<PAGE> 1
As filed with the Securities and Exchange Commission on July 8, 1999
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
SEPARATE ACCOUNT THREE OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
(Exact name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
(Name of Depositor)
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of Depositor's Principal Executive Offices)
James D. Gallagher Copy to:
Vice President, Secretary J. Sumner Jones, Esq.
and General Counsel Jones & Blouch L.L.P.
The Manufacturers Life Insurance Company of 1025 Thomas Jefferson Street, NW
America Washington, DC 20007
73 Tremont Street
Boston, MA 02108
(Name and Address of Agent for Service)
Title of Securities Being Registered: Variable Life Insurance Contracts
Approximate date of commencement of proposed public offering: As soon after the
effective date of this Registration Statement as is practicable.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
Separate Account Three of
The Manufacturers Life Insurance Company of America
Registration Statement on Form S-6
Cross-Reference Sheet
FORM
N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
1 Cover Page; General Information About Manufacturers (Separate Account
Three)
2 Cover Page; General Information About Manufacturers (Manufacturers Life
of America)
3 *
4 Other Information (Distribution of the Policy)
5 General Information About Manufacturers Life (Separate Account Three)
6 General Information About Manufacturers (Separate Account Three)
7 *
8 *
9 Other Information (Litigation)
10 Death Benefits; Premium Payments; Charges and Deductions; Policy Value;
Policy Loans; Policy Surrender and Partial Withdrawals; Lapse and
Reinstatement; Other Provisions of the Policy; Other Information
11 General Information About Manufacturers (Manufacturers Investment
Trust)
12 General Information About Manufacturers (Manufacturers Investment
Trust)
13 Charges and Deductions
14 Issuing A Policy; Other Information (Responsibilities Assumed By
Manufacturers Life)
15 Issuing A Policy
16 **
17 Policy Surrender and Partial Withdrawals
18 General Information About Manufacturers
19 Other Information (Reports to Policyholders; Responsibilities Assumed
By Manufacturers Life)
20 *
21 Policy Loans
22 *
<PAGE> 3
23 **
24 Other Provisions of the Policy
25 General Information About Manufacturers (Manufacturers Life of America)
26 *
27 **
28 Other Information (Officers and Directors)
29 General Information About Manufacturers (Manufacturers Life of America)
30 *
31 *
32 *
33 *
34 *
35 **
36 *
37 *
38 Other Information (Distribution of the Policies; Responsibilities of
Manufacturers Life)
39 Other Information (Distribution of the Policies)
40 *
41 **
42 *
43 *
44 Policy Values --Determination of Policy Value; Units and Unit Values)
45 *
46 Policy Surrender and Partial Withdrawals; Other Information -- Payment
of Proceeds)
47 General Information About Manufacturers (Manufacturers Investment
Trust)
48 *
49 *
50 General Information About Manufacturers
<PAGE> 4
51 Issuing a Policy; Death Benefits; Premium Payments; Charges and
Deductions; Policy Value; Policy Loans; Policy Surrender and Partial
Withdrawals; Lapse and Reinstatement; Other Policy Provisions
52 Other Information (Substitution of Portfolio Shares)
53 **
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 5
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE> 6
PROSPECTUS
SEPARATE ACCOUNT THREE OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
VENTURE SPVL
A MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
This prospectus describes Venture SPVL, a modified single premium variable life
insurance policy (the "Policy"). The Manufacturers Life Insurance Company of
America (the "Company," "Manufacturers Life of America," "we" or "us") offers
the Policy on both a single life and a survivorship basis.
Policy Value may accumulate on a fixed basis or vary with the investment
performance of the sub-accounts of Manufacturers Life of America's Separate
Account Three (the "Separate Account"). The assets of each sub-account will be
used to purchase shares of a particular investment portfolio (a "Portfolio") of
Manufacturers Investment Trust (the "Trust"). The accompanying prospectus for
the Trust and the corresponding statement of additional information, describe
the investment objectives of the Portfolios in which you may invest net
premiums. Other sub-accounts and Portfolios may be added in the future.
EXCEPT FOR CERTAIN POLICIES ISSUED IN EXCHANGE FOR A POLICY WHICH IS NOT A
MODIFIED ENDOWMENT CONTRACT (A "MEC"), THE POLICY WILL BE TREATED AS A MEC FOR
FEDERAL INCOME TAX PURPOSES. AS A RESULT, ANY LOAN, PARTIAL WITHDRAWAL,
ASSIGNMENT, PLEDGE, LAPSE OR SURRENDER OF THE POLICY (OR ANY LOAN, PARTIAL
WITHDRAWAL, ASSIGNMENT OR PLEDGE OF THE POLICY WITHIN TWO YEARS BEFORE THE
POLICY BECOMES A MEC) MAY BE SUBJECT TO INCOME TAX AND A 10% PENALTY TAX.
PROSPECTIVE PURCHASERS SHOULD NOTE THAT IT MAY NOT BE ADVISABLE TO PURCHASE A
POLICY AS A REPLACEMENT FOR EXISTING INSURANCE.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
Please read this prospectus carefully and keep it for future reference. It is
valid only when accompanied by a current prospectus for the Trust.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Manufacturers Life Insurance Company of America
500 North Woodward Avenue
Bloomfield Hills, Michigan 48304
The date of this Prospectus is ____, 1999
<PAGE> 7
TABLE OF CONTENTS
DEFINITIONS.....................................................................
POLICY SUMMARY..................................................................
General......................................................................
Death Benefits...............................................................
Premiums.....................................................................
Policy Value.................................................................
Policy Loans.................................................................
Surrender and Partial Withdrawals............................................
Lapse and Reinstatement......................................................
Charges and Deductions.......................................................
Investment Options and Investment Advisers ..................................
Investment Management Fees and Expenses......................................
Table of Charges and Deductions..............................................
Table of Investment Management Fees and Expenses.............................
Table of Investment Options and Investment Advisers..........................
GENERAL INFORMATION ABOUT MANUFACTURERS.........................................
Manufacturers Life of America................................................
Separate Account Three.......................................................
Manufacturers Investment Trust...............................................
ISSUING A POLICY................................................................
Requirements.................................................................
Temporary Insurance Agreement................................................
Right to Examine the Policy..................................................
Life Insurance Qualification.................................................
DEATH BENEFITS..................................................................
Death Benefit ...............................................................
Maturity Date................................................................
PREMIUM PAYMENTS................................................................
Initial Premiums.............................................................
Subsequent Premiums..........................................................
Maximum Premium Limitation...................................................
Premium Allocation...........................................................
CHARGES AND DEDUCTIONS..........................................................
Premium Charge...............................................................
Withdrawal Transaction Fee...................................................
Surrender Charges............................................................
Monthly Charges..............................................................
Administration Charge........................................................
Cost of Insurance Charge.....................................................
Mortality and Expense Risks Charge...........................................
Distribution Charge..........................................................
Charges for Supplementary Benefits...........................................
Charges for Transfers........................................................
Reduction in Charges.........................................................
SPECIAL PROVISIONS FOR EXCHANGES................................................
COMPANY TAX CONSIDERATIONS......................................................
POLICY VALUE....................................................................
Determination of the Policy Value............................................
Units and Unit Values........................................................
2
<PAGE> 8
Transfers of Policy Value....................................................
Telephone Transfers..........................................................
Dollar Cost Averaging........................................................
Asset Allocation Balancer Transfer...........................................
POLICY LOANS....................................................................
Maximum Loanable Amount......................................................
Effect of Policy Loan........................................................
Interest Charged on Policy Loans.............................................
Loan Account.................................................................
POLICY SURRENDER AND PARTIAL WITHDRAWALS........................................
Policy Surrender.............................................................
Partial Withdrawals..........................................................
LAPSE AND REINSTATEMENT.........................................................
Lapse........................................................................
Reinstatement................................................................
Termination..................................................................
THE GENERAL ACCOUNT.............................................................
Fixed Account................................................................
OTHER PROVISIONS OF THE POLICY..................................................
Assignment of Rights.........................................................
Beneficiary..................................................................
Incontestability.............................................................
Misstatement of Age or Sex...................................................
Suicide Exclusion............................................................
Supplementary Benefits.......................................................
TAX TREATMENT OF THE POLICY.....................................................
Life Insurance Qualification.................................................
Tax Treatment of Policy Benefits.............................................
Alternate Minimum Tax........................................................
Income Tax Reporting.........................................................
OTHER INFORMATION...............................................................
Payment of Proceeds..........................................................
Reports to Policyowners......................................................
Distribution of the Policies.................................................
Responsibilities of Manufacturers Life.......................................
Voting Rights................................................................
Substitution of Portfolio Shares.............................................
Records and Accounts.........................................................
State Regulations............................................................
Litigation...................................................................
Independent Auditors.........................................................
Further Information..........................................................
Officers and Directors.......................................................
Impact of Year 2000..........................................................
Illustrations................................................................
Appendix A - Definitions
Appendix B - Sample Illustrations of Policy Values, Cash Surrender values and
Death Benefits
Financial Statements
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION WHERE IT
WOULD NOT BE LAWFUL. YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS, THE PROSPECTUS OF MANUFACTURERS INVESTMENT TRUST, OR THE STATEMENT
OF ADDITIONAL INFORMATION OF MANUFACTURERS INVESTMENT TRUST. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
Examine this prospectus carefully. The Policy Summary will briefly describe the
Policy. More detailed information will be found further in the prospectus.
3
<PAGE> 9
POLICY SUMMARY
GENERAL
This Policy may be issued either as a modified single premium variable life
insurance policy or as a modified single premium survivorship variable life
insurance policy. We have prepared the following summary as a general
description of the most important features of the Policy. It is not
comprehensive and you should refer to the more detailed information contained in
this prospectus. Unless otherwise indicated or required by the context, the
discussion throughout this prospectus assumes that the Policy has not gone into
default, there is no outstanding Policy Debt, and the death benefit is not
determined by the minimum death benefit percentage. The Policy's provisions may
vary in some states.
DEATH BENEFITS
The Policy provides a death benefit in the event of the death of the Life
Insured. The death benefit is the Face Amount of the Policy at the date of death
(less any Policy Debt and outstanding Monthly Deductions due) or, if greater,
the Minimum Death Benefit (less any Policy Debt and outstanding Monthly
Deductions due).
PREMIUMS
The Policy permits the payment of a large initial premium. The initial premium
may be 80%, 90% or 100% of the Guideline Single Premium (based on Face Amount).
However, in the case of simplified underwriting, and in order to qualify for the
Lapse Protection Benefit, 100% of the Guideline Single Premium is required. The
minimum single premium is $25,000. Additional premiums will be accepted only
under certain conditions as stated under "Premium Payments - Subsequent
Premiums." Premiums will be allocated, according to your instructions and at the
Company's discretion, to one or more of our general account (the "Fixed
Account") and the sub-accounts of the Separate Account of the Company. You may
change your allocation instructions at any time. You may also transfer amounts
among the accounts.
POLICY VALUE
The Policy has a Policy Value reflecting premiums paid, certain charges for
expenses and cost of insurance, and the investment performance of the accounts
to which you have allocated premiums.
POLICY LOANS
You may borrow an amount not to exceed 90% of your Policy's Net Cash Surrender
Value. Loan interest at a rate of 5.25% during the first ten years of the loan
and 4.00% thereafter is due on each Policy Anniversary. Preferred interest rates
are also available in the case of loans on amounts that represent Earnings on
the Policy and in the case of loans transferred to the Policy pursuant to an
exchange from another life insurance policy pursuant to Section 1035 of the
Internal Revenue Code of 1986, as amended (the "Code"). We will deduct all
outstanding Policy Debt from proceeds payable at the insured's death, or upon
surrender. Policy loans may have tax consequences. See section entitled "Tax
Treatment of the Policy" for a discussion of the potential Federal income tax
implications of a loan from the Policy.
SURRENDER AND PARTIAL WITHDRAWALS
You may make a partial withdrawal of your Policy Value. A partial withdrawal
will result in a reduction in the Face Amount of the Policy . A partial
withdrawal may result in a surrender charge if made during the Surrender Charge
Period.
You may surrender your Policy for its Net Cash Surrender Value at any time while
the Life Insured is living. The Net Cash Surrender Value is equal to the Policy
Value less the sum of (a) Surrender Charges, (b) outstanding Monthly Deductions
due, and (c) Policy Debt.
See section entitled "Tax Treatment of the Policy" for a discussion of the
potential Federal income tax implications of a surrender of, or partial
withdrawal from, the Policy.
LAPSE AND REINSTATEMENT
Unless the Lapse Protection Benefit is in effect, a Policy will lapse (and
terminate without value) when its Net Cash Surrender Value is insufficient to
pay the next monthly deduction and a grace period of 61 days expires without
your having made an adequate payment. Therefore, a Policy could lapse eventually
if increases in Policy Value (prior to deduction of Policy charges) are not
sufficient to cover Policy charges. A Policy could also lapse if the Policy Debt
is greater than the
4
<PAGE> 10
Cash Surrender Value since the Lapse Protection Benefit terminates on any date
that the Policy Debt exceeds the Cash Surrender Value.
A policyowner may reinstate a lapsed Policy at any time within the five year
period following lapse provided the Policy was not surrendered for its Net Cash
Surrender Value. However, in the case of a Survivorship Policy, the Policy may
not be reinstated if any of the Life Insured have died since the Policy lapsed.
We will require evidence of insurability along with a certain amount of premium
as described under "Reinstatement."
See section entitled "Tax Treatment of the Policy" for a discussion of the
potential Federal income tax implications of a lapse and reinstatement of the
Policy.
CHARGES AND DEDUCTIONS
We assess certain charges and deductions in connection with the Policy. These
include:
o charges assessed monthly for mortality and expense risks, cost of
insurance and administration expenses,
o charges deducted from premiums paid, and
o charges assessed on surrender, lapse or withdrawal of Net Cash Surrender
Value.
These charges are summarized in the Table of Charges and Deductions. Unless you
otherwise specify and we allow, the monthly deduction will be allocated among
the Investment Accounts and the Fixed Account in the same proportion as the
Policy Value in each bears to the Net Policy Value immediately prior to the
deduction. However, the mortality and expense risk charge will only be allocated
among the Investment Accounts.
In addition, there are charges deducted from each Portfolio of the Trust. These
charges are summarized in the Table of Investment Management Fees and Expenses.
INVESTMENT OPTIONS AND INVESTMENT ADVISERS
You may allocate Net Premiums to the Fixed Account or to one or more of the
sub-accounts of our Separate Account Three. Each of the sub-accounts invests in
the shares of one of the Portfolios of the Trust.
The Trust receives investment advisory services from Manufacturers Securities
Services, LLC ("MSS"). MSS is a registered investment adviser under the
Investment Advisers Act of 1940.
The Trust also employs subadvisers. The Table of Investment Options and
Investment Advisers shows the subadvisers that provide investment subadvisory
services to the indicated Portfolios.
INVESTMENT MANAGEMENT FEES AND EXPENSES
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects investment management fees and certain
expenses of the Portfolios. The fees and expenses for each Portfolio for the
Trust's last fiscal year are shown in the Table of Investment Management Fees
and Expenses below. These fees and expenses are described in detail in the
accompanying Trust prospectus to which reference should be made.
TABLE OF CHARGES AND DEDUCTIONS
Surrender Charge
The total amount of the surrender charge is determined by multiplying the amount
withdrawn or surrendered in excess of the free withdrawal amount by the
applicable surrender charge percentage shown in the following table.
Policy Year Surrender Charge
1 10.00%
2 9.00%
3 8.00%
4 7.00%
5
<PAGE> 11
5 6.00%
6 5.00%
7 4.00%
8 3.00%
9 1.50%
10+ 0%
If necessary, the Company will reduce the surrender charge deducted upon a
partial withdrawal or a surrender of the Policy so that the sum of all premium
loads, the administration charges and surrender charge deducted (including the
surrender charge to be deducted upon such partial withdrawal or surrender) does
not exceed 10% of aggregate payments made during the first Policy Year.
Monthly Deductions: o A premium load of 0.030% of Policy
Value is deducted monthly (equivalent to 0.360%
annually) for the first 10 Policy Years. If
additional premium payments are made, the 0.030%
premium load for a particular premium payment is
deducted from the Policy Value corresponding to the
premium payment for 10 Policy Years following the
premium payment.
o An administration charge of $7.50 plus 0.030% monthly
(equivalent to 0.36% annually) for the first 10
Policy Years and 0.015% monthly (equivalent to 0.18%
annually) thereafter.
o The cost of insurance charge.
o Any additional charges for supplementary benefits, if
applicable.
o A mortality and expense risks charge. This charge is
calculated as a percentage of the value of the
Investment Accounts and is assessed against the
Investment Accounts. The charge varies by Policy Year
as follows:
<TABLE>
<CAPTION>
Guaranteed Monthly Mortality Guaranteed Annual Mortality
Policy Years and Expense Risks Charge and Expense Risks Charge
------------ ---------------------------- ---------------------------
<S> <C> <C> <C>
1-10 0.075% 0.900%
10+ 0.025% 0.30%
</TABLE>
All of the above charges, except the mortality and
expense risks charge, are deducted from the Net Policy
Value.
Loan Charges: A fixed loan interest rate of 5.25% during the
first 10 ten years of the loan and 4.00% thereafter.
Interest credited to amounts in the Loan Account is
guaranteed not to be less than 4% at all times. The
maximum loan amount is 90% of the Net Cash Surrender
Value.
Transfer Charge: A charge of $25 per transfer for each transfer in excess
of 12 in a Policy Year.
TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT)*** ANNUAL EXPENSES
- --------------- ---------- ----------------- ---------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets................ 0.850% 0.360% 1.210%
Science & Technology........................ 1.100% 0.110% 1.210%
International Small Cap..................... 1.100% 0.150% 1.250%
</TABLE>
6
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Aggressive Growth........................... 1.000%+ 0.090% 1.090%
Emerging Small Company...................... 1.050% 0.050% 1.100%
Small Company Blend......................... 1.050% 0.150%* 1.200%
Mid Cap Growth.............................. 0.950%+ 0.040% 0.990%
Mid Cap Stock............................... 0.925% 0.000%* 0.925%
Overseas.................................... 0.950% 0.210% 1.160%
International Stock......................... 1.050% 0.200% 1.250%
International Value......................... 1.000% 0.300%* 1.300%
Mid Cap Blend............................... 0.850%+ 0.050% 0.900%
Small Company Value......................... 1.050% 0.180% 1.230%
Global Equity............................... 0.900% 0.110% 1.010%
Growth...................................... 0.850% 0.050% 0.900%
Large Cap Growth............................ 0.875%+ 0.130% 1.005%
Quantitative Equity......................... 0.700% 0.060% 0.760%
Blue Chip Growth............................ 0.875%+ 0.045% 0.920%
Real Estate Securities...................... 0.700% 0.060% 0.760%
Value....................................... 0.800% 0.050% 0.850%
Equity Index................................ 0.250% 0.150%** 0.400%**
Growth & Income............................. 0.750% 0.040% 0.790%
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT)*** ANNUAL EXPENSES
- --------------- ---------- ----------------- ---------------
<S> <C> <C> <C>
U.S. Large Cap Value........................ 0.875% 0.100%* 0.975%
Equity-Income............................... 0.875%+ 0.050% 0.925%
Income & Value.............................. 0.800%+ 0.090% 0.890%
Balanced.................................... 0.800% 0.070% 0.870%
High Yield.................................. 0.775% 0.065% 0.840%
Strategic Bond.............................. 0.775% 0.075% 0.850%
Global Bond................................. 0.800% 0.110% 0.910%
Total Return................................ 0.775% 0.100%* 0.875%
Investment Quality Bond..................... 0.650% 0.070% 0.720%
Diversified Bond............................ 0.750% 0.140% 0.890%
U.S. Government Securities.................. 0.650% 0.070% 0.720%
Money Market................................ 0.500% 0.120% 0.620%
Lifestyle Aggressive 1000#.................. 0% 1.110%*** 1.110%
Lifestyle Growth 820#....................... 0% 1.000%*** 1.000%
Lifestyle Balanced 640#..................... 0% 0.920%*** 0.920%
Lifestyle Moderate 460#..................... 0% 0.830%*** 0.830%
Lifestyle Conservative 280#................. 0% 0.720%*** 0.720%
</TABLE>
+Management Fees for the portfolios listed below changed effective May 1, 1999.
Prior to May 1, 1999, management fees were as follows:
Aggressive Growth Trust 1.050% Blue Chip Growth Trust 0.925%
Mid Cap Growth Trust 1.000% Equity-Income Trust 0.800%
Mid Cap Blend Trust 0.750% Income & Value Trust 0.750%
Large Cap Growth Trust 0.750%
*Based on estimates of payments to be made during the current fiscal year.
**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 0.55%, and Other
Expenses would have been 0.30%, of the average annual net assets of the Equity
Index Trust.
7
<PAGE> 13
***Reflects expenses of the 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 0.02% higher, except for the Lifestyle Conservative 280 Trust,
which would be 0.03% higher (based on expenses of the Lifestyle Trusts for the
fiscal year ended December 31, 1998) as noted in the chart below:
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT)*** ANNUAL EXPENSES
- --------------- ---------- ----------------- ---------------
<S> <C> <C> <C>
Lifestyle Aggressive 1000................... 0% 1.130% 1.130%
Lifestyle Growth 820........................ 0% 1.020% 1.020%
Lifestyle Balanced 640...................... 0% 0.940% 0.940%
Lifestyle Moderate 460...................... 0% 0.850% 0.850%
Lifestyle Conservative 280.................. 0% 0.750% 0.750%
</TABLE>
# Each Lifestyle Trust will bear its own pro rata share of the fees and expenses
incurred by the Underlying Portfolios in which it invests, 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, MSS is
currently paying those expenses as described in footnote (***) above.
TABLE OF INVESTMENT OPTIONS AND INVESTMENT ADVISERS
SUBADVISER PORTFOLIO
A I M Capital Management, Inc. Mid Cap Growth Trust
Aggressive Growth Trust
AXA Rosenberg Investment Management LLC Small Company Value Trust
Capital Guardian Trust Company Small Company Blend Trust
U.S. Large Cap Value Trust
Income & Value Trust
Diversified Bond Trust
Fidelity Management Trust Company Mid Cap Blend Trust
Large Cap Growth Trust
Overseas Trust
Founders Asset Management LLC International Small Cap Trust
Balanced Trust
Franklin Advisers, Inc. Emerging Small Company Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Equity Index Trust
Money Market Trust
Lifestyle Trusts
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Pacific Investment Management Company Global Bond Trust
Total Return Trust
Rowe Price-Fleming International, Inc. International Stock Trust
8
<PAGE> 14
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
State Street Global Advisors Growth Trust
T. Rowe Price Associates, Inc. Science & Technology Trust
Blue Chip Growth Trust
Equity-Income Trust
Templeton Investment Counsel, Inc. International Value Trust
Wellington Management Company, LLP Growth & Income Trust
Investment Quality Bond Trust
Mid Cap Stock Trust
Each of the Trust's Subadvisers, except Capital Guardian Trust Company, Fidelity
Management Trust Company and State Street Global Advisors, is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.
GENERAL INFORMATION ABOUT MANUFACTURERS
MANUFACTURERS LIFE OF AMERICA
Manufacturers Life of America is a stock life insurance company organized under
the laws of Pennsylvania on April 11, 1977 and redomesticated under the laws of
Michigan on December 9, 1992. It is a licensed life insurance company in the
District of Columbia and all states of the United States except New York. The
ultimate parent of Manufacturers Life of America is 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. However,
neither Manufacturers Life of America nor Manufacturers Life guarantees the
investment performance of the Separate Account.
On January 20, 1998, the Board of Directors of Manufacturers Life 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. On May 19, 1999, the Manulife
Board of Directors approved the demutualization plan. Any demutualization plan
for Manufacturers Life is subject to the approval of the Manufacturers Life
policyowners as well as regulatory approval.
RATINGS
Manufacturers Life and the Company have received the following ratings from
independent rating agencies:
Standard and Poor's Insurance Ratings Service: AA+ (for financial strength)
A.M. Best Company: A++ (for financial strength)
Duff & Phelps Credit Rating Co.: AAA (for claims paying ability)
Moody's Investors Service, Inc.: Aa2 (for financial strength)
These ratings, which are current as of the date of this prospectus and are
subject to change, are assigned to the Company as a measure of the Company's
ability to honor the death benefit but not specifically to its products, the
performance (return) of these products, the value of any investment in these
products upon withdrawal or to individual securities held in any portfolio.
SEPARATE ACCOUNT THREE
The Company established its Separate Account Three (the "Separate Account") on
August 22, 1986 as a separate account under Pennsylvania Law. Since December 9,
1992, it has been operated under Michigan Law. The Separate Account holds assets
that are segregated from all of the Company's other assets. The Separate Account
is currently used only to support variable life insurance policies.
ASSETS OF THE SEPARATE ACCOUNT
The Company is the legal owner of the assets in the Separate Account. The
income, gains, and losses of the Separate Account, whether or not realized, are,
in accordance with applicable contracts, credited to or charged against the
Account without regard to the other income, gains, or losses of the Company. The
Company 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
9
<PAGE> 15
under all policies participating in the Separate Account. These assets may not
be charged with liabilities which arise from any other business the Company
conducts. However, all obligations under the variable life insurance policies
are general corporate obligations of the Company.
REGISTRATION
The Separate Account is registered with the Securities and Exchange Commission
("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. A unit investment trust is a type of investment company which
invests its assets in specified securities, such as the shares of one or more
investment companies, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the S.E.C.
of the management or investment policies or practices of the Separate Account.
For state law purposes the Separate Account is treated as a part or division of
the Company.
MANUFACTURERS INVESTMENT TRUST
Each sub-account of the Separate Account will purchase shares only of a
particular Portfolio. The Trust is registered under the 1940 Act as an open-end
management investment company. The Separate Account will purchase and redeem
shares of the Portfolios at net asset value. Shares will be redeemed to the
extent necessary for the Company to provide benefits under the Policies, to
transfer assets from one sub-account to another or to the general account as
requested by policyowners, and for other purposes not inconsistent with the
Policies. Any dividend or capital gain distribution received from a Portfolio
with respect to the Policies will be reinvested immediately at net asset value
in shares of that Portfolio and retained as assets of the corresponding
sub-account.
The Trust shares are issued to fund benefits under both variable annuity
policies and variable life insurance policies issued by the Company or life
insurance companies affiliated with the Company. The Company may also purchase
shares through its general account for certain limited purposes including
initial portfolio seed money. For a description of the procedures for handling
potential conflicts of interest arising from the funding of such benefits see
the accompanying Trust prospectus.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The investment objectives and certain policies of the Portfolios currently
available to policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met. A
full description of the Trust, its investment objectives, policies and
restrictions, the risks associated therewith, its expenses, and other aspects of
its operation is contained in the accompanying Trust prospectus, which should be
read together with this prospectus.
ELIGIBLE PORTFOLIOS
The Portfolios of Manufacturers Investment Trust available under the Policies
are as follows:
The PACIFIC RIM EMERGING MARKETS TRUST seeks long-term growth of capital by
investing in a diversified portfolio that is comprised primarily of common
stocks and equity-related securities of corporations domiciled in countries in
the Pacific Rim region.
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital. Current income
is incidental to the portfolio's objective.
The INTERNATIONAL SMALL CAP TRUST seeks capital appreciation by investing
primarily in securities issued by foreign companies which have total market
capitalization or annual revenues of $1 billion or less. These securities may
represent companies in both established and emerging economies throughout the
world.
The AGGRESSIVE GROWTH TRUST (formerly, the Pilgrim Baxter Growth Trust) seeks
long-term capital appreciation by investing the portfolio's asset principally in
common stocks, convertible bonds, convertible preferred stocks and warrants of
companies which in the opinion of the subadviser are expected to achieve
earnings growth over time at a rate in excess of 15% per year. Many of these
companies are in the small and medium-sized category.
The EMERGING SMALL COMPANY TRUST (formerly, the Emerging Growth Trust) seeks
long-term growth of capital by investing, under normal market conditions, at
least 65% of the portfolio's total assets in common stock equity securities of
small capitalization ("small cap") growth companies. In general, companies in
which the portfolio invests will have market cap values of less than $1.5
billion at the time of purchase.
10
<PAGE> 16
The SMALL COMPANY BLEND TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalization
between $50 million and $1 billion.
The MID CAP GROWTH TRUST (formerly, the Small/Mid Cap Trust) seeks long-term
capital appreciation by investing the portfolio's assets principally in common
stocks, with emphasis on medium-sized and smaller emerging growth companies.
The MID CAP STOCK TRUST seeks long-term growth of capital by investing primarily
in equity securities of companies with market capitalizations that approximately
match the range of capitalization of the Wilshire Mid Cap 750 Index.
The OVERSEAS TRUST (formerly, the International Growth & Income Trust) seeks
growth of capital by investing, under normal market conditions, at least 65% of
the portfolio's assets in foreign securities (including American Depositary
Receipts (ADRs) and European Depositary Receipts (EDRs). The portfolio expects
to invest primarily in equity securities.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by investing
primarily in common stocks of established, non-U.S. companies.
The INTERNATIONAL VALUE TRUST seeks long-term growth of capital by investing,
under normal market conditions, primarily in equity securities of companies
located outside the U.S., including emerging markets.
The MID CAP BLEND TRUST (formerly, the Equity Trust) seeks growth of capital by
investing primarily in common stocks of United States issuers and securities
convertible into or carrying the right to buy common stocks.
The SMALL COMPANY VALUE TRUST seeks long term growth of capital by investing in
equity securities of smaller companies which are traded principally in the
markets of the United States.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by investing
primarily in equity securities throughout the world, including U.S. issuers and
emerging markets.
The GROWTH TRUST seeks long-term growth of capital by investing primarily in
large capitalization growth securities (market capitalization of approximately
$1 billion or greater).
The LARGE CAP GROWTH TRUST (formerly, the Aggressive Asset Allocation Trust)
seeks long-term growth of capital by investing, under normal market conditions,
at least 65% of the portfolio's assets in equity securities of companies with
large market capitalizations.
The QUANTITATIVE EQUITY TRUST seeks 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.
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of capital (current
income is a secondary objective) and many of the stocks in the portfolio are
expected to pay dividends.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of long-term
capital appreciation and satisfactory current income by investing in real estate
related equity and debt securities.
The VALUE TRUST seeks to realize an above-average total return over a market
cycle of three to five years, consistent with reasonable risk, 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.
The EQUITY INDEX TRUST seeks to achieve investment results which approximate the
aggregate total return of publicly traded common stocks which are included in
the Standard & Poor's 500 Composite Stock Price.
The GROWTH & INCOME TRUST seeks long-term growth of capital and income,
consistent with prudent investment risk, by investing primarily in a diversified
portfolio of common stocks of United States issuers which the subadviser
believes are of high quality.
11
<PAGE> 17
The U.S. LARGE CAP VALUE TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalization
greater than $500 million.
The EQUITY-INCOME TRUST seeks to provide substantial dividend income and also
long-term capital appreciation by investing primarily in dividend-paying common
stocks, particularly of established companies with favorable prospects for both
increasing dividends and capital appreciation.
The INCOME & VALUE TRUST (formerly, the Moderate Asset Allocation Trust) seeks
the balanced accomplishment of (a) conservation of principal and (b) long-term
growth of capital and income by investing the portfolio's assets in both equity
and fixed-income securities. The subadviser has full discretion to determine the
allocation between equity and fixed-income securities.
The BALANCED TRUST seeks current income and capital appreciation by investing in
a balanced portfolio of common stocks, U.S. and foreign government obligations
and a variety of corporate fixed-income securities.
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, by
investing primarily in high yield debt securities, including corporate bonds and
other fixed-income securities.
The STRATEGIC BOND TRUST seeks a high level of total return consistent with
preservation of capital by giving its subadviser broad discretion to deploy the
portfolio's assets among certain segments of the fixed-income market as the
subadviser believes will best contribute to achievement of the portfolio's
investment objective.
The GLOBAL BOND TRUST (formerly, the Global Government Bond Trust) seeks to
realize maximum total return, consistent with preservation of capital and
prudent investment management by investing the portfolio's asset primarily in
fixed income securities denominated in major foreign currencies, baskets of
foreign currencies (such as the ECU), and the U.S. dollar.
The TOTAL RETURN TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing, under
normal market conditions, at least 65% of the portfolio's assets in a
diversified portfolio of fixed income securities of varying maturities. The
average portfolio duration will normally vary within a three- to six-year time
frame based on Pacific Investment Management Company's forecast for interest
rates.
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by investing
primarily in a diversified portfolio of investment grade corporate bonds and
U.S. Government bonds with intermediate to longer term maturities. The portfolio
may also invest up to 20% of its assets in non-investment grade fixed income
securities.
The DIVERSIFIED BOND TRUST (formerly, the Conservative Asset Allocation Trust)
seeks high total return consistent with the conservation of capital by investing
at least 75% of the portfolio's assets in fixed-income securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income
consistent with preservation of capital and maintenance of liquidity, by
investing 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.
The MONEY MARKET TRUST seeks maximum current income consistent with preservation
of principal and liquidity by investing in high quality money market instruments
with maturities of 397 days or less issued primarily by United States entities.
The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long-term growth of capital
(current income is not a consideration) by investing 100% of the Lifestyle
Trust's assets in other portfolios of the Trust ("Underlying Portfolios") which
invest primarily in equity securities.
12
<PAGE> 18
The LIFESTYLE GROWTH 820 TRUST seeks to provide long-term growth of capital with
consideration also given to current income 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.
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 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.
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 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.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of current
income with some consideration also given to growth of capital by investing
approximately 80% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 20% of its assets
in Underlying Portfolios which invest primarily in equity securities.
ISSUING A POLICY
REQUIREMENTS
To purchase a Policy, an applicant must submit a completed application. A Policy
will not be issued until the underwriting process has been completed to the
Company's satisfaction.
Policies may be issued on a basis which does not distinguish between the
insured's sex, with prior approval from the Company. A Policy will generally be
issued only on the lives of insureds from ages 20 through 90.
Under current underwriting rules, which are subject to change, proposed insureds
are eligible for simplified underwriting without a medical examination if (a)
their application responses and initial payment meet simplified underwriting
standards and (b) the initial premium is 100% of the Guideline Single Premium.
Customary underwriting standards will apply to all other proposed insured. The
maximum initial premium currently permitted on a simplified underwriting basis
varies with the issue age of the insured according to the following table.
Simplified underwriting is not available for additional premium payments.
AGE* SIMPLIFIED UNDERWRITING
MAXIMUM INITIAL PAYMENT
20-29 $30,000
30-39 $60,000
40-49 $100,000
50-74 $150,000
75-90 $100,000
*In the case of a Survivorship Policy, the youngest of the Life Insured.
Each Policy has a Policy Date, an Effective Date and an Issue Date (See
"Definitions" in Appendix A).
The Policy Date is the date from which the first monthly deductions are
calculated and from which Policy Years, Policy Months and Policy Anniversaries
are determined. The Effective Date is the date the Company becomes obligated
under the Policy and when the first monthly deductions are deducted from the
Policy Value. The Issue Date is the date from which Suicide and Incontestability
are measured.
If an application is accompanied by a check for the initial premium and the
application is accepted:
13
<PAGE> 19
(i) the Policy Date will be the date the application and check were received
at the Service Office (unless a special Policy Date is requested (See
"Backdating a Policy" below));
(ii) the Effective Date will be the date the Company's underwriters approve
issuance of the Policy; and
(iii) the Issue Date will be the date the Company issues the Policy.
If an application accepted by the Company is not accompanied by a check for the
initial premium:
(i) the Policy Date will be the date the Company issues the Policy (unless a
special Policy Date is requested (See "Backdating a Policy" below);
(ii) the Effective Date will be the date the Service Office receives the
initial premium; and
(iii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Policy Date. If
the premium is not paid or if the application is rejected, the Policy will be
canceled and any partial premiums paid will be returned to the applicant.
MINIMUM INITIAL FACE AMOUNT
The Company will generally issue a Policy only if it has a Face Amount that
corresponds to an initial premium of at least $25,000.
BACKDATING A POLICY
Under limited circumstances, the Company may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
However, in no event will a Policy be backdated earlier than the earliest date
allowed by state law, which is generally three months to one year prior to the
date of application for the Policy. Monthly deductions will be made for the
period the Policy Date is backdated.
As of the Effective Date, the premiums paid plus interest credited, net of the
premium charge (if any), will be allocated among the Investment Accounts and/or
Fixed Account in accordance with the policyowner's instructions unless such
amount is first allocated to the Money Market portfolio for the duration of the
Right to Examine period.
TEMPORARY INSURANCE AGREEMENT
In accordance with the Company's underwriting practices, temporary insurance
coverage may be provided under the terms of a Temporary Insurance Agreement.
Generally, temporary life insurance may not exceed $1,000,000 and may not be in
effect for more than 90 days. This temporary insurance coverage will be issued
on a conditional receipt basis, which means that any benefits under such
temporary coverage will only be paid if the Life Insured meets the Company's
usual and customary underwriting standards for the coverage applied for.
The acceptance of an application is subject to the Company's underwriting rules,
and the Company reserves the right to request additional information or to
reject an application for any reason.
Persons failing to meet standard underwriting classification may be eligible for
a Policy with an additional risk rating assigned to it.
RIGHT TO EXAMINE THE POLICY
A Policy may be returned for a refund within 10 days after you received it. Some
states provide a longer period of time to exercise this right. The Policy will
indicate if a longer time period applies. The Policy can be mailed or delivered
to the Company's agent who sold it or to the Service Office. Immediately on such
delivery or mailing, the Policy shall be deemed void from the beginning. Within
seven days after receipt of the returned Policy at its Service Office, the
Company will refund to the policyholder an amount equal to either:
(1) the amount of all premiums paid or
(2)
14
<PAGE> 20
(a) the difference between payments made and amounts allocated to the Separate
Account and the Fixed Account; plus
(b) the value of the amount allocated to the Separate Account and the Fixed
Account as of the date the returned Policy is received by the Company;
minus
(c) any partial withdrawals made and policy loans taken.
Whether the amount described in (1) or (2) is refunded depends on the
requirements of the applicable state.
If a policyowner requests an increase in face amount, he or she will have the
same rights as described above to cancel the increase. If canceled, the Policy
Value and the surrender charges will be recalculated to the amounts they would
have been had the increase not taken place. A policyowner may request a refund
of all or any portion of premiums paid during the right to examine period, and
the Policy Value and the surrender charges will be recalculated to the amounts
they would have been had the premiums not been paid.
The Company reserves the right to delay the refund of any premium paid by check
until the check has cleared.
LIFE INSURANCE QUALIFICATION
A Policy must qualify as a life insurance policy for purposes of Section 7702 of
the Code by satisfying the Guideline Premium Test.
GUIDELINE PREMIUM TEST
The Guideline Premium Test restricts the maximum premiums that may be paid into
a life insurance policy for a given death benefit. The policy's death benefit
must also be at least equal to the Minimum Death Benefit (described below).
Changes to the Policy may affect the maximum amount of premiums, such as:
o Change in Risk Classification
o Partial Withdrawals
o Addition or deletion of supplementary benefits
Any of the above changes could cause the total premiums paid to exceed the new
maximum limit. In this situation, the Company may refund any excess premiums
paid. In addition, these changes could reduce the future premium limitations.
The Guideline Premium Test requires a life insurance policy to meet minimum
ratios of life insurance coverage to policy value. This is achieved by ensuring
that the death benefit is at all times at least equal to the Minimum Death
Benefit (as described below under "Death Benefit").
DEATH BENEFITS
If the Policy is in force at the time of the death of the Life Insured, the
Company will pay an insurance benefit on receiving due proof of death. For a
Survivorship Policy, due proof of death must be provided for each of the Life
Insured although the insurance benefit is payable on the death of the last to
die of the Life Insured. If the Life Insured should die after the Company's
receipt of a request for surrender, no insurance benefit will be payable, and
the Company will pay only the Net Cash Surrender Value.
The amount payable will be the death benefit, plus any amounts payable under any
supplementary benefits added to the Policy, less the Policy Debt and less any
outstanding monthly deductions due. The insurance benefit will be paid in one
lump sum unless another form of settlement option is agreed to by the
beneficiary and the Company. If the insurance benefit is paid in one sum, the
Company will pay interest from the date of death to the date of payment.
DEATH BENEFIT
The death benefit is the Face Amount of the Policy at the date of death (less
any Policy Debt and outstanding Monthly Deductions due) or, if greater, the
Minimum Death Benefit (less any Policy Debt and outstanding Monthly Deductions
due).
MINIMUM DEATH BENEFIT
15
<PAGE> 21
The Minimum Death Benefit on any date is defined as the Policy Value on that
date times the applicable Minimum Death Benefit Percentage for the Attained Age
of the Life Insured in the case of a Single Life Policy (or the youngest of the
Life Insured in the case of a Survivorship Policy). The Minimum Death Benefit
Percentages are set forth in the Policy.
Therefore, the death benefit will always be at least equal to the Face Amount of
the Policy. However, if there is a sufficient increase in Policy Value such that
the Policy Value times the applicable Minimum Death Benefit Percentage is
greater than the Face Amount, the death benefit will be greater than the Face
Amount.
LAPSE PROTECTION BENEFIT
The Lapse Protection Benefit protects the Policy from going into default. As
long as this benefit is in force and any outstanding Policy Debt is less than
the Cash Surrender Value, the Policy will not go into default.
The Lapse Protection Benefit is applies to a Policy only if the initial premium
paid is 100% of the Guideline Single Premium for the Face Amount of the Policy.
As a result, if you pay less than 100% of the Guideline Single Premium, then you
may be required to pay additional premiums in the future in order to prevent
your Policy from lapsing.
The Lapse Protection Benefit terminates on the Maturity Date of the Policy
unless the Maturity Advantage option has been elected.
MATURITY DATE
Provided that the Policy is in force and the Life Insured is alive (or the last
to die of the Life Insured in the case of a Survivorship Policy), the Company
will pay the policyowner the Policy Value (less any outstanding Policy Debt)
calculated as of the Maturity Date.
MATURITY ADVANTAGE OPTION
If the Life Insured is alive (or in the case of a Survivorship Policy, the last
to die of the Life Insured is alive) on the Maturity Date, the policyowner may
elect to continue the Policy. The Policyowner's written election to continue the
Policy must be received at the Service Office prior to the Maturity Date. If
this election is made, the Policy will continue in force subject to the
following:
(a) any existing Investment Account Value will be transferred to the Fixed
Account;
(b) no additional premium payments will be accepted although loan repayments
will be accepted;
(c) no additional charges or deductions (as described under "Charges and
Deductions") will be assessed;
(d) interest on any Policy Debt will continue to accrue;
(e) the death benefit described below will be payable to the beneficiary upon
receipt of due proof of death of the Life Insured.
The death benefit payable after the Maturity Date if the Maturity Advantage
Option is elected is the greater of the Face Amount or the Minimum Death Benefit
(as described above) less any Policy Debt due at the date of death.
If the Policy is continued after the Maturity Date, the Policy will go into
default after the Maturity Date if the Policy Debt equals or exceeds the Policy
Value;
The Company will notify the policyowner of the default and will allow a 61 day
grace period (from the date the Policy goes into default) in which the
policyowner may make a payment of the loan interest which would then bring the
Policy out of default. If the required payment is not received by the end of the
grace period, the Policy will terminate with no value.
PREMIUM PAYMENTS
INITIAL PREMIUMS
The Policy permits the payment of a large initial premium and, subject to the
restrictions described below, additional premiums. The minimum initial premium
is $25,000. The policyowner may choose an initial premium that is 80%, 90% or
100% of the Guideline Single Premium (based on Face Amount selected by the
policyowner). In the case of simplified underwriting, the initial premium must
be 100% of the Guideline Single Premium for the Face Amount of the Policy.
16
<PAGE> 22
The Lapse Protection Benefit applies to a Policy only if the initial premium
paid is 100% of the Guideline Single Premum for the Face Amount of the Policy.
As a result, if you pay less than 100% of the Guideline Single Premium, then you
may be required to pay additional premiums in the future in order to prevent you
Policy from lapsing. Therefore, prospective policyowners should discuss with
their financial adviser the appropriate percentage of Guideline Single Premium
for a given Face Amount.
No premiums will be accepted prior to receipt of a completed application by the
Company. All premiums received prior to the Effective Date of the Policy will be
held in the general account and credited with interest from the date of receipt
at the rate of return then being earned on amounts allocated to the Money Market
Trust.
SUBSEQUENT PREMIUMS
After payment of the initial premium, additional premiums may be made subject to
the following conditions:
(a) while there is an outstanding Policy Debt, any additional premium payment
will be applied first to repay the loan;
(b) Face Amount increases are not permitted in connection with additional
premiums (Therefore, the total of all premiums paid for a Policy may not
exceed 100% of the Guideline Single Premium for the Face Amount of the
Policy);
(c) the Company may refuse or refund any premium payment (or any portion of
such premium payment) that would cause the Policy to fail to qualify as
life insurance under Section 7702 of the Code, and
(d) additional premiums may require evidence of insurability on the Life
Insured satisfactory to the Company unless the additional premium is
applied to repay a loan.
The Company will add additional premiums to Policy Value as of the Business Day
it receives the additional premium at its Service Office unless evidence of
insurability is required in which case the additional premium will be added to
Policy Value as of the Business Day the Company's underwriters approve the
additional premium.
PREMIUM ALLOCATION
On the later of the Effective Date or the Business Day a premium is received,
the Net Premiums paid plus interest credited will be allocated among the
Investment Accounts or the Fixed Account in accordance with the policyowner's
instructions.
Premiums may be allocated to the Fixed Account for accumulation at a rate of
interest equal to at least 4% or to one or more of the Investment Accounts for
investment in the Portfolio shares held by the corresponding sub-account of the
Separate Account. Allocations among the Investment Accounts and the Fixed
Account are made as a percentage of the premium. The percentage allocation to
any account may be any number between zero and 100, provided the total
allocation equals 100. A policyowner may change the way in which premiums are
allocated at any time without charge. The change will take effect on the date a
written request for change satisfactory to the Company is received at the
Service Office. A policyowner may also change premium allocation by telephone if
he or she has a currently valid authorization form on file with the Company.
MAXIMUM PREMIUM LIMITATION
The Policy is issued under the Guideline Premium Test which requires that in no
event may the total of all premiums paid exceed the then current maximum premium
limitations established by federal income tax law for a Policy to qualify as
life insurance.
If, at any time, a premium is paid which would result in total premiums
exceeding the above maximum premium limitation, the Company will only accept
that portion of the premium which will make the total premiums equal to the
maximum. Any part of the premium in excess of that amount will be returned and
no further premiums will be accepted until allowed by the then current maximum
premium limitation.
CHARGES AND DEDUCTIONS
PREMIUM LOAD
A Premium Load of 0.030% of Policy Value is deducted monthly (equivalent to
0.360% annually) for the 10 Policy Years. If additional premium payments are
made, the 0.030% premium load for a particular premium payment is deducted from
the amount of Policy Value corresponding to the premium payment for 10 Policy
Years following the premium payment. For example, if:
o the initial premium payment is $100,000,
17
<PAGE> 23
o an additional premium payment of $50,000 is made in Policy Year 7, and
o the Policy Value at the time the additional premium payment is made is
$200,000 (including the additional premium payment),
then 0.030% will be deducted from 75% of Net Policy Value in Policy Years 7
through 10 and an additional 0.030% will be deducted from 25% of Net Policy
Value in Policy Years 7 through 17.
Unless otherwise allowed by the Company and specified by the policyowner, the
premium load will be allocated among the Investment Accounts and the Fixed
Account in the Policy in the same proportion as the Policy Value in each bears
to the Net Policy Value.
The premium load is designed to cover a portion of the Company's acquisition and
sales expenses and federal and premium taxes.
SURRENDER CHARGES
During the Surrender Charge Period, the Company will deduct a Surrender Charge
if:
- the Policy is surrendered for its Net Cash Surrender Value,
- a partial withdrawal is made (above the Free Withdrawal Amount), or
- the Policy terminates due to default.
The surrender charge, together with a portion of the premium load, is designed
to compensate the Company for some of the expenses it incurs in selling and
distributing the Policies, including agents' commissions, advertising, agent
training and the printing of prospectuses and sales literature.
SURRENDER CHARGE CALCULATION
The Surrender Charge is determined by multiplying the amount withdrawn or
surrendered in excess of the Free Withdrawal Amount by the applicable total
Surrender Charge percentage shown in the table below.
Policy Year Surrender Charge
1 10.00%
2 9.00%
3 8.00%
4 7.00%
5 6.00%
6 5.00%
7 4.00%
8 3.00%
9 1.50%
10+ 0%
If necessary, the We will reduce the surrender charge deducted upon a partial
withdrawal or a surrender of the Policy so that the sum of all premium loads,
the administration charges and surrender charge deducted (including the
surrender charge to be deducted upon such partial withdrawal or surrender) does
not exceed 10% of aggregate payments made during the first Policy Year.
We will allocate the deduction of the Surrender Charge for a withdrawal to the
Fixed 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 Surrender Charge allocated to a particular account are greater than the
value of that account, we will reduce the portion of the withdrawal allocated to
that account. We will reduce the allocated portion so that the withdrawal plus
the charge allocated to
18
<PAGE> 24
the account equals the value of the account. If the amount in all accounts is
not sufficient to pay the Surrender Charge, we will reduce the amount of the
withdrawal.
SURRENDER CHARGES ON A PARTIAL WITHDRAWAL
FREE WITHDRAWAL AMOUNT
A portion of the Net Cash Surrender Value may be withdrawn without being subject
to a Surrender Charge (the "Free Withdrawal Amount"). The Free Withdrawal Amount
is the greater of 10% of the total premiums or 100% of Earnings. In determining
what, if any, portion of a partial withdrawal is in excess of the Free
Withdrawal Amount, all previous partial withdrawals that have occurred in the
current Policy Year are included.
MONTHLY CHARGES
On the Policy Date and at the beginning of each Policy Month, a deduction is due
from the Net Policy Value to cover certain charges in connection with the Policy
until the Maturity Date. On and after the Maturity Date, if there is a Policy
Debt under the Policy, loan interest and principal will continue to be payable
at the beginning of each Policy Month. Monthly deductions due prior to the
Effective Date will be taken on the Effective Date instead of the dates they
were due. These charges consist of:
o a Premium Load, if applicable; o an administration charge; o a charge for
the cost of insurance; o a mortality and expense risks charge; o if
applicable, a charge for any supplementary benefits added to the
Policy.
Unless otherwise allowed by the Company and specified by the policyowner, the
Monthly Deduction will be allocated among the Investment Accounts and the Fixed
Account in the Policy in the same proportion as the Policy Value in each bears
to the Net Policy Value immediately prior to the deduction. However, the
mortality and expense risk charge will only be allocated among the Investment
Accounts.
ADMINISTRATION CHARGE
This charge will be equal to $7.50 per Policy Month plus 0.030% of Net Policy
Value deducted monthly for the first ten Policy Years and 0.015% deducted
monthly thereafter. The charge is designed to cover certain administrative
expenses associated with the Policy, including maintaining policy records,
collecting premiums and processing death claims, surrender and withdrawal
requests and various changes permitted under the Policy.
COST OF INSURANCE CHARGE
The monthly charge for the cost of insurance is determined by multiplying the
applicable cost of insurance rate times the net amount at risk at the beginning
of each Policy Month.
The net amount at risk is equal to (a) minus (b) where:
(a) is the death benefit as of the first day of the Policy Month, divided
by 1.0032737; and
(b) is the Policy Value as of the first day of the Policy Month.
The rates for the cost of insurance are based upon the issue age, duration of
coverage, sex, and Risk Classification of the Life Insured. For a Survivorship
Policy, the rates are determined for each of the Life Insured on the basis
described above and then are blended to produce a single cost of insurance rate.
Cost of insurance rates will generally increase with the age of the Life
Insured. The first year cost of insurance rate is guaranteed.
The cost of insurance rates reflect the Company's expectations as to future
mortality experience. The rates may be re-determined from time to time on a
basis which does not unfairly discriminate within the class of life insured. In
no event will the cost of insurance rates exceed the guaranteed rates set forth
in the Policy except to the extent that an extra charge is imposed because of an
additional rating applicable to the Life Insured. After the first Policy Year,
the cost of insurance will
19
<PAGE> 25
generally increase on each Policy Anniversary. The guaranteed rates are based on
the 1980 Commissioners Smoker Distinct Mortality tables.
MORTALITY AND EXPENSE RISKS CHARGE
A monthly charge equal to a percentage of the value of the Investment Accounts
is assessed against the Investment Accounts. This charge is to compensate the
Company for the mortality and expense risks it assumes under the Policy. The
mortality risks assumed are that the Life Insured may live for a shorter period
of time than the Company estimated. The expense risks assumed are that expenses
incurred in issuing and administering the Policy will be greater than the
Company estimated. The Company will realize a gain from this charge to the
extent it is not needed to provide benefits and pay expenses under the Policy.
The charge varies by Policy Year as follows:
Guaranteed Monthly Mortality Equivalent Annual
and Mortality and Expense
Policy Year Expense Risks Charge Risks Charge
----------- ---------------------------- ---------------------
1-10 0.075% 0.900%
10+ 0.025% 0.300%
CHARGES FOR SUPPLEMENTARY BENEFITS
If the Policy includes Supplementary Benefits, a charge may apply to such
Supplementary Benefit.
CHARGES FOR TRANSFERS
A charge of $25 will be imposed on each transfer in excess of twelve in a Policy
Year. The charge will be deducted from the Investment Account or the Fixed
Account to which the transfer is being made. All transfer requests received by
the Company on the same Business Day are treated as a single transfer request.
REDUCTION IN CHARGES
The Policy is available for purchase by corporations and other groups or
sponsoring organizations. Group or sponsored arrangements may include reduction
or elimination of withdrawal charges and deductions for employees, officers,
directors, agents and immediate family members of the foregoing. The Company
reserves the right to reduce any of the Policy's charges on certain cases where
it is expected that the amount or nature of such cases will result in savings of
sales, underwriting, administrative, commissions or other costs. Eligibility for
these reductions and the amount of reductions will be determined by a number of
factors, including the number of lives to be insured, the total premiums
expected to be paid, total assets under management for the policyowner, the
nature of the relationship among the insured individuals, the purpose for which
the policies are being purchased, expected persistency of the individual
policies, and any other circumstances which the Company believes to be relevant
to the expected reduction of its expenses. Some of these reductions may be
guaranteed and others may be subject to withdrawal or modification, on a uniform
case basis. Reductions in charges will not be unfairly discriminatory to any
policyowners. The Company may modify from time to time, on a uniform basis, both
the amounts of reductions and the criteria for qualification.
SPECIAL PROVISIONS FOR EXCHANGES
The Company will permit policyowners of certain fixed life insurance policies
issued either by the Company or Manufacturers USA to exchange their policies for
the Policies described in this prospectus (and likewise, policyowners of
policies described in this Prospectus may also exchange their Policies for
certain fixed policies issued either by the Company or by Manufacturers USA).
Policyowners considering an exchange should consult their tax advisors as to the
tax consequences of an exchange.
COMPANY TAX CONSIDERATIONS
At the present time, the Company makes no charge to the Separate Account for any
federal, state, or local taxes that the Company incurs that may be attributable
to such Account or to the Policies. The Company, however, reserves the right in
the future to make a charge for any such tax or other economic burden resulting
from the application of the tax laws that it determines to be properly
attributable to the Separate Account or to the Policies.
20
<PAGE> 26
POLICY VALUE
DETERMINATION OF THE POLICY VALUE
A Policy has a Policy Value, a portion of which is available to the policyowner
by making a policy loan or partial withdrawal, or upon surrender of the Policy.
The Policy Value may also affect the amount of the death benefit. The Policy
Value at any time is equal to the sum of the values in the Investment Accounts,
the Fixed Account, and the Loan Account.
INVESTMENT ACCOUNTS
An Investment Account is established under each Policy for each sub-account of
the Separate Account to which net premiums or transfer amounts have been
allocated. Each Investment Account under a Policy measures the interest of the
Policy in the corresponding sub-account. The value of the Investment Account
established for a particular sub-account is equal to the number of units of that
sub-account credited to the Policy times the value of such units.
FIXED ACCOUNT
Amounts in the Fixed Account do not vary with the investment performance of any
sub-account. Instead, these amounts are credited with interest at a rate
determined by the Company. For a detailed description of the Fixed Account, see
"The General Account - Fixed Account".
LOAN ACCOUNT
Amounts borrowed from the Policy are transferred to the Loan Account. Amounts in
the Loan Account do not vary with the investment performance of any sub-account.
Instead, these amounts are credited with interest at a rate which is equal to
4%. For a detailed description of the Loan Account, see "Policy Loans - Loan
Account".
UNITS AND UNIT VALUES
CREDITING AND CANCELING UNITS
Units of a particular sub-account are credited to a Policy when net premiums are
allocated to that sub-account or amounts are transferred to that sub-account.
Units of a sub-account are canceled whenever amounts are deducted, transferred
or withdrawn from the sub-account. The number of units credited or canceled for
a specific transaction is based on the dollar amount of the transaction divided
by the value of the unit on the Business Day on which the transaction occurs.
The number of units credited with respect to a premium payment will be based on
the applicable unit values for the Business Day on which the premium is received
at the Service Office, except for any premiums received before the Effective
Date. For premiums received before the Effective Date, the values will be
determined on the Effective Date.
A Business Day is any day that the New York Stock Exchange is open for business.
A Business Day ends at the close of regularly scheduled day-time trading of the
New York Stock Exchange on that day.
Units are valued at the end of each Business Day. 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 on the next Business Day. Similarly, any determination
of Policy Value, Investment Account value or death benefit to be made on a day
which is not a Business Day will be made on the next Business Day.
UNIT VALUES
The value of a unit of each sub-account was initially fixed at $10.00. For each
subsequent Business Day the unit value for that sub-account is determined by
multiplying the unit value for the immediately preceding Business Day by the net
investment factor for the sub-account on such subsequent Business Day.
The net investment factor for a sub-account on any Business Day is equal to (a)
divided by (b) where:
(a) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of such Business Day before any policy
transactions are made on that day; and
(b) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of the immediately preceding Business Day
after all policy transactions were made for that day;
The value of a unit may increase, decrease, or remain the same, depending on the
investment performance of a sub-account from one Business Day to the next.
21
<PAGE> 27
TRANSFERS OF POLICY VALUE
At any time, a policyowner may transfer Policy Value from one sub-account to
another or to the Fixed Account. (Transfers involving the Fixed Account are
subject to certain limitations as noted below under "Transfers Involving Fixed
Account.") Transfer requests must be in writing in a format satisfactory to the
Company, or by telephone if a currently valid telephone transfer authorization
form is on file.
The Company reserves the right to impose limitations on transfers, including the
maximum amount that may be transferred. The Company also reserves the right to
modify or terminate the transfer privilege at any time in accordance with
applicable law. Transfers may also be delayed when any of the events described
under items (i) through (iv) in "Payment of Proceeds" occur. Transfer privileges
are also subject to any restrictions that may be imposed by the Trust. In
addition, the Company reserves the right to defer the transfer privilege at any
time that the Company is unable to purchase or redeem shares of the Trust.
While the Policy is in force, the policyowner may transfer the Policy Value from
any of the Investment Accounts to the Fixed Account without incurring transfer
charges:
(a) within eighteen months after the Issue Date; or
(b) within 60 days of the effective date of a material change in the
investment objectives of any of the sub-accounts or within 60 days of
the date of notification of such change, whichever is later.
Such transfers will not count against the twelve transfers that may be made free
of charge in any Policy Year.
TRANSFER CHARGES
A policyowner may make up to twelve transfers each Policy Year free of charge.
Additional transfers in each Policy Year may be made at a cost of $25 per
transfer. This charge will be deducted from the Investment Account or the Fixed
Account to which the transfer is being made. All transfer requests received by
the Company on the same Business Day are treated as a single transfer request.
Transfers under the Dollar Cost Averaging and Asset Allocation Balancer programs
do not count against the number of free transfers permitted per Policy Year.
TRANSFERS INVOLVING FIXED ACCOUNT
The maximum amount that may be transferred from the Fixed Account in any one
Policy Year is the greater of $500 or 15% of the Fixed Account Value at 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.
TELEPHONE TRANSFERS
Although failure to follow reasonable procedures may result in the Company being
liable for any losses resulting from unauthorized or fraudulent telephone
transfers, the Company will not be liable for following instructions
communicated by telephone that the Company reasonably believes to be genuine.
The Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures shall consist of
confirming that a valid telephone authorization form is on file, tape recording
of all telephone transactions and providing written confirmation thereof.
DOLLAR COST AVERAGING
The Company will offer policyowners a Dollar Cost Averaging ("DCA") program.
Under the DCA program, the policyowner will designate an amount which will be
transferred monthly from one Investment Account into any other Investment
Account(s) or the Fixed Account. Currently, no charge will be made for this
program, although the Company reserves the right to institute a charge on 90
days' written notice to the policyholder. If insufficient funds exist to effect
a DCA transfer, the transfer will not be effected and the policyowner will be so
notified.
The Company reserves the right to cease to offer this program as of 90 days
after written notice is sent to the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS
Under the Asset Allocation Balancer program the policyowner will designate an
allocation of Policy Value among
22
<PAGE> 28
Investment Accounts. At six-month intervals beginning six months after the
Policy Date (or the last Policy Anniversary), the Company will move amounts
among the Investment Accounts as necessary to maintain the policyowner's chosen
allocation. A change to the policyowner premium allocation instructions will
automatically result in a change in Asset Allocation Balancer instructions so
that the two are identical unless the policyowner either instructs the Company
otherwise or has elected the Dollar Cost Averaging program. Currently, there is
no charge for this program; however, the Company reserves the right to institute
a charge on 90 days' written notice to the policyowner.
The Company reserves the right to cease to offer this program as of 90 days
after written notice is sent to the policyowner.
POLICY LOANS
While this Policy is in force and has an available loan value, a policyowner may
borrow against the Policy Value of the Policy. The Policy serves as the only
security for the loan. Policy loans may have tax consequences.
MAXIMUM LOANABLE AMOUNT
The Maximum Loanable Amount is 90% of the Policy's Net Cash Surrender Value.
EFFECT OF POLICY LOAN
A policy loan will have an effect on future Policy Values, since that portion of
the Policy Value in the Loan Account will increase in value at the crediting
interest rate rather than varying with the performance of the underlying
Portfolios or increasing in value at the rate of interest credited for amounts
allocated to the Fixed Account. A policy loan may cause a Policy to be more
susceptible to going into default since a policy loan will be reflected in the
Net Cash Surrender Value. See "Lapse and Reinstatement." In addition, a policy
loan may result in a termination of the Lapse Protection Benefit since this
benefit terminates if Policy Debt exceeds the Cash Surrender Value. Finally, a
policy loan will affect the amount payable on the death of the Life Insured,
since the death benefit is reduced by the Policy Debt at the date of death in
arriving at the insurance benefit.
If the Policy is a MEC, then a loan will be treated as a withdrawal for tax
purposes and may be taxable. See sections entitled "Tax Treatment of the Policy
- - Policies Which Are MECs," and "Tax Treatment of the Policy Policies Which Are
Not MECs."
INTEREST CHARGED ON POLICY LOANS
Interest on the Policy Debt will accrue daily and be payable annually on the
Policy Anniversary. During the first ten Policy Years, the rate of interest
charged will be an effective annual rate of 5.25%. Thereafter, the rate of
interest charged will be an effective annual rate of 4.00%. If the interest due
on a Policy Anniversary is not paid by the policyowner, the interest will be
borrowed against the Policy.
Interest on the Policy Debt will continue to accrue daily if there is an
outstanding loan when monthly deductions and premium payments cease when the
Life Insured (youngest of the Life Insured in the case of a Survivorship Policy)
reaches age 100. The Policy will go into default at any time the Policy Debt
exceeds the Cash Surrender Value. At least 61 days prior to termination, the
Company will send the policyowner a notice of the pending termination. Payment
of interest on the Policy Debt during the 61 day grace period will bring the
policy out of default.
LOAN ACCOUNT
When a loan is made, an amount equal to the loan principal, plus interest to the
next Policy Anniversary, will be deducted from the Investment Accounts or the
Fixed Account and transferred to the Loan Account. Amounts transferred into the
Loan Account cover the loan principal plus loan interest due to the next Policy
Anniversary. The policyowner may designate how the amount to be transferred to
the Loan Account is allocated among the accounts from which the transfer is to
be made. In the absence of instructions, the amount to be transferred will be
allocated to each account in the same proportion as the value in each Investment
Account and the Fixed Account bears to the Net Policy Value. A transfer from an
Investment Account will result in the cancellation of units of the underlying
sub-account equal in value to the amount transferred from the Investment
Account. However, since the Loan Account is part of the Policy Value, transfers
made in connection with a loan will not change the Policy Value.
INTEREST CREDITED TO THE LOAN ACCOUNT
23
<PAGE> 29
Nonpreferred Loans
Interest will be credited to amounts in the Loan Account at an effective annual
rate of 4.00%. The actual rate credited is equal to the rate of interest charged
on the policy loan less than the Loan Interest Credited Differential, which is
currently 1.25% during the first ten Policy Years and 0% thereafter. (The Loan
Interest Credited Differential is the difference between the rate of interest
charged on a policy loan and the rate of interest credited to amounts in the
Loan Account.)
Preferred Loans
Preferred interest rates are available in the case of loans of amounts that
represent Earnings on the Policy and in the case of a loan transferred to the
Policy pursuant to an exchange from another life insurance policy pursuant to
Section 1035 of the Code ("Preferred Loans").
Interest will be credited to amounts in the Loan Account at an effective annual
rate of 4.50% during the first 10 Policy Years and at an effective annual rate
of at least 4.00% thereafter. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Interest Credited
Differential, which is currently 0.75% during the first ten Policy Years and 0%
thereafter.
The Company may change the Current Loan Interest Credited Differential as of 90
days after sending you written notice of such change.
For a Policy that is not a MEC, the tax consequences associated with a loan
interest credited differential of 0% are unclear. A tax adviser should be
consulted before effecting a loan to evaluate the tax consequences that may
arise in such a situation. If we determine, in our sole discretion, that there
is a substantial risk that a loan will be treated as a taxable distribution
under Federal tax law as a result of the differential between the credited
interest rate and the loan interest rate, the Company retains the right to
increase the loan interest rate to an amount that would result in the
transaction being treated as a loan under Federal tax law. If this amount is not
prescribed by any IRS ruling or regulation or any court decision, the amount of
increase will be that which the Company considers to be most likely to result in
the transaction being treated as a loan under Federal tax law. In no event will
the loan interest rate exceed the rate charged in the first ten Policy Years.
If the Policy is a MEC then, regardless of the loan interest credited
differential, a loan will be treated as a withdrawal for tax purposes and may be
taxable. See sections entitled "Tax Treatment of the Policy - Policies Which Are
MECs," and "Tax Treatment of the Policy - Policies Which Are Not MECs."
LOAN ACCOUNT ADJUSTMENTS
On the first day of each Policy Anniversary the difference between the Loan
Account and the Policy Debt is transferred to the Loan Account from the
Investment Accounts or the Fixed Account. Amounts transferred to the Loan
Account will be taken from the Investment Accounts and the Fixed Account in the
same proportion as the value in each Investment Account and the Fixed Account
bears to the Net Policy Value.
LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the death of
the Life Insured, provided that the Policy is in force. When a repayment is
made, the amount is credited to the Loan Account and transferred to the Fixed
Account or the Investment Accounts. Loan repayments will be allocated first to
the Fixed Account until the associated Loan Sub-Account is reduced to zero and
then to each Investment Account in the same proportion as the value in the
corresponding Loan Sub-Account bears to the value of the Loan Account.
Where permitted by applicable state law, any additional premium payment will be
applied to outstanding loan balances.
24
<PAGE> 30
POLICY SURRENDER AND PARTIAL WITHDRAWALS
POLICY SURRENDER
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the Life Insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any surrender charges and outstanding monthly deductions due (the
"Cash Surrender Value") minus the Policy Debt. The Net Cash Surrender Value will
be determined as of the end of the Business Day on which the Company receives
the Policy and a written request for surrender at its Service Office. After a
Policy is surrendered, the insurance coverage and all other benefits under the
Policy will terminate. See section entitled "Tax Treatment of the Policy" for a
discussion of the potential Federal income tax implications of a surrender of
the Policy.
PARTIAL WITHDRAWALS
A policyowner may make a partial withdrawal of the Net Cash Surrender Value
after the first Policy Anniversary. The minimum partial withdrawal amount is
$500. The policyowner may specify the portion of the withdrawal to be taken from
each Investment Account and the Fixed Account. In the absence of instructions,
the withdrawal will be allocated among such accounts in the same proportion as
the Policy Value in each account bears to the Net Policy Value. For information
on Surrender Charges on a Partial Withdrawal see "Charges and Deductions
Surrender Charges." See section entitled "Tax Treatment of the Policy" for a
discussion of the potential Federal income tax implications of a partial
withdrawal from the Policy.
If the withdrawal would cause the Policy Value to fall below $25,000, we will
treat the withdrawal request as a full surrender of the Policy.
Reduction in Face Amount due to a Partial Withdrawal
A partial withdrawal will cause a reduction in Face Amount. The Face Amount will
be reduced by an amount equal to (a) multiplied by (b) where:
(a) is the Face Amount prior to the withdrawal; and
(b) is the Policy Value after the withdrawal, divided by the Policy Value prior
to the withdrawal.
If the reduction in the Face Amount would require the return of premiums in
order for the policy to qualify as life insurance under Section 7702 of the
Code, or any other equivalent section of the Code, then we will return premiums,
with interest, in the year of reduction, or in any subsequent year that the
return of premiums is required. If necessary, we will also limit the amount of
the withdrawal so that the Face Amount does not fall below the Face Amount
associated with the minimum initial premium of $25,000 and the percent of
Guideline Single Premium selected. The decrease in Face Amount will be effective
as of the date of the withdrawal.
LAPSE AND REINSTATEMENT
LAPSE
Unless the Lapse Protection Benefit is in effect, a Policy will go into default
if at the beginning of any Policy Month the Policy's Net Cash Surrender Value
would be zero or below after deducting the monthly deduction then due.
Therefore, a Policy could lapse eventually if increases in Policy Value (prior
to deduction of Policy charges) are not sufficient to cover Policy charges. A
Policy could also lapse if the Policy Debt is greater than the Cash Surrender
Value since the Lapse Protection Benefit terminates on any date that the Policy
Debt exceeds the Cash Surrender Value. The Company will notify the policyowner
of the default and will allow a 61 day grace period (from the date the Policy
goes into default) in which the policyowner may make a premium payment
sufficient to bring the Policy out of default. The required payment will be
equal to the amount necessary to bring the Net Cash Surrender Value to zero, if
it was less than zero on the date of default, plus the sum of (a) the monthly
deductions due at the date of default and (b) the amount equal to the monthly
deductions due to the later of the next Policy Anniversary or for at least three
Policy Months. If the required payment is not received by the end of the grace
period, the Policy will terminate with no value. See section entitled "Tax
Treatment of the Policy - Lapse or Surrender" for a discussion of the potential
Federal income tax implications of a lapse of the Policy.
DEATH DURING GRACE PERIOD
If the Life Insured should die during the grace period, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit will be reduced by any outstanding Monthly
Deductions due at the time of death.
25
<PAGE> 31
MATURITY ADVANTAGE OPTION
If the Policy is extended after the Maturity Date by electing the Maturity
Advantage Option, the Policy will go into default after the Maturity Date if the
Policy Debt equals or exceeds the Policy Value.
The Company will notify the policyowner of the default and will allow a 61 day
grace period (from the date the Policy goes into default) in which the
policyowner may make a payment of the loan interest which would then bring the
Policy out of default. If the required payment is not received by the end of the
grace period, the Policy will terminate with no value.
REINSTATEMENT
A policyowner can, by making a written request, reinstate a Policy which has
terminated after going into default at any time within the five-year period
following the date of termination subject to the following conditions:
(a) In the case of a Survivorship Policy, the Policy may not be reinstated if
any of the Life Insured have died since the Policy lapsed;
(b) Evidence of the Life Insured's insurability, satisfactory to the Company is
provided to the Company; and
(c) A premium equal to the amount that was required to bring the Policy out of
default immediately prior to termination, plus an amount equal to the
Monthly Deductions due until the next Policy Anniversary or for at least
three Policy Months is paid.
If the reinstatement is approved, the date of reinstatement will be the later of
the date the Company approves the policyowner's request or the date the required
payment is received at the Company's Service Office. In addition, any surrender
charges will be reinstated to the amount they were at the date of default. The
Policy Value on the date of reinstatement, prior to the crediting of any Net
Premium paid on the reinstatement, will be equal to the Policy Value on the date
the Policy terminated. See section entitled "Tax Treatment of the Policy Lapse
or Surrender" for a discussion of the potential Federal income tax implications
of a lapse and subsequent reinstatement of the Policy.
TERMINATION
The Policy will terminate on the earliest to occur of the following events:
(a) the end of the grace period for which the policyowner has not paid the
amount necessary to bring the Policy out of default,
(b) surrender of the Policy for its Net Cash Surrender Value; (c) the Maturity
Date unless the policyowner has elected the Maturity Advantage
option;
(d) the death of the Life Insured.
THE GENERAL ACCOUNT
The general account of the Company consists of all assets owned by the Company
other than those in the Separate Account and other separate accounts of the
Company. Subject to applicable law, the Company has sole discretion over the
investment of the assets of the general account.
By virtue of exclusionary provisions, interests in the general account of the
Company have not been registered under the Securities Act of 1933 and the
general account has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, neither the general account nor any
interests therein are subject to the provisions of these acts, and as a result
the staff of the S.E.C. has not reviewed the disclosures in this prospectus
relating to the general account. Disclosures regarding the general account may,
however, be subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of statements made in
a prospectus.
FIXED ACCOUNT
A policyowner may elect to allocate net premiums to the Fixed Account or to
transfer all or a portion of the Policy Value to the Fixed Account from the
Investment Accounts. The Company will hold the reserves required for any portion
of the Policy Value allocated to the Fixed Account in its general account.
Transfers from the Fixed Account to the Investment Accounts are subject to
restrictions.
26
<PAGE> 32
Policy Value in the Fixed Account The Policy Value in the Fixed Account is equal
to:
(a) the portion of the net premiums allocated to it; plus (b) any amounts
transferred to it; plus (c) interest credited to it; less (d) any charges
deducted from it; less (e) any partial withdrawals from it; less (f) any
amounts transferred from it.
INTEREST ON THE FIXED ACCOUNT
An allocation of Policy Value to the Fixed Account does not entitle the
policyowner to share in the investment experience of the general account.
Instead, the Company guarantees that the 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 the general account. Consequently, if a
policyowner pays the planned premiums, allocates all net premiums only to the
general account and makes no transfers, partial withdrawals, or policy loans,
the minimum amount and duration of the death benefit of the Policy will be
determinable and guaranteed.
OTHER PROVISIONS OF THE POLICY
ASSIGNMENT OF RIGHTS
The Company will not be bound by an assignment until it receives a copy of the
assignment at its Service Office. The Company assumes no responsibility for the
validity or effects of any assignment.
BENEFICIARY
One or more beneficiaries of the Policy may be appointed by the policyowner by
naming them in the application. Beneficiaries may be appointed in three classes
- - primary, secondary, and final. Beneficiaries may also be revocable or
irrevocable. Unless an irrevocable designation has been elected, the beneficiary
may be changed by the policyowner during the Life Insured's lifetime by giving
written notice to Manufacturers Life of America in a form satisfactory to the
Company. The change will take effect as of the date such notice is signed but
will not apply to any payments made or actions taken by the Company prior to
receiving such written notice. If the Life Insured dies and there is no
surviving beneficiary, the policyowner, or the policyowner's estate if the
policyowner is the Life Insured, will be the beneficiary. If a beneficiary dies
before the seventh day after the death of the Life Insured, the Company will pay
the insurance benefit as if the beneficiary had died before the Life Insured.
INCONTESTABILITY
The Company will not contest the validity of a Policy after it has been in force
during the Life Insured's lifetime for two years from the Issue Date. It will
not contest the validity of an increase in Face Amount, after such increase or
addition has been in force during the lifetime of the Life Insured for two years
from the date of such increase. If a Policy has been reinstated and been in
force during the lifetime of the Life Insured for less than two years from the
reinstatement date, the Company can contest any misrepresentation of a fact
material to the reinstatement.
MISSTATEMENT OF AGE OR SEX
If the stated age or sex, or both, of the Life Insured in the Policy are
incorrect, the Company will change the Face Amount so that the death benefit
will be that which the most recent monthly charge for the cost of insurance
would have purchased for the correct age and sex.
SUICIDE EXCLUSION
If the Life Insured dies by suicide within two years after the Issue Date (or
within the maximum period permitted by the state in which the Policy was
delivered, if less than two years), the Policy will terminate and the Company
will pay only the premiums paid less any partial Net Cash Surrender Value
withdrawal and less any Policy Debt.
The Company reserves the right to obtain evidence of the manner and cause of
death of the Life Insured.
27
<PAGE> 33
SUPPLEMENTARY BENEFITS
Subject to certain requirements, one or more supplementary benefits may be added
to a Policy, including those providing a lapse protection benefit and an
acceleration of benefits in the event of a terminal illness. More detailed
information concerning these supplementary benefits may be obtained from an
authorized agent of the Company. The cost, if any, for supplementary benefits
will be deducted as part of the monthly deduction.
TAX TREATMENT OF THE POLICY
INTRODUCTION
The following discussion of the Federal income tax treatment of the
Policy is not exhaustive, does not purport to cover all situations, and is not
intended as tax advice. The Federal income tax treatment of the Policy is
unclear in certain circumstances, and a qualified tax advisor should always be
consulted with regard to the application of law to individual circumstances.
This discussion is based on the Code, Treasury Department regulations, and
interpretations existing on the date of this Prospectus. These authorities,
however, are subject to change by Congress, the Treasury Department, and
judicial decisions.
This discussion does not address state or local tax consequences
associated with the purchase of the Policy. In addition, THE COMPANY MAKES NO
GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY
POLICY OR OF ANY TRANSACTION INVOLVING A POLICY.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under the Code. Since
the operations of the Separate Account are a part of, and are taxed with, the
operations of the Company, the Separate Account is not separately taxed as a
"regulated investment company" under the Code. Under existing Federal income tax
laws, investment income and capital gains of the Separate Account are not taxed
to the extent they are applied under a Policy. The Company does not anticipate
that it will incur any Federal income tax liability attributable to such income
and gains of the Separate Account, and therefore the Company does not intend to
make any provision for such taxes. If the Company is taxed on investment income
or capital gains of the Separate Account, then the Company may impose a charge
against the Separate Account to make provision for such taxes. The Company's
Federal tax liability is increased, however, in respect of the Policies because
of the Federal tax law's treatment of deferred acquisition costs (for which the
Company imposes a Federal tax charge) (see "CHARGES AND DEDUCTIONS").
TAXATION OF LIFE INSURANCE POLICIES IN GENERAL
Tax Status of the Policy
There are several requirements that must be met for a Policy to be considered a
Life Insurance Contract under the Code, and thereby to enjoy the tax benefits of
such a contract:
o The Policy must satisfy the definition of life insurance under Section 7702
of the Code.
o The investments of the Separate Account must be "adequately diversified" in
accordance with Section 817(h) of the Code and Treasury Regulations.
o The Policy must be a valid life insurance contract under applicable state
law.
o The Policyowner must not possess "incidents of ownership" in the assets of
the Separate Account.
These four items are discussed in detail below.
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. For a Policy to be a life insurance contract, it must
satisfy either the Cash Value Accumulation Test or the Guideline Premium Test.
Only the Guideline Premium Test is permitted under the Policy. The Guideline
Premium Test also requires a minimum death benefit, but in addition limits the
total premiums that can be paid into a Policy for a given amount of death
benefit.
With respect to a Policy which is issued on the basis of a standard rate class,
the Company believes (largely in reliance on IRS Notice 88-128 and the proposed
mortality charge regulations under Section 7702, issued on July 5, 1991) that
such a Policy should meet the Section 7702 definition of a life insurance
contract.
28
<PAGE> 34
With respect to a Policy that is issued on a substandard basis (i.e., a rate
class involving higher-than-standard mortality risk), there is less guidance, in
particular as to how mortality and other expense requirements of Section 7702
are to be applied in determining whether such a Policy meets the Section 7702
definition of a life insurance contract. Thus it is not clear whether or not
such a Policy would satisfy Section 7702, particularly if the policyowner pays
the full amount of premiums permitted under the Policy.
The Secretary of the Treasury (the "Treasury") is authorized to prescribe
regulations implementing Section 7702. However, while proposed regulations and
other interim guidance have been issued, final regulations have not been adopted
and guidance as to how Section 7702 is to be applied is limited. If a Policy
were determined not to be a life insurance contract for purposes of Section
7702, such a Policy would not provide the tax advantages normally provided by a
life insurance policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company may take whatever steps are appropriate and reasonable to attempt to
cause such a Policy to comply with Section 7702. For these reasons, the Company
reserves the right to restrict Policy transactions as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
DIVERSIFICATION
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
Code (discussed above). The Separate Account, through the Trust, intends to
comply with the diversification requirements prescribed in Treas. Reg. Sec.
1.817-5, which affect how the Trust's assets are to be invested. The Company
believes that the Separate Account will thus meet the diversification
requirement, and the Company will monitor continued compliance with the
requirement.
STATE LAW
State regulations require that the policyowner have appropriate insurable
interest in the life insured. Failure to establish an insurable interest may
result in the Policy not qualifying as a life insurance contract for federal tax
purposes.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance Policies may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their policies. In those circumstances, income
and gains from the separate account assets would be includible in the variable
policyowner's gross income. The IRS has stated in published rulings that a
variable policyowner will be considered the owner of separate account assets if
the policyowner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury Department
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyowners may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets". As of the date of this prospectus, no such guidance has been
issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
policyowner has additional flexibility in allocating premium payments and Policy
Values. These differences could result in an owner being treated as the owner of
a pro-rata portion of the assets of the Separate Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Separate Account.
The remainder of this discussion assumes that the Policy will be
treated as a life insurance Policy for Federal tax purposes.
Tax Treatment of Life Insurance Death Benefit Proceeds
29
<PAGE> 35
In general, the amount of the death benefit payable from a Policy by
reason of the death of the insured is excludable from gross income under Section
101 of the Code. Certain transfers of the Policy for valuable consideration,
however, may result in a portion of the death benefit being taxable.
If the death benefit is not received in a lump sum and is, instead,
applied under one of the settlement options, payments generally will be prorated
between amounts attributable to the death benefit which will be excludable from
the beneficiary's income and amounts attributable to interest (accruing after
the insured's death) which will be includible in the beneficiary's income.
Tax Deferral During Accumulation Period
Under existing provisions of the Code, except as described below, any
increase in an policyowner's Policy value is generally not taxable to the
policyowner unless amounts are received (or are deemed to be received) from the
Policy prior to the insured's death.
Lapse or Surrender
Upon a lapse or surrender of the Policy, the amount received, will be
includible in the policyowner's income to the extent the amount received exceeds
the "investment in the Policy." If there is any debt at the time of a lapse or
surrender, such debt will be treated as an amount received by the policyowner.
The "investment in the Policy" generally is the aggregate amount of premium
payments and other consideration paid for the Policy, less the aggregate amount
received under the Policy previously to the extent such amounts received were
excludable from gross income. A subsequent reinstatement will not change this
tax treatment of a surrendered or lapsed Policy.
POLICIES WHICH ARE MECS
Characterization of a Policy as a MEC.
Section 7702A establishes a class of life insurance contracts designated as
Modified Endowment Contracts ("MECs"), which applies to Policies entered into or
materially changed after June 20, 1988. 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 level premiums which would have been paid on or before
such time if the Policy 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 the Policy Value at the time of such change and the
additional premiums paid in the seven years following the material change. In
general, this Policy will constitute a MEC unless:
(1) it was received in exchange for another life insurance policy which was not
a MEC,
(2) no premium payments (other than the exchanged policy) are paid into the
Policy during the first seven Policy years, and
(3) the death benefit on the new Policy is not less than the death benefit on
the exchanged policy.
If the death benefit on the new policy is less than the death benefit on the
exchanged policy, the new policy may become a MEC if (1) the exchanged policy
was, at the time of the exchange, subject to the MEC rules, (2) premiums
payments had been made to the old policy after it had become subject to the MEC
rules, and (3) the exchanged policy was in a seven-pay test period at the time
of exchange or, in the case of a Survivorship Policy, the Policy was issued (or
deemed issued) after September 13, 1989.
In addition, even if the Policy initially is not a MEC, it may in certain
circumstances become a MEC. These circumstances would include a later increase
in benefits, any other material change of the Policy (within the meaning of the
tax law), and a withdrawal or reduction in the death benefit during the first
seven Policy years.
Tax Treatment of Withdrawals, Loans, Assignments and Pledges under
MECs. If the Policy is a MEC, withdrawals from the Policy will be treated first
as withdrawals of income and then as a recovery of premium payments. Thus,
withdrawals will be includible in income to the extent the Policy value exceeds
the investment in the Policy. The amount of any loan (including unpaid interest
thereon) under the Policy will be treated as a withdrawal from the Policy for
tax purposes. In addition, if the policyowner assigns or pledges any portion of
the value of a Policy (or agrees to assign or pledge any portion), such portion
will be treated as a withdrawal from the Policy for tax purposes. The
policyowner's investment in the Policy is increased by the amount includible in
income with respect to such assignment, pledge, or loan, though it is not
affected by any other aspect
30
<PAGE> 36
of the assignment, pledge, or loan (including its release or repayment). Before
assigning, pledging, or requesting a loan under a Policy which is a MEC, an
policyowner should consult a qualified tax advisor.
Penalty Tax. Generally, withdrawals (or the amount of any deemed
withdrawals) from a MEC are subject to a penalty tax equal to 10% of the portion
of the withdrawal that is includible in income, unless the withdrawals are made
(1) after the policyowner attains age 59 1/2, (2) because the policyowner has
become disabled (as defined in the tax law), or (3) as substantially equal
periodic payments over the life or life expectancy of the policyowner (or the
joint lives or life expectancies of the policyowner and his or her beneficiary,
as defined in the tax law).
Aggregation of Policies. All life insurance Policies which are MECs and
which are purchased by the same person from the Company or any of its affiliates
within the same calendar year will be aggregated and treated as one Policy for
purposes of determining the amount of a withdrawal (including a deemed
withdrawal) that is includible in income. The effects of such aggregation are
not clear; however, it could affect the amount of a withdrawal (or a deemed
withdrawal) that is taxable and the amount which might be subject to the 10%
penalty tax described above.
POLICIES WHICH ARE NOT MECS
Tax Treatment of Withdrawals Generally. If the Policy is not a MEC
(described above), the amount of any withdrawal from the Policy will be treated
first as a non-taxable recovery of premium payments and then as income from the
Policy. Thus, a withdrawal from a Policy that is not a MEC will not be
includible in income except to the extent it exceeds the investment in the
Policy immediately before the withdrawal.
Certain Distributions Required by the Tax Law in the First 15 Policy
Years. As indicated under "Payments," Section 7702 places limitations on the
amount of premium payments that may be made and the Policy values that can
accumulate relative to the death benefit. Where cash distributions are required
under Section 7702 in connection with a reduction in benefits during the first
15 years after the Policy is issued (or if withdrawals are made in anticipation
of a reduction in benefits, within the meaning of the tax law, during this
period), some or all of such amounts may be includible in income. A reduction in
benefits may result upon a decrease in the face amount, if withdrawals are made,
and in certain other instances.
Tax Treatment of Loans. If a Policy is not a MEC, a loan received under
the Policy generally will be treated as indebtedness of the policyowner. As a
result, no part of any loan under such a Policy will constitute income to the
policyowner so long as the Policy remains in force. Nevertheless, in those
situations where the interest rate credited to the loan account equals the
interest rate charged for the loan, it is possible that some or all of the loan
proceeds may be includible in income. If a policy lapses (or if all Policy value
is withdrawn) when a loan is outstanding, the amount of the loan outstanding
will be treated as withdrawal proceeds for purposes of determining whether any
amounts are includible in the policyowner's income.
Survivorship Policies
Although the Company believes that the Policy, when issued as a
Survivor Policy, complies with Section 7702 of the Code, the manner in which
Section 7702 should be applied to Survivor Policies is not directly addressed by
Section 7702. In the absence of final regulations or other guidance issued under
Section 7702 regarding this form of Policy, there is necessarily some
uncertainty whether a Survivor Policy will meet the Section 7702 definition of a
life insurance Policy. Prospective policyowners considering purchase of the
Policy as a Survivor Policy should consult a qualified tax advisor.
Where the policyowner of the Policy is the last surviving insured, the
death proceeds will generally be includible in the policyowner's estate on his
or her death for purposes of the Federal estate tax. If the policyowner dies and
was not the last surviving insured, the fair market value of the Policy would be
included in the policyowner's estate. In general, no part of the Policy value
would be includible in the last surviving insured's estate if he or she neither
retained incidents of policyownership at death nor had given up policyownership
within three years before death.
Treatment of Maturity Benefits and Extension of Maturity Date
At the maturity date, the surrender value will be paid to the
policyowner, and this amount will be includible in income to the extent the
amount received exceeds the investment in the Policy. If the policyowner elects
to extend the maturity date past the year in which the insured attains age 100
(which must be done prior to the original maturity date), the Company believes
the Policy will continue to qualify as a life insurance policy for Federal tax
purposes. However, there is some uncertainty regarding this treatment, and it is
possible that the policyowner would be viewed as constructively receiving the
cash value in the year the
31
<PAGE> 37
insured attains age 100. If this were the case, an amount equal to the excess of
the cash value over the investment in the Policy would be includible in the
policyowner's income at that time.
Actions to Ensure Compliance with the Tax Law
The Company believes that the maximum amount of premium payments it has
determined for the Policies will comply with the Federal tax definition of life
insurance. The Company will monitor the amount of premium payments, and, if the
premium payments during a Policy year exceed those permitted by the tax law, the
Company will refund the excess premiums within 60 days of the end of the Policy
year and will pay interest and other earnings (which will be includible in
income subject to tax) as required by law on the amount refunded. The Company
also reserves the right to increase the death benefit (which may result in
larger charges under a Policy) or to take any other action deemed necessary to
ensure the compliance of the Policy with the Federal tax definition of life
insurance.
Other Considerations
Changing the policyowner, exchanging the Policy, and other changes
under the Policy may have tax consequences (in addition to those discussed
herein) depending on the circumstances of such change.
Federal estate tax, state and local estate and inheritance tax, and
other tax consequences of policyownership or receipt of Policy proceeds depend
on the circumstances of each policyowner or beneficiary. Federal estate tax is
integrated with Federal gift tax under a unified rate schedule. In general,
estates valued at less than the "applicable exclusion amount" will not incur a
Federal estate tax liability. The applicable exclusion amount for decedents
dying in 1999 is $625,000 and increases annually until it reaches $1,000,000 for
decedents dying in 2006 and after. In addition, an unlimited marital deduction
may be available for Federal estate and gift tax purposes.
If the policyowner (whether or not he or she is an insured) transfers
policyownership of the Policy to someone two or more generations younger, the
transfer may be subject to the generation-skipping tax, the amount subject to
tax being the value of the Policy. The generation-skipping tax provisions
generally apply to transfers which would be subject to the gift or estate tax
rules. Individuals are generally allowed an aggregate generation-skipping tax
exemption of $1 million. For generation skipping transfers of decedents dying
after 1998, this exemption is indexed for inflation.
Because the Federal estate tax, gift tax, and generation skipping tax
rules are complex, prospective Policyowners should consult a qualified tax
advisor before using this Policy for estate planning purposes.
DISALLOWANCE OF INTEREST DEDUCTIONS
The Policy generally will be characterized as a single premium life
insurance Policy under Section 264 of the Code and, as a result, interest paid
on any loans under the Policy will not be tax deductible, irrespective of
whether the policyowner is an individual or a non-natural entity, such as a
corporation or a trust. In addition, in the case of Policies issued to a
non-natural taxpayer, or held for the benefit of such an entity, a portion of
the taxpayer's otherwise deductible interest expenses may not be deductible as a
result of policyownership of a Policy even if no loans are taken under the
Policy. An exception to the latter rule is provided for certain life insurance
Policies which cover the life of an individual who is a 20-percent policyowner,
or an officer, director, or employee of, a trade or business. Entities that are
considering purchasing the policy, or entities that will be beneficiaries under
a Policy, should consult a tax advisor.
FEDERAL INCOME TAX WITHHOLDING
The Company will withhold and remit to the Federal government a part of
the taxable portion of withdrawals made under a Policy unless the policyowner
notifies the Company in writing at or before the time of the withdrawal that he
or she elects not to have any amounts withheld. Regardless of whether the
policyowner requests that no taxes be withheld or whether the Company withholds
a sufficient amount of taxes, the policyowner will be responsible for the
payment of any taxes and early distribution penalties that may be due on the
amounts received. The policyowner may also be required to pay penalties under
the estimated tax rules, if the policyowner's withholding and estimated tax
payments are insufficient to satisfy the policyowner's total tax liability.
32
<PAGE> 38
OTHER INFORMATION
PAYMENT OF PROCEEDS
As long as the Policy is in force, the Company will ordinarily pay any policy
loans, surrenders, partial withdrawals or insurance benefit within seven days
after receipt at its Service Office of all the documents required for such a
payment. The Company may delay for up to six months the payment from the Fixed
Account of any policy loans, surrenders, partial withdrawals, or insurance
benefit. In the case of any such payments from any Investment Account, the
Company may delay payment during any period during which:
(i) the New York Stock Exchange is closed for trading (except for normal
weekend and holiday closings),
(ii) trading on the New York Stock Exchange is restricted, (iii) an emergency
exists as a result of which disposal of securities held in
the Separate Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Separate Account's net assets or
(iv) the SEC, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the SEC shall govern as
to whether the conditions described in (ii) and (iii) exist.
REPORTS TO POLICYOWNERS
Within 30 days after each Policy Anniversary, the Company will send the
policyowner a statement showing, among other things:
o the amount of death benefit;
o the Policy Value and its allocation among the Investment Accounts, the
Fixed Account and the Loan Account;
o the value of the units in each Investment Account to which the Policy
Value is allocated;
o the Policy Debt and any loan interest charged since the last report; o
the premiums paid and other Policy transactions made during the period
since the last report; and
o any other information required by law.
Each policyowner will also be sent an annual and a semi-annual report for the
Trust which will include a list of the securities held in each Portfolio as
required by the 1940 Act.
DISTRIBUTION OF THE POLICIES
ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life, will
act as the principal underwriter of, and continuously offer, the Policies
pursuant to a Distribution Agreement with the Company. ManEquity, Inc. is
registered as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers. ManEquity, Inc. is
located at 200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5 and was
organized under the laws of Colorado on May 4, 1970. The directors of ManEquity,
Inc. are: Roy Bubbs, Gary Buchanan, Robert Cook, Douglas Myers and Joseph Scott.
The officers of ManEquity, Inc. are: (i) Douglas Myers - President, (ii) Gary
Buchanan - Vice President, Compliance, (iii) Thomas Reives Treasurer, (iv) Brian
Buckley - Secretary and General Counsel. The Policies will be sold by registered
representatives of either ManEquity, Inc. or other broker-dealers having
distribution agreements with ManEquity, Inc. who are also authorized by state
insurance departments to do so. The Policies will be sold in all states of the
United States except New York.
A registered representative will receive commissions not to exceed 7% of
premiums in the first year and .0625% of Net Policy Value beginning 19 months
after issuance of the Policy. Representatives who meet certain productivity
standards with regard to the sale of the Policies and certain other policies
issued by the Company or Manufacturers Life will be eligible for additional
compensation.
RESPONSIBILITIES OF MANUFACTURERS LIFE
Manufacturers Life and Manufacturers USA have entered into an agreement with
ManEquity, Inc. pursuant to which Manufacturers Life or Manufacturers USA, on
behalf of ManEquity, Inc. will pay the sales commissions in respect of the
Policies and certain other policies issued by the Company, prepare and maintain
all books and records required to be prepared and maintained by ManEquity, Inc.
with respect to the Policies and such other policies, and send all confirmations
required to be sent by ManEquity, Inc. with respect to the Policies and such
other policies. ManEquity, Inc. will promptly reimburse Manufacturers Life or
Manufacturers USA for all sales commissions paid by Manufacturers Life or
Manufacturers USA
33
<PAGE> 39
and will pay Manufacturers Life or Manufacturers USA for its other services
under the agreement in such amounts and at such times as agreed to by the
parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with the Company pursuant to which Manufacturers Life and
Manufacturers USA will provide to the Company all issue, administrative, general
services and recordkeeping functions on behalf of the Company with respect to
all of its insurance policies including the Policies.
Finally, the Company 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
As stated previously, all of the assets held in the sub-accounts of the Separate
Account will be invested in shares of a particular Portfolio of the Trust. The
Company is the legal owner of those shares and as such has the right to vote
upon certain matters that are required by the 1940 Act to be approved or
ratified by the shareholders of a mutual fund and to vote upon any other matters
that may be voted upon at a shareholders' meeting. However, the Company will
vote shares held in the sub-accounts in accordance with instructions received
from policyowners having an interest in such sub-accounts. Shares held in each
sub-account for which no timely instructions from policyowners are received,
including shares not attributable to the Policies, will be voted by the Company
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 the Company to vote shares held in the
Separate Account in its own right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyowner is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding Portfolio. The number will be determined as of a date chosen by
the Company, but not more than 90 days before the shareholders' meeting.
Fractional votes are counted. Voting instructions will be solicited in writing
at least 14 days prior to the meeting.
The Company may, if required by state officials, disregard voting instructions
if such instructions would require shares to be voted so as to cause a change in
the sub-classification or investment policies of one or more of the Portfolios,
or to approve or disapprove an investment management policy. In addition, the
Company itself may disregard voting instructions that would require changes in
the investment policies or investment adviser, provided that the Company
reasonably disapproves such changes in accordance with applicable federal
regulations. If the Company does disregard voting instructions, it will advise
policyowners of that action and its reasons for such action in the next
communication to policyowners.
SUBSTITUTION OF PORTFOLIO SHARES
It is possible that in the judgment of the management of the Company, one or
more of the Portfolios may become unsuitable for investment by the Separate
Account because of a change in investment policy or a change in the applicable
laws or regulation, because the shares are no longer available for investment,
or for some other reason. In that event, the Company may seek to substitute the
shares of another Portfolio or of an entirely different mutual fund. Before this
can be done, the approval of the S.E.C. and one or more state insurance
departments may be required.
The Company also reserves the right (i) to combine other separate accounts with
the Separate Account, (ii) to create new separate accounts, (iii) to establish
additional sub-accounts within the Separate Account to invest in additional
portfolios of the Trust or another management investment company, (iv) to
eliminate existing sub-accounts and to stop accepting new allocations and
transfers into the corresponding portfolio, (v) to combine sub-accounts or to
transfer assets in one sub-account to another sub-account or (vi) to transfer
assets from the Separate Account to another separate account and from another
separate account to the Separate Account. The Company also reserves the right to
operate the Separate Account as a management investment company or other form
permitted by law, and to de-register the Separate Account under the 1940 Act.
Any such change would be made only if permissible under applicable federal and
state law.
RECORDS AND ACCOUNTS
The Service Office will perform administrative functions, such as decreases,
increases, surrenders and partial withdrawals, and fund transfers on behalf of
the Company.
34
<PAGE> 40
All records and accounts relating to the Separate Account and the Portfolios
will be maintained by the Company. All financial transactions will be handled by
the Company. All reports required to be made and information required to be
given will be provided by the Company.
STATE REGULATIONS
The Company is subject to the regulation and supervision by the Michigan
Department of Insurance, which periodically examines its financial condition and
operations. It is also subject to the insurance laws and regulations of all
jurisdictions in which it is authorized to do business. The Policies have been
filed with insurance officials, and meet all standards set by law, in each
jurisdiction where they are sold.
The Company is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business for the purposes of determining solvency and
compliance with local insurance laws and regulations.
LITIGATION
No litigation is pending that would have a material effect upon the Separate
Account or the Trust.
INDEPENDENT AUDITORS
The consolidated financial statements of The Manufacturers Life Insurance
Company of America and Separate Account Three of The Manufacturers Life
Insurance Company of America at December 31, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given on the authority of such firm
as experts in accounting and auditing.
FURTHER INFORMATION
A registration statement under the Securities Act of 1933 has been filed with
the S.E.C. relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. The omitted information may be obtained from the S.E.C.'s principal
office in Washington D.C. upon payment of the prescribed fee. The Commission
also maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission which is located at http://www.sec.gov.
For further information you may also contact the Company's Home Office, the
address and telephone number of which are on the first page of the prospectus.
OFFICERS AND DIRECTORS
The directors and executive officers of the Company, together with their
principal occupations during the past five years, are as follows:
<TABLE>
<CAPTION>
POSITION WITH MANUFACTURERS LIFE
NAME (AGE) OF AMERICA PRINCIPAL OCCUPATION
- ---------- -------------------------------- --------------------
<S> <C> <C>
Sandra M. Cotter (36) Director (since December 1992) Attorney, Dykema, Gossett, PLLC, 1989 to present.
James D. Gallagher (44) Director (since May 1996), Vice President, Secretary and General Counsel, The
Secretary and General Counsel Manufacturers Life Insurance Company (USA), January 1997 to
present; Secretary and General Counsel, Manufacturers Adviser
Corporation, January 1997 to present; Vice President, Legal
Services U.S. Operations, The Manufacturers Life Insurance
Company, January 1996 to present; Vice President, Secretary and
General Counsel, The Manufacturers Life Insurance Company of
North America, 1994 to present; Vice President and Associate
General Counsel, The Prudential Insurance Company of America,
1991 to 1994.
</TABLE>
35
<PAGE> 41
<TABLE>
<CAPTION>
<S> <C> <C>
Donald A. Guloien (41) Director (since August 1990) and Executive Vice President, Business Development, The
President Manufacturers Life Insurance Company, January 1999 to
present; Senior Vice President, Business Development, The
Manufacturers Life Insurance Company, 1994 to December
1998; Vice President, U.S. Individual Business, The
Manufacturers Life Insurance Company, 1990 to 1994.
Theodore Kilkuskie (43) Director (since May 1996) Senior Vice President, U.S. Annuities, The Manufacturers
Life Insurance Company, January 1999 to present; President,
The Manufacturers Life Insurance Company of North America,
January 1999 to present; Senior Vice President, U.S.
Individual Insurance, The Manufacturers Life Insurance
February 1998 to December 1998; Vice President, U.S.
Individual Insurance, The Manufacturers Life Insurance
Company, June 1995 to February 1998; Executive Vice
President, Mutual Fund Sales & Marketing, State Street
Research & Management, March 1994 to June 1995.
POSITION WITH MANUFACTURERS LIFE
NAME (AGE) OF AMERICA PRINCIPAL OCCUPATION
- ---------- -------------------------------- --------------------
James O'Malley (52) Director (since November 1998) Senior Vice President, U.S. Pensions, The Manufacturers
Life Insurance Company, January 1999 to present; Vice
President, Systems New Business Pensions, The Manufacturers
Life Insurance Company, 1984 to December 1998.
Joseph J. Pietroski (60) Director (since July 1992) Senior Vice President, General Counsel and Corporate
Secretary, The Manufacturers Life Insurance Company, 1988
to present.
John D. Richardson (61) Chairman and Director (since Senior Executive Vice President, The Manufacturers Life
January 1995) Insurance Company, January 1999 to present; Executive Vice
President, U.S. Operations, The Manufacturers Life Insurance
Company, November 1997 to December 1998; Senior Vice President
and General Manager, U.S. Operations, The Manufacturers Life
Insurance Company, January 1995 to October 1997; Senior Vice
President and General Manager, Canadian Operations, The
Manufacturers Life Insurance Company, June 1992 to December
1994.
Victor Apps (51) Vice President, Asia Executive Vice President, Asia Operations, The
Manufacturers Life Insurance Company, November 1997 to
present; Senior Vice President and General Manager, Greater
China Division, The Manufacturers Life Insurance Company,
1995 to 1997; Vice President and General Manager, Greater
China Division, The Manufacturers Life Insurance Company,
1993 to 1995; International Vice President, Asia Pacific
Division, The Manufacturers Life Insurance Company, 1988
to 1993.
Felix Chee (52) Vice President, Investments Executive Vice President, The Manufacturers Life Insurance
Company, November 1997 to present; Chief Investment
Officer, The Manufacturers Life Insurance Company, June
1997 to present; Senior Vice President and Treasurer, The
Manufacturers Life Insurance Company, August 1994 to May
1997; Vice President and Treasurer, The Manufacturers Life
Insurance Company, October 1993
</TABLE>
36
<PAGE> 42
<TABLE>
<CAPTION>
<S> <C> <C>
to July 1994.
Robert A. Cook (44) Vice President, Marketing Senior Vice President, US Individual Insurance, The
Manufacturers Life Insurance Company, January 1999 to
present; Vice President, Product Management, The
Manufacturers Life Insurance Company, 1996 to December
1998; Sales and Marketing Director, U.K. Division, The
Manufacturers Life Insurance Company, 1994 to-1995.
POSITION WITH MANUFACTURERS LIFE
NAME (AGE) OF AMERICA PRINCIPAL OCCUPATION
- ---------- -------------------------------- --------------------
Douglas H. Myers (44) Vice President, Finance and President, ManEquity, Inc., April 1994 to present;
Compliance, Controller Assistant Vice President and Controller, U.S. Operations,
The Manufacturers Life Insurance Company, 1988 to
present.
John G. Vrysen (43) Vice President and Appointed Chief Financial Officer and Treasurer, Manulife-Wood
Actuary Logan Holding Co., Inc., January 1996 to present; Vice
President and Chief Financial Officer, U.S. Operations, The
Manufacturers Life Insurance Company, January 1996 to present;
Vice President and Chief Actuary, The Manufacturers Life
Insurance Company of New York, March 1992 to present; Vice
President and Chief Actuary, The Manufacturers Life Insurance
Company of North America, January 1986 to present.
Jean Wong (35) Vice President and Treasurer Vice President, Product Management, US Insurance, The
Manufacturers Life Insurance Company, March 1999 to
present; Vice President and Chief Accountant, US
Division, The Manufacturers Life Insurance Company, May
1998 to February 1999; Chief Accountant, US Division, The
Manufacturers Life Insurance Company, July 1996 to May
1998; Director, Finance and Administration, Star Data
Systems Inc., December 1995 to July 1996; Vice President
and Chief Financial Officer, Primerica Financial
Services, June 1993 to December 1995.
</TABLE>
IMPACT OF YEAR 2000
The Company makes extensive use of information systems in the operations of its
various businesses, including for the exchange of financial data and other
information with customers, suppliers and other counterparties. The Company also
uses software and information systems provided by third parties in its
accounting, business and investment systems.
The Year 2000 risk, as it is commonly known, is the result of computer programs
being written using two digits, rather than four, to define the applicable year.
Any of the Company's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the Year 2000. This
could result in systems failures or miscalculations causing disruptions of
operations, including among other things, a temporary inability to process
transactions, send premium billing notices, make claims payments or engage in
other normal business activities.
The systems used by the Company have been assessed as part of a comprehensive
written plan conducted by The Manufacturers Life Insurance Company (collectively
with its subsidiaries, "Manulife Financial"), to ensure that computer systems
and processes of Manulife Financial and its subsidiaries and affiliates,
including the Company, will continue to perform through the end of this century
and in the next.
In 1996, in order to make Manulife Financial's systems Year 2000 compliant, a
program was instituted to modify or replace both Manulife Financial's
information technology systems ("IT systems") and embedded technology systems
"Non-IT
37
<PAGE> 43
systems"). The phases of this program include (i) an inventory and assessment of
all systems to determine which are critical, (ii) planning and designing the
required modifications and replacements, (iii) making these modifications and
replacements, (iv) testing modified or replaced systems, (v) redeploying
modified or replaced systems and (vi) final management review and certification.
For most IT and Non-IT systems identified as critical, certification has been
completed for the Company. Of those systems classified as critical, management
believes that over 99% were Year 2000 compliant at the end of 1998. Management
continues to focus attention on the remaining 1% of critical systems. Those that
affect the Company are expected to be compliant by the end of the second quarter
in 1999. The Company's non-critical systems were Year 2000 compliant by the end
of the first quarter 1999.
In addition to efforts directed at Manulife Financial's own systems, Manulife
Financial is presently consulting vendors, customers, and other third parties
with which it deals in an effort to ensure that no material aspect of Manulife
Financial's operations will be hindered by Year 2000 problems of these third
parties. This process includes providing third parties with questionnaires
regarding the state of their Year 2000 readiness and, where possible or where
appropriate, conducting further due diligence activities.
Manulife Financial recognizes the importance of preparing for the change to the
Year 2000 and, in January 1999, commenced preparation of contingency plans, in
the event that Manulife Financial's year 2000 program has not fully resolved its
Year 2000 issues. The Year 2000 Project Management Office for Manulife
Financial's U.S. Division is coordinating the preparation of the Year 2000
contingency plan on behalf of U.S. Division affiliates and subsidiaries.
Contingency planning is targeted for completion by mid-1999.
Management currently believes that, with modifications to existing software and
conversions to new software, the Year 2000 risk will not pose significant
operations problems for Manulife Financial's computer systems. As part of the
Year 2000 program, critical systems were "time-shift" tested in the year 2000
and beyond to confirm that they will continue to function properly before,
during and after the change to the Year 2000. However, there can be no assurance
that Manulife Financial's Year 2000 program, including consulting third parties
and its contingency planning, will avoid any material adverse effect on Manulife
Financial's operations, customer relations or financial condition. Manulife
Financial estimates the total cost of its Year 2000 program will be
approximately $US59.9 million*, of which $US49.6 million* has been incurred
through December 31, 1998; however, there can be no assurance that the actual
cost incurred will not be materially higher than such estimate. Manulife
Financial's Year 2000 costs were $US3.9 million* for the first three months of
1999 and $US7.1 million* for the first three months of 1998. Most costs will be
expensed as incurred; however, those costs attributed to the purchase of new
software and hardware will generally be capitalized. The total cost of the Year
2000 program is not expected to have a material effect on Manulife Financial's
net operating income.
*All dollar values converted from Canadian dollars using the exchange rate of
1.512 in effect March 31, 1999.
38
<PAGE> 44
APPENDIX A
DEFINITIONS
Additional Rating
is an increase to the Cost of Insurance Rate for insureds who do not meet, at a
minimum, the Company's underwriting requirements for the standard Risk
Classification.
Age
on any date is the Life Insured's age on his or her nearest birthday. If no
specific date is mentioned, Age means the Life Insured's age on the Policy
Anniversary nearest to the birthday.
Attained Age
on any date is the Age at issue plus the number of whole years that have elapsed
since the Policy Date. In the case of a Survivorship Policy, Attained Age is
based on the youngest Life Insured at issue of the Policy.
Business Day
is any day that the New York Stock Exchange is open for business. A Business Day
ends at the close of regularly scheduled day-time trading of the New York Stock
Exchange on that day.
Cash Surrender Value
is the Policy Value less the sum of (a) the Surrender Charge and (b) any
outstanding Monthly Deductions due.
The Company (or "we," "us" or "our")
refers to The Manufacturers Life Insurance Company of America.
Earnings
is an amount calculated in relation to a loan and free withdrawals. The amount
is calculated as of the date the Company receives the request for the loan or
the free withdrawal and is equal to the Policy Value less the sum of (a) the
value of any Policy Debt and (b) total premiums paid.
Effective Date
is the date the underwriters approve issuance of the policy. If the Policy is
approved without the initial premium, the Effective Date will be the date the
Company receives at least the minimum initial premium at our Service Office. In
either case, the Company will take the first Monthly Deduction on the Effective
Date.
Fixed Account
is that part of the Policy Value which reflects the value the policyowner has in
the general account of the Company.
Guideline Single Premium
is the maximum premium that can be paid under the Guideline Premium Test
(described under "Life Insurance Qualification") which will still allow the
Policy to qualify as life insurance for tax purposes under Section 7702 of the
Code.
Investment Account
is that part of the Policy Value which reflects the value the policyowner has in
one of the sub-accounts of the Separate Account.
Issue Date
is the date the Company issued the Policy. The Issue Date is also the date from
which the Suicide and Validity provisions of the Policy are measured.
Life Insured
is the person or persons whose life (or lives) is (are) covered by the Policy.
In the case of a Survivorship Policy, all provisions of the Policy which are
based on the death of the Life Insured will be based on the death of the last
survivor of the persons so named and reference to the youngest of the Life
Insured means the youngest person insured under the Policy when it is first
issued.
39
<PAGE> 45
Loan Account
is that part of the Policy Value which reflects the value transferred from the
Fixed Account or the Investment Accounts as collateral for a policy loan.
Maturity Date
is the date shown in the Policy. In the case of a Single Life Policy, it is the
Policy Anniversary nearest Attained Age 100 of the Life Insured. In the case of
a Survivorship Policy, it is the Policy Anniversary nearest Attained Age 100 of
the youngest of the Life Insured at issue. The Maturity Date may be extended
pursuant to the Maturity Advantage Option described under "Maturity Date."
Net Cash Surrender Value
is the Cash Surrender Value less the Policy Debt.
Net Policy Value
is the Policy Value less the value in the Loan Account.
Net Premium
is the gross premium paid less the Premium Charge. It is the amount of premium
allocated to the Fixed Account and/or Investment Accounts.
Policy Date
is the date coverage takes effect under the Policy, provided the underwriting
process has been completed to the Company's satisfaction and the Company has
received the minimum initial premium at its Service Office, and is the date from
which charges for the first monthly deduction are calculated, and the date from
which Policy Years, Policy Months, and Policy Anniversaries are determined.
Policy Debt
as of any date equals (a) plus (b) plus (c) minus (d), where:
(a) is the total amount of loans borrowed as of such date; (b) is the total
amount of any unpaid loan interest charges which have been
borrowed against the policy on a Policy Anniversary;
(c) is any interest charges accrued from the last Policy Anniversary to the
current date; and
(d) is the total amount of loan repayments as of such date.
Policy Value
is the sum of the values in the Loan Account, the Fixed Account, and the
Investment Accounts.
Single Life Policy
is a modified single premium variable life insurance policy offered on a single
life basis under the Policy described in this Prospectus.
Separate Account
refers to Separate Account Three of the Company.
Service Office Address
is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
Surrender Charge Period
is the period following the Issue Date during which the Company will assess
surrender charges. Surrender charges will apply during this period if the Policy
terminates due to default, if the policyowner surrenders the Policy or makes a
partial withdrawal.
Survivorship Policy
is a modified single premium survivorship variable life insurance policy offered
on a survivorship basis under the Policy described in this Prospectus.
40
<PAGE> 46
Written Request
is the policyowner's request to the Company which must be in a form satisfactory
to the Company, signed and dated by the policyowner, and received at the Service
Office.
41
<PAGE> 47
APPENDIX B
ILLUSTRATIONS
The tables set forth in Appendix A illustrate the way in which a Policy's Death
Benefit, Policy Value, and Cash Surrender Value could vary over an extended
period of time.
[TO BE FILED BY AMENDMENT]
42
<PAGE> 48
FINANCIAL STATEMENTS
[TO BE FILED BY AMENDMENT]
43
<PAGE> 49
PART II. OTHER INFORMATION
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The Manufacturers Life Insurance Company of America hereby represents
that the fees and charges deducted under the contracts issued pursuant to this
registration statement in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
Cross-Reference Sheet;
The Prospectus, consisting of 43 pages;
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The signatures;
Written consents of the following persons:
A. Ernst & Young LLP - [TO BE FILED BY AMENDMENT]
B. Lucio Fortunato - [TO BE FILED BY AMENDMENT]
C. James D. Gallagher - [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
registration statement on Form S-6, file number 333-66303
filed October 29, 1998 (the "SVUL Registration Statement").
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 SVUL Registration Statement.
A(3)(a)(ii) Amendment to Distribution Agreement between The Manufacturers
Life Insurance Company of America and ManEquity, Inc. dated
May 30, 1992. Incorporated by reference to Exhibit A(3)(a)(ii)
to the SVUL Registration Statement.
A(3)(a)(iii) Amendment to Distribution Agreement between The Manufacturers
Life Insurance Company of America and ManEquity, Inc. dated
February 23, 1994. Incorporated by reference to Exhibit
A(3)(a)(iii) to the SVUL Registration Statement.
A(3)(b)(i) Specimen Agreement between ManEquity, Inc. and registered
representatives. Incorporated by reference to Exhibit
A(3)(b)(i) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(3)(b)(ii) Specimen agreement between The Manufacturers Life Insurance
Company of America and registered representatives.
Incorporated by reference to Exhibit A(3)(b)(ii) to
pre-effective amendment no. 1 to the registration statement on
Form S-6, file number 333-51293 filed August 28, 1998.
<PAGE> 50
A(3)(b)(iii) Specimen Agreement between ManEquity, Inc. and dealers.
Incorporated by reference to Exhibit A(3)(b)(iii) to
pre-effective amendment no. 1 to the registration statement on
Form S-6, file number 333-51293 filed August 28, 1998.
A(3)(b)(iv) Specimen agreement between The Manufacturers Life Insurance
Company of America and dealers. Incorporated by reference to
Exhibit A(3)(b)(iv) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(5)(a) Specimen Flexible Premium Variable Life Insurance Policy -
FILED HEREWITH]
A(6)(a) Restated Articles of Redomestication of The Manufacturers Life
Insurance Company of America. Incorporated by reference to
Exhibit A(6)(a) to post-effective amendment no. 20 to the
registration statement on Form S-6, file number 33-13774,
filed April 26, 1996.
A(6)(b) By-Laws of The Manufacturers Life Insurance Company of
America. Incorporated by reference to Exhibit A(6)(b) to
post-effective amendment no. 20 to the registration statement
on Form S-6, file number 33-13774, filed April 26, 1996.
A(8)(a)(i) Service Agreement between The Manufacturers Life Insurance
Company and The Manufacturers Life Insurance Company of
America dated June 1, 1988. Incorporated by reference to
Exhibit A(8)(a)(i) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(ii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated December 31, 1992. Incorporated by reference
to Exhibit A(8)(a)(ii) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(iii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated May 31, 1993. Incorporated by reference to
Exhibit A(8)(a)(iii) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(iv) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated June 30, 1993. Incorporated by reference to
Exhibit A(8)(a)(iv) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(v) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated December 31, 1996. Incorporated by reference
to Exhibit A(8)(a)(v) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(vi) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated May 31, 1998. Incorporated by reference to
Exhibit A(8)(a)(vi) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(vii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated December 31, 1998. Incorporated by reference
to Exhibit A(8)(a)(vii) to post-effective amendment No. 11 to
the registration statement on Form N-4, file number 33-57018
filed March 1, 1999.
<PAGE> 51
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 SVUL Registration
Statement. . A(8)(c)(i) Service Agreement between The
Manufacturers Life Insurance Company and ManEquity, Inc. dated
January 2, 1991. Incorporated by reference to Exhibit
A(8)(c)(i) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(c)(ii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and ManEquity, Inc. dated March 1, 1994.
Incorporated by reference to Exhibit A(8)(c)(ii) to
pre-effective amendment no. 1 to the registration statement on
Form S-6, file number 333-51293 filed August 28, 1998.
A(10)(a) Specimen Application for Flexible Premium Variable Life
Insurance Policy. Incorporated by reference to Exhibit A(10)
to post effective amendment no. 7 to the registration
statement on Form S-6, file number 33-52310, filed April 26,
1996.
A(10)(b) Specimen Application Supplement for Flexible Premium Variable
Life Insurance Policy. Incorporated by reference to Exhibit
A(10)(a) to post effective amendment no. 9 to the registration
statement on Form S-6, file number 33-52310, filed December
23, 1996.
2. Consents of the following:
A. Opinion and consent of James D. Gallagher, Esq., Secretary and
General Counsel of The Manufacturers Life Insurance Company of
America - [TO BE FILED BY AMENDMENT]
B. Opinion and consent of Lucio Fortunato, Assistant Vice-President,
U.S. Product Management, of The Manufacturers Life Insurance
Company of America -[TO BE FILED BY AMENDMENT]
C. Consent of Ernst & Young LLP- [TO BE FILED BY AMENDMENT]
3. No financial statements are omitted from the prospectus pursuant to
instruction 1(b) or (c) of Part I.
4. Not applicable.
6. Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer
Procedures for the Policies. [TO BE FILED BY AMENDMENT]
7. Power of Attorney.
Incorporated by reference to Exhibit 12 to post effective amendment no.
10 to the registration statement on Form S-6, file number 33-52310,
filed February 28, 1997.
James P. O'Malley - FILED HEREWITH
<PAGE> 52
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant and the Depositor have caused this Registration Statement to be
signed on their behalf in the City of Toronto, Province of Ontario, Canada, on
this 8th day of July, 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
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 8th day of July, 1999.
SIGNATURE TITLE
*_______________________ Chairman and Director
JOHN D. RICHARDSON
/s/ Donald A. Guloien President and Director
- ------------------------ (Principal Executive Officer)
DONALD A. GULOIEN
*_______________________ Director
SANDRA M. COTTER
/s/ James D. Gallagher Director
- ------------------------
JAMES D. GALLAGHER
*_______________________ Director
JAMES O'MALLEY
*_______________________ Director
JOSEPH J. PIETROSKI
*_______________________ Director
THEODORE KILKUSKIE, JR.
/s/ Douglas H. Myers Vice President, Finance
- ------------------------ (Principal Financial and
DOUGLAS H. MYERS Accounting Officer)
*By: /s/ James D. Gallagher
----------------------
James D. Gallagher
Attorney-in-Fact
Pursuant to Powers
of Attorney
<PAGE> 54
EXHIBIT INDEX
Item No. Description
A(5)(a) Specimen Flexible Premium Variable Life Insurance Policy
James P. O'Malley - Power of Attorney
<PAGE> 1
================================================================================
LIFE INSURED ONE JOHN M. DOE
[LIFE INSURED TWO MARY J. DOE]
POLICY NUMBER 12 345 678
================================================================================
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE.
PAYABLE ON LIFE INSURED'S DEATH.
POLICY VALUES ALLOCATED TO AN INVESTMENT ACCOUNT REFLECT THE INVESTMENT
EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS. INVESTMENT OPTIONS ARE 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 of the policy. "We", "us" and
"our" refer to The Manufacturers Life Insurance Company of America.
If the Life Insured is living and the policy is in force on the Maturity Date,
we will pay you the Net Cash Surrender Value of the policy. You may elect to
continue the policy under the Maturity Advantage option instead.
If the Life Insured dies while the policy is in force, we will pay the Insurance
Benefit to the beneficiary, subject to the provisions of the policy. The Life
Insured and the beneficiary are named on page 3 and in the application for this
policy, a copy of which is attached to this policy. If more than one Life
Insured is named, the Insurance Benefit is payable on the death of the last
survivor.
THIS POLICY IS DESIGNED TO PERMIT A LARGE INITIAL PREMIUM AND, SUBJECT TO
CERTAIN CONDITIONS, ADDITIONAL PREMIUMS. YOU MAY ALLOCATE YOUR PREMIUMS TO ONE
OR MORE OF THE INVESTMENT ACCOUNT AND/OR THE FIXED ACCOUNT.
THE PORTION OF YOUR POLICY VALUE THAT IS IN AN INVESTMENT ACCOUNT WILL VARY FROM
DAY TO DAY. THE AMOUNT IS NOT GUARANTEED; IT MAY INCREASE OR DECREASE, DEPENDING
ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS FOR THE INVESTMENT
ACCOUNTS THAT YOU HAVE CHOSEN.
THE PORTION OF YOUR POLICY VALUE THAT IS IN THE FIXED ACCOUNT WILL ACCUMULATE,
AFTER DEDUCTIONS, AT RATES OF INTEREST WE DETERMINE. SUCH RATES WILL NOT BE LESS
THAN THE EFFECTIVE ANNUAL FIXED ACCOUNT RATE SHOWN ON PAGE 3.2.
READ YOUR POLICY CAREFULLY. IT IS A CONTRACT BETWEEN YOU AND US.
RIGHT TO RETURN POLICY. WITHIN TEN DAYS AFTER YOU RECEIVE YOUR POLICY, YOU CAN
RETURN THE POLICY FOR CANCELLATION BY DELIVERING OR MAILING IT TO US OR THE
AGENT WHO SOLD IT. IMMEDIATELY ON DELIVERY OR MAILING, THE POLICY WILL BE VOID
FROM THE BEGINNING. WE WILL REFUND IN FULL THE PAYMENT MADE.
================================================================================
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
A STOCK COMPANY
/s/ Conform /s/ Conform [MANULIFE FINANCIAL LOGO]
- --------------------- -----------------------
President Secretary
================================================================================
<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 Termination.............................................................7
Reinstatement..................................................................7
Maturity Benefit...............................................................8
Maturity Advantage.............................................................8
Insurance Benefit..............................................................8
Policy Value...................................................................9
Policy Value Composition......................................................10
Separate Account And Sub-Accounts.............................................11
Investment Options............................................................12
Policy Loan Conditions........................................................13
Surrender And Withdrawals.....................................................14
Right To Postpone Payment Of Benefits.........................................15
Suicide.......................................................................15
Beneficiary...................................................................16
Ownership And Assignment......................................................16
Protection Against Creditors..................................................17
Currency And Place Of Payment.................................................17
Contract......................................................................17
Validity......................................................................17
Non-Participating.............................................................17
Age And Sex...................................................................17
How Values Are Computed.......................................................17
Annual Statement..............................................................18
Tax Considerations............................................................18
Any endorsements, any supplementary benefits, and a copy
of the application, follow page 18.
Page 2
<PAGE> 3
POLICY INFORMATION
LIFE INSURED JOHN M. DOE AGE AT POLICY DATE: 35
POLICY NUMBER 12 345 678 POLICY DATE: SEP 1, 1999
ISSUE DATE: SEP 1, 1999
MATURITY DATE: SEP 1, 2064
OWNER JOHN M. DOE
BENEFICIARY AS DESIGNATED IN THE APPLICATION OR SUBSEQUENTLY CHANGED
PLAN MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
NON-PARTICIPATING
LAPSE PROTECTION BENEFIT
FACE AMOUNT $171,658.84
INITIAL PREMIUM $25,000.00
SEX MALE
RISK
CLASSIFICATION NON-SMOKER, STANDARD CLASS
ADDITIONAL
RATING NOT APPLICABLE
Insurance under this policy may end before the maturity date shown if premium
and investment experience are insufficient to continue coverage to such date.
Keeping the policy and coverage in force will be affected by factors such as:
changes in the current cost of insurance rates; the amount, timing and frequency
of premium payments; the interest rate being credited to the Fixed Account; the
investment experience of the Sub-Accounts; loan activity; and partial
withdrawals. Also refer to the "Policy Termination" provision of your policy.
(Single Life)
PAGE 3.0
<PAGE> 4
POLICY INFORMATION
LIFE INSURED ONE JOHN M. DOE AGE AT POLICY DATE: 35
LIFE INSURED TWO MARY J. DOE AGE AT POLICY DATE: 35
POLICY NUMBER 12 345 678 POLICY DATE: SEP 1, 1999
ISSUE DATE: SEP 1, 1999
MATURITY DATE: SEP 1, 2064
OWNER JOHN M. DOE
BENEFICIARY AS DESIGNATED IN THE APPLICATION OR SUBSEQUENTLY CHANGED
PLAN MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
NON-PARTICIPATING
PAYABLE ON DEATH OF LAST SURVIVOR
LAPSE PROTECTION BENEFIT
FACE AMOUNT $323,569.21
INITIAL PREMIUM $25,000.00
SEX LIFE INSURED ONE: MALE
SEX LIFE INSURED TWO: FEMALE
RISK
CLASSIFICATION LIFE INSURED ONE: NON-SMOKER, STANDARD CLASS
LIFE INSURED TWO: NON-SMOKER, STANDARD CLASS
ADDITIONAL
RATING NOT APPLICABLE
Insurance under this policy may end before the maturity date shown if premium
and investment experience are insufficient to continue coverage to such date.
Keeping the policy and coverage in force will be affected by factors such as:
changes in the current cost of insurance rates; the amount, timing and frequency
of premium payments; the interest rate being credited to the Fixed Account; the
investment experience of the Sub-Accounts; loan activity; and partial
withdrawals. Also refer to the "Policy Termination" provision of your policy.
(Joint Life)
PAGE 3.0
<PAGE> 5
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF CHARGES
Unless otherwise specified, charges are deducted proportionately from the Fixed
Account Value and the Investment Account Value.
PREMIUM LOAD:
0.030% MONTHLY FOR 10 YEARS AFTER THE DATE OF EACH PREMIUM PAYMENT. THE
PREMIUM LOAD FOR ADDITIONAL PREMIUMS IS BASED ON THE PROPORTION OF THE
POLICY VALUE ASSOCIATED WITH THE PREMIUM.
ADMINISTRATION CHARGE:
A FLAT MONTHLY CHARGE OF $7.50, PLUS 0.030% MONTHLY FOR 10 POLICY YEARS,
REDUCING TO 0.015% THEREAFTER.
MORTALITY AND EXPENSE RISKS CHARGE:
0.075% DEDUCTED MONTHLY FROM EACH INVESTMENT ACCOUNT VALUE FOR THE FIRST
10 POLICY YEARS, REDUCING TO 0.025% THEREAFTER.
COST OF INSURANCE CHARGE:
SEE THE MONTHLY DEDUCTIONS SECTION OF THE POLICY VALUE PROVISION FOR
DETAILS ON HOW THE COST OF INSURANCE CHARGE IS DETERMINED.
PAGE 3.1A
<PAGE> 6
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF CHARGES (CONTINUED)
SURRENDER CHARGE:
A SURRENDER CHARGE WILL BE DEDUCTED FROM YOUR POLICY VALUE UNDER CERTAIN
CONDITIONS. SEE THE FOLLOWING PROVISIONS FOR DETAILS: POLICY VALUE AND SURRENDER
AND WITHDRAWALS.
AS SHOWN BELOW, THE SURRENDER CHARGE IS A PERCENTAGE OF THE POLICY VALUE BEING
WITHDRAWN OR SURRENDERED IN EXCESS OF THE FREE WITHDRAWAL AMOUNT.
SURRENDER SURRENDER CHARGE
CHARGE PERIOD PERCENTAGE
------------- ----------------
1 10.00%
2 9.00%
3 8.00%
4 7.00%
5 6.00%
6 5.00%
7 4.00%
8 3.00%
9 1.50%
10 0.00%
Percentage shown is at beginning of policy year. For other policy
months the percentage can be found by reducing the above percentages
proportionately.
MAXIMUM SURRENDER CHARGE:
IF NECESSARY, THE SURRENDER CHARGE DETERMINED ABOVE WILL BE REDUCED SUCH THAT
THE SUM OF (A) AND (B) DOES NOT EXCEED (C) WHERE:
(A) IS THE CUMULATIVE PREMIUM LOAD AND ADMINISTRATIVE CHARGE DEDUCTED UNDER THE
POLICY;
(B) IS THE SURRENDER CHARGE DETERMINED BY THE ABOVE TABLE; AND
(C) IS 10% OF PREMIUMS RECEIVED IN THE FIRST POLICY YEAR.
PAGE 3.1B
<PAGE> 7
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF VALUES
Refer to your policy provisions for details on the terms and values shown
in this table.
GUIDELINE SINGLE PREMIUM $25,000.00
GUIDELINE LEVEL PREMIUM $2,134.44
MINIMUM INITIAL PREMIUM $25,000.00
MINIMUM WITHDRAWAL AMOUNT $500.00
TRANSFER FEE $25.00
(FOR TRANSFERS IN EXCESS OF 12 IN A POLICY YEAR)
ASSET ALLOCATION BALANCER CHARGE
CURRENT $0.00
MAXIMUM $15.00
DOLLAR COST AVERAGING CHARGE
CURRENT $0.00
MAXIMUM $5.00
FIXED ACCOUNT MAXIMUM TRANSFER PERCENTAGE 15%
FIXED ACCOUNT MAXIMUM TRANSFER AMOUNT $500.00
FIXED ACCOUNT RATE 4%
LOAN INTEREST CHARGED RATE
FIRST 10 POLICY YEARS 5.25%
THEREAFTER 4.00%
LOAN ACCOUNT CREDITED RATE (PREFERRED LOANS)
FIRST 10 POLICY YEARS 4.50%
THEREAFTER 4.00%
LOAN ACCOUNT CREDITED RATE (OTHER LOANS) 4.00%
DEATH BENEFIT DISCOUNT FACTOR 1.0032737
PAGE 3.2
<PAGE> 8
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
ATTAINED AGE APPLICABLE PERCENTAGE
------------ ---------------------
40 and under 250%
45 215%
50 185%
55 150%
60 130%
65 120%
70 115%
75 105%
90 105%
95 and above 100%
For ages not shown, the Applicable Percentage can be found by reducing
the above Applicable Percentages proportionately.
PAGE 3.3
<PAGE> 9
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
GUARANTEED MAXIMUM MONTHLY RATES PER $1,000
OF NET AMOUNT AT RISK
MALE, SMOKER
LIFE LIFE LIFE
INSURED'S INSURED'S INSURED'S
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE RATE AGE RATE AGE RATE
$ $ $
20 0.1925 47 0.6200 74 6.3883
21 0.1941 48 0.6733 75 6.9808
22 0.1916 49 0.7333 76 7.5916
23 0.1883 50 0.7966 77 8.2100
24 0.1841 51 0.8700 78 8.8258
25 0.1783 52 0.9516 79 9.4575
26 0.1733 53 1.0450 80 10.1325
27 0.1716 54 1.1500 81 10.8675
28 0.1700 55 1.2616 82 11.6833
29 0.1716 56 1.3825 83 12.5858
30 0.1750 57 1.5075 84 13.5408
31 0.1808 58 1.6408 85 14.5166
32 0.1866 59 1.7791 86 15.4816
33 0.1958 60 1.9325 87 16.4216
34 0.2066 61 2.1050 88 17.4475
35 0.2191 62 2.2991 89 18.4600
36 0.2341 63 2.5191 90 19.4741
37 0.2533 64 2.7616 91 20.5100
38 0.2750 65 3.0241 92 21.6108
39 0.3000 66 3.2975 93 23.0250
40 0.3283 67 3.5841 94 24.8458
41 0.3616 68 3.8791 95 27.4966
42 0.3958 69 4.1933 96 32.0458
43 0.4350 70 4.5400 97 40.0166
44 0.4758 71 4.9241 98 54.8316
45 0.5225 72 5.3608 99 83.3333
46 0.5691 73 5.8525
The above rates will be adjusted for any Additional Rating shown in the Policy
Information section.
Page 4
<PAGE> 10
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
GUARANTEED MAXIMUM MONTHLY RATES PER $1,000
OF NET AMOUNT AT RISK
MALE, NON-SMOKER
LIFE LIFE LIFE
INSURED'S INSURED'S INSURED'S
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE RATE AGE RATE AGE RATE
$ $ $
20 0.1400 47 0.3233 74 4.4100
21 0.1391 48 0.3491 75 4.9000
22 0.1366 49 0.3783 76 5.4216
23 0.1341 50 0.4091 77 5.9700
24 0.1308 51 0.4458 78 6.5391
25 0.1266 52 0.4883 79 7.1433
26 0.1233 53 0.5358 80 7.8058
27 0.1216 54 0.5908 81 8.5433
28 0.1200 55 0.6516 82 9.3766
29 0.1200 56 0.7191 83 10.3158
30 0.1200 57 0.7908 84 11.3425
31 0.1225 58 0.8683 85 12.4333
32 0.1250 59 0.9558 86 13.5666
33 0.1291 60 1.0533 87 14.7325
34 0.1341 61 1.1616 88 15.9075
35 0.1408 62 1.2850 89 17.1075
36 0.1475 63 1.4258 90 18.3491
37 0.1566 64 1.5850 91 19.6533
38 0.1666 65 1.7608 92 21.0625
39 0.1783 66 1.9500 93 22.6358
40 0.1908 67 2.1550 94 24.6375
41 0.2058 68 2.3750 95 27.4966
42 0.2208 69 2.6150 96 32.0458
43 0.2383 70 2.8858 97 40.0166
44 0.2558 71 3.2425 98 54.8316
45 0.2766 72 3.5466 99 83.3333
46 0.2991 73 3.9533
The above rates will be adjusted for any Additional Rating shown in the Policy
Information section.
Page 4
<PAGE> 11
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
GUARANTEED MAXIMUM MONTHLY RATES PER $1,000
OF NET AMOUNT AT RISK
FEMALE, SMOKER
LIFE LIFE LIFE
INSURED'S INSURED'S INSURED'S
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE RATE AGE RATE AGE RATE
$ $ $
20 0.0966 47 0.4425 74 3.4783
21 0.0983 48 0.4733 75 3.8866
22 0.1008 49 0.5066 76 4.3266
23 0.1025 50 0.5450 77 4.7883
24 0.1058 51 0.5833 78 5.2691
25 0.1075 52 0.6266 79 5.7841
26 0.1116 53 0.6775 80 6.3550
27 0.1150 54 0.7291 81 7.0000
28 0.1183 55 0.7833 82 7.7366
29 0.1233 56 0.8375 83 8.5725
30 0.1291 57 0.8891 84 9.5541
31 0.1341 58 0.9375 85 10.5350
32 0.1400 59 0.9875 86 11.6491
33 0.1458 60 1.0425 87 12.7225
34 0.1550 61 1.1133 88 13.9358
35 0.1616 62 1.1991 89 15.0891
36 0.1741 63 1.3150 90 16.4175
37 0.1900 64 1.4441 91 17.8333
38 0.2075 65 1.5891 92 19.3783
39 0.2275 66 1.7325 93 21.1291
40 0.2500 67 1.8816 94 23.2758
41 0.2775 68 2.0166 95 26.4433
42 0.3033 69 2.1683 96 31.3116
43 0.3300 70 2.3291 97 39.5808
44 0.3566 71 2.5375 98 54.6541
45 0.3841 72 2.7958 99 83.3333
46 0.4125 73 3.1108
The above rates will be adjusted for any Additional Rating shown in the Policy
Information section.
Page 4
<PAGE> 12
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
GUARANTEED MAXIMUM MONTHLY RATES PER $1,000
OF NET AMOUNT AT RISK
FEMALE, NON-SMOKER
LIFE LIFE LIFE
INSURED'S INSURED'S INSURED'S
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE RATE AGE RATE AGE RATE
$ $ $
20 0.0841 47 0.2841 74 2.7516
21 0.0850 48 0.3041 75 3.1100
22 0.0866 49 0.3250 76 3.5033
23 0.0875 50 0.3491 77 3.9258
24 0.0900 51 0.3750 78 4.3775
25 0.0908 52 0.4041 79 4.8708
26 0.0933 53 0.4383 80 5.4266
27 0.0950 54 0.4733 81 6.0633
28 0.0975 55 0.5108 82 6.7991
29 0.1000 56 0.5491 83 7.6466
30 0.1033 57 0.5875 84 8.5858
31 0.1058 58 0.6241 85 9.6150
32 0.1091 59 0.6633 86 10.7150
33 0.1125 60 0.7091 87 11.8925
34 0.1183 61 0.7633 88 13.1341
35 0.1225 62 0.8316 89 14.4591
36 0.1300 63 0.9175 90 15.8658
37 0.1391 64 1.0191 91 17.3816
38 0.1491 65 1.1291 92 19.0500
39 0.1608 66 1.2475 93 20.9500
40 0.1733 67 1.3675 94 23.2758
41 0.1883 68 1.4883 95 26.4433
42 0.2033 69 1.6175 96 31.3116
43 0.2183 70 1.7666 97 39.5808
44 0.2333 71 1.9450 98 54.6541
45 0.2491 72 2.1658 99 83.3333
46 0.2658 73 2.4350
The above rates will be adjusted for any Additional Rating shown in the Policy
Information section.
Page 4
<PAGE> 13
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
GUARANTEED MAXIMUM MONTHLY RATES PER $1,000
OF NET AMOUNT AT RISK
FOR THE JOINT LIFE INSURED UNDER THIS POLICY
<TABLE>
<CAPTION>
DURATION MONTHLY DURATION MONTHLY DURATION MONTHLY
(POLICY RATE (POLICY RATE (POLICY RATE
YEARS) YEARS) YEARS)
<S> <C> <C> <C> <C> <C>
1 0.000207 23 0.103964 45 3.953521
2 0.000665 24 0.122184 46 4.558705
3 0.001212 25 0.143495 47 5.253161
4 0.001864 26 0.168742 48 6.055917
5 0.002654 27 0.198793 49 6.980966
6 0.003598 28 0.235576 50 8.015102
7 0.004763 29 0.281020 51 9.149825
8 0.006128 30 0.336457 52 10.364422
9 0.007748 31 0.401980 53 11.654835
10 0.009612 32 0.478377 54 13.000300
11 0.011830 33 0.565716 55 14.412617
12 0.014426 34 0.664435 56 15.891977
13 0.017472 35 0.777709 57 17.459834
14 0.021034 36 0.911511 58 19.156860
15 0.025213 37 1.080715 59 21.054761
16 0.030130 38 1.268137 60 23.368153
17 0.036011 39 1.507613 61 26.517002
18 0.043094 40 1.795237 62 31.354662
19 0.051658 41 2.130491 63 39.595173
20 0.061825 42 2.513928 64 54.652603
21 0.073840 43 2.944356 65 83.333333
22 0.087887 44 3.421111
</TABLE>
The above rates have been increased for any additional rating shown in the
policy information section.
Page 4
<PAGE> 14
DEFINITIONS
THE FOLLOWING TERMS HAVE SPECIFIC MEANINGS IN YOUR POLICY. PLEASE REFER TO THESE
DEFINITIONS AS YOU READ YOUR POLICY.
ADDITIONAL RATING is an increase in the Cost of Insurance Rate that is applied
when a Life Insured does not meet, at a minimum, our underwriting requirements
for the standard Risk Classification.
AGE at a specific date means age on the nearest birthday. If no specific date is
mentioned, age means the Life Insured's age on the Policy Anniversary nearest to
the birthday.
ATTAINED AGE on any date means the Age plus the number of whole years that have
elapsed since the Policy Date. For a last-to-die survivorship policy, Attained
Age is based on the youngest Life Insured when the policy is first issued.
BUSINESS DAY is any day that the New York Stock Exchange is open for business.
The net asset value of the underlying shares of a Sub-Account will be determined
as of the end of each Business Day. A Business Day ends at the close of
regularly scheduled day-time trading of the New York Stock Exchange on that day.
CASH SURRENDER VALUE equals the Policy Value reduced by any Surrender Charge and
any outstanding Monthly Deductions due.
CODE means the Internal Revenue Code of 1986 (as amended).
EARNINGS is an amount calculated in relation to a loan, partial Net Cash
Surrender Value Withdrawal or surrender of the policy. It is equal to (a) minus
the sum of (b) and (c), each calculated as of the date we receive your Written
Request, where:
(a) is the Policy Value;
(b) is the value of any Policy Debt; and
(c) is total premiums paid.
FIXED ACCOUNT is that part of the Policy Value which reflects the value you have
in our general account.
FREE WITHDRAWAL AMOUNT is, at any date, the greater of (a) and (b), where:
(a) is 100% of Earnings; and
(b) is 10% of total premiums paid.
INVESTMENT ACCOUNT is that part of the Policy Value that reflects the value you
have in one of the Sub-Accounts.
ISSUE DATE is the date shown in the Policy Information section from which the
Suicide and Validity provisions are applied.
LIFE INSURED is the person or persons whose life is covered by this policy as
specified in the Policy Information section. If more than one person is so
named, all provisions of the policy which are based on the death of the Life
Insured will be based on the death of the last survivor of the persons so named.
LOAN ACCOUNT is that part of the Policy Value which reflects the value
transferred from the Fixed Account or the Investment Accounts as collateral for
a policy loan.
MATURITY DATE is the date shown in the Policy Information
section. It is the Policy Anniversary nearest Attained Age 100 of the Life
Insured. For a last-to-die survivorship policy, the Maturity Date is the Policy
Anniversary nearest Attained Age 100 of the youngest Life Insured at issue.
NET CASH SURRENDER VALUE is the Cash Surrender Value less the Policy Debt.
NET POLICY VALUE is the Policy Value less the value in the Loan Account.
POLICY DATE is the date coverage takes effect under the policy provided we
receive the full amount of the initial premium at our Service Office. The Policy
Date is shown in the Policy Information section. The amount of the first Monthly
Deduction is calculated from the Policy Date. The Policy Date is also used to
determine Policy Years, Policy Months and Policy Anniversaries.
(continued)
Page 5
<PAGE> 15
DEFINITIONS (continued)
POLICY DEBT as of any date equals (a) plus (b) plus (c) minus (d), where:
(a) is the total amount of loans borrowed as of such date;
(b) is the total amount of any unpaid loan interest charges which have been
borrowed against the policy on a Policy Anniversary;
(c) is any interest charges accrued from the last Policy Anniversary to the
current date; and
(d) is the total amount of loan repayments as of such date.
POLICY VALUE is the sum of the values in the Loan Account, the Fixed Account and
the Investment Accounts.
SEPARATE ACCOUNT refers to Separate Account Three of The Manufacturers Life
Insurance Company of America.
SERVICE OFFICE is the office that we designate to service this policy as shown
on the back cover of your policy.
SUB-ACCOUNT refers to one of the sub-accounts of the Separate Account.
SURRENDER CHARGE PERIOD is the period following the Issue Date of the policy
during which we will assess surrender charges. Surrender charges will apply
during this period to amounts in excess of the Free Withdrawal Amount if you
surrender the policy or make a partial withdrawal, or if the policy terminates
due to default. The Surrender Charge Period is shown in the Policy Information
section.
WRITTEN REQUEST is your request to us which must be in a form satisfactory to
us, signed and dated by you, and filed at our Service Office.
PREMIUM PAYMENTS
Premiums are payable at our Service Office. On request, we will give you a
receipt signed by one of our officers.
INITIAL PREMIUM. No insurance will take effect under this policy before we
approve the application and receive the initial premium. The Minimum Initial
Premium is shown in the Policy Information section. The initial premium is used
to determine the Face Amount of insurance.
ADDITIONAL PREMIUMS. You may pay additional premiums subject to the following
conditions:
(a) we have the right to refuse or refund any premium payments that would
cause this policy to fail to qualify as life insurance under Section
7702 of The Code or any other equivalent section;
(b) we reserve the right to request that you provide us with satisfactory
evidence of insurability if a premium payment would result in an
increase in the Death Benefit that is greater than the increase in
Policy Value; 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 Premiums to such date.
The Guideline Single Premium and the Guideline Level Premium
are shown in the Policy Information section; and
(d) while there is an outstanding Policy Debt, any additional premium
payment will be applied first to repay the Policy Debt.
(continued)
Page 6
<PAGE> 16
PREMIUM PAYMENTS (continued)
ALLOCATION OF PREMIUM PAYMENTS. You may allocate premiums to any of the
Investment Accounts and/or the Fixed Account. Unless you change the initial
premium allocation specified in your application for this policy, it will
continue to apply to additional 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.
POLICY TERMINATION
DEFAULT. The policy will go into default if, at the beginning of any Policy
Month the Net Cash Surrender Value would go to zero or below after we take the
Monthly Deduction that is due for that month.
GRACE PERIOD. We will allow 61 days from the date that the policy goes into
default, for you to pay the amount that is required to bring the policy out of
default. At least 30 days prior to the termination of coverage, we will send a
notice to your last known address, specifying the amount you must pay to bring
the policy out of default. If we have notice of a policy assignment on file at
our Service Office, we will also mail a copy of the notice of the amount due to
the assignee on record.
The amount required to bring the policy out of default is equal to (a) plus (b),
where:
(a) is the amount necessary to bring the Net Cash Surrender Value to zero,
if it is less than zero, at the date of default; and
(b) is the Monthly Deduction due on the date of default, plus an amount to
cover Monthly Deductions to the later of the next Policy Anniversary or
at least three Policy Months.
If the amount necessary to bring the policy out of default has not been paid by
the end of the grace period, the policy will terminate.
TERMINATION DATE. This policy terminates on the earliest of the following
events:
(a) the end of the grace period for which you have not paid the amount
necessary to bring the policy out of default;
(b) surrender of the policy for its Net Cash Surrender Value;
(c) the Maturity Date unless you have elected the Maturity Advantage option;
or
(d) the death of the Life Insured.
REINSTATEMENT
You can ask us to reinstate your policy only if it terminates at the end of a
grace period in which you did not make a required payment. You can reinstate the
policy if you:
(a) make a Written Request for reinstatement within 5 years after the date
your policy terminates;
(b) provide us with evidence of insurability satisfactory to us on the Life
Insured; and
(c) pay a premium equal to the amount that was required to bring the policy
out of default immediately prior to termination, plus an amount to cover
Monthly Deductions to the later of the next Policy Anniversary or at
least three Policy Months.
(continued)
Page 7
<PAGE> 17
REINSTATEMENT (continued)
If we approve your request,
(a) the reinstatement date will be the later of the date we approve your
request or the date we receive the required payment at our Service
Office; and
(b) any remaining Surrender Charge Period will be reinstated to WHAT it was
at the date of default.
The Policy Value on the date of reinstatement, prior to the crediting of any Net
Premium paid on the reinstatement, will be equal to the Policy Value on the date
the policy terminated.
MATURITY BENEFIT
Provided the policy is in force and the Life Insured is alive on the Maturity
date, we will pay you the following amount calculated as of the Maturity Date:
(a) the Policy Value, less
(b) any outstanding Policy Debt.
MATURITY ADVANTAGE
By Written Request prior to the Maturity Date, you may elect to continue this
policy after the Maturity Date.
If you elect this option, we will continue the policy subject to the following:
(a) any existing Investment Account Value will be transferred to the Fixed
Account;
(b) after the Maturity Date we will not accept any additional premium
payments, only loan repayments;
(c) we will continue to credit interest monthly to your Policy Value;
(d) monthly deductions for expense charges listed in the Policy Information
section will be discontinued; and
(e) interest on any Policy Debt will continue to accrue.
DEFAULT AFTER THE MATURITY DATE. The policy will go into default if the Policy
Debt equals or exceeds the Policy Value.
At least 61 days prior to termination, we will send a notice to your last known
address. If you had filed a notice of assignment with us, we will also send a
copy of the notice to the last known address of the assignee on record. Payment
of the loan interest during the 61-day grace period will bring the policy out of
default.
INSURANCE BENEFIT
If the Life Insured dies prior to the Maturity Date, while the policy is in
force, we will pay the Insurance Benefit to the beneficiary 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.
For a last-to-die survivorship policy, you must provide us with proof of the
death of each Life Insured although the Insurance Benefit is payable at last
death.
INSURANCE BENEFIT. The Insurance Benefit payable is:
(a) the Death Benefit as described below; less
(b) the value of the Policy Debt as of the date of death.
(continued)
Page 8
<PAGE> 18
INSURANCE BENEFIT (continued)
If the Life Insured dies during a grace period prior to the Maturity Date, the
Insurance Benefit will be reduced by any outstanding Monthly Deductions due.
DEATH BENEFIT. The Death Benefit is the greater of (a) and (b) where:
(a) is the Face Amount of the policy at the date of the Life Insured's
death; and
(b) is the Policy Value at the date of death, multiplied by the Applicable
Percentage in the Table of Minimum Death Benefit Percentages shown in
the Policy Information section.
PAYMENT OF INSURANCE BENEFIT. We will pay the Insurance Benefit in one lump sum
with interest calculated from the date of the Life Insured's death to the date
of payment. The rate will be at the rate prescribed by the state. If the state
does not specify the interest rate, we will use the rate for insurance benefits
left on deposit with us.
POLICY VALUE
INITIAL PREMIUM. Based on your allocation instructions, we will allocate your
initial premium plus any earned interest on the later of the date our
underwriters approve issuance of the policy or the Business Day we receive the
initial premium at our Service Office. For premium received prior to the
underwriting decision we will credit interest as of the date we received the
initial premium payment at the rate of return then being earned on allocations
to the Money Market Trust. This initial allocation will become your Policy Value
to which additional premiums will be allocated.
ADDITIONAL PREMIUMS. We will add your premium to your Policy Value as of the
Business Day we receive an additional premium at our Service Office. However, if
evidence of insurability is required for an additional premium, we will add it
to your Policy Value as of the Business Day our underwriters approve the
evidence, but before we take any deductions due as of that Business Day.
MONTHLY DEDUCTIONS. Monthly Deductions are due until the Maturity Date. At the
beginning of each Policy Month, a deduction is taken from your policy to cover
the following expense charges:
(a) Premium Load, if applicable;
(b) Administration Charge;
(c) Mortality and Expense Risks Charge; and
(d) Cost of Insurance Charge.
The Cost of Insurance Charge is described below. The amount and duration of the
other charges are shown in the Table of Expense Charges in the Policy
Information section.
Unless specified otherwise in the Table of Expense Charges, we will take Monthly
Deductions from the Fixed 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. We will take the deductions
according to your instructions if we approve your request and you have
sufficient funds in the accounts.
COST OF INSURANCE CHARGE. The Cost of Insurance for a specific Policy Month is
determined as the rate for the Cost of Insurance for that month, as described
below, multiplied by the net amount at risk.
The net amount at risk is equal to (a) minus (b), where:
(a) is the Death Benefit as of the first day of the Policy Month, divided by
the Death Benefit Discount Factor shown in the Table of Values in the
Policy Information section; and
(b) is the Policy Value as of the first day of the Policy Month.
(continued)
Page 9
<PAGE> 19
POLICY VALUE (continued)
The rates for the Cost of Insurance, as of the Policy Date and subsequently for
each Face Amount increase, are based on the Life Insured's Age, Sex, Risk
Classification and duration that the coverage has been in force. The Cost of
Insurance calculation will reflect any Additional Rating shown in the Policy
Information section. For a last-to-die survivorship policy, the individual rates
determined for each Life Insured on the bases specified above are blended to
produce a single rate.
We will re-determine Cost of Insurance rates from time to time on a basis that
does not discriminate unfairly within any class of Life Insured. The Cost of
Insurance rates will never exceed those shown on Page 4 in the Table of
Guaranteed Maximum Cost of Insurance Rates.
OTHER DEDUCTIONS. As stated in the Surrender and Withdrawal provision, we will
deduct a Surrender Charge if during the Surrender Charge Period you: (a)
surrender the policy, and the Net Cash Surrender Value is above the Free
Withdrawal Amount; or (b) make partial withdrawals above the Free Withdrawal
Amount.
POLICY VALUE COMPOSITION
Your Policy Value at any time is equal to the sum of the values you have in the
Loan Account, the Fixed Account and the Investment Accounts.
LOAN ACCOUNT VALUE. The amount you have in the Loan Account at any time equals:
(a) amounts transferred to it for loans or borrowed loan interest; plus
(b) interest credited to it; less
(c) amounts transferred from it for loan repayment.
For the details of the Loan Account see the Policy Loan Conditions provision.
FIXED ACCOUNT VALUE. The amount you have in the Fixed Account at any time
equals:
(a) 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 Fixed Account at an effective annual
rate of no less than the Fixed Account Rate shown in the Table of Values in the
Policy Information Section. The actual interest rate used will be set by us from
time to time. For all transactions, interest is calculated from the date of the
transaction.
INVESTMENT ACCOUNT VALUE. The amount you have in an Investment
Account at any time equals the number of units in that Investment Account,
multiplied by the unit value of the corresponding Sub-Account at that time.
The number of units in an Investment Account at any time equals (a) minus (b),
where:
(a) is the number of units credited to the Investment Account because of:
(1) premiums allocated to it; and
(2) amounts transferred to it; and
(b) is the number of units canceled from the Investment Account because of:
(1) amounts deducted from it;
(2) amounts transferred from it; and
(3) amounts withdrawn from it.
The number of units credited or canceled for a given transaction is equal to the
dollar amount of the transaction, divided by the unit value as of the Business
Day of the transaction. See the Unit Value Calculation section of this provision
for details on how unit values are determined.
Page 10
<PAGE> 20
SEPARATE ACCOUNT AND SUB-ACCOUNTS
The Separate Account is authorized to invest in the shares of Manufacturers
Investment Trust, or another management investment company. Each Sub-Account of
the Separate Account purchases shares of a corresponding Fund of Manufacturers
Investment Trust or another management investment company. The Funds are listed
in the Policy Information section.
FUND SUBSTITUTION. A Fund might, in our judgment, become unsuitable for
investment by a Sub-Account. This might happen because of a change of investment
policy; or a change in the applicable laws or regulations; or because the shares
are no longer available for investment; or for some other reason.
If a Fund becomes unsuitable for investment, we have the right to substitute
another Fund or another management investment company. Before doing this, we
would first seek, where required, approval from the Securities and Exchange
Commission and the Insurance Commissioner of the state in which this policy is
delivered.
To the extent permitted by applicable federal and state law, we also have the
right, without your approval, to:
(a) create new separate accounts;
(b) combine any two or more separate accounts including the Separate
Account;
(c) make available additional Sub-Accounts investing in additional Funds of
Manufacturers Investment Trust, or another investment company;
(d) eliminate existing Sub-Accounts and stop accepting new allocations and
transfers into the corresponding Fund;
(e) operate the Separate Account as a management investment company under
the Investment Company Act of 1940 or in any other form permitted by
law;
(f) de-register the Separate Account under the Investment Company Act of
1940;
(g) transfer assets between the Separate Account and other separate
accounts; and
(h) combine Sub-Accounts or to transfer assets in one Sub-Account to another
Sub-Account.
UNIT VALUE CALCULATION. We will determine the unit values for each Sub-Account
as of the end of each Business Day. When we need to determine a Policy Value or
an amount after the end of a Business Day, or on a day that is not a Business
Day, we will do so as of the next Business Day.
The value of a unit of each Sub-Account was initially fixed at $10 for the first
Business Day that an amount was allocated, or transferred to the particular
Sub-Account. For any subsequent Business Day, the unit value for that
Sub-Account is obtained by multiplying the unit value for the immediately
preceding Business Day by the net investment factor for the particular
Sub-Account on such subsequent Business Day.
NET INVESTMENT FACTOR. The net investment factor for a Sub-Account on any
Business Day is equal to (a) divided by (b), where:
(a) is the net asset value of the underlying Fund shares held by that
Sub-Account as of the end of such Business Day before any policy
transactions are made on that day; and
(b) is the net asset value of the underlying Fund shares held by that
Sub-Account as of the end of the immediately preceding Business Day
after all policy transactions were made for that day.
We reserve the right to adjust the above formula for any taxes determined by us
to be attributable to the operations of the Sub-Account.
(continued)
Page 11
<PAGE> 21
SEPARATE ACCOUNT AND SUB-ACCOUNTS (continued)
SEPARATE ACCOUNT ASSETS. The assets held in each Sub-Account are used to support
variable life insurance policies.
Income, gains and losses of the Separate Account are credited to, or charged
against, the applicable Sub-Accounts without regard to our other income, gains
and losses.
The assets of the Separate Account are our property. The part of the assets that
is equal to the Investment Account values in respect of all Single Premium and
Flexible Premium Variable Life Insurance policies will not be charged with
liabilities from any other business we conduct. We can transfer to our general
account, Separate Account assets in excess of the liabilities of the Separate
Account arising under the Single Premium and Flexible Premium Variable Life
Insurance policies supported by the Separate Account.
INVESTMENT OPTIONS
TRANSFERS. By Written Request you may transfer portions of your Policy Value
among the Investment Accounts and the Fixed Account. We will also permit
telephone transfers if a currently valid authorization form is on file with us.
Transfers are subject to the following restrictions:
(a) you can make as many transfers in a Policy Year as you want. There is no
charge for the first twelve transfers in any Policy Year. If you make
more than twelve transfers in any Policy Year, the Transfer Fee shown in
the Table of Values in the Policy Information section will apply to each
subsequent transfer in that Policy Year. We will consider all transfer
requests received on the same Business Day as one transfer;
(b) you may transfer the Policy Value from any of the Investment Accounts to
the Fixed Account without incurring the transfer charges in (a) above,
provided such transfers occur within:
(1) eighteen months after the Issue Date, as shown in the Policy
Information section of this policy; or
(2) the later of (i) or (ii) below:
(i) 60 days from the effective date of a material change in
the investment objectives of any of the Sub-Accounts; or
(ii) 60 days from the notification date of any such change.
(c) the maximum amount that you can transfer out of the Fixed Account in any
one Policy Year is limited to the greater of:
(1) the Fixed Account Maximum Transfer Percentage shown in the
Policy Information section, multiplied by the value in the Fixed
Account at the previous Policy Anniversary; or
(2) the Fixed Account Maximum Transfer Amount shown in the Policy
Information section.
(d) any transfer out of the Fixed Account may not involve a transfer to the
Investment Account for the Money Market Trust;
(e) transfer privileges are subject to any restrictions we or the
Manufacturers Investment Trust may impose; and
(f) transfer privileges may be terminated at any time.
ASSET ALLOCATION BALANCER TRANSFERS. If you elect this option, we will
automatically transfer amounts among your specified Investment Accounts in order
to maintain your designated percentage in each account. We will effect the
transfers six months after the later of the Policy Date and the last Policy
Anniversary, and at each six month interval thereafter.
(continued)
Page 12
<PAGE> 22
INVESTMENT OPTIONS (continued)
The current and maximum Asset Allocation Balancer Charge for transfers under
this option are shown in the Policy Information section of this policy. We will
provide you with 90 days written notice of any change in the current amount.
When you change your premium allocation instructions, your Asset Allocation
Balancer will change so the two are identical. This change will automatically
occur unless you instruct us otherwise, or a Dollar Cost Averaging request is in
effect.
We reserve the right to cease to offer this option as of 90 days after we send
you written notice.
DOLLAR COST AVERAGING. If you elect this option, we will automatically transfer
amounts each month from one Investment Account to one or more of the other
Investment Accounts or the Fixed Account. You must select the amount to be
transferred and the accounts.
If the value in the Investment Account from which the transfer is being made is
insufficient to cover the transfer amount, we will not effect the transfer and
we will notify you.
The current and maximum Dollar Cost Averaging Charge for transfers under this
option are shown in the Policy Information section of this policy. We will
provide you with 90 days written notice of any change in the current amount.
We reserve the right to cease to offer this option as of 90 days after we send
you written notice.
POLICY LOAN CONDITIONS
At any time while this policy is in force and has an available loan value, you
can get a loan by Written Request. We may require a loan agreement from you as
the policy is the only security for the loan.
AVAILABLE LOAN VALUE. The available loan value on any date is 90% of the Net
Cash Surrender Value.
Loan amounts that represent Earnings under the policy are considered Preferred
Loans.
LOAN ACCOUNT. When you take out a loan, or when loan interest charges are
borrowed, we will do a transfer from the Fixed Account and/or one or more of the
Investment Accounts into the Loan Account. Amounts we transfer into the Loan
Account cover the loan principal plus loan interest due to the next Policy
Anniversary.
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.
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 Fixed 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 Fixed 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 Investment Options provision.
Interest is credited to the Loan Account and interest is also charged on the
Policy Debt, as described under the Loan Interest Charged and the Loan Interest
Credited sections of this provision.
LOAN INTEREST CHARGED. Interest will accrue daily on loans. In the event that
you do not pay the Loan Interest Charged in any Policy Year, it will be borrowed
against the policy and added to the Policy Debt in arrears at the Policy
Anniversary. We will allocate the amount borrowed for interest payment in the
same proportion that your value in the Fixed Account and the Investment Accounts
bears to the Net Policy Value as of the Policy Anniversary.
(continued)
Page 13
<PAGE> 23
POLICY LOAN CONDITIONS (continued)
The effective annual Loan Interest Charged Rate is shown in the Table of Values
in the Policy Information section.
LOAN INTEREST CREDITED. Interest will accrue daily to amounts in the Loan
Account. The effective annual Loan Interest Credited Rate for Preferred and
other loans is shown in the Table of Values in the Policy Information section.
Should it be determined at any time after the tenth Policy Anniversary that a
loan would become taxable under applicable federal tax law, ruling, regulation,
or court decision because loan interest is being charged and credited at the
same rate, we will increase the Loan Interest Charged Rate to the extent
necessary for the transaction to be treated as a loan for federal tax purposes.
In no event will the new rate exceed the rate charged in the first ten Policy
Years.
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.
Repayments will be applied first to the portion of the Policy Debt that is not a
Preferred Loan.
When you repay a loan, we credit the amount to the Loan Account, and make a
transfer to the Fixed Account and/or the Investment Accounts.
We will allocate loan repayments as follows:
(a) first to the Fixed Account, until the associate 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, any additional premium payment will be applied first to
repay the Policy Debt.
SURRENDER AND WITHDRAWALS
SURRENDER OF THE POLICY. You may surrender this policy for its Net Cash
Surrender Value at any time prior to the death of the Life Insured. We will
determine the Net Cash Surrender Value as of the end of the Business Day on
which we receive the policy and your Written Request for surrender at our
Service Office. After we receive your surrender request, no insurance will be in
force.
If you surrender your policy during the Surrender Charge Period, we will deduct
a Surrender Charge from your Policy Value in calculating the Net Cash Surrender
Value. The Surrender Charge will apply to the amount of your Policy Value in
excess of the Free Withdrawal amount.
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. Upon Written Request, you may
withdraw a portion of the Net Cash Surrender Value of your policy as a partial
withdrawal. 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 Fixed
Account and the Investment Accounts bears to the Net Policy Value.
Partial withdrawals will be subject to the following conditions:
(a) they can only be made after the first Policy Anniversary;
(b) we will do the withdrawal as of the end of the Business Day on which we
receive your Written Request;
(c) the partial withdrawal cannot be less than the Minimum Withdrawal amount
specified in the Policy Information section;
(continued)
Page 14
<PAGE> 24
SURRENDER AND WITHDRAWALS (continued)
(d) we will deduct the applicable Surrender Charge if the partial withdrawal
occurs during the Surrender Charge Period and exceeds the Free
Withdrawal Amount;
(e) the withdrawal will result in a reduction in the Face Amount of
insurance; and
(f) if the withdrawal would cause the Policy Value to fall below the Minimum
Initial Premium shown in the Policy Information section, we will treat
the withdrawal request as a full surrender of the policy.
SURRENDER CHARGE DEDUCTION. We will allocate the deduction of the Surrender
Charge for the withdrawal to the Fixed 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 Surrender Charge allocated to a particular account
are greater than the value of that account, we will reduce the portion of the
withdrawal allocated to that account. We will reduce the allocated portion so
that the withdrawal plus the charge allocated to the account equal the value of
the account.
If the amount in all accounts is not sufficient to pay the Surrender Charge, we
will reduce the amount of the withdrawal.
FACE AMOUNT REDUCTION. The Face Amount after a partial withdrawal will be equal
to (a) multiplied by (b), where:
(a) is the Face Amount prior to the withdrawal; and
(b) is the Policy Value after the withdrawal, divided by the Policy Value
prior to the withdrawal.
The reduction in Face Amount will be effective as of the date of the withdrawal.
If the reduction in the Face Amount would require the return of premiums in
order for the policy to qualify as life insurance under Section 7702 of the
Code, or any other equivalent section, we will return such premiums.
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), as a result of which disposal of securities held in the Separate
Account or determining the value of the Separate Account's net assets is
not reasonably practicable, 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.
SUICIDE
If within two years after the Issue Date a Life Insured dies by suicide, while
sane or insane, the policy will terminate and our liability will be limited to:
(a) the premiums paid; less
(b) any partial Net Cash Surrender Value withdrawals; and less
(c) the Policy Debt.
We reserve the right under this provision to obtain evidence of the manner and
cause of death of the Life Insured.
Page 15
<PAGE> 25
BENEFICIARY
The following four sections will apply unless there is a beneficiary appointment
in force that provides otherwise.
BENEFICIARY CLASSIFICATION. You can appoint beneficiaries for the Insurance
Benefit in three classes: primary, secondary and final. Beneficiaries in the
same class will share equally in the Insurance Benefit payable to them.
PAYMENT TO BENEFICIARIES. We will pay the Insurance Benefit:
(a) to any primary beneficiaries who are alive when the Life Insured dies;
or
(b) if no primary beneficiary is then alive, to any secondary beneficiaries
who are then alive; or
(c) if no primary or secondary beneficiary is then alive, to any final
beneficiaries who are then alive.
CHANGE OF BENEFICIARY. Until the Life Insured's death you can change the
beneficiary by Written Request unless you make an irrevocable designation. We
are not responsible if the change does not achieve your purpose. The change will
take effect as of the date you signed such request. It will not apply to any
payments we made or any action we may have taken before we received your Written
Request.
DEATH OF BENEFICIARY. If no beneficiary is alive when the Life Insured dies, the
Insurance Benefit will be payable to you; or to your estate if you are the Life
Insured. Unless otherwise provided, if a beneficiary dies before the seventh day
after the death of the Life Insured, we will pay the Insurance Benefit as if the
beneficiary had died before the Life Insured.
OWNERSHIP AND ASSIGNMENT
Until the Life Insured's death, without the consent of any beneficiary, except
an irrevocable beneficiary, you as owner can:
(a) receive any amount payable under your policy;
(b) exercise all rights and privileges granted by the policy; and
(c) assign the policy.
An assignment does not bind us until we receive it in writing at our Service
Office. We are not responsible for its validity or its effects. It should be
filed with us in duplicate. We will return a copy.
CHANGE OF OWNER. Until the Life Insured's death, the owner can change the
ownership of the policy by Written Request. The change will take effect as of
the date you signed the Written Request. It will not apply to any payments we
made or any action we may have taken before we received your Written Request.
TRUSTEE OWNER. Should the owner be a trustee, payment to the trustee(s) of any
amount to which the trustee(s) is (are) entitled under the policy, either by
death or otherwise, will fully discharge us from all liability under the policy
to the extent of the amount so paid.
JOINT OWNERSHIP. Two or more owners will own the policy as joint tenants with
right of survivorship, unless otherwise requested on the application or in any
subsequent assignment of the policy. On death of any of the owners, the deceased
owner's interest in the policy passes to the surviving owner(s).
Any rights and privileges that may be exercised by the owner, may be exercised
only with the consent of all joint owners.
(continued)
Page 16
<PAGE> 26
OWNERSHIP AND ASSIGNMENT (continued)
SUCCESSOR OWNER. Upon the owner's death during the lifetime of the Life 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 you or the Life Insured are representations, not warranties,
unless fraud is involved. We will not use any statement by you or any of the
Life 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
Life Insured for two years from the Issue Date.
We can contest after two years if the policy has been reinstated and has been in
force during the lifetime of the Life Insured for less than two years from the
reinstatement date. If this is the case, we can only contest the validity in
respect of any fact material to the reinstatement that was misrepresented.
NON-PARTICIPATING
Your policy is non-participating. It does not earn dividends.
AGE AND SEX
If the Age or Sex of a Life 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.
HOW VALUES ARE COMPUTED
We provide Cash Surrender Values that are at least equal to those required by
law. A detailed statement of the method of computing the values of this policy
has been filed with the insurance department of the state in which this policy
is delivered.
We use the Commissioners 1980 Standard Ordinary Smoker/Non-Smoker Mortality
Table in computing reserves, and in determining Maximum Cost of Insurance Rates.
Values relating to amounts in the Fixed Account are computed at the Fixed
Account Rate shown in the Table of Values in the Policy Information section.
Page 17
<PAGE> 27
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 Fixed Account, the Loan Account
and each of the Investment Accounts;
(d) the value of the units in each chosen Investment Account;
(e) any Loan Account balance and loan interest charged since the last
report;
(f) the premiums paid and policy transactions for the year; and
(g) any further information required by law.
TAX CONSIDERATIONS
It is the intent that this policy be considered as life insurance for tax
purposes, to comply with Section 7702 of the Code, or any other equivalent
section. We reserve the right to limit the amount of premiums paid for this
policy, or to make any other reasonable adjustments to the terms or conditions
of this policy if it becomes necessary to allow it to qualify as life insurance.
This provision should not be construed to guarantee that the policy will be
treated as life insurance or that the tax treatment of life insurance will never
be changed by the future actions of any tax authority.
Page 18
<PAGE> 28
================================================================================
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
A Stock Company
Service Office: 200 Bloor Street East, Toronto, Canada, M4W 1E5
================================================================================
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE.
PAYABLE ON LIFE INSURED'S DEATH.
POLICY VALUES ALLOCATED TO AN INVESTMENT ACCOUNT REFLECT THE INVESTMENT
EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS. INVESTMENT OPTIONS ARE 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
our nearest representative. Or write to our Service Office at
the address above.
Please tell us promptly of any change in your address.
WE STRONGLY URGE THAT, BEFORE YOU TAKE ANY ACTION TO REPLACE
THIS OR ANY OTHER POLICY, YOU ASK THE ADVICE OF THE COMPANY THAT
ISSUED THE POLICY.
================================================================================
[MANULIFE FINANCIAL LOGO]
- --------------------------------------------------------------------------------
Manulife Financial and the block design are registered service marks of The
Manufacturers Life Insurance Company and are used by it and its subsidiaries.
<PAGE> 29
SUPPLEMENTARY BENEFIT
LAPSE PROTECTION BENEFIT
This benefit is a part of your policy. Should any provisions in your policy
conflict with this benefit, the provisions of this benefit will prevail.
EFFECTIVE DATE
The benefit takes effect on the Policy Date SHOWN IN THE POLICY INFORMATION
SECTION.
BENEFIT
This benefit prevents your policy from going into default unless the Policy Debt
is equal to or greater than the Cash Surrender Value.
TERMINATION
The benefit terminates on the earliest of the following dates:
(a) the Maturity Date of the policy unless you have elected the Maturity
Advantage option; or
(b) the date the policy terminates.
The benefit can be reinstated with your policy.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
/s/
---------------------------------------------------
President
<PAGE> 1
POWER OF ATTORNEY
I, James P. O'Malley, Director of The Manufacturers Life Insurance
Company of America (the "Company"), do hereby constitute and appoint John
Richardson, John DesPrez, Donald Guloien, James Gallagher, Douglas Myers or Hugh
McHaffie, or any of them, my true and lawful attorneys to sign or execute (i)
registration statements and reports and other filings to be filed with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended (the "1933 Act") and/or the Investment Company Act of 1940, as amended
(the "1940 Act") and (ii) reports and other filings to be filed with the SEC (or
any other regulatory entity) pursuant to the Securities Exchange Act of 1934
(the "1934 Act") and to do any and all acts and things and to sign or execute
any and all instruments for me, in my name, in the capacities indicated below,
which said attorney, may deem necessary or advisable to enable the Company to
comply with the 1933 Act, the 1940 Act and the 1934 Act, and any rules,
regulations and requirements of the SEC, in connection with such registration
statements, reports and filings made under the 1933 Act, the 1940 Act and the
1934 Act, including specifically, but without limitation, power and authority to
sign or execute for me, in my name, and in the capacities indicated below, (i)
any and all amendments (including post-effective amendments) to such
registration statements and (ii) Form 10-Ks and Form 10-Qs filed under the 1934
Act; and I do hereby ratify and confirm all that the said attorneys, or any of
them, shall do or cause to be done by virtue of this power of attorney. This
Power of Attorney is intended to supersede any and all prior Power of Attorneys
in connection with the above mentioned acts.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ JAMES P. O'MALLEY Director May 28, 1999
- ---------------------
James P. O'Malley
