NOT ELIGIBLE FOR
100 OR WOULD HAVE REACHED ATTAINED DIVIDENDS).
AGE 100 IF LIVING.
- --------------------------------------------------------------------------------
In this policy "you" and "your" refer to the owner(s) of the policy. "We", "us"
and "our" "refer" to The Manufacturers Life Insurance Company of America.
If all of the Lives Insured die while the policy is in force, on the last death
we will pay the Insurance Benefit to the beneficiary, subject to the provisions
of the policy. The Lives Insured and the beneficiary are named in the Policy
Information section of this policy and in the application for this policy, a
copy of which is attached to this policy. The death benefit is described in the
"Insurance Benefit" provision.
The Insurance Benefit is payable following the death of the last-to-die of the
Lives Insured. However, you must give us proof of each death as soon as it
occurs. Proof of death for all the Lives Insured is important for us to
accurately determine benefits under the policy.
YOUR NET PREMIUMS ARE ADDED TO YOUR POLICY VALUE. YOU MAY ALLOCATE THEM TO ONE
OR MORE OF THE INVEST-MENT ACCOUNTS AND TO THE GUARANTEED INTEREST ACCOUNT.
THE PORTION OF YOUR POLICY VALUE THAT IS IN AN INVESTMENT ACCOUNT WILL VARY FROM
DAY TO DAY. THE AMOUNT IS NOT GUARANTEED; IT MAY INCREASE OR DECREASE, DEPENDING
ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS FOR THE INVESTMENT
ACCOUNTS THAT YOU HAVE CHOSEN.
THE PORTION OF YOUR POLICY VALUE THAT IS IN THE GUARANTEED INTEREST ACCOUNT WILL
ACCUMULATE, AFTER DEDUCTIONS, AT RATES OF INTEREST WE DETERMINE. SUCH RATES WILL
NOT BE LESS THAN 4% A YEAR.
THE AMOUNT OF THE INSURANCE BENEFIT, OR THE DURATION OF THE INSURANCE COVERAGE,
OR BOTH, MAY BE VARIABLE OR FIXED UNDER SPECIFIED CONDITIONS AND MAY INCREASE OR
DECREASE AS DESCRIBED IN THE "PAYMENT OF PREMIUMS" PROVISION AND THE "INSURANCE
BENEFIT" PROVISION.
READ YOUR POLICY CAREFULLY. IT IS A CONTRACT BETWEEN YOU AND US.
RIGHT TO RETURN POLICY. WITHIN TEN DAYS AFTER YOU RECEIVE YOUR POLICY, YOU CAN
RETURN THE POLICY FOR CANCELLATION BY DELIVERING OR MAILING IT TO US OR THE
AGENT WHO SOLD IT. IMMEDIATELY ON DELIVERY OR MAILING, THE POLICY WILL BE VOID
FROM THE BEGINNING. WE WILL REFUND IN FULL THE PAYMENT MADE.
- --------------------------------------------------------------------------------
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
A STOCK COMPANY
/s/ Dan Guloien /s/ James D. Gallagher
President Secretary
[MANULIFE FINANCIAL LOGO]
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE
Policy Information............................................................3
Table Of Guaranteed Maximum Cost Of Insurance Rates...........................4
Definitions...................................................................5
Payment Of Premiums...........................................................6
No-Lapse Guarantee............................................................7
Termination...................................................................7
Reinstatement.................................................................8
Insurance Benefit.............................................................8
Policy Value.................................................................10
Policy Value Composition.....................................................11
Separate Account And Sub-Accounts............................................12
Investment Options...........................................................13
Policy Loan Conditions.......................................................14
Changing The Death Benefit Option Or The Face Amount.........................15
Surrender For Cash...........................................................17
Surrender Charges............................................................18
Right To Postpone Payment Of Benefits........................................19
Right To Cancel Increases....................................................19
Suicide......................................................................19
Beneficiary..................................................................20
Ownership And Assignment.....................................................20
Protection Against Creditors.................................................21
Currency And Place Of Payment................................................21
Contract.....................................................................21
Validity.....................................................................21
Non-Participating............................................................21
Age And Sex..................................................................21
How Values Are Computed......................................................22
Annual Statement.............................................................22
Tax Considerations...........................................................22
Any endorsements, any supplementary benefits, and a copy of the application,
follow page 22.
Page 2
<PAGE> 3
POLICY INFORMATION
LIVES INSURED NO. 1 - JOHN M. DOE AGE AT POLICY DATE: 35
NO. 2 - MARY C. DOE AGE AT POLICY DATE: 35
POLICY NUMBER 12 345 678 POLICY DATE: JAN 1, 1998
ISSUE DATE: FEB 1, 1998
OWNER JOHN M. DOE AND MARY C. DOE, JOINTLY IF LIVING,
OTHERWISE THE SURVIVOR
BENEFICIARY AS DESIGNATED IN THE APPLICATION OR SUBSEQUENTLY CHANGED
PREMIUM MODE ANNUALLY
BEGINNING ON
MON DAY YEAR PLANNED PREMIUM
JAN 01 1998 $700.00
THIS POLICY PROVIDES LIFE INSURANCE COVERAGE FOR THE LIFETIME OF THE LIVES
INSURED IF SUFFICIENT PREMIUMS ARE PAID. PREMIUM PAYMENTS IN ADDITION TO THE
PLANNED PREMIUM SHOWN MAY NEED TO BE MADE TO KEEP THIS POLICY AND COVERAGE IN
FORCE.
CHANGES IN THE CURRENT COST OF INSURANCE RATES; THE AMOUNT, TIMING AND FREQUENCY
OF THE PLANNED PREMIUM; THE INTEREST RATE BEING CREDITED TO THE GUARANTEED
INTEREST ACCOUNT; THE INVESTMENT EXPERIENCE OF THE SUB-ACCOUNTS; CHANGES TO THE
DEATH BENEFIT OPTION; CHANGES IN THE FACE AMOUNT; LOAN ACTIVITY; AND PARTIAL
WITHDRAWALS OR MONTHLY DEDUCTIONS FOR ANY SUPPLEMENTARY BENEFITS THAT APPLY AND
ARE ATTACHED TO THIS POLICY WILL AFFECT THE PERIOD OF COVERAGE. ALSO REFER TO
THE "TERMINATION" PROVISION OF YOUR POLICY.
PLAN DETAILS, RISK CLASSIFICATION AND ADDITIONAL RATING ARE SHOWN ON THE NEXT
PAGE.
PAGE 3.0A
<PAGE> 4
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
LIVES INSURED NO. 1 - JOHN M. DOE
NO. 2 - MARY C. DOE
POLICY NUMBER 12 345 678
PLAN FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE
PAYABLE ON DEATH OF THE LAST-TO-DIE OF THE LIVES INSURED,
NON-PARTICIPATING
FACE AMOUNT $250,000.00
DEATH BENEFIT OPTION 1
SEX NO. 1 - MALE
NO. 2 - FEMALE
RISK
CLASSIFICATION NO. 1 - NON-SMOKER,STANDARD CLASS
NO. 2 - NON-SMOKER,STANDARD CLASS
ADDITIONAL
RATING NO. 1 - NOT APPLICABLE
NO. 2 - NOT APPLICABLE
PAGE 3.0B
<PAGE> 5
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF CHARGES
PREMIUM LOAD:
7.5% OF EACH PREMIUM PAID IN EACH POLICY YEAR.
MONTHLY ADMINISTRATION CHARGE:
FOR THE FIRST POLICY YEAR THE CHARGE IS $30.00 PLUS $0.08 FOR EACH
$1,000 OF CURRENT FACE AMOUNT. THE CURRENT FACE AMOUNT IN ANY POLICY
MONTH IS THE FACE AMOUNT OF INSURANCE INITIALLY PURCHASED, PLUS OR
MINUS ADJUSTMENTS FOR INCREASES AND DECREASES. FOR ALL SUBSEQUENT
POLICY YEARS, A CHARGE NOT TO EXCEED $15.00 PLUS $0.02 FOR EACH $1,000
OF CURRENT FACE AMOUNT WILL APPLY.
MORTALITY AND EXPENSE RISKS CHARGE:
0.063% IS DEDUCTED MONTHLY FROM EACH INVESTMENT ACCOUNT VALUE TO A
MAXIMUM OF 0.067% FOR 20 YEARS AND THEN REDUCES TO 0.033% THEREAFTER.
THIS REDUCTION IN THE CHARGE IS GUARANTEED.
MONTHLY COST OF INSURANCE CHARGE:
SEE THE MONTHLY DEDUCTIONS SECTION OF THE "POLICY VALUE" PROVISION FOR
DETAILS. THE COST OF ANY SUPPLEMENTARY BENEFIT IS DESCRIBED IN THE
SUPPLEMENTARY BENEFIT PAGE ATTACHED TO THIS POLICY.
PAGE 3.1A
<PAGE> 6
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF CHARGES (CONTINUED)
SURRENDER CHARGES:
A SURRENDER CHARGE WILL BE DEDUCTED FROM YOUR POLICY VALUE UNDER CERTAIN
CONDITIONS AND WILL REDUCE OVER TIME ACCORDING TO THE GRADING PERCENTAGES SHOWN
IN THE TABLE BELOW. SEE THE POLICY VALUE, CHANGING THE DEATH BENEFIT OPTION OR
FACE AMOUNT, SURRENDER FOR CASH AND SURRENDER CHARGES PROVISIONS FOR DETAILS.
THE SURRENDER CHARGE IS DETERMINED AS FOLLOWS:
(I) 3.75 MULTIPLIED BY EACH $1,000 OF FACE AMOUNT; PLUS
(II) 82.5% OF THE SUM OF PREMIUMS PAID IN THE FIRST POLICY YEAR, OR THE TARGET
PREMIUM SHOWN ON PAGE 3.2; WHICHEVER IS LESS.
TABLE OF GRADING PERCENTAGES DURING THE SURRENDER CHARGE PERIOD
(APPLICABLE TO THE INITIAL FACE AMOUNT AND SUBSEQUENT INCREASES)
SURRENDER AGE AND GRADING PERCENTAGE**
CHARGE PERIOD* 0-75 76 77 78 79 80+
-----------------------------------------------------------------
1 93% 92% 92% 91% 90% 90%
2 86% 85% 84% 83% 81% 80%
3 80% 78% 76% 75% 72% 70%
4 73% 71% 69% 66% 63% 60%
5 66% 64% 61% 58% 54% 50%
6 60% 57% 53% 50% 45% 40%
7 53% 50% 46% 41% 36% 30%
8 46% 42% 38% 33% 27% 20%
9 40% 35% 30% 25% 18% 10%
10 33% 28% 23% 16% 9% 0%
11 26% 21% 15% 8% 0%
12 20% 14% 7% 0%
13 13% 7% 0%
14 6% 0%
15 0%
* PERIODS SHOWN ARE AFTER END OF POLICY YEAR.
** AGE FOR THE INITIAL FACE AMOUNT REFERS TO THE ISSUE AGE OF THE
YOUNGEST OF THE LIVES INSURED UNDER THIS POLICY AT ISSUE; OR THE
ATTAINED AGE OF THE YOUNGEST OF THE LIVES INSURED UNDER THIS POLICY AT
ISSUE AT THE TIME OF A SUBSEQUENT FACE AMOUNT INCREASE.
PAGE 3.1B
<PAGE> 7
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF VALUES
REFER TO YOUR POLICY PROVISIONS FOR DETAILS ON THE TERMS AND VALUES SHOWN IN
THIS TABLE.
TARGET PREMIUM $1,168.50
NO-LAPSE GUARANTEE PREMIUM $690.00
NO-LAPSE GUARANTEE PERIOD FIRST 10 POLICY
YEARS
MINIMUM FACE AMOUNT $250,000.00
MINIMUM FACE AMOUNT INCREASE OR DECREASE $50,000.00
TRANSFER FEE $25.00
(FOR TRANSFERS IN EXCESS OF 12 IN A POLICY YEAR)
ASSET ALLOCATION BALANCER CHARGE
CURRENT $0.00
MAXIMUM $15.00
DOLLAR COST AVERAGING CHARGE
CURRENT $0.00
MAXIMUM $5.00
GUARANTEED INTEREST ACCOUNT MAXIMUM TRANSFER PERCENTAGE 15%
GUARANTEED INTEREST ACCOUNT MAXIMUM TRANSFER AMOUNT $500.00
GUARANTEED INTEREST ACCOUNT RATE 4%
WITHDRAWAL TIER AMOUNT PERCENTAGE 10%
ANNUAL LOAN INTEREST CHARGED RATE 5.75%
LOAN INTEREST CREDITED DIFFERENTIAL
CURRENT 1.25%
MAXIMUM 1.75%
DEATH BENEFIT DISCOUNT FACTOR 1.0032737
FIRST YEAR GUARANTEED MONTHLY COST OF INSURANCE
RATE PER THOUSAND 0.00248
PAGE 3.2
<PAGE> 8
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
LIST OF INVESTMENT FUNDS
THE SEPARATE ACCOUNT IS AUTHORIZED TO INVEST IN SHARES OF MANUFACTURERS
INVESTMENT TRUST OR ANOTHER INVESTMENT COMPANY. EACH SUB-ACCOUNT OF THE SEPARATE
ACCOUNT PURCHASES SHARES IN THE FUNDS LISTED BELOW. WE WILL INFORM YOU OF ANY
CHANGES IN THE AVAILABLE FUNDS.
YOU MAY ALLOCATE NET PREMIUMS TO ANY OF THE FUNDS. YOUR INITIAL INVESTMENT
ALLOCATION IS SHOWN IN THE APPLICATION FOR THE POLICY.
SEE THE FOLLOWING PROVISIONS FOR DETAILS: POLICY VALUE, POLICY VALUE
COMPOSITION, SEPARATE ACCOUNT AND SUB-ACCOUNTS, AND INVESTMENT OPTIONS.
MANUFACTURERS INVESTMENT TRUST PORTFOLIOS AND INVESTMENT OBJECTIVES
(1) THE PACIFIC RIM EMERGING MARKETS TRUST SEEKS TO PROVIDE LONG-TERM
GROWTH OF CAPITAL.
(2) THE SCIENCE AND TECHNOLOGY TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL. CURRENT INCOME IS INCIDENTAL TO THE PORTFOLIO'S OBJECTIVE.
(3) THE INTERNATIONAL SMALL CAP TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL
APPRECIATION.
(4) THE SMALL COMPANY TRUST SEEKS TO PROVIDE MAXIMUM CAPITAL APPRECIATION.
(5) THE PILGRIM BAXTER GROWTH TRUST SEEKS TO PROVIDE CAPITAL APPRECIATION.
(6) THE SMALL/MID CAP TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL
APPRECIATION.
(7) THE INTERNATIONAL STOCK TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL.
(8) THE WORLDWIDE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL.
(9) THE GLOBAL EQUITY TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL
APPRECIATION.
(10) THE SMALL COMPANY VALUE TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL.
(11) THE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
PAGE 3.3A
<PAGE> 9
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
LIST OF INVESTMENT FUNDS
(12) THE EQUITY TRUST SEEKS TO PROVIDE GROWTH OF CAPITAL. CURRENT INCOME IS
A SECONDARY CONSIDERATION ALTHOUGH GROWTH OF INCOME MAY ACCOMPANY
GROWTH OF CAPITAL.
(13) THE QUANTITATIVE EQUITY TRUST SEEKS TO ACHIEVE INTERMEDIATE AND
LONG-TERM GROWTH THROUGH CAPITAL APPRECIATION AND CURRENT INCOME.
(14) THE EQUITY INDEX TRUST SEEKS 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.
(15) THE BLUE CHIP GROWTH TRUST SEEKS 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.
(16) THE REAL ESTATE SECURITIES TRUST SEEKS TO ACHIEVE A COMBINATION OF
LONG-TERM CAPITAL APPRECIATION AND SATISFACTORY CURRENT INCOME.
(17) THE VALUE TRUST SEEKS TO PROVIDE AN ABOVE-AVERAGE TOTAL RETURN OVER A
MARKET CYCLE OF THREE TO FIVE YEARS, CONSISTENT WITH REASONABLE RISK.
(18) THE INTERNATIONAL GROWTH AND INCOME TRUST SEEKS TO PROVIDE LONG-TERM
GROWTH OF CAPITAL AND INCOME.
(19) THE GROWTH AND INCOME TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL AND INCOME CONSISTENT WITH PRUDENT INVESTMENT RISK.
(20) THE EQUITY-INCOME TRUST SEEKS TO PROVIDE SUBSTANTIAL DIVIDEND INCOME
AND ALSO LONG-TERM CAPITAL APPRECIATION.
(21) THE BALANCED TRUST SEEKS TO PROVIDE CURRENT INCOME AND CAPITAL
APPRECIATION.
(22-24) THE AUTOMATIC ASSET ALLOCATION TRUSTS (AGGRESSIVE, MODERATE AND
CONSERVATIVE) SEEK TO OBTAIN THE HIGHEST POTENTIAL TOTAL RETURN
CONSISTENT WITH A SPECIFIED LEVEL OF RISK TOLERANCE -- AGGRESSIVE,
MODERATE AND CONSERVATIVE.
(25) THE HIGH YIELD TRUST SEEKS TO REALIZE AN ABOVE-AVERAGE TOTAL RETURN
OVER A MARKET CYCLE OF THREE TO FIVE YEARS, CONSISTENT WITH REASONABLE
RISK.
PAGE 3.3B
<PAGE> 10
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
LIST OF INVESTMENT FUNDS
(26) THE STRATEGIC BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF TOTAL RETURN
CONSISTENT WITH PRESERVATION OF CAPITAL.
(27) THE GLOBAL GOVERNMENT BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF
TOTAL RETURN BY PLACING PRIMARY EMPHASIS ON HIGH CURRENT INCOME AND
THE PRESERVATION OF CAPITAL.
(28) THE CAPITAL GROWTH BOND TRUST SEEKS TO ACHIEVE GROWTH OF CAPITAL BY
INVESTING IN MEDIUM-GRADE OR BETTER DEBT SECURITIES, WITH INCOME AS A
SECONDARY CONSIDERATION.
(29) THE INVESTMENT QUALITY BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME CONSISTENT WITH THE MAINTENANCE OF PRINCIPAL AND
LIQUIDITY.
(30) THE U.S. GOVERNMENT SECURITIES TRUST SEEKS TO OBTAIN A HIGH LEVEL OF
CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL AND MAINTENANCE
OF LIQUIDITY.
(31) THE MONEY MARKET TRUST SEEKS TO OBTAIN MAXIMUM CURRENT INCOME
CONSISTENT WITH PRESERVATION OF PRINCIPAL AND LIQUIDITY.
(32) THE LIFESTYLE AGGRESSIVE 1000 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH
OF CAPITAL. CURRENT INCOME IS NOT A CONSIDERATION.
(33) THE LIFESTYLE GROWTH 820 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL WITH CONSIDERATION ALSO GIVEN TO CURRENT INCOME.
(34) THE LIFESTYLE BALANCED 640 TRUST SEEKS TO PROVIDE A BALANCE BETWEEN A
HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL WITH A GREATER
EMPHASIS GIVEN TO CAPITAL GROWTH.
(35) THE LIFESTYLE MODERATE 460 TRUST SEEKS TO PROVIDE A BALANCE BETWEEN A
HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL WITH A GREATER
EMPHASIS GIVEN TO HIGH INCOME.
(36) THE LIFESTYLE CONSERVATIVE 280 TRUST SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME WITH SOME CONSIDERATION ALSO GIVEN TO GROWTH OF
CAPITAL.
PAGE 3.3C
<PAGE> 11
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
GUARANTEED MAXIMUM MONTHLY RATES PER $1,000
OF NET AMOUNT AT RISK
FOR THE LIVES INSURED UNDER THIS POLICY
<TABLE>
<CAPTION>
DURATION MONTHLY DURATION MONTHLY DURATION MONTHLY
(POLICY RATE (POLICY RATE (POLICY RATE
YEARS) YEARS) YEARS)
<S> <C> <C> <C> <C> <C>
1 0.00248 23 1.24757 45 47.44225
2 0.00798 24 1.46620 46 54.70446
3 0.01454 25 1.72194 47 63.03793
4 0.02236 26 2.02490 48 72.67100
5 0.03185 27 2.38551 49 83.77159
6 0.04318 28 2.82691 50 96.18122
7 0.05716 29 3.37224 51 109.79790
8 0.07353 30 4.03748 52 124.37306
9 0.09297 31 4.82376 53 139.85802
10 0.11535 32 5.74052 54 156.00360
11 0.14196 33 6.78860 55 172.95140
12 0.17311 34 7.97321 56 190.70372
13 0.20967 35 9.33251 57 209.51801
14 0.25241 36 10.93813 58 229.88232
15 0.30256 37 12.96858 59 252.65714
16 0.36156 38 15.21765 60 280.41783
17 0.43214 39 18.09135 61 318.20402
18 0.51713 40 21.54284 62 376.25594
19 0.61990 41 25.56589 63 475.14207
20 0.74190 42 30.16713 64 655.83123
21 0.88608 43 35.33227 65 1000.00000
22 1.05464 44 41.05334
</TABLE>
THE ABOVE RATES HAVE BEEN INCREASED FOR ANY ADDITIONAL RATING SHOWN IN THE
POLICY INFORMATION SECTION.
Page 4
<PAGE> 12
DEFINITIONS
THE FOLLOWING TERMS HAVE SPECIFIC MEANINGS IN YOUR POLICY. PLEASE REFER TO THESE
DEFINITIONS AS YOU READ YOUR POLICY.
ADDITIONAL RATING is an increase in the Cost of Insurance Rate for any of the
Lives Insured who do not meet, at a minimum, our underwriting requirements for
the standard Risk Classification.
AGE means each of the Lives Insured's age on their birthday closer to the Policy
Date.
ATTAINED AGE on any date means the Age plus the number of whole years that have
elapsed since the Policy Date.
BUSINESS DAY is 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 will be determined as of the end of each Business Day. We will deem
each Business Day to end at the close of regularly scheduled trading of the New
York Stock Exchange (currently 4:00 p.m. Eastern Time) on that day.
CASH SURRENDER VALUE equals the Policy Value less the Surrender Charge and any
outstanding Monthly Deductions due.
EFFECTIVE DATE is the date we become obligated under this policy. It is the date
our underwriters approve issuance of the policy. If the policy is approved
without the initial premium, the Effective Date will be the date we receive at
least the minimum initial premium described in the Payment of Premiums provision
at our Service Office. In either case, we will take the first Monthly Deduction
on the Effective Date.
GROSS WITHDRAWAL is the amount of partial Net Cash Surrender Value you request
plus any Surrender Charge applicable to the withdrawal.
GUARANTEED INTEREST ACCOUNT is that part of the Policy Value which reflects the
value you have in our general account.
INVESTMENT ACCOUNT is that part of the Policy Value that reflects the value you
have in one of the Sub-Accounts.
ISSUE DATE is the date shown in the Policy Information section from which the
Suicide and Validity provisions are applied.
LIFE INSURED is the last-to-die of the Lives Insured.
LIVES INSURED are the persons whose lives are insured under this policy as set
out in the Policy Information section. References to the youngest of the Lives
Insured means the youngest person insured under this policy when it is first
issued.
LOAN ACCOUNT is that part of the Policy Value which reflects the value
transferred from the Guaranteed Interest Account or the Investment Accounts as
collateral for a policy loan.
NET CASH SURRENDER VALUE is the Cash Surrender Value less the Policy Debt.
NET POLICY VALUE is the Policy Value less the value in the Loan Account.
NET PREMIUM is the gross premium paid less the Premium Load. It is the amount of
premium allocated to the Guaranteed Interest Account and/or Investment Accounts.
POLICY DATE is the date shown in the Policy Information section from which
charges for the first Monthly Deduction are calculated. The Policy Date is used
to determine POLICY YEARS, POLICY MONTHS AND POLICY ANNIVERSARIES.
(continued)
Page 5
<PAGE> 13
DEFINITIONS (continued)
POLICY DEBT as of any date equals (a) plus (b) plus (c) minus (d), where:
(a) is the total amount of loans borrowed as of such date;
(b) is the total amount of any unpaid loan interest charges which have been
borrowed against the policy on a Policy Anniversary;
(c) is any interest charges accrued from the last Policy Anniversary to the
current date; and
(d) is the total amount of loan repayments as of such date.
POLICY VALUE is the sum of the values in the Loan Account, the Guaranteed
Interest Account and the Investment Accounts.
SEPARATE ACCOUNT refers to Separate Account Three of The Manufacturers Life
Insurance Company of America.
SERVICE OFFICE is the office that we designate to service this policy as shown
on the back cover of your policy.
SUB-ACCOUNT refers to one of the sub-accounts of the Separate Account.
SURRENDER CHARGE PERIOD is the period following issuance of the policy or
following any increase in Face Amount during which we will assess surrender
charges. Surrender charges will apply during this period if you surrender the
policy, make a partial withdrawal, or if it terminates due to default.
TARGET PREMIUM is used to determine the maximum Surrender Charge. The Target
Premium for the initial Face Amount is shown in the Table of Values in the
Policy Information section. You will be advised of the Target Premium for any
increase in Face Amount.
WITHDRAWAL TIER AMOUNT as of any date is the Net Cash Surrender Value at the
previous Policy Anniversary, multiplied by the Withdrawal Tier Amount Percentage
shown in the Table of Values in the Policy Information Section.
WRITTEN REQUEST is your request to us which must be in a form satisfactory to
us, signed and dated by you, and filed at our Service Office.
PAYMENT OF PREMIUMS
No insurance will take effect under this policy before we approve the
application and receive the initial premium. The minimum initial premium is
one-twelfth of the No-Lapse Guarantee Premium shown in the Table of Values in
the Policy Information section.
Subsequent premiums can be paid at any time at our Service Office, and in any
amount subject to the limits described below. On request, we will give you a
receipt signed by one of our officers.
You may pay premiums until the youngest of the Lives Insured reaches Attained
Age 100 or would have reached Attained Age 100 if living. At that time, Monthly
Deductions will cease and no further premiums may be paid. If there is a Policy
Debt under the policy, loan interest and principal will continue to be payable
at the beginning of each Policy Month.
LIMITS. Each premium payment after the first is subject to the following
limitations under Section 7702 of the Internal Revenue Code of 1986, or any
other equivalent section of the Code:
(a) we have the right to refuse or refund any premium payments that would cause
this policy to fail to qualify as life insurance under the Internal Revenue
Code; and
(b) we reserve the right to request that you provide us with satisfactory
evidence of insurability if a premium payment would result in an increase
in the Death Benefit that is greater than the increase in Policy Value.
Page 6
<PAGE> 14
NO-LAPSE GUARANTEE
Your policy includes a No-Lapse Guarantee. The guarantee period applicable to
this policy is shown in the Table of Values in the Policy Information section.
During your No-Lapse Guarantee Period, if the Net Cash Surrender Value falls to
zero or below, your policy will not go into default provided it satisfies the
cumulative premium test.
CUMULATIVE PREMIUM TEST. The test will be performed at the beginning of any
Policy Month that your policy would otherwise be in default in the absence of
the No-Lapse Guarantee. Your policy will satisfy the test if the sum of the
premiums paid, less any Policy Debt, and less any Gross Withdrawals taken on or
before the date of the test, is equal to or greater than the sum of the monthly
No-Lapse Guarantee Premiums due from the Policy Date to the date of the test.
The No-Lapse Guarantee Premium is shown as an annualized amount in the Table of
Values in the Policy Information section.
This amount will change if any of the following changes occur under your policy:
(a) you add, terminate or change a Supplementary Benefit;
(b) you change the Death Benefit Option under your policy;
(c) you change the Face Amount of insurance; or
(d) there is a change in the Risk Classification of any of the Lives Insured
because of a change in smoking status.
We will inform you of any change to the No-Lapse Guarantee Premium resulting
from any such change. The revised premium will be effective from the date of the
change. For the purpose of performing the cumulative premium test, we will use
the No-Lapse Guarantee Premium in effect as of the Policy Date up to the date of
the change, including any revised premium in effect as of the date of a prior
change.
TERMINATION
DEFAULT. Unless the policy has met the No-Lapse Guarantee requirements, it will
go into default if, at the beginning of any Policy Month, the Net Cash Surrender
Value would go to zero or below after we take the Monthly Deduction that is due
for that month.
GRACE PERIOD. We will allow 61 days from the date that the policy goes into
default, for you to pay the amount that is required to bring the policy out of
default. At least 30 days prior to the termination of coverage, we will send a
notice to your last known address, specifying the amount you must pay to bring
the policy out of default. If we have notice of a policy assignment on file at
our Service Office, we will also mail a copy of the notice of the amount due to
the assignee on record.
The amount required to bring the policy out of default is equal to (a) plus (b)
plus (c) where:
(a) is the amount necessary to bring the Net Cash Surrender Value to zero, if
it is less than zero, at the date of default; and
(b) is the Monthly Deduction due on the date of default, plus the next two
Monthly Deductions; and
(c) is the applicable Premium Load.
(continued)
Page 7
<PAGE> 15
TERMINATION (continued)
If the policy is in the No-Lapse Guarantee Period, then the following amount, if
less than the amount stated above, will bring the policy out of default. This
amount is equal to (a) plus (b), where:
(a) is the amount, if any, necessary to satisfy the No-Lapse Guarantee
cumulative premium test at the date of default; and
(b) is the No-Lapse Guarantee Premium for the next two Policy Months.
If the amount necessary to bring the policy out of default has not been paid by
the end of the grace period, the policy will terminate.
TERMINATION DATE. This policy terminates on the earliest of the following
events:
(a) the end of the grace period for which you have not paid the amount
necessary to bring the policy out of default;
(b) surrender of the policy for its Net Cash Surrender Value; or
(c) the death of the Life Insured.
REINSTATEMENT
You can ask us to reinstate your policy only if it terminates at the end of a
grace period in which you did not make a required payment. The policy cannot be
reinstated if any of the Lives Insured die after the policy has terminated. You
can reinstate the policy if you:
(a) make a Written Request for reinstatement within 5 years after the date your
policy terminates;
(b) provide us with evidence of insurability satisfactory to us on the Lives
Insured or on the survivor(s) who were insured at the end of the Grace
Period; and
(c) pay a premium equal to the amount that was required to bring the policy out
of default immediately prior to termination, plus the amount needed to keep
the policy in force to the next scheduled date for payment of the Planned
Premium.
If we approve your request,
(a) the reinstatement date will be the later of the date we approve your
request or the date we receive the required payment at our Service Office;
and
(b) any Surrender Charges will be reinstated to the amount they were at the
date of default.
The Policy Value on the date of reinstatement, prior to the crediting of any Net
Premium paid on the reinstatement, will be equal to the Policy Value on the date
the policy terminated. If the policy is in a Surrender Charge Period when it
terminates, upon reinstatement the period will be the same as at the date of
default.
INSURANCE BENEFIT
The Insurance Benefit is payable when the Life Insured dies, but you must
provide us with proof when any of the Lives Insured die.
If the Life Insured dies while the policy is in force, we will pay the Insurance
Benefit to the beneficiary on receiving due proof of death of the last to die of
the Lives Insured, subject to the Age and Sex, Suicide and Validity provisions.
If the Life Insured dies after we receive a request from you to surrender the
policy, there will be no Insurance Benefit. We will pay the amount payable under
the Surrender For Cash provision instead.
(Continued)
Page 8
<PAGE> 16
INSURANCE BENEFIT (continued)
If the Life Insured dies during a grace period, the Insurance Benefit payable
will be the same as defined below with the following modifications:
(a) the Insurance Benefit will be reduced by any outstanding Monthly Deductions
due; and
(b) the Policy Value used in the calculation of the Death Benefit will be the
Policy Value as of the default date.
INSURANCE BENEFIT. The Insurance Benefit payable is:
(a) the Death Benefit as described below; plus
(b) any amounts payable under any Supplementary Benefits that form part of the
policy; less
(c) the value of the Policy Debt as of the date of death.
DEATH BENEFIT. The Death Benefit will depend on whether Death Benefit Option 1
or 2 is in effect on the date of death.
Under Option 1, the Death Benefit is the Face Amount of the policy at the date
of the Life Insured's death.
Under Option 2, the Death Benefit is the Face Amount of the policy, plus the
Policy Value at the date of the Life Insured's death.
MINIMUM DEATH BENEFIT. To ensure that the policy continues to qualify as life
insurance under the Internal Revenue Code, the Death Benefit will never be less
than the Minimum Death Benefit. The Minimum Death Benefit is equal to the Policy
Value at the date of death, multiplied by the Minimum Death Benefit Percentage
for the Attained Age of the youngest of the Lives Insured, or the Attained Age
such person would have reached if living. The Minimum Death Benefit Percentages
are shown in the Table of Minimum Death Benefit Percentages shown below.
-----------------------------------------------
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
------------------------------------------
ATTAINED AGE APPLICABLE PERCENTAGE
40 and under 250%
45 215%
50 185%
55 150%
60 130%
65 120%
70 115%
75 105%
90 105%
95 and above 100%
For ages not shown, the Applicable
Percentage can be found by reducing the
Applicable Percentages proportionately.
-----------------------------------------------
To determine the Applicable Percentage in the above table, we will use the
Attained Age of the youngest of the Lives Insured, or the Attained Age such
person would have reached if living.
SIMULTANEOUS DEATH. If the Lives Insured die simultaneously or in circumstances
rendering it uncertain who is the Life Insured, the oldest of the Lives Insured
will be deemed to have been the Life Insured. No payment will be made on the
death of the other Lives Insured.
PAYMENT OF INSURANCE BENEFIT. We will pay the Insurance Benefit in one lump sum
with interest calculated from the date of the Life Insured's death to the date
of payment. The rate will be at the rate prescribed by the state. If the state
does not specify the interest rate, we will use the rate for insurance benefits
left on deposit with us.
Page 9
<PAGE> 17
POLICY VALUE
NET PREMIUMS ADDED. As of the Business Day we receive your premium payments at
our Service Office, we add your Net Premium to your Policy Value. We will do
this before we take any deductions due as of that Business Day.
For premiums received prior to the Effective Date, your Net Premiums plus any
interest credited will be added to your Policy Value as of the Business Day
coincident with or next following the Effective Date. Any premium received prior
to the Effective Date of the policy will be credited with interest from the date
of receipt. Interest will be credited at the rate of return then being earned on
allocations to the Money Market Trust.
MONTHLY DEDUCTIONS. At the beginning of each Policy Month, a deduction is due to
cover Monthly Administration Charges and the cost to provide the insurance
coverage. If the Policy Date precedes the Effective Date, we will take any
Monthly Deductions due for the period prior to the Effective Date on the
Effective Date.
Monthly Deductions are due until the Policy Anniversary on which the youngest of
the Lives Insured reaches or would have reached Attained Age 100 if living. If
the policy is in force on that date, it will remain in force without further
premium payments or Monthly Deductions, subject to the Policy Loan Conditions
provision.
The Monthly Deduction for any Policy Month is the sum of the following amounts
determined as of the beginning of that month:
(a) the Monthly Administration Charge shown in the Table Of Expense Charges in
the Policy Information section;
(b) the Mortality and Expense Risks Charge shown in the Table Of Expense
Charges in the Policy Information section;
(c) the monthly cost of any Supplementary Benefits you have added to your
policy; and
(d) the monthly Cost of Insurance for the Lives Insured.
Unless otherwise agreed to by us, we will take Monthly Deductions from the
Guaranteed Interest Account and the Investment Accounts in the same proportion
that the Policy Value in each of these accounts bears to the Net Policy Value
immediately prior to the deduction.
The Cost of Insurance for a specific Policy Month is determined as the rate for
the Cost of Insurance for that month, as described below, multiplied by the net
amount at risk.
The net amount at risk is equal to (a) minus (b), where:
(a) is the Death Benefit as of the first day of the Policy Month, divided by
the Death Benefit Discount Factor shown in the Table of Values in the
Policy Information section; and
(b) is the Policy Value as of the first day of the Policy Month prior to the
deduction of the monthly cost of insurance for the Lives Insured.
The rates for the Cost of Insurance, as of the Policy Date and subsequently for
each Face Amount increase, are blended and based on the Lives Insured's Age,
their Sex, Risk Classification and duration that the coverage has been in force.
The Cost of Insurance Rate shown in the Table of Values in the Policy
Information section is payable for the first Policy Year. After the first Policy
Year, the Cost of Insurance will generally increase on each Policy Anniversary.
The Cost of Insurance calculation will reflect any Additional Rating shown in
the Policy Information section.
(continued)
Page 10
<PAGE> 18
POLICY VALUE (continued)
We will re-determine Cost of Insurance rates from time to time on a basis that
does not discriminate unfairly within any class of lives insured. The Cost of
Insurance rates will never exceed those shown in the Table of Guaranteed Maximum
Cost of Insurance Rates on Page 4.
OTHER DEDUCTIONS. We will deduct a Surrender Charge if during the Surrender
Charge Period shown in the Policy Information section:
(a) you surrender the policy for its Net Cash Surrender Value;
(b) you make one or more partial withdrawals in a Policy Year totaling more
than the Withdrawal Tier Amount; or
(c) you do not pay an amount due at the end of a grace period, and the policy
terminates.
See the Surrender Charges provision for details.
POLICY VALUE COMPOSITION
Your Policy Value at any time is equal to the sum of the values you have in the
Loan Account, the Guaranteed Interest Account and the Investment Accounts.
LOAN ACCOUNT VALUE. The amount you have in the Loan Account at any time equals:
(a) amounts transferred to it for loans or borrowed loan interest; plus
(b) interest credited to it; less
(c) amounts transferred from it for loan repayment.
For the details of the Loan Account see the Policy Loan Conditions
provision.
GUARANTEED INTEREST ACCOUNT VALUE. The amount you have in the Guaranteed
Interest Account at any time equals:
(a) Net Premiums allocated to it; plus
(b) amounts transferred to it; plus
(c) interest credited to it; less
(d) amounts deducted from it; less
(e) amounts transferred from it; less
(f) amounts withdrawn from it.
Interest will be credited to amounts in the Guaranteed Interest Account at an
effective annual rate of no less than the Guaranteed Interest Account Rate shown
in the Table of Values in the Policy Information Section. The actual interest
rate used will be set by us from time to time. For all transactions, interest is
calculated from the date of the transaction.
INVESTMENT ACCOUNT VALUE. The amount you have in an Investment Account at any
time equals the number of units in that Investment Account, multiplied by the
unit value of the corresponding Sub-Account at that time.
The number of units in an Investment Account at any time equals (a) minus (b),
where:
(a) is the number of units credited to the Investment Account because of:
(1) Net Premiums allocated to it; and
(2) amounts transferred to it; and
(b) is the number of units canceled from the Investment Account because of:
(1) amounts deducted from it;
(2) amounts transferred from it; and
(3) amounts withdrawn from it.
The number of units credited or canceled for a given transaction is equal to the
dollar amount of the transaction, divided by the unit value as of the Business
Day of the transaction. See the Unit Value Calculation section of this provision
for details on how unit values are determined.
Page 11
<PAGE> 19
SEPARATE ACCOUNT AND SUB-ACCOUNTS
The Separate Account is authorized to invest in the shares of Manufacturers
Investment Trust, or another management investment company. Each Sub-Account of
the Separate Account purchases shares of a corresponding Fund of Manufacturers
Investment Trust or another management investment company. The Funds are listed
in the Policy Information section.
FUND SUBSTITUTION. A Fund might, in our judgment, become unsuitable for
investment by a Sub-Account. This might happen because of a change of investment
policy; or a change in the applicable laws or regulations; or because the shares
are no longer available for investment; or for some other reason.
If a Fund becomes unsuitable for investment, we have the right to substitute
another Fund or another management investment company. Before doing this, we
would first seek, where required, approval from the Securities and Exchange
Commission and the Insurance Commissioner of the state in which this policy is
delivered.
To the extent permitted by applicable federal and state law, we also have the
right, without your approval, to:
(a) create new separate accounts;
(b) combine any two or more separate accounts including the Separate Account;
(c) make available additional Sub-Accounts investing in additional Funds of
Manufacturers Investment Trust, or another investment company;
(d) eliminate existing Sub-Accounts and stop accepting new allocations and
transfers into the corresponding Fund;
(e) operate the Separate Account as a management investment company under the
Investment Company Act of 1940 or in any other form permitted by law;
(f) de-register the Separate Account under the Investment Company Act of 1940;
(g) transfer assets between the Separate Account and other separate accounts;
and
(h) combine Sub-Accounts or to transfer assets in one Sub-Account to another
Sub-Account.
The investment objectives of a Sub-Account within the Separate Account will not
be changed materially without first filing the change with the Insurance
Commissioner of our state of domicile. We will inform you of any changes deemed
to be material.
UNIT VALUE CALCULATION. We will determine the unit values for each Sub-Account
as of the end of each Business Day. When we need to determine a Policy Value or
an amount after the end of a Business Day, or on a day that is not a Business
Day, we will do so as of the next Business Day.
The value of a unit of each Sub-Account was initially fixed at $10 for the first
Business Day that an amount was allocated, or transferred to the particular
Sub-Account. For any subsequent Business Day, the unit value for that
Sub-Account is obtained by multiplying the unit value for the immediately
preceding Business Day by the net investment factor for the particular
Sub-Account on such subsequent Business Day.
NET INVESTMENT FACTOR. The net investment factor for a Sub-Account on any
Business Day is equal to (a) divided by (b), where:
(a) is the net asset value of the underlying Fund shares held by that
Sub-Account as of the end of such Business Day before any policy
transactions are made on that day; and
(b) is the net asset value of the underlying Fund shares held by that
Sub-Account as of the end of the immediately preceding Business Day after
all policy transactions were made for that day.
We reserve the right to adjust the above formula for any taxes determined by us
to be attributable to the operations of the Sub-Account.
(continued)
Page 12
<PAGE> 20
SEPARATE ACCOUNT AND SUB-ACCOUNTS
(continued)
SEPARATE ACCOUNT ASSETS. The assets held in each Sub-Account are used to support
the Policy Values of Single Premium and Flexible Premium Variable Life Insurance
policies. The Separate Account will be used to fund only variable life insurance
benefits.
Income, gains and losses of the Separate Account are credited to, or charged
against, the applicable Sub-Accounts without regard to our other income, gains
and losses.
The assets of the separate account are our property. the part of the assets that
is equal to the investment account values in respect of all single premium and
flexible premium variable life insurance policies will not be charged with
liabilities from any other business we conduct. we can transfer to our general
account, separate account assets in excess of the liabilities of the separate
account arising under the single premium and flexible premium variable life
insurance policies supported by the separate account.
INVESTMENT OPTIONS
ALLOCATIONS. You may allocate Net Premiums to the Guaranteed Interest Account or
any of the Investment Accounts. Unless you change the initial premium allocation
specified in your application for this policy, it will continue to apply to
subsequent premium payments.
Allocation percentages must be zero or a whole number not greater than 100. The
sum of the allocation percentages must equal 100. You may change the allocation
percentages by Written Request to our Service Office. The change will take
effect as of the date we receive your request at our Service Office. You may
also change your allocation percentages by telephone if a currently valid
authorization form is on file with us.
TRANSFERS. By Written Request you may transfer portions of your Policy Value
among the Investment Accounts and the Guaranteed Interest Account. We will also
permit telephone transfers if a currently valid authorization form is on file
with us.
TRANSFERS ARE SUBJECT TO THE FOLLOWING RESTRICTIONS:
(a) you can make as many transfers in a Policy Year as you want. There is no
charge for the first twelve transfers in any Policy Year. If you make more
than twelve transfers in any Policy Year, the Transfer Fee shown in the
Table of Values in the Policy Information section will apply to each
subsequent transfer in that Policy Year. We will consider all transfer
requests received on the same Business Day as one transfer;
(b) you may transfer the Policy Value from any of the Investment Accounts to
the Guaranteed Interest Account without incurring the transfer charges in
(a) above, provided such transfers occur within:
(1) eighteen months after the Issue Date, as shown in the Policy
Information section of this policy; or
(2) the later of (i) or (ii) below:
(i) 60 days from the effective date of a material change in the
investment objectives of any of the Sub-Accounts; or
(ii) 60 days from the notification date of any such change.
(c) the maximum amount that you can transfer out of the Guaranteed Interest
Account in any one Policy Year is limited to the greater of:
(1) the Guaranteed Interest Account Maximum Transfer Percentage shown in
the Policy Information section, multiplied by the value in the
Guaranteed Interest Account at the previous Policy Anniversary; or
(2) the Guaranteed Interest Account Maximum Transfer Amount shown in the
Policy Information section.
(continued)
Page 13
<PAGE> 21
INVESTMENT OPTIONS (continued)
(d) any transfer out of the Guaranteed Interest Account may not involve a
transfer to the Investment Account for the Money Market Trust; and
(e) transfer privileges are subject to any restrictions that may be imposed by
the Trust.
ASSET ALLOCATION BALANCER TRANSFERS. If you elect this option, we will
automatically transfer amounts among your specified Investment Accounts in order
to maintain your designated percentage in each account. We will effect the
transfers six months after the Policy Date and each six month interval
thereafter
The current and maximum Asset Allocation Balancer Charge for transfers under
this option are shown in the Policy Information section of this policy. We will
provide you with 90 days written notice of any change in the current amount.
When you change your premium allocation instructions, your Asset Allocation
Balancer will change so the two are identical. This change will automatically
occur unless you instruct us otherwise, or a Dollar Cost Averaging request is in
effect.
We reserve the right to cease to offer this option as of 90 days after we send
you written notice.
DOLLAR COST AVERAGING. If you elect this option, we will automatically transfer
amounts each month from one Investment Account to one or more of the other
Investment Accounts or the Guaranteed Interest Account. You must select the
amount to be transferred and the accounts.
If the value in the Investment Account from which the transfer is being made is
insufficient to cover the transfer amount, we will not effect the transfer and
we will notify you.
The current and maximum Dollar Cost Averaging Charge for transfers under this
option are shown in the Policy Information section of this policy. We will
provide you with 90 days written notice of any change in the current amount.
We reserve the right to cease to offer this option as of 90 days after we send
you written notice.
POLICY LOAN CONDITIONS
At any time while this policy is in force and has a loan value, you can get a
loan by Written Request. We may require a loan agreement from you as the policy
is the only security for the loan.
AVAILABLE LOAN VALUE. The available loan value on any date is the Net Cash
Surrender Value, less the Monthly Deductions due to the next Policy Anniversary.
LOAN ACCOUNT. When you take out a loan, or when loan interest charges are
borrowed, we will do a transfer from the Guaranteed Interest Account and/or one
or more of the Investment Accounts into 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.
You may tell us how much of the amount to be transferred to the Loan Account you
wish to allocate to your value in the Guaranteed Interest Account and each of
the Investment Accounts. If you do not tell us, we will allocate the amounts to
be transferred in the same proportion that your value in the Guaranteed Interest
Account and the Investment Accounts bears to the Net Policy Value.
(continued)
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<PAGE> 22
POLICY LOAN CONDITIONS (continued)
When an amount to be transferred is allocated to an Investment Account, we will
redeem units of that Investment Account sufficient in value to cover the
allocated amount. These transfers do not count as a transfer for the purposes of
the Transfers section of the Investment Options provision.
Interest is credited to the Loan Account and interest is also charged on the
Policy Debt, as described under the Loan Interest Charged and the Loan Account
Interest Credited sections of this provision.
LOAN INTEREST CHARGED. Interest will accrue daily on loans. In the event that
you do not pay the Loan Interest Charged in any Policy Year, it will be borrowed
against the policy and added to the Policy Debt in arrears at the Policy
Anniversary. We will allocate the amount borrowed for interest payment in the
same proportion that your value in the Guaranteed Interest Account and the
Investment Accounts bears to the Net Policy Value as of the Policy Anniversary.
Loan interest will continue to be charged if there is an outstanding loan when
Monthly Deductions and premium payments cease at the youngest of the Lives
Insured's Attained Age 100. The policy will go into default at any time the
Policy Debt exceeds the Policy Value. At least 61 days prior to termination, we
will send a notice to your last known address. If you had filed a notice of
assignment with us, we will also send a copy of the notice to the last known
address of the assignee on record. Payment of the loan interest during the
61-day grace period will bring the policy out of default.
The rate of interest charged is fixed at the effective Annual Loan Interest
Charged Rate shown in the Table of Values in the Policy Information section.
LOAN INTEREST CREDITED. Interest will accrue daily to amounts in the Loan
Account. The effective annual Loan Interest Credited Rate is the difference
between the Loan Interest Charged Rate and the Loan Interest Credited
Differential.
The current and maximum Loan Interest Credited Differential are shown in the
Table of Values in the Policy Information section. We may reduce the Current
Loan Interest Credited Differential as of 90 days after we send you written
notice of such change.
LOAN REPAYMENT. You may repay the Policy Debt in whole or in part at any time
prior to the death of the Life Insured, and while the policy is in force.
When you repay a loan, we credit the amount to the Loan Account, and make a
transfer to the Guaranteed Interest Account and/or the Investment Accounts.
We will allocate loan repayments as follows:
(a) first to the Guaranteed Interest Account, until the associated Loan
Sub-Account is reduced to zero;
(b) then to each Investment Account in the same proportion that the value in
the corresponding Loan Sub-Account bears to the value of the Loan Account.
While a loan exists, we will treat the amounts you pay as premiums, unless you
request in writing that they be treated as loan repayments.
CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT
You may change your Death Benefit Option or your Face Amount of insurance by
Written Request. Such changes are subject to the general conditions of this
provision and the conditions described in the section for each type of change.
The following general conditions apply to changes in Death Benefit Option or
Face Amount of insurance:
(a) changes may be made once in each Policy Year after the first Policy
Anniversary;
(continued)
Page 15
<PAGE> 23
CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT (continued)
(b) changes will take effect as of the beginning of the next Policy Month
following the date we approve the request; and
(c) we reserve the right to limit any changes that would cause this policy to
fail to qualify as life insurance under the Internal Revenue Code.
A Death Benefit Option Change, or a Face Amount Change, or an increase in Face
Amount, will cause a change in the No-Lapse Guarantee Premium. For increases in
Face Amount the Target Premium will also change. The Target Premium will be
associated only with the new Face Amount that has been added after restoring
prior decreases.
We will inform you of the new premium amounts at the time of the change.
CHANGE FROM DEATH BENEFIT OPTION 1 TO DEATH BENEFIT OPTION 2.
The Face Amount of insurance after the change from Option 1 to Option 2 will be
(a) minus (b), where:
(a) is the Face Amount of insurance immediately before the change; and
(b) is the Policy Value as of the effective date of the change.
We will not allow the change in Death Benefit Option if it would cause the Face
Amount to decrease below the Minimum Face Amount shown in the Table of Values in
the Policy Information section.
CHANGE FROM DEATH BENEFIT OPTION 2 TO DEATH BENEFIT OPTION 1.
The Face Amount of insurance after the change from Option 2 to Option 1 will be
(a) plus (b), where:
(a) is the Face Amount of insurance immediately before the change; and
(b) is the Policy Value as of the effective date of the change.
We will not increase the Surrender Charge because of the increase in the Face
Amount of insurance resulting from this change.
DECREASE IN FACE AMOUNT. The Minimum Face Amount Decrease is shown in the Table
of Values in the Policy Information section. We may change this amount as of 90
days after we send you written notice of the change. We will not allow a
decrease if it would cause the Face Amount to go below the Minimum Face Amount
shown in the Table Of Values in the Policy Information section.
When you request a decrease in the Face Amount of insurance, we will reduce the
Face Amount in the following order:
(a) the amounts of insurance provided by any increases you may have requested
to the policy Face Amount, starting with the most recent increase until all
such increases are reduced; then
(b) the initial Face amount of the policy.
INCREASE IN FACE AMOUNT. The Lives Insured shown in the Policy Information
Section must all be alive when you request an increase in the Face Amount of
insurance. You must provide us with evidence of insurability on the Lives
Insured that is satisfactory to us. The Minimum Face Amount Increase is shown in
the Policy Information section. We may decrease this amount as of 90 days after
we send you written notice of the change.
We reserve the right to refuse a Face Amount increase if the Attained Age of any
of the Lives Insured at the date the increase would be effective is greater than
the maximum issue age for new policies at that time.
(continued)
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<PAGE> 24
CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT (continued)
The Face Amount of insurance will increase in the following order:
(a) we will restore the Face Amount reduced by the most recent decrease first;
followed by
(b) the next most recent decrease until all decreases are restored; then
(c) we will add the new Face Amount of insurance.
There will be no new Surrender Charge associated with the restoration of prior
decreases under (a) or (b) above. However, there will be a new Surrender Charge
associated with the new Face Amount under (c). We will inform you of any new
Surrender Charges at the time of the increase.
You will not necessarily have to pay additional premium with an increase in Face
Amount, but the new Surrender Charge may require an additional premium payment
to prevent the policy from going into default.
For Surrender Charge purposes, the premiums attributable to the increase in Face
Amount at any time will be equal to (a) plus (b), where:
(a) is the proportion of the Policy Value on the date of the increase
attributable to the increase; and
(b) is the proportion of the premiums received on or after the date of increase
attributable to the increase.
SURRENDER FOR CASH
SURRENDER OF THE POLICY. You may surrender this policy for its Net Cash
Surrender Value at any time prior to the death of the Life Insured. We will
determine the Net Cash Surrender Value as of the end of the Business Day on
which we receive the policy and your Written Request for surrender at our
Service Office. After we receive your surrender request, no insurance will be in
force.
A Surrender Charge will be deducted from your Policy Value in calculating the
Net Cash Surrender Value. If you have increased the Face Amount of insurance,
the Surrender Charge will be the sum of the Surrender Charge for the initial
Face Amount plus the Surrender Charge for each increase as shown in the Policy
Update page amending the policy. No additional Surrender Charge will be imposed
on any portion of an increase in Face Amount that restores a prior decrease.
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. You may request a partial Net Cash
Surrender Value withdrawal once each Policy Month after the first Policy
Anniversary. You may make this request provided there is a Net Cash Surrender
Value for the policy. The partial Net Cash Surrender Value withdrawal will be
done as of the end of the Business Day on which we receive your Written Request.
You may specify the accounts from which we should make the partial Net Cash
Surrender Value withdrawal. If we do not receive such instructions, we will make
the withdrawal in the same proportion that the value in the Guaranteed Interest
Account and the Investment Accounts bears to the Net Policy Value.
If the sum of partial Net Cash Surrender Value withdrawals in any Policy Year
during the Surrender Charge Period is greater than the Withdrawal Tier Amount
for that year, we will deduct a pro-rata Surrender Charge from the Policy Value.
See the Surrender Charges provision for details.
The portion of a partial Net Cash Surrender Value withdrawal that is considered
above the Withdrawal Tier Amount includes all previous partial Net Cash
Surrender Value withdrawals that have occurred in the current Policy Year.
(continued)
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<PAGE> 25
SURRENDER FOR CASH (continued)
If Death Benefit Option 1 is in effect at the time of the withdrawal, the Face
Amount will be reduced by:
(a) the amount of the withdrawal plus the pro-rata Surrender Charge, if at the
time of the withdrawal the Death Benefit equals the Face Amount; otherwise
(b) the amount, if any, by which the withdrawal plus the pro-rata Surrender
Charge exceeds the difference between the Death Benefit and the Face
Amount.
If there has been a prior increase in Face Amount, then the Face Amount will be
decreased in the same order as if you had requested the decrease. See the
Decrease in Face Amount section of the Changing The Death Benefit Option Or The
Face Amount provision.
SURRENDER CHARGES
As described below, depending on the policy transaction, either all of the
applicable charges or a portion of the charges will be incurred.
FULL CHARGES. We will deduct the applicable surrender charge if any of the
following transactions occur during the surrender charge period:
(a) you cancel an increase in Face Amount in the two years following the
increase;
(b) you surrender the policy for its Net Cash Surrender Value; or
(c) the policy goes into default and terminates at the end of a grace period.
PRO-RATA CHARGES. We will deduct a pro-rata Surrender Charge from the Policy
Value if during the Surrender Charge Period you make a partial Net Cash
Surrender Value Withdrawal in excess of the Withdrawal Tier Amount.
See the Charges Remaining After Partial Withdrawals section of this provision
for a description of the charges remaining after deduction of the pro-rata
charges.
For a partial withdrawal, the pro-rata charges deducted will equal the sum of
the pro-rata Surrender Charge for the initial Face Amount and any previous
increase in Face Amount. This amount is (a) divided by (b), multiplied by (c),
where:
(a) is the amount of the partial Net Cash Surrender Value withdrawal in excess
of the Withdrawal Tier Amount;
(b) is the Net Cash Surrender Value prior to the withdrawal, in excess of the
Withdrawal Tier Amount; and
(c) is the current total Surrender Charge prior to the withdrawal.
We will allocate the deduction of the pro-rata charges for the withdrawal to the
Guaranteed Interest Account and the Investment Accounts in the same proportion
that the withdrawal from each account bears to the total withdrawal.
If the withdrawal plus the pro-rata Surrender Charge allocated to a particular
account are greater than the value of that account, we will reduce the portion
of the withdrawal allocated to that account. We will reduce the allocated
portion so that the withdrawal plus the pro-rata charges allocated to the
account equal the value of the account.
(continued)
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<PAGE> 26
SURRENDER CHARGES (continued)
CHARGES REMAINING AFTER PARTIAL WITHDRAWALS. Each time we deduct the Surrender
Charge for a partial withdrawal, we will reduce the remaining Surrender Charge
proportionately. The remaining Surrender Charge will be calculated using the
Table of Grading Percentages shown in the Table of Charges in the Policy
Information section.
The actual remaining Surrender Charge will be (a) divided by (b), multiplied by
(c), where:
(a) is the grading percentage for the applicable Policy Month;
(b) is the grading percentage applicable to the Policy Month in which the last
decrease or partial withdrawal was done; and
(c) is the remaining Surrender Charge prior to the last partial withdrawal,
less the Surrender Charge deducted for that partial withdrawal.
RIGHT TO POSTPONE PAYMENT OF BENEFITS
We reserve the right to postpone the payment of Net Cash Surrender Values,
partial Net Cash Surrender Value withdrawals, policy loans and the portion of
the Insurance Benefit that depends on Investment Account values, for any period
during which:
(a) the New York Stock Exchange (Exchange) is closed for trading (other than
customary week-end and holiday closings), or trading on the Exchange is
otherwise restricted;
(b) an emergency exists as defined by the Securities and Exchange Commission
(SEC), or the SEC requires that trading be restricted; or
(c) the SEC permits a delay for the protection of policyholders.
We also reserve the right to postpone payments for up to six months if such
payments are based on values that do not depend on the investment performance of
the Sub-Accounts.
In addition, we may deny transfers under the circumstances stated in (a) and (b)
above, and in the Transfers section of the Investment Options provision.
RIGHT TO CANCEL INCREASES
If you request an increase in Face Amount which results in a new Surrender
Charge, you have the same rights to cancel the increase as described on the
front cover of this policy, under the Right to Return Policy. If canceled, the
Policy Value and the Surrender Charge will be recalculated to the amounts they
would have been, had the increase not taken place. You may request a refund for
all or a portion of premiums paid during this period. Upon payment of the
refund, we will recalculate the Policy Value and the Surrender Charge to the
amounts they would have been, had the premiums not been paid.
SUICIDE
If within two years after the Issue Date any of the Lives Insured die by
suicide, while sane or insane, the policy will terminate and our liability will
be limited to:
(a) the premiums paid; less
(b) any partial Net Cash Surrender Value withdrawals; and less
(c) the Policy Debt.
If any of the Lives Insured die by suicide, while sane or insane, within two
years after the effective date of an increase in Face Amount, we will credit the
amount of any Monthly Deductions taken for the increase and reduce the Face
Amount to what it was prior to the increase. If the last death is by suicide,
the Death Benefit for that increase will be limited to the Monthly Deductions
taken for the increase.
We reserve the right under this provision to obtain evidence of the manner and
cause of death of the Lives Insured.
Page 19
<PAGE> 27
BENEFICIARY
The following four sections will apply unless there is a beneficiary appointment
in force that provides otherwise.
BENEFICIARY CLASSIFICATION. You can appoint beneficiaries for the Insurance
Benefit in three classes: primary, secondary and final. Beneficiaries in the
same class will share equally in the Insurance Benefit payable to them.
PAYMENT TO BENEFICIARIES. We will pay the Insurance Benefit:
(a) to any primary beneficiaries who are alive when the Life Insured dies; or
(b) if no primary beneficiary is then alive, to any secondary beneficiaries who
are then alive; or
(c) if no primary or secondary beneficiary is then alive, to any final
beneficiaries who are then alive.
CHANGE OF BENEFICIARY. Until the Life Insured's death you can change the
beneficiary by Written Request unless you make an irrevocable designation. We
are not responsible if the change does not achieve your purpose. The change will
take effect as of the date you signed such request. It will not apply to any
payments we made or any action we may have taken before we received your Written
Request.
DEATH OF BENEFICIARY. If no beneficiary is alive when the Life Insured dies, the
Insurance Benefit will be payable to you; or to your estate if you are the Life
Insured. Unless otherwise provided, if a beneficiary dies before the seventh day
after the death of the Life Insured, we will pay the Insurance Benefit as if the
beneficiary had died before the Life Insured.
OWNERSHIP AND ASSIGNMENT
Until the Life Insured's death, without the consent of any beneficiary, except
an irrevocable beneficiary, you as owner can:
(a) receive any amount payable under your policy;
(b) exercise all rights and privileges granted by the policy; and
(c) assign the policy.
An assignment does not bind us until we receive it in writing at our Service
Office. We are not responsible for its validity or its effects. It should be
filed with us in duplicate. We will return a copy.
CHANGE OF OWNER. Until the Life Insured's death, the owner can change the
ownership of the policy by Written Request. The change will take effect as of
the date you signed the Written Request. It will not apply to any payments we
made or any action we may have taken before we received your Written Request.
TRUSTEE OWNER. Should the owner be a trustee, payment to the trustee(s) of any
amount to which the trustee(s) is (are) entitled under the policy, either by
death or otherwise, will fully discharge us from all liability under the policy
to the extent of the amount so paid.
JOINT OWNERSHIP. Two or more owners will own the policy as joint tenants with
right of survivorship, unless otherwise requested on the application or in any
subsequent assignment of the policy. On death of any of the owners, the deceased
owner's interest in the policy passes to the surviving owner(s).
Any rights and privileges that may be exercised by the owner, may be exercised
only with the consent of all joint owners.
(continued)
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<PAGE> 28
OWNERSHIP AND ASSIGNMENT (continued)
SUCCESSOR OWNER. Upon the owner's death during the lifetime of the Lives
Insured, a named successor owner will, if then living, have all the owner's
rights and interest in the policy. Until the Life Insured's death, the owner,
without the consent of any revocable beneficiary or any successor owner, can
cancel or change the designation of successor owner. This may be done from time
to time by agreement in writing with us.
PROTECTION AGAINST CREDITORS
If permitted by state law, all payments shall be exempt from the debts and
contracts of the owners and beneficiaries, and from seizure by court order.
CURRENCY AND PLACE OF PAYMENT
All payments to or by us will be in U.S. currency. We will make payments from
our Service Office. We may require proof that the person claiming any payment is
entitled to it.
CONTRACT
The policy, application, supplementary benefits, and any endorsements form your
whole contract. A copy of the application is attached to the policy and deemed a
part of it. We will not be bound by any statement that is not in the application
or the policy.
Only our President or one of our Vice-Presidents can agree to amend or modify
the policy or waive any of its provisions. Any change must be in writing.
Statements made by any of the Lives Insured are representations, not warranties,
unless fraud is involved. We will not use any statement by you or any of the
Lives Insured to deny a claim, unless it is written in the application or any
supplement to the application.
VALIDITY
We have the right to contest the validity of this policy based on material
misstatements made in the initial application or an application for policy
change that requires evidence of insurability. However, we cannot contest the
validity of your policy after it has been in force during the lifetime of the
Lives Insured for two years from the Issue Date.
We cannot contest the validity of an applied for increase in Face Amount or the
addition of a Supplementary Benefit after such increase or addition has been in
force during the lifetime of the Lives Insured for two years from the date of
such increase or addition.
We can contest after two years if the policy has been reinstated and has been in
force during the lifetime of the Lives Insured for less than two years from the
reinstatement date. If this is the case, we can only contest the validity in
respect of any fact material to the reinstatement that was misrepresented.
NON-PARTICIPATING
Your policy is non-participating. It does not earn dividends.
AGE AND SEX
If the Age or Sex of any of the Lives Insured was misstated in the application,
we will change the Face Amount of insurance. The new Face Amount will be
determined so that the Death Benefit will be that which the most recent Cost of
Insurance deduction would have purchased for the correct Age and Sex.
Page 21
<PAGE> 29
HOW VALUES ARE COMPUTED
We provide Cash Surrender Values that are at least equal to those required by
law. A detailed statement of the method of computing the values of this policy
has been filed with the insurance department of the state in which this policy
is delivered.
We use the Commissioners 1980 Standard Ordinary Smoker/Non-Smoker Mortality
Table in computing reserves, and in determining Maximum Cost of Insurance Rates.
Values relating to amounts in the Guaranteed Interest Account are computed at
the Guaranteed Interest Account Rate shown in the Table of Values in the Policy
Information section.
ANNUAL STATEMENT
Within 30 days after each Policy Anniversary, we will send you a report showing:
(a) the Death Benefit;
(b) the Policy Value;
(c) the current allocation of money in the Guaranteed Interest Account, the
Loan Account and each of the Investment Accounts;
(d) the value of the units in each chosen Investment Account;
(e) any Loan Account balance and loan interest charged since the last report;
(f) the premiums paid and policy transactions for the year; and
(g) any further information required by law.
TAX CONSIDERATIONS
It is the intent that this policy be considered as life insurance for tax
purposes, to comply with Section 7702 of the Internal Revenue Code of 1986, or
any other equivalent section of the code. We reserve the right to limit the
amount of premiums paid for this policy, or to make any other reasonable
adjustments to the terms or conditions of this policy if it becomes necessary to
allow it to qualify as life insurance.
This provision should not be construed to guarantee that the policy will be
treated as life insurance or that the tax treatment of life insurance will never
be changed by the future actions of any tax authority.
Page 22
<PAGE> 30
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THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
A Stock Company
Service Office: 200 Bloor Street East, Toronto, Canada, M4W 1E5
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FLEXIBLE PREMIUM SURVIVORSHIP CASH SURRENDER VALUES AND BENEFITS
VARIABLE LIFE INSURANCE POLICY. FOR A PORTION OF THE POLICY VALUES
PAYABLE ON DEATH OF THE LAST-TO-DIE ALLOCATED TO AN INVESTMENT ACCOUNT
OF THE LIVES INSURED. REFLECT THE INVESTMENT EXPERIENCE OF
ADJUSTABLE DEATH BENEFIT. THE UNDERLYING SUB-ACCOUNTS.
FLEXIBLE PREMIUMS PAYABLE UNTIL THE INVESTMENT OPTIONS ARE DESCRIBED IN
EARLIER OF LAST DEATH, OR THE POLICY THE "POLICY VALUE COMPOSITION" AND
ANNIVERSARY WHEN THE YOUNGEST OF THE THE "INVESTMENT OPTIONS" PROVISIONS.
LIVES INSURED REACHES ATTAINED AGE NON-PARTICIPATING (NOT ELIGIBLE FOR
100 OR WOULD HAVE REACHED ATTAINED DIVIDENDS).
AGE 100 IF LIVING.
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IMPORTANT NOTICE
To claim a benefit or request a change in your policy,
contact our nearest representative. Or write to our
Service Office at the address above.
Please tell us promptly of any change in your address.
WE STRONGLY URGE THAT, BEFORE YOU TAKE ANY ACTION TO
REPLACE THIS OR ANY OTHER POLICY, YOU ASK THE ADVICE
OF THE COMPANY THAT ISSUED THE POLICY.
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[MANULIFE FINANCIAL LOGO]
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Manulife Financial and the block design are registered service marks of The
Manufacturers Life Insurance Company and are used by it and its subsidiaries.
<PAGE> 1
Exhibit A(8)(b)
STOPLOSS REINSURANCE AGREEMENT
BETWEEN
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
(The Ceding Company, hereinafter referred to as "ManAmerica")
AND
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF TORONTO, ONTARIO, CANADA
(The Reinsuring Company, hereinafter referred to as
"Manufacturers Life")
<PAGE> 2
2
I - SCOPE
This Agreement applies to stop-loss reinsurance of standard and
substandard insurance arising from Base Plan and attaching Benefit
Riders issued by ManAmerica, as described in Schedule A and later
referred to as Flexible Premium Survivorship Variable Life (FPSVL).
II - AUTOMATIC REINSURANCE
This coverage is automatically provided for all FPSVL policies issued
by ManAmerica, up to the amounts shown in schedule B, and sold in any
calendar year starting at the effective date specified in section XV.
Amounts over those shown in Schedule B will be submitted facultatively
to Manufacturers Life.
III - LIABILITY
For reinsurance under this Agreement, the exposure to liability of
Manufacturers Life will commence simultaneously with the liability of
ManAmerica. Subject to the provisions of this section and section VII
and conditional to the payment of reinsurance premiums as provided for
in section VI of this Agreement, Manufacturers Life's exposure will
continue as long as ManAmerica is liable under the original policies
and shall cease when the liability of ManAmerica ceases.
IV - PLAN OF REINSURANCE
Manufacturers Life will reimburse 100% of the total death claims and
total monthly deductions waived on the policies reinsured in excess of
the Attachment Point, as set in Schedule C, on a calendar quarter basis
in arrears. Manufacturers Life shall not reimburse surrender benefits
paid by ManAmerica. The total death claims shall exclude any amounts
reimbursed under any other reinsurance agreement on the policies
reinsured hereunder.
V - PREMIUMS
The reinsurance premiums will be computed for each calendar quarter in
arrears as set out in Schedule D attached hereto.
VI - PAYMENTS/REPORTING
Within 15 days after the end of each calendar quarter, ManAmerica will
send to Manufacturers Life an itemized statement of account, in
substantial accord with Schedule E, together with any remittance for
the balance due to Manufacturers Life as stated therein. Manufacturers
Life will have 15 days after receipt of the statement of account to pay
any amounts owing to ManAmerica.
ManAmerica will supply Manufacturers Life with details as outlined in
Schedule E. All policy details will be housed with ManAmerica.
<PAGE> 3
3
VII - OVERSIGHTS
It is expressly understood and agreed that if non-payment of premiums
or failure to comply with any terms of this contract is shown to be
unintentional and the result of misunderstanding or oversights on the
part of either Manufacturers Life or ManAmerica, both Manufacturers
Life and ManAmerica shall be restored to the position they would have
occupied had no such error or oversights occurred.
VIII - CLAIMS
ManAmerica shall give Manufacturers Life a copy of the total death
benefit claims as well as total monthly deductions waived on the
policies reinsured hereunder net of any amount reimbursed under any
other reinsurance agreement. Manufacturers Life shall be liable to
ManAmerica for the total claims in excess of the Attachment Point as
defined in Schedule C. Any liability of Manufacturers Life shall be
settled in one lump-sum.
IX - CURRENCY
Reinsurance under this Agreement will be effected on an original
currency basis whereby the risk and premium amounts will be expressed
in U.S. Dollars. Settlements for all amounts due to either party by the
other as a result of transactions under the provisions of this
Agreement shall be paid in U.S. Dollars.
X - INSOLVENCY
In the event of the insolvency of ManAmerica, all reinsurance under
this Agreement will be paid by Manufacturers Life directly to
ManAmerica, its liquidator, receiver or statutory successor, on the
basis of the liability of ManAmerica under the policies reinsured
without diminution because of the insolvency of ManAmerica, or because
the Company has failed to pay all or a portion of any claims.
XI - INSPECTION OF RECORDS
Manufacturers Life shall have the right, at any reasonable time, at the
office of ManAmerica to examine all books and documents relating to
reinsurance under this Agreement.
XII - ARBITRATION
All disputes and differences between the two contracting parties upon
which an amicable understanding cannot be reached are to be decided by
arbitration before a panel of three arbitrators. One arbitrator is to
be appointed by ManAmerica, the second by Manufacturers Life and the
third is to be selected by these two representatives. Should the two
arbitrators be unable to agree on the choice of a third, the
appointment shall be left to the President of the American Council of
Life insurance, or its successor.
The arbitrators are not bound by any rules of law. They shall decide by
a majority of votes and from their written decision there can be no
appeal. The cost of arbitration, including
<PAGE> 4
4
the fees of the arbitrators, shall be shared by each party unless the
arbitrators shall decide otherwise.
XIII - SEVERABILITY
In the event that any of the provisions herein contained shall be
invalid or unenforceable, such declaration or adjudication shall in no
manner affect or impair the validity or the enforceability of the other
provisions and the remaining provisions shall remain in full force and
effect as though such invalid or unenforceable provisions or clauses
had not been herein included or made part of the Agreement.
XIV - DURATION OF AGREEMENT
This Agreement will be effective on and after the effective date stated
in section XV.
This Agreement may be amended only be mutual consent of ManAmerica and
Manufacturers Life.
ManAmerica and Manufacturers Life may terminate this Agreement by
giving ninety (90) days prior written notice of termination. The day
the notice is received in the mail at the other party's Home Office,
or, if the mail is not used, the day it is delivered to the other
party's Home Office or to an Officer of the other party, as the case
may be, shall be the first day of the ninety (90) day period.
During the ninety (90) day period, this Agreement shall continue to
operate in accordance with its terms.
Manufacturers Life and ManAmerica shall remain liable after
termination, in accordance with the terms and conditions of this
Agreement, with respect to all reinsurance which was effective prior to
termination of this Agreement.
<PAGE> 5
5
XV - EXECUTION
In witness of the above, this Agreement is signed in duplicate on the
date and at the places indicated below.
The effective date of this Agreement is, the first day of March 1994.
Date: __________________________ For: __________________________
Place __________________________ By: __________________________
Attest: __________________________ Title: __________________________
Date: __________________________ For: __________________________
Place __________________________ By: __________________________
Attest: __________________________ Title: __________________________
<PAGE> 6
6
SCHEDULE A
POLICY SUBJECT TO REINSURANCE
Base Plan: Flexible Premium Survivorship Variable Plan
Riders: - Policy Split Option
- Estate Preservation Rider
<PAGE> 7
7
SCHEDULE B
RETENTION LIMITS OF MANUFACTURERS LIFE
Life $10,000,000
Aviation Risk $5,000,000
Accidental Death $1,000,000
Total Disability Waiver
of Monthly Deductions $5,000 per month
<PAGE> 8
8
SCHEDULE C
ATTACHMENT POINT
The Attachment Point shall be 110% of the expected claims. Expected
claims, for a given period, are defined as 75% of the total insurance
charges for the base plan and riders, as described in Schedule A,
deducted during that period for the coverages reinsured hereunder.
<PAGE> 9
9
SCHEDULE D
REINSURANCE PREMIUMS
Reinsurance premiums shall be paid at the end of each calendar quarter,
in arrears, and shall be computed as 5% of the expected claims as
defined in Schedule C.
