<PAGE> 1
As filed with the Securities and Exchange Commission on February 19, 1999
Registration No.33-77256
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 8
TO THE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SEPARATE ACCOUNT THREE
OF
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Exact name of trust)
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Name of depositor)
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of depositor's principal executive offices)
JAMES D. GALLAGHER, ESQ. Notice to:
Secretary and General Counsel J. Sumner Jones, Esq.
The Manufacturers Life Jones & Blouch L.L.P.,
Insurance Company of America Suite 405W
73 Tremont Street 1025 Thomas Jefferson Street, N.W
Boston, MA 02108 Washington, D.C. 20007-0805
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
- ----
on [date] pursuant to paragraph (b) of Rule 485
- ----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
- ----
X on May 1, 1999 pursuant to paragraph (a)(1) of Rule 485
- ----
this post-effective amendment designates a new effective date for a
- ---- previously filed post-effective amendment
<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 Life of America,
Separate Account Three, and Manufacturers Investment Trust
(Manufacturers Life of America's Separate Account Three)
2 Cover Page; General Information About Manufacturers Life of America,
Separate Account Three, and Manufacturers Investment Trust
(Manufacturers Life Of America And Manufacturers Life)
3 *
4 Miscellaneous Matters (Distribution of the Policy)
5 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust (Manufacturers Life
of America's Separate Account Three)
6 General Information About Manufacturers Life of America, Separate
Account Three, Manufacturers Investment Trust (Manufacturers Life of
America's Separate Account Three)
7 *
8 *
9 Miscellaneous Matters (Pending Litigation)
10 Detailed Information About The Policies
11 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust (Manufacturers
Investment Series Trust)
12 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust (Manufacturers
Investment Series Trust)
13 Detailed Information About The Policies (Charges and Deductions)
14 Detailed Information About the Policies (Premium Provisions -- Policy
Issue and Initial Premium); Miscellaneous Matters (Responsibilities
Assumed By Manufacturers Life)
15 Detailed Information About The Policies (Premium Provisions -- Policy
Issue and Initial Premium)
16 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust (Manufacturers
Investment Trust)
17 Detailed Information About The Policies (Policy Values -- Partial
Withdrawals and Surrenders); Other Provisions -- Payment of Proceeds)
18 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust
19 Detailed Information About The Policies (Other Provisions -- Reports
To Policyowners); Miscellaneous Matters (Responsibilities Assumed By
Manufacturers Life)
20 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust; Miscellaneous
Matters (Responsibilities Assumed By Manufacturers Life)
21 Detailed Information About The Policies (Policy Values -- Policy
Loans)
22 *
23 **
24 Detailed Information About the Policies (Other General Policy
Provisions)
25 General Information About Manufacturers Life Of America, Separate
Account Three, Manufacturers Investment Trust (Manufacturers Life Of
America And Manufacturers Life)
26 *
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27 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust (Manufacturers Life
Of America And Manufacturers Life)
28 Miscellaneous Matters (Directors And Officers Of Manufacturers Life Of
America)
29 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust (Manufacturers Life
Of America And Manufacturers Life)
30 *
31 *
32 *
33 *
34 *
35 Miscellaneous Matters (State Regulations)
36 *
37 *
38 Miscellaneous Matters (Distribution of the Policy; Responsibilities
Assumed By Manufacturers Life)
39 Miscellaneous Matters (Distribution of the Policy)
40 *
41(a) Miscellaneous Matters (Distribution of the Policy)
41(b) **
41(c) **
42 *
43 *
44 Detailed Information About The Policies (Policy Values -- Policy
Value)
45 *
46 Detailed Information About The Policies (Policy Values -- Partial
Withdrawals and Surrenders; Other Provisions -- Payment of Proceeds)
47 General Information About Manufacturers Life Of America, Separate
Account Three, and Manufacturers Investment Trust (Manufacturers
Investment Trust)
48 *
49 *
50 *
51 Detailed Information About The Policies
52 Detailed Information About The Policies (Miscellaneous Matters --
Portfolio Share Substitution)
53 **
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 4
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE> 5
PROSPECTUS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
VENTURE SVUL - FLEXIBLE PREMIUM SURVIVORSHIP
VARIABLE LIFE INSURANCE POLICY
This prospectus describes the flexible premium survivorship variable life
insurance policy (the "Policy") issued by The Manufacturers Life Insurance
Company of America ("we" or "us"). The Policies 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 you, the policyowner or
policyowners, to pay premiums and adjust insurance coverage in light of your
current financial circumstances and insurance needs.
* Policy Value may be accumulated on a fixed basis or vary with the
investment performance of the sub-accounts of our Separate Account
Three (the "Separate Account").
* We invest the assets of each sub-account in shares of a corresponding
investment portfolio ("Portfolio") of a mutual fund, Manufacturers
Investment Trust (the "Trust"). The Trust Portfolios available to you
are set forth commencing on the inside front cover of this prospectus.
We may add other sub-accounts and Portfolios in the future. The
accompanying Trust prospectus and the corresponding statement of
additional information more fully describe the Trust, the Portfolios
and their investment objectives.
You should ask one of our representatives if changing, or adding to, existing
insurance coverage would be advantageous. You should note that it may not be
advisable to purchase a Policy as a replacement for existing insurance.
Because of the substantial nature of the surrender charges in the early years,
the Policy is not suitable for short-term investment purposes. If you are
contemplating surrendering a Policy, you should pay special attention to the
sales charge limitation provisions described in this prospectus. These
limitations apply only during the first two years following the Policy date or
following an increase in face amount.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS INFORMATION ABOUT THE SEPARATE ACCOUNT AND THE POLICY THAT YOU SHOULD
KNOW BEFORE INVESTING.
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 SEC.
THE 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
Home Office: Service Office:
500 N. Woodward Avenue 200 Bloor Street east
Bloomfield Hills, Michigan 48304 Toronto, Ontario, Canada M4W 1E5
Telephone: 1-800-427-4546
(1-800-VARILIN[E])
The date of this prospectus is , 1999.
<PAGE> 6
ELIGIBLE PORTFOLIOS
The Portfolios of the Trust in which you may invest net premiums under the
Policies are listed below, together with summary descriptions of their
respective investment objectives and the names of their respective investment
sub-advisers.
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 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 & Technology
Trust is long-term growth of capital. Current income is incidental to the
portfolio's objective. T. Rowe Price Associates, Inc. ("T. Rowe Price") 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.
EMERGING SMALL COMPANY TRUST (formerly EMERGING GROWTH TRUST). The investment
objective of the Emerging Small Company Trust is maximum capital appreciation.
Warburg, Pincus Asset Management, 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 growth 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 the 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 Dean Witter Investment Management
Inc. manages the Global Equity Trust and intends to pursue this objective by
investing primarily in equity securities of issuers throughout the world,
including U.S. issuers.
SMALL COMPANY VALUE TRUST. The investment objective of the Small Company Value
Trust is long-term growth of capital. AXA Rosenberg Investment Management LLC
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.
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<PAGE> 7
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
("FMTC") 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.
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 (formerly COMMON STOCK FUND). The investment objective
of the Quantitative Equity Trust is to achieve intermediate and long-term growth
through capital appreciation and current income by investing in common stocks
and other equity securities of well established companies with promising
prospects for providing an above-average rate of return. 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 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, LLP ("Wellington Management")
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 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 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.
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<PAGE> 8
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 FMTC 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 manages the
Investment Quality Bond Trust and seeks to achieve the Trust's objective by
investing 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.
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<PAGE> 9
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 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 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 its 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 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 a high level of current income and
growth of capital with a greater emphasis given to high income. MAC 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 seeks to achieve this
objective by investing approximately 80% 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.
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<PAGE> 10
PROSPECTUS CONTENTS
PAGE
----
INTRODUCTION TO POLICIES...............................................
GENERAL INFORMATION ABOUT US, THE SEPARATE ACCOUNT AND THE
TRUST..................................................................
Manufacturers Life of America And Manufacturers Life..............
Manufacturers Life of America's Separate Account
Three............................................................
Manufacturers Investment Trust....................................
DETAILED INFORMATION ABOUT THE POLICIES................................
PREMIUM PROVISIONS...................................................
Policy Issue And Initial Premium..................................
Premium Allocation................................................
Premium Limitations...............................................
Short-Term Cancellation Right And
"Free Look" Provisions..........................................
PROVISIONS FOR AVOIDING LAPSE........................................
No Lapse Guarantee................................................
Death Benefit Guarantee...........................................
INSURANCE BENEFIT....................................................
The Insurance Benefit.............................................
Death Benefit Options.............................................
Death Benefit Option Changes......................................
Face Amount Changes...............................................
POLICY VALUES........................................................
Policy Value......................................................
Transfers Of Policy Value.........................................
Policy Loans......................................................
Partial Withdrawals And Surrenders................................
CHARGES AND DEDUCTIONS.................................................
Deductions From Premiums..........................................
Surrender Charges.................................................
Monthly Deductions................................................
Administration Charge.............................................
Cost Of Insurance Charge..........................................
Mortality And Expense Risks Charge................................
Other Charges.....................................................
Special Provisions For Group Or Sponsored
Arrangements.....................................................
Special Provisions For Exchanges..................................
The General Account...............................................
OTHER GENERAL POLICY PROVISIONS......................................
Policy Default....................................................
Policy Reinstatement..............................................
Miscellaneous Policy Provisions...................................
OTHER PROVISIONS.....................................................
Supplementary Benefits............................................
Payment Of Proceeds...............................................
Reports To Policyowners...........................................
MISCELLANEOUS MATTERS................................................
Portfolio Share Substitution......................................
Federal Income Tax Considerations.................................
Tax Status Of The Policy..........................................
Tax Treatment Of Policy Benefits..................................
The Company's Taxes...............................................
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Distribution Of The Policy........................................
Responsibilities Assumed By Manufacturers Life....................
Voting Rights.....................................................
Directors And Officers Of Manufacturers Life of
America..........................................................
State Regulations.................................................
Pending Litigation................................................
Additional Information............................................
Legal Matters.....................................................
Experts...........................................................
Year 2000 Issues..................................................
Financial Statements...................................................
Appendices.............................................................
A. Sample Illustrations Of Policy Values, Cash Surrender
Values And Death Benefits.........................................
B. Definitions........................................................
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION WHERE THE
OFFERING WOULD NOT BE LAWFUL. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
IN THIS PROSPECTUS OR IN THE PROSPECTUS OR STATEMENT OF ADDITIONAL INFORMATION
OF THE TRUST. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT.
vii
<PAGE> 12
INTRODUCTION TO POLICIES
The following summary describes the most important features of the Policy. It is
not a complete description. You should read all of this prospectus to fully
understand the provisions of the Policy.
GENERAL
The Policy provides a death benefit at the time of the death of the last
surviving life insured.
You may pay premiums at any time and in any amount, subject to certain
limitations.
- --------------------------------------------------------------------------------
You may instruct us how to invest your premiums.
- --------------------------------------------------------------------------------
You may instruct us how to allocate your premiums, net of certain deductions,
among one or more of our general account and the sub-accounts of the Separate
Account. We invest the premiums you allocate to the sub-accounts of the Separate
Account in shares of corresponding Portfolios of the Trust. You may change
allocation instructions at any time. You may also transfer amounts among the
sub-accounts subject to certain restrictions (see "Transfers of Policy Value").
If the Policy is owned by two or more persons, we require each policyowner to
authorize any action on the Policy.
The Portfolios currently available to you are set forth beginning on the inside
front cover of this prospectus. In the future, we may make available other
sub-accounts and Portfolios.
The Policy has a Policy Value reflecting premiums you have paid, the investment
performance of the accounts to which you have allocated premiums, and certain
charges for expenses and cost of insurance. You may obtain a portion of the
Policy Value by taking a policy loan, making a partial withdrawal, or fully
surrendering the Policy.
- --------------------------------------------------------------------------------
You have two death benefit options.
- --------------------------------------------------------------------------------
DEATH BENEFIT
DEATH BENEFIT OPTIONS. You choose one of two death benefit options:
- a death benefit equal to the face amount of the Policy, or
- a death benefit equal to the face amount of the Policy plus the Policy
Value.
Under either option, the death benefit may have to be increased to satisfy the
so-called "corridor percentage test" under the definition of life insurance in
the Internal Revenue Code of 1986, as amended (the "Code"). See DETAILED
INFORMATION ABOUT THE POLICIES: INSURANCE BENEFIT -- "The Insurance Benefit" and
"Death Benefit Options."
YOU MAY CHANGE THE DEATH BENEFIT OPTION. You may change the death benefit option
after the Policy has been in force for two years. See DETAILED INFORMATION ABOUT
THE POLICIES; INSURANCE BENEFIT -- "Death Benefit Option Changes."
- --------------------------------------------------------------------------------
You may increase or decrease the Policy's face amount.
- --------------------------------------------------------------------------------
YOU MAY INCREASE THE FACE AMOUNT. After the Policy has been in force for two
years, you may increase the face amount of the Policy once per policy year. You
may have to furnish satisfactory evidence of your insurability. Usually a Policy
will have new surrender charges after an increase. See DETAILED INFORMATION
ABOUT THE POLICIES; INSURANCE BENEFIT -- "Face Amount Changes."
YOU MAY DECREASE THE FACE AMOUNT. After the Policy has been in force for two
years, you may decrease the face amount once per policy year, except during the
two-year period following any increase in face amount. During the two-year
period following an increase, you may choose to decrease the increased face
amount. Such a decrease will result in the
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<PAGE> 13
deduction of certain surrender charges from Policy Value. Also during the
two-year period following an increase, the deferred sales charge for the
increase is subject to the Policy's sales charge limitation provisions. A
decrease in face amount may result in the deduction of certain surrender charges
from Policy Value. See DETAILED INFORMATION ABOUT THE POLICIES; INSURANCE
BENEFIT -- "Face Amount Changes."
- --------------------------------------------------------------------------------
You may be able to guarantee that your Policy will not go into default.
- --------------------------------------------------------------------------------
DEATH BENEFIT GUARANTEE
A Death Benefit Guarantee is available under the Policies. As long as the Death
Benefit Guarantee Cumulative Premium Test or, where applicable, the Fund Value
Test is satisfied, and regardless of the investment performance of the
Portfolios underlying the Policy Value, we guarantee that the Policy will not go
into default:
* prior to the youngest life insured's attaining age 100 if Death Benefit
Option 1 is maintained throughout the life of the Policy and
* prior to the youngest life insured's attaining age 85, or when he or she
would have attained age 85, if living, if Death Benefit Option 2 is
selected at any time.
NO LAPSE GUARANTEE
As long as the No Lapse Guarantee Cumulative Premium Test is satisfied, we
guarantee that the Policy will not go into default during the No Lapse Guarantee
Period. For lives insured with an average Issue Age of up to and including age
70, the No Lapse Guarantee Period is 10 years. For lives insured with an average
Issue Age of 71 and older, the No Lapse Guarantee Period decreases by one year
for each year the average age exceeds 70, until average age 77. From average age
77 to 85, the No Lapse Guarantee Period is fixed at three years. The No Lapse
Guarantee is not available to life insureds whose average Issue Age exceeds 85.
See DETAILED INFORMATION ABOUT THE POLICIES; INSURANCE BENEFIT - "No Lapse
Guarantee."
DOLLAR COST AVERAGING
Under our Dollar Cost Averaging ("DCA") program, you may designate an amount
which will be transferred at predetermined intervals from one Investment Account
into any other Investment Account(s) or the Fixed Account.
Each transfer under the DCA program must be of a minimum amount as set by us. We
may change this minimum at any time in our discretion. Currently, there is no
charge for this program if the Policy Value exceeds $15,000 on the date of
transfer. Otherwise, we will charge $5 for each transfer under this program. We
will deduct the charge from the value of the Investment Account out of which the
transfer occurs. If insufficient funds exist to effect a DCA transfer, including
the charge, if applicable, we will not effect the transfer and will so notify
you.
We may cease to offer this program as of 90 days after sending you written
notice of discontinuance.
ASSET ALLOCATION BALANCER TRANSFERS. Under our Asset Allocation Balancer
program, you may designate an allocation of Policy Value among Investment
Accounts. At six-month intervals , we will move amounts among the Investment
Accounts as necessary to maintain your chosen allocation.
Currently, there is no charge for this program. We may, however, institute a
charge on 90 days' notice to you. We may also cease to offer this program as of
90 days after sending you written notice of discontinuance.
2
<PAGE> 14
PREMIUM PAYMENTS ARE FLEXIBLE
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You may pay premiums at any time.
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You may pay premiums at any time and in any amount, subject to certain
limitations. See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS --
"Policy Issue" and "Premium Limitations."
You must pay at least the Initial Premium to put the Policy in force. See
DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS -- "Policy
Limitations" and "Death Benefit Guarantee."
After the Initial Premium is paid there is no minimum premium required. However,
minimum premiums are required to maintain the Death Benefit Guarantee or the No
Lapse Guarantee. See DETAILED INFORMATION ABOUT THE POLICIES; INSURANCE BENEFIT
- - "Death Benefit Guarantee" and "No Lapse Guarantee." In addition, certain
premium payments may be required to keep the Policy from lapsing. See DETAILED
INFORMATION ABOUT THE POLICIES; OTHER GENERAL POLICY PROVISIONS -- "Policy
Default."
The Policy is subject to maximum premium limitations to ensure that it qualifies
as life insurance under the Code. See DETAILED INFORMATION ABOUT THE POLICIES;
PREMIUM PROVISIONS -- "Premium Limitations."
THE POLICY VALUE
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What is the Policy Value?
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The Policy has a Policy Value which reflects the following:
* the premium payments you have made; plus
* the investment performance of the sub-accounts to which you have
allocated net premiums; plus
* the interest we have credited to amounts allocated to our general
account; less
* any partial withdrawals you have made; and less
* any charges we have deducted under the Policy.
The Policy Value is the sum of the values in the Investment Accounts, the Fixed
Account and the Loan Account.
INVESTMENT ACCOUNT. We establish an Investment Account under the Policy for each
sub-account of the Separate Account to which you have allocated net premiums or
transferred amounts. An Investment Account measures the interest of the Policy
in the corresponding sub-account.
The value of each Investment Account varies each Business Day and reflects the
investment performance of the Portfolio shares held in the corresponding
sub-account. See DETAILED INFORMATION ABOUT THE POLICIES; POLICY VALUES --
"Policy Value."
FIXED ACCOUNT. The Fixed Account consists of that portion of the Policy Value
based on net premiums allocated to, and amounts transferred to, our general
account.
We credit interest on amounts in the Fixed Account at an effective annual rate
guaranteed to be at least 4%. See DETAILED INFORMATION ABOUT THE POLICIES;
POLICY VALUES - "The General Account."
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<PAGE> 15
LOAN ACCOUNT. When you take a policy loan, we will establish a Loan Account
under the Policy and transfer an amount from the Investment Accounts and the
Fixed Account to the Loan Account.
We will credit interest to amounts in the Loan Account at an effective annual
rate of at least 4%. The actual rate credited on loan amounts will be the rate
charged on loan amounts less an interest rate differential. See DETAILED
INFORMATION ABOUT THE POLICIES; POLICY VALUES -- "Policy Loans."
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You may transfer amounts among accounts.
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TRANSFERS ARE PERMITTED. You may transfer amounts among Investment Accounts and
the Fixed Account, subject to certain restrictions. See DETAILED INFORMATION
ABOUT THE POLICIES; POLICY VALUES -- "Policy Value."
We permit twelve transfers per policy year at no cost to you. Additional
transfers will cost $25 per transfer. We will treat requests for more than one
transfer at the same time as a single request.
USING THE POLICY VALUE
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How you may use your Policy Value.
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BORROWING AGAINST THE POLICY VALUE. You may borrow against the Policy Value. In
most states, the minimum loan amount is $500.
Loan interest will be charged on a fixed basis at an effective annual rate of
5.75%. See DETAILED INFORMATION ABOUT THE POLICIES; POLICY VALUES -- "Policy
Loans."
PARTIAL WITHDRAWAL OF THE POLICY VALUE. After a Policy has been in force for two
years, you may make a partial withdrawal of the Policy Value. In most states,
the minimum amount you may withdraw is $500. You may specify that the withdrawal
be made from a specific Investment Account or the Fixed Account.
A partial withdrawal may result in a reduction in the face amount of the Policy.
It may also result in the assessment of a portion of the surrender charges to
which the Policy is subject. See DETAILED INFORMATION ABOUT THE POLICIES; POLICY
VALUES -- "Partial Withdrawals and Surrenders" and CHARGES AND DEDUCTIONS --
"Surrender Charges."
SURRENDER OF THE POLICY FOR NET CASH SURRENDER VALUE. You may surrender the
Policy for its Net Cash Surrender Value. The Net Cash Surrender Value is equal
to the Policy Value less surrender charges, outstanding monthly deductions due
and the value of the Loan Account. Surrender of a Policy during the Surrender
Charge Period will usually result in our assessing surrender charges. See
DETAILED INFORMATION ABOUT THE POLICIES; POLICY VALUES -- "Partial Withdrawals
and Surrenders" and CHARGES AND DEDUCTIONS -- "Surrender Charges."
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What are the various charges under the Policy?
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CHARGES AND DEDUCTIONS
1) DEDUCTIONS FROM PREMIUMS. We deduct:
* 2.35% of all premiums paid, for state and local taxes (except for Oregon
where no premium tax is deducted), and 1.25% of all premiums paid for
federal taxes, to the end of the tenth policy year. Currently we expect
this deduction to cease after the tenth policy year.
* a sales charge of 5.5% of the premiums paid, in the current policy year, up
to a maximum of the Target Premium for the current policy year. This
deduction is taken to the end of the tenth policy year. See DETAILED
INFORMATION ABOUT THE POLICIES; CHARGES AND DEDUCTIONS - "Deductions from
Premiums."
2) SURRENDER CHARGES. We deduct a deferred underwriting charge
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<PAGE> 16
and a deferred sales charge if:
* you surrender the Policy,
* you make a partial withdrawal in excess of the Withdrawal Tier Amount,
* you decrease the face amount of the Policy, or
* the Policy lapses.
The deferred underwriting charge is $4 for each $1,000 of face amount.
The maximum deferred sales charge is 100% of the lower of first-year premium or
the Target premium.
The sum of the deferred sales charge and the sales charge deducted from premiums
will in no event exceed the amount that would be permitted by Section 27(a)(2)
of the Investment Company Act of 1940, as amended (the "1940 Act"), if such
section applied to the Policy. See DETAILED INFORMATION ABOUT THE POLICIES;
CHARGES AND DEDUCTIONS -- "Surrender Charges."
3) MONTHLY DEDUCTIONS. We deduct monthly:
* an administration charge of $.04 per $1,000 of face amount , until the
later of the fifteenth policy year or the time the youngest life
insured reaches Attained Age 55, or when he or she would have attained
age 55, if living; thereafter the administration charge is 0. The
minimum monthly charge is $30; the maximum is $60;
* a charge for the cost of insurance;
* a charge for mortality and expense risks of 0.67% through the later of
the tenth policy year and the youngest life insured's reaching
Attained Age 55, or when he or she would have attained age 55, if
living; we currently expect the charge for mortality and expense risks
thereafter to be .0125%; and
* charge(s) for any supplementary benefit(s) added to the Policy.
If the Policy is still in force when the youngest life insured reaches or would
have reached age 100, we will not take any further monthly deductions from the
Policy Value.
4) OTHER CHARGES.
TRANSFER FEES. We impose charges on certain transfers of Policy Values,
including a $25 charge for each transfer in excess of twelve per policy year and
a $5 charge for each transfer under the DCA program if Policy Value does not
exceed $15,000. We treat multiple transfer requests received at the same time as
a single request. See DETAILED INFORMATION ABOUT THE POLICIES; POLICY VALUES --
"Transfers Of Policy Value."
INVESTMENT MANAGEMENT FEES AND EXPENSES. The Trust (excluding the Lifestyle
Trusts) pays investment management fees that range from .25% to 1.10% of the
assets of the Portfolios. Maximum expenses range from .15% to .75% of the assets
of the Portfolios (excluding the Lifestyle Trusts). Because each Lifestyle Trust
invests in shares of other Portfolios, each bears its pro rata share of the fees
and expenses incurred by the other Portfolios. See DETAILED INFORMATION ABOUT
THE POLICIES; CHARGES AND DEDUCTIONS -- "Other Charges."
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<PAGE> 17
OTHER. We reserve the right to charge or establish a provision for any federal,
state or local taxes that may be attributable to the Separate Account or our
operations with respect to the Policies. This charge or provision for taxes
would be in addition to the deductions for state, local and federal taxes
currently being made.
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Supplementary benefits are available.
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SUPPLEMENTARY BENEFITS
You may choose to add certain supplementary benefits to the Policy. These
supplementary benefits include an estate preservation rider and a policy split
option. We will deduct the cost of any supplementary benefits from the Policy
Value monthly. See DETAILED INFORMATION ABOUT THE POLICIES; OTHER PROVISIONS --
"Supplementary Benefits."
DEFAULT
Unless the Death Benefit Guarantee or No Lapse Guarantee is in effect, the
Policy will go into default if the Net Cash Surrender Value at the beginning of
any policy month would go below zero after deducting the monthly charges then
due. The Policy will not go into default if it qualifies for the Death Benefit
Guarantee or No Lapse Guarantee. We will send you a notice if the Policy goes
into default. You will have a grace period in which to make a premium payment
sufficient to bring the Policy out of default. If you do not pay the required
premium during the grace period, the Policy will terminate. See DETAILED
INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS -- "Policy Default."
REINSTATEMENT
If your Policy is terminated, you may have it reinstated within either the
21-day or five-year period following the date of termination if certain
conditions are met. See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM
PROVISIONS -- "Policy Reinstatement."
FREE LOOK. You may return a Policy for a refund of premium within the latest of:
* 10 days after it is received,
* 45 days after the application for the Policy is signed, or
* 10 days after we mail or deliver a notice of this right of withdrawal.
If you request an increase in face amount which results in new surrender
charges, the "free look" provision will also apply to the increase. See DETAILED
INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS -- "Short-Term Cancellation
Right and `Free Look' Provisions."
FEDERAL TAX MATTERS
We believe that a Policy issued on a standard risk class basis should meet the
definition of a life insurance contract as set forth in Section 7702 of the
Code. There is less guidance available to determine if a Policy issued on a
substandard basis would satisfy the Section 7702 definition, particularly if the
policyowner pays the full amount of premiums permitted under such a Policy. If
your Policy qualifies as a life insurance contract for federal income tax
purposes, you should not be deemed to be in constructive receipt of Policy Value
under the Policy until there is a distribution from the Policy. Moreover, death
benefits payable under a Policy should be completely excludable from the gross
income of the beneficiary. As a result, the beneficiary generally should not be
taxed on these proceeds. See DETAILED INFORMATION ABOUT THE POLICIES;
MISCELLANEOUS MATTERS - "Federal Income Tax Considerations (Tax Status of the
Policy)."
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<PAGE> 18
Under certain circumstances, a Policy may be treated as a "Modified Endowment
Contract" ("MEC"). If the Policy is a MEC, then all pre-death distributions,
including policy loans, will be treated first as a distribution of taxable
income and then as a return of investment in the Policy. In addition, prior to
age 59 1/2 any such distributions generally will be subject to a 10% penalty
tax. See DETAILED INFORMATION ABOUT THE POLICIES; MISCELLANEOUS MATTERS -
"Federal Income Tax Considerations," "Tax Status of the Policy" and "Tax
Treatment of Policy Benefits."
If the Policy is not a MEC, distributions generally will be treated first as a
return of investment in the Policy and then a disbursement of taxable income.
Moreover, loans will not be treated as distributions. Select Loans may, however,
be treated as taxable distributions. If you are considering the use of
systematic Policy loans as one element of a comprehensive retirement income
plan, you should consult your personal tax adviser regarding the potential tax
consequences if such loans were to so reduce Policy Value such that the Policy
would lapse in the absence of additional payments. The premium payment necessary
to avert lapse would increase with the average age of the lives of the insured.
Finally, neither distributions nor loans under a Policy that is not a MEC are
subject to the 10% penalty tax. See DETAILED INFORMATION ABOUT THE POLICIES;
MISCELLANEOUS MATTERS - "Distributions from Policies Not Classified as Modified
Endowment Contracts."
The United States Congress has in the past considered, and in the future may
consider legislation that, if enacted, could change the tax treatment of life
insurance policies. In addition, the Treasury Department may amend existing
regulations or adopt new interpretations of existing laws; state tax laws or, if
the policyowner is not a United States resident, foreign tax laws may affect the
tax consequences to the policyowner, the lives insured or the beneficiary. These
laws may change from time to time without notice and, as a result, the tax
consequences may be altered. There is no way of predicting whether, when or in
what form any such change would be adopted. Any such change could have a
retroactive effect regardless of the date of enactment. We suggest that you
consult a tax adviser.
ESTATE AND GENERATION-SKIPPING TAXES
The proceeds of the Policy may be taxable under Estate and Generation-Skipping
Tax provisions of the Code. You should consult your tax adviser regarding these
taxes.
GENERAL INFORMATION ABOUT US, THE SEPARATE ACCOUNT AND THE TRUST
MANUFACTURERS LIFE OF AMERICA AND MANUFACTURERS LIFE
We are a stock life insurance company governed by the laws of Michigan. We are
licensed to do business as a life insurance company in the District of Columbia
and all states of the United States except New York. We are an indirect
wholly-owned subsidiary of The Manufacturers Life Insurance Company
("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.
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We are an indirect subsidiary of Manufacturers Life.
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We and Manufacturers Life have received the following ratings from independent
rating agencies: Standard and Poor's Insurance Rating Service -- AA+ (for claims
paying ability), A.M. Best Company -- A++ (for financial strength), Duff &
Phelps Credit Rating Co. -- AAA (for claims paying ability), and Moody's
Investors Service, Inc. - Aa2 (for financial strength). Neither we nor
Manufacturers Life guarantees the investment performance of the Separate
Account.
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<PAGE> 19
On January 20, 1998, the Board of Directors of Manufacturers Life announced that
it had 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 its Board of Directors and
participating policy holders, as well as regulatory approval.
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The Policy Values you allocate to the Separate Account are invested in the Trust
Portfolio(s) you select.
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MANUFACTURERS LIFE OF AMERICA'S SEPARATE ACCOUNT THREE
We established the Separate Account on August 22, 1986. The Separate Account
holds assets that are segregated from all of our other assets. It is currently
used only to support variable life insurance policies.
We are 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 Separate Account
without regard to our other income, gains or losses.
We 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 we
conduct. However, our obligations under the policies are part of our general
corporate obligations.
The Separate Account is registered with the SEC 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 SEC 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 us.
MANUFACTURERS INVESTMENT TRUST
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The Trust is a mutual fund in which the Separate Account invests.
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We invest the assets of each sub-account of the Separate Account in shares of a
corresponding Portfolio of the Trust. The Trust, a mutual fund, is registered
under the 1940 Act as an open-end management investment company. It receives
investment advisory services from Manufacturers Securities Services, LLC
("MSS"). MSS is a registered investment adviser under the Investment Advisers
Act of 1940. It too is an indirect wholly-owned subsidiary of Manufacturers
Life. The Trust also employs sub-advisers to perform the securities selection
process.
The Separate Account purchases and redeems shares of the Trust at net asset
value. Any dividend or capital gain distribution received from a Portfolio will
be reinvested immediately at net asset value in shares of that Portfolio and
retained as assets of the corresponding sub-account.
The list of the Trust's investment Portfolios available to you under the Policy,
brief summaries of their respective investment objectives and the names of their
respective sub-advisers are set forth commencing on the inside front cover of
this prospectus. 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. You should read the Trust prospectus together with this prospectus.
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<PAGE> 20
We use shares of the Trust to support benefits under both variable annuity
contracts and variable life insurance policies that we or life insurance
companies affiliated with us issue. We also purchase shares through our general
account for certain limited purposes including providing initial portfolio seed
money. For a description of the procedures for handling potential conflicts of
interest arising from the funding of benefits under both types of policies, you
should review the accompanying Trust prospectus.
DETAILED INFORMATION ABOUT THE POLICIES
Unless otherwise indicated or required by the context, the discussion throughout
this prospectus assumes that the Policy has not gone into default, there is no
outstanding Policy Debt, and the death benefit is not determined by the corridor
percentage test (see "Death Benefit Options").
PREMIUM PROVISIONS
POLICY ISSUE AND INITIAL PREMIUM
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The minimum face amount is $250,000.
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To purchase a Policy, you must submit a completed application. We will generally
issue a Policy only if it has a face amount of at least $250,000. Generally, we
issue a Policy only to persons between ages 0 and 90. In certain circumstances
we may in our sole discretion issue a Policy to persons above age 90. Before
issuing a Policy, we will require evidence of insurability satisfactory to us.
Each life insured will have a risk class of preferred/non-smoker,
preferred/smoker, standard/non-smoker or standard/smoker as determined by our
underwriting rules. We may issue Policies to persons who fail to meet standard
underwriting requirements by assigning an additional rating.
We will accept an application if it meets our insurance underwriting rules. Each
Policy has an effective date and a policy date. The effective date is the date
we become obligated under the Policy and take the first monthly deductions,
other than for backdated policies (which are described below). The policy date
is the date used to calculate the insurance age. It is also the date from which
policy years, policy months and policy anniversaries are all determined.
If an application is accompanied by a check for at least the Initial Premium and
we accept the application, the policy date will be the date we receive the
application and check at our Service Office. The effective date will be the date
our underwriters approve issuance of the Policy. If an application is
accompanied by a check for at least the Initial Premium, the life insured may be
covered under the terms of a conditional insurance agreement until the effective
date.
If an application that we accept is not accompanied by a check for at least the
Initial Premium, we will issue the Policy with a policy date which is seven days
after issuance of the Policy (the "issue date") and with an effective date which
is the date our Service Office receives at least the Initial Premium. In certain
situations a different policy date may be used. We must receive the Initial
Premium within 60 days after the policy date; however, we may require the
Initial Premium within 30 days on Policies issued with Additional Ratings. If
the Initial Premium is not paid or if the application is rejected, we will
cancel the Policy and return any premiums paid to the applicant.
Under certain circumstances we may issue a Policy with a backdated policy date.
A Policy will not be backdated more than six months (12 months where allowed by
state regulation) before the date of the application for the Policy. Monthly
deductions will be made for the period the policy date is backdated.
We will credit interest on all premiums received prior to the effective date of
a Policy from the date of receipt at the rate of return then being earned on
amounts allocated to the
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<PAGE> 21
Money Market Trust. On the effective date, we will allocate the premiums paid
plus interest credited, net of deductions for federal, state and local taxes and
the premium charge, among the Investment Accounts and/or the Fixed Account in
accordance with your instructions.
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Premiums paid after the first premium are allocated as of the date received.
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We will allocate all premiums received on or after the effective date of the
Policy among the Investment Accounts or the Fixed Account as of the date the
premiums were received at our Service Office. Monthly deductions are made as of
the policy date and at the beginning of each policy month thereafter. However,
if due prior to the effective date on a backdated policy, they will be made as
of the effective date instead of the dates they were due.
PREMIUM ALLOCATION
You may allocate your premium payments, net of deductions, to either the Fixed
Account or to one or more of the Investment Accounts. Amounts allocated to the
Fixed Account will accumulate at an annual rate of interest equal to at least
4%. We will invest amounts allocated to the Investment Accounts in shares of the
Portfolios held by the corresponding sub-accounts of the Separate Account. Your
allocation must be made as a percentage of the Net Premium. The percentage may
be any whole number between zero and 100, provided the total percentage equals
100. You may change your allocation at any time without charge. The change will
take effect as of the date a written or telephone request for change, in a
format satisfactory to us, is received at our Service Office.
PREMIUM LIMITATIONS
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We issue Policies with a Planned Premium you select.
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After you pay the Initial Premium, you may pay additional premiums at any time
and in any amount during the lifetime of any of the lives insured subject to
certain limitations. After the Initial Premium, all premiums must be paid to our
Service Office. Unlike traditional insurance, premiums are not payable at
specified intervals or in specified amounts. Your Policy will be issued with a
Planned Premium which is based on the amount of premium you wish to pay. We
recommend as the Planned Premium a premium amount that will satisfy the
requirements of the No Lapse Guarantee Cumulative Premium Test or the Death
Benefit Guarantee.
We will send you notices setting forth the Planned Premium at the payment
interval you select, unless you are making payments pursuant to a pre-authorized
payment plan. However, you are under no obligation to make the indicated
payment.
We will not accept any premium payment which is less than $50, unless the
premium is payable pursuant to a pre-authorized payment plan. In that case we
will accept a payment of as little as $10. We may change these as of 90 days
after giving you written notice. The Policies also limit the sum of the premiums
that may be paid at any time in order to preserve the qualification of the
Policies as life insurance for federal tax purposes. These limitations are set
forth in each Policy. We reserve the right to refuse or refund any premium
payments that may cause a Policy to fail to qualify as life insurance under
applicable tax law.
SHORT-TERM CANCELLATION RIGHT AND "FREE LOOK" PROVISIONS
You may return a Policy for a refund of the premium within the latest of:
* 10 days after it is received,
* 45 days after the application for the Policy is signed, or
* 10 days after we mail or deliver a notice of right of withdrawal.
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<PAGE> 22
The Policy can be mailed or delivered to our agent who sold it or to our Service
Office. Immediately on such delivery or mailing, the Policy is deemed void from
the beginning. Within seven days after receipt of the returned Policy at our
Service Office, we will refund any premium paid. We reserve the right to delay
the refund of any premium paid by check until the check has cleared.
If you request an increase in face amount which results in new surrender
charges, you will have the same rights as described above to cancel the
increase. If you cancel the increase, the Policy Value and the surrender charges
will be recalculated to the amounts they would have been had the increase not
taken place. You 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.
PROVISIONS FOR AVOIDING LAPSE
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Policies may be issued with a No Lapse Guarantee.
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NO LAPSE GUARANTEE
In those states where it is permitted, you may elect the No Lapse Guarantee. If
elected, as long as the No Lapse Guarantee Cumulative Premium Test (see below)
is satisfied during the No Lapse Guarantee Period, we guarantee that the Policy
will not go into default (see OTHER GENERAL PROVISIONS -- "Policy Default"). Our
guarantee applies even if a combination of Policy loans, adverse investment
experience and other factors causes the Policy's Net Cash Surrender Value to be
insufficient to meet the monthly deductions due at the beginning of a policy
month.
The No Lapse Guarantee Period terminates at the end of the tenth policy year for
lives insured with an average Issue Age up to and including 70. For lives
insured with an average Issue Age of 71 and older, the No Lapse Guarantee Period
decreases by one year for each year the average age exceeds 70, until the
average age reaches 77. For lives insured with an average Issue Age between 77
and 85, the No Lapse Guarantee Period is three years. The No Lapse Guarantee is
not offered to lives insured whose average Issue Age exceeds 85.
While the No Lapse Guarantee is in effect, we will determine at the beginning of
each policy month whether the No Lapse Guarantee Cumulative Premium Test,
described below, has been satisfied. If it has not been satisfied, we will
notify you and allow a 61-day grace period in which you may make a premium
payment sufficient to keep the No Lapse Guarantee in effect. This required
payment, as described in the notification to you, will be equal to the
outstanding premium required to meet the No Lapse Guarantee Cumulative Premium
Test as of the date the No Lapse Guarantee was not satisfied plus the Monthly No
Lapse Guarantee Premium due for the next two policy months.
If the required payment is not received by the end of the grace period, the No
Lapse Guarantee will terminate. Thereafter, the Policy may go into default. A
death benefit option change will also terminate the No Lapse Guarantee if it is
in effect at the time of the change. The No Lapse Guarantee cannot be reinstated
after it has been terminated. See OTHER GENERAL POLICY PROVISIONS -- "Policy
Default," and INSURANCE BENEFIT -- "Death Benefit Option Changes."
NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST. The No Lapse Guarantee Cumulative
Premium Test is satisfied if, as of the beginning of the policy month, the sum
of all premiums paid to date less any partial withdrawals and less any Policy
Debt is at least equal to the sum of the Monthly No Lapse Guarantee Premiums due
since the policy date.
The Monthly No Lapse Guarantee Premium is one-twelfth of the No Lapse Guarantee
Premium.
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<PAGE> 23
The No Lapse Guarantee Premium is equal to the Target Premium and any Additional
Rating, if applicable. The No Lapse Guarantee Premium is set forth in the
Policy. It is subject to change if you change the face amount of the Policy (see
INSURANCE BENEFIT -- "Face Amount Changes"), or if there is any change in the
supplementary benefits added to the Policy or in the risk class of any life
insured.
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<PAGE> 24
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Policies may be issued with a death benefit guarantee.
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DEATH BENEFIT GUARANTEE
If permitted by state law and if you elect, we will guarantee that the Policy
will not go into default if the Death Benefit Guarantee Cumulative Premium Test
(see below) is satisfied. (See OTHER GENERAL POLICY PROVISIONS -- "Policy
Default".) Our guarantee applies even if a combination of policy loans, adverse
investment experience or other factors causes the Policy's Net Cash Surrender
Value to be insufficient to meet the monthly deductions due at the beginning of
a policy month.
If after the tenth policy year the Death Benefit Guarantee Cumulative Premium
Test is not satisfied but the Fund Value Test (see below) is satisfied, we will
keep the Death Benefit Guarantee in effect.
This Death Benefit Guarantee will expire at the end of a policy year specified
in the Policy. Currently, the specified policy year is
(i) the year in which the youngest life insured reaches or would have
reached Attained Age 100 if Death Benefit Option 1 is maintained throughout
the life of the Policy, and
(ii) the year in which the youngest life insured reaches or would have
reached Attained Age 85 if Death Benefit Option 2 is selected at any time.
While the Death Benefit Guarantee is in effect, we will determine at the
beginning of each policy month whether the Death Benefit Guarantee Cumulative
Premium Test or the Fund Value Test has been satisfied. If neither has been
satisfied, we will notify you and allow a 61-day grace period in which you may
make a premium payment sufficient to keep the Death Benefit Guarantee in effect.
The required payment stated in the notification will be equal to the outstanding
premium required to meet the Death Benefit Guarantee Cumulative Premium Test or
the Fund Value Test at the date neither test was satisfied, plus the Monthly
Minimum Death Benefit Guarantee Premium due for the next two policy months. If
the required payment is not received by the end of the grace period, the Death
Benefit Guarantee will terminate, and the Policy may go into default. Once the
Death Benefit Guarantee is terminated, it cannot be reinstated.
POLICIES WITH FACE AMOUNTS UNDER $250,000. If permitted by state law and you
elect, we will guarantee that a Policy issued by us with a face amount less than
$250,000 at issue or after face amount decrease will not go into default during
the first three policy years if the Cumulative Premium Test is satisfied. Our
guarantee applies even if a combination of policy loans, adverse investment
experience or other factors should causes the Policy's Net Cash Surrender Value
to be insufficient to meet the monthly deductions due at the beginning of a
policy month. After the third policy anniversary, the Death Benefit Guarantee
terminates.
DEATH BENEFIT GUARANTEE CUMULATIVE PREMIUM TEST. The Death Benefit Guarantee
Cumulative Premium Test is satisfied if at the beginning of each policy month
the sum of all premiums paid to date less any partial withdrawals and any Policy
Debt is at least equal to the sum of the Monthly Death Benefit Guarantee
Premiums due since the policy date.
The Death Benefit Guarantee Premium is set forth in the Policy. It is subject to
change if you change the face amount of the Policy or the death benefit option
(see -- "Death Benefit Option Changes" and "Face Amount Changes") or if there is
any change in the supplementary benefits added to the Policy or in the risk
class of any life insured.
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<PAGE> 25
FUND VALUE TEST. The Fund Value Test is applicable after the end of the tenth
year of the Policy. The Fund Value Test is satisfied if at the beginning of each
policy month the Net Policy Value is greater than or equal to the Gross Single
Premium.
INSURANCE BENEFIT
THE INSURANCE BENEFIT
If the Policy is in force at the time of the last surviving life insured's
death, we will pay , upon receipt of due proof of death, an insurance benefit
based on the death benefit option that you select. The amount payable will be
the death benefit under the selected option, plus any amounts payable under any
supplementary benefits added to the Policy, less the value of the Loan Account
at the date of death. The insurance benefit will be paid in one sum unless we
and the beneficiary agree upon another form of settlement. If the insurance
benefit is paid in one sum, we will pay interest from the date of death to the
date of payment. If the last surviving life insured should die after our receipt
of a request for surrender, no insurance benefit will be payable, and we will
pay only the Net Cash Surrender Value.
DEATH BENEFIT OPTIONS
You may select one of two death benefit options -- Option 1 and Option 2.
- --------------------------------------------------------------------------------
What is Option 1?
- --------------------------------------------------------------------------------
Under Option 1 the death benefit is the greater of
* the face amount of the Policy, or
* the Policy Value multiplied by the applicable percentage in the table
set forth below.
- --------------------------------------------------------------------------------
What is Option 2?
- --------------------------------------------------------------------------------
Under Option 2 the death benefit is the greater of
* the face amount of the Policy plus the Policy Value, or
* the Policy Value multiplied by the applicable percentage in the
following table set forth below.
Age in the table refers to the age of the youngest life insured or the age such
person would have reached.
- --------------------------------------------------------------------------------
Use of the corridor percentage may increase your death benefit.
- --------------------------------------------------------------------------------
<TABLE>
- -----------------------------------------------------------------------------------------------------
Corridor Corridor Corridor
- -----------------------------------------------------------------------------------------------------
Age Percentage Age Percentage Age Percentage
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
40 & below 250% 54 157 68 117
- -----------------------------------------------------------------------------------------------------
41 243 55 150 69 116
- -----------------------------------------------------------------------------------------------------
42 236 56 146 70 115
- -----------------------------------------------------------------------------------------------------
43 229 57 142 71 113
- -----------------------------------------------------------------------------------------------------
44 222 58 138 72 111
- -----------------------------------------------------------------------------------------------------
45 215 59 134 73 109
- -----------------------------------------------------------------------------------------------------
46 209 60 130 74 107
- -----------------------------------------------------------------------------------------------------
47 203 61 128 75 - 90 105
- -----------------------------------------------------------------------------------------------------
48 197 62 126 91 104
- -----------------------------------------------------------------------------------------------------
49 191 63 124 92 103
- -----------------------------------------------------------------------------------------------------
50 185 64 122 93 102
- -----------------------------------------------------------------------------------------------------
51 178 65 120 94 101
- -----------------------------------------------------------------------------------------------------
52 171 66 119 95 & above 100
- -----------------------------------------------------------------------------------------------------
53 164 67 118
- -----------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 26
Regardless of which death benefit option is in effect, the relationship of
Policy Value to death benefit will change whenever we use the "corridor
percentages" to determine the amount of the death benefit. This will occur
whenever multiplying the Policy Value by the applicable percentage set forth in
the above table results in a greater death benefit than would otherwise apply
under the selected option.
For example, assume the youngest life insured under a Policy with a face amount
of $400,000 has an Attained Age of 40. If Option 1 is in effect, the corridor
percentage will produce a greater death benefit whenever the Policy Value
exceeds $160,000 (250% x $160,000 = $400,000). If the Policy Value is less than
$160,000, an incremental change in Policy Value will have no effect on the death
benefit. If the Policy Value is greater than $160,000, an incremental change in
Policy Value will result in a change in the death benefit by a factor of 2.5.
Thus, if the Policy Value were to increase to $160,010, the death benefit would
be increased to $400,025 (250% x $160,010 = $400,025).
If Option 2 were in effect in the above example, the corridor percentage would
produce a greater death benefit whenever the Policy Value exceeded $266,667
(250% x $266,667 = $666,667). At that point the death benefit produced by
multiplying the Policy Value by 250% would result in a greater amount than
adding the Policy Value to the face amount of the Policy. If the Policy Value is
less than $266,667, an incremental change in Policy Value will have a
dollar-for-dollar effect on the death benefit. If the Policy Value is greater
than $266,667, an incremental change in Policy Value will result in a change in
the death benefit by a factor of 2.5 in the same manner as would be the case
under Option 1 when the corridor percentage determined the death benefit.
DEATH BENEFIT OPTION CHANGES
Your initial selection of the death benefit option is made in the application.
After the Policy has been in force for two years, you may change the death
benefit option. The change will be effective as of the next policy anniversary
following a request. Your written request for a change must be received by us at
least 30 days prior to a policy anniversary in order to become effective on that
date. We reserve the right to limit a request for change if the change would
cause the Policy to fail to qualify as life insurance for tax purposes.
A change in death benefit option will result in a change in the Policy's face
amount. The change in face amount is required to avoid any change in the amount
of the death benefit.
- --------------------------------------------------------------------------------
CHANGE TO OPTION 2
NEW FACE AMOUNT =
OLD FACE AMOUNT
MINUS
POLICY VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If the change in death benefit is from OPTION 1 TO OPTION 2, the new face amount
will be equal to the face amount prior to the change minus the Policy Value on
the effective date of the change. Thereafter, the death benefit will vary with
changes in the policy Value. A change to Option 2 will not be allowed if it
would cause the face amount of the Policy to go below the minimum face amount of
$250,000. A change to Option 2 will shorten the Death Benefit Guarantee Period
to the year in which the younger Insured reaches average Attained Age 85.
- --------------------------------------------------------------------------------
15
<PAGE> 27
- --------------------------------------------------------------------------------
CHANGE TO OPTION 1
NEW FACE AMOUNT =
OLD FACE AMOUNT
PLUS
POLICY VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If the change in death benefit is 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 on
the effective date of the change. The increase in face amount resulting from a
change to Option 1 will not affect the amount of surrender charges to which a
Policy may be subject. We have the right to require satisfactory evidence of
insurability before permitting a change from Option 2 to Option 1. We do not
currently require evidence of insurability when making this change.
- --------------------------------------------------------------------------------
If you wish to have level insurance coverage, you should generally select Option
1. Under Option 1, increases in Policy Value usually will reduce the net amount
of risk under a Policy which will reduce cost of insurance charges. This means
that favorable investment performance should result in a faster increase in
Policy Value than would occur under an identical Policy with Option 2 in effect.
However, the larger Policy Value which may result under Option 1 will not affect
the amount of the death benefit unless the corridor percentages are used to
determine the death benefit.
If you want to have the Policy Value reflected in the death benefit so that any
increases in Policy Value will increase the death benefit, you should generally
select Option 2. Under Option 2, the net amount at risk will remain level unless
the corridor percentages are used to determine death benefit, in which case
increases in Policy Value will increase the net amount at risk.
FACE AMOUNT CHANGES
- --------------------------------------------------------------------------------
You may increase or decrease the Policy's face amount.
- --------------------------------------------------------------------------------
Subject to certain limitations, you may increase or decrease the face amount of
your Policy. A change in face amount may affect the Death Benefit Guarantee
Premium, the No Lapse Guarantee Premium, the Guideline Single Premium , the
Guideline Level Premium and the monthly deductions and surrender charges (see
CHARGES AND DEDUCTIONS).
MINIMUM CHANGES. Currently, each increase in face amount (other than an increase
for a corporate-owned policy) must be at least $100,000. Each decrease in face
amount (other than a decrease resulting from a partial withdrawal or a decrease
for a corporate-owned policy) currently must be at least $50,000. We reserve the
right to modify this minimum requirement as of 90 days after we give you written
notice of such modification. We also reserve the right to limit a change in face
amount to the extent necessary to prevent the Policy from failing to qualify as
life insurance for tax purposes.
INCREASES. After the Policy has been in force for two years, you may increase
the face amount of your Policy once per policy year, subject to satisfactory
evidence of insurability. Increases in corporate-owned Policies may be made in
any policy year and with no minimum amount requirement. An increase will become
effective at the beginning of the next policy month following the date we
approve the requested increase. We reserve the right to refuse your request for
an increase if the Attained Age of any of the lives insured still living at the
effective date of the increase would be greater than the maximum issue age for
new Policies at that time.
In addition, subject to certain conditions as set forth in the Policy, you may
be entitled to increase the face amount of he Policy by a certain amount without
further evidence of insurability if there is an increase in federal estate taxes
within three years of the policy date. You are entitled to this benefit if both
insureds are standard risks and under age 75 at the time of issue. The benefit
may not be available If you are considered a substandard risk in accordance with
our normal underwriting practices.
16
<PAGE> 28
- --------------------------------------------------------------------------------
Face amount increases usually subject the Policy to new surrender charges.
- --------------------------------------------------------------------------------
An increase in face amount will usually subject the Policy to new surrender
charges. The new surrender charges will be computed as if a new Policy were
being purchased for the increase in face amount. For purposes of determining the
new deferred sales charge, a portion of the Policy Value at the time of the
increase, and a portion of the premiums paid on or subsequent to the increase,
will be deemed to be premiums attributable to the increase. See CHARGES AND
DEDUCTIONS -- "Surrender Charges."
Any increase in face amount, following a prior decrease in face amount, to a
level less than the highest face amount previously in effect will have no effect
on the surrender charges to which the Policy is subject. This is because
surrender charges, if applicable, will have been assessed in connection with the
prior decrease in face amount. The insurance coverage eliminated by the decrease
of the oldest face amount will be deemed to be restored first. As with the
purchase of a Policy, you will have free look and sales charge limitation rights
with respect to any increase resulting in new surrender charges.
An additional premium may be required for a face amount increase, and new Death
Benefit Guarantee Premiums, No Lapse Guarantee Premiums, Guideline Annual
Premium and Target Premium will be determined.
DECREASES. After the Policy has been in force for two years, you may decrease
the face amount of your Policy once per policy year. For corporate-owned
Policies, decreases may be made in any policy year, with no minimum requirement.
However, during the two-year period following an increase in face amount, you
may choose to cancel the increase in face amount and have the deferred sales
charge for the increase reduced by applicable limitations on sales charges
attributable to the increase. A decrease in face amount will become effective at
the beginning of the next policy month following the receipt of a properly
executed request. A decrease will not be allowed if it would cause the face
amount to go below the minimum face amount of $250,000.
- --------------------------------------------------------------------------------
Face amount decreases usually result in the assessment of a surrender charge.
- --------------------------------------------------------------------------------
Usually, we will deduct surrender charges from the Policy Value whenever a
decrease in face amount is made during the Surrender Charge Period. See CHARGES
AND DEDUCTIONS -- "Surrender Charges." For purposes of determining surrender and
cost of insurance charges, a decrease will reduce face amount in the following
order: first (a) the face amount provided by the most recent increase, then (b)
the face amounts provided by the next most recent increases successively, and
finally (c) the initial face amount.
POLICY VALUES
POLICY VALUE
- --------------------------------------------------------------------------------
The Policy Value is the sum of your values in the Investment Accounts, the Fixed
Account and the Loan Account.
- --------------------------------------------------------------------------------
A Policy has a Policy Value. You may access a portion of the Policy Value by
making a policy loan or partial withdrawal or by surrendering the Policy. See
"Policy Loans" and "Partial Withdrawals And Surrenders" below. The Policy Value
may also affect the amount of the death benefit. See INSURANCE BENEFIT -- "Death
Benefit Options." The Policy Value at any time is equal to the sum of the values
in the Investment Accounts, the Fixed Account and the Loan Account. The
following discussion relates only to the Investment Accounts. Policy loans are
discussed under "Policy Loans" and the Fixed Account is discussed under "The
General Account." The portion of the Policy Value based on the Investment
Accounts is not guaranteed and will vary each Business Day with the investment
performance of the underlying Portfolio.
We establish an Investment Account under the Policy for each sub-account of the
Separate Account to which you allocate net premiums or transfer amounts. Each
Investment Account measures the interest of the Policy in the corresponding
sub-account. The value of the Investment Account 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.
17
<PAGE> 29
- --------------------------------------------------------------------------------
Sub-account units are used to measure Investment Account values.
- --------------------------------------------------------------------------------
We credit sub-account units to a Policy whenever you allocate net premiums or
transfer amounts to that sub-account. Sub-account units 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 at the end of the
Business Day on which the transaction occurs. The number of units credited with
respect to a premium payment is based on the applicable unit values at the end
of the Business Day on which the premium is received at our Service Office or
other office or entity so designated by us.
Units are valued at the end of each Business Day. A Business Day is deemed to
end at the time of the determination of the net asset value of the underlying
Portfolio shares. When an order involving the crediting or canceling of units is
received after the end of a Business Day or on a day which is not a Business
Day, the order will be processed on the basis of unit values determined at the
end of the next Business Day. Similarly, any determination of Policy Value,
Investment Account value or death benefit to be made on a day which is not a
Business Day will be made at the end of the next Business Day.
The value of a unit of each sub-account was initially fixed at $10. For each
subsequent Business Day the unit value is determined by multiplying the unit
value for the preceding Business Day by the "net investment factor" for the
particular sub-account for that subsequent Business Day. The net investment
factor for a sub-account for any Business Day is equal to (a) divided by (b),
where:
(a) is the net asset value of the underlying Portfolio shares held by
that sub-account as of the end of such Business Day before any policy
transactions are made for that day;
(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 have been 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.
TRANSFERS OF POLICY VALUE
- --------------------------------------------------------------------------------
You may make 12 transfers per year free of charge.
- --------------------------------------------------------------------------------
You may transfer amounts from one or more Investment Accounts or our general
account to other Investment Accounts and/or the general account. You are
permitted to make twelve transfers each policy year free of charge. If you make
additional transfers in a policy year, we will charge you $25 per transfer. We
will assess this charge against the Investment Account or Fixed Account from
which the amount is being transferred. For this purpose all transfer requests
which we receive from you on the same Business Day will be treated as a single
transfer request.
The most that you may transfer from the Fixed Account in any one policy year is
the greater of $500 or 15% of the Fixed Account value as of the previous policy
anniversary. Any transfer which involves a transfer out of the Fixed Account may
not involve a transfer to the Investment Account for the Money Market Trust.
Your transfer request must be in a format satisfactory to us. It must be in
writing unless you have a currently valid telephone transfer authorization form
on file with us. Generally, we will not be liable for following telephone
instructions that we reasonably believe to be genuine. We will employ reasonable
procedures to confirm that telephone instructions are genuine. Those procedures
will consist of confirming that a valid telephone authorization form is on file,
tape recording all telephone transactions and providing written confirmation of
the instructions. We may be liable for any losses resulting from unauthorized or
fraudulent telephone transfers if we fail to follow reasonable procedures.
18
<PAGE> 30
- --------------------------------------------------------------------------------
You may effectively convert your Policy to a fixed benefit Policy.
- --------------------------------------------------------------------------------
You may effectively convert your Policy to a fixed benefit Policy by
transferring the Policy Value in all of the Investment Accounts to the Fixed
Account and by changing your allocation of net premiums entirely to the Fixed
Account. As long as the entire Policy Value is allocated to the Fixed Account,
the Policy Value, other values based thereon and the death benefit will be
determinable and guaranteed. This means that future values and minimum levels of
benefits can be computed using guaranteed charges, guaranteed interest rate and
the guaranteed Mortality Table for a given death benefit option, face amount of
insurance and premium payment. Actual values will never be less than the minimum
guaranteed values provided the entire Policy Value remains in the Fixed Account.
The Investment Account values to be transferred to the Fixed Account will be
determined as of the Business Day on which we receive the request for
conversion. No change in the issue age, risk classes of the lives insured or
face amount will result from a conversion. You may transfer any or all of the
Policy Value to the Fixed Account at any time, even if a prior transfer has been
made during the policy month. After the conversion has been effected, you may
again transfer all or part of the Policy Value back into the Investment Accounts
and/or allocate net premiums to the Investment Accounts. The Policy will then
cease to be considered a fixed-benefit Policy. Transfers from the Fixed Account
will be subject to the limitations stated above.
- --------------------------------------------------------------------------------
You may arrange for periodic transfers from one Investment Account to other
accounts.
- --------------------------------------------------------------------------------
DOLLAR COST AVERAGING. Under our DCA program, you may designate an amount which
will be transferred at predetermined intervals from one Investment Account into
any other Investment Account(s) or the Fixed Account. Each transfer under the
DCA program must be of a minimum amount set by us. We may change this minimum at
any time in our discretion. Currently, no charge will be made for this program
if the Policy Value exceeds $15,000 on the date of transfer. Otherwise, there
will be a charge of $5 for each transfer. We will deduct the charge from the
value of the Investment Account out of which the transfer is made. If there are
insufficient funds to effect a DCA transfer, including the charge, if
applicable, we will not effect the transfer and will notify you of that fact. We
reserve the right to cease to offer this program on 90 days' written notice.
ASSET ALLOCATION BALANCER TRANSFERS. We offer policyowners the ability to have
amounts automatically transferred among stipulated Investment Accounts to
maintain an allocated percentage in each stipulated Investment Account.
- --------------------------------------------------------------------------------
You may arrange for automatic transfers every six months to preserve your
investment allocations.
- --------------------------------------------------------------------------------
Under the Asset Allocation Balancer program you designate an allocation of
Policy Value among Investment Accounts. At six month intervals, beginning six
months after the policy date, we will move amounts among the Investment Accounts
as necessary to maintain your chosen allocation. A change to your premium
allocation instructions will automatically result in a change in Asset
Allocation Balancer instructions so that the two are identical unless you
instruct us differently or a DCA request is in effect. Currently, we make no
charge for this program; however, we reserve the right to institute a charge on
90 days' written notice.
We may cease to offer this program on 90 days' written notice.
POLICY LOANS
- --------------------------------------------------------------------------------
You may borrow against your Policy Value.
- --------------------------------------------------------------------------------
While the Policy is in force and has a loan value, you may borrow against your
Policy Value. The Policy serves as the only security for the loan. In most
states the minimum loan amount is $500. The maximum loan amount is the amount
which would cause the Modified Policy Debt, as described below, to equal the
loan value of the Policy as of the date of the loan. The loan value is the
Policy's Cash Surrender Value less the monthly deductions due to the next policy
anniversary. The Modified Policy Debt as of any date is the Policy Debt (the
aggregate amount of policy loans, including borrowed interest, less any loan
repayments) plus the amount of interest to be charged to the next policy
anniversary, all discounted from the next policy anniversary to such date at an
annual rate of 4%. When a loan has been
19
<PAGE> 31
taken out, or when loan interest charges are borrowed, we transfer an amount
equal to the Modified Policy Debt to the Loan Account to ensure that a
sufficient amount will be available to pay interest on the Policy Debt at the
next policy anniversary.
For example, assume a Policy with a loan value of $5,000, no outstanding policy
loans and a loan interest rate of 5.75%. The maximum amount that can be borrowed
is an amount that will cause the Modified Policy Debt to equal $5,000. If the
loan is made on a policy anniversary, the maximum loan will be $4,917. This
amount at 5.75% interest will equal $5,200 one year later; $5,200 discounted to
the date of the loan at 4% (the Modified Policy Debt) equals $5,000. Because the
minimum rate of interest credited to the Loan Account is 4%, $5,000 must be
transferred to the Loan Account to ensure that $5,200 will be available as of
the next policy anniversary to cover the interest accrued on the Policy Debt.
The current credited interest rate to the loan account is 4.5%
- --------------------------------------------------------------------------------
You may designate how the loan is to be taken from your various accounts.
- --------------------------------------------------------------------------------
When a loan is made, we will deduct from the Investment Accounts or the Fixed
Account, and transfer to the Loan Account, an amount which will result in the
Loan Account value being equal to the Modified Policy Debt. You 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,
we will allocate the amount to be transferred to each account in the same
proportion as the value in each Investment Account and the Fixed Account bears
to the Net Policy Value.
A policy loan may result in a Policy's failing to satisfy the Death Benefit
Guarantee Cumulative Premium Test and/or the No Lapse Guarantee Cumulative
Premium Test, since the Policy Debt is subtracted from the sum of the premiums
paid in determining whether these tests are satisfied. As a result, the Death
Benefit Guarantee and/or No Lapse Guarantee may terminate. See INSURANCE BENEFIT
- -- "Death Benefit Guarantee" and OTHER GENERAL POLICY PROVISIONS -- "Policy
Default."
Moreover, if the Death Benefit Guarantee or No Lapse Guarantee is not in force,
a policy loan may cause a Policy to be more susceptible to going into default,
since a policy loan will be reflected in the Net Cash Surrender Value. See OTHER
GENERAL POLICY PROVISIONS -- "Policy Default."
A policy loan will also affect future Policy Values, since that portion of the
Policy Value in the Loan Account will increase in value at the crediting
interest rate rather than varying with the performance of the underlying
Portfolios selected by the policyowner or increasing in value at the rate of
interest credited for amounts allocated to the Fixed Account.
- --------------------------------------------------------------------------------
Systematic loans may have adverse tax consequences, and a premium necessary to
avoid lapse will increase as the insured grows older.
- --------------------------------------------------------------------------------
Policy loans may have tax consequences. If you are considering the use of
systematic policy loans as one element of a comprehensive retirement income
plan, you should consult your personal tax adviser regarding the potential tax
consequences if such loans were to so reduce Policy Value that the Policy would
lapse, absent additional payments. The premium payment necessary to avert lapse
would increase with the ages of the insureds. See MISCELLANEOUS MATTERS -
"Federal Income Tax Considerations (Tax Treatment of Policy Benefits)." Finally,
a Policy loan will affect the amount payable on the death of the last surviving
life insured, since the death benefit is reduced by the value of the Loan
Account at the date of death in arriving at the insurance benefit.
INTEREST CHARGED ON POLICY LOANS. Interest on the Policy Debt will accrue daily
and be payable annually on the policy anniversary. We will fix the rate of
interest charged at an effective annual rate of 5.75%. If the interest due on a
policy anniversary is not paid by the policyowners, the interest will be
borrowed against the Policy.
INTEREST CREDITED TO THE LOAN ACCOUNT. We will credit interest to any amount in
the Loan Account at an effective annual rate of at least 4%. The actual rate
credited is the rate of interest charged on the Policy loan less an interest
rate differential, currently 1.25%.
20
<PAGE> 32
LOAN ACCOUNT ADJUSTMENTS. Whenever a loan is first taken out, and at specified
events thereafter, we adjust the value of the Loan Account. We take the
difference between (i) the Loan Account before any adjustment and (ii) the
Modified Policy Debt at the time of adjustment and transfer that amount between
the Loan Account and the Investment Accounts or the Fixed Account. The amount
transferred to or from the Loan Account will be such that the value of the Loan
Account after the adjustment will be equal to the Modified Policy Debt.
The specified events which cause an adjustment to the Loan Account are:
* a policy anniversary,
* a partial or full loan repayment,
* a new loan, or
* an amount is needed to meet a monthly deduction.
A loan repayment may be implicit in that Policy Debt is effectively repaid upon
termination (i.e., upon death of the last surviving life insured, surrender or
lapse of the policy). In each of these instances, the Loan Account will be
adjusted so that any excess of the Loan Account over the Modified Policy Debt
after the repayment will be included in the termination proceeds.
Except as noted below under "Loan Repayments," we will allocate amounts
transferred from the Loan Account to the Investment Accounts and the Fixed
Account in the same proportion as the value in the corresponding "loan
sub-account" bears to the value of the Loan Account. A "loan sub-account" exists
for each Investment Account and for the Fixed Account. Amounts transferred to
the Loan Account are allocated to the appropriate loan sub-account to reflect
the account from which the transfer was made.
LOAN ACCOUNT ILLUSTRATION. (Dollar amounts in this illustration have been
rounded to the nearest dollar.) The operation of the Loan Account may be
illustrated as follows: assume a Policy with a loan value of $5,000, a loan
interest rate of 5.75%, and a maximum loan amount on a policy anniversary of
$4,917. If a loan in the maximum amount of $4,917 is made, an amount equal to
the Modified Policy Debt, $5,000, is transferred to the Loan Account. At the
next policy anniversary the value of the Loan Account will have increased to
$5,225 ($5,000 x 1.045) reflecting interest credited at an effective annual rate
of 4.5%. At that time the loan will have accrued interest charges of $283
($4,917 x .0575), bringing the Policy Debt to $5,200.
If the accrued interest charges are paid on the policy anniversary, the Policy
Debt will continue to be $4,917, and the Modified Policy Debt, reflecting
interest for the next policy year and discounting the Policy Debt and such
interest at 4%, will be $5,000. An amount will be transferred from the Loan
Account to the Fixed Account or the Investment Accounts so that the Loan Account
value will equal the Modified Policy Debt. Since the Loan Account value was
$5,225, a transfer of $225 will be required ($5,225 - $5,000).
If, however, the accrued interest charges of $283 are borrowed, an amount will
be transferred from the Investment Accounts and the Fixed Account so that the
Loan Account value will equal the Modified Policy Debt recomputed at the policy
anniversary. The new Modified Policy Debt is the Policy Debt, $5,200, plus loan
interest to be charged to the next policy anniversary, $299 ($5,200 x .0575),
discounted at 4%, which results in a figure of $5,288. Since the value of the
Loan Account was $5,225, a transfer of $63 will be required. This amount is
equivalent to the 1.25% interest rate differential on the $5,000 transferred to
the Loan Account on the previous policy anniversary.
21
<PAGE> 33
- --------------------------------------------------------------------------------
You may repay your Policy loan at any time prior to the death of the last
surviving insured.
- --------------------------------------------------------------------------------
LOAN REPAYMENTS. You may repay Policy Debt in whole or in part at any time prior
to the death of the last surviving life insured provided the Policy is in force.
When a repayment is made, we will credit the repayment amount to the Loan
Account and transfer an amount to the Fixed Account or the Investment Accounts
so that the Loan Account at that time will equal the Modified Policy Debt. We
will allocate loan repayments first to the Fixed Account until the associated
loan sub-account is reduced to zero. We will then allocate loan repayments 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 us not specifically designated in writing as loan repayments
will be treated as premiums.
- --------------------------------------------------------------------------------
You may partially withdraw your Policy's Net Cash Surrender Value after the
Policy has been in force for two policy years.
- --------------------------------------------------------------------------------
PARTIAL WITHDRAWALS AND SURRENDERS
After a Policy has been in force for two policy years, you may make a partial
withdrawal of the Net Cash Surrender Value. In most states the minimum amount
that may be withdrawn is $500. You should specify the portion of the withdrawal
to be taken from each Investment Account and the Fixed Account. In the absence
of instructions we will allocate the withdrawal among such accounts in the same
proportion as the Policy Value in each account bears to the Net Policy Value. No
more than one partial withdrawal may be made in any one policy month.
If you make a partial withdrawal during the Surrender Charge Period, we will
usually assess a portion of the surrender charges to which the Policy is subject
(see CHARGES AND DEDUCTIONS -- "Surrender Charges") if the amount withdrawn is
in excess of the Withdrawal Tier Amount. The Withdrawal Tier Amount is 10% of
the Net Cash Surrender Value determined as of the previous policy anniversary.
The portion of a partial withdrawal that is considered to be in excess of the
Withdrawal Tier Amount includes all previous partial withdrawals that have
occurred in the current policy year.
If the Option 1 death benefit is in effect under a Policy from which a partial
withdrawal is made, the face amount of the Policy will be reduced by the amount
of the partial withdrawal and any surrender charges. If the death benefit is
equal to the face amount at the time of withdrawal, the face amount will be
reduced by the amount of the withdrawal plus the portion of the surrender
charges assessed. If the death benefit is based upon the Policy Value times the
corridor percentage set forth under INSURANCE BENEFIT -- "Death Benefit Options"
above, the face amount will be reduced only to the extent that the amount of the
withdrawal plus the portion of the surrender charges assessed exceeds the
difference between the death benefit and the face amount.
Reductions in face amount resulting from partial withdrawals will not incur any
surrender charges above the surrender charges applicable to the withdrawal. When
the face amount of a Policy is based on one or more increases subsequent to
issuance of the Policy, a reduction resulting from a partial withdrawal will be
applied in the same manner as a requested decrease in face amount, i.e., first
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. If there has been a prior increase in face amount, then the face amount
will be decreased in the same order as if the policyowner had requested the
decrease. See CHARGES AND DEDUCTIONS - "Surrender Charges (Charges on Partial
Withdrawals)."
You may surrender your Policy for its Net Cash Surrender Value at any time while
at least one of the lives insured is living. The Net Cash Surrender Value is the
Policy Value less any surrender charges and outstanding monthly deductions due
(the "Cash Surrender Value") minus the value of the Loan Account. The Net Cash
Surrender Value will be determined as of the end of the Business Day on which we
receive the Policy and a written request for surrender at our Service Office.
After a Policy is surrendered, the insurance coverage and all other benefits
under the Policy will terminate. Surrender of a Policy during the Surrender
Charge Period will usually result in our assessment of surrender charges. See
Charges And Deductions -- "Surrender Charges."
22
<PAGE> 34
CHARGES AND DEDUCTIONS
The charges we make under the Policy are assessed as:
* deductions from premiums,
* surrender charges upon surrender, partial withdrawals, decreases
in face amount or lapse,
* monthly deductions, and
* other charges.
DEDUCTIONS FROM PREMIUMS
We deduct a charge of 2.35% from each premium payment for state and local taxes,
except for Policies issued in Oregon where no premium tax is deducted. State and
local taxes differ from state to state. We expect the 2.35% rate to be
sufficient, on average, to pay state and local taxes where required.
We also deduct a charge of 1.25% of each premium payment for federal taxes
related to premium payments, an amount which we also expect to be sufficient to
pay federal taxes.
Currently, we intend to cease these deductions at the end of the tenth policy
year. However, we may continue these deductions beyond the tenth policy year. In
addition, if any other taxes are incurred, we may make a charge for those taxes
in addition to the deductions for federal, state or local taxes currently being
made from premium payments. We also deduct a sales charge of 5.5% of the
premiums paid in each policy year, up to a maximum of the Target Premium in the
then current policy year. We guarantee that this deduction will cease at the end
of the tenth policy year, or 10 years after a face increase.
SURRENDER CHARGES
We will assess surrender charges upon surrender, a partial withdrawal of Policy
Value in excess of the Withdrawal Tier Amount, a requested decrease in face
amount, or lapse. We usually assess these charges if any of the above
transactions occurs within the Surrender Charge Period unless the charges have
been previously deducted. There are two surrender charges -- a deferred
underwriting charge and a deferred sales charge. The charges will never exceed
the allowable maximums under standard non-forfeiture law.
In states where approved, we will reduce the surrender charge as described below
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. We will waive 80% of the Surrender Charge (deferred underwriting
charge and deferred sales charge) 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.
- --------------------------------------------------------------------------------
The deferred underwriting charge is $4 per $1000 of face amount not to exceed
$4000.
- --------------------------------------------------------------------------------
DEFERRED UNDERWRITING CHARGE. The deferred underwriting charge is $4 for each
$1,000 of face amount of life insurance coverage initially purchased or added by
increase. The charge applies only to the first $1,000,000 of face amount
initially purchased or the first $1,000,000 of each subsequent increase in face
amount. Thus, the charge made in connection with any one underwriting will not
exceed $4,000.
We designed the deferred underwriting charge to cover the administrative
expenses associated with underwriting and policy issue, including the costs of
processing applications, conducting medical examinations, determining each life
insured's risk class and establishing policy records. We do not expect to
recover from the deferred underwriting charge any
23
<PAGE> 35
amount in excess of its expenses associated with underwriting and Policy issue,
including the costs of processing applications, conducting medical examinations,
determining the risk classes of the lives insured and establishing Policy
records.
- --------------------------------------------------------------------------------
The maximum deferred sales charge is equal to the premiums paid in the first
policy year, not to exceed the Target Premium.
- --------------------------------------------------------------------------------
DEFERRED SALES CHARGE. The maximum deferred sales charge is equal to the
premiums paid in the first policy year up to a maximum of the Target Premium,
multiplied by the percentages shown in Table 1 below. In no event will the sum
of the deferred sales charge and the sales charge deducted from premiums exceed
the amount that would be permitted by Section 27(a)(2) of the 1940 Act were such
section applicable to the Policy. This charge compensates us for some of the
expenses of selling and distributing the Policies, including agents'
commissions, advertising, agent training and the printing of prospectuses and
sales literature.
The deferred sales charge deducted in any policy year is not specifically
related to sales expenses incurred in that year. Instead, we expect that the
major portion of the sales expenses attributable to a Policy will be incurred
during the first policy year, although the deferred sales charge might be
deducted up to fifteen years later. We anticipate that the aggregate amounts we
receive under the Policies for sales charges will be insufficient to cover our
aggregate sales expenses. To the extent that our sales expenses exceed our sales
charges, we will pay the excess from our other assets or surplus, including
amounts derived from the mortality and expense risks charge described below. We
may forego deducting a portion of the deferred sales charge if the Policy is
surrendered for its Net Cash Surrender Value at any time during the first two
years following issuance or following an increase in face amount or if the
increase is canceled during the two-year period following the increase. Where
such sales charge limitation is applicable, the deferred sales charge assessable
under the Policy will increase at the beginning of the third policy year. See
"Surrender Charges (Sales Charge Limitation)" below.
We specify the Target Premium for the initial face amount in the Policy. We will
compute a Target Premium for each increase in face amount above the highest face
amount of coverage previously in effect, except for an increase in face amount
which results from a change in the death benefit option, and we will advise you
of each new Target Premium. Target Premiums depend upon the face amount of
insurance provided at issue or by an increase and the issue age and sex (unless
unisex rates are required by law) of each life insured. Except for surrenders to
which the sales charge limitation provisions described below apply, the maximum
deferred sales charge will be in effect for at least the first six years of the
Surrender Charge Period for lives insured with either an Average Issue Age (or
an Average Attained Age at time of face increase) of 0-75. For average ages
higher than 75, the portion of the deferred sales charge that remains in effect
will grade down at a rate that also varies according to Table 1 as described
below.
To determine the deferred sales charge applicable to a face amount increase, we
will treat a portion of the Policy Value on the date of increase as a premium
attributable to the increase. In addition, we will treat a portion of each
premium paid on or subsequent to the increase as attributable to the increase.
In each case, the portion attributable to the increase will be the ratio of the
"Guideline Annual Premium" for the increase to the sum of the guideline annual
premiums for the initial face amount and all increases including the requested
increase.
A "Guideline Annual Premium" is a hypothetical amount based on SEC rules that we
use to measure the maximum amount of the deferred sales charge that may be
imposed upon surrender, partial withdrawal, a decrease in face amount or lapse
during the first two years after issuance or after an increase in face amount.
24
<PAGE> 36
TABLE 1: THE DEFERRED UNDERWRITING CHARGE AND THE SURRENDER CHARGE GRADING
PERCENTAGES DURING THE SURRENDER CHARGE PERIOD (APPLICABLE TO THE INITIAL FACE
AMOUNT AND SUBSEQUENT INCREASES)
SURRENDER AVERAGE AGE AND PERCENTAGE OF CHARGES**
CHARGE PERIOD* AVERAGE AGE:
- ---------------- ------------------------------------------------------------
0-75 76 77 78 79 80+
12 100% 100% 100% 100% 100% 100%
24 100% 100% 100% 100% 100% 90%
36 100% 100% 100% 100% 90% 80%
48 100% 100% 100% 90% 80% 70%
60 100% 100% 90% 80% 70% 60%
72 100% 90% 80% 70% 60% 50%
84 90% 80% 70% 60% 50% 40%
96 80% 70% 60% 50% 40% 30%
108 70% 60% 50% 40% 30% 20%
120 60% 50% 40% 30% 20% 10%
132 50% 40% 30% 20% 10% 0%
144 40% 30% 20% 10% 0%
156 30% 20% 10% 0%
168 20% 10% 0%
180 0% 0%
* Periods shown are after end of policy month. Policy months not shown may be
calculated by linear extrapolation.
** Average Age refers to the average rated Issue Age of the lives insured when
the Policy is first issued, or their average Attained Age at the time of a
subsequent face amount increase.
The following example illustrates how deferred underwriting and sales charges
are calculated using data from Table 1 above.
EXAMPLE:
Assume a 42-year-old male and a 42-year-old female (standard risks), whose
Policy was issued at an average Issue Age 35 and who have paid $9,000 in
premiums in equal installments under a Policy with a Target Premium of $505 and
a face amount of $250,000, surrender their Policy during the last month of the
seventh Policy Year.
We would assess a deferred underwriting charge of $900. The maximum deferred
underwriting charge of $1,000 ($4 per $1,000 of face amount x 250) would be
multiplied by the 90% listed in Table 1 as applicable to surrenders during the
last month of the seventh Policy Year (90% x ($4 x 250) = $900).
We would assess a deferred sales charge of $454.50. The deferred sales charge is
equal to the lower of premiums paid in the first Policy Year (or first year
after a face increase), in our example $9,000/7 = $1,285.71, or the Target
Premium ($505). Therefore the deferred sales charge is $505. Because the
surrender occurs during the last month of the seventh Policy Year, only 90%
(from Table 1) of the maximum sales charge remains applicable (.90 x $505 =
$454.50).
25
<PAGE> 37
SALES CHARGE LIMITATION. The maximum sales charge that we may take under the
Policy is 9% of 20 guideline annual premiums ("GAPs"). If the insureds' joint
life expectancy is less than 20 years, then the number of years of life
expectancy would replace 20 GAPs in determining the maximum sales charge.
However, if you surrender a Policy or the Policy lapses, or you request a face
amount decrease at any time during the first two years after issuance or after
an increase in face amount, we will forego taking that part of the deferred
sales charge with respect to "premiums" paid for the initial face amount or such
increase (including the portion of Policy Value treated as premiums for the
increase, as described above), whichever is applicable, which exceeds the sum of
(i) 30% of the premiums paid up to the lesser of one guideline annual premium or
the cumulative premiums paid to the surrender date plus (ii) 10% of the premiums
paid in excess of one guideline annual premium, up to the lesser of two
guideline annual premiums or the cumulative premiums paid to the surrender date,
plus (iii) 9% of the premiums paid in excess of two guideline annual premiums.
The operation of the sales charge limitation that applies in the first two years
after issuance, or after an increase in face amount, is illustrated by the
following example.
EXAMPLE:
A 37-year-old male non-smoker and a 37-year-old female non-smoker purchased a
Policy with a face amount in excess of $250,000 when their average Issue Age was
35. They have paid $2,000 in premiums in equal installments under the Policy,
and the Policy has a guideline annual premium ("GAP") of $1,614 and a Target
Premium ("TP") of $505. They surrender the Policy during the second Policy Year.
In the absence of the sales charge limitation, the maximum deferred sales charge
would be $505 as described IN CHARGES AND DEDUCTIONS -- "Deferred Sales Charge."
However, under the formula described above, the maximum sales charge allowable
would be $523. This is calculated as the sum of:
(i) 30% of one GAP, or $484 (.30 x $1,614 = $484), because one GAP
($1,614) is less than premiums paid ($2,000);
plus
(ii) 10% of premiums paid in excess of one GAP, or $39 (.1 x $386 =
$39) because premiums paid in excess of one GAP ($2,000 -
$1,614 = $386) are less than the amount of a second GAP
($1,614);
plus
(iii) $0, because no premiums in excess of two GAPs were paid.
Thus, (i) $484 plus (ii) $39 plus (iii) $0 equals $523.
Thus after applying the sales charge limitation calculation, the maximum
allowable sales charge is $523. However, since we have already deducted from
premiums the sum of $27.78 (5.5% of $505), this amount is deducted from $523 to
arrive at a maximum deferred sales charge of $495.22. This maximum deferred
sales is equal to the smaller of the deferred sales charge ($505) and the
maximum sales charge limitation ($495.22).
Since a deferred sales charge is deducted when a Policy terminates for failure
to make the required payment following the Policy's going into default, the
sales charge limitation will apply if the termination occurs during the two-year
period following issuance or any increase
26
<PAGE> 38
in face amount. If the Policy terminates during the two years after a face
amount increase, the sales charge limitation will relate only to the sales
charges applicable to the increase.
CHARGES ON PARTIAL WITHDRAWALS. Whenever a portion of the surrender charges is
deducted as a result of a partial withdrawal of Policy Value in excess of the
Withdrawal Tier Amount, we will reduce the Policy's remaining surrender charges
by the amount of the charges taken. The surrender charges not assessed as a
result of the 10% free withdrawal provision remain in effect under the Policy
and may be assessed upon surrender or lapse, other partial withdrawals in excess
of the Withdrawal Tier Amount in each policy year, or a requested decrease in
face amount. The portion of the surrender charges assessed will be based on the
ratio of (i) to (ii), where
(i) is the amount of the withdrawal in excess of the Withdrawal Tier
Amount, and
(ii) is to the Net Cash Surrender Value of the Policy less the
Withdrawal Tier Amount immediately prior to the withdrawal.
We will deduct the surrender charges from each Investment Account and the Fixed
Account in the same proportion as the amount of the withdrawal taken from such
account bears to the total amount of the withdrawal. If the amount in the
account is insufficient to pay the portion of the surrender charges allocated to
that account, then the portion of the withdrawal allocated to that account will
be reduced so that the withdrawal plus the portion of the surrender charges
allocated to that account equal the value of that account.
Units equal to the amount of the partial withdrawal taken, and surrender charges
deducted, from each Investment Account will be redeemed based on the value of
such units determined as of the end of the Business Day on which we receive a
written request for withdrawal at our Service Office.
- --------------------------------------------------------------------------------
We deduct a portion of the surrender charges if you decrease the face amount or
cancel an increase.
- --------------------------------------------------------------------------------
CHARGES ON DECREASES IN FACE AMOUNT. As with partial withdrawals, we will deduct
a portion of a Policy's surrender charges upon a decrease, or a cancellation of
an increase (other than by means of a "Free Look") in face amount which you
request. Since surrender charges are determined separately for the initial face
amount and each face amount increase, and since a decrease in face amount will
have a different impact on each level of insurance coverage, we will determine
separately the portion of the surrender charges to be deducted with respect to
each level of insurance coverage. That portion will be the same as the ratio of
the amount of the reduction in such coverage to the amount of such coverage
prior to the reduction.
As noted under INSURANCE BENEFIT -- "Face Amount Changes," we apply decreases to
the most recent increase first and thereafter to the next most recent increases
successively. We will deduct the charges from the Policy Value, and we will
allocate the amount so deducted among the Investment Accounts and the Fixed
Account in the same proportion as the Policy Value in each bears to the Net
Policy Value. Whenever a portion of the surrender charges is deducted as a
result of a decrease in face amount, the Policy's remaining surrender charges
will be reduced by the amount of the charges taken.
CHARGES REMAINING AFTER FACE AMOUNT DECREASES OR PARTIAL WITHDRAWALS. Each time
we deduct a portion of the deferred underwriting charge or a portion of the
deferred sales charge for a face amount decrease or for a partial withdrawal, we
will reduce the remaining deferred underwriting charge and deferred sales charge
proportionately.
We will calculate the remaining deferred underwriting and sales charge using
Table 1 above. The actual remaining charges will be the result of (a) multiplied
by (b), where
(a) is the grading percentage applicable as per Table; and
27
<PAGE> 39
(b) is the remaining deferred sales charge prior to the last face
amount decrease or partial withdrawal less the deferred sales charge
deducted for that face amount decrease or partial withdrawal.
MONTHLY DEDUCTIONS
- --------------------------------------------------------------------------------
We deduct monthly from the Policy Value: an administrative charge, a cost of
insurance charge, a mortality and expense risks charge and charges for
supplementary benefits.
- --------------------------------------------------------------------------------
Each month we make a deduction from Policy Value consisting of:
* an administration charge,
* a charge for the cost of insurance,
* a charge for mortality and expense risks, and
* charge(s) for any supplementary benefit(s) (see OTHER PROVISIONS --
"Supplementary Benefits").
We allocate the monthly deduction among the Investment Accounts and (other than
the mortality and expense risks charge) the Fixed Account in the same proportion
as the Policy Value in each bears to the Net Policy Value. Monthly deductions
due prior to the effective date will be taken as of the effective date instead
of the dates they were due. Monthly deductions are due until the youngest of the
lives insured attains or would have attained age 100.
ADMINISTRATION CHARGE
The monthly administration charge is $.04 per $1,000 of face amount until the
later of the youngest life insured's Attained Age 55, or when he or she would
have attained age 55, if living, or the end of the fifteenth Policy Year.
Thereafter, the charge is 0. This charge has a minimum of $30 per month and a
maximum of $60 per month. The charge covers certain administrative expenses
associated with the Policy, including maintaining policy records, collecting
premiums and processing death claims, surrender and withdrawal requests and
various charges permitted under a 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 is based on:
* each life insured's Issue Age,
* the duration of the coverage,
* sex (unless unisex rates are required by law or are requested),
* risk class, and,
* in the case of certain Policies issued in group or sponsored
arrangements providing for reduction in cost of insurance charges (see
"Special Provisions For Group Or Sponsored Arrangements"), the face
amount of the Policy.
We determine the rate separately for the initial face amount and for each
increase in face amount. Cost of insurance rates will generally increase with
the Attained Age of the lives insured. Any Additional Ratings as indicated in
the Policy will be added to the cost of insurance rate.
We use cost of insurance rates that reflect our expectations as to future
mortality experience as based on current experience. We may change the rates
from time to time on a basis which does not unfairly discriminate within the
class of life insureds. In no event will
28
<PAGE> 40
the cost of insurance rate exceed the guaranteed rate set forth in the Policy
except to the extent that an extra rate is imposed because of an Additional
Rating applicable any life insured or if simplified underwriting is granted in a
group or sponsored arrangement (see "Special Provisions for Group or Sponsored
Arrangements"). The guaranteed rates are based on the 1980 Commissioners
Standard Ordinary Smoker/Nonsmoker Mortality Tables, except in the case of Group
or Sponsored Arrangements, where the guaranteed rates are based on the 1980
Commissioners Extended Term Mortality Table.
If requested by the applicant, we may offer the Policy with provisions based on
actuarial tables that do not differentiate on the basis of sex to such
prospective purchasers in states where the unisex version of the Policy has been
approved.
The State of Montana currently prohibits the issuance of policies with
assumptions that distinguish between men and women in determining premiums and
policy benefits for policies issued on the life of any of its residents.
Consequently, Policies issued to Montana residents will have premiums and
benefits which do not differentiate on the basis of sex.
The net amount at risk to which the cost of insurance rate is applied is the
difference between the death benefit, divided by 1.0032737 (a factor which
reduces the net amount at risk for cost of insurance charge purposes by taking
into account assumed monthly earnings at an annual rate of 4%), and the Policy
Value. Because different cost of insurance rates may apply to different levels
of insurance coverage, we will calculate the net amount at risk separately for
each level of insurance coverage. When the Option 1 death benefit is in effect,
for purposes of determining the net amount at risk applicable to each level of
insurance coverage, the Policy Value is attributed first to the initial face
amount and then, if the Policy Value is greater than the initial face amount, to
each increase in face amount in the order made.
Because the calculation of the net amount at risk is different under the death
benefit options when more than one level of insurance coverage is in effect, a
change in the death benefit option may result in a different net amount at risk
for each level of insurance coverage than would have occurred had the death
benefit option not been changed. Since the cost of insurance is calculated
separately for each level of insurance coverage, any change in the net amount at
risk for a level of insurance coverage resulting from a change in the death
benefit option may affect the amount of the charge for the cost of insurance.
Partial withdrawals and decreases in face amount will also affect the manner in
which the net amount at risk for each level of insurance coverage is calculated.
MORTALITY AND EXPENSE RISKS CHARGE
We make a monthly charge against your Policy Value for the mortality and expense
risks we assume under the Policies. We make this charge at the beginning of each
policy month at an annual rate of:
* .067% through the later of the tenth policy year and the youngest life
insured's Attained Age 55, and
* (currently) .45% thereafter (this drop in the mortality and expense
risks charge is not guaranteed).
We assess the charge against the value of your Investment Accounts by canceling
units in the same proportion as the value of each Investment Account bears to
the total value of your Investment Accounts. The mortality risk assumed is that
the lives insured may live for a shorter period of time than we estimated when
setting the maximum mortality rates in the Policy. The expense risk assumed is
that expenses incurred in issuing and administering the Policies will be greater
than we estimated when setting the guaranteed administration
29
<PAGE> 41
charge in the Policy. We will realize a gain from this charge to the extent it
is not needed to provide benefits and pay expenses under the Policies.
OTHER CHARGES
Currently, we make no charge against the Separate Account for federal, state or
local taxes that may be attributable to the Separate Account or to our
operations with respect to the Policies. However, if we incur any such taxes, we
may make a charge therefor in addition to the deductions from premium payments
currently made for federal, state or local taxes.
We impose charges on certain transfers of Policy Values, including a $25 charge
for each transfer in excess of twelve in a policy year and a $5 charge for each
DCA transfer when Policy Value does not exceed $15,000. See POLICY VALUES --
"Transfers of Policy Value."
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects investment management fees and other
expenses which are summarized below.
TRUST EXPENSES [FIGURES TO BE UPDATED BY AMENDMENT]
<TABLE>
<CAPTION>
INVESTMENT
MANAGEMENT
FEES
----------
<S> <C>
Pacific Rim Emerging Markets Trust ....... .850%
Science & Technology Trust ............... 1.100%
International Small Cap Trust ............ 1.100%
Emerging Small Company Trust ............. 1.050%
Pilgrim Baxter Growth Trust .............. 1.050%
Small/Mid Cap Trust ...................... 1.000%
International Stock Trust ................ 1.050%
Worldwide Growth Trust ................... 1.000%
Global Equity Trust ...................... .900%
Small Company Value Trust ................ 1.050%
Equity Trust ............................. .750%
Growth Trust ............................. .850%
Quantitative Equity Trust ................ .700%
Equity Index Trust ....................... .250%
Blue Chip Growth Trust ................... .925%
Real Estate Securities Trust ............. .700%
Value Trust .............................. .800%
International Growth and Income Trust..... .950%
Growth and Income Trust .................. .750%
Equity-Income Trust ...................... .800%
Balanced Trust ........................... .800%
Aggressive Asset Allocation Trust ........ .750%
Moderate Asset Allocation Trust .......... .750%
Conservative Asset Allocation Trust ...... .750%
High Yield Trust ......................... .775%
Strategic Bond Trust ..................... .775%
Global Government Bond Trust ............. .800%
Capital Growth Bond Trust ................ .650%
Investment Quality Bond Trust ............ .650%
U.S. Government Securities Trust ......... .650%
</TABLE>
30
<PAGE> 42
#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 EXPENSES FEES EXPENSES ANNUAL
- ----------------------------------------------------------------------------------------------------------
<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.
SPECIAL PROVISIONS FOR GROUP OR SPONSORED ARRANGEMENTS
- --------------------------------------------------------------------------------
We may reduce any Policy charges when the Policy is issued in group or sponsored
arrangements.
- --------------------------------------------------------------------------------
Where permitted by state insurance laws, Policies may be purchased under group
or sponsored arrangements, as well as on an individual basis. A "group
arrangement" includes a program under which a trustee, employer or similar
entity purchases Policies covering a group of individuals on a group basis. In
California all participants of group arrangements will be individually
underwritten. A "sponsored arrangement" includes a program under which an
employer permits group solicitation of its employees or an association permits
group solicitation of its members for the purchase of Policies on an individual
basis.
We may reduce the charges and deductions described above for Policies issued in
connection with group or sponsored arrangements. Such arrangements may include
reduction or elimination of withdrawal charges and deductions for our employees,
officers, directors, agents, immediate family members of the foregoing, and
employees of our agents and our subsidiaries. We will reduce or eliminate the
above charges and deductions in accordance with our rules in effect as of the
date an application for a Policy is approved. To qualify for such a reduction, a
group or sponsored arrangement must satisfy certain criteria as to, for example,
size of the group, expected number of participants and anticipated premium
payments from the group.
Generally, the sales contacts and effort, administrative costs and mortality
cost per Policy vary based on such factors as the size of the group or sponsored
arrangement, the purposes for which Policies are purchased and certain
characteristics of its members. The amount of reduction and the criteria for
qualification will reflect the reduced sales effort and administrative costs
resulting from, and the different mortality experience expected as a result of,
sales to qualifying groups and sponsored arrangements.
We may modify from time to time, on a uniform basis, both the amounts of
reductions and the criteria for qualification. Reductions in these charges will
not be unfairly discriminatory against any person, including the affected
policyowners and all other policyowners funded by the Separate Account.
In addition, groups and persons purchasing under a sponsored arrangement may
request increases in face amount within the first policy year and decreases in
face amount within one year of an increase in face amount. 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.
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SPECIAL PROVISIONS FOR EXCHANGES
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We may eliminate or reduce charges in connection with certain exchanges.
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We will permit owners of certain life insurance policies issued either by us or
Manufacturers Life to exchange their policies for the Policies described in this
prospectus. Owners of certain policies may be entitled to convert their policies
to the Policies described in this prospectus. If they elect to convert, they may
receive a credit upon conversion in an amount up to their first-year premium.
Charges under the policies being exchanged or the Policies issued upon an
exchange may be reduced or eliminated. Policy loans made under policies being
exchanged may, in some circumstances, be carried over to the new Policies
without repayment at the time of exchange. If you are considering an exchange,
you should consult your tax advisers as to its tax consequences.
THE GENERAL ACCOUNT
By virtue of exclusionary provisions, interests in our general account have not
been registered under the Securities Act of 1933 and our general account has not
been registered as an investment company under the 1940 Act. Accordingly,
neither our general account nor any interests therein are subject to the
provisions of these acts, and as a result the staff of the SEC 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.
Our general account consists of all assets owned by us other than those in our
separate accounts. Subject to applicable law, we have sole discretion over the
investment of the assets of our general account.
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We will credit interest to the portion of your Policy Value allocated to the
Fixed Account at an annual rate of at least 4%.
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You may elect to allocate net premiums to the Fixed Account or to transfer all
or a portion of your Policy Value to the Fixed Account from the Investment
Accounts. Transfers from the Fixed Account to the Investment Accounts are
subject to restrictions. See POLICY VALUES -- "Transfers Of Policy Value" and
"Policy Value." We will hold the reserves required for any portion of the Policy
Value allocated to the Fixed Account in our general account. However, your
allocation of Policy Value to the Fixed Account does not entitle you to share in
the investment experience of our general account. Instead, we guarantee that
your Policy Value in the Fixed Account will accrue interest daily at an
effective annual rate of at least 4%, without regard to the actual investment
experience of our general account. We may, at our sole discretion, credit a
higher rate of interest, although we are not obligated to do so. You assume the
risk that interest credited may not exceed the guaranteed minimum rate of 4% per
year.
OTHER GENERAL POLICY PROVISIONS
POLICY DEFAULT
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Unless the Death Benefit Guarantee is in effect, your Policy will go into
default if the Net Cash Surrender Value would go below zero after taking the
monthly deductions then due.
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Unless the Death Benefit Guarantee or the No Lapse Guarantee is in effect, your
Policy will go into default if the Policy's Net Cash Surrender Value at the
beginning of any policy month would go below zero after deducting the monthly
deductions then due. We will notify you of the default and will allow a 61-day
grace period in which you may make a premium payment sufficient to bring the
Policy out of default. The payment you must make will be equal to the amount
necessary to bring the Net Cash Surrender Value to zero, if it was less than
zero as of the date of default, plus the monthly deductions due as of the date
of default and as of the beginning of each of the two policy months thereafter,
based on the Policy Value as of the date of default. If we do not receive the
required payment by the end of the grace period, we will terminate the Policy
and pay to you the Net Cash Surrender Value (subject to any applicable
limitation on surrender charges; see CHARGES AND DEDUCTIONS -- "Surrender
Charges") as of the date of default less the monthly deductions then due. If the
last surviving life insured should die during the grace period following a
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Policy's going into default, the Policy Value used in the calculation of the
death benefit will be the Policy Value as of the date of default, and the
insurance benefit payable will be reduced by any outstanding monthly deductions
due at the time of death.
POLICY REINSTATEMENT
You 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:
* the risk class of all lives insured is standard or preferred; and
* the Attained Age of all lives insured is less than 46.
You can reinstate a Policy which has terminated after going into default at any
time within the five-year period following the date of termination, subject to
the following conditions:
* you must not have surrendered the Policy for its Net Cash Surrender
Value;
* you furnish to us satisfactory evidence of insurability with respect
to all lives insured;
* you pay us a premium equal to the payment required during the 61-day
grace period following default to keep the Policy in force; and
* you repay to us an amount equal to any amounts paid by us in
connection with the termination of the Policy.
If we approve the reinstatement, the date of reinstatement will be the later of
the date of your written request or the date we receive the required payment at
our Service Office.
MISCELLANEOUS POLICY PROVISIONS
BENEFICIARY. You may appoint one or more beneficiaries of the Policy by naming
them in the application. You may appoint beneficiaries in three classes --
primary, secondary and final. Thereafter you may change the beneficiary during
the last surviving life insured's lifetime by giving written notice to us in a
form satisfactory to us unless an irrevocable designation has been elected. If
the last surviving life insured dies and there is no surviving beneficiary, you,
or your estate if you are the last surviving life insured, will be the
beneficiary. 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.
INCONTESTABILITY. We will not contest the validity of a Policy after it has been
in force during the lifetime of the last surviving life insured for two years
from the issue date. We will not contest the validity of an increase in face
amount or the addition of a supplementary benefit after such increase or
addition has been in force during the lifetime of the last surviving life
insured for two years. If a Policy has been reinstated and has been in force for
less than two years from the reinstatement date, we can contest any
misrepresentation of a fact material to the reinstatement.
MISSTATEMENT OF AGE OR SEX. If any life insured's stated age or sex or both in
the Policy are incorrect, we will change the face amount of insurance so that
the death benefit will be that which the most recent monthly charge for the cost
of insurance would have bought for the correct age and sex (unless unisex rates
are required by law or are requested).
SUICIDE EXCLUSION. Except for the last to die, if any of the lives insured dies
by suicide within two years after the Issue Date, whether such life insured is
sane or insane, we will re-
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issue the Policy. The new policy(ies) on the survivor(s) will be any single life
permanent policy that is available at the time of re-issue. The suicide
provision for any new policy(ies) will be effective as of the original Issue
Date.
If the last surviving life insured, whether sane or insane, dies by suicide
within two years from the policy date, we will pay only the premiums paid less
any partial withdrawals of the Net Cash Surrender Value and any amount in the
Loan Account. If the last surviving life insured should die by suicide within
two years after a face amount increase, the death benefit for the increase will
be limited to the monthly deductions for the increase.
ASSIGNMENT. We will not be bound by an assignment until we receive a copy of it
at our Service Office. We assume no responsibility for the validity or effects
of any assignment.
OTHER PROVISIONS
SUPPLEMENTARY BENEFITS
Subject to certain requirements, you may add one or more supplementary benefits
to a Policy. These include 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 life policies upon divorce
or certain federal tax law changes without evidence of insurability ("Policy
Split Option").
You may obtain more detailed information concerning supplementary benefits from
one of our authorized agents. The cost of any supplementary benefits will be
deducted as part of the monthly deduction. See CHARGES AND DEDUCTIONS --
"Monthly Deductions."
PAYMENT OF PROCEEDS
As long as the Policy is in force, we will ordinarily pay any policy loans,
partial withdrawals, Net Cash Surrender Value or any insurance benefit within
seven days after we receive at our Service Office all the documents required for
such a payment.
We may delay the payment of any policy loans, partial withdrawals, Net Cash
Surrender Value or the portion of any insurance benefit that depends on the
Fixed Account value for up to six months. Otherwise we may delay payment for any
period during which:
* the New York Stock Exchange is closed for trading (except for normal
holiday closings) or trading is otherwise restricted;
* an emergency exists as defined by the SEC or the SEC requires that
trading be restricted; or
* the SEC permits a delay for the protection of policyowners.
We may also deny transfers in the circumstances stated above and in the
circumstances previously set forth. See POLICY VALUES -- "Transfers of Policy
Value."
REPORTS TO POLICYOWNERS
Within 30 days after each Policy Anniversary, we will send you a statement
showing, among other things, the following:
* the amount of the death benefit,
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<PAGE> 46
* the Policy Value and its allocation among the Investment Accounts, the
Fixed Account and the Loan Account,
* the value of the units in each Investment Account to which the Policy
Value is allocated,
* any Loan Account balance and any interest charged since the last
statement,
* the premiums paid and policy transactions made during the period since
the last statement, and
* any other information required by law.
Within seven days after any transaction involving the purchase, sale, or
transfer of units of Investment Accounts, we will send a confirmation statement.
You 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.
MISCELLANEOUS MATTERS
PORTFOLIO SHARE SUBSTITUTION
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Under certain circumstances we may seek to substitute shares of a different
Portfolio or fund.
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Although we believe it to be highly unlikely, it is possible that in the
judgment of our management, one or more of the Portfolios of the Trust may
become unsuitable for investment by the Separate Account because of a change in
investment policy or a change in applicable laws or regulations, because the
shares are no longer available for investment, or for some other reason. In that
event, we 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 SEC
and one or more state insurance departments may be required.
We also reserve the right to:
* create new separate accounts,
* combine other separate accounts with the Separate Account,
* establish additional sub-accounts within the Separate Account,
* operate the Separate Account as a management investment company or
other form permitted by law,
* transfer assets from the Separate Account to another separate account
and from another separate account to the Separate Account,
* de-register the Separate Account under the 1940 Act, and
* eliminate sub-accounts.
We would make any such changes only if permissible under applicable federal and
state laws.
We will not materially change the investment objectives of the Separate Account
without first filing the change with the Insurance Commissioner of the State of
Michigan. You will be advised of any change at the time it is made.
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FEDERAL INCOME TAX CONSIDERATIONS
The following summary generally describes the federal income tax considerations
associated with the Policy. The summary does not purport to be complete or to
cover all situations and is not intended as tax advice. You should consult
counsel or other competent tax advisers for more complete information. This
discussion is based upon our understanding of the present federal income tax
laws as they are currently interpreted by the Internal Revenue Service (the
"IRS"). We make no representation as to the likelihood of continuation of the
present federal income tax laws or of the current interpretations by the IRS. WE
DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY
TRANSACTION REGARDING THE POLICIES.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans, charitable remainder
trusts and others. The tax consequences of all such plans may vary depending on
the particular facts and circumstances of each individual arrangement.
Therefore, if you contemplate the use of a Policy in any such arrangement and
the value of such use depends in part on its tax consequences, you should
consult a qualified tax adviser for advice on the tax attributes of the
particular arrangement.
TAX STATUS OF THE POLICY
Section 7702 of the "Code" sets forth a definition of a life insurance contract
for federal tax purposes. The Secretary of Treasury (the "Treasury") is
authorized to prescribe regulations implementing Section 7702. However, while
proposed regulations and other interim guidance have been issued, final
regulations have not been adopted and guidance as to how Section 7702 is to be
applied is limited. If a Policy were determined not to be a life insurance
contract for purposes of Section 7702, such Policy would not provide the tax
advantages normally provided by a life insurance policy.
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Policies issued on a standard rate basis should qualify as life insurance under
the Internal Revenue Code.
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With respect to a Policy issued on the basis of a standard rate class, we
believe (largely in reliance on IRS Notice 88-128 and the proposed mortality
charge regulations under Section 7702, issued on July 5, 1991) that such a
Policy should meet the Section 7702 definition of a life insurance contract.
With respect to a Policy that is issued on a substandard basis (i.e., a premium
class involving higher-than-standard mortality risk), there is less guidance, in
particular as to how mortality and other expense requirements of Section 7702
are to be applied in determining whether such a Policy meets the Section 7702
definition of a life insurance contract. Thus, it is not clear whether or not
such a Policy would satisfy Section 7702, particularly if the policyowner pays
the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702, we
may take whatever steps are appropriate and reasonable to attempt to cause such
a Policy to comply with Section 7702. For these reasons, we reserve the right to
restrict Policy transactions as necessary to attempt to qualify a Policy as a
life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702. 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. We believe that the Separate Account will
thus meet the diversification requirement, and we will monitor continued
compliance with the requirement.
In certain circumstances, owners of variable life insurance policies may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to
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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 policyowner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which policyowners may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets.
For example, the Policy has many more Portfolios to which policyowners may
allocate premium payments and Policy Values than were available in the policies
described in the rulings. These differences could result in a policyowner being
treated as the owner of a pro rata portion of the assets of the Separate
Account. In addition, we do 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. We therefore reserve the right to modify the Policy as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the death benefit under the Policy
should be excludable from the gross income of the beneficiary under Section
101(a)(1) of the Code.
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Generally, you will not be deemed to be in constructive receipt of your Policy
Value until there is a distribution.
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Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each policyowner or beneficiary. Generally, the policyowner
will not be deemed to be in constructive receipt of the Policy Value, including
increments thereof, until there is a distribution. The tax consequences of
distributions from, and loans taken from or secured by, a Policy depend on
whether the Policy is classified as a "Modified Endowment Contract" ("MEC").
Upon a complete surrender or lapse of a Policy or when benefits are paid at a
Policy's maturity date, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax, regardless of whether the Policy is or is not
a MEC.
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.
Because of the Policy's flexibility, classification as a MEC will depend on the
individual circumstances of each Policy. In general, a Policy will be a MEC if
the accumulated premiums paid at any time during the first seven policy years
exceed the sum of the net
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level premiums which would have been paid on or before such time if the Policy
provided for paid-up future benefits after the payment of seven level annual
premiums (the "seven-pay test"). The determination of whether a Policy will be a
MEC after a material change generally depends upon the relationship of the death
benefit and Policy Value at the time of such change and the additional premiums
paid in the seven years following the material change. If a premium is received
which would cause the Policy to become a MEC within 23 days of the next policy
anniversary, we 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. We
will advise you of this action, and you will be offered the opportunity to have
the premium credited as of the original date received or to have the premium
returned. If you do not respond, we will apply the premium and interest to the
Policy as of the first day of the next anniversary.
If a premium is received which would cause your Policy to become a MEC more than
23 days prior to the next policy anniversary, we will refund any excess premium
to you. The portion of the premium which is not excess will be applied as of the
date received. We will advise you of this action and will offer to return the
premium and have it credited to the account as of the original date received.
If, in connection with the application or issue of the Policy, you acknowledge
that your Policy is or will become a MEC, we will credit excess premiums that
would cause MEC status as of the date received.
Further, if a transaction occurs which reduces the face amount of your Policy,
we will retest the Policy, retroactive to the date of purchase, to determine
compliance with the seven-pay test based on the lower face amount. Failure to
comply would result in classification as a MEC regardless of any efforts by us
to provide a payment schedule that will not violate the seven-pay test.
The rules relating to whether a Policy will be treated as a MEC are extremely
complex and cannot be adequately described in the limited confines of this
summary. Therefore, you should consult with a competent adviser to determine
whether a transaction will cause the Policy to be treated as a MEC.
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Generally, a distribution from a Policy that is not a MEC is taxable to you only
to the extent the distribution exceeds your investment in the Policy.
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DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS. Policies
classified as MECs will be subject to the following tax rules:
* First, all partial withdrawals from such a Policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of the
Policy Value immediately before the distribution over the investment in the
Policy (described below) at such time.
* Second, loans taken from or secured by such a Policy are treated as partial
withdrawals from the Policy and taxed accordingly; past-due loan interest
that is added to the loan amount is treated as a loan.
* Third, a 10% additional income tax is imposed on the portion of any
distribution (including distributions upon surrender) from, or 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 date the policyowner
attains age 59 1/2; (ii) is attributable to the policyowner's 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.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS. A
distribution from a Policy that is not a MEC is generally treated as a tax-free
recovery by the
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policyowner of the investment in the Policy (described below) to the extent of
such investment in the Policy, and as a distribution of taxable income only to
the extent the distribution exceeds the investment in the Policy. An exception
to this general rule occurs in the case of a decrease in the Policy's death
benefit or any other change that reduces benefits under the Policy in the first
15 years after the Policy is issued and that results in a cash distribution to
the policyowner in order for the Policy to continue complying with the Section
7702 definitional limits. Such a cash distribution will be taxed in whole or in
part as ordinary income (to the extent of any gain in the Policy) under rules
prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a MEC are not treated as
distributions. Instead, such loans are treated as indebtedness of the
policyowner.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a MEC are subject to the 10%
additional tax.
POLICY LOAN INTEREST. Generally, personal interest paid on any loan under a
Policy which is owned by an individual is not deductible. In addition, except
for the transition rules described in the paragraph below, interest on any loan
under a Policy owned by a taxpayer and covering the life of any individual who
is an officer or employee of or is financially interested in the business
carried on by 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 exceeds $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.
For policies issued after June 20, 1986 and prior to January 1, 1994 a
transition rule permits all or a portion of the interest paid on policy debt
incurred before January 1, 1996 to be deducted. For policies issued in 1994 or
1995 the transition rule applies to indebtedness incurred before January 1,
1997. To be deducted the interest must be paid or accrued prior to January 1,
1999, and must meet other rules contained in Section 264 of the Code and section
501 of the Health Insurance Portability and Accountability Act of 1996.
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 bears to the average adjusted bases for all assets of the taxpayer.
If the taxpayer is not the owner, but is the direct or indirect beneficiary
under the contract, 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.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which has been excluded from gross
income of the policyowner (except that the amount of any loan from, or secured
by, a Policy that is a MEC, to the extent such amount has been excluded from
gross income, will be disregarded), plus (iii) the amount of any loan from, or
secured by, a Policy that is a MEC to the extent that such amount has been
included in the gross income of the policyowner.
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MULTIPLE POLICIES. All MECs that are issued by us (or our affiliates) to the
same policyowner during any calendar year are treated as one MEC for purposes of
determining the amount includible in the gross income under Section 72(e) of the
Code.
TAXATION OF POLICY SPLIT OPTION. This option permits a Policy to be split into
two other individual Policies upon the occurrence of a divorce of the lives
insured or certain changes in federal estate tax law. The purchase and exercise
of the policy split option could have adverse tax consequences. For example, it
is not clear whether a policy split will be treated as a nontaxable exchange
under Sections 1031 through 1043 of the Code. If a policy split is not treated
as a nontaxable exchange, a split could result in the recognition of taxable
income in an amount up to any gain in the Policy at the time of the split. It is
also not clear whether the cost of the policy split option, which is deducted
monthly from Policy Value, will be treated as a taxable distribution. Before
purchasing the policy split option or exercising rights provided by the policy
split option, you should consult with a competent tax adviser regarding the
possible consequences.
THE COMPANY'S TAXES
As a result of the Omnibus Budget Reconciliation Act of 1990, insurance
companies are generally required to capitalize and amortize certain policy
acquisition expenses over a 10-year period rather than currently deducting such
expenses. This treatment applies to the deferred acquisition expenses of a
Policy and results in a significantly higher corporate income tax liability for
us. We reserve the right to make a charge to premiums to compensate us for the
anticipated higher corporate income taxes.
At the present time, we make no charge to the Separate Account for any federal,
state or local taxes that we incur that may be attributable to the Separate
Account or to the Policies. We, however, reserve 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 we determine to be properly attributable to the
Separate Account or to the Policies.
DISTRIBUTION OF THE POLICY
ManEquity, Inc., one of our indirect wholly-owned subsidiaries, acts as the
principal underwriter of, and continuously offers, the Policies pursuant to a
Distribution Agreement with us. 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, Inc. The Policies will be sold by registered
representatives of either ManEquity, Inc. or other broker-dealers having
distribution agreements with ManEquity, Inc.
who are also authorized by state insurance departments to do so.
Compensation is comprised of:
* first-year commissions and bonus not to exceed 136.5% of premiums paid up
to the Target Premium,
* commissions not to exceed 2% of premiums in excess thereof ,and
* beginning in the second policy year, 0.15% of the previous unloaned Policy
Value per annum.
If certain standards with regard to the sale of the Policies and certain other
policies issued by us or Manufacturers USA are met, additional compensation will
be available.
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RESPONSIBILITIES ASSUMED BY MANUFACTURERS LIFE
Manufacturers Life and its wholly-owned subsidiary, The Manufacturers Life
Insurance Company (U.S.A.) ("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 us, 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 and
Manufacturers USA for all sales commissions paid by them and will pay them for
their 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 us pursuant to which they will provide to us all issue,
administrative, general services and record-keeping functions on our behalf with
respect to all of our insurance policies including the Policies.
Finally, Manufacturers Life of America may, from time to time in its sole
discretion, enter into one or more reinsurance agreements with other life
insurance companies under which policies issued by it may be reinsured, such
that its total amount at risk under a policy would be limited for the life of an
insured.
VOTING RIGHTS
- --------------------------------------------------------------------------------
We will vote shares of the Trust attributable to your Policy in accordance with
your instructions.
- --------------------------------------------------------------------------------
As stated above, we will invest all of the assets held in the sub-accounts of
the Separate Account in shares of corresponding Portfolios of the Trust. We are
the legal owner of those shares and as such have 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, we will vote shares held in the
sub-accounts in accordance with instructions received from policyowners having
an interest in such sub-accounts.
We will vote shares held in each sub-account for which no timely instructions
from policyowners are received, including shares not attributable to Policies,
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 us to vote shares held in the Separate
Account in our own right, we 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 Trust Portfolio. We will determine the number as of a date chosen
by us, but not more than 90 days before the shareholders' meeting. Fractional
votes are counted. We will solicit voting instructions in writing at least 14
days prior to the shareholders' meeting.
We may, if required by state insurance officials, disregard voting instructions
which would direct 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, we may
disregard voting instructions that would require changes in the investment
policies or investment adviser, provided that we reasonably disapprove such
changes in accordance with applicable federal regulations. If we disregard
voting instructions, we will advise you of that action and our reasons therefor
in the next communication to policyowners.
41
<PAGE> 53
DIRECTORS AND OFFICERS OF MANUFACTURERS LIFE OF AMERICA
Our Directors and Officers, together with their principal occupations during the
past few years, are as follows:
<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 Executive Vice President, Business Development
(since August 1990) - 1999 - present, The Manufacturers Life
Insurance Company; Senior Vice President,
Business Development - 1994 - 1998, The
Manufacturers Life Insurance Company; Vice
President, U.S. Individual Business - 1990 -
1994, The Manufacturers Life Insurance Company
Theodore Kilkuskie, Jr. Director, Vice President U.S. Senior Vice President, Annuities - 1999 -
(42) Individual Insurance present, The Manufacturers Life Insurance
Company; President, The Manufacturers Life
Insurance Company of North America - 1999
present; Vice President, U.S. Individual
Insurance - January 1997 - present, ManUSA;
Vice President, U.S. Individual Insurance June
1995 - 1998, 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 Senior Executive Vice President, U.S.
(since January 1995) Individual Insurance - 1999 - present, The
Manufacturers Life Insurance Company;
Executive Vice President and General Manager,
U.S. Operations - 1995 - 1998, 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
Position with
Name Manufacturers Life Principal Occupation
Of America
</TABLE>
42
<PAGE> 54
<TABLE>
<S> <C> <C>
Robert A. Cook (43) Vice President, Marketing Senior Vice President, U.S. Individual
Insurance - 1999 - present; The Manufacturers
Life Insurance Company; Vice President, Product
Management - 1996 - 1998, The Manufacturers
Life Insurance Company; Sales and Marketing
Director, U.S. Division - 1994 - 1995, 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
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 Vice President and Chief Financial Officer,
Actuary 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>
STATE REGULATIONS
We are subject to regulation and supervision by the Michigan Department of
Insurance, which periodically examines our financial condition and operations.
We are also subject to the insurance laws and regulations of all jurisdictions
in which we are 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.
We are required to submit annual statements of our operations, including
financial statements, to the insurance departments of the various jurisdictions
in which we do business for the purposes of determining solvency and compliance
with local insurance laws and regulations.
PENDING LITIGATION
No litigation is pending that would have a material effect upon the Separate
Account or the Trust.
ADDITIONAL INFORMATION
We have filed a registration statement under the Securities Act of 1933 with the
SEC relating to the offering described in this prospectus. This prospectus does
not include all the information set forth in the registration statement. You may
obtain the omitted information from the SEC's principal office in Washington,
D.C. upon payment of the prescribed fee.
For further information you may also contact our Service Office, the address and
telephone number of which are on the cover page of this prospectus.
LEGAL MATTERS
James D. Gallagher, Esq., our Secretary and General Counsel, has passed on the
legal validity of the Policies. Jones & Blouch L.L.P., Washington, D.C., has
passed on certain matters relating to the federal securities laws.
43
<PAGE> 55
INDEPENDENT AUDITORS
Our financial statements and those of our Separate Account III for the period
ended December 31, 1998 appearing in this prospectus have been audited by Ernst
& Young LLP, independent auditors, to the extent indicated in their reports
thereon also appearing elsewhere herein. Those financial statements have been
included herein in reliance upon their reports given upon the authority of such
firm as experts in auditing and accounting.
YEAR 2000 ISSUES
Preparing computer systems to deal with the Year 2000 risk has become a major
issue for businesses throughout the world. Within the group of companies made up
of Manufacturers Life and its subsidiaries ("Manulife Financial"), 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 us with Manulife Financial.
Based on a detailed assessment, Manulife Financial 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 Manulife Financial, and
extensive resources have been dedicated to modifying existing software and to
converting to new software. However, there can be no assurances that Manulife
Financial's systems, nor those of other companies on which Manulife Financial
relies, will be fully converted on a timely basis and therefore that all adverse
effects on us due to the Year 2000 risk will be avoided. Manulife Financial 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
our operations will be hindered by the Year 2000 risk.
The costs of the project and the date on which Manulife Financial plans to
complete the modifications are based on management's best estimates and are
subject to some uncertainty. Manulife Financial 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 Manulife Financial is estimated
to be $64 million, comprised of $55 million for specifically budgeted programs
and $9 million for general contingencies. Manulife Financial has incurred $15
million as at December 31, 1997 of which we will receive an allocation due to
our shared systems. The costs allocated are not expected to have a material
effect on our net operating income.
FINANCIAL STATEMENTS
Our financial statements included herein should be distinguished from the
financial statements of the Separate Account and should be considered only as
bearing upon our ability to meet our obligations under the Policies.
[TO BE INCLUDED BY AMENDMENT.]
44
<PAGE> 56
APPENDIX A
SAMPLE ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER VALUES AND DEATH BENEFITS
The following tables have been prepared to help show how values under the Policy
change with investment performance. The tables include both Policy Values and
Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of
the values in the Investment Accounts, as the tables assume no values in the
Fixed Account or Loan Account. The Cash Surrender Value is the Policy Value
less any applicable surrender charges. The tables illustrate how Policy Values
and Cash Surrender Values, which reflect all applicable charges and deductions,
and Death Benefits of the Policy on lives insured of given ages would vary over
time if the return on the assets of the Portfolios was a uniform, gross,
after-tax, annual rate of 0%, 6% or 12%. The Policy Values, Death Benefits and
Cash Surrender Values would be different from those shown if the returns
averaged 0%, 6% or 12%, but fluctuated over and under those averages throughout
the years. The charges reflected in the tables include those for deductions from
premiums, surrender charges, and monthly deductions.
The amounts shown for the Policy Value, Death Benefit and Cash Surrender Value
as of each Policy Year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because the expenses and fees borne by Manufacturers Investment Trust are
deducted from the gross return. The illustrations reflect an average of those
Portfolios' current expenses, which is approximately 0.954% per annum. The gross
annual rates of return of 0%, 6% and 12% correspond to approximate net annual
rates of return of -0.949%, 4.994% and 10.937%.
The tables assume that no premiums have been allocated to the Fixed Account,
that planned premiums are paid on the Policy Anniversary and that no transfers,
partial withdrawals, Policy loans, changes in death benefit options or changes
in face amount have been made. The tables reflect the fact that no charges for
federal, state or local taxes are currently made against the Separate Account.
If such a charge is made in the future, it would take a higher gross rate of
return to produce after-tax returns of 0%, 6% and 12% than it does now.
There are two tables shown for each combination of age and death benefit option
for a Policy issued to a male non-smoker and female non-smoker, one based on
current cost of insurance charges assessed by the Company and the other based on
the maximum cost of insurance charges based on the 1980 Commissioners Standard
Ordinary Smoker/Nonsmoker Mortality Tables. Current cost of insurance charges
are not guaranteed and may be changed. Upon request, Manufacturers Life of
America will furnish a comparable illustration based on the proposed lives
insured's issue ages, sex (unless unisex rates are required by law, or are
requested) and risk classes, any additional ratings and the death benefit
option, face amount and planned premium requested. Illustrations for smokers
would show less favorable results than the illustrations shown below.
From time to time, in advertisements or sales literature for the Policies that
quote performance data of one or more of the Portfolios, the Company may include
cash surrender values and death benefit figures computed using the same
methodology as that used in the following illustrations, but with the average
annual total return of the Fund for which performance data is shown in the
advertisement replacing the hypothetical rates of return shown in the following
tables. This information may be shown in the form of graphs, charts, tables and
examples.
The Policies have been offered to the public only since September 1, 1994.
However, total return data may be advertised for as long a period of time as the
underlying
<PAGE> 57
Portfolio has been in existence. The results for any period prior to the
Policies' being offered would be calculated as if the Policies had been offered
during that period of time, with all charges assumed to be those applicable to
the Policies.
<PAGE> 58
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$7,500 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
------------------------
End of Accumulated Cash
Policy Premiums Policy Surrender Death
Year(l) (2) Value Value(4) Benefit
<S> <C> <C> <C> <C>
1 $ 7,875 $ 6,563(3) $ 2,406(3) $500,000(3)
2 16,144 12,975 8,077 500,000
3 24,826 19,242 14,124 500,000
4 33,942 25,360 20,242 500,000
5 43,514 31,326 26,208 500,000
6 53,565 37,136 32,018 500,000
7 64,118 42,784 38,177 500,000
8 75,199 48,264 44,170 500,000
9 86,834 53,571 49,988 500,000
10 99,051 58,695 55,624 500,000
15 169,931 85,604 85,604 500,000
20 260,394 107,236 107,236 500,000
25 375,851 116,931 116,931 500,000
30 523,206 98,951 98,951 500,000
</TABLE>
<TABLE>
<CAPTION>
6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return
----------------------- -----------------------
End of Cash Cash
Policy Policy Surrender Death Policy Surrender Death
Year(l) Value Value(4) Benefit Value Value(4) Benefit
<S> <C> <C> <C> <C> <C> <C>
1 $ 6,967(3) $ 2,810(3) $ 500,000(3) $ 7,371(3) $ 3,214(3) $ 500,000(3)
2 14,186 9,288 500,000 15,445 10,547 500,000
3 21,670 16,552 500,000 24,295 19,177 500,000
4 29,425 24,307 500,000 33,993 28,875 500,000
5 37,457 32,339 500,000 44,620 39,502 500,000
6 45,769 40,651 500,000 56,263 51,144 500,000
7 54,366 49,760 500,000 69,017 64,411 500,000
8 63,254 59,160 500,000 82,991 78,896 500,000
9 72,437 68,854 500,000 98,300 94,718 500,000
10 81,916 78,845 500,000 115,075 112,004 500,000
15 140,385 140,385 500,000 236,638 236,638 500,000
20 211,902 211,902 500,000 440,782 440,782 511,307
25 296,780 296,780 500,000 782,160 782,160 836,911
30 398,550 398,550 500,000 1,347,396 1,347,396 1,414,765
</TABLE>
- ----------
<PAGE> 59
(1) All values shown are as of the end of the Policy Year indicated, have been
rounded to the nearest dollar, and assume that (a) premiums paid after the
initial premium are received on the Policy Anniversary, (b) no Policy loan
has been made, (c) no partial withdrawal of the Cash Surrender Value has
been made and (d) no premiums have been allocated to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 10 Policy Years. Provided the Death Benefit
Guarantee Cumulative Premium Test or the Fund Value Test has been and
continues to be met, the Guaranteed Death Benefit will keep the Policy in
force until the Policy Anniversary on which the lives insured are average
Attained Age 100 years old.
(4) Cash Surrender Value for first two years reflects sales charge limitations
imposed by the S.E.C.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. iT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH
SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE> 60
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$7,500 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
----------------------- -----------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(4) Benefit Value Value(4) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,875 $ 6,563(3) $ 2,406(3) $500,000(3) $ 6,967(3) $ 2,810(3) $500,000(3)
2 16,144 12,974 8,077 500,000 14,185 9,288 500,000
3 24,826 19,230 14,112 500,000 21,658 16,540 500,000
4 33,942 25,322 20,204 500,000 29,386 24,268 500,000
5 43,514 31,243 26,125 500,000 37,368 32,250 500,000
6 53,565 36,982 31,864 500,000 45,604 40,486 500,000
7 64,118 42,529 37,923 500,000 54,090 49,484 500,000
8 75,199 47,870 43,776 500,000 62,822 58,727 500,000
9 86,834 52,991 49,408 500,000 71,795 68,212 500,000
10 99,051 57,874 54,803 500,000 81,000 77,929 500,000
15 169,931 78,518 78,518 500,000 130,885 130,885 500,000
20 260,394 88,424 88,424 500,000 184,788 184,788 500,000
25 37,585 73,799 73,799 500,000 234,985 234,985 500,000
30 52,326 2,921(5) 2,921(5) 0(5) 269,220 269,220 500,000
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
-----------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value Value(4) Benefit
<S> <C> <C> <C>
1 $ 7,371(3) $ 3,214(3) $ 500,000(3)
2 15,444 10,547 500,000
3 24,282 19,164 500,000
4 33,951 28,833 500,000
5 44,526 39,408 500,000
6 56,086 50,968 500,000
7 68,718 64,111 500,000
8 82,518 78,424 500,000
9 97,593 94,010 500,000
10 114,059 110,988 500,000
15 223,409 223,409 500,000
20 398,728 398,728 500,000
25 684,631 684,631 732,556
30 1,140,853 1,140,853 1,197,896
</TABLE>
- -----------
<PAGE> 61
(1) All values shown are as of the end of the Policy Year indicated, have been
rounded to the nearest dollar, and assume that (a) premiums paid after the
initial premium are received on the Policy Anniversary, (b) no Policy loan
has been made, (c) no partial withdrawal of the Cash Surrender Value has
been made and (d) no premiums have been allocated to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 10 Policy Years. Provided the Death Benefit
Guarantee Cumulative Premium Test or the Fund Value Test has been and
continues to be met, the Guaranteed Death Benefit will keep the Policy in
force until the Policy Anniversary on which the lives insured are average
Attained Age 100 years old.
(4) Cash Surrender Value for first two years reflects sales charge limitations
imposed by the S.E.C.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH
SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE> 62
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$8,200 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
----------------------- -----------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(4) Benefit Value Value(4) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,610 $ 7,226(3) $ 2,766(3) $507,226(3) $ 7,669(3) $ 3,209(3) $507,669(3)
2 17,651 14,288 9,170 514,288 15,619 10,501 515,619
3 27,143 21,191 16,073 521,191 23,862 18,744 523,862
4 37,110 27,932 22,814 527,932 32,403 27,285 532,403
5 47,576 34,505 29,387 534,505 41,247 36,129 541,247
6 58,564 40,904 35,786 540,904 50,397 45,278 550,397
7 70,103 47,122 42,515 547,122 59,855 55,248 559,855
8 82,218 53,151 49,057 553,151 69,623 65,529 569,623
9 94,939 58,983 55,400 558,983 79,701 76,119 579,701
10 108,296 64,605 61,534 564,605 90,087 87,016 590,087
15 185,791 93,749 93,749 593,749 153,358 153,358 653,358
20 284,698 115,737 115,737 615,737 227,116 227,116 727,116
25 410,930 121,921 121,921 621,921 303,855 303,855 803,855
30 572,038 92,927 92,927 592,927 361,323 361,323 861,323
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
-----------------------
End of Cash
Policy Policy Surrender Death
Year(l) Value Value(4) Benefit
<S> <C> <C> <C>
1 $ 8,114(3) $ 3,654(3) $ 508,114(3)
2 17,003 11,885 517,003
3 26,747 21,629 526,747
4 37,426 32,308 537,426
5 49,123 44,005 549,123
6 61,934 56,816 561,934
7 75,957 71,351 575,957
8 91,305 87,210 591,305
9 108,096 104,513 608,096
10 126,459 123,388 626,459
15 257,985 257,985 757,985
20 470,090 470,090 970,090
25 804,841 804,841 1,304,841
30 1,317,895 1,317,895 1,817,895
</TABLE>
- -----------
<PAGE> 63
(1) All values shown are as of the end of the Policy Year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the Policy Anniversary, (b) no
Policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 10 Policy Years. Provided the Death Benefit
Guarantee Cumulative Premium Test or the Fund Value Test has been and
continues to be met, the Guaranteed Death Benefit will keep the Policy in
force until the Policy Anniversary on which the lives insured are average
Attained Age 85 years old.
(4) Cash Surrender Value for first two years reflects sales charge
limitations imposed by the S.E.C.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH
SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE> 64
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$8,200 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
----------------------- -----------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(4) Benefit Value Value(4) Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 8,610 $ 7,226(3) $ 2,766(3) $507,226(3) $ 7,669(3) $ 3,209(3) $507,669(3)
2 17,651 14,287 9,169 514,287 15,618 10,500 515,618
3 27,143 21,179 16,061 521,179 23,849 18,731 523,849
4 37,110 27,892 22,774 527,892 32,361 27,242 532,361
5 47,576 34,416 29,298 534,416 41,152 36,034 541,152
6 58,564 40,739 35,621 540,739 50,218 45,100 550,218
7 70,103 46,847 42,240 546,847 59,551 54,945 559,551
8 82,218 52,722 48,627 552,722 69,143 65,048 569,143
9 94,939 58,346 54,763 558,346 78,979 75,396 578,979
10 108,296 63,695 60,624 563,695 89,041 85,970 589,041
15 185,791 85,814 85,814 585,814 142,440 142,440 642,440
20 284,698 94,439 94,439 594,439 194,668 194,668 694,668
25 410,930 73,846 73,846 573,846 226,161 226,161 726,161
30 572,038 0(5) 0(5) 0(5) 198,146 198,146 698,146
</TABLE>
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
-----------------------
End of Cash
Policy Policy Surrender Death
Year(l) Value Value(4) Benefit
<S> <C> <C> <C>
1 $ 8,114(3) $ 3,654(3) $ 508,114(3)
2 17,002 11,884 517,002
3 26,734 21,616 526,734
4 37,381 32,263 537,381
5 49,022 43,904 549,022
6 61,740 56,622 561,740
7 75,623 71,017 575,623
8 90,767 86,673 590,767
9 107,276 103,693 607,276
10 125,254 122,183 625,254
15 242,330 242,330 742,330
20 416,286 416,286 916,286
25 659,980 659,980 1,159,980
30 977,179 977,179 1,477,179
</TABLE>
- -----------
<PAGE> 65
(1) All values shown are as of the end of the Policy Year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the Policy Anniversary, (b) no
Policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated to
the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 10 Policy Years. Provided the Death Benefit
Guarantee Cumulative Premium Test or the Fund Value Test has been and
continues to be met, the Guaranteed Death Benefit will keep the Policy in
force until the Policy Anniversary on which the lives insured are average
Attained Age 85 years old.
(4) Cash Surrender Value for first two years reflects sales charge
limitations imposed by the S.E.C.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS
FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH
SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE> 66
APPENDIX B
DEFINITIONS
The following terms have the following meanings when used in this Prospectus:
ADDITIONAL RATING -- an addition to the cost of insurance rate for lives insured
who do not meet at least the underwriting requirements of the standard risk
class.
AGE -- at a specific date means, for each of the lives insured, the age on the
nearest birthday. If no specific date is mentioned, age means the age on the
birthday nearest to the Policy Anniversary.
ATTAINED AGE -- Issue Age plus duration the policy has been in force since the
Policy Date.
BUSINESS DAY -- any day that the New York Stock Exchange is open for trading and
trading is not restricted. The net asset value of the underlying shares of a
subaccount of the Separate Account will be determined as of the end of each
Business Day. A Business Day is deemed to end at 4:00 p.m. Eastern Time.
CASH SURRENDER VALUE -- the Policy Value less the deferred sales charge, the
deferred underwriting charge and any outstanding monthly deductions due.
DEATH BENEFIT GUARANTEE -- Manufacturers Life of America guarantees that the
Policy will not go into default even if a combination of Policy loans, adverse
investment experience or other factors should cause the Policy's Net Cash
Surrender Value to be insufficient to meet the monthly deductions due at the
beginning of a Policy Month.
DEATH BENEFIT GUARANTEE CUMULATIVE PREMIUM TEST -- a test that, if satisfied to
youngest Attained Age 100 for death benefit Option 1 Policies, and youngest
Attained Age 85 for death benefit Option 2 Policies, will maintain the Death
Benefit Guarantee. To satisfy the Death Benefit Guarantee Cumulative Premium
Test, the sum of premiums paid, less withdrawals, and less Policy loans must
equal or exceed the sum of Death Benefit Guarantee Premiums since issue as at
the beginning of each Policy Month.
DEATH BENEFIT GUARANTEE PREMIUM -- a measure of premium used in determining
compliance with the Death Benefit Guarantee Cumulative Premium Test. The Death
Benefit Guarantee Premium as an annual amount is established by the Company
based on the individual life insured's Issue Age, sex (unless unisex rates are
required by law or are requested), risk class, death benefit option,
supplementary benefits and additional ratings.
EFFECTIVE DATE -- the date that Manufacturers Life of America becomes obligated
under the Policy and when the first monthly deductions are taken. It is the
later of the date the underwriters approve issuance of the Policy, or the date
at least the Initial Premium is received at the Service Office.
FIXED ACCOUNT -- that part of the Policy Value which reflects the value the
policyowner has in the general account of Manufacturers Life of America.
FUND VALUE TEST -- a test which, if satisfied in applicable Policy Years, will
maintain the Death Benefit Guarantee. To satisfy the Fund Value Test the Gross
Single Premium at the beginning of any applicable Policy Month must not be
greater than the Net Policy Value.
GROSS SINGLE PREMIUM -- the amount of premium, based on each life insured's
Attained Age, the duration of the coverage, sex (unless unisex rates are
required by law or are requested), and risk class, needed to endow the Policy at
the age the Death Benefit Guarantee terminates, assuming 4% interest and current
charges.
<PAGE> 67
GUIDELINE ANNUAL PREMIUM (GAP) -- an amount defined by S.E.C. regulation. It is
used to determine maximum sales charges that may be deducted under the Policy.
INITIAL PREMIUM -- at least 1/12 of the Target Premium.
<PAGE> 68
ISSUE AGE -- the Age nearest birthday, at Policy Date, as shown in the Policy.
If there is an Additional Rate based on age, the Issue Age will be adjusted to
reflect the underwriting class.
LOAN ACCOUNT -- that part of the Policy Value which reflects the value the
policyowner has transferred from the Fixed Account or the Investment Accounts as
collateral for a Policy loan.
MODIFIED POLICY DEBT -- as of any date, the Policy Debt plus the amount of
interest to be charged to the next Policy Anniversary, all discounted from the
next Policy Anniversary to such date at an annual rate of 4%.
MONTHLY DEATH BENEFIT GUARANTEE PREMIUM -- 1/12 of the Death Benefit Guarantee
Premium.
MONTHLY NO LAPSE GUARANTEE PREMIUM -- 1/12 of the No Lapse Guarantee Premium.
NET CASH SURRENDER VALUE -- the Cash Surrender Value less the Policy Debt.
NET POLICY VALUE -- the Policy Value less the value in the Loan Account.
NET PREMIUM -- amount of premium allocated to the Investment Accounts and/or the
Fixed Account. It equals gross premiums less the deductions for premium charge
and state, local and federal taxes.
NO LAPSE GUARANTEE -- Manufacturers Life of America guarantees that the Policy
will not go into default even if a combination of Policy loans, adverse
investment experience or other factors should cause the Policy's Net Cash
Surrender Value to be insufficient to meet the monthly deductions due at the
beginning of a Policy Month.
The No Lapse Guarantee requires a lower cumulative premium than the Death
Benefit Guarantee, and in return guarantees a shorter number of years that the
Policy will stay in force if the No Lapse Guarantee Cumulative Premium Test is
met.
NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST -- a test that, if satisfied in the
No Lapse Guarantee Period, will maintain the No Lapse Guarantee. To satisfy the
No Lapse Guarantee Cumulative Premium Test, the sum of premiums paid, less
withdrawals, and less Policy loans must equal or exceed the sum of No Lapse
Guarantee Premiums since issue as at the beginning of each Policy Month.
NO LAPSE GUARANTEE PERIOD -- is the first 10 Policy Years for lives insured with
an average Issue Age up to and including age 70. For lives insured with an
average Issue Age of 71 and older, the No Lapse Guarantee Period decreases by
one year for each year the average Issue Age exceeds 70, until age 77. After age
77 the No Lapse Guarantee Period is fixed at three years.
The No Lapse Guarantee is available only to lives insured whose average Issue
Age is 85 or less.
NO LAPSE GUARANTEE PREMIUM -- is equal to Target Premium, and is a measure of
premium used in determining compliance with the No Lapse Guarantee Premium Test.
PLANNED PREMIUM -- the premium the policyowner plans to pay periodically.
Subject to certain requirements of law, the Planned Premium may be changed at
any time.
POLICY DATE -- the date from which Policy Years, Policy Months and Policy
Anniversaries are determined. Monthly deductions are due on the Policy Date.
<PAGE> 69
POLICY DEBT -- as of any date, the aggregate amount of Policy loans, including
borrowed interest, less any loan repayments.
POLICY VALUE -- the sum of the values in the Loan Account, the Fixed Account and
the Investment Accounts.
SERVICE OFFICE -- the office designated to service the Policies, which is shown
on the cover page of this prospectus.
SURRENDER CHARGE PERIOD -- the period (usually 15 years) following the Policy
Date or any increase in face amount during which surrender charges may be
assessed if the Policy is surrendered or lapsed, the face
<PAGE> 70
amount is decreased or a partial withdrawal takes place. There are two surrender
charges under the Policy: a Deferred Underwriting Charge and a Deferred Sales
Charge.
TARGET PREMIUM (TP) -- premium amount used to determine the maximum sales charge
and deferred sales charge under a Policy and to determine the level of
compensation the agent shall receive. The Target Premium for the initial face
amount is set forth in the Policy.
This premium is based on each individual life insured's Issue Age, sex (unless
unisex rates are required by law or are requested), risk class, death benefit
option, supplementary benefits and additional ratings. The policyowner will be
advised of the Target Premium for any increase in face amount.
WITHDRAWAL TIER AMOUNT -- of any date is the net Cash Surrender Value at the
previous anniversary, multiplied by 10%.
<PAGE> 71
[MANULIFE FINANCIAL LOGO]
<PAGE> 72
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 policies 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 ____ pages;
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940 The signatures; Written consents of the following persons:
Jones & Blouch L.L.P. [To be filed by amendment]
Ernst & Young LLP [To be filed by amendment]
Brian R. Koop [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. Incorporated by reference to Exhibit A(1) to the
Initial Registration Statement on Form S-6 filed October 29,
1998 (File No. 333-66303).
A(3)(a)(i) Distribution Agreement between The Manufacturers Life
Insurance Company of America and ManEquity, Inc. dated
December 23, 1986. Incorporated by reference to Exhibit
A(3)(a)(i) to the Initial Registration Statement on Form S-6
filed October 29, 1998 (File No. 333-66303).
A(3)(a)(ii) Amendment to Distribution Agreement dated May 30, 1992.
Incorporated by reference to Exhibit A(3)(a)(ii) to the
Initial Registration Statement on Form S-6 filed October 29,
1998 (File No. 333-66303).
A(3)(a)(iii) Amendment to Distribution Agreement dated February 23, 1994.
Incorporated by reference to Exhibit A(3)(a)(iii) to the
Initial Registration Statement on Form S-6 filed October 29,
1998 (File No. 333-66303).
A(3)(b)(i) Specimen Agreement between ManEquity, Inc. and registered
representatives. Incorporated by reference to Exhibit
A(3)(b)(i) to the Pre-effective Amendment No. 1 to the
Registration Statement on Form S-6 filed August 28, 1998 (File
No. 333-51293).
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 the
Pre-effective Amendment No. 1 to the Registration Statement on
Form S-6 filed August 28, 1998 (File No. 333-51293).
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 filed August 28, 1998 (File No. 333-51293).
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 filed August 28, 1998 (File
No. 333-51293).
<PAGE> 73
A(5)(a) Specimen Flexible Premium Variable Life Insurance Policy.
Filed herein.
A(5)(a)(i) Endorsement to Policy. Incorporated by reference to Exhibit
A(5)(a)(i) to Post-Effective Amendment No. 6 to the
Registration Statement on Form S-6 filed by The Manufacturers
Life Insurance Company of America on April 30, 1997 (File No.
33-77256).
A(6)(a) Restated Articles of Redomestication of The Manufacturers Life
Insurance Company of America. Incorporated by reference to
Exhibit (3)(a)(i) to Post-Effective Amendment No. 6 to the
Registration Statement on Form S-1 filed by The Manufacturers
Life Insurance Company of America on December 9, 1996 (file
No. 33-57020).
A(6)(b) By-Laws of The Manufacturers Life Insurance Company of
America. Incorporated by reference to Exhibit (3)(b)(i) to
Post-Effective Amendment No. 6 to the Registration Statement
on Form S-1 filed by The Manufacturers Life Insurance Company
of America on December 9, 1996 (file No. 33-57020).
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 filed August 28, 1998 (file
No. 333-51293).
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 filed August 28, 1998 (file
No. 333-51293).
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 filed August 28, 1998 (file
No. 333-51293).
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 filed August 28, 1998 (file
No. 333-51293).
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 filed August 28, 1998 (file
No. 333-51293).
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 filed August 28, 1998 (file
No. 333-51293).
A(8)(b) Specimen Stoploss Reinsurance Agreement between The
Manufacturers Life Insurance Company of America and The
Manufacturers Life Insurance Company. Incorporated by
reference to Exhibit A(8)(b) to the Initial Registration
Statement on Form S-6 filed October 29, 1998 (File No.
333-66303).
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 filed August 28, 1998 (file No. 333-51293).
<PAGE> 74
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 filed August 28, 1998 (file No. 333-51293).
A(10) 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 filed by The Manufacturers Life
Insurance Company of America on April 26, 1996 (File No.
33-77256).
A(10)(a) 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 filed by The Manufacturers Life
Insurance Company of America on December 23, 1996 (File No.
33-77256).
2. See Exhibit 1.A(5)(a).
3. Opinion and consent of James D. Gallagher, Esq., General
Counsel of The Manufacturers Life Insurance Company of
America. Incorporated by reference to Exhibit 3 to Post
Effective Amendment No. 5 to the Registration Statement on
Form S-6 filed by The Manufacturers Life Insurance Company of
America on December 23, 1996 (File No. 33-77256).
4. No financial statements are omitted from the prospectus
pursuant to instruction 1(b) or (c) of Part I.
5. Not applicable.
6. Opinion and consent of Brian R. Koop, actuary of The
Manufacturers Life Insurance Company of America. To be filed
by amendment
7. Specimen notice of withdrawal right ("free look" notice).
Filed herein.
8(a). Specimen notice of right of surrender while sales charge
limitation applies (initial purchase). Filed herein.
8(b). Specimen notice of cancellation right (face amount increase).
Filed herein.
8(c). Specimen notice of right of surrender while sales charge
limitation applies (default). Filed herein.
9. Memorandum Regarding Issuance, Face Amount Increase,
Redemption and Transfer Procedures for the Policies.
Incorporated by reference to Exhibit 9 to Post-Effective
Amendment No. 4 to the Registration Statement on Form S-6
filed by The Manufacturers Life Insurance Company of America
on November 1, 1996 (File no. 33-77256)
10. Consent of Ernst & Young LLP. To be filed by amendment.
11. Consent of Jones & Blouch L.L.P. To be filed by amendment.
12 Power of Attorney. Incorporated by reference to Exhibit 12 to
Post Effective Amendment No. 10 to the Registration Statement
on Form S-6 filed by The Manufacturers Life Insurance Company
of America on February 28, 1997 (File No. 33-52310)
<PAGE> 75
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the
registrant, SEPARATE ACCOUNT THREE OF THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA, and the depositor, THE MANUFACTURERS LIFE INSURANCE COMPANY OF
AMERICA, have duly caused this amendment to the registration statement to be
signed on their behalf by the undersigned thereunto duly authorized, and the
seal of the depositor to be hereunto affixed and attested, all in the City of
Toronto, Province of Ontario, Canada, on the 18th day of February, 1999.
SEPARATE ACCOUNT THREE OF THE
MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
(Registrant)
By: THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Depositor)
By: /s/ Donald A. Guloien
----------------------------
DONALD A. GULOIEN
President
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Donald A. Guloien
----------------------------
DONALD A. GULOIEN
President
[SEAL]
Attest
/s/ James D. Gallagher
- ----------------------
JAMES D. GALLAGHER
Secretary
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
amended registration statement has been signed by the following persons in the
capacities indicated on this 18th day of February, 1999.
Signature Title
* Chairman and Director
- ----------------------------
JOHN D. RICHARDSON
/s/ Donald A. Guloien President and Director
- ---------------------------- (Principal Executive Officer)
DONALD A. GULOIEN
*
- ----------------------------
SANDRA M. COTTER Director
/s/ James D. Gallagher Director
- ----------------------------
JAMES D. GALLAGHER
* Director
- ----------------------------
BRUCE GORDON
* Director
- ----------------------------
JOSEPH J. PIETROSKI
* Director
- ----------------------------
THEODORE KILKUSKIE, JR.
* Vice President, Finance
- ---------------------------- (Principal Financial
DOUGLAS H. MYERS and Accounting Officer)
*/s/ James D. Gallagher
- ----------------------------
JAMES D. GALLAGHER
Pursuant to Power of Attorney
<PAGE> 77
EXHIBIT INDEX
Exhibit No. Description
99.A(5)(a) Specimen Flexible Premium Variable Life
Insurance Policy
99.7. Specimen notice of withdrawal right
("free look" notice).
99.8(a). Specimen notice of right of surrender while sales
charge limitation applies (initial purchase).
99.8(b). Specimen notice of cancellation right
(face amount increase).
99.8(c). Specimen notice of right of surrender while sales
charge limitation applies(default).
<PAGE> 1
Exhibit 99.A(5)a
- --------------------------------------------------------------------------------
---------------------------
Lives Insured
Policy Number
---------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY.
PAYABLE ON LAST DEATH.
ADJUSTABLE DEATH BENEFIT.
FLEXIBLE PREMIUMS PAYABLE TO LAST DEATH.
CASH SURRENDER VALUE AND BENEFITS FOR PORTION OF POLICY.
VALUE IN THE INVESTMENT ACCOUNTS REFLECT THE INVESTMENT EXPERIENCE OF THE
UNDERLYING SUB-ACCOUNTS. INVESTMENT OPTIONS DESCRIBED IN THE "POLICY VALUE
COMPOSITION" AND THE "INVESTMENT OPTIONS" PROVISIONS.
NON-PARTICIPATING (NOT ELIGIBLE FOR DIVIDENDS).
- --------------------------------------------------------------------------------
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 on page 3. The
death benefit is described in the "Insurance Benefit" provision.
The Insurance Benefit is payable following the death of the last-to-die of 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. We will adjust your Monthly Deduction
accordingly when we receive proof of each death.
YOUR NET PREMIUMS ARE ADDED TO YOUR POLICY VALUE. YOU MAY ALLOCATE THEM TO ONE
OR MORE OF THE INVESTMENT 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 BEEN 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 AS DESCRIBED IN THE "INSURANCE BENEFIT"
PROVISION.
READ YOUR POLICY CAREFULLY. IT IS A CONTRACT BETWEEN YOU AND US.
RIGHT TO RETURN POLICY. WITHIN (1) TEN DAYS AFTER YOU RECEIVE YOUR POLICY; OR
(2) FORTY-FIVE DAYS AFTER YOU SIGN THE APPLICATION; OR (3) TEN DAYS AFTER WE
MAIL OR DELIVER A NOTICE OF RIGHT OF WITHDRAWAL, YOU CAN RETURN THE POLICY FOR
CANCELLATION BY DELIVERING OR MAILING IT TO US OR TO THE AGENT WHO SOLD IT.
IMMEDIATELY ON DELIVERY OR MAILING, THE POLICY WILL BE VOID FROM THE BEGINNING.
WE WILL REFUND IN FULL THE PREMIUM PAID.
- --------------------------------------------------------------------------------
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA.
/s/ illegible /s/ illegible [MANUFLIFE
- ----------------------- ------------------------- FINANCIAL LOGO]
President Secretary
The Manufacturers
Life Insurance
Company of America
<PAGE> 2
TABLE OF CONTENTS
PAGE
Policy Information.......................................................... 3
Table Of Guaranteed Maximum Cost Of Insurance Rates......................... 4
Definitions................................................................. 5
Payment Of Premiums......................................................... 6
Policy Guarantees........................................................... 7
Termination................................................................. 9
Reinstatement............................................................... 9
Insurance Benefit........................................................... 10
Policy Value................................................................ 11
Policy Value Composition.................................................... 13
Separate Account And Sub-Accounts........................................... 13
Investment Options.......................................................... 15
Policy Loan Conditions...................................................... 17
Changing The Death Benefit Option Or The Face Amount........................ 19
Surrender For Cash.......................................................... 21
Surrender Charges........................................................... 22
Right To Postpone Payment Of Benefits....................................... 25
Right To Return Policy Or Cancel Increases.................................. 25
Age And Sex................................................................. 25
Suicide..................................................................... 25
Beneficiary................................................................. 26
Ownership And Assignment.................................................... 26
Protection Against Creditors................................................ 27
Currency And Place Of Payment............................................... 27
Contract.................................................................... 27
Validity.................................................................... 27
Non-Participating........................................................... 27
How Values Are Computed..................................................... 28
Annual Statement............................................................ 28
Tax Considerations.......................................................... 28
Any endorsements, any supplementary benefits, and a copy of the application,
follow page 28.
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 1,234,567 POLICY DATE: 1 FEB, 1994
ISSUE DATE: 1 FEB, 1994
OWNER JOHN M. DOE AND MARY C. DOE, JOINTLY IF LIVING,
OTHERWISE THE SURVIVOR
BENEFICIARY AS DESIGNATED IN THE APPLICATION OR SUBSEQUENTLY CHANGED
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
PREMIUM MODE ANNUALLY
BEGINNING ON
MON DAY YEAR PLANNED PREMIUM
FEB 01 1994 $2,042.85
SEX
NO. 1 MALE
NO. 2 FEMALE
RATE CLASS
NO. 1 STANDARD NON-SMOKER
NO. 2 STANDARD NON-SMOKER
ADDITIONAL RATE
NO. 1 $0.00 PER $1,000 OF FACE AMOUNT
NO. 2 $0.00 PER $1,000 OF FACE AMOUNT FOR 0 YEARS
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.
Page 3
<PAGE> 4
POLICY INFORMATION (CONTINUED) - POLICY 1,234,567
TABLE OF EXPENSE CHARGES
DEDUCTIONS FROM PREMIUMS
(A) STATE, LOCAL AND FEDERAL TAXES:
2.35% FOR STATE AND LOCAL TAXES, AND
1.25% FOR FEDERAL TAXES
THE ABOVE DEDUCTIONS ARE MADE FROM EACH PREMIUM PAYMENT UNTIL THE END OF
THE TENTH POLICY YEAR. IF WE INCUR HIGHER CHARGES FOR STATE, LOCAL OR
FEDERAL TAXES, THEY MAY INCREASE AND/OR CONTINUE AFTER THE TENTH POLICY
YEAR. TAX DEDUCTIONS FROM PREMIUMS DO NOT INCLUDE TAXES DESCRIBED IN THE
SEPARATE ACCOUNT AND SUB-ACCOUNT PROVISIONS.
(B) PREMIUM CHARGE:
5.5% OF PREMIUMS PAID IN EACH POLICY YEAR TO A MAXIMUM OF THE THEN
CURRENT TARGET PREMIUM, AND ZERO ON THE EXCESS. THE PREMIUM CHARGE IS
DEDUCTED FOR THE FIRST TEN POLICY YEARS FOLLOWING THE POLICY DATE OR AN
INCREASE IN FACE AMOUNT.
MONTHLY ADMINISTRATION CHARGE:
$0.04 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. THE CHARGE IS
DEDUCTED MONTHLY FROM THE POLICY VALUE UNTIL THE LATER OF THE END OF THE
FIFTEENTH POLICY YEAR OR WHEN THE YOUNGEST OF THE LIVES INSURED REACHES
OR WOULD HAVE REACHED ATTAINED AGE 55. THE CHARGE IS SUBJECT TO A
MINIMUM OF $30 AND A MAXIMUM OF $60 PER MONTH.
MORTALITY AND EXPENSE RISKS CHARGE:
0.067% IS DEDUCTED MONTHLY FROM EACH INVESTMENT ACCOUNT VALUE UNTIL THE
LATER OF THE END OF THE TENTH POLICY YEAR OR WHEN THE YOUNGEST OF THE
LIVES INSURED REACHES OR WOULD HAVE REACHED ATTAINED AGE 55. 0.0125% IS
DEDUCTED MONTHLY THEREAFTER. THIS REDUCTION IN THE CHARGE IS NOT
GUARANTEED.
Page 3.1
<PAGE> 5
POLICY INFORMATION (CONTINUED) - POLICY 1,234,567
TABLE OF EXPENSE CHARGES (CONTINUED)
SURRENDER CHARGES
THE DEFERRED UNDERWRITING CHARGE AND THE DEFERRED SALES CHARGE WILL BE
DEDUCTED FROM THE POLICY VALUE UNDER CERTAIN CONDITIONS. SEE THE
FOLLOWING PROVISIONS FOR DETAILS: POLICY VALUE, CHANGING THE DEATH
BENEFIT OPTION OR THE FACE AMOUNT, SURRENDER FOR CASH, AND SURRENDER
CHARGES. THERE MAY BE A LIMITATION ON THE DEFERRED SALES CHARGE AS
DESCRIBED UNDER THE DEFERRED SALES CHARGE LIMITATION SECTION OF THE
SURRENDER CHARGES PROVISION.
THE DEFERRED UNDERWRITING CHARGE AND THE DEFERRED SALES CHARGE REDUCE
OVER TIME ACCORDING TO THE GRADING PERCENTAGES SHOWN IN THE TABLE BELOW.
THE CHARGES WILL NEVER EXCEED THE ALLOWABLE MAXIMUMS UNDER STANDARD
NON-FORFEITURE LAW.
(A) DEFERRED UNDERWRITING CHARGE:
$4.00 FOR EACH $1,000 OF FACE AMOUNT INITIALLY PURCHASED AND ADDED BY
INCREASE, MULTIPLIED BY THE PERCENTAGE SHOWN IN THE TABLE BELOW. THE
MAXIMUM CHARGE IS $4,000 FOR EACH SUCH LEVEL OF COVERAGE.
(B) DEFERRED SALES CHARGE:
THE PREMIUM PAID IN THE FIRST POLICY YEAR AFTER THE POLICY DATE OR IN
THE FIRST YEAR AFTER A FACE AMOUNT INCREASE, MULTIPLIED BY THE
PERCENTAGE SHOWN IN THE TABLE BELOW. PREMIUM AMOUNTS IN EXCESS OF THE
TARGET PREMIUM ARE NOT SUBJECT TO THE DEFERRED SALES CHARGE.
THE DEFERRED UNDERWRITING CHARGE
AND DEFERRED SALES CHARGE GRADING PERCENTAGES DURING THE SURRENDER CHARGE PERIOD
(APPLICABLE TO THE INITIAL FACE AMOUNT AND SUBSEQUENT INCREASES)
<TABLE>
<CAPTION>
SURRENDER AVERAGE AGE AND PERCENTAGE OF CHARGES**
CHARGE PERIOD* 0-75 76 77 78 79 80+
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12 100% 100% 100% 100% 100% 100%
24 100% 100% 100% 100% 100% 90%
36 100% 100% 100% 100% 90% 80%
48 100% 100% 100% 90% 80% 70%
60 100% 100% 90% 80% 70% 60%
72 100% 90% 80% 70% 60% 50%
84 90% 80% 70% 60% 50% 40%
96 80% 70% 60% 50% 40% 30%
108 70% 60% 50% 40% 30% 20%
120 60% 50% 40% 30% 20% 10%
132 50% 40% 30% 20% 10% 0%
144 40% 30% 20% 10% 0%
156 30% 20% 10% 0%
168 20% 10% 0%
180 0% 0%
</TABLE>
* PERIODS SHOWN ARE AFTER END OF POLICY MONTH. POLICY MONTHS NOT SHOWN MAY BE
CALCULATED BY LINEAR INTERPOLATION.
** AVERAGE AGE REFERS TO THE AVERAGE ISSUE AGE OF THE LIVES INSURED WHEN THE
POLICY IS FIRST ISSUED OR THEIR AVERAGE ATTAINED AGE AT THE TIME OF A
SUBSEQUENT FACE AMOUNT INCREASE.
Page 3.2
<PAGE> 6
POLICY INFORMATION (CONTINUED) - POLICY 1,234,567
TABLE OF VALUES
Refer to your policy provisions for details on the terms and values shown in
this table.
<TABLE>
<S> <C>
GUIDELINE ANNUAL PREMIUM (GAP) $ 1,613.59
TARGET PREMIUM $ 505.92
GUIDELINE SINGLE PREMIUM $ 21,164.04
GUIDELINE LEVEL PREMIUM $ 2,042.85
DEATH BENEFIT GUARANTEE PREMIUM $ 2,042.85
NO LAPSE GUARANTEE PREMIUM $ 505.92
NO LAPSE GUARANTEE PERIOD FIRST 10 POLICY
YEARS
MINIMUM FACE AMOUNT $250,000.00
MINIMUM FACE AMOUNT INCREASE OR DECREASE $100,000.00
MINIMUM PAYMENT AMOUNT $ 50.00
- IF PAYABLE BY PRE-AUTHORIZED PLAN $ 10.00
MINIMUM TRANSFER AMOUNT $ 500.00
TRANSFER CHARGES
TRANSFER FEE $ 35.00
DOLLAR COST AVERAGING CHARGE $ 5.00
ASSET ALLOCATION BALANCER CHARGE $ 15.00
GUARANTEED INTEREST ACCOUNT MAXIMUM TRANSFER PERCENTAGE 15%
GUARANTEED INTEREST ACCOUNT RATE 4%
MINIMUM PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL $ 500.00
WITHDRAWAL TIER AMOUNT PERCENTAGE 10%
MINIMUM LOAN AMOUNT $ 500.00
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 0.000206976
</TABLE>
Page 3.3
<PAGE> 7
POLICY INFORMATION (CONTINUED) - POLICY 1,234,567
LIST OF INVESTMENT FUNDS
THE SEPARATE ACCOUNT IS AUTHORIZED TO INVEST IN SHARES OF MANULIFE SERIES FUND,
INC. 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 TO
THE AVAILABILITY OF 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 EMERGING 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 EQUITY TRUST SEEKS TO PROVIDE GROWTH OF CAPITAL. CURRENT INCOME IS A
SECONDARY CONSIDERATION ALTHOUGH GROWTH OF INCOME MAY ACCOMPANY GROWTH
OF CAPITAL.
(12) THE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
(13) THE QUANTITATIVE EQUITY TRUST SEEKS TO ACHIEVE INTERMEDIATE AND
LONG-TERM GROWTH THROUGH CAPITAL APPRECIATION AND CURRENT INCOME.
Page 3.4
<PAGE> 8
POLICY INFORMATION (CONTINUED) - POLICY 1,234,567
LIST OF INVESTMENT FUNDS
(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) 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.
(23) 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.
(24) THE STRATEGIC BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF TOTAL RETURN
CONSISTENT WITH PRESERVATION OF CAPITAL.
(25) 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.
(26) 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.
(27) THE INVESTMENT QUALITY BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME CONSISTENT WITH THE MAINTENANCE OF PRINCIPAL AND
LIQUIDITY.
Page 3.5
<PAGE> 9
POLICY INFORMATION (CONTINUED) - POLICY 1,234,567
LIST OF INVESTMENT FUNDS
(28) THE U.S. GOVERNMENT SECURITIES TRUST SEEKS TO OBTAIN A HIGH LEVEL OF
CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL AND MAINTENANCE
OF LIQUIDITY.
(29) THE MONEY MARKET TRUST SEEKS TO OBTAIN MAXIMUM CURRENT INCOME CONSISTENT
WITH PRESERVATION OF PRINCIPAL AND LIQUIDITY.
(30) THE LIFESTYLE AGGRESSIVE 1000 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL. CURRENT INCOME IS NOT A CONSIDERATION.
(31) THE LIFESTYLE GROWTH 820 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL WITH CONSIDERATION ALSO GIVEN TO CURRENT INCOME.
(32) 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.
(33) 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.
(34) THE LIFESTYLE CONSERVATIVE 280 TRUST SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME WITH SOME CONSIDERATION ALSO GIVEN TO GROWTH OF CAPITAL.
Page 3.6
<PAGE> 10
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 YEARS) RATE (POLICY YEARS) RATE (POLICY YEARS) RATE
<S> <C> <C> <C> <C> <C>
1 0.00021 23 0.10398 45 3.95316
2 0.00067 24 0.12221 46 4.55839
3 0.00121 25 0.14352 47 5.25286
4 0.00186 26 0.16877 48 6.05567
5 0.00266 27 0.19882 49 6.98075
6 0.00360 28 0.23560 50 8.01491
7 0.00476 29 0.28104 51 9.14967
8 0.00613 30 0.33649 52 10.36432
9 0.00775 31 0.40202 53 11.65476
10 0.00962 32 0.47841 54 13.00031
11 0.01184 33 0.56575 55 14.41266
12 0.01443 34 0.66447 56 15.89205
13 0.01748 35 0.77774 57 17.45994
14 0.02104 36 0.91157 58 19.15692
15 0.02522 37 1.07175 59 21.05483
16 0.03014 38 1.26774 60 23.36823
17 0.03602 39 1.50719 61 26.51708
18 0.04311 40 1.79482 62 31.35474
19 0.05167 41 2.13005 63 39.59523
20 0.06184 42 2.51352 64 54.65267
21 0.07386 43 2.94394 65 83.33333
22 0.08791 44 3.42072
</TABLE>
The above rates have been adjusted for any Additional Rate shown on page 3.
Page 4
<PAGE> 11
DEFINITIONS
THE FOLLOWING TERMS HAVE SPECIFIC MEANING IN YOUR POLICY. PLEASE REFER TO THE
DEFINITIONS AS YOU READ YOUR POLICY.
ADDITIONAL RATE is an adjustment to the Cost of Insurance Rate for any of the
Lives Insured who do not meet at least our underwriting requirements for the
standard risk class.
AGE at a specific date means, for each of the Lives Insured, the age on the
nearest birthday. If no specific date is mentioned, age means the age on the
birthday nearest to the Policy Anniversary.
ATTAINED AGE means the Issue Age plus the duration the policy has been in force
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 4:00 p.m. Eastern Time.
CASH SURRENDER VALUE equals the Policy Value less the Deferred Underwriting
Charge, the Deferred Sales Charge and any outstanding Monthly Deductions due.
EFFECTIVE DATE is the date we become obligated under this policy and when we
take the first Monthly Deductions. It is the later of the date our underwriters
approve issuance of this policy, or the date we receive at least the initial
premium at our Service Office.
GUARANTEED INTEREST ACCOUNT is that part of the Policy Value which reflects the
value you have in our general account.
GROSS SINGLE PREMIUM is the amount of premium necessary to endow the policy at
the age the Death Benefit Guarantee terminates, assuming an annual interest rate
of 4% and current charges. The amount of premium is based on the Attained Age of
each of the Lives Insured, their sex and risk class, and duration of the
coverage.
GUIDELINE ANNUAL PREMIUM (GAP) is used to determine maximum sales charges that
may be deducted under this policy.
INVESTMENT ACCOUNT is that part of the Policy Value that reflects the value you
have in one of the Sub-Accounts.
ISSUE AGE is the Age on the birthday nearest to the Policy Date. If applicable,
this age will be adjusted to reflect the underwriting risk class.
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 on page 3. 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.
LOAN INTEREST CREDITED DIFFERENTIAL is the amount by which the interest rate
charged on loans exceeds the interest rate credited to the Loan Account. It is
the annual cost of keeping a loan.
NET CASH SURRENDER VALUE is the Cash Surrender Value less the Policy Debt.
(continued)
Page 5
<PAGE> 12
DEFINITIONS (continued)
NET POLICY VALUE is the Policy Value less the value in the Loan Account.
NET PREMIUM is the gross premium less the deductions for the Sales Charge and
state, local and federal taxes. It is the amount of premium allocated to the
Guaranteed Interest Account and/or Investment Accounts.
POLICY DEBT is the aggregate amount of policy loans, including borrowed
interest, less any loan repayments.
POLICY VALUE is the sum of the values in the Loan Account, the Guaranteed
Interest Account and the Investment Accounts.
POLICY YEARS, POLICY MONTHS and POLICY ANNIVERSARIES are determined from the
Policy Date shown on page 3.
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.
SUB-ACCOUNT refers to one of the sub-accounts of the Separate Account.
SURRENDER CHARGE PERIOD is the period following the Policy Date or following any
increase in Face Amount during which we will assess surrender charges. Surrender
charges will apply during this period if the policy terminates due to default,
if you surrender the policy, decrease the Face Amount, or make a partial
withdrawal. There are two surrender charges under this policy: a Deferred
Underwriting Charge and a Deferred Sales Charge.
TARGET PREMIUM is used to determine the maximum Sales Charge and Deferred Sales
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 received at our Service Office.
PAYMENT OF PREMIUMS
Premiums are payable until the death of the Life Insured. The initial premium
payment is due as of the Policy Date. No insurance will take effect before we
approve the application and receive the initial premium. The minimum initial
premium is one-twelfth of the Target Premium shown in the Table of Values in the
Policy Information section.
You can pay subsequent premiums 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.
LIMITS. Each premium payment after the first is subject to the following:
(a) no premium payment may be less than the Minimum Payment Amount 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 such
change;
(continued)
Page 6
<PAGE> 13
PAYMENT OF PREMIUMS (continued)
(b) we have the right to refuse or refund any premium payments that would
cause this policy to fail to qualify as life insurance under applicable
tax law; and
(c) the sum of the premiums paid into this policy at any time may not exceed
the guideline premium limitation as of such time. The guideline premium
limitation is, as of any date, the greater of:
(1) the Guideline Single Premium, or
(2) the sum of the Guideline Level Pre-miums to such date.
The Guideline Single Premium and the Guideline Level Premium for the
initial Face Amount are shown in the Table of Values in the Policy Information
section.
POLICY GUARANTEES
If you elect the No Lapse Guarantee and/or the Death Benefit Guarantee option,
we guarantee that this Policy will not go into default while either of these
options is in effect.
While the No Lapse Guarantee or the Death Benefit Guarantee is in effect, we
will continue to make Monthly Deductions from your Net Policy Value. The
guarantees ensure that the policy does not go into default even if the policy's
Net Cash Surrender Value falls below the amount needed to pay the Monthly
Deductions due. We will deduct any outstanding amount for Monthly Deductions
from subsequent premium payments.
The No Lapse Guarantee Premium and the Death Benefit Guarantee Premium for the
initial Face Amount are shown in the Table of Values in the Policy Information
Section. The amounts shown may change if any of the following occurs:
(a) the Face Amount changes;
(b) the Death Benefit Option changes (this applies to the Death Benefit
Guarantee Premium only. A Death Benefit Option change will terminate the
No Lapse Guarantee);
(c) a Supplementary Benefit is added, changed or terminated;
(d) your rate class changes; or
(e) a temporary Additional Rate is added (due to a Face Amount increase), or
terminated.
We will inform you at any time there is a change in the amounts.
NO LAPSE GUARANTEE. To keep the No Lapse Guarantee in effect the policy must
satisfy the No Lapse Guarantee Cumulative Premium Test.
The duration of the No Lapse Guarantee Period is dependent on the average Issue
Age of the Lives Insured. The maximum period is ten years and the minimum period
is three years. The No Lapse Guarantee is not available if the average Issue Age
of the Lives Insured exceeds 85. The No Lapse Guarantee Period for this policy
is stated in the Table of Values in the Policy Information section.
(continued)
Page 7
<PAGE> 14
POLICY GUARANTEES (continued)
NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST. We will apply the Cumulative Premium
Test at the beginning of each Policy Month. Your policy will satisfy the test if
(a) is greater than or equal to (b), where:
(a) is the sum of all premiums paid, less any partial withdrawals and less
any Policy Debt; and
(b) is the sum of monthly No Lapse Guarantee Premiums due since the Policy
Date.
If in any Policy Month the policy does not satisfy the No Lapse Guarantee
Cumulative Premium Test, we will notify you and allow a 61-day grace period for
you to make a premium payment sufficient to keep the No Lapse Guarantee in
effect. The amount due will be the No Lapse Guarantee premium for that Policy
Month and the next two Policy Months.
If we do not receive the amount due by the end of the 61-day grace period, the
No Lapse Guarantee will be discontinued, and the policy may go into default.
The No Lapse Guarantee terminates on the earliest of the following dates:
(a) at the end of the No Lapse Guarantee period shown in the Table of Values
in the Policy Information section;
(b) the date you change your Death Benefit Option; and
(c) at the end of the grace period for which you have not made the required
premium payment.
The No Lapse Guarantee cannot be reinstated once it has been terminated.
DEATH BENEFIT GUARANTEE. To keep the Death Benefit Guarantee in effect, the
policy must satisfy the Death Benefit Guarantee Cumulative Premium Test or,
after the end of the tenth Policy Year, the Fund Value Test.
While the Death Benefit Guarantee is in effect, we will determine at the
beginning of each Policy Month whether the Death Benefit Guarantee Cumulative
Premium Test or the Fund Value Test has been satisfied. If either test has not
been satisfied, we will notify you and allow a 61-day grace period for you to
make a premium payment sufficient to keep the Death Benefit Guarantee in effect.
The required payment will be equal to:
(a) the amount needed to satisfy the Death Benefit Guarantee Cumulative
Premium Test or, after the end of the tenth Policy Year, the Fund Value
Test; plus
(b) the monthly Death Benefit Guarantee Premium due for the next two Policy
Months.
If we do not receive the required payment by the end of the 61-day grace period,
the Death Benefit Guarantee will be discontinued, and the policy may go into
default.
The Death Benefit Guarantee terminates on the earliest of the following dates:
(a) when the youngest of the Lives Insured reaches or would have reached:
(1) Attained Age 100, if Death Benefit Option 1 was always in effect
under the policy, or
(2) Attained Age 85, if Death Benefit Option 2 was in effect at any
time; and
(continued)
Page 8
<PAGE> 15
POLICY GUARANTEES (continued)
(b) at the end of the grace period for which you have not made the required
premium payment.
The Death Benefit Guarantee cannot be reinstated once it has been terminated.
DEATH BENEFIT GUARANTEE CUMULATIVE PREMIUM TEST. We will apply the Cumulative
Premium Test to your policy at the beginning of each Policy Month. Your policy
will satisfy the test if (a) is greater than or equal to (b), where:
(a) is the sum of all premiums paid, less any partial withdrawals and less
any Policy Debt; and
(b) is the sum of monthly Death Benefit Guarantee Premiums due since the
Policy Date.
FUND VALUE TEST. We will apply the Fund Value Test if your policy does not
satisfy the Death Benefit Guarantee Cumulative Premium Test at any time after
the end of the tenth Policy Year.
We will apply the Fund Value Test to your policy at the beginning of each Policy
Month. Your policy will satisfy the Fund Value Test if the Net Policy Value is
greater than or equal to the Gross Single Premium.
TERMINATION
DEFAULT. Unless the No Lapse Guarantee or the Death Benefit Guarantee is in
effect, this policy will go into default if the Net Cash Surrender Value at the
beginning of any Policy Month would go below zero after we take the Monthly
Deductions that are due.
GRACE PERIOD. We will allow 61 days of grace from the date when the policy goes
into 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. This amount is equal to (a) plus (b) 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 Deductions due, plus the Monthly Deductions for the next
two Policy Months.
If we have notice of a policy assignment on file at our Service Office, we will
also mail a copy of the notice to the assignee on record. 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 dates:
(a) at the end of the grace period for which you have not paid the amount
necessary to bring the policy out of default;
(b) as of the date you surrender the policy; or
(c) as of the date the Life Insured dies.
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. You can reinstate the
policy if you:
(continued)
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<PAGE> 16
REINSTATEMENT (continued)
(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
surviving Lives Insured;
(c) pay a premium equal to the amount that was required during the 61-day
grace period following default; and
(d) repay any amount we had paid in connection with the termination of the
policy.
If we approve your request, your policy reinstatement date will be the later of
the date of your request, or the date we receive the required payment at our
Service Office.
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 on receiving due proof of death, 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.
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 greater of (a) and (b), as of the date
of the Life Insured's death where:
(a) is the Face Amount of the policy; and
(b) is the Policy Value multiplied by the Applicable Percentage shown in the
table below.
Under Option 2, the Death Benefit is the greater of (a) and (b), where:
(a) is the Face Amount of the policy, plus the Policy Value as of the date
of the Life Insured's death; and
(continued)
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<PAGE> 17
INSURANCE BENEFIT (continued)
(b) is the Policy Value as of the date of death, multiplied by the
Applicable Percentage shown in the table below.
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 interpolation.
The Age of the youngest of the Lives Insured, or the Age such person would have
reached, will be used to determine the Applicable Percentage.
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.
INTEREST. 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 least the minimum required by the law of the state in which this
policy was delivered. If the state does not specify the interest rate, we will
use the rate for insurance benefits left on deposit with us.
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 Fund.
MONTHLY DEDUCTIONS. A deduction is due from your policy as of the beginning of
each Policy Month to cover monthly administration charges and the cost to
provide the insurance coverage. We will take the deductions as of the date they
are due. However, if at issue your Policy Date is set to an earlier date for
purposes of determining Age, any Monthly Deductions due from the Policy Date up
to the Effective Date will be taken as of the Effective Date.
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.
Monthly Deductions are due until the youngest of the Lives Insured reaches or
would have reached Age 100.
(continued)
Page 11
<PAGE> 18
POLICY VALUE (continued)
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 that are a part of this
policy, as determined in accordance with such Supplementary Benefits;
and
(d) The monthly Cost of Insurance for the Lives Insured.
The Cost of Insurance for a specific Policy Month is 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 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 month.
The rates for the Cost of Insurance, as of the Policy Date and subsequently for
each increase, are blended and based on the Lives Insured's Attained Age, their
sex and rate class. We will determine Cost of Insurance rates from time to time,
on a basis that does not discriminate unfairly within any class of insureds.
The Cost of Insurance calculation will reflect any Additional Rate shown on page
3. 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 also make the following deductions from your Policy Value
as they occur.
We deduct a Deferred Underwriting Charge and a Deferred Sales Charge if any of
the following occurs during the Surrender Charge Period. If you,
(a) give up the policy for its Net Cash Surrender Value;
(b) make one or more partial withdrawals in a Policy Year totaling more than
the Withdrawal Tier Amount;
(c) reduce the Face Amount of insurance; or
(d) do not pay an amount due at the end of a grace period, and the policy
terminates.
See the Surrender Charges provision for details.
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.
Page 12
<PAGE> 19
POLICY VALUE COMPOSITION
LOAN ACCOUNT VALUE. The amount you have in the Loan Account at any time equals:
(a) amounts transferred to it; less
(b) amounts credited for loan repayments; plus
(c) net interest credited to it; less
(d) amounts transferred from it.
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 ACCOUNTS 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.
SEPARATE ACCOUNT
AND SUB-ACCOUNTS
The Separate Account is authorized to invest in the shares of Manulife Series
Fund, Inc., an open-end diversified management investment company. Each
Sub-Account of the Separate Account purchases shares of a corresponding Fund of
Manulife Series Fund, Inc. The Funds are listed in the Policy Information
section on page 3.4.
(continued)
Page 13
<PAGE> 20
SEPARATE ACCOUNT
AND SUB-ACCOUNTS (continued)
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
Manulife Series Fund, Inc., 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; and
(g) transfer assets between the Separate Account and other separate
accounts.
The investment objectives of 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
(continued)
Page 14
<PAGE> 21
SEPARATE ACCOUNT
AND SUB-ACCOUNTS (continued)
(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.
SEPARATE ACCOUNT ASSETS. The assets held in each Sub-Account are used to support
the Policy Values of Single 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 and Flexible
Premium Variable Life Insurance policies will not be charged with liabilities
from any other business we conduct. We can transfer any Separate Account assets
in excess of those Investment Account values to our general 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:
(a) you can make two transfers each Policy Month. There is no charge for the
first transfer. The Transfer Fee shown in the Table of Values in the
Policy Information section will apply if you make the second transfer;
(b) we will allocate the Transfer Fee among the Investment Accounts and the
Guaranteed Interest Account in the same proportion that the amount being
transferred from each account bears to the total amount transferred. For
this purpose, we will consider all transfer requests received on the
same Business Day as one transfer;
(c) the Minimum Transfer Amount is shown in the Table of Values in the
Policy Information section. If an account balance is less than the
Minimum Transfer Amount, we will transfer the entire amount;
(continued)
Page 15
<PAGE> 22
INVESTMENT OPTIONS (continued)
(d) 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 Table of Values in the Policy Information section,
multiplied by the value in the Guaranteed Interest Account as of
the previous Policy Anniversary; and
(2) the Minimum Transfer Amount shown in the Table of Values in the
Policy Information section;
(e) any transfer out of the Guaranteed Interest Account may not involve a
transfer to the Investment Account for the Money-Market Fund; and
(f) if transfers would result in more than a 5% reduction in the number of
outstanding shares in the underlying Fund of a Sub-Account as of the end
of the previous Business Day, some transfers may be declined. In
determining which transfers to effect, we will effect Dollar Cost
Averaging transfers first, followed by Asset Allocation Balancer
transfers, written transfer requests next, and telephone requests last.
If at a later date you wish to make a previously declined transfer, we
will require a new transfer request.
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 as of the Policy Anniversary and every six months thereafter.
We will deduct the Asset Allocation Balancer Charge for each transfer or series
of transfers occurring on the same transfer date. The charge will be deducted
from all accounts affected by the re-balancing in the same proportion that the
value in each account bears to the Policy Value immediately after the transfer.
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. The transfers under this option are
subject to the following restrictions:
(a) the amount of each transfer cannot be less than the Minimum Transfer
Amount shown in the Table of Values in the Policy Information Section;
(b) if your Policy Value is equal to or less than $15,000 on the date of a
transfer, we will deduct the Dollar Cost Averaging Charge shown in the
Table of Values in the Policy Information Section. We will deduct the
charge from the Investment Account from which the transfer occurs; and
(c) if the value in the Investment Account from which the transfer is being
made is insufficient to cover the transfer amount plus the Dollar Cost
Averaging Charge, if applicable, we will not effect the transfer and we
will notify you.
We reserve the right to cease to offer this option, change the Minimum Transfer
Amount, and change the Dollar Cost Averaging Charge as of 90 days after we send
you written notice.
Page 16
<PAGE> 23
POLICY LOAN CONDITIONS
While this policy is in force and has a loan value, you can take out 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
assuming net interest at the Guaranteed Interest Rate shown in the Table of
Values in the Policy Information section, and no premium payment. The Minimum
Loan Amount is shown in the Table of Values in the Policy Information Section.
LOAN ACCOUNT. When you take out a loan, or when loan interest charges are
borrowed, we transfer amounts 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.
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 Investments 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.
POLICY DEBT. The Policy Debt as of any date equals (a) plus (b), minus (c),
where:
(a) is the total amount of loans as of such date;
(b) is the total amount of loan interest charges which have been borrowed as
of such date; and
(c) is the total amount of loan repayments as of such date.
MODIFIED POLICY DEBT. The Modified Policy Debt as of any date equals the Policy
Debt as of such date, plus the loan interest to be charged to the next Policy
Anniversary. All are discounted from the next Policy Anniversary back to such
date at the same interest rate as the Guaranteed Interest Account Rate shown in
the Table of Values in the Policy Information section.
LOAN INTEREST CHARGED. Interest will accrue daily on the Policy Debt, and is
added to the Policy Debt annually in arrears as of each Policy Anniversary. In
the event that you do not pay the Loan Interest Charged, it will be borrowed
against the policy as of 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.
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.
(continued)
Page 17
<PAGE> 24
POLICY LOAN CONDITIONS (continued)
LOAN ACCOUNT INTEREST CREDITED. Interest will accrue daily to amounts in the
Loan Account. The effective annual Loan Account 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 change
the Current Loan Interest Credited Differential as of 90 days after we send you
written notice of such change.
LOAN ACCOUNT ADJUSTMENTS. We will adjust the value of the Loan Account when you
take out a loan. We will also make an adjustment at other specified events
listed below.
When we adjust the Loan Account, the difference between:
(a) the Loan Account before any adjustment; and
(b) the Modified Policy Debt at the time of adjustment;
is transferred between the Loan Account and the Investment Accounts or the
Guaranteed Interest Account.
The amount transferred to or from the Loan Account will be such that the value
of the Loan Account is equal to the Modified Policy Debt after the adjustment.
The specified events which cause an adjustment to the Loan Account are:
(a) a Policy Anniversary;
(b) a partial or full loan repayment;
(c) a new loan being taken out;
(d) when an amount is needed to meet a Monthly Deduction; or
(e) termination of the policy.
At surrender, amounts transferred from the Loan Account will be allocated to the
Guaranteed Interest Account and to the Investment Accounts in the same
proportion that the value in the corresponding Loan Sub-Account bears to the
value of the Loan Account.
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 or the Investment Accounts so that the Loan
Account at that time equals the Modified Policy Debt.
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.
Page 18
<PAGE> 25
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 end of the second
Policy Year;
(b) a change in Death Benefit Option will take effect only as of a Policy
Anniversary. We must receive your Written Request for the change at
least 30 days prior to the Policy Anniversary as of which the change is
to be effective;
(c) decreases in Face Amount will take effect as of the beginning of the
next Policy Month following the date we receive your Written Request;
(d) increases in Face Amount will take effect as of the beginning of the
next Policy Month following the date we approve the required evidence of
insurability; and
(e) a Death Benefit Option change will cause the No Lapse Guarantee to
terminate if it is in effect at the time of the change.
A Death Benefit Option Change or a Face Amount Change will cause a change in the
Guideline Single Premium, Guideline Level Premium, and the Death Benefit
Guarantee Premium.
For increases in Face Amount, the No Lapse Guarantee Premium, the Guideline
Annual Premium (GAP) and the Target Premium will also change. The new GAP and
Target Premium will be associated only with the new Face Amount that has been
added after restoring prior decreases. See the Increases in Face Amount section
of this provision.
We will inform you of the new premium amounts at the time of the change.
We reserve the right to limit any changes that would cause this policy to fail
to qualify as life insurance for tax purposes.
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.
(continued)
Page 19
<PAGE> 26
CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT (continued)
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 require evidence of insurability on the Lives Insured that is
satisfactory to us for a change from Option 2 to Option 1. We will not increase
the Deferred Underwriting Charge or Deferred Sales 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.
You may not decrease a prior increase during the two Policy Years following such
increase.
A decrease in Face Amount will reduce the Face Amount in the following order:
(a) the Face Amount provided by the most recent increase will decrease
first; followed by
(b) the next most recent increase until all increases are reduced; then
(c) the initial Face Amount.
If you decrease the initial Face Amount or a prior increase in Face Amount
during the Surrender Charge Period, we will deduct a pro-rata Deferred
Underwriting Charge and a pro-rata Deferred Sales Charge from the Policy Value.
See the Surrender Charges provision for details.
INCREASE IN FACE AMOUNT. For 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 change this amount as of 90 days after we send you
written notice of the change.
An increase may be canceled, but not partially decreased, at any time during the
two Policy Years following the increase. If you cancel an increase we will
deduct from the Policy Value the Deferred Underwriting Charge and the Deferred
Sales Charge attributable to the increase. The Deferred Sales Charge will be
subject to the Deferred Sales Charge Limitation section of the Surrender Charges
provision.
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.
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
(continued)
Page 20
<PAGE> 27
CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT (continued)
(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 Deferred Underwriting Charge or Deferred Sales Charge
associated with the restoration of prior decreases under (a) or (b) above.
However, there will be a new Deferred Underwriting Charge, and Deferred Sales
Charge associated with the new Face Amount under (c).
You will not necessarily have to pay additional premium with an increase in Face
Amount, but the new Deferred Underwriting Charge and Deferred Sales Charge may
require an additional premium payment to prevent the policy from going into
default.
For Deferred Sales 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.
The proportion of Policy Value or premiums attributable to the increase will
equal the ratio of (a) to (b), where:
(a) is the GAP for the increase; and
(b) is the sum of the GAPs for the initial Face Amount and all increases,
including the requested increase.
After an increase in Face Amount the proportion of each premium attributable to
the initial Face Amount is equal to the ratio of (a) to (b), where:
(a) is the GAP for the initial Face Amount; and
(b) is the sum of the GAPs for the initial Face Amount and all increases in
effect at that time.
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. We will pay you the Net Cash Surrender Value less any Monthly
Deductions due. After the date of surrender, no insurance will be in force.
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. You may request a partial Net Cash
Surrender Value withdrawal once each Policy Month after the end of the second
Policy Year. 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.
The minimum amount that you may withdraw is the Minimum Partial Net Cash
Surrender Value Withdrawal Amount shown in the Table of Values in the Policy
Information section. 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.
(continued)
Page 21
<PAGE> 28
SURRENDER FOR CASH (continued)
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 Deferred Underwriting Charge and a
pro-rata Deferred Sales 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.
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 Deferred Underwriting
Charge and the pro-rata Deferred Sales 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 Deferred
Underwriting Charge and the pro-rata Deferred Sales 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
The Deferred Underwriting Charge and the Deferred Sales Charge are the two
surrender charges under this policy. For details on the amount of the charges,
see the description of the Deferred Underwriting Charge and the Deferred Sales
Charge on page 3.2.
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 all of the applicable Deferred Underwriting Charge
and the Deferred Sales 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.
The Deferred Sales Charge Limitation section of this provision will apply if the
transaction occurs in the first two years following the Policy Date or an
increase in Face Amount.
PRO-RATA CHARGES. We will deduct a pro-rata Deferred Underwriting Charge and a
pro-rata Deferred Sales Charge from the Policy Value if any of the following
transactions occur during the Surrender Charge Period:
(a) you decrease the Face Amount of insurance; or
(continued)
Page 22
<PAGE> 29
SURRENDER CHARGES (continued)
(b) you make a partial Net Cash Surrender Value Withdrawal in excess of the
Withdrawal Tier Amount.
See the Charges Remaining After Face Amount Decreases Or Partial Withdrawals
section of this provision for a description of the charges remaining after
deduction of the pro-rata charges.
For a decrease in Face Amount, the pro-rata charges deducted will equal to the
sum of the pro-rata Deferred Underwriting Charge and the pro-rata Deferred Sales
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 decrease in Face Amount;
(b) is the amount of the current total Face Amount prior to the decrease;
and
(c) is the current total Deferred Underwriting Charge and Deferred Sales
Charge prior to the decrease.
We will allocate the deduction of the pro-rata charges for the decrease to the
Guaranteed Interest Account and the Investment Accounts in the same proportion
that the value in each account bears to the Net Policy Value.
A decrease in Face Amount caused by a change from Death Benefit Option 1 to
Option 2 will not incur the pro-rata Deferred Underwriting Charge or the
Pro-rata Deferred Sales Charge described above.
For a partial withdrawal, the pro-rata charges deducted will equal the sum of
the pro-rata Deferred Underwriting Charge and the pro-rata Deferred Sales 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 Deferred Underwriting Charge and Deferred Sales
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 Deferred Underwriting Charge and the
pro-rata Deferred Sales 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)
Page 23
<PAGE> 30
SURRENDER CHARGES (continued)
CHARGES REMAINING AFTER FACE AMOUNT DECREASES OR PARTIAL WITHDRAWALS. Each time
we deduct the pro-rata Deferred Underwriting Charge or the pro-rata Deferred
Sales Charge for a Face Amount decrease or for a partial withdrawal, we will
reduce the remaining Deferred Underwriting Charge and Deferred Sales Charge
proportionately. The remaining Deferred Underwriting Charge and Deferred Sales
Charge will be calculated using the Table of Grading Percentages on Page 3.2 in
the Policy Information Section.
The actual remaining Deferred Underwriting 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 Deferred Underwriting Charge prior to the last decrease
or partial withdrawal, less the Deferred Underwriting Charge deducted
for that decrease or partial withdrawal.
The actual remaining Deferred Sales 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 Year in which the
last decrease or partial withdrawal was done; and
(c) is the remaining Deferred Sales Charge prior to the last decrease or
partial withdrawal, less the Deferred Sales Charge deducted for that
decrease or partial withdrawal.
DEFERRED SALES CHARGE LIMITATION. If you surrender this policy for its Net Cash
Surrender Value, or if the policy goes into default and terminates in the first
two years following the Policy Date or the date of an increase in Face Amount,
we will forego deducting that part of the Deferred Sales Charge that is in
excess of the sum of (a), (b) and (c), where:
(a) is 30% of premiums paid, to the lesser of one GAP or the cumulative
premiums paid to the surrender date; and
(b) is 10% of premiums paid in excess of one GAP; up to the lesser of two
GAPs or the cumulative premiums paid to the surrender date; and
(c) is 9% of premiums paid in excess of two GAPs.
If you cancel an increase in Face Amount during the first two years following
the date of the increase, we will not take any part of the Deferred Sales Charge
with respect to premiums attributable to that increase, which is in excess of
the amount permitted by the above formula.
In this section, premiums refer to the premiums attributable, for Deferred Sales
Charge purposes, to the initial Face Amount or an increase in Face Amount, as
appropriate. GAP refers to the Guideline Annual Premium for the initial Face
Amount, as shown in the Table of Values in the Policy Information section or for
any subsequent increase in Face Amount, as appropriate.
Page 24
<PAGE> 31
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), (b)
and (c) above, and in the Transfers section of the Investment Options provision.
RIGHT TO RETURN POLICY OR CANCEL INCREASES
Within (1) ten days after you receive your policy; or (2) forty-five days after
you sign the application; or (3) ten days after we mail or deliver a notice of
right of withdrawal, you can return the policy for cancellation by delivering or
mailing it to us or to the agent who sold it. Immediately on delivery or
mailing, the policy will be void from the beginning. We will refund in full the
premium paid.
If you request an increase in Face Amount which results in a new Deferred
Underwriting Charge or Deferred Sales Charge, you have the same rights as
described above to cancel the increase. If canceled, the Policy Value, the
Deferred Underwriting Charge and the Deferred Sales 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, the Deferred
Underwriting Charge and the Deferred Sales Charge to the amounts they would have
been, had the premiums not been paid.
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.
SUICIDE
Except for the last-to-die, if any of the Lives Insured die by suicide within
two years after the Issue Date, whether the insured person is sane or insane, we
will re-issue this policy. The new policy(ies) on the survivor(s) will be any
variable life insurance policy covering one insured that is available at time of
re-issue. The suicide provision for any new policy(ies) will be effective as of
the original Issue Date.
(continued)
Page 25
<PAGE> 32
SUICIDE (continued)
If the last death is by suicide, within two years after the Issue Date, whether
the insured person is sane or insane, we will pay only the premiums paid, less
any partial Net Cash Surrender Value withdrawals, less the amount in the Loan
Account. If death occurs within two years after the date an increase in Face
Amount is effective, the death benefit for that increase will be limited to the
Monthly Deductions for the increase.
We reserve the right under this provision to obtain evidence of the manner and
cause of death.
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.
DEATH OF BENEFICIARY. If no beneficiary is alive when the Life Insured dies, the
Insurance Benefit will belong to you; or to your estate if you are the Life
Insured. 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 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.
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.
(continued)
Page 26
<PAGE> 33
OWNERSHIP AND ASSIGNMENT (continued)
JOINT OWNERSHIP. Two or more owners will own the policy as joint tenants with
right of survivorship, unless otherwise requested. 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.
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 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.
Page 27
<PAGE> 34
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. This statement is available on request from our Service Office.
We use the Commissioners 1980 Standard Ordinary Smoker or 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. The Death Benefit is designed to comply with Section 7702 of the
Internal Revenue Code of 1986, or any other equivalent section of the Code.
We do not give tax advice and this provision should not be construed to mean
that the Death Benefit and Policy Value will be exempt from the future actions
of any tax authority.
Page 28
<PAGE> 35
- --------------------------------------------------------------------------------
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
Service Office: 200 Bloor Street East, Toronto, Canada M4W 1E5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY.
PAYABLE ON LAST DEATH.
ADJUSTABLE DEATH BENEFIT.
FLEXIBLE PREMIUMS PAYABLE TO LAST DEATH.
CASH SURRENDER VALUE AND BENEFITS FOR PORTION OF POLICY.
VALUE IN THE INVESTMENT ACCOUNTS REFLECT THE INVESTMENT EXPERIENCE OF THE
UNDERLYING SUB-ACCOUNTS.
INVESTMENT OPTIONS DESCRIBED IN THE "POLICY VALUE COMPOSITION" AND THE
"INVESTMENT OPTIONS" PROVISIONS.
NON-PARTICIPATING (NOT ELIGIBLE FOR DIVIDENDS).
- --------------------------------------------------------------------------------
IMPORTANT NOTICE
To claim a benefit or request a change in your policy;
contact your nearest representatives. 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.
- --------------------------------------------------------------------------------
<PAGE> 1
Exhibit 99.7
[Date]
NOTICE OF WITHDRAWAL RIGHT
RE: [Policy Number]
------------------------------------------
[Name]
------------------------------------------
Premium Mode:
-----------------------------
Modal Planned Premium:$
-------------------
This notice is sent to you in accordance with the laws administered by the
United States Securities and Exchange Commission ("SEC"). Please read it
carefully and retain it with your important records.
You have recently purchased a flexible survivorship premium variable life
insurance policy from The Manufacturers Life Insurance Company of America under
which benefits may depend on the experience of the sub-accounts of Manufacturers
Life of America's Separate Account Three (the "Separate Account"). You have,
pursuant to requirements of the SEC and your policy, the right to examine and
return your policy for cancellation, and receive a full refund of all premiums
paid, at any time within 10 days from delivery of the policy or 45 days from the
date of execution of the application, whichever is later, but in any event you
have until 10 days from the date of delivery or mailing (as determined by its
postmark) of this notice to return the policy for cancellation.
In determining whether or not to exercise your right, you should consider, among
other things, the projected cost of your policy including your ability to make
additional payments, if required. You have already been furnished a prospectus
which describes the deductions from premiums before amounts are allocated to the
applicable Separate Account. These are:
For applicable state and local taxes, 2.35% of each premium payment.
For applicable federal taxes, 1.25% of each premium payment.
For sales charges, 5.5% of each premium payment in each Policy Year, up to
a maximum of the then current Target Premium for the first ten Policy Years
following the Policy Date or following an increase in face amount.
The prospectus also describes other charges which are taken from the Policy
Value, including the charges assessed upon surrenders and decreases in face
amount.
Should you decide to exercise this right of cancellation, complete the enclosed
form and return your policy in accordance with the enclosed instructions,
postmarked on or before the latest date permitted for cancellation as described
above.
<PAGE> 2
INSTRUCTIONS
Please Read Carefully
To the Policyowner:
If, after reading the enclosed notice, you elect to return your policy for
cancellation you must:
1. Sign and date the bottom of this form.
2. Mail the form together with your policy (if received by you) to
The Manufacturers Life Insurance Company of America
P.O. Box 633
Niagara Square Station
Buffalo, New York, 14202-0633.
3. The postmark on the envelope must be on or before the latest date
permitted for cancellation as described in the attached letter.
4. Please check the box at the bottom if you have not yet received your
policy when mailing this form.
To: The Manufacturers Life Insurance Company of America
Pursuant to the terms of the notice previously furnished by The Manufacturers
Life Insurance Company of America, the policy numbered below is being returned
for cancellation and a full refund of the premium paid for the policy is hereby
requested. The undersigned policyowner(s) hereby release(s) The Manufacturers
Life Insurance Company of America from any and all claims arising out of or in
connection with the sale or issuance of this policy and I (we) have hereby
acknowledge that The Manufacturers Life Insurance Company of America's sole
liability with respect to the policy is the refund of the premiums paid for the
policy.
----------------------------------------
- ----------------------- ----------------------------------------
Date Signature of Policyowner(s)
----------------------------------------
Policy number
[ ] The policy has not yet been received and should it be received will be
returned to The Manufacturers Life Insurance Company of America.
<PAGE> 1
Exhibit 99.8(a)
NOTICE OF RIGHT OF SURRENDER WHILE
SALES CHARGE LIMITATION APPLIES (INITIAL PURCHASE)
RE: [Policy Number]
------------------------------------------
[Name]
------------------------------------------
Premium Mode:
-----------------------------
Modal Planned Premium:$
-------------------
This notice is sent to you in accordance with the laws administered by the
United States Securities and Exchange Commission ("SEC"). Please read it
carefully and retain it with your important records.
You have purchased a flexible premium survivorship variable life insurance
Policy from The Manufacturers Life Insurance Company of America under which
benefits may depend on the experience of the sub-accounts of the applicable
Manufacturers Life of America's separate account. You have, pursuant to
requirements of the SEC and your Policy, the right to surrender your Policy at
any time from the date of issuance to the expiration of twenty-four (24) months
from that date and to receive, in cash, the Net Cash Surrender Value of the
Policy at the time of surrender as determined in accordance with the provisions
of your Policy, together with any amount to which you may be entitled under the
Policy's sales charge limitation provision.
The deferred sales charge will be limited to (i) the sum of 30% of premiums paid
up to the lesser of one guideline annual premium or the cumulative premiums paid
to the surrender date plus (ii) 10% of premiums paid in excess of one guideline
annual premium up to the lesser of two guideline annual premiums or the
cumulative premiums paid to the surrender date plus (iii) 9% of the premiums
paid in excess of two guideline annual premiums. The same sales charge
limitation apply to this Policy for twenty four (24) months from following the
date of an increase in face amount which results in new surrender charges. The
sales charge limitation relating to an increase in face amount only applies to
the deferred sales charges attributable to the increase.
In determining whether or not to exercise your right to surrender while the
sales charge limitation applies, you should consider, among other things, the
projected cost of your Policy, including your ability to make additional
payment, if required. You have already been furnished a prospectus which
describes the deductions from premiums before amounts are allocated to the
applicable separate account for investment. These are:
For applicable state and local taxes, 2.35% of each premium payment.
For applicable federal taxes, 1.25% of each premium payment.
For sales charges, 5.5% of each premium payment in each Policy Year, up
to a maximum of the then current Target Premium for the first ten
Policy Years following the Policy Date or following an increase in face
amount.
The prospectus also describes other charges which are taken from the Policy
Value, including the charge assessed upon surrenders and decreases in face
amount.
If you should have any questions regarding your right of surrender while the
sales charge limitation applies, please refer to your prospectus. Should you
decide to exercise this right, complete the enclosed form and return your Policy
in accordance with the enclosed instructions, postmarked on or before the latest
date permitted for cancellation as described above.
<PAGE> 2
INSTRUCTIONS
Please Read Carefully
To the Policyowner:
If, after reading the enclosed notice, you elect to return your policy for
surrender while the sales charge limitation applies you must:
1. Sign and date the bottom of this form.
2. Mail the form together with your policy (if received by you) to
The Manufacturers Life Insurance Company of America
P.O. Box 633
Niagara Square Station
Buffalo, New York, 14202-0633.
3. The postmark on the envelope must be on or before the latest date
permitted for surrender while the sales charge limitation applies, as
described in the attached letter.
4. Please check the box at the bottom if you have not yet received your
policy when mailing this form.
To: The Manufacturers Life Insurance Company of America
Pursuant to the terms of the notice previously furnished by The Manufacturers
Life Insurance Company of America, the policy numbered below is being returned
for surrender and the payment in cash of the Net Cash Surrender Value next
computed after the request for surrender is received plus any amount to which
the undersigned policyowner(s) is/are entitled under the Policy's surrender
charge limitation provisions is hereby requested.
--------------------------------------
- -------------------------- --------------------------------------
Date Signature of Policyowner(s)
--------------------------------------
Policy number
[ ] The policy has not yet been received and should it be received will be
returned to The Manufacturers Life Insurance Company of America.
<PAGE> 1
Exhibit 99.8(b)
NOTICE OF CANCELLATION RIGHT
(FACE AMOUNT INCREASE)
RE: [Policy Number]
------------------------------------------
[Name]
------------------------------------------
Premium Mode:
-----------------------------
Modal Planned Premium:$
-------------------
This notice is sent to you in accordance with the laws administered by the
United States Securities and Exchange Commission ("SEC"). Please read it
carefully and retain it with your important records.
You have recently increased the face amount of the flexible premium survivorship
variable life insurance policy you purchased from The Manufacturers Life
Insurance Company of America under which benefits may depend on the experience
of the sub-accounts of the applicable Manufacturers Life of America's separate
account. You have, pursuant to requirements of the SEC and your Policy, the
right to cancel the increase at any time within 30 days from delivery of the
Policy Update Page or 45 days from the date of execution of the application for
increase, whichever is later, but in any event you have until 30 days from the
date of delivery or mailing (as determined by its postmark) of this notice to
return the Policy Update page for cancellation of the face amount increase. If
you choose to cancel the increase, the Policy Value and the surrender charges
will be recalculated to the amounts they would have been had the increase not
taken place.
In determining whether or not to exercise your right of surrender and refund,
you should consider, among other things, the projected cost of your Policy
including your ability to make additional payment, if required. You have already
been furnished a prospectus which describes the deductions from premiums before
amounts are allocated to the applicable separate account for investment. These
are:
For applicable state and local taxes, 2.35% of each premium payment.
For applicable federal taxes, 1.25% of each premium payment.
For sales charges, 5.5% of each premium payment in each Policy Year, up
to a maximum of the then current Target Premium for the first ten
Policy Years following the Policy Date or following an increase in face
amount.
The prospectus also describes other charges which are taken from the Policy
Value, including the charge assessed upon surrenders and decreases in face
amount.
If you should have any questions regarding your right to cancel the face amount
increase, please refer to your prospectus. Should you decide to exercise this
right, complete the enclosed form and return the Policy Update Page in
accordance with the enclosed instructions, postmarked on or before the latest
date permitted for cancellation as described above.
<PAGE> 2
INSTRUCTIONS
Please Read Carefully
To the Policyowner:
If, after reading the enclosed notice, you elect to cancel the face amount
increase you must:
1. Sign and date the bottom of this form.
2. Mail the form together with your Policy Update Page (if received by you)
to
The Manufacturers Life Insurance Company of America
P.O. Box 633
Niagara Square Station
Buffalo, New York, 14202-0633.
3. The postmark on the envelope must be on or before the latest date
permitted for cancellation as described in the attached letter.
4. Please check the box at the bottom if you have not yet received your
Policy Update Page when mailing this form.
To: The Manufacturers Life Insurance Company of America
Pursuant to the terms of the notice previously furnished by The Manufacturers
Life Insurance Company of America, the Policy Update Page for the Policy
numbered below is being returned for cancellation of the face amount increase.
I/We understand that the Policy Value and surrender charges will be recalculated
to the amount they would have been had the increase not taken place. I/We hereby
release The Manufacturers Life Insurance Company of America from any and all
claims arising out of or in connection with the sale or issuance of the face
amount increase of the Policy and I/we hereby acknowledge that The Manufacturers
Life Insurance Company of America has no liability with respect to the face
amount increase of the policy except the recalculation of Policy Value and
surrender charges as described above.
---------------------------------------
- -------------------------- ---------------------------------------
Date Signature of Policyowner(s)
---------------------------------------
Policy number
[ ] The policy has not yet been received and should it be received will be
returned to The Manufacturers Life Insurance Company of America.
<PAGE> 1
Exhibit 99.8(c)
NOTICE OF RIGHT OF SURRENDER WHILE
SALES CHARGE LIMITATION APPLIES (DEFAULT)
RE: [Policy Number]
------------------------------------------
[Name]
------------------------------------------
Premium Mode:
-----------------------------
Modal Planned Premium:$
-------------------
This notice is sent to you in accordance with the laws administered by the
United States Securities and Exchange Commission ("SEC"). Please read it
carefully and retain it with your important records.
Your Policy has gone into default. If you fail to make the required payment
within the grace period (61 days), the Policy will lapse and your Net Cash
Surrender Value as of the date of default less the monthly deduction then due
will be paid to you together with any amount to which you may be entitled under
the Policy's sales charge limitation provisions.
The deferred sales charge will be limited to (i) the sum of 30% of premiums paid
up to the lesser of one guideline annual premium or the cumulative premiums paid
to the surrender date plus (ii) 10% of premiums paid in excess of one guideline
annual premium up to the lesser of two guideline annual premiums or the
cumulative premiums paid to the surrender date plus (iii) 9% of the premiums
paid in excess of two guideline annual premiums.
You also have, pursuant to requirements of the SEC and your Policy, the right to
surrender your Policy at any time from the date of issuance to the expiration of
twenty-four (24) months from that date and to receive, in cash, the Net Cash
Surrender Value of the Policy at the time of surrender, and any amount to which
you are entitled under the sales charge limitation provisions described above.
The same rights apply to this Policy for twenty-four months following the date
of an increase in face amount which results in new surrender charges. The sales
charge limitation relating to an increase in face amount only applies to the
deferred sales charges attributable to the increase.
In determining whether or not the exercise your right to surrender while the
sales charge limitation applies, you should consider, among other things, the
projected cost of your Policy including your ability to make additional
payments, if required. You have already been furnished a prospectus which
describes the deductions from premiums before amounts are allocated to the
applicable separate account for investment. These are:
For applicable state and local taxes, 2.35% of each premium payment.
For applicable federal taxes, 1.25% of each premium payment.
For sales charges, 5.5% of each premium payment in each Policy Year, up
to a maximum of the then current Target Premium for the first ten
Policy Years following the Policy Date or following an increase in face
amount.
The prospectus also describes other charges which are taken from the Policy
Value, including the charge assessed upon surrenders and decreases in face
amount.
If you should have any questions regarding your right of surrender while the
sales charge limitation applies, please refer to your prospectus. Should you
decide to exercise this right, complete the enclosed form and return your Policy
in accordance with the enclosed instructions, postmarked on or before the latest
date permitted for cancellation as described above.
<PAGE> 2
INSTRUCTIONS
Please Read Carefully
To the Policyowner:
If, after reading the enclosed notice, you elect to return your Policy for
surrender while the sales charge limitation applies you must:
1. Sign and date the bottom of this form.
2. Mail the form together with your Policy Update Page (if received by you)
to
The Manufacturers Life Insurance Company of America
P.O. Box 633
Niagara Square Station
Buffalo, New York, 14202-0633.
3. The postmark on the envelope must be on or before the latest date
permitted for surrender while the sales charge limitation applies, as
described in the attached letter.
4. Please check the box at the bottom if you have not yet received your
Policy when mailing this form.
To: The Manufacturers Life Insurance Company of America
Pursuant to the terms of the notice previously furnished by The Manufacturers
Life Insurance Company of America, the Policy numbered below is hereby returned
for surrender and the payment in cash of the Net Cash Surrender Value next
computed after the request for surrender is received plus any amount to which
the undersigned policyowner(s) is/are entitled under the Policy's surrender
charge limitation provisions is hereby requested.
----------------------------------------
- ----------------------- ----------------------------------------
Date Signature of Policyowner(s)
----------------------------------------
Policy number
[ ] The policy has not yet been received and should it be received will be
returned to The Manufacturers Life Insurance Company of America.