<PAGE> 1
As filed with the Securities and Exchange Commission on February 25, 2000.
Registration No. 333-66303
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 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
Vice President, Secretary
and General Counsel
The Manufacturers Life Insurance Company
of America
73 Tremont Street
Boston, MA 02108
(Name and Address of Agent for Service)
Copy to:
J. Sumner Jones, Esq.
Jones & Blouch L.L.P.
1025 Thomas Jefferson Street, NW
Washington, DC 20007
It is proposed that this filing will become effective:
- ---- immediately upon filing pursuant to paragraph (b) of Rule 485
- ---- on [date] pursuant to paragraph (b) of Rule 485
- ---- 60 days after filing pursuant to paragraph (a)(1) of Rule 485
X on May 1, 2000 pursuant to paragraph (a)(1) of Rule 485
- ----
- ---- 75 days after filing pursuant to paragraph (a)(2) of Rule 485
<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 General Information About Manufacturers (Manufacturers Investment
Trust)
17 Policy Surrender and Partial Withdrawals
18 General Information About Manufacturers
19 Other Information (Reports to Policyholders; Responsibilities Assumed
By Manufacturers Life)
20 *
21 Policy Loans
<PAGE> 3
22 *
23 **
24 Other Provisions of the Policy
25 General Information About Manufacturers (Manufacturers Life of America)
26 *
27 General Information About Manufacturers (Manufacturers Life of America)
28 Other Information (Officers and Directors)
29 General Information About Manufacturers (Manufacturers Life of America)
30 *
31 *
32 *
33 *
34 *
35 General Information About Manufacturers (Manufacturers Life of
America); Other Information (Distribution of the Policies)
36 *
37 *
38 Other Information (Distribution of the Policies; Responsibilities of
Manufacturers Life)
39 Other Information (Distribution of the Policies)
40 *
41 Other Information (Distribution of the Policies)
42 Other Information (Distribution of the Policies)
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)
<PAGE> 4
48 *
49 *
50 General Information About Manufacturers
51 Issuing a Policy; Death Benefits; Premium Payments; Charges and
Deductions; Policy Value; Policy Loans; Policy Surrender and Partial
Withdrawals; Lapse and Reinstatement; Other Policy Provisions
52 Other Information (Substitution of Portfolio Shares)
53 General Information About Manufacturers (Separate Account Three);
Tax Treatment of the Policy
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
* Omitted since answer is negative or item is not applicable.
**Omitted.
<PAGE> 5
PROSPECTUSES FOR
VENTURE(R)
SURVIVORSHIP
VUL
A FLEXIBLE PREMIUM
SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
Issued by
The Manufacturers Life Insurance Company of America
And for
Manufacturers Investment Trust
Printed May __, 2000
MANULIFE FINANCIAL
<PAGE> 6
PROSPECTUS
SEPARATE ACCOUNT THREE OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
VENTURE SURVIVORSHIP VUL
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
This prospectus describes Survivorship VUL, a flexible premium survivorship
variable universal life insurance policy (the "Policy") offered by The
Manufacturers Life Insurance Company of America (the "Company" or "Manufacturers
Life Of America"), a stock life insurance company that is an indirect
wholly-owned subsidiary of The Manufacturers Life Insurance Company
("Manufacturers Life").
The Policy is designed to provide lifetime insurance protection together with
flexibility as to the timing and amount of premium payments, the investments
underlying the Policy Value, and the amount of insurance coverage. This
flexibility allows the policyowner to pay premiums and adjust insurance coverage
in light of his or her current financial circumstances and insurance needs.
The Policy provides for:
(1) a Net Cash Surrender Value that can be obtained by surrendering the Policy;
(2) policy loans and partial withdrawals; and
(3) an insurance benefit payable at the death of the last-to-die of the Lives
Insured.
Unless the No-Lapse Guarantee is in effect, the Policy will remain in force so
long as the Net Cash Surrender Value is sufficient to cover charges assessed
against the Policy. If the No-Lapse Guarantee is in effect, the Policy will
remain in force as long as the No-Lapse Guarantee Cumulative Premium Test has
been met.
Policy Value may be accumulated on a fixed basis or vary with the investment
performance of the sub-accounts of Manufacturers Life of America's Separate
Account Three (the "Separate Account") to which the policyowner allocates net
premiums. The assets of each sub-account will be used to purchase shares of a
particular investment portfolio (a "Portfolio") of Manufacturers Investment
Trust (the "Trust"). The accompanying prospectus for the Trust, and the
corresponding statement of additional information, describe the investment
objectives of the Portfolios. The Portfolios available for allocation of Net
Premiums are shown in the Policy Summary under "Investment Options and
Investment Advisers." Other sub-accounts and Portfolios may be added in the
future.
BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT
SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. ALSO, PROSPECTIVE PURCHASERS SHOULD
NOTE THAT IT MAY NOT BE ADVISABLE TO PURCHASE A POLICY AS A REPLACEMENT FOR
EXISTING INSURANCE.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE TRUST.
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 MAY __, 2000.
<PAGE> 7
[This page intentionally left blank]
iii
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
COVER PAGE
TABLE OF CONTENTS
DEFINITIONS
POLICY SUMMARY
<S> <C>
General....................................................................... 4
Death Benefits................................................................ 4
Premiums...................................................................... 4
Policy Value.................................................................. 4
Policy Loans.................................................................. 4
Surrender and Partial Withdrawals............................................. 4
Lapse and Reinstatement....................................................... 4
Charges and Deductions........................................................ 5
Investment Options and Investment Subadvisers................................. 5
Investment Management Fees and Expenses....................................... 5
Table of Charges and Deductions............................................... 6
Table of Investment Management Fees and Expenses.............................. 7
Table of Investment Options and Investment Advisers........................... 9
GENERAL INFORMATION ABOUT MANUFACTURERS
Manufacturers Life of America................................................. 10
Separate Account Three........................................................ 10
Manufacturers Investment Trust................................................ 11
Investment Objectives of the Portfolios....................................... 11
ISSUING A POLICY
Requirements.................................................................. 14
Temporary Insurance Agreement................................................. 15
Right to Examine the Policy................................................... 15
DEATH BENEFITS
Life Insurance Qualification.................................................. 16
Death Benefit Options......................................................... 17
Changing the Face Amount...................................................... 18
PREMIUM PAYMENTS
Initial Premiums.............................................................. 18
Subsequent Premiums........................................................... 19
Maximum Premium Limitation.................................................... 19
Premium Allocation............................................................ 19
CHARGES AND DEDUCTIONS
Amount Deducted from Premium.................................................. 19
Surrender Charges............................................................. 19
Monthly Charges............................................................... 23
Charges for Transfers......................................................... 24
Reduction in Charges.......................................................... 24
SPECIAL PROVISIONS FOR EXCHANGES
COMPANY TAX CONSIDERATIONS
POLICY VALUE
Determination of the Policy Value............................................. 25
Units and Unit Values......................................................... 26
Transfers of Policy Value..................................................... 26
POLICY LOANS
Effect of Policy Loan......................................................... 28
Interest Charged on Policy Loans.............................................. 28
Loan Account.................................................................. 28
</TABLE>
iv
<PAGE> 9
<TABLE>
<S> <C>
POLICY SURRENDER AND PARTIAL WITHDRAWALS
Policy Surrender.............................................................. 29
Partial Withdrawals........................................................... 29
LAPSE AND REINSTATEMENT
Lapse......................................................................... 29
No-Lapse Guarantee............................................................ 29
No-Lapse Guarantee Cumulative Premium Test.................................... 30
Reinstatement................................................................. 30
THE GENERAL ACCOUNT
Fixed Account................................................................. 31
OTHER PROVISIONS OF THE POLICY
Policyowner Rights............................................................ 32
Beneficiary................................................................... 32
Incontestability.............................................................. 32
Misstatement of Age or Sex.................................................... 32
Suicide Exclusion............................................................. 33
Supplementary Benefits........................................................ 33
TAX TREATMENT OF THE POLICY
Life Insurance Qualification.................................................. 34
Tax Treatment of Policy Benefits.............................................. 35
Alternate Minimum Tax......................................................... 39
Income Tax Reporting.......................................................... 39
OTHER INFORMATION
Payment of Proceeds........................................................... 39
Reports to Policyowners....................................................... 40
Distribution of the Policies.................................................. 40
Responsibilities of Manufacturers Life........................................ 40
Voting Rights................................................................. 41
Substitution of Portfolio Shares.............................................. 41
Records and Accounts.......................................................... 41
State Regulations............................................................. 42
Litigation.................................................................... 42
Independent Auditors.......................................................... 42
Further Information........................................................... 42
Officers and Directors........................................................ 42
Year 2000 Issues.............................................................. 42
Optional Term Rider........................................................... 42
Illustrations................................................................. 45
Financial Statements.......................................................... F-1
Appendix A -- Sample Illustrations of Policy Values,
Cash Surrender Values and Death Benefits...................................... A-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS OF MANUFACTURERS INVESTMENT TRUST, OR THE
STATEMENT OF ADDITIONAL INFORMATION OF MANUFACTURERS INVESTMENT TRUST.
Examine this prospectus carefully. The Policy Summary will briefly describe the
Policy. More detailed information will be found further in the prospectus.
v
<PAGE> 10
DEFINITIONS
Additional Rating
is an increase to the Cost of Insurance Rate for any of the Lives Insured who do
not meet, at a minimum, the Company's underwriting requirements for the standard
Risk Classification.
Age
on any date is each of the Lives Insured's age on their birthday closest to the
policy date.
Attained Age
is the Age plus the number of whole years that have elapsed since the Policy
Date.
Business Day
is any day that the New York Stock Exchange is open for trading. The net asset
value of the underlying shares of a Sub-Account will be determined as of the end
of each Business Day. The Company will deem each Business Day to end at the
close of regularly scheduled trading of the New York Stock Exchange (currently
4:00 p.m. Eastern Time) on that day.
Cash Surrender Value
is the Policy Value less the Surrender Charge and any outstanding Monthly
Deductions due.
Effective Date
is the date the 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.
Gross Withdrawal
is the amount of partial Net Cash Surrender Value the policyowner requests plus
any Surrender Charge applicable to the withdrawal.
Investment Account
is that part of the Policy Value which reflects the value the policyowner has in
one of the sub-accounts of the Separate Account.
Issue Date
is the date the Company issued the Policy. The Issue Date is also the date from
which the Suicide and Validity provisions of the Policy are measured.
Life Insured
is the last-to-die of the Lives Insured.
<PAGE> 11
Lives Insured
are the persons whose lives are insured under this policy. References to the
youngest of the Lives Insured means the youngest person insured under this
policy when it is first issued.
Loan Account
is that part of the Policy Value which reflects the value transferred from the
Fixed Account or the Investment Accounts as collateral for a policy loan.
Net Cash Surrender Value
is the Cash Surrender Value less the Policy Debt.
Net Policy Value
is the Policy Value less the value in the Loan Account.
Net Premium
is the gross premium paid less any amounts deducted from the premium. It is the
amount of premium allocated to the Fixed Account and/or Investment Accounts.
No-Lapse Guarantee
When the Policy is in the No-Lapse Guarantee Period, as long as the No-Lapse
Guarantee Cumulative Premium Test is met, the Policy will not lapse, even when
the Net Cash Surrender Value falls to or below zero.
No-Lapse Guarantee Period
is the period, set at issue, during which the No-Lapse Guarantee is provided.
The No-Lapse Guarantee period is fixed at the lesser of (a) [ten][twenty] years
or (b) the number of years remaining until the life insured's age is 95,
depending upon applicable state law requirements Certain states may have a
shorter guarantee period. The No Lapse Guarantee Period for a particular Policy
is stated in the Policy.
No-Lapse Guarantee Premium
is set at issue and is recalculated whenever there is a policy change.
No-Lapse Guarantee Cumulative Premium
is the minimum amount due to satisfy the No-Lapse Guarantee Cumulative Premium
Test. This amount will change if any of the following changes occur under the
Policy:
- - the face amount of insurance changes.
- - a Supplementary Benefit is added, changed or terminated.
- - the risk classification of any of the Lives Insured changes because of a
change in smoking status.
- - a temporary Additional Rating is added (due to a face amount increase), or
terminated.
- - the Death Benefit Option Changes.
No-Lapse Guarantee Cumulative Premium Test
is a test that is satisfied if the sum of all premiums paid, less any gross
partial withdrawals and less any Policy Debt, is
7
<PAGE> 12
greater than or equal to the sum of the monthly No-Lapse Guarantee Premiums due
since the Policy Date.
Policy Date
is the date coverage takes effect under the Policy, provided the Company
receives 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.
Service Office Address
is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
Surrender Charge Period
is the period following the Issue Date or following any increase in Face Amount
during which the Company will assess surrender charges. Surrender charges will
apply during this period if the policy terminates due to default, if the
policyowner surrenders the policy or makes a partial withdrawal.
Written Request
is the policyowner's request to the Company which must be in a form satisfactory
to the Company, signed and dated by the policyowner, and received at the Service
Office.
8
<PAGE> 13
POLICY SUMMARY
GENERAL
The Policy is a flexible premium survivorship variable universal life insurance
policy. The following summary is intended to provide a general description of
the most important features of the Policy. It is not comprehensive and is
qualified in its entirety by the more detailed information contained in this
prospectus. Unless otherwise indicated or required by the context, the
discussion throughout this prospectus assumes that the Policy has not gone into
default, there is no outstanding Policy Debt, and the death benefit is not
determined by the minimum death benefit percentage. The Policy's provisions may
vary in some states.
DEATH BENEFITS
The Policy provides a death benefit in the event of the death of the last-to-die
of the Lives Insured. There are two death benefit options. Under Option 1 the
death benefit is the Face Amount of the Policy at the date of death or, if
greater, the Minimum Death Benefit. Under Option 2 the death benefit is the Face
Amount plus the Policy Value of the Policy at the date of death or, if greater,
the Minimum Death Benefit. The policyowner may change the death benefit option
and increase or decrease the Face Amount.
[Optional Term Rider
The Policy may be issued with an optional term insurance rider (the "Term
Rider"). The benefit of the term rider is that the cost of insurance rates will
always be less than or equal to the cost of insurance rates on the Policy.
HOWEVER, UNLIKE THE DEATH BENEFIT UNDER THE POLICY, THE DEATH BENEFIT UNDER THE
TERM RIDER IS NOT PROTECTED BY THE NO-LAPSE GUARANTEE AFTER THE SECOND POLICY
YEAR AND TERMINATES AT AGE 100.]
PREMIUMS
Premium payments may be made at any time and in any amount, subject to certain
limitations as described under "Premium Payments -- Subsequent Premiums." Net
Premiums will be allocated, according to the policyowner's instructions, to one
or more of the general account and the sub-accounts of Manufacturers Life of
America's Separate Account Three. Allocation instructions may be changed at any
time and transfers among the accounts may be made.
POLICY VALUE
The Policy has a Policy Value reflecting premiums paid, certain charges for
expenses and cost of insurance, and the investment performance of the accounts
to which the policyowner has allocated premiums. The policyowner may obtain a
portion of the Policy Value by taking a policy loan or a partial withdrawal, or
by full surrender of the Policy.
POLICY LOANS
The policyowner may borrow against the Cash Surrender Value of the Policy. Loan
interest at a rate of 5.25% is due and payable in arrears on each Policy
Anniversary. All outstanding Policy Debt will be deducted from proceeds payable
at the insured's death, or upon surrender.
SURRENDER AND PARTIAL WITHDRAWALS
The policyowner may make a partial withdrawal of the Policy Value. A partial
withdrawal may result in a reduction in the Face Amount of the Policy and an
assessment of a portion of the surrender charges to which the Policy is subject.
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the Life Insured is living. The Net Cash Surrender Value is equal to the Policy
Value less Surrender Charges and outstanding Monthly Deductions due minus the
Policy Debt.
9
<PAGE> 14
LAPSE AND REINSTATEMENT
Unless the No-Lapse Guarantee is in effect, a Policy will lapse (and terminate
without value) when the Net Cash Surrender Value is insufficient to pay the next
monthly deduction and a grace period of 61 days expires without an adequate
payment being made by the policyowner. If the No-Lapse Guarantee is in effect,
the Policy will lapse if the No-Lapse Guarantee Cumulative Premium Test (see
definition) has not been met.
The Policies, therefore, differ in two important respects from conventional life
insurance policies. First, the failure to make planned premium payments will not
itself cause a Policy to lapse. Second, a Policy can lapse even if planned
premiums have been paid.
A lapsed Policy may be reinstated by the policyowner at any time within the five
year period following lapse provided none of the Lives Insured dies after the
policy termination and the Policy was not surrendered for its Net Cash Surrender
Value. Evidence of insurability is required, along with a certain amount of
premium as described under "Reinstatement."
CHARGES AND DEDUCTIONS
The Company assesses certain charges and deductions in connection with the
Policy. These include: (i) charges assessed monthly for mortality and expense
risks, cost of insurance, administration expenses, (ii) amounts deducted from
premiums paid (iii) and charges assessed on surrender or lapse. These charges
are summarized in the Table of Charges and Deductions.
In addition, there are charges deducted from each Portfolio of the Trust. These
charges are summarized in the Table of Investment Management Fees and Expenses.
INVESTMENT OPTIONS AND INVESTMENT ADVISERS
Net Premiums may be allocated to the general account or to one or more of the
sub-accounts of Manufacturers Life of America's Separate Account Three. Each of
the sub-accounts invests in the shares of one of the Portfolios of the Trust.
The Trust receives investment advisory services from Manufacturers Securities
Services, LLC ("MSS"). MSS is a registered investment adviser under the
Investment Advisers Act of 1940. The Trust also employs subadvisers. The Table
of Investment Options and Investment Subadvisers shows the subadvisers that
provide investment subadvisory services to the indicated Portfolios.
INVESTMENT MANAGEMENT FEES AND EXPENSES
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects investment management fees and certain
expenses. The fees and expenses for each Portfolio for the Trust's last fiscal
year are shown in the Table of Investment Management Fees and Expenses. These
fees and expenses are described in detail in the accompanying Trust prospectus
to which reference should be made.
TABLE OF CHARGES AND DEDUCTIONS
<TABLE>
<CAPTION>
Amount Deducted from Premium 7.50% of each premium paid.
<S> <C>
Surrender Charges A Surrender Charge is applicable during the
first 15 Policy Years. The Surrender Charge is
determined by the following formula:
Surrender Charge = (Surrender Charge Rate) x
(Grading Percentage)
The Grading Percentage is based on the issue
age of the youngest insured and the policy year
in which the transaction causing the assessment
of the charge occurs and is set forth in the
table under "Surrender Charges."
The Surrender Charge Rate is calculated as
follows:
Surrender Charge Rate = (Factor) x (Surrender
Face Amount / 1000) + (82.5%) x
</TABLE>
10
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C>
(Surrender Charge Premium)
The Surrender Charge Premium is the lesser of:
(a) the premiums paid during the first policy
year;
(b) the premium amount used to measure the
maximum Surrender Charge under the Policy;
(c) the net level annual premium required to
provide level insurance to attained age 100 of
the younger insured based on guaranteed monthly
mortality charges and an interest rate of 4%;
and
(d) $60 per $1000 of Face Amount.
A portion of this charge may be assessed on a
partial withdrawal, as set forth under "Charges
and Deductions -- Surrender Charges on a
Partial Withdrawal."
Monthly Deductions An administration charge of $30 plus $0.08 per
$1,000 of current face amount per policy month
will be deducted in the first policy year. In
subsequent years, the administration charge
will not exceed $15 plus $0.02 per $1,000 of
current Face Amount per policy month.
The cost of insurance charge.
Any additional charges for supplementary
benefits.
A mortality and expense risks charge. This
charge varies by Policy Year as follows:
</TABLE>
<TABLE>
<CAPTION>
CURRENT AND
GUARANTEED EQUIVALENT
MONTHLY ANNUAL
MORTALITY MORTALITY AND
AND EXPENSE EXPENSE
RISKS CHARGE RISK CHARGE
- --------------------------------------------------------------------------------
POLICY YEARS
<S> <C> <C>
1-20.......................................... 0.063% 0.75%
21+........................................... 0.033% 0.40%
</TABLE>
All of the above charges are deducted from the Net Policy Value.
Loan Charges A fixed loan interest rate of 5.25%.
Interest credited to amounts in the Loan
Account will be equal to the 5.25% rate
charged to the loan less the current and
maximum loan spread of 1.25%.
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 as of fiscal year ended
December 31, 1999)
- --------------------------------------------------------------------------------
11
<PAGE> 16
<TABLE>
<CAPTION>
TOTAL TRUST
OTHER EXPENSES ANNUAL EXPENSES
MANAGEMENT (AFTER EXPENSE (AFTER EXPENSE
TRUST PORTFOLIO FEES REIMBURSEMENT) REIMBURSEMENT)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets........ 0.850% 0.260% 1.110%
Science & Technology................ 1.100% 0.060% 1.160%
International Small Cap............. 1.100% 0.270% 1.370%
Aggressive Growth................... 1.000%(F) 0.130% 1.130%
Emerging Small Company.............. 1.050% 0.070% 1.120%
Small Company Blend................. 1.050% 0.250%(A) 1.300%(E)
Mid Cap Growth...................... 0.950%(F) 0.070% 1.020%
Mid Cap Stock....................... 0.925% 0.100%(A) 1.025%(E)
Overseas............................ 0.950% 0.260% 1.210%
International Stock................. 1.050% 0.200% 1.250%
International Value................. 1.000% 0.230%(A) 1.230%(E)
Mid Cap Blend....................... 0.850%(F) 0.060% 0.910%
Small Company Value................. 1.050% 0.170% 1.220%
Global Equity....................... 0.900% 0.160% 1.060%
Growth.............................. 0.850% 0.050% 0.900%
Large Cap Growth.................... 0.875%(F) 0.100% 0.975%
Quantitative Equity................. 0.700% 0.060% 0.760%
Blue Chip Growth.................... 0.875%(F) 0.050% 0.925%
Real Estate Securities.............. 0.700% 0.070% 0.770%
Value............................... 0.800% 0.070% 0.870%
Equity Index........................ % %(G) %(G)
Growth & Income..................... 0.750% 0.050% 0.800%
U.S. Large Cap Value................ 0.875% 0.070%(A) 0.945%(E)
Equity-Income....................... 0.875%(F) 0.060% 0.935%
Income & Value...................... 0.800%(F) 0.080% 0.880%
Balanced............................ 0.800% 0.070% 0.870%
High Yield.......................... 0.775% 0.065% 0.840%
Strategic Bond...................... 0.775% 0.095% 0.870%
Global Bond......................... 0.800% 0.180% 0.980%
Total Return........................ 0.775% 0.060%(A) 0.835%(E)
Investment Quality Bond............. 0.650% 0.120% 0.770%
Diversified Bond.................... 0.750% 0.090% 0.840%
U.S. Government Securities.......... 0.650% 0.070% 0.720%
Money Market........................ 0.500% 0.050% 0.550%
Lifestyle Aggressive 1000(D)........ 0.075% 1.060%(B) 1.135%(C)
Lifestyle Growth 820(D)............. 0.057% 0.990%(B) 1.047%(C)
Lifestyle Balanced 640(D)........... 0.057% 0.910%(B) 0.967%(C)
Lifestyle Moderate 460(D)........... 0.066% 0.860%(B) 0.926%(C)
Lifestyle Conservative 280(D)....... 0.075% 0.780%(B) 0.855%(C)
</TABLE>
(A) Based on estimates of payments to be made during the current fiscal year.
(B) Reflects expenses of the Underlying Portfolios.
(C) The investment adviser to the Trust, The Manufacturers Securities Services,
LLC ("MSS" or "the Adviser"), has voluntarily agreed to pay certain expenses of
each Lifestyle Trust (excluding the expenses of the Underlying Portfolios) as
noted below. This voluntary expense reimbursement may be terminated at any time.
If such expense reimbursement was not in effect, Total Trust Annual Expenses
would be 0.03% higher, except for the Lifestyle Conservative 280 Trust, which
would be 0.04% higher (based on current advisory fees and Other Expenses of the
Lifestyle Trusts for the fiscal year ended December 31, 1999) as noted in the
chart below:
12
<PAGE> 17
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Aggressive 1000........... 0.075% 1.090% 1.165%
Lifestyle Growth 820................ 0.057% 1.030% 1.087%
Lifestyle Balanced 640.............. 0.057% 0.940% 0.997%
Lifestyle Moderate 460.............. 0.066% 0.900% 0.966%
Lifestyle Conservative 280.......... 0.075% 0.810% 0.885%
</TABLE>
If total expenses of a Lifestyle Trust (absent reimbursement) exceed .075%, the
Adviser will reduce the advisory fee or reimburse expenses of that Lifestyle
Trust by an amount such that total expenses of the Lifestyle Trust including the
advisory fee but excluding: (a) the expenses of the underlying portfolios, (b)
taxes, (c) portfolio brokerage, (d) interest, (e) litigation and (f)
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Trust's business, equal 0.075%. If the total expenses of
a Lifestyle Trust (absent reimbursement) are equal to or less than 0.075%, then
no expenses will be reimbursed by the Adviser.
(D) Each Lifestyle Trust will invest in shares of the Underlying Portfolios.
Therefore, each Lifestyle Trust will bear its pro rata share of the fees and
expenses incurred by the Underlying Portfolios in which it invests, and the
investment return of each Lifestyle Trust will be net of the Underlying
Portfolio expenses. Each Lifestyle Portfolio must bear its own expenses.
However, the Adviser is currently paying certain of these expenses as described
in footnote (C) above.
(E) Annualized - For the period May 1, 1999 (commencement
of operations) to December 31, 1999.
(F) Management Fees changed effective May 1,
1999. Fees shown are the current management fees.
(G) 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) exceeds 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 the Adviser 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.
TABLE OF INVESTMENT OPTIONS AND INVESTMENT ADVISERS
MSS is the investment adviser to the Trust. The Trust currently has sixteen
subadvisers who manage all of the portfolios, one of which subadvisers is
Manufacturers Adviser Corporation ("MAC"). Both MSS and MAC are affiliates of
Manufacturers Life Insurance Company of America.
<TABLE>
<CAPTION>
SUBADVISER PORTFOLIO
<S> <C>
A I M Capital Management, Inc. Mid Cap Growth Trust
Aggressive Growth Trust
AXA Rosenberg Investment Management 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
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C>
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Equity Index Trust
Money Market Trust
Lifestyle Trusts (A)
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
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
State Street Global Advisors Growth Trust
Lifestyle Trusts (A)
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
</TABLE>
(A) State Street Global Advisors provides subadvisory consulting services to
Manufacturers Adviser Corporation regarding management of the Lifestyle Trusts.
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
The Manufacturers Life Insurance Company 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. Its ultimate
parent entity is Manulife Financial Corporation ("MFC"), based in Toronto,
Canada. MFC is the holding company of The Manufacturers Life Insurance Company
("Manufacturers Life") and its subsidiaries, collectively known as Manulife
Financial. The Manufacturers Life Insurance Company is one of the largest life
insurance companies in North America and ranks among the 60 largest life
insurers in the world as measured by assets. However, neither Manufacturers Life
nor any of it's affiliated companies guarantees the investment performance of
the Separate Account.
RATINGS
Manufacturers Life and Manufacturers Life of America have received the following
ratings from independent rating agencies:
Standard and Poor's Insurance Ratings Service: AA+ (for financial strength)
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<PAGE> 19
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 Manufacturers Life of America as a measure of
the Company's ability to honor the death benefit and life annuitization
guarantees but not specifically to its products, the performance (return) of
these products, the value of any investment in these products upon withdrawal or
to individual securities held in any portfolio.
SEPARATE ACCOUNT THREE
Manufacturers Life of America established its Separate Account Three on August
22, 1986 as a separate account under Pennsylvania Law. Since December 9, 1992,
it has been operated under Michigan Law. The Separate Account holds assets that
are segregated from all of Manufacturers Life of America's other assets. The
Separate Account is currently used only to support variable life insurance
policies.
Assets of the Separate Account
Manufacturers Life of America is the legal owner of the assets in the Separate
Account. The income, gains, and losses of the Separate Account, whether or not
realized, are, in accordance with applicable contracts, credited to or charged
against the Account without regard to the other income, gains, or losses of
Manufacturers Life of America. Manufacturers Life of America will at all times
maintain assets in the Separate Account with a total market value at least equal
to the reserves and other liabilities relating to variable benefits under all
policies participating in the Separate Account. These assets may not be charged
with liabilities which arise from any other business Manufacturers Life of
America conducts. However, all obligations under the variable life insurance
policies are general corporate obligations of Manufacturers Life of America.
Registration
The Separate Account is registered with the Securities and Exchange Commission
("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. A unit investment trust is a type of investment company which
invests its assets in specified securities, such as the shares of one or more
investment companies, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the S.E.C.
of the management or investment policies or practices of the Separate Account.
For state law purposes the Separate Account is treated as a part or division of
Manufacturers Life of America.
MANUFACTURERS INVESTMENT TRUST
Each sub-account of the Separate Account will purchase shares only of a
particular Portfolio. The Trust is registered under the 1940 Act as an open-end
management investment company. The Separate Account will purchase and redeem
shares of the Portfolios at net asset value. Shares will be redeemed to the
extent necessary for Manufacturers Life of America to provide benefits under the
Policies, to transfer assets from one sub-account to another or to the general
account as requested by policyowners, and for other purposes not inconsistent
with the Policies. Any dividend or capital gain distribution received from a
Portfolio with respect to the Policies will be reinvested immediately at net
asset value in shares of that Portfolio and retained as assets of the
corresponding sub-account.
The Trust shares are issued to fund benefits under both variable annuity
contracts and variable life insurance policies issued by the Company or life
insurance companies affiliated with the Company. Manufacturers Life of America
may also purchase shares through its general account for certain limited
purposes including initial portfolio seed money. For a description of the
procedures for handling potential conflicts of interest arising from the funding
of such benefits see the accompanying Trust prospectus.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The investment objectives and certain policies of the Portfolios currently
available to policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met. A
full description of the Trust, its investment objectives, policies and
restrictions, the risks associated therewith, its expenses, and other aspects of
its operation is contained in the accompanying Trust prospectus, which should be
read together with this prospectus.
15
<PAGE> 20
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
companies with market capitalizations that approximately match the range of
capitalization of the Russell 2000 Index ("small cap stocks") at the time of
purchase.
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 capitalizations
that approximately match the range of capitalization of the Russell 2000 Index
("small cap stocks") at the time of purchase.
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 portfolios' assets in foreign securities (including American Depositary
Receipts (ADRs) and European Depositary Receipts (EDRs). The portfolios 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 in 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.
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<PAGE> 21
The GROWTH TRUST seeks long-term growth of capital by investing primarily in
large capitalization growth securities (market capitalizations 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.
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-tem
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.
17
<PAGE> 22
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 PIMCO'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 as is 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.
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.
18
<PAGE> 23
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 and/or smoking status, with prior approval from the Company. A
Policy will generally be issued only on the lives of insureds from ages 0
through 90.
Each Policy is issued with a Policy Date, an Effective Date and an Issue Date
(see Definitions). The Issue Date is the date from which the Suicide and
Validity provisions of the Policy are determined and is the expected date of
actual delivery of the Policy to the policyowner. The Effective Date is the date
on which the first monthly deductions are taken, and is the date on which the
underwriters approve the Policy issuance. The Policy Date is the date coverage
takes effect under the Policy, provided the Company receives the minimum initial
premium at its Service Office, is the date from which charges for the first
monthly deduction are calculated, and is the date from which Policy Years,
Policy Months and Policy Anniversaries are determined.
If an application is accompanied by a check for the initial premium and the
application is accepted:
(i) the Policy Date will be the date the application and check were
received at the Service Office (unless a special Policy Date is
requested (See "Backdating a Policy" below));
(ii) the Effective Date will be the date the Company's underwriters approve
issuance of the Policy; and
(iii) the Issue Date will be the date the Company issues the Policy.
If an application accepted by the Company is not accompanied by a check for the
initial premium:
(i) the Policy Date will be the date the Company issues the Policy (unless
a special Policy Date is requested (See "Backdating a Policy" below);
(ii) the Effective Date will be the date the Service Office receives the
initial premium; and
(iii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Policy Date. If
the premium is not paid or if the application is rejected, the Policy will be
canceled and any partial premiums paid will be returned to the applicant.
MINIMUM INITIAL FACE AMOUNT
Manufacturers Life of America will generally issue a Policy only if it has a
Face Amount of at least $250,000.
BACKDATING A POLICY
Under limited circumstances, the Company may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
However, in no event will a Policy be backdated earlier than the earliest date
allowed by state law, which is generally three months to one year prior to the
date of application for the Policy. Monthly deductions will be made for the
period the Policy Date is backdated. Regardless of whether or not a policy is
backdated, Net Premiums received prior to the Effective Date of a Policy will be
credited with interest from the date of receipt at the rate of return then being
earned on amounts allocated to the Money Market portfolio.
TEMPORARY INSURANCE AGREEMENT
In accordance with the Company's underwriting practices, temporary insurance
coverage may be provided under the terms
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<PAGE> 24
of a Temporary Insurance Agreement. Generally, temporary life insurance may not
exceed $5,000,000 and may not be in effect for more than 90 days. This temporary
insurance coverage will be issued on a conditional receipt basis, which means
that any benefits under such temporary coverage will only be paid if the Lives
Insured meet the Company's usual and customary underwriting standards for the
coverage applied for.
The acceptance of an application is subject to the Company's underwriting rules,
and the Company reserves the right to request additional information or to
reject an application for any reason.
Persons failing to meet standard underwriting classification may be eligible for
a Policy with an additional rating assigned to it.
RIGHT TO EXAMINE THE POLICY
A Policy may be returned for a refund within 10 days after it is received. Some
states provide a longer period of time to exercise this right. The Policy will
indicate if a longer time period applies. The Policy can be mailed or delivered
to the Manufacturers Life of America agent who sold it or to the Service Office.
Immediately on such delivery or mailing, the Policy shall be deemed void from
the beginning. Within seven days after receipt of the returned Policy at its
Service Office, the Company will refund in full the payment made.
If a policyowner requests an increase in face amount which results in new
surrender charges, he or she will have the same rights as described above to
cancel the increase. If canceled, the Policy Value and the surrender charges
will be recalculated to the amounts they would have been had the increase not
taken place. A policyowner may request a refund of all or any portion of
premiums paid during the free look period, and the Policy Value and the
surrender charges will be recalculated to the amounts they would have been had
the premiums not been paid.
The Company reserves the right to delay the refund of any premium paid by check
until the check has cleared.
DEATH BENEFITS
If the Policy is in force at the time of the death of the last-to-die of the
Lives Insured, the Company will pay an insurance benefit. The amount payable
will be the death benefit under the selected death benefit option, plus any
amounts payable under any supplementary benefits added to the Policy, less the
Policy Debt and less any outstanding monthly deductions due. The insurance
benefit will be paid in one lump sum unless another form of settlement option is
agreed to by the beneficiary and the Company. If the insurance benefit is paid
in one sum, the Company will pay interest from the date of death to the date of
payment. If the Life Insured should die after the Company's receipt of a request
for surrender, no insurance benefit will be payable, and the Company will pay
only the Net Cash Surrender Value.
LIFE INSURANCE QUALIFICATION
This product uses the Guideline Premium Test to qualify as a life insurance
contract for purposes of Section 7702 of the Internal Revenue Code of 1986, as
amended.
GUIDELINE PREMIUM TEST
The Guideline Premium Test restricts the maximum premiums that may be paid into
a life insurance policy for a given death benefit. The policy's death benefit
must also be at least equal to the Minimum Death Benefit (described below).
Changes to the Policy may affect the maximum amount of premiums, such as:
- - A change in the policy's Face Amount.
- - A change in the death benefit option.
- - Partial Withdrawals.
- - Addition or deletion of supplementary benefits.
Any of the above changes could cause the total premiums paid to exceed the new
maximum limit. In this situation, the Company will require the policyowner to
take a partial withdrawal. In addition, these changes could reduce the future
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<PAGE> 25
premium limitations.
MINIMUM DEATH BENEFIT
The Guideline Premium Test requires a life insurance policy to meet minimum
ratios of life insurance coverage to policy value. This is achieved by ensuring
that the death benefit is at all times at least equal to the Minimum Death
Benefit. The Minimum Death Benefit on any date is defined as the Policy Value on
that date times the applicable Minimum Death Benefit Percentage for the Attained
Age of the youngest of the Lives Insured would have reached if living. The
Minimum Death Benefit Percentages are shown in the Table of Minimum Death
Benefit Percentages.
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED AGE APPLICABLE PERCENTAGE
----------------------------------------------------------- ---------------------
<S> <C>
40 and under.............................................. 250%
45........................................................ 215%
50........................................................ 185%
55........................................................ 150%
60........................................................ 130%
65........................................................ 120%
70........................................................ 115%
75........................................................ 105%
90........................................................ 105%
95 and above.............................................. 100%
</TABLE>
To determine the Applicable Percentage in the above table, use the Attained Age
of the youngest of the Lives Insured, or the Attained Age such person would have
reached if living. For ages not shown, the Applicable Percentage can be found by
reducing the values proportionately
DEATH BENEFIT OPTIONS
There are two death benefit options, described below.
DEATH BENEFIT OPTION 1
Under Option 1 the death benefit is the Face Amount of the Policy at the date of
death or, if greater, the Minimum Death Benefit.
DEATH BENEFIT OPTION 2
Under Option 2 the death benefit is the Face Amount plus the Policy Value of the
Policy at the date of death or, if greater, the Minimum Death Benefit.
CHANGING THE DEATH BENEFIT OPTION
The death benefit option may be changed on the first day of any policy month
once each Policy Year after the first Policy Year. The change will occur on the
first day of the next Policy Month after a written request for a change is
received at the Service Office. The Company reserves the right to limit a
request for a change if the change would cause the Policy to fail to qualify as
life insurance for tax purposes.
A change in the death benefit option will result in a change in the Policy's
Face Amount, in order to avoid any change in the amount of the death benefit, as
follows:
CHANGE FROM OPTION 1 TO OPTION 2
The new Face Amount will be equal to the Face Amount prior to the change minus
the Policy Value as of the date of the change. The Policy will not be assessed a
Surrender Charge for a reduction in Face Amount solely due to a change in the
death benefit option.
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<PAGE> 26
CHANGE FROM OPTION 2 TO OPTION 1
The new Face Amount will be equal to the Face Amount prior to the change plus
the Policy Value as of the date of the change. No new Surrender Charges will
apply to an increase in Face Amount solely due to a change in the death benefit
option.
CHANGING THE FACE AMOUNT
Subject to the limitations stated in this Prospectus, a policyowner may, upon
written request, increase or decrease the Face Amount of the Policy. The Company
reserves the right to limit a change in Face Amount so as to prevent the Policy
from failing to qualify as life insurance for tax purposes.
INCREASE IN FACE AMOUNT
Increases in Face Amount may be made once each Policy Year after the first
Policy Year. Any increase in Face Amount must be at least $50,000. An increase
will become effective at the beginning of the policy month following the date
Manufacturers Life of America approves the requested increase. Increases in Face
Amount are subject to satisfactory evidence of insurability. The Company
reserves the right to refuse a requested increase if any of the Lives Insureds'
Attained Ages at the effective date of the increase would be greater than the
maximum issue age for new Policies at that time.
NEW SURRENDER CHARGES FOR AN INCREASE
An increase in face amount will usually result in the Policy being subject to
new surrender charges. There will be no new surrender charges associated with
restoration of a prior decrease in Face Amount. As with the purchase of a
Policy, a policyowner will have free look right with respect to any increase
resulting in new surrender charges.
An additional premium may be required for a face amount increase, and a new
No-Lapse Guarantee Premium will be determined, if the No-Lapse Guarantee is in
effect at the time of the face amount increase.
INCREASE WITH PRIOR DECREASES
If, at the time of the increase, there have been prior decreases in Face Amount,
these prior decreases will be restored first. The insurance coverage eliminated
by the decrease of the oldest face amount will be deemed to be restored first.
DECREASE IN FACE AMOUNT
Decreases in Face Amount may be made once each Policy Year after the first
Policy Year. Any decrease in Face Amount must be at least $50,000. A written
request from a policy owner for a decrease in the Face Amount will be effective
at the beginning of the Policy Month following the date Manufacturers Life of
America approves the requested decrease. If there have been previous increases
in Face Amount, the decrease will be applied to the most recent increase first
and thereafter to the next most recent increases successively.
PREMIUM PAYMENTS
INITIAL PREMIUMS
No premiums will be accepted prior to receipt of a completed application by the
Company. All premiums received prior to the Effective Date of the Policy will be
held in the general account and credited with interest from the date of receipt
at the rate of return then being earned on amounts allocated to the Money Market
Trust.
The minimum initial premium is one-twelfth of the No-Lapse Guarantee Premium.
On the Effective Date, the Net Premiums paid plus interest credited will be
allocated among the Investment Accounts or the Fixed Account in accordance with
the policyowner's instructions.
SUBSEQUENT PREMIUMS
After the payment of the initial premium, premiums may be paid at any time and
in any amount until the youngest of the Lives Insured has reached Attained Age
100, or the date such person would have reached Attained Age 100, if living,
subject
22
<PAGE> 27
to the limitations on premium amount described below.
A Policy will be issued with a planned premium, which is based on the amount of
premium the policyowner wishes to pay. Manufacturers Life of America will send
notices to the policyowner setting forth the planned premium at the payment
interval selected by the policyowner. However, the policyowner is under no
obligation to make the indicated payment.
The Company may refuse any premium payment that would cause the Policy to fail
to qualify as life insurance under the Internal Revenue Code. The Company also
reserves the right to request evidence of insurability if a premium payment
would result in an increase in the Death Benefit that is greater than the
increase in Policy Value.
Payment of premiums will not guarantee that the Policy will stay in force.
Conversely, failure to pay premiums will not necessarily cause the Policy to
lapse.
All Net Premiums received on or after the Effective Date will be allocated among
Investment Accounts or the Fixed Account as of the Business Day the premiums
were received at the Service Office. Monthly deductions are due on the Policy
Date and at the beginning of each Policy Month thereafter. However, if due prior
to the Effective Date, they will be taken on the Effective Date instead of the
dates they were due.
MAXIMUM PREMIUM LIMITATION
In no event may the total of all premiums paid exceed the then current maximum
premium limitations established by federal income tax law for a Policy to
qualify as life insurance.
If, at any time, a premium is paid which would result in total premiums
exceeding the above maximum premium limitation, the Company will only accept
that portion of the premium which will make the total premiums equal to the
maximum. Any part of the premium in excess of that amount will be returned and
no further premiums will be accepted until allowed by the then current maximum
premium limitation.
PREMIUM ALLOCATION
Premiums may be allocated to either the 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.
CHARGES AND DEDUCTIONS
AMOUNT DEDUCTED FROM PREMIUM
Manufacturers Life of America deducts an amount from each premium payment, equal
to 7.50% of the premium.
SURRENDER CHARGES
The Company will deduct a Surrender Charge if during the first 15 years
following the Policy Date, or the effective date of a Face Amount increase:
- - the Policy is surrendered for its Net Cash Surrender Value,
- - a partial withdrawal is made in excess of the Withdrawal Tier Amount
(see below for a description of this amount), or
- - the Policy lapses.
SURRENDER CHARGE CALCULATION
The Surrender Charge for the initial Face Amount or for the amount of any
increase in Face Amount is determined by the following formula (the calculation
is also described in words below):
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<PAGE> 28
Surrender Charge = (Surrender Charge Rate) x (Grading Percentage)
Surrender Charge Rate (the calculation is also described in words below)
Surrender Charge Rate = (Factor) x (Surrender Face Amount / 1000) + (82.5%) x
(Surrender Charge Premium)
DEFINITIONS OF THE FORMULA FACTORS ABOVE
Surrender Face Amount
If the Face Amount at the time of surrender is equal to or less than the initial
Face Amount, then the Surrender Face Amount is equal to the Face Amount at the
time of surrender. However, if the Face Amount has increased, then the surrender
charge is calculated separately on (a) the initial Face Amount and (b) on the
amount of Face Amount above the initial Face Amount. In the case of (a), the
Surrender Face Amount is equal to the initial Face Amount and in the case of (b)
the Surrender Face Amount is equal to the Face Amount above the initial Face
Amount.
The Factor is set forth in the following chart:
<TABLE>
<CAPTION>
ISSUE AGE FACTOR
- ------------------------------------------------------------------------- ------
<S> <C>
38 or younger......................................................... 3.75
39.................................................................... 4.25
40.................................................................... 4.75
41.................................................................... 5.25
42.................................................................... 5.75
43.................................................................... 6.25
44.................................................................... 6.75
45.................................................................... 7.25
46.................................................................... 7.75
47.................................................................... 8.25
48 or older........................................................... 8.50
</TABLE>
The Surrender Charge Premium is the lesser of:
(a) the premiums paid during the first policy year;
(b) the premium amount used to measure the maximum Surrender Charge under
the Policy;
(c) the net level annual premium ("Net Level Premium") required to provide
level insurance to attained age 100 of the younger insured based on
guaranteed maximum mortality charges and an interest rate of 4%; and
(d) $60 per $1000 of Face Amount.
Grading Percentage
The grading percentage is based on the issue age of the youngest insured and the
Policy Year in which the transaction causing the assessment of the charge occurs
as set forth in the table below:
<TABLE>
<CAPTION>
SURRENDER CHARGE GRADING PERCENTAGE
--------------------------------------------------------------
ISSUE AGES OF YOUNGER INSURED 0-75 76 77 78 79 80+
- --------------------------------------------------------------- --------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Policy Year 1............................................... 93% 92% 92% 91% 90% 90%
Policy Year 2............................................... 86% 85% 84% 83% 81% 80%
Policy Year 3............................................... 80% 78% 76% 75% 72% 70%
Policy Year 4............................................... 73% 71% 69% 66% 63% 60%
Policy Year 5............................................... 66% 64% 61% 58% 54% 50%
Policy Year 6............................................... 60% 57% 53% 50% 45% 40%
Policy Year 7............................................... 53% 50% 46% 41% 36% 30%
Policy Year 8............................................... 46% 42% 38% 33% 27% 20%
Policy Year 9............................................... 40% 35% 30% 25% 18% 10%
Policy Year 10.............................................. 33% 28% 23% 16% 9% 0%
Policy Year 11.............................................. 26% 21% 15% 8% 0%
Policy Year 12.............................................. 20% 14% 7% 0%
Policy Year 13.............................................. 13% 7% 0%
Policy Year 14.............................................. 6% 0%
Policy Year 15.............................................. 0%
</TABLE>
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<PAGE> 29
Formulas Described in Words
Surrender Charge
The Surrender Charge is determined by multiplying the Surrender Charge Rate by
the Grading Percentage, a percent which starts at 100% and grades down each
policy year to zero over a period not to exceed 15 years.
Surrender Charge Rate
The Surrender Charge Rate is equal to the sum of (a) plus (b) where (a) equals
the Factor multiplied by the Surrender Face Amount divided by 1000 and (b)
equals 82.5% times the Surrender Charge Premium.
Illustration of Surrender Charge Calculation
Assumptions
- - 50 year old male and 40 year old female (standard risks and nonsmoker
status)
- - Policy issued 7 years ago
- - $904 in premiums have been paid on the Policy in equal annual
installments over the 7 year period
- - the premium amount used to measure the maximum Surrender Charge under
the Policy is $2,188
- - Net Level Premium for the Policy is $2,541
- - Face Amount of the Policy is $250,000 o Policy is surrendered during
the last month of the seventh policy year
Surrender Charge
The Surrender Charge to be assessed would be $1,025, determined as follows:
First, the Surrender Charge Rate is determined by applying the Surrender Charge
Rate formula as set forth below.
Surrender Charge Rate = (Factor) x (Surrender Face Amount / 1000) + (82.5%) x
(Surrender Charge Premium)
1933.30 = (4.75) x ($250,000 / 1000) + (82.5%) x (904)
The Surrender Charge Rate is equal to 1933.30.
Second, the Surrender Charge Rate is entered into the Surrender Charge formula
and the Surrender Charge is determined as set forth below.
Surrender Charge = (Surrender Charge Rate) x (Grading Percentage)
$1,025 = (1933.30) x (53%)
The Surrender Charge is equal to $1,025.
The following calculation illustrates the maximum Surrender Charge that would be
payable on a Policy under the assumptions set forth below.
Illustration of Maximum Surrender Charge Calculation
25
<PAGE> 30
Assumptions
- - 50 year old male and 40 year old female (standard risks and nonsmoker
status)
- - Policy issued 7 years ago
- - $2,188 in premiums have been paid on the Policy in equal annual
installments over the 7 year period
- - the premium amount used to measure the maximum Surrender Charge under
the Policy is $2,188
- - Net Level Premium for the Policy is $2,541
- - Face Amount of the Policy is $250,000
- - Policy is surrendered during the last month of the seventh policy year
Maximum Surrender Charge
The maximum Surrender Charge to be assessed would be $1,586, determined as
follows:
First, the Surrender Charge Rate is determined by applying the Surrender Charge
Rate formula as set forth below.
Surrender Charge Rate = (Factor) x (Surrender Face Amount / 1000) + (82.5%) x
(Surrender Charge Premium)
2,992.60 = (4.75) x ($250,000 / 1000) + (82.5%) x (2,188)
The Surrender Charge Rate is equal to 2,992.60.
Second, the Surrender Charge Rate is entered into the Surrender Charge formula
and the Surrender Charge is determined as set forth below.
Surrender Charge = (Surrender Charge Rate) x (Grading Percentage)
$1,586 = (2992.60) x (53%)
The maximum Surrender Charge payable on the Policy is equal to $1,586.
Depending upon the Face Amount of the Policy, the age of the youngest insured at
issue, premiums paid under the Policy and the performance of the underlying
investment options, the Policy may have no Cash Surrender Value and therefore,
the policyowner may receive no surrender proceeds upon surrendering the Policy.
Manufacturers Life of America may reduce the surrender charge as described above
on policies where the anticipated annual premium is $100,000 or greater and the
Policy is issued as part of an employer sponsored split dollar or keyman
arrangement; 80% of the Surrender Charge will be waived during the first year of
the Policy, 60% during the second year and 40% during the third year. The full
Surrender Charge will be imposed if the surrender takes place in a fourth or
subsequent Policy Year.
SURRENDER CHARGES ON A PARTIAL WITHDRAWAL
A partial withdrawal will result in the assessment of a portion of the Surrender
Charges to which the Policy is subject. The portion of the Surrender Charges
assessed will be based on the ratio of the amount of the withdrawal which
exceeds the Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy
as at the date of the withdrawal. The Surrender Charges will be deducted from
the Policy Value at the time of the partial withdrawal on a pro-rata basis from
each of the Investment Accounts and the Fixed Account. If the amount in the
accounts is not sufficient to pay the Surrender Charges assessed, then the
amount of the withdrawal will be reduced.
Whenever a portion of the surrender charges is deducted as a result of a partial
withdrawal, the Policy's remaining surrender charges will be reduced in the same
proportion that the surrender charge deducted bears to the total surrender
charge immediately before the partial withdrawal.
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<PAGE> 31
WITHDRAWAL TIER AMOUNT
The Withdrawal Tier Amount is equal to 10% of the Net Cash Surrender Value as at
the last Policy Anniversary. In determining what, if any, portion of a partial
withdrawal is in excess of the Withdrawal Tier Amount, all previous partial
withdrawals that have occurred in the current Policy Year are included.
MONTHLY CHARGES
On the Policy Date and at the beginning of each Policy Month, a deduction is due
from the Net Policy Value to cover certain charges in connection with the Policy
until the youngest of the Lives Insured reaches Attained Age 100, or the date
such person would have reached Attained Age 100, if living. If there is a Policy
Debt under the Policy, loan interest and principal will continue to be payable
at the beginning of each Policy Month. Monthly deductions due prior to the
Effective Date will be taken on the Effective Date instead of the dates they
were due. The charges consist of:
(i) a monthly administration charge;
(ii) a monthly charge for the cost of insurance;
(iii) a monthly mortality and expense risk charge;
(iv) a monthly charge for any supplementary benefits added to the Policy.
Unless otherwise allowed by the Company and specified by the policyowner, the
Monthly Deduction will be allocated among the Investment Accounts and the Fixed
Account in the same proportion as the Policy value in each bears to the Net
Policy Value.
ADMINISTRATION CHARGE
This charge will be equal to $30 plus $0.08 per $1,000 of current face amount
per Policy Month in the first Policy Year. For all subsequent Policy Years, the
administration charge will not exceed $15 plus $0.02 per $1,000 of current face
amount per Policy Month. The charge is designed to cover certain administrative
expenses associated with the Policy, including maintaining policy records,
collecting premiums and processing death claims, surrender and withdrawal
requests and various changes permitted under the Policy.
COST OF INSURANCE CHARGE
The monthly charge for the cost of insurance is determined by multiplying the
applicable cost of insurance rate times the net amount at risk at the beginning
of each Policy Month. The cost of insurance rate and the net amount at risk are
determined separately for the initial Face Amount and for each increase in Face
Amount. In determining the net amount at risk, if there have been increases in
the Face Amount, the Policy Value shall first be considered a part of the
initial Face Amount. If the Policy Value exceeds the initial Face Amount, it
shall then be considered a part of the additional increases in Face Amount
resulting from the increases, in the order the increases occurred.
The net amount at risk is equal to the greater of zero, or the result of (a)
minus (b) where:
(a) is the death benefit as of the first day of the Policy Month, divided
by 1.0032737; and
(b) is the Policy Value as of the first day of the Policy Month prior to
deduction of monthly cost of insurance.
The rates for the cost of insurance are blended and based upon the Attained Age,
sex, and Risk Classification of the Lives Insured.
Cost of insurance rates will generally increase with the age of each of the
Lives Insured. The first year cost of insurance rate is guaranteed.
The cost of insurance rates reflect the Company's expectations as to future
mortality experience. The rates may be re-determined from time to time on a
basis which does not unfairly discriminate within the class of Lives Insured. In
no event will the cost of insurance rates exceed the guaranteed rates set forth
in the Policy except to the extent that an extra charge is imposed because of an
additional rating applicable to the Lives Insured. After the first Policy Year,
the cost of insurance will
27
<PAGE> 32
generally increase on each Policy Anniversary. The guaranteed rates are based on
the 1980 Commissioners Standard Ordinary Smoker/Non-Smoker Mortality Tables.
CHARGES FOR SUPPLEMENTARY BENEFITS
If the Policy includes Supplementary Benefits, a charge will be made applicable
to such Supplementary Benefit.
MORTALITY AND EXPENSE RISK CHARGE
A monthly charge is assessed against the Policy Value equal to a percentage of
the Policy Value. This charge is to compensate the Company for the mortality and
expense risks it assumes under the Policy. The mortality risk assumed is that
Lives Insured may live for a shorter period of time than the Company estimated.
The expense risk assumed is that expenses incurred in issuing and administering
the Policy will be greater than the Company estimated. The Company will realize
a gain from this charge to the extent it is not needed to provide benefits and
pay expenses under the Policy.
The charge varies by Policy Year as follows:
<TABLE>
<CAPTION>
CURRENT AND
GUARANTEED
MONTHLY MORTALITY EQUIVALENT ANNUAL
AND EXPENSE MORTALITY AND
POLICY YEAR RISKS CHARGE RISKS CHARGE
- ------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
1-20...................................................... 0.063% 0.75%
21+....................................................... 0.033% 0.40%
</TABLE>
CHARGES FOR TRANSFERS
A charge of $25 will be imposed on each transfer in excess of twelve in a Policy
Year, other than transfers made pursuant to the Dollar Cost Averaging or Asset
Allocation Balancer programs.
REDUCTION IN CHARGES
The Policy is available for purchase by corporations and other groups or
sponsoring organizations. Group or sponsored arrangements may include reduction
or elimination of withdrawal charges and deductions for employees, officers,
directors, agents, immediate family members of the foregoing, and employees or
agents of Manufacturers Life and its subsidiaries. Manufacturers Life of America
reserves the right to reduce any of the Policy's loads or charges on certain
cases where it is expected that the amount or nature of such cases will result
in savings of sales, underwriting, administrative, commissions or other costs.
Eligibility for these reductions and the amount of reductions will be determined
by a number of factors, including the number of lives to be insured, the total
premiums expected to be paid, total assets under management for the policyowner,
the nature of the relationship among the insured individuals, the purpose for
which the policies are being purchased, expected persistency of the individual
policies, and any other circumstances which Manufacturers Life of America
believes to be relevant to the expected reduction of its expenses.
Some of these reductions may be guaranteed and others may be subject to
withdrawal or modification, on a uniform case basis. Reductions in charges will
not be unfairly discriminatory to any policyowners. Manufacturers Life of
America may modify from time to time, on a uniform basis, both the amounts of
reductions and the criteria for qualification.
In addition, groups and persons purchasing under a sponsored arrangement may
apply for simplified underwriting. If simplified underwriting is granted, the
cost of insurance charge may increase as a result of higher anticipated
mortality experience.
SPECIAL PROVISIONS FOR EXCHANGES
The Company will permit owners of certain fixed life insurance policies issued
either by the Company or Manufacturers Life Insurance Company (U.S.A.) to
exchange their policies for the Policies described in this prospectus (and
likewise, owners of policies described in this Prospectus may also exchange
their Policies for certain fixed policies issued either by the Company or by
Manufacturers Life Insurance Company (U.S.A)). Policyowners considering an
exchange should consult their tax
28
<PAGE> 33
advisers as to the tax consequences of an exchange.
COMPANY TAX CONSIDERATIONS
At the present time, the Company makes no charge to the Separate Account for any
federal, state, or local taxes that the Company incurs that may be attributable
to such Account or to the Policies. The Company, however, reserves the right in
the future to make a charge for any such tax or other economic burden resulting
from the application of the tax laws that it determines to be properly
attributable to the Separate Account or to the Policies.
POLICY VALUE
DETERMINATION OF THE POLICY VALUE
A Policy has a Policy Value, a portion of which is available to the policyowner
by making a policy loan or partial withdrawal, or upon surrender of the Policy.
The Policy Value may also affect the amount of the death benefit. The Policy
Value at any time is equal to the sum of the values in the Investment Accounts,
the 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 Manufacturers Life of America. 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
the amount charged on the outstanding Policy Debt less the Loan Spread. For a
detailed description of the Loan Account, see "Policy Loans -- Loan Account".
UNITS AND UNIT VALUES
CREDITING AND CANCELING UNITS
Units of a particular sub-account are credited to a Policy when net premiums are
allocated to that sub-account or amounts are transferred to that sub-account.
Units of a sub-account are canceled whenever amounts are deducted, transferred
or withdrawn from the sub-account. The number of units credited or canceled for
a specific transaction is based on the dollar amount of the transaction divided
by the value of the unit on the Business Day on which the transaction occurs.
The number of units credited with respect to a premium payment will be based on
the applicable unit values for the Business Day on which the premium is received
at the Service Office, except for any premiums received before the Effective
Date. For premiums received before the Effective Date, the values will be
determined on the Effective Date.
Units are valued at the end of each Business Day. When an order involving the
crediting or 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
29
<PAGE> 34
that sub-account is determined by multiplying the unit value for the immediately
preceding Business Day by the net investment factor for the that sub-account on
such subsequent Business Day.
The net investment factor for a sub-account on any Business Day is equal to (a)
divided by (b) where:
(a) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of such Business Day before any policy
transactions are made on that day; and
(b) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of the immediately preceding Business Day after
all policy transactions were made for that day;
The value of a unit may increase, decrease, or remain the same, depending on the
investment performance of a sub-account from one Business Day to the next.
TRANSFERS OF POLICY VALUE
At any time, a policyowner may transfer Policy Value from one sub-account to
another or to the 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. In addition, transfer privileges are
subject to any restrictions that may be imposed by the Trust.
While the Policy is in force, the policyowner may transfer the Policy Value from
any of the Investment Accounts to the 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.
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, Manufacturers Life of America will not be liable for following
instructions communicated by telephone that the Company reasonably believes to
be genuine. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures shall
consist of confirming that a valid telephone authorization form is on file, tape
recording of all telephone transactions and providing written confirmation
thereof.
30
<PAGE> 35
DOLLAR COST AVERAGING
The Company will offer policyowners a Dollar Cost Averaging program. Under the
Dollar Cost Averaging program the policyowner will designate an amount which
will be transferred at predetermined intervals from one Investment Account into
any other Investment Account(s) or the Fixed Account. Currently, no charge will
be made for this program. If insufficient funds exist to effect a Dollar Cost
Averaging transfer, the transfer will not be effected and the policyowner will
be so notified.
The Company reserves the right to cease to offer this program as of 90 days
after written notice is sent to the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS
Under the Asset Allocation Balancer program the policyowner will designate an
allocation of Policy Value among Investment Accounts. At six-month intervals
beginning six months after the Policy Date, the Company will move amounts among
the Investment Accounts as necessary to maintain the policyowner's chosen
allocation. A change to the policyowner premium allocation instructions will
automatically result in a change in Asset Allocation Balancer instructions so
that the two are identical unless the policyowner either instructs Manufacturers
of America otherwise or has elected the Dollar Cost Averaging program.
Currently, there is no charge for this program; however, the Company reserves
the right to institute a charge on 90 days' written notice to the policyowner.
The Company reserves the right to cease to offer this program as of 90 days
after written notice is sent to the policyowner.
POLICY LOANS
At any time while this Policy is in force, a policyowner may borrow against the
Policy Value of the Policy. The amount of any loan cannot exceed 90% of the
Policy's Net Cash Surrender Value. The Policy serves as the only security for
the loan. Policy loans may have tax consequences, see "Tax Treatment of Policy
Benefits -- Policy Loan Interest."
LOAN VALUE
The Loan Value is equal to the Policy's Net Cash Surrender Value less the
monthly deductions due to the next Policy Anniversary.
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 Policy's failing to satisfy the No-Lapse Guarantee
Cumulative Premium Test since the Policy Debt is subtracted from the sum of the
premiums paid in determining whether this test is satisfied. Finally, a policy
loan will affect the amount payable on the death of the last-to-die of the Lives
Insured, since the death benefit is reduced by the Policy Debt at the date of
death in arriving at the insurance benefit.
INTEREST CHARGED ON POLICY LOANS
Interest on the Policy Debt will accrue daily and be payable annually on the
Policy Anniversary. The rate of interest charged will be an effective annual
rate of 5.25%. If the interest due on a Policy Anniversary is not paid by the
policyowner, the interest will be borrowed against the Policy.
The Policy will go into default at any time the Policy Debt exceeds the Policy
Value. At least 61 days prior to termination, the Company will send the
policyowner a notice of the pending termination. Payment of interest on the
Policy Debt during the 61 day grace period will bring the policy out of default.
LOAN ACCOUNT
When a loan is made, an amount equal to the loan, discounted by 4%, will be
deducted from the Investment Accounts or the Fixed Account and transferred to
the Loan Account. The policyowner may designate how the amount to be transferred
to the
31
<PAGE> 36
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
Interest will be credited to amounts in the Loan Account at an effective annual
rate of at least 4.00%. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Interest Credited
Differential, which is currently 1.25% and is guaranteed not to exceed this
amount.
LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the death of
the last-to-die of the Lives Insured, provided that the Policy is in force. When
a repayment is made, the amount is credited to the Loan Account and transferred
to the 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.
Amounts paid to the Company not specifically designated in writing as loan
repayments will be treated as premiums.
POLICY SURRENDER AND PARTIAL WITHDRAWALS
POLICY SURRENDER
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the Life Insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any surrender charges and outstanding monthly deductions due (the
"Cash Surrender Value") minus the Policy Debt. If there have been any prior Face
Amount increases, the Surrender Charge will be the sum of the Surrender Charge
for the Initial Face Amount plus the Surrender Charge for each increase. The Net
Cash Surrender Value will be determined as of the end of the Business Day on
which Manufacturers Life of America receives the Policy and a written request
for surrender at its Service Office. After a Policy is surrendered, the
insurance coverage and all other benefits under the Policy will terminate.
PARTIAL WITHDRAWALS
A policyowner may make a partial withdrawal of the Net Cash Surrender Value once
each Policy Month after the first Policy Anniversary. The policyowner may
specify the portion of the withdrawal to be taken from each Investment Account
and the 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."
REDUCTION IN FACE AMOUNT DUE TO A PARTIAL WITHDRAWAL
If Death Benefit Option 1 is in effect when a partial withdrawal is made, the
Face Amount of the Policy will be reduced by the amount of the withdrawal plus
any applicable Surrender Charges.
If the death benefit is based upon the Policy Value times the minimum death
benefit percentage set forth under "Death Benefit Minimum Death Benefit," the
Face Amount will be reduced only to the extent that the amount of the withdrawal
plus the portion of the Surrender Charge assessed exceeds the difference between
the death benefit and the Face Amount. When the Face Amount of a Policy is based
on one or more increases subsequent to issuance of the Policy, a reduction
resulting from a partial withdrawal will be applied in the same manner as a
requested decrease in Face Amount, i.e., against the Face Amount provided by the
most recent increase, then against the next most recent increases successively
and finally against the initial Face Amount.
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LAPSE AND REINSTATEMENT
LAPSE
Unless the No-Lapse Guarantee is in effect, a Policy will go into default if at
the beginning of any Policy Month the Policy's Net Cash Surrender Value would be
zero or below after deducting the monthly deduction then due. Therefore, a
Policy could lapse eventually if increases in Policy Value (prior to deduction
of Policy charges) are not sufficient to cover Policy charges. A lapse could
have adverse tax consequences as described under "Tax Treatment of the Policy --
Tax Treatment of Policy Benefits -- Surrender or Lapse." Manufacturers Life of
America will notify the policyowner of the default and will allow a 61 day grace
period in which the policyowner may make a premium payment sufficient to bring
the Policy out of default. The required payment will be equal to the amount
necessary to bring the Net Cash Surrender Value to zero, if it was less than
zero on the date of default, plus the monthly deductions due at the date of
default and payable at the beginning of each of the two Policy Months
thereafter, plus any applicable premium load. If the required payment is not
received by the end of the grace period, the Policy will terminate with no
value.
NO-LAPSE GUARANTEE
In those states where it is permitted, as long as the No-Lapse Guarantee
Cumulative Premium Test is satisfied during the No-Lapse Guarantee Period, as
described below, the Company will guarantee that the Policy will not go into
default, even if adverse investment experience or other factors should cause the
Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deductions due at the beginning of a Policy Month.
The Monthly No-Lapse Guarantee Premium is one-twelfth of the No-Lapse Guarantee
Premium.
The No-Lapse Guarantee Premium is set at issue and reflects any Additional
Rating and Supplementary Benefits, if applicable. It is subject to change if the
face amount of the Policy is changed, if there is a Death Benefit Option change,
or if there is any change in the supplementary benefits added to the Policy or
in the risk classification of any Lives Insured because of a change in smoking
status.
The No-Lapse Guarantee Period is described under "Definitions".
While the No-Lapse Guarantee is in effect, the Company will determine at the
beginning of the Policy Month that the Policy would otherwise be in default,
whether the No-Lapse Guarantee Cumulative Premium Test, described below, has
been met. If it has not been satisfied, the Company will notify the policyowner
of that fact and allow a 61-day grace period in which the policyowner may make a
premium payment sufficient to keep the policy from going into default. This
required payment, as described in the notification to the policyowner, will be
equal to the lesser of:
(a) the outstanding premium requirement to satisfy the No-Lapse Guarantee
Cumulative Premium Test at the date of default, plus the Monthly No-Lapse
Guarantee Premium due for the next two Policy Months, or
(b) the amount necessary to bring the Net Cash Surrender Value to zero plus the
monthly deductions due, plus the next two monthly deductions plus the
applicable premium load.
If the required payment is not received by the end of the grace period, the
No-Lapse Guarantee and the Policy will terminate.
NO-LAPSE GUARANTEE CUMULATIVE PREMIUM TEST
The No-Lapse Guarantee Cumulative Premium Test is satisfied if, as of the
beginning of the Policy Month that the Policy would otherwise be in default, the
sum of all premiums paid to date less any gross withdrawals and less any policy
debt, is at least equal to the sum of the Monthly No-Lapse Guarantee Premiums
due from the Policy Date to the date of the test.
DEATH DURING GRACE PERIOD
If the Life Insured should die during the grace period, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit will be reduced by any outstanding Monthly
Deductions due
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at the time of death.
REINSTATEMENT
A policyowner can reinstate a Policy which has terminated after going into
default at any time within 21 days following the date of termination without
furnishing evidence of insurability, subject to the following conditions:
(a) All Lives Insured's risk classifications are standard or preferred, and
(b) All Lives Insured's Attained Ages are less than 46.
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the five-year period following the date of
termination subject to the following conditions:
(a) Evidence of all Lives Insured's insurability, or on the survivor(s) who were
insured at the end of the grace period, satisfactory to the Company is
provided to the Company;
(b) A premium equal to the amount that was required to bring the Policy out of
default immediately prior to termination, plus the next two monthly
deductions;
(c) The Policy cannot be reinstated if any of the Lives Insured die after the
Policy has terminated.
If the reinstatement is approved, the date of reinstatement will be the later of
the date the Company approves the policyowner's request or the date the required
payment is received at the Company's Service Office. In addition, any surrender
charges will be reinstated to the amount they were at the date of default. The
Policy Value on the date of reinstatement, prior to the crediting of any Net
Premium paid on the reinstatement, will be equal to the Policy Value on the date
the Policy terminated.
THE GENERAL ACCOUNT
The general account of Manufacturers Life of America consists of all assets
owned by the Company other than those in the Separate Account and other separate
accounts of the Company. Subject to applicable law, Manufacturers Life of
America has sole discretion over the investment of the assets of the general
account.
By virtue of exclusionary provisions, interests in the general account of
Manufacturers Life of America have not been registered under the Securities Act
of 1933 and the general account has not been registered as an investment company
under the Investment Company Act of 1940. Accordingly, neither the general
account nor any interests therein are subject to the provisions of these acts,
and as a result the staff of the S.E.C. has not reviewed the disclosures in this
prospectus relating to the general account. Disclosures regarding the general
account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in a prospectus.
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. Manufacturers Life of America 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.
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
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(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, Manufacturers Life of America 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
POLICYOWNER RIGHTS
Unless otherwise restricted by a separate agreement, the policyowner may:
- - Vary the premiums paid under the Policy.
- - Change the death benefit option.
- - Change the premium allocation for future premiums.
- - Transfer amounts between sub-accounts.
- - Take loans and/or partial withdrawals.
- - Surrender the contract.
- - Transfer ownership to a new owner.
- - Name a contingent owner that will automatically become owner if the
policyowner dies before the insured.
- - Change or revoke a contingent owner.
- - Change or revoke a beneficiary.
ASSIGNMENT OF RIGHTS
Manufacturers Life of America will not be bound by an assignment until it
receives a copy of the assignment at its Service Office. Manufacturers Life of
America assumes no responsibility for the validity or effects of any assignment.
BENEFICIARY
One or more beneficiaries of the Policy may be appointed by the policyowner by
naming them in the application. Beneficiaries may be appointed in three classes
- -- primary, secondary, and final. Beneficiaries may also be revocable or
irrevocable. Unless an irrevocable designation has been elected, the beneficiary
may be changed by the policyowner during the Lives Insured lifetime by giving
written notice to Manufacturers Life of America in a form satisfactory to the
Company. The change will take effect as of the date such notice is signed. If
the Life Insured dies and there is no surviving beneficiary, the policyowner, or
the policyowner's estate if the policyowner is the Life Insured, will be the
beneficiary. If a beneficiary dies before the seventh day after the death of the
Life Insured, the Company will pay the insurance benefit as if the beneficiary
had died before the Life Insured.
INCONTESTABILITY
Manufacturers Life of America will not contest the validity of a Policy after it
has been in force during any Lives Insured's lifetime for two years from the
Issue Date. It will not contest the validity of an increase in Face Amount,
after such increase or addition has been in force during the lifetime of the
Lives Insured for two years. If a Policy has been reinstated and been in force
during the lifetime of the Lives Insured for less than two years from the
reinstatement date, the Company can contest
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any misrepresentation of a fact material to the reinstatement.
MISSTATEMENT OF AGE OR SEX
If the stated age or sex or both of any of the Lives Insured in the Policy are
incorrect, Manufacturers Life of America will change the Face Amount so that the
death benefit will be that which the most recent monthly charge for the cost of
insurance would have purchased for the correct age and sex.
SUICIDE EXCLUSION
If any of the Lives Insured dies by suicide within two years after the Issue
Date, the Policy will terminate and the Company will pay only the premiums paid
less any partial Net Cash Surrender Value withdrawal and less any Policy Debt.
If any of the Lives Insured dies by suicide within two years after the effective
date of an applied for increase in Face Amount, the Company will credit the
amount of any Monthly Deductions taken for the increase and reduce the Face
Amount to what it was prior to the increase. If the last death is by suicide,
the Death Benefit for that increase will be limited to the Monthly Deductions
taken for the increase.
The Company reserves the right to obtain evidence of the manner and cause of
death of the Lives Insured.
SUPPLEMENTARY BENEFITS
Subject to certain requirements, one or more supplementary benefits may be added
to a Policy, including the Estate Preservation Rider which provides additional
term insurance at no extra charge during the first four Policy Years to protect
against application of the "three year contemplation of death" rule and an
option to split the Policy into two individual policies upon divorce, or certain
federal tax law changes without evidence of insurability (the "Policy Split
Option"). More detailed information concerning these supplementary benefits may
be obtained from an authorized agent of the Company. The cost of any
supplementary benefits will be deducted as part of the monthly deduction.
TAX TREATMENT OF THE POLICY
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon the Company's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present federal income tax laws nor of the
current interpretations by the Service. MANUFACTURERS LIFE OF AMERICA DOES NOT
MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION
REGARDING THE POLICIES.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the use of such
Policies in any such arrangement, the value of which depends in part on the tax
consequences, is contemplated, a qualified tax adviser should be consulted for
advice on the tax attributes of the particular arrangement.
LIFE INSURANCE QUALIFICATION
There are several requirements that must be met for a Policy to be considered a
Life Insurance Contract under the Internal Revenue Code, and thereby to enjoy
the tax benefits of such a contract:
1. The Policy must satisfy the definition of life insurance under Section 7702
of the Internal Revenue Code of 1986 (the "Code").
2. The investments of the Separate Account must be "adequately diversified" in
accordance with Section 817(h) of the Code and Treasury Regulations.
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3. The Policy must be a valid life insurance contract under applicable state
law.
4. The Policyowner must not possess "incidents of ownership" in the assets of
the Separate Account.
These four items are discussed in detail below.
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 and
Cash Value Corridor Test. The Cash Value Accumulation Test requires a minimum
death benefit for a given Policy Value. The Guideline Premium Test also requires
a minimum death benefit, but in addition limits the total premiums that can be
paid into a Policy for a given amount of death benefit.
With respect to a Policy which is issued on the basis of a standard rate class,
the Company believes (largely in reliance on IRS Notice 88-128 and the proposed
mortality charge regulations under Section 7702, issued on July 5, 1991) that
such a Policy should meet the Section 7702 definition of a life insurance
contract.
With respect to a Policy that is issued on a substandard basis (i.e., a rate
class involving higher-than-standard mortality risk), there is less guidance, in
particular as to how mortality and other expense requirements of Section 7702
are to be applied in determining whether such a Policy meets the Section 7702
definition of a life insurance contract. Thus it is not clear whether or not
such a Policy would satisfy Section 7702, particularly if the policyowner pays
the full amount of premiums permitted under the Policy.
The Secretary of the Treasury (the "Treasury") is authorized to prescribe
regulations implementing Section 7702. However, while proposed regulations and
other interim guidance have been issued, final regulations have not been adopted
and guidance as to how Section 7702 is to be applied is limited. If a Policy
were determined not to be a life insurance contract for purposes of Section
7702, such a Policy would not provide the tax advantages normally provided by a
life insurance policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company may take whatever steps are appropriate and reasonable to attempt to
cause such a Policy to comply with Section 7702. For these reasons, the Company
reserves the right to restrict Policy transactions as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
DIVERSIFICATION
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
Code (discussed above). The Separate Account, through the Trust, intends to
comply with the diversification requirements prescribed in Treas. Reg. Sec.
1.817-5, which affect how the Trust's assets are to be invested. The Company
believes that the Separate Account will thus meet the diversification
requirement, and the Company will monitor continued compliance with the
requirement.
STATE LAW
A policy must qualify as a valid life insurance contract under applicable 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
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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.
TAX TREATMENT OF POLICY BENEFITS
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
The Company believes that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Depending on the circumstances, the
exchange of a Policy, a change in the Policy's death benefit option, a Policy
loan, partial withdrawal, surrender, change in ownership, the addition of an
accelerated death benefit rider, or an assignment of the Policy may have federal
income tax consequences. In addition, federal, state and local transfer, and
other tax consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each policyowner or beneficiary.
DEATH BENEFIT
The death benefit under the Policy should be excludible from the gross income of
the beneficiary under Section 101(a)(1) of the Code.
CASH VALUES
Generally, the policyowner will not be deemed to be in constructive receipt of
the Policy Value, including increments thereof, until there is a distribution.
This includes additions attributable to interest, dividends, appreciation or
gains realized on transfers among sub-accounts.
INVESTMENT IN THE POLICY
Investment in the Policy means:
- - the aggregate amount of any premiums or other consideration paid for a
Policy; minus
- - the aggregate amount, other than loan amounts, received under the
Policy which has been excluded from the gross income of the policyowner
(except that the amount of any loan from, or secured by, a Policy that
is a MEC, to the extent such amount has been excluded from gross
income, will be disregarded); plus
- - the amount of any loan from, or secured by a Policy that is a MEC to
the extent that such amount has been included in the gross income of
the policyowner.
The repayment of a policy loan, or the payment of interest on a loan, does not
affect the Investment in the Policy.
SURRENDER OR LAPSE
Upon a complete surrender or lapse of a Policy, if the amount received plus the
amount of Policy Debt exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to tax.
If, at the time of lapse or surrender, a Policy has a loan, the loan is
extinguished and the amount of the loan is a deemed payment to the policyholder.
If the amount of this deemed payment exceeds the investment in the contract, the
excess is taxable income and is subject to Internal Revenue Service reporting
requirements."
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DISTRIBUTIONS
The tax consequences of distributions from, and loans taken from or secured by,
a Policy depend on whether the Policy is classified as a "Modified Endowment
Contract" or "MEC".
DISTRIBUTIONS FROM NON-MEC'S
A distribution from a non-MEC is generally treated as a tax-free recovery by the
policyowner of the Investment in the Policy to the extent of such Investment in
the Policy, and as a distribution of taxable income only to the extent the
distribution exceeds the Investment in the Policy. Loans from, or secured by, a
non-MEC are not treated as distributions. Instead, such loans are treated as
indebtedness of the policyowner.
Force Outs
An exception to this general rule occurs in the case of a decrease in the
Policy's death benefit or any other change that reduces benefits under the
Policy in the first 15 years after the Policy is issued and that results in a
cash distribution to the policyowner in order for the Policy to continue to
comply with the Section 7702 definitional limits. Such a cash distribution will
be taxed in whole or in part as ordinary income (to the extent of any gain in
the Policy) under rules prescribed in Section 7702. Changes include partial
withdrawals and death benefit option changes.
DISTRIBUTIONS FROM MEC'S
Policies classified as MEC's will be subject to the following tax rules:
- - First, all partial withdrawals from such a Policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of the
Policy Value immediately before the distribution over the Investment in the
Policy at such time.
- - Second, loans taken from or secured by such a Policy are treated as partial
withdrawals from the Policy and taxed accordingly. Past-due loan interest
that is added to the loan amount is treated as a loan.
- - Third, a 10% additional income tax is imposed on the portion of any
distribution (including distributions on surrender) from, or loan taken
from or secured by, such a policy that is included in income except where
the distribution or loan:
- is made on or after the policyowner attains age 59-1/2;
- is attributable to the policyowner becoming disabled; or
- is part of a series of substantially equal periodic payments for
the life (or life expectancy) of the policyowner or the joint
lives (or joint life expectancies) of the policyowner and the
policyowner's beneficiary.
These exceptions are not likely to apply in situations where the Policy is
not owned by an individual.
Definition of Modified Endowment Contracts
Section 7702A establishes a class of life insurance contracts designated as
"Modified Endowment Contracts," which applies to Policies entered into or
materially changed after June 20, 1988.
In general, a Policy will be a Modified Endowment Contract if the accumulated
premiums paid at any time during the first seven Policy Years exceed the
"seven-pay premium limit". The seven-pay premium limit on any date is equal to
the sum of the net level premiums that would have been paid on or before such
date if the policy provided for paid-up future benefits after the payment of
seven level annual premiums (the "seven-pay premium").
The rules relating to whether a Policy will be treated as a MEC are extremely
complex and cannot be adequately described in the limited confines of this
summary. Therefore, a current or prospective policyowner should consult with a
competent adviser to determine whether a transaction will cause the Policy to be
treated as a MEC.
Material Changes
A policy that is not a MEC may become a MEC if it is "materially changed". If
there is a material change to the policy, the seven year testing period for MEC
status is restarted. The material change rules for determining whether a Policy
is a MEC are complex. In general, however, the determination of whether a Policy
will be a MEC after a material change generally
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depends upon the relationship among the death benefit of the Policy at the time
of such change, the Policy Value at the time of the change, and the additional
premiums paid into the Policy during the seven years starting with the date on
which the material change occurs.
Reductions in Face Amount
If there is a reduction in benefits during any Policy Year, the seven-pay
premium limit is recalculated as if the policy had been originally issued at the
reduced benefit level. Failure to comply would result in classification as a MEC
regardless of any efforts by the Company to provide a payment schedule that will
not violate the seven pay test.
Exchanges
A life insurance contract received in exchange for a MEC will also be treated as
a MEC.
Processing of Premiums
If a premium is received which would cause the Policy to become a MEC within 23
days of the next Policy Anniversary, the Company will not apply the portion of
the premium which would cause MEC status ("excess premium") to the Policy when
received. The excess premium will be placed in a suspense account until the next
anniversary date, at which point the excess premium, along with interest, earned
on the excess premium at a rate of 3.5% from the date the premium was received,
will be applied to the Policy. The policyowner will be advised of this action
and will be offered the opportunity to have the premium credited as of the
original date received or to have the premium returned. If the policyowner does
not respond, the premium and interest will be applied to the Policy as of the
first day of the next anniversary.
If a premium is received which would cause the Policy to become a MEC more than
23 days prior to the next Policy Anniversary, the Company will refund any excess
premium to the policyowner. The portion of the premium which is not excess will
be applied as of the date received. The policyowner will be advised of this
action and will be offered the opportunity to return the premium and have it
credited to the account as of the original date received.
If in connection with the application or issue of the Policy, the policyowner
acknowledges that the policy is or will become a MEC, excess premiums that would
cause MEC status will be credited to the account as of the original date
received.
Multiple Policies
All MEC's that are issued by a Company (or its affiliates) to the same
policyowner during any calendar year are treated as one MEC for purposes of
determining the amount includible in gross income under Section 72(e) of the
Code.
Policy Split Options
This option permits a Policy to be split into two other individual Policies upon
the occurrence of a divorce of the lives insured or certain changes in federal
estate tax law. The purchase and exercise of the policy split option could have
adverse tax consequences. For example, it is not clear whether a policy split
will be treated as a nontaxable exchange under Sections 1031 through 1043 of the
Code. If a policy split is not treated as a nontaxable exchange, a split could
result in the recognition of taxable income in an amount up to any gain in the
Policy at the time of the split. It is also not clear whether the cost of the
policy split option, which is deducted monthly from Policy Value, will be
treated as a taxable distribution. Before purchasing the policy split option or
exercising rights provided by the policy split option, please consult with a
competent tax adviser regarding the possible consequences.
POLICY LOAN INTEREST
Generally, personal interest paid on any loan under a Policy which is owned by
an individual is not deductible. For policies purchased on or after January 1,
1996, interest on any loan under a Policy owned by a taxpayer and covering the
life of any individual who is an officer or employee of or is financially
interested in the business carried on by the taxpayer will not be tax deductible
unless the employee is a key person within the meaning of Section 264 of the
Code. A deduction will not be
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permitted for interest on a loan under a Policy held on the life of a key person
to the extent the aggregate of such loans with respect to contracts covering the
key person exceed $50,000. The number of employees who can qualify as key
persons depends in part on the size of the employer but cannot exceed 20
individuals.
Furthermore, if a non-natural person owns a Policy, or is the direct or indirect
beneficiary under a Policy, section 264(f) of the Code disallows a pro-rata
portion of the taxpayer's interest expense allocable to unborrowed Policy cash
values attributable to insurance held on the lives of individuals who are not
20% (or more) owners of the taxpayer-entity, officers, employees, or former
employees of the taxpayer.
The portion of the interest expense that is allocable to unborrowed Policy cash
values is an amount that bears the same ratio to that interest expense as the
taxpayer's average unborrowed Policy cash values under such life insurance
policies bear to the average adjusted bases for all assets of the taxpayer.
If the taxpayer is not the Policyowner, but is the direct or indirect
beneficiary under the Policy, then the amount of unborrowed cash value of the
Policy taken into account in computing the portion of the taxpayer's interest
expense allocable to unborrowed Policy cash values cannot exceed the benefit to
which the taxpayer is directly or indirectly entitled under the Policy.
INTEREST ON POLICY LOANS AFTER YEAR 10
Interest credited to amounts in the Loan Account at an effective annual rate of
at least 4.00%. The actual rate credited is equal to the rate of interest
charged on the policy loan less than the Loan Interest Credited Differential,
which is currently 1.25% during the first ten policy years and 0% thereafter,
and is guaranteed not to exceed 1.25%. 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.
POLICY EXCHANGES
A policyowner generally will not recognize gain upon the exchange of a Policy
for another life insurance policy issued by the Company or another insurance
company, except to the extent that the policyowner receives cash in the exchange
or is relieved of Policy indebtedness as a result of the exchange. The receipt
of cash or forgiveness of indebtedness is treated as "boot" which is taxable up
to the amount of the gain in the policy. In no event will the gain recognized
exceed the amount by which the Policy Value (including any unpaid loans) exceeds
the policyowner's Investment in the Policy.
OTHER TRANSACTIONS
A transfer of the Policy, a change in the owner, a change in the beneficiary,
and certain other changes to the Policy, as well as particular uses of the
Policy (including use in a so called "split-dollar" arrangement) may have tax
consequences depending upon the particular circumstances and should not be
undertaken prior to consulting with a qualified tax adviser. For instance, if
the owner transfers the Policy or designates a new owner in return for valuable
consideration (or, in some cases, if the transferor is relieved of a liability
as a result of the transfer), then the Death Benefit payable upon the death of
the Insured may in certain circumstances be includible in taxable income to the
extent that the Death Benefit exceeds the prior consideration paid for the
transfer and any premiums or other amounts subsequently paid by the transferee.
Further, in such a case, if the consideration received exceeds the transferor's
Investment in the Policy, the difference will be taxed to the transferor as
ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the individual
circumstances of each policyowner and beneficiary.
41
<PAGE> 46
ALTERNATE MINIMUM TAX
Corporate owners may be subject to Alternate Minimum Tax on the annual increases
in Cash Surrender Values and on the Death Benefit proceeds.
INCOME TAX REPORTING
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income tax
purposes, one or more of the following:
(a) the value each year of the life insurance protection provided;
(b) an amount equal to any employer-paid premiums; or
(c) some or all of the amount by which the current value exceeds the employer's
interest in the Policy.
Participants should consult with their tax adviser to determine the tax
consequences of these arrangements.
OTHER INFORMATION
PAYMENT OF PROCEEDS
As long as the Policy is in force, Manufacturers Life of America will ordinarily
pay any policy loans, surrenders, partial withdrawals or insurance benefit
within seven days after receipt at its Service Office of all the documents
required for such a payment. The Company may delay for up to six months the
payment from the 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, Manufacturers Life of America will
send the policyowner a statement showing, among other things:
- - the amount of death benefit;
- - the Policy Value and its allocation among the Investment Accounts, the Fixed
Account and the Loan Account;
- - the value of the units in each Investment Account to which the Policy Value
is allocated;
- - the Policy Debt and any loan interest charged since the last report;
- - the premiums paid and other Policy transactions made during the period since
the last report; and
- - any other information required by law.
Each policyowner will also be sent an annual and a semi-annual report for the
Trust which will include a list of the securities held in each Portfolio as
required by the 1940 Act.
42
<PAGE> 47
DISTRIBUTION OF THE POLICIES
ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life, will
act as the principal underwriter of, and continuously offer, the Policies
pursuant to a Distribution Agreement with Manufacturers Life of America.
ManEquity, Inc. is registered as a broker-dealer under the Securities Exchange
Act of 1934 and is a member of the National Association of Securities Dealers.
ManEquity, Inc. is located at 200 Bloor Street East, Toronto, Ontario, Canada,
M4W 1E5 and was organized under the laws of Colorado on May 4, 1970. The
directors of ManEquity, Inc. are: Roy Bubbs, Joe Scott, Robert Cook Bruce
Gordon, Gary Buchanan and Douglas Myers. The officers of ManEquity, Inc. are:
(i) Douglas Myers - President, (ii) Gary Buchanan - Vice President, Compliance,
(iii) Thomas Reives - Treasurer, and (iv) Brian Buckley - Secretary and General
Counsel. The Policies will be sold by registered representatives of either
ManEquity or other broker-dealers having distribution agreements with ManEquity
who are also authorized by state insurance departments to do so. The Policies
will be sold in all states of the United States except New York.
A registered representative will receive commissions not to exceed 105% of
premiums in the first year, 2% of all premiums paid in the second year and
after, and after the second anniversary 0.15% of the Policy Value per year.
Representatives who meet certain productivity standards with regard to the sale
of the Policies and certain other policies issued by Manufacturers Life of
America or Manufacturers Life will be eligible for additional compensation.
RESPONSIBILITIES OF MANUFACTURERS LIFE
Manufacturers Life and Manufacturers USA have entered into an agreement with
ManEquity, Inc. pursuant to which Manufacturers Life or Manufacturers USA, on
behalf of ManEquity, Inc. will pay the sales commissions in respect of the
Policies and certain other policies issued by Manufacturers Life of America,
prepare and maintain all books and records required to be prepared and
maintained by ManEquity, Inc. with respect to the policies and such other
policies, and send all confirmations required to be sent by ManEquity, Inc. with
respect to the Policies and such other policies. ManEquity, Inc. will promptly
reimburse Manufacturers Life or Manufacturers USA for all sales commissions paid
by Manufacturers Life or Manufacturers USA and will pay Manufacturers Life or
Manufacturers USA for its other services under the agreement in such amounts and
at such times as agreed to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and recordkeeping functions on behalf of
Manufacturers Life of America with respect to all of its insurance policies
including the Policies.
Finally, Manufacturers Life of America may, from time to time in its sole
discretion, enter into one or more reinsurance agreements with other life
insurance companies under which policies issued by it may be reinsured, such
that its total amount at risk under a policy would be limited for the life of an
insured.
VOTING RIGHTS
As stated previously, all of the assets held in the sub-accounts of the Separate
Account will be invested in shares of a particular Portfolio of the Trust.
Manufacturers Life of America is the legal owner of those shares and as such has
the right to vote upon certain matters that are required by the 1940 Act to be
approved or ratified by the shareholders of a mutual fund and to vote upon any
other matters that may be voted upon at a shareholders' meeting. However,
Manufacturers Life of America will vote shares held in the sub-accounts in
accordance with instructions received from policyowners having an interest in
such sub-accounts. Shares held in each sub-account for which no timely
instructions from policyowners are received, including shares not attributable
to the Policies, will be voted by Manufacturers Life of America in the same
proportion as those shares in that sub-account for which instructions are
received. Should the applicable federal securities laws or regulations change so
as to permit Manufacturers Life of America to vote shares held in the Separate
Account in its own right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyowner is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding Portfolio. The number will be determined as of a date chosen by
Manufacturers Life of America, but not more than 90 days before the
shareholders' meeting. Fractional votes are counted. Voting instructions will be
solicited in writing at
43
<PAGE> 48
least 14 days prior to the meeting.
Manufacturers Life of America may, if required by state officials, disregard
voting instructions if such instructions would require shares to be voted so as
to cause a change in the sub-classification or investment policies of one or
more of the Portfolios, or to approve or disapprove an investment management
contract. In addition, the Company itself may disregard voting instructions that
would require changes in the investment policies or investment adviser, provided
that Manufacturers Life of America reasonably disapproves such changes in
accordance with applicable federal regulations. If Manufacturers Life of America
does disregard voting instructions, it will advise policyowners of that action
and its reasons for such action in the next communication to policyowners.
Substitution of Portfolio Shares
It is possible that in the judgment of the management of Manufacturers Life of
America, one or more of the Portfolios may become unsuitable for investment by
the Separate Account because of a change in investment policy or a change in the
applicable laws or regulation, because the shares are no longer available for
investment, or for some other reason. In that event, Manufacturers Life of
America may seek to substitute the shares of another Portfolio or of an entirely
different mutual fund. Before this can be done, the approval of the S.E.C. and
one or more state insurance departments may be required.
Manufacturers Life of America also reserves the right (i) to combine other
separate accounts with the Separate Account, (ii) to create new separate
accounts, (iii) to establish additional sub-accounts within the Separate Account
to invest in additional portfolios of the Trust or another management investment
company, (iv) to eliminate existing sub-accounts and to stop accepting new
allocations and transfers into the corresponding portfolio, (v) to combine
sub-accounts or to transfer assets in one sub-account to another sub-account or
(vi) to transfer assets from the Separate Account to another separate account
and from another separate account to the Separate Account. The Company also
reserves the right to operate the Separate Account as a management investment
company or other form permitted by law, and to de-register the Separate Account
under the 1940 Act. Any such change would be made only if permissible under
applicable federal and state law.
RECORDS AND ACCOUNTS
The Service Office will perform administrative functions, such as decreases,
increases, surrenders and partial withdrawals, and fund transfers on behalf of
the Company.
All records and accounts relating to the Separate Account and the Portfolios
will be maintained by the Company. All financial transactions will be handled by
the Company. All reports required to be made and information required to be
given will be provided by the Company.
STATE REGULATIONS
Manufacturers Life of America is subject to the regulation and supervision by
the Michigan Department of Insurance, which periodically examines its financial
condition and operations. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business. The
Policies have been filed with insurance officials, and meet all standards set by
law, in each jurisdiction where they are sold.
Manufacturers Life of America is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business for the purposes of determining
solvency and compliance with local insurance laws and regulations.
LITIGATION
No litigation is pending that would have a material effect upon the Separate
Account or the Trust.
INDEPENDENT AUDITORS
The consolidated financial statements of Manufacturers Life Insurance Company of
America and Separate Account Three of The Manufacturers Life Insurance Company
of America at December 31, 1999 and 1998, and for each of the three years in the
period ended December 31, 1999, appearing in this Prospectus and Registration
Statement have been audited by Ernst &
44
<PAGE> 49
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 SEC's principal
office in Washington D.C. upon payment of the prescribed fee. The Commission
also maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission which is located at http://www.sec.gov.
For further information you may also contact Manufacturers Life of America's
Home Office, the address and telephone number of which are on the first page of
the prospectus.
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Position with
Manufacturers Life
Name of America Principal Occupation
- ---- ---------- --------------------
<S> <C> <C>
Sandra M. Cotter (37) Director Attorney, Dykema Gossett, PLLC, 1989 to present.
(since December 1992)
James D. Gallagher (45) Director (since May 1996), Vice President, Secretary and General Counsel,
Secretary and General Counsel The 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.
Donald A. Guloien (42) Director (since August 1990) Executive Vice President, Business Development,
and President The 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, Jr. (43) Director (since May 1996) Senior Vice President, Chief Distribution
Officer, U. S. Operations, The Manufacturers
Life Insurance Company, August 1999 to present;
Senior Vice President, U.S. Annuities, The
Manufacturers Life Insurance Company, January
1999 to August 1999; President, The
Manufacturers Life Insurance Company of
</TABLE>
45
<PAGE> 50
<TABLE>
<S> <C> <C>
North America, January 1999 to August 1999; Senior
Vice President, U.S. Individual Insurance, The
Manufacturers Life Insurance Company, August
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, March 1994 to
June 1995.
James O'Malley (54) 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 (61) Director (since July 1992) Senior Vice President and Corporate Secretary,
The Manufacturers Life Insurance Company, 1999
to present. Senior Vice President, General
Counsel and Corporate Secretary, The
Manufacturers Life Insurance Company, 1988 to
1999.
John D. Richardson (62) Director (since January 1995) Senior Executive Vice President, The
and Chairman Manufacturers Life 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 (52) 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.
</TABLE>
46
<PAGE> 51
<TABLE>
<S> <C> <C>
Felix Chee (53) Vice President, Investments Executive Vice President & Chief Investment
Officer, 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 to July 1994.
Robert A. Cook (45) Vice President, Marketing Senior Vice President, U.S. 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,
The Manufacturers Life Insurance Company, 1994
to 1995.
Douglas H. Myers (45) Vice President, Finance and President, ManEquity, Inc., April 1994 to
Compliance, Controller present; Assistant Vice President and
Controller, U.S. Operations, The Manufacturers
Life Insurance Company, 1988 to present.
John G. Vrysen (44) Vice President, Appointed Chief Financial Officer and Treasurer,
Actuary Manulife-Wood 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.
Denis Turner (44) Vice President and Treasurer Vice President and Treasurer, The Manufacturers
Life Insurance Company of America, May 1999 to
present; Vice President & Chief Accountant, U.S.
Division, The Manufacturers Life Insurance
Company, May 1999 to present; Assistant Vice
President, Financial Operations, Reinsurance
Division, The Manufacturers Life Insurance
Company, February 1998 to April 1999; Assistant
Vice President & Controller, Reinsurance
Division, The Manufacturers Life Insurance
Company, November 1995, January 1998.
</TABLE>
YEAR 2000 ISSUES
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year
47
<PAGE> 52
2000 dates is processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than a date.
Although the change in date has occurred, it is not possible to conclude that
all aspects of the Year 2000 Issue that may affect us, including those related
to customers, suppliers, or other third parties, have been fully resolved.
[OPTIONAL TERM RIDER
The Policy may be issued with an optional term insurance rider (the "Term
Rider"). The benefit of the term rider is that the cost of insurance rates will
always be less than or equal to the cost of insurance rates on the Policy.
HOWEVER, UNLIKE THE DEATH BENEFIT UNDER THE POLICY, THE DEATH BENEFIT UNDER THE
TERM RIDER IS NOT PROTECTED BY THE NO LAPSE GUARANTEE AFTER THE SECOND POLICY
YEAR AND TERMINATES AT AGE 100.]
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.
48
<PAGE> 53
APPENDIX A - SAMPLE ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER VALUES AND
DEATH BENEFITS
The following tables have been prepared to help show how values under the Policy
change with investment performance. The tables include both Policy Values and
Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of
the values in the Investment Accounts, as the tables assume no values in the
Fixed Account or Loan Account. The Cash Surrender Value is the Policy Value less
any applicable surrender charges. The tables illustrate how Policy Values and
Cash Surrender Values, which reflect all applicable charges and deductions, and
Death Benefits of the Policy on an insured of given age would vary over time if
the return on the assets of the Portfolios was a uniform, gross, after-tax,
annual rate of 0%, 6% or 12%. The Policy Values, Death Benefits and Cash
Surrender Values would be different from those shown if the returns averaged 0%,
6% or 12%, but fluctuated over and under those averages throughout the years.
The charges reflected in the tables include those for deductions from premiums,
surrender charges, and monthly deductions.
The amounts shown for the Policy Value, Death Benefit and Cash Surrender Value
as of each Policy Year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because the expenses and fees borne by Manufacturers Investment Trust are
deducted from the gross return. The illustrations reflect an average of those
Portfolios' current expenses, which is approximately 0.949% per annum. The gross
annual rates of return of 0%, 6% and 12% correspond to approximate net annual
rates of return of -0.944%, 4.999% and 10.942%. The illustrations reflect the
expense reimbursement in effect for the Lifestyle Trust and the expense
limitation in effect for the Equity Index Trust. In the absence of such expense
reimbursement and expense limitation, the average of the Portfolio's current
expenses would have been 0.953% per annum and the gross annual rates of return
of 0%, 6% and 12% would have corresponded to approximate net annual rates of
return of -0.949%, 4.944% and 10.938%. The expense reimbursement for the
Lifestyle Trusts and the expense limitation for the Equity Index Trust remained
in effect during the fiscal year ended December 31, 1999. The expense
reimbursement for the Equity Index Trust is expected to remain in effect during
the fiscal year ended December 31, 1999. It is anticipated that the expense
reimbursement for the Lifestyle Growth 820 Trust, the Lifestyle Balanced 640
Trust and the Lifestyle Moderate 460 Trust will be reduced during the fiscal
year ended December 31, 2000. Were the expense reimbursement and expense
limitation to terminate, the average of the Portfolios' current expenses would
be higher and the approximate net annual rates of return would be lower.
The tables assume that no premiums have been allocated to the Fixed Account,
that planned premiums are paid on the Policy Anniversary and that no transfers,
partial withdrawals, Policy loans, changes in death benefit options or changes
in face amount have been made. The tables reflect the fact that no charges for
federal, state or local taxes are currently made against the Separate Account.
If such a charge is made in the future, it would take a higher gross rate of
return to produce after-tax returns of 0%, 6% and 12% than it does now.
There are two tables shown for each combination of age and death benefit option
for a Policy issued to a male non-smoker, one based on current cost of insurance
charges assessed by the Company and the other based on the maximum cost of
insurance charges based on the 1980 Commissioners Smoker Distinct Mortality
Tables. Current cost of insurance charges are not guaranteed and may be changed.
Upon request, Manufacturers Life of America will furnish a comparable
illustration based on the proposed life insured's issue age, sex (unless unisex
rates are required by law, or are requested) and risk classes, any additional
ratings and the death benefit option, face amount and planned premium requested.
Illustrations for smokers would show less favorable results than the
illustrations shown below.
From time to time, in advertisements or sales literature for the Policies that
quote performance data of one or more of the Portfolios, the Company may include
Cash Surrender Values and Death Benefit figures computed using the same
methodology as that used in the following illustrations, but with the average
annual total return of the Portfolio for which performance data is shown in the
advertisement replacing the hypothetical rates of return shown in the following
tables. This information may be shown in the form of graphs, charts, tables and
examples.
A-1
<PAGE> 54
The Policies have been offered to the public only since approximately May 1,
1999. However, total return data may be advertised for as long a period of time
as the underlying Portfolio has been in existence. The results for any period
prior to the Policies' being offered would be calculated as if the Policies had
been offered during that period of time, with all charges assumed to be those
applicable to the Policies.
A-2
<PAGE> 55
ILLUSTRATIONS FOR POLICIES
WITH
10 YEAR NO LAPSE GUARANTEE PROVISION
<PAGE> 56
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$7,500 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
End of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Value Value Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,875 5,971 0 500,000 6,353 0 500,000 6,736 0 500,000
2 16,144 12,341 3,940 500,000 13,489 5,088 500,000 14,683 6,283 500,000
3 24,826 18,588 10,774 500,000 20,911 13,096 500,000 23,419 15,605 500,000
4 33,942 24,723 17,592 500,000 28,637 21,506 500,000 33,031 25,900 500,000
5 43,514 30,742 24,295 500,000 36,677 30,230 500,000 43,602 37,155 500,000
6 53,565 36,643 30,782 500,000 45,039 39,178 500,000 55,226 49,365 500,000
7 64,118 42,421 37,244 500,000 53,731 48,554 500,000 68,004 62,827 500,000
8 75,199 48,073 43,579 500,000 62,760 58,266 500,000 82,045 77,552 500,000
9 86,834 53,594 49,687 500,000 72,135 68,228 500,000 97,476 93,569 500,000
10 99,051 58,975 55,752 500,000 81,861 78,638 500,000 114,428 111,204 500,000
11 111,878 64,201 61,662 500,000 91,937 89,398 500,000 133,041 130,502 500,000
12 125,347 69,271 67,317 500,000 102,376 100,422 500,000 153,487 151,534 500,000
13 139,490 74,171 72,901 500,000 113,180 111,910 500,000 175,947 174,677 500,000
14 154,339 78,878 78,292 500,000 124,342 123,756 500,000 200,611 200,025 500,000
15 169,931 83,384 83,384 500,000 135,875 135,875 500,000 227,713 227,713 500,000
16 186,303 87,658 87,658 500,000 147,768 147,768 500,000 257,497 257,497 500,000
17 203,493 91,674 91,674 500,000 160,017 160,017 500,000 290,244 290,244 500,000
18 221,543 95,401 95,401 500,000 172,619 172,619 500,000 326,278 326,278 500,000
19 240,495 98,803 98,803 500,000 185,568 185,568 500,000 365,967 365,967 500,000
20 260,394 101,837 101,837 500,000 198,857 198,857 500,000 409,740 409,740 500,000
21 281,289 104,834 104,834 500,000 213,250 213,250 500,000 459,711 459,711 528,667
22 303,229 107,416 107,416 500,000 228,102 228,102 500,000 514,903 514,903 581,840
23 326,265 109,529 109,529 500,000 243,426 243,426 500,000 575,842 575,842 639,185
24 350,453 111,113 111,113 500,000 259,239 259,239 500,000 643,147 643,147 701,030
25 375,851 112,100 112,100 500,000 275,566 275,566 500,000 717,515 717,515 767,741
26 402,518 112,409 112,409 500,000 292,441 292,441 500,000 799,732 799,732 839,719
</TABLE>
A-2
<PAGE> 57
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
27 430,519 111,951 111,951 500,000 309,907 309,907 500,000 890,441 890,441 934,963
28 459,920 110,627 110,627 500,000 328,029 328,029 500,000 990,493 990,493 1,040,017
29 490,791 108,323 108,323 500,000 346,888 346,888 500,000 1,100,823 1,100,823 1,155,864
30 523,206 104,910 104,910 500,000 366,590 366,590 500,000 1,222,453 1,222,453 1,283,576
31 557,241 100,248 100,248 500,000 387,274 387,274 500,000 1,356,502 1,356,502 1,424,327
32 592,978 93,980 93,980 500,000 409,063 409,063 500,000 1,504,154 1,504,154 1,579,361
33 630,502 85,871 85,871 500,000 432,187 432,187 500,000 1,666,723 1,666,723 1,750,059
34 669,902 75,658 75,658 500,000 456,942 456,942 500,000 1,845,643 1,845,643 1,937,926
35 711,272 63,061 63,061 500,000 483,629 483,629 507,810 2,042,479 2,042,479 2,144,603
36 754,711 47,366 47,366 500,000 511,494 511,494 537,068 2,258,839 2,258,839 2,371,780
37 800,322 27,608 27,608 500,000 540,362 540,362 567,380 2,496,407 2,496,407 2,621,227
38 848,213 3,007 3,007 500,000 570,239 570,239 598,751 2,757,078 2,757,078 2,894,932
39 898,498 0 0 0 601,127 601,127 631,183 3,042,895 3,042,895 3,195,040
40 951,298 633,027 633,027 664,679 3,356,073 3,356,073 3,523,876
41 1,006,738 665,838 665,838 699,130 3,698,423 3,698,423 3,883,344
42 1,064,950 700,285 700,285 728,296 4,076,655 4,076,655 4,239,721
43 1,126,073 736,638 736,638 758,737 4,495,766 4,495,766 4,630,639
44 1,190,251 775,232 775,232 790,737 4,961,775 4,961,775 5,061,010
45 1,257,639 816,472 816,472 824,637 5,481,956 5,481,956 5,536,776
46 1,328,396 860,847 860,847 860,847 6,065,128 6,065,128 6,065,128
47 1,402,690 907,256 907,256 907,256 6,709,555 6,709,555 6,709,555
48 1,480,700 955,792 955,792 955,792 7,421,674 7,421,674 7,421,674
49 1,562,610 1,006,553 1,006,553 1,006,553 8,208,592 8,208,592 8,208,592
50 1,648,615 1,059,641 1,059,641 1,059,641 9,078,169 9,078,169 9,078,169
</TABLE>
(1) All values shown are as of the end of the policy Year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the Policy Anniversary, (b)
no Policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the end of the first 10 Policy Years.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only, and should not be deemed
a representation of past or future results. Actual investment returns may be
more or less than those shown and will depend on a number of factors, including
the investment allocation mad by the policyowner, and the investment returns for
the funds of Manufacturers Investment Trust. The policy value, cash surrender
value and death benefit for a policy would be different from those shown if
actual rates of investment return averaged the rate shown above over a period
of years, but also fluctuated above or below that average for individual
policy years. No representations can be made that these hypothetical rates
of return can be achieved for any one year or sustained over any period of time.
A-3
<PAGE> 58
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$7,500 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
End of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Value Value Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,875 5,971 0 500,000 6,353 0 500,000 6,736 0 500,000
2 16,144 12,341 3,940 500,000 13,489 5,088 500,000 14,683 6,283 500,000
3 24,826 18,558 10,743 500,000 20,879 13,065 500,000 23,387 15,572 500,000
4 33,942 24,615 17,484 500,000 28,525 21,394 500,000 32,913 25,783 500,000
5 43,514 30,505 24,058 500,000 36,426 29,979 500,000 43,336 36,890 500,000
6 53,565 36,216 30,355 500,000 44,581 38,720 500,000 54,735 48,874 500,000
7 64,118 41,739 36,562 500,000 52,987 47,810 500,000 67,196 62,019 500,000
8 75,199 47,058 42,565 500,000 61,640 57,147 500,000 80,814 76,321 500,000
9 86,834 52,161 48,254 500,000 70,535 66,628 500,000 95,697 91,789 500,000
10 99,051 57,028 53,804 500,000 79,664 76,440 500,000 111,958 108,735 500,000
11 111,878 61,636 59,096 500,000 89,013 86,474 500,000 129,726 127,186 500,000
12 125,347 65,958 64,004 500,000 98,568 96,615 500,000 149,140 147,187 500,000
13 139,490 69,958 68,688 500,000 108,305 107,035 500,000 170,357 169,087 500,000
14 154,339 73,589 73,003 500,000 118,193 117,607 500,000 193,548 192,961 500,000
15 169,931 76,798 76,798 500,000 128,196 128,196 500,000 218,910 218,910 500,000
16 186,303 79,525 79,525 500,000 138,273 138,273 500,000 246,677 246,677 500,000
17 203,493 81,675 81,675 500,000 148,359 148,359 500,000 277,106 277,106 500,000
18 221,543 83,223 83,223 500,000 158,450 158,450 500,000 310,553 310,553 500,000
19 240,495 84,063 84,063 500,000 168,479 168,479 500,000 347,405 347,405 500,000
20 260,394 84,095 84,095 500,000 178,391 178,391 500,000 388,139 388,139 500,000
21 281,289 83,516 83,516 500,000 188,818 188,818 500,000 434,924 434,924 500,162
22 303,229 81,854 81,854 500,000 199,068 199,068 500,000 486,860 486,860 550,152
23 326,265 78,908 78,908 500,000 209,048 209,048 500,000 544,127 544,127 603,981
</TABLE>
A-4
<PAGE> 59
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
24 350,453 74,431 74,431 500,000 218,651 218,651 500,000 607,319 607,319 661,977
25 375,851 68,125 68,125 500,000 227,756 227,756 500,000 677,124 677,124 724,523
26 402,518 59,630 59,630 500,000 236,229 236,229 500,000 754,354 754,354 792,072
27 430,519 48,530 48,530 500,000 243,930 243,930 500,000 839,326 839,326 881,292
28 459,920 34,333 34,333 500,000 250,709 250,709 500,000 932,758 932,758 979,395
29 490,791 16,446 16,446 500,000 256,399 256,399 500,000 1,035,423 1,035,423 1,087,194
30 523,206 0 0 0 260,797 260,797 500,000 1,148,154 1,148,154 1,205,562
31 557,241 263,641 263,641 500,000 1,271,838 1,271,838 1,335,430
32 592,978 264,581 264,581 500,000 1,407,418 1,407,418 1,477,789
33 630,502 263,143 263,143 500,000 1,555,887 1,555,887 1,633,681
34 669,902 258,686 258,686 500,000 1,718,288 1,718,288 1,804,203
35 711,272 250,391 250,391 500,000 1,895,734 1,895,734 1,990,521
36 754,711 237,136 237,136 500,000 2,089,392 2,089,392 2,193,862
37 800,322 217,402 217,402 500,000 2,300,505 2,300,505 2,415,530
38 848,213 189,010 189,010 500,000 2,530,364 2,530,364 2,656,882
39 898,498 148,861 148,861 500,000 2,780,329 2,780,329 2,919,346
40 951,298 92,250 92,250 500,000 3,051,743 3,051,743 3,204,330
41 1,006,738 12,016 12,016 500,000 3,345,925 3,345,925 3,513,221
42 1,064,950 0 0 0 3,672,166 3,672,166 3,819,053
43 1,126,073 4,035,625 4,035,625 4,156,694
44 1,190,251 4,442,875 4,442,875 4,531,733
45 1,257,639 4,902,425 4,902,425 4,951,450
46 1,328,396 5,424,723 5,424,723 5,424,723
47 1,402,690 6,001,883 6,001,883 6,001,883
48 1,480,700 6,639,668 6,639,668 6,639,668
49 1,562,610 7,344,445 7,344,445 7,344,445
50 1,648,615 8,123,252 8,123,252 8,123,252
</TABLE>
(1) All values shown are as of the end of the policy Year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the Policy Anniversary, (b)
no Policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the end of the first 10 Policy Years.
(4) In the absence of additional premium payment, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only, and should not be deemed
a representation of past or future results. Actual investment returns may be
more or less than those shown and will depend on a number of factors, including
the investment allocation mad by the policyowner, and the investment returns for
the funds of Manufacturers Investment Trust. The policy value, cash surrender
value and death benefit for a policy would be different from those shown if
actual rates of investment return averaged the rate shown above over a period of
years, but also fluctuated above or below that average for individual policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
A-5
<PAGE> 60
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$8,200 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
End of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Value Value Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 8,610 6,608 0 506,608 7,028 0 507,028 7,449 0 507,449
2 17,651 13,601 5,201 513,601 14,865 6,465 514,865 16,179 7,779 516,179
3 27,143 20,461 12,647 520,461 23,016 15,202 523,016 25,776 17,961 525,776
4 37,110 27,197 20,066 527,197 31,502 24,371 531,502 36,333 29,203 536,333
5 47,576 33,805 27,358 533,805 40,330 33,883 540,330 47,943 41,497 547,943
6 58,564 40,282 34,422 540,282 49,510 43,650 549,510 60,707 54,846 560,707
7 70,103 46,624 41,447 546,624 59,050 53,873 559,050 74,732 69,555 574,732
8 82,218 52,824 48,331 552,824 68,956 64,462 568,956 90,139 85,645 590,139
9 94,939 58,879 54,971 558,879 79,236 75,328 579,236 107,058 103,151 607,058
10 108,296 64,775 61,552 564,775 89,891 86,668 589,891 125,629 122,406 625,629
11 122,320 70,495 67,955 570,495 100,915 98,376 600,915 145,995 143,455 645,995
12 137,046 76,034 74,080 576,034 112,317 110,363 612,317 168,330 166,376 668,330
13 152,509 81,377 80,107 581,377 124,092 122,822 624,092 192,812 191,542 692,812
14 168,744 86,490 85,904 586,490 136,220 135,634 636,220 219,622 219,036 719,622
15 185,791 91,364 91,364 591,364 148,700 148,700 648,700 248,978 248,978 748,978
16 203,691 95,958 95,958 595,958 161,501 161,501 661,501 281,092 281,092 781,092
17 222,486 100,236 100,236 600,236 174,594 174,594 674,594 316,196 316,196 816,196
18 242,220 104,153 104,153 604,153 187,941 187,941 687,941 354,542 354,542 854,542
19 262,941 107,663 107,663 607,663 201,497 201,497 701,497 396,401 396,401 896,401
20 284,698 110,706 110,706 610,706 215,204 215,204 715,204 442,057 442,057 942,057
21 307,543 113,627 113,627 613,627 229,819 229,819 729,819 493,592 493,592 993,592
22 331,530 116,008 116,008 616,008 244,586 244,586 744,586 550,007 550,007 1,050,007
23 356,716 117,777 117,777 617,777 259,432 259,432 759,432 611,732 611,732 1,111,732
24 383,162 118,857 118,857 618,857 274,272 274,272 774,272 679,231 679,231 1,179,231
25 410,930 119,158 119,158 619,158 289,002 289,002 789,002 753,007 753,007 1,253,007
26 440,087 118,581 118,581 618,581 303,507 303,507 803,507 833,604 833,604 1,333,604
27 470,701 117,021 117,021 617,021 317,652 317,652 817,652 921,612 921,612 1,421,612
</TABLE>
A-6
<PAGE> 61
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
28 502,846 114,366 114,366 614,366 331,295 331,295 831,295 1,017,678 1,017,678 1,517,678
29 536,599 110,498 110,498 610,498 344,275 344,275 844,275 1,122,507 1,122,507 1,622,507
30 572,038 105,291 105,291 605,291 356,414 356,414 856,414 1,236,866 1,236,866 1,736,866
31 609,250 98,625 98,625 598,625 367,532 367,532 867,532 1,361,612 1,361,612 1,861,612
32 648,323 90,133 90,133 590,133 377,183 377,183 877,183 1,497,425 1,497,425 1,997,425
33 689,349 79,645 79,645 579,645 385,099 385,099 885,099 1,645,260 1,645,260 2,145,260
34 732,427 67,008 67,008 567,008 391,016 391,016 891,016 1,806,187 1,806,187 2,306,187
35 777,658 52,098 52,098 552,098 394,683 394,683 894,683 1,981,422 1,981,422 2,481,422
36 825,151 34,379 34,379 534,379 395,413 395,413 895,413 2,171,862 2,171,862 2,671,862
37 875,018 13,197 13,197 513,197 392,358 392,358 892,358 2,378,371 2,378,371 2,878,371
38 927,379 0 0 0 385,040 385,040 885,040 2,602,321 2,602,321 3,102,321
39 982,358 372,997 372,997 872,997 2,845,273 2,845,273 3,345,273
40 1,040,086 355,801 355,801 855,801 3,109,001 3,109,001 3,609,001
41 1,100,700 331,446 331,446 831,446 3,393,866 3,393,866 3,893,866
42 1,164,345 299,249 299,249 799,249 3,701,721 3,701,721 4,201,721
43 1,231,173 258,399 258,399 758,399 4,034,517 4,034,517 4,534,517
44 1,301,341 208,086 208,086 708,086 4,394,447 4,394,447 4,894,447
45 1,375,018 147,491 147,491 647,491 4,783,962 4,783,962 5,283,962
46 1,452,379 76,259 76,259 576,259 5,206,293 5,206,293 5,706,293
47 1,533,608 0 0 0 5,661,901 5,661,901 6,161,901
48 1,618,899 6,153,478 6,153,478 6,653,478
49 1,708,454 6,684,856 6,684,856 7,184,856
50 1,802,486 7,261,793 7,261,793 7,761,793
</TABLE>
(1) All values shown are as of the end of the policy Year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the Policy Anniversary, (b)
no Policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the end of the first 10 Policy Years.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only, and should not be deemed
a representation of past or future results. Actual investment returns may be
more or less than those shown and will depend on a number of factors, including
the investment allocation mad by the policyowner, and the investment returns for
the funds of Manufacturers Investment Trust. The policy value, cash surrender
value and death benefit for a policy would be different from those shown if
actual rates of investment return averaged the rate shown above over a period of
years, but also fluctuated above or below that average for individual policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
A-7
<PAGE> 62
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$8,200 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
End of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Value Value Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 8,610 6,608 0 506,608 7,028 0 507,028 7,449 0 507,449
2 17,651 13,601 5,201 513,601 14,865 6,465 514,865 16,179 7,779 516,179
3 27,143 20,430 12,615 520,430 22,983 15,169 522,983 25,742 17,928 525,742
4 37,110 27,084 19,953 527,084 31,383 24,252 531,383 36,209 29,078 536,209
5 47,576 33,554 27,107 533,554 40,062 33,615 540,062 47,658 41,211 547,658
6 58,564 39,827 33,966 539,827 49,016 43,155 549,016 60,170 54,309 560,170
7 70,103 45,889 40,712 545,889 58,237 53,060 558,237 73,835 68,658 573,835
8 82,218 51,722 47,228 551,722 67,717 63,224 567,717 88,747 84,254 588,747
9 94,939 57,308 53,400 557,308 77,443 73,535 577,443 105,008 101,101 605,008
10 108,296 62,622 59,399 562,622 87,394 84,171 587,394 122,725 119,501 622,725
11 122,320 67,635 65,095 567,635 97,547 95,007 597,547 142,007 139,467 642,007
12 137,046 72,312 70,358 572,312 107,867 105,913 607,867 162,970 161,016 662,970
13 152,509 76,606 75,336 576,606 118,307 117,037 618,307 185,728 184,458 685,728
14 168,744 80,458 79,872 580,458 128,806 128,220 628,806 210,395 209,808 710,395
15 185,791 83,800 83,800 583,800 139,288 139,288 639,288 237,080 237,080 737,080
16 203,691 86,556 86,556 586,556 149,664 149,664 649,664 265,900 265,900 765,900
17 222,486 88,611 88,611 588,611 159,801 159,801 659,801 296,935 296,935 796,935
18 242,220 89,931 89,931 589,931 169,642 169,642 669,642 330,363 330,363 830,363
19 262,941 90,391 90,391 590,391 179,032 179,032 679,032 366,278 366,278 866,278
20 284,698 89,876 89,876 589,876 187,820 187,820 687,820 404,795 404,795 904,795
21 307,543 88,589 88,589 588,589 196,548 196,548 696,548 447,643 447,643 947,643
22 331,530 86,021 86,021 586,021 204,338 204,338 704,338 493,612 493,612 993,612
23 356,716 81,968 81,968 581,968 210,916 210,916 710,916 542,793 542,793 1,042,793
24 383,162 76,191 76,191 576,191 215,960 215,960 715,960 595,249 595,249 1,095,249
25 410,930 68,424 68,424 568,424 219,102 219,102 719,102 651,014 651,014 1,151,014
26 440,087 58,378 58,378 558,378 219,929 219,929 719,929 710,104 710,104 1,210,104
</TABLE>
A-8
<PAGE> 63
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
27 470,701 45,764 45,764 545,764 218,004 218,004 718,004 772,526 772,526 1,272,526
28 502,846 30,292 30,292 530,292 212,868 212,868 712,868 838,285 838,285 1,338,285
29 536,599 11,676 11,676 511,676 204,038 204,038 704,038 907,388 907,388 1,407,388
30 572,038 0 0 0 190,995 190,995 690,995 979,824 979,824 1,479,824
31 609,250 173,155 173,155 673,155 1,055,541 1,055,541 1,555,541
32 648,323 149,859 149,859 649,859 1,134,432 1,134,432 1,634,432
33 689,349 120,351 120,351 620,351 1,216,307 1,216,307 1,716,307
34 732,427 83,800 83,800 583,800 1,300,918 1,300,918 1,800,918
35 777,658 39,408 39,408 539,408 1,388,061 1,388,061 1,888,061
36 825,151 0 0 0 1,477,514 1,477,514 1,977,514
37 875,018 1,569,122 1,569,122 2,069,122
38 927,379 1,662,667 1,662,667 2,162,667
39 982,358 1,757,959 1,757,959 2,257,959
40 1,040,086 1,854,547 1,854,547 2,354,547
41 1,100,700 1,951,788 1,951,788 2,451,788
42 1,164,345 2,048,634 2,048,634 2,548,634
43 1,231,173 2,143,550 2,143,550 2,643,550
44 1,301,341 2,234,937 2,234,937 2,734,937
45 1,375,018 2,322,506 2,322,506 2,822,506
46 1,452,379 2,407,468 2,407,468 2,907,468
47 1,533,608 2,470,599 2,470,599 2,970,599
48 1,618,899 2,488,120 2,488,120 2,988,120
49 1,708,454 2,412,254 2,412,254 2,912,254
50 1,802,486 2,147,236 2,147,236 2,647,236
</TABLE>
(1) All values shown are as of the end of the policy Year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the Policy Anniversary, (b)
no Policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
A-9
<PAGE> 64
ILLUSTRATIONS FOR POLICIES
WITH
20 YEAR NO LAPSE GUARANTEE PROVISION
<PAGE> 65
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$7,500 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End Of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year (1) (2) Value (3) Value (3) Value (3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,875
2 16,144
3 24,826
4 33,942
5 43,514
6 53,565
7 64,118
8 75,199
9 86,834
10 99,051
11 111,878
12 125,347
13 139,490
14 154,339
15 169,931
16 186,303
17 203,493
18 221,543
19 240,495
20 260,394
21 281,289
22 303,229
23 326,265
24 350,453
25 375,851
26 402,518
27 430,519
28 459,920
29 490,791
30 523,206
31 557,241
32 592,978
33 630,502
34 669,902
35 711,272
36 754,711
37 800,322
38 848,213
39 898,498
40 951,298
41 1,006,738
42 1,064,950
43 1,126,073
44 1,190,251
45 1,257,639
46 1,328,396
47 1,402,690
48 1,480,700
</TABLE>
<PAGE> 66
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
49 1,562,610
50 1,648,615
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b)
no policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the end of the first 20 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of Manufacturers Investment Trust. The policy value, cash surrender
value and death benefit for a policy would be different from those shown if
actual rates of investment return averaged the rate shown above over a period of
years, but also fluctuated above or below that average for individual policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<PAGE> 67
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$7,500 ANNUAL PLANNED PREMIUM
ASSUMING MAXIMUM CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End Of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year (1) (2) Value (3) Value (3) Value (3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,875
2 16,144
3 24,826
4 33,942
5 43,514
6 53,565
7 64,118
8 75,199
9 86,834
10 99,051
11 111,878
12 125,347
13 139,490
14 154,339
15 169,931
16 186,303
17 203,493
18 221,543
19 240,495
20 260,394
21 281,289
22 303,229
23 326,265
24 350,453
25 375,851
26 402,518
27 430,519
28 459,920
29 490,791
30 523,206
31 557,241
32 592,978
33 630,502
34 669,902
35 711,272
36 754,711
37 800,322
38 848,213
39 898,498
40 951,298
41 1,006,738
42 1,064,950
43 1,126,073
44 1,190,251
45 1,257,639
46 1,328,396
47 1,402,690
48 1,480,700
</TABLE>
<PAGE> 68
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
49 1,562,610
50 1,648,615
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b)
no policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the end of the first 20 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of Manufacturers Investment Trust. The policy value, cash surrender
value and death benefit for a policy would be different from those shown if
actual rates of investment return averaged the rate shown above over a period of
years, but also fluctuated above or below that average for individual policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<PAGE> 69
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$8,200 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End Of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year (1) (2) Value (3) Value (3) Value (3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 8,610
2 17,651
3 27,143
4 37,110
5 47,576
6 58,564
7 70,103
8 82,218
9 94,939
10 108,296
11 122,320
12 137,046
13 152,509
14 168,744
15 185,791
16 203,691
17 222,486
18 242,220
19 262,941
20 284,698
21 307,543
22 331,530
23 356,716
24 383,162
25 410,930
26 440,087
27 470,701
28 502,846
29 536,599
30 572,038
31 609,250
32 648,323
33 689,349
34 732,427
35 777,658
36 825,151
37 875,018
38 927,379
39 982,358
40 1,040,086
41 1,100,700
42 1,164,345
43 1,231,173
44 1,301,341
45 1,375,018
46 1,452,379
47 1,533,608
48 1,618,899
</TABLE>
<PAGE> 70
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
49 1,708,454
50 1,802,486
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b)
no policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the end of the first 20 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of Manufacturers Investment Trust. The policy value, cash surrender
value and death benefit for a policy would be different from those shown if
actual rates of investment return averaged the rate shown above over a period of
years, but also fluctuated above or below that average for individual policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<PAGE> 71
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$8,200 ANNUAL PLANNED PREMIUM
ASSUMING MAXIMUM CHARGES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End Of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death
Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year (1) (2) Value (3) Value (3) Value (3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 8,610
2 17,651
3 27,143
4 37,110
5 47,576
6 58,564
7 70,103
8 82,218
9 94,939
10 108,296
11 122,320
12 137,046
13 152,509
14 168,744
15 185,791
16 203,691
17 222,486
18 242,220
19 262,941
20 284,698
21 307,543
22 331,530
23 356,716
24 383,162
25 410,930
26 440,087
27 470,701
28 502,846
29 536,599
30 572,038
31 609,250
32 648,323
33 689,349
34 732,427
35 777,658
36 825,151
37 875,018
38 927,379
39 982,358
40 1,040,086
41 1,100,700
42 1,164,345
43 1,231,173
44 1,301,341
45 1,375,018
46 1,452,379
47 1,533,608
48 1,618,899
</TABLE>
<PAGE> 72
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
49 1,708,454
50 1,802,486
</TABLE>
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b)
no policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the end of the first 20 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of Manufacturers Investment Trust. The policy value, cash surrender
value and death benefit for a policy would be different from those shown if
actual rates of investment return averaged the rate shown above over a period of
years, but also fluctuated above or below that average for individual policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<PAGE> 73
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 50 pages and illustrations;
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940 The signatures;
Written consents of the following persons:
Ernst & Young LLP - To Be Filed by Amendment
Actuary - 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.
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 registration statement on Form S-6, file
number 333-66303 filed October 29, 1998.
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)(i)
to the registration statement on Form S-6, file number
333-66303 filed October 29, 1998.
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 registration statement on Form S-6, file
number 333-66303 filed October 29, 1998.
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> 74
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 -
Incorporated by reference to Exhibit A(5)(a) to pre-effective
amendment no. 1 to the registration statement on Form S-6,
file number 333-66303 filed February 5, 1999.
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.
<PAGE> 75
A(8)(a)(vi) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated May 31, 1998. Incorporated by reference to
Exhibit A(8)(a)(vi) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(b) Specimen Stoploss Reinsurance Agreement between The
Manufacturers Life Insurance Company of America and The
Manufacturers Life Insurance Company. Incorporated by
reference to Exhibit A(8)(b) to the registration statement on
Form S-6, file number 333-66303 filed October 29, 1998.
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)(i) Specimen Application for Flexible Premium Variable Life
Insurance Policy. Incorporated by reference to Exhibit A(10)
to post effective amendment no. 3 to the registration
statement on Form S-6, file number 33-77256, filed April 26,
1996.
A(10)(a)(ii) Specimen Rider for Flexible Premium Survivorship Variable Life
Insurance Policy - Filed Herein
A(10)(b) Specimen Application Supplement for Flexible Premium Variable
Life Insurance Policy. Incorporated by reference to Exhibit
A(10)(a) to post effective amendment no. 5 to the registration
statement on Form S-6, file number 33-77256, filed December
23, 1996.
2. Consents of the following:
A. Opinion and consent of James D. Gallagher, Esq., Secretary and
General Counsel of The Manufacturers Life Insurance Company of
America - Incorporated by reference to Exhibit 2.A to pre-effective
amendment no. 1 to the registration statement on Form S-6, file
number 333-66303, filed February 5, 1999.
B. Opinion and consent of Brian Koop, Assistant Vice-President and
Pricing Actuary of The Manufacturers Life Insurance Company of
America - To Be Filed By Amendment
C. Consent of Ernst & Young LLP - To Be Filed By Amendment
3. No financial statements are omitted from the prospectus pursuant to
instruction 1(b) or (c) of Part I.
4. Not applicable.
6. Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer
Procedures for the Policies. Incorporated by reference to Exhibit 6 to
pre-effective amendment no. 1 to the registration statement on Form S-6,
file number 333-66303, filed February 5, 1999.
7. Powers of Attorney. Incorporated by reference to Exhibit 1 to post effective
amendment no. 1 to the registration statement on Form S-6, file number
333-69719, filed February 25, 2000.
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the
Registrant, and the Depositor, have duly caused this amendment to the
registration statement to be signed on their behalf by the undersigned thereunto
duly authorized, and the seal of the depositor to be hereunto affixed and
attested, all in the City of Toronto, Province of Ontario, Canada, on this 25th
day of February, 2000.
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> 77
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, this
amended registration statement has been signed by the following persons in the
capacities indicated on this 25th day of February.
Signature Title
* Chairman and Director
- ----------------------
JOHN D. RICHARDSON
/s/ Donald A. Guloien President and Director
- ----------------------
DONALD A. GULOIEN (Principal Executive
Officer)
*
- ----------------------
SANDRA M. COTTER Director
/s/ James D. Gallagher Director
- ----------------------
JAMES D. GALLAGHER
*---------------------- Director
JAMES O'MALLEY
* Director
- ----------------------
JOSEPH J. PIETROSKI
* Director
- ----------------------
THEODORE KILKUSKIE, JR.
/s/ Denis Turner Vice President and
- ---------------------- Treasurer
DENIS TURNER (Principal Financial
and Accounting Officer)
*/s/ James D. Gallagher
- -----------------------
JAMES D. GALLAGHER
Pursuant to Power of Attorney
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
Item No. Description
- -------- -----------
<S> <C>
1A(10)(a)(ii) Specimen Rider for Flexible Premium Survivorship
Variable Life Insurance Policy
</TABLE>
<PAGE> 1
Exhibit 1A(10)(a)(ii)
SUPPLEMENTARY BENEFIT
SUPPLEMENTARY INSURANCE OPTION
TERM LIFE INSURANCE
PAYABLE ON SECOND DEATH
This benefit is part of your policy. Except where the benefit provides
otherwise, it is subject to all the provisions of your policy.
EFFECTIVE DATE. The effective date for this benefit is shown in the Policy
Information section.
LIFE INSURED is the last-to-die of the Lives Insured.
LIVES INSURED are the persons whose lives are insured under your policy, as
shown in the Policy Information section.
BENEFIT. This benefit provides an additional insurance amount which is level
term life insurance. On receiving due proof that the Life Insured died while the
benefit was in force, we will pay the benefit amount to the same beneficiary and
in the same manner as the proceeds payable under your policy.
BENEFIT AMOUNT. The Benefit Amount is shown in the Policy Information section.
CHANGING THE BENEFIT AMOUNT. The Benefit Amount can be increased or decreased
only when a corresponding change occurs under your policy resulting from your
Written Request to change the policy Face Amount. The change in the Benefit
Amount will be subject to the following:
(a) the amount of the change will be in the same percentage as the change
in the Face Amount under your policy;
(b) the change will be subject to the same policy conditions that apply to
changing the Face Amount of your policy;
(c) the change will take effect on the same effective date as the Face
Amount change under your policy; and
(d) a decrease in the Face Amount of your policy could cause this benefit
to terminate as described in the Termination section below.
MINIMUM DEATH BENEFIT. The Minimum Death Benefit provision under your policy is
deleted and replaced by the following:
To ensure that the policy continues to qualify as life insurance under the
Internal Revenue Code, the sum of the Death Benefit as under your policy and the
Benefit Amount payable under the Supplementary Insurance Option will never be
less than the Minimum Death Benefit. The Minimum Death Benefit is equal to the
Policy Value multiplied by the Minimum Death Benefit Percentage for the Attained
Age of the youngest of the Lives Insured, or the Attained Age such person would
have reached if living. The Minimum Death Benefit Percentages are shown in the
Table of Minimum Death Benefit Percentages shown below.
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED AGE APPLICABLE PERCENTAGE
------------ ---------------------
<S> <C>
40 and under 250%
45 215%
50 185%
55 150%
60 130%
65 120%
70 115%
75 105%
90 105%
95 and above 100%
</TABLE>
To determine the Applicable Percentage, we will use the Attained Age of the
youngest of the Lives Insured, or the Attained Age such person would have
reached if living.
For ages not shown, the Applicable Percentage can be found by reducing the above
Applicable Percentages proportionately.
(continued)
Page 1
<PAGE> 2
SUPPLEMENTARY INSURANCE OPTION
TERM LIFE INSURANCE
PAYABLE ON SECOND DEATH
BENEFIT COST. The monthly cost of the benefit is one of the Monthly Deductions
under your policy. The monthly cost is equal to (a) multiplied by (b), where:
(a) is the monthly cost of insurance rate per $1,000 of benefit amount; and
(b) is the benefit amount divided by $1,000.
Solely for purposes of determining the monthly cost for this benefit, if, at the
beginning of any policy month, the Policy Value exceeds the Face Amount of your
policy, we will consider the Benefit Amount to be reduced by such excess.
The rates for the Cost of Insurance are based on the Lives Insured's Age, sex,
Risk Classification, and the duration that the coverage has been in force. The
rates for the Cost of Insurance under this benefit will always be less than or
equal to the rates for the Cost of Insurance under the policy. We will determine
Cost of Insurance rates from time to time, on a basis that does not discriminate
unfairly within any class of lives insured.
The Cost of Insurance calculation will reflect any Additional Rating shown in
the Policy Information section. The Cost of Insurance rates will never exceed
those shown in the Table Of Guaranteed Maximum Cost Of Insurance Rates on page 4
of your policy, plus any Additional Rating.
VALIDITY. We cannot contest the validity of this benefit after it has been in
force during the lifetime of the Lives Insured for two years from the effective
date of this benefit.
For an increase in the Benefit Amount, the validity period will start on the
effective date of the increase.
SUICIDE. If any of the Lives Insured die by suicide, while sane or insane,
within two years after the effective date of this benefit, this benefit will
terminate and we will pay only the amount of premiums paid for the benefit.
If any of the Lives Insured die by suicide, while sane or insane, within two
years after the effective date of an increase in Benefit Amount, we will credit
the amount of any Monthly Deductions taken for the increase and reduce the
Benefit Amount to what it was prior to the increase. If the last death is by
suicide, for that increase in Benefit Amount, we will pay only the Monthly
Deductions taken for the increase.
NO-LAPSE GUARANTEE. The No-Lapse Guarantee in your policy applies to this
benefit only during the first two Policy Years.
DEFAULT. This benefit will not go into default during the first two Policy Years
if the No-Lapse Guarantee requirements are met under your policy. Otherwise,
this benefit will go into default if, at the beginning of any Policy Month, the
Net Cash Surrender Value under your policy would go to zero or below after we
take the Monthly Deduction that is due for that month. After the second Policy
Year, this benefit could go into default even if your policy does not go into
default.
GRACE PERIOD. We will allow 61 days from the date that this benefit goes into
default, for you to pay the amount that is required to bring this benefit out of
default or it will terminate. 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 this benefit 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 of record.
The amount required to bring this benefit out of default is equal to (a) plus
(b) plus (c) where:
(a) is the amount necessary to bring the Net Cash Surrender Value under
your policy to zero, if it is less than zero, at the date of default of
this benefit; and
(continued)
Page 2
<PAGE> 3
SUPPLEMENTARY INSURANCE OPTION
TERM LIFE INSURANCE
PAYABLE ON SECOND DEATH
(b) is the monthly cost of this benefit due on the date of default of this
benefit, plus the cost for the next two Policy Months; and
(c) is the applicable Premium Load.
TERMINATION. This benefit terminates on the earliest of:
(a) termination of your policy;
(b) the end of the grace period for which you have not paid the amount
necessary to bring this benefit out of default;
(c) the date there is a decrease in the Face Amount of your policy which
would cause the amount of this benefit to fall below the Minimum
Benefit shown in the Policy Information section;
(d) the Policy Anniversary nearest the date the younger of the Lives
Insured reaches Attained Age 100, or would have reached Attained Age
100 if living, or
(e) the Policy Anniversary following the date we receive your Written
Request for termination of this benefit.
This benefit cannot be reinstated after it terminates.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
/s/ D A Guloien
---------------------------------------------------
President
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<PAGE> 4
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
SUPPLEMENTARY BENEFITS
BENEFIT SUPPLEMENTARY INSURANCE OPTION
PAYABLE ON SECOND DEATH
LIFE INSURED NO.1 - JOHN M. DOE
NO.2 - MARY C. DOE
AGE AT
EFFECTIVE DATE NO.1 - 35
NO.2 - 35
EFFECTIVE DATE JANUARY 1, 2000
BENEFICIARY AS DESIGNATED IN THE APPLICATION OR
SUBSEQUENTLY CHANGED
BENEFIT AMOUNT $ 250,000.00
MINIMUM BENEFIT $ 250,000.00 OR 10% OF THE POLICY
FACE AMOUNT, WHICHEVER IS GREATER
SEX NO.1 - MALE
NO.2 - FEMALE
RISK
CLASSIFICATION NO.1 - NON-SMOKER, STANDARD CLASS
NO.2 - NON-SMOKER, STANDARD CLASS
ADDITIONAL
RATING NO.1 - NOT APPLICABLE
NO.2 - NOT APPLICABLE
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