<PAGE> 1
As filed with the Securities and Exchange Commission on January 8, 2001
Registration No. 333-45970
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
PRE-EFFECTIVE AMENDMENT NO. 1
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)
38500 Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of Depositor's Principal Executive Offices)
James D. Gallagher
Secretary and General Counsel
The Manufacturers Life Insurance Company of America
73 Tremont Street
Boston, MA 02108
(Name and Address of Agent for Service)
Copy to:
J. Sumner Jones, Esq.
Jones & Blouch L.L.P.
1025 Thomas Jefferson Street, NW
Washington, DC 20007
Title of Securities Being Registered: Variable Life Insurance Contracts
Approximate date of commencement of proposed public offering: As soon after the
effective date of this Registration Statement as is practicable.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
Separate Account Three of
The Manufacturers Life Insurance Company of America
Registration Statement on Form S-6
Cross-Reference Sheet
FORM
N-8B-2
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<CAPTION>
ITEM NO. CAPTION IN PROSPECTUS
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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 (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
22 *
23 **
</TABLE>
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<TABLE>
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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);
Other Information (Distribution of the Policy)
28 Other Information (Officers and Directors)
29 General Information About Manufacturers (Manufacturers Life of America)
30 *
31 *
32 *
33 *
34 *
35 *
36 *
37 *
38 Other Information (Distribution of the Policies; Responsibilities of Manufacturers Life)
39 Other Information (Distribution of the Policies)
40 *
41 Other Information (Distribution of the Policy)
42 Other Information (Distribution of the Policy)
43 *
44 Policy Values --Determination of Policy Value; Units and Unit Values
45 *
46 Policy Surrender and Partial Withdrawals; Other Information -- Payment of Proceeds
47 General Information About Manufacturers (Manufacturers Investment Trust)
48 *
49 *
50 General Information About Manufacturers
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
</TABLE>
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<TABLE>
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52 Other Information (Substitution of Portfolio Shares)
53 General Information About Manufacturers Life (Separate Account Three);
Tax Treatment of the Policy
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
</TABLE>
* Omitted since answer is negative or item is not applicable.
<PAGE> 5
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE> 6
PROSPECTUS
SEPARATE ACCOUNT THREE OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
VENTURE VUL ACCUMULATOR
A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
This prospectus describes Venture VUL Accumulator, a flexible premium variable
universal life insurance policy (the "Policy") offered by The Manufacturers Life
Insurance Company of America (the "Company," "Manufacturers Life of America,"
"we" or "us").
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 you, the policyowner, to pay premiums and adjust
insurance coverage in light of your current financial circumstances and
insurance needs.
Policy Value may be accumulated on a fixed basis or vary with the investment
performance of the sub-accounts of Manufacturers Life of America's Separate
Account Three (the "Separate Account"). The assets of each sub-account will be
used to purchase shares of a particular investment portfolio (a "Portfolio") of
Manufacturers Investment Trust (the "Trust"). The accompanying prospectus for
the Trust, and the corresponding statement of additional information, describe
the investment objectives of the Portfolios in which you may invest net
premiums. Other sub-accounts and Portfolios may be added in the future.
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 (the "SEC") maintains a web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the SEC.
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 SEC 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
38500 Woodward Avenue
Bloomfield Hills, Michigan 48304
THE DATE OF THIS PROSPECTUS IS ________, 2001
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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DEFINITIONS................................................................................................................
POLICY SUMMARY
General....................................................................................................................
Death Benefits.............................................................................................................
Optional Term Rider........................................................................................................
Cash Value Enhancement Riders..............................................................................................
Premiums...................................................................................................................
Policy Value...............................................................................................................
Policy Loans...............................................................................................................
Surrender and Partial Withdrawals..........................................................................................
Lapse and Reinstatement....................................................................................................
Charges and Deductions.....................................................................................................
Investment Options and Investment Advisers ................................................................................
Investment Management Fees and Expenses....................................................................................
Table of Charges and Deductions............................................................................................
Table of Investment Management Fees and Expenses...........................................................................
Table of Investment Options and Investment Subadvisers.....................................................................
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, THE SEPARATE ACCOUNT AND THE TRUST
Manufacturers Life of America..............................................................................................
The Separate Account.......................................................................................................
The Trust..................................................................................................................
Investment Objectives of the Portfolios....................................................................................
ISSUING A POLICY
Requirements...............................................................................................................
Temporary Insurance Agreement..............................................................................................
Right to Examine the Policy................................................................................................
Life Insurance Qualification...............................................................................................
DEATH BENEFITS.............................................................................................................
Death Benefit Options......................................................................................................
Changing the Death Benefit Option..........................................................................................
Changing the Face Amount...................................................................................................
PREMIUM PAYMENTS
Initial Premiums...........................................................................................................
Subsequent Premiums........................................................................................................
Maximum Premium Limitation.................................................................................................
Premium Allocation.........................................................................................................
CHARGES AND DEDUCTIONS
Premium Charge.............................................................................................................
Surrender Charges..........................................................................................................
Monthly Deductions.........................................................................................................
Charges for Transfers......................................................................................................
Reduction in Charges.......................................................................................................
SPECIAL PROVISIONS FOR EXCHANGES...........................................................................................
COMPANY TAX CONSIDERATIONS.................................................................................................
POLICY VALUE
Determination of the Policy Value..........................................................................................
Units and Unit Values......................................................................................................
Transfers of Policy Value..................................................................................................
POLICY LOANS...............................................................................................................
Effect of Policy Loan......................................................................................................
Interest Charged on Policy Loans...........................................................................................
</TABLE>
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<TABLE>
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Loan Account...............................................................................................................
POLICY SURRENDER AND PARTIAL WITHDRAWALS
Policy Surrender...........................................................................................................
Partial Withdrawals........................................................................................................
LAPSE AND REINSTATEMENT
Lapse......................................................................................................................
No Lapse Guarantee.........................................................................................................
No-Lapse Guarantee Cumulative Premium Test.................................................................................
Reinstatement..............................................................................................................
THE GENERAL ACCOUNT........................................................................................................
Fixed Account..............................................................................................................
OTHER PROVISIONS OF THE POLICY
Cash Value Enhancement Riders......................................................................................
Policyowner Rights.........................................................................................................
Beneficiary................................................................................................................
Validity...................................................................................................................
Misstatement of Age or Sex.................................................................................................
Suicide Exclusion..........................................................................................................
Supplementary Benefits.....................................................................................................
TAX TREATMENT OF THE POLICY................................................................................................
Life Insurance Qualification...............................................................................................
Tax Treatment of Policy Benefits...........................................................................................
Alternate Minimum Tax......................................................................................................
Income Tax Reporting.......................................................................................................
OTHER INFORMATION
Payment of Proceeds........................................................................................................
Reports to Policyowners....................................................................................................
Distribution of the Policies...............................................................................................
Responsibilities of Manufacturers Life.....................................................................................
Voting Rights..............................................................................................................
Substitution of Portfolio Shares...........................................................................................
Records and Accounts.......................................................................................................
State Regulations..........................................................................................................
Litigation.................................................................................................................
Independent Auditors.......................................................................................................
Further Information........................................................................................................
Officers and Directors.....................................................................................................
Optional Term Rider........................................................................................................
Illustrations
APPENDIX A - SAMPLE ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER VALUES AND DEATH BENEFITS............................A-1
APPENDIX B - AUDITED FINANCIAL STATEMENTS...............................................................................B-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION WHERE IT
WOULD NOT BE LAWFUL. YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS, THE PROSPECTUS OF MANUFACTURERS INVESTMENT TRUST, OR THE STATEMENT
OF ADDITIONAL INFORMATION OF MANUFACTURERS INVESTMENT TRUST. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
Examine this prospectus carefully. The Policy Summary will briefly describe the
Policy. More detailed information will be found further in the prospectus.
DEFINITIONS
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<PAGE> 9
Additional Rating
is an increase to the Cost of Insurance Rate for insureds who do not meet, at a
minimum, the Company's underwriting requirements for the standard Risk
Classification.
Age
on any date is the life insured's age on his or her nearest birthday to the
Policy Date. If no specific age is mentioned, age means the life insured's age
on the Policy Anniversary nearest to the birthday.
Attained Age
is the Age at issue 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 business. A Business Day
ends at the close of regularly scheduled daytime trading of the New York Stock
Exchange 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. The
Company will take the first Monthly Deduction on the Effective Date.
Gross Withdrawal
is the amount of partial Net Cash Surrender Value the policyowner requests plus
any Surrender Charge applicable to the withdrawal.
Fixed Account
is that part of the Policy Value which reflects the value the policyowner has in
the general account of the Company.
Investment Account
is that part of the Policy Value which reflects the value the policyowner has in
one of the sub-accounts of the Separate Account.
Issue Date
is the date the Company issued the Policy. The Issue Date is also the date from
which the Suicide and Validity provisions of the Policy are measured.
Life Insured
is the person whose life is insured under this Policy.
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<PAGE> 10
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.
Loan Interest Credited Differential
is the difference between the rate of interest charged on a Policy Loan and the
rate of interest credited to amounts in the Loan Account.
Maximum Loanable Amount
is 100% of the Policy Net Cash Surrender Value less estimated charges to the
next Policy anniversary, including loan interest.
Minimum Death Benefit
is on any date the Policy Value on that date multiplied by the applicable
minimum death benefit percentage for the Attained Age of the life insured.
Monthly No-Lapse Guarantee Premium
is one-twelfth of the No-Lapse Guarantee Premium.
Net Cash Surrender Value
is the Cash Surrender Value less the Policy Debt.
Net Policy Value
is the Policy Value less the value in the Loan Account.
Net Premium
is the gross premium paid less the Premium Charge. It is the amount of premium
allocated to the Fixed Account and/or Investment Accounts.
No-Lapse Guarantee
is a provision of the Policy which occurs when the Policy is in the No-Lapse
Guarantee Period, and meets the No-Lapse Guarantee Cumulative Premium Test. If
such a condition 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) 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 the annual premium used to determine the Monthly No-Lapse Guarantee Premium.
It is set at issue and is recalculated, prospectively, whenever 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 the life insured changes.
- a temporary Additional Rating is added (due to a face amount increase), or
terminated.
- the death benefit option changes.
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No-Lapse Guarantee Cumulative Premium
is the minimum amount due to satisfy the No-Lapse Guarantee Cumulative Premium
Test. This amount equals the sum, from issue to the date of the test, of the
Monthly No-Lapse Guarantee Premiums.
No-Lapse Guarantee Cumulative Premium Test
is a test that, if satisfied, during the No Lapse Guarantee Period will keep the
policy in force when the Net Cash Surrender Value is less than zero. The test is
satisfied if the sum of all premiums paid, less any Gross Withdrawals and less
any Policy Debt, is greater than or equal to the sum of the monthly No-Lapse
Guarantee Premiums due since the Policy Date.
Policy Date
is the date 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.
Premium Death Benefit Account
is the sum of premiums paid to date less any Gross Withdrawals, but is not less
than zero.
Service Office Address
is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
Surrender Charge Period
is the period following the Policy 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.
Surrender Charge Premium Limit
is used to determine the Surrender Charge. The Surrender Charge Premium Limit
for the initial Face Amount is stated in the Policy. The Company will advise the
policyowner of the Surrender Charge Premium Limit for any increase in Face
Amount.
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.
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POLICY SUMMARY
GENERAL
We have prepared the following summary as a general description of the most
important features of the Policy. It is not comprehensive and you should refer
to the more detailed information contained in this prospectus. Unless otherwise
indicated or required by the context, the discussion throughout this prospectus
assumes that the Policy has not gone into default, there is no outstanding
Policy Debt, and the death benefit is not determined by the minimum death
benefit percentage. The Policy's provisions may vary in some states and the
terms of your policy and any endorsement or rider supercede the disclosure in
this prospectus.
DEATH BENEFITS
There are three death benefit options. Under OPTION 1, the death benefit is the
Face Amount of the Policy at the date of death. Under OPTION 2, the death
benefit is the Face Amount plus the Policy Value of the Policy at the date of
death. Under OPTION 3 the death benefit is the Face Amount plus the Premium
Death Benefit account at the date of death. The actual death benefit will be the
greater of the death benefit under the applicable death benefit option or the
Minimum Death Benefit. The Minimum Death Benefit is on any date the Policy Value
on that date multiplied by the applicable minimum death benefit percentage for
the Attained Age of the life insured. A table of Minimum Death Benefit
Percentages is located under "Death Benefits - Minimum Death Benefit." You may
change the death benefit option and increase or decrease the Face Amount
subject to the limitations described in this Prospectus.
OPTIONAL TERM RIDER
The Policy may be issued with an optional term insurance rider (the "Term
Rider") which provides an additional insurance amount which is level term life
insurance. The benefit of the Term Rider is that the cost of insurance will
always be less than or equal to the cost of insurance under 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 the life insured's Attained Age 100.
Cash Value Enhancement Riders
The Policy may be issued with one of two optional Cash Value Enhancement riders.
The benefit of either rider is that the Cash Surrender VALUE under the Policy
will be enhanced during the period for which Surrender Charges apply. The
decision to add one of these two riders must be made at issuance of the Policy
and, once made, is irrevocable. Adding either of these riders will result in
different premium and asset-based risk charges under the Policy.
PREMIUMS
You may pay premiums 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 your instructions and at the Company's
discretion, to one or more of our general account and the sub-accounts of the
Separate Account. You may change your allocation instructions at any time. You
may also transfer amounts among the accounts.
POLICY VALUE
The Policy has a Policy Value reflecting premiums paid, certain charges for
expenses and cost of insurance, and the investment performance of the accounts
to which you have allocated premiums.
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POLICY LOANS
You may borrow an amount not to exceed the Maximum Loanable Amount. Loan
interest at a rate of 5.25% during the first ten Policy Years and 4% thereafter
is due on each Policy Anniversary. We will deduct all outstanding Policy Debt
from proceeds payable at the insured's death or upon surrender.
SURRENDER AND PARTIAL WITHDRAWALS
You may make a partial withdrawal of your Policy Value. A partial withdrawal may
result in a reduction in the Face Amount of or the death benefit under the
Policy and an assessment of a portion of the Surrender Charges to which the
Policy is subject.
You may surrender your Policy for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any Surrender Charge and outstanding monthly deductions due minus the
Policy Debt.
LAPSE AND REINSTATEMENT
Unless the No-Lapse Guarantee Cumulative Premium Test has been met, a Policy
will lapse (and terminate without value) when its Net Cash Surrender Value is
insufficient to pay the next monthly deduction and a grace period of 61 days
expires without your having made an adequate payment.
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 policyowner may reinstate a lapsed Policy at any time within the five year
period following lapse provided the Policy was not surrendered for its Net Cash
Surrender Value. We will require evidence of insurability along with a certain
amount of premium as described under "reinstatement."
CHARGES AND DEDUCTIONS
We assess certain charges and deductions in connection with the Policy. These
include:
- charges deducted from premiums paid,
- monthly deductions for administration, asset-based risk and cost of
insurance charges,
- charges assessed on surrender or lapse, and
- if applicable, a charge for any supplementary benefits added to the Policy.
The charges are summarized in the Table of Charges and Deductions. We may allow
you to request that the sum of the charges assessed monthly for the cost of
insurance and administrative expenses be deducted from the Fixed Account or one
or more of the sub-accounts of the Separate Account.
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.
The Policy may be issued with either one of the two optional Cash Value
Enhancement riders which we offer.
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In the case of the Cash Value Enhancement rider, the Surrender Charge is
reduced. In the case of the Cash Value Enhancement Plus rider the Surrender
Charge is eliminated. If a Policy is issued with either of these riders, it will
have different premium charges and the same or higher asset-based risk charges
as noted under the "Table of Charges and Deductions."
INVESTMENT OPTIONS AND INVESTMENT ADVISERS
You may allocate Net Premiums to the Fixed Account or to one or more of the
sub-accounts of the Separate Account. 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, as amended.
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
Each sub-account of the Separate Account purchases shares of the Portfolios at
net asset value. The net asset value of those shares reflects investment
management fees and certain expenses of the Portfolios. The fees and expenses
for each Portfolio for the Trust's last fiscal year are shown in the Table of
Investment Management Fees and Expenses below. These fees and expenses are
described in detail in the accompanying Trust prospectus to which reference
should be made.
Allocating net premiums only to one or a small number of the investment options
(other than the Lifestyle Trusts) should not be considered a balanced investment
strategy. In particular, allocating net premiums to a small number of investment
options that concentrate their investments in a particular business or market
sector will increase the risk that the value of your Policy will be more
volatile since these investment options may react similarly to business or
market specific events. Examples of business or market sectors where this risk
historically has been and may continue to be particularly high include: (a)
technology related businesses, including internet related businesses, (b) small
cap securities and (c) foreign securities. The Company does not provide advice
regarding appropriate investment allocations, please discuss this matter with
your financial adviser.
TABLE OF CHARGES AND DEDUCTIONS
The table below sets forth the charges and deductions for the Policy. The Policy
may be issued with either one of two optional riders, the Cash Value Enhancement
Rider and the Cash Value Enhancement Plus Rider. Adding either one of these
riders to the Policy will alter certain charges under the Policy. The charges
associated with these riders are discussed below.
PREMIUM CHARGES The Policy provides for a deduction of 7.5% of the
premium paid during the first 10 Policy Years and 5.0%
of each premium paid thereafter. Where the Cash Value
Enhancement Rider is used, the premium charges are
increased to 8.5% of the premium paid during the first
10 Policy Years and 5.5% thereafter. Where the Cash
Value Enhancement Plus Rider is used, the premium
charges are 3.25% for the first 10 policy years and
2.25% thereafter.
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Monthly Deductions: An administration charge of $40 plus a per $1000 of
Face Amount charge per Policy Month is deducted in the
first five Policy years. In subsequent years, the
administration charge IS $20 plus a per $1000 of Face
Amount charge per Policy Month. The monthly charge per
$1000 of Face Amount varies by the Age of the life
insured at issuance (or the Attained Age of the life
insured at the time of an increase) and the death
benefit option in effect. It applies to the initial
Face Amount for the first 10 policy years and
thereafter to the initial face amount less any
decreases. The monthly administration charge does not
vary with the Cash Value Enhancement Options.
A monthly asset-based risk charge is assessed against
the Investment Accounts at an annual rate of 0.15%.
This rate is guaranteed not to exceed 0.45%. Where the
Cash Value Enhancement Rider is used, the asset-based
risk charges are the same as those provided in the
Policy - an annual rate of 0.15% guaranteed not to
exceed 0.45%. Where the Cash Value Enhancement Plus
Rider is used, the current asset-based risk charges are
at an annual rate of 1.00% For the first 15 Policy
Years and 0.25% thereafter. The guaranteed rates are
1.30% for the first 15 Policy Years and 0.55%
thereafter.
A cost of insurance charge is assessed monthly based on
the amount at risk under the Policy. The rate of this
charge does not vary with the Cash Value Enhancement
Options.
SURRENDER CHARGES: A Surrender Charge is assessed upon surrender of the
Policy, a partial withdrawal of Net Cash Surrender
Value or lapse of the Policy occurring during the first
10 years following the Policy Date or the effective
date of a face amount increase. The Surrender Charge is
calculated separately for the initial Face Amount and
each Face Amount increase.
The Surrender Charge is the sum of (i) plus (ii),
multiplied by (iii), multiplied by the Grading
Percentage, where:
(i) is the Rate per $1000 of initial Face Amount (or
Face Amount increase); (ii) is 80% of the lesser of (a)
the premiums paid per $1000 of Face Amount during the
first two Policy Years (or premiums attributable to
each $1000 of Face Amount increase for the two years
following the increase) or (b) the Surrender Charge
Premium Limit set out in the Policy for the initial
Face Amount (or furnished by the Company with respect
to a Face Amount increase); and (iii) is the initial
Face Amount (or Face Amount increase) divided by 1000.
The Rate per $1000 of initial Face Amount is based on
the life insured's Age at issuance of the Policy. The
Rate per $1000 of Face Amount increase is based on the
life insured's Attained Age at the time of the
increase.
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The Grading Percentage starts at 100% for the First Policy
Month and grades down by .833% each subsequent Policy Month
reaching zero at the end of 10 years.
If the Policy is issued with a Cash Value Enhancement Rider,
the Surrender Charge calculated as described above is
reduced by 80% for a surrender, withdrawal or lapse
occurring in the first two Policy Years, 60% in the third
policy year, 40% in the fourth policy Year and 20% in the
fifth Policy Year.
If the Policy is issued with a Cash Value Enhancement Plus
Rider, there is no Surrender Charge
Loan Charges: A fixed loan interest rate of 5.25% is charged during the
first 10 Policy Years and 4% thereafter. Interest is
credited to amounts in the Loan Account at a rate of 4%.
This rate is guaranteed not to be less than 4.00% during the
first 10 policy years and 3.50% thereafter.
Transfer Charge: A charge of $25 per transfer is assessed 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 for the fiscal year ended December
31, 1999)
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL TRUST
MANAGEMENT (AFTER EXPENSE ANNUAL EXPENSES
TRUST PORTFOLIO FEES REIMBURSEMENT)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets........ 0.850% 0.260% 1.110%
Internet Technologies............... 1.150% 0.136%(A) 1.286%
Science & Technology(J)............. 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)
Dynamic Growth...................... 1.000%(F) 0.132%(A) 1.132%
Mid Cap Stock....................... 0.925% 0.100%(A) 1.025%(E)
All Cap Growth(H)................... 0.950%(F) 0.070% 1.020%
Overseas............................ 0.950% 0.260% 1.210%
International Stock(J).............. 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%
</TABLE>
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL TRUST
MANAGEMENT (AFTER EXPENSE ANNUAL EXPENSES
TRUST PORTFOLIO FEES REIMBURSEMENT)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
11
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
Quantitative Equity................. 0.700% 0.060% 0.760%
Blue Chip Growth(J)................. 0.875%(F) 0.050% 0.925%
Real Estate Securities.............. 0.700% 0.070% 0.770%
Value............................... 0.800% 0.070% 0.870%
Tactical Allocation................. 0.900% 0.127%(A) 1.027%
Equity Index I...................... 0.250% 0.150%(I) 0.400%(I)
Growth & Income..................... 0.750% 0.050% 0.800%
U.S. Large Cap Value................ 0.875% 0.070%(A) 0.945%(E)
Equity-Income(J).................... 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%
Small Cap Index..................... 0.525% 0.075%(AG) 0.600%
International Index................. 0.550% 0.050%(AG) 0.600%
Mid Cap Index....................... 0.525% 0.075%(AG) 0.600%
Total Stock Market Index............ 0.525% 0.075%(AG) 0.600%
500 Index........................... 0.525% 0.039%(AG) 0.564%
Lifestyle Aggressive 1000(D)........ 0.075% 1.060%(B) 1.135%(C)
Lifestyle Growth 820(D)............. 0.057% 1.008%(B) 1.065%(C)
Lifestyle Balanced 640(D)........... 0.057% 0.928%(B) 0.985%(C)
Lifestyle Moderate 460(D)........... 0.066% 0.869%(B) 0.935%(C)
Lifestyle Conservative 280(D)....... 0.075% 0.780%(B) 0.855%(C)
</TABLE>
-----------------
(A) Based on estimates to be made during the current fiscal year.
(B) Reflects expenses of the Underlying Portfolios.
(C) The investment adviser to the Trust, 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 follows:
If total expenses of a Lifestyle Trust (absent reimbursement) exceed 0.075%, 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 equal 0.075%.
If the total expenses of the Lifestyle Trust (absent reimbursement) are equal to
or less than 0.075%, then no expenses will be reimbursed by the Adviser. (For
purposes of the expense reimbursement, total expenses of a Lifestyle Trust
includes the advisory fee but excludes (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.)
This voluntary expense reimbursement may be terminated at any time. If such
expense reimbursement was not in effect, Total Trust Annual Expenses would be
higher (based on current advisory fees and the Other Expenses of the Lifestyle
Trusts for the fiscal year ended December 31, 1999) as noted in the chart below:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
<S> <C> <C> <C>
</TABLE>
12
<PAGE> 18
<TABLE>
<CAPTION>
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>
(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) MSS has voluntarily agreed to pay expenses of each Index Trust (excluding
the advisory fee) that exceed the following amounts: 0.050% in the case of
the International Index Trust and 500 Index Trust and 0.075% in the case of
the Small Cap Index Trust, the Mid Cap Index Trust and Total Stock Market
Index Trust. If such expense reimbursement were not in effect, it is
estimated that "Other Expenses" and "Total Trust Annual Expenses" would be
0.022% higher for the International Index Trust, 0.014% higher for the
Small Cap Index Trust, 0.060% higher for the Mid Cap Index Trust and 0.005%
higher for the Total Stock Market Index Trust. It is estimated that the
expense reimbursement will not be effective during the year end December
31, 2000 for the 500 Index Trust. The expense reimbursement may be
terminated at any time by MSS.
(H) Formerly, the Mid Cap Growth Trust.
(I) The Equity Index Trust is available only for Policies issued for
applications dated prior to May 1, 2000. 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 may be terminated
at any time by MSS. 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.
(J) Effective June 1, 2000, the Adviser voluntarily agreed to waive a portion
of its advisory fee for the Science & Technology Trust, the Blue Chip
Growth Trust, the Equity-Income Trust and the International Stock Trust.
The fee reduction is based on the combined asset level of all four
portfolios. Once the combined assets exceed specified amounts, the fee
reduction is increased. The percentage fee reduction for each asset level
is as follows:
<TABLE>
<CAPTION>
COMBINED ASSET LEVELS FEE REDUCTION
(AS A PERCENTAGE OF THE ADVISORY FEE)
<S> <C>
First $750 million 0.0%
Between $750 million and $1.5 billion 2.5%
Between $1.5 billion and $3.0 billion 3.75%
Over $3.0 billion 5.0%
</TABLE>
The fee reductions are applied to the advisory fees of each of the four
Portfolios. This voluntary fee waiver
13
<PAGE> 19
may be terminated at any time by the adviser. As of December 4, 2000, the
combined asset level for all four Portfolios was approximately $4.4 billion
resulting in a fee reduction of 5.0%. There is no guarantee that the combined
asset level will remain at this amount. If the combined asset level were to
decrease to a lower breakpoint, the fee reduction would decrease as well. The
fee reductions are not reflected in the "Trust Annual Expense" table above since
the table reflects expenses for the year ended December 31, 1999 which is prior
to the commencement of the fee reduction.
TABLE OF INVESTMENT OPTIONS AND INVESTMENT SUBADVISERS
The Trust currently has nineteen 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 of America.
<TABLE>
<CAPTION>
SUBADVISER PORTFOLIO
<S> <C>
AIM Capital Management, Inc. Aggressive Growth Trust
All Cap Growth Trust(C)
AXA Rosenberg Investment Management LLC Small Company Value Trust
Capital Guardian Trust Company Small Company Blend Trust
U.S. Large Cap Value Trust
Income & Value Trust
Diversified Bond Trust
Fidelity Management Trust Company Mid Cap Blend Trust
Large Cap Growth Trust
Overseas Trust
Founders Asset Management LLC International Small Cap Trust
Balanced Trust
Franklin Advisers, Inc. Emerging Small Company Trust
Janus Capital Corporation Dynamic Growth Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Equity Index Trust(B)
Real Estate Securities Trust
Money Market Trust
Index Trusts
Lifestyle Trusts(A)
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Mitchell Hutchins Asset Management Inc. Tactical Allocation Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Munder Capital Management Internet Technologies Trust
Pacific Investment Management Company Global Bond Trust
Total Return Trust
</TABLE>
14
<PAGE> 20
<TABLE>
<S> <C>
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.
(B) The Equity Index Trust is available only for policies issued for
applications dated prior to May 1, 2000.
(C) Formerly, the Mid Cap Growth Trust
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, THE SEPARATE
ACCOUNT AND THE TRUST
MANUFACTURERS LIFE OF AMERICA
We are 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. We are a licensed life insurance company in
the District of Columbia and all states of the United States except New
York. Our ultimate parent is Manulife Financial Corporation ("MFC"), a
publicly traded company, based in Toronto, Canada. MFC is the holding
company of The Manufacturers Life Insurance Company 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 its affiliated
companies guarantees the investment performance of the Separate Account.
RATINGS
Manufacturers Life of America has received the following ratings from
independent rating agencies:
<TABLE>
<S> <C>
Standard and Poor's Insurance Ratings Service: AA+ (for financial strength)
A.M. Best Company: A++ (for financial strength)
Fitch: AAA (for insurer financial strength)
Moody's Investors Service, Inc.: Aa2 (for financial strength)
</TABLE>
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 no lapse
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.
15
<PAGE> 21
THE SEPARATE ACCOUNT
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 SEC under the Investment Company Act
of 1940, as amended (the"1940 Act") as a unit investment trust. A unit
investment trust is a type of investment company which invests its assets in
specified securities, such as the shares of one or more investment companies,
rather than in a portfolio of unspecified securities. Registration under the
1940 Act does not involve any supervision by the SEC of the management or
investment policies or practices of the Separate Account. For state law purposes
the Separate Account is treated as a part or division of Manufacturers Life of
America.
THE 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,
16
<PAGE> 22
the risks associated therewith, its expenses, and other aspects of its operation
is contained in the accompanying Trust prospectus, which should be read together
with this prospectus.
ELIGIBLE PORTFOLIOS
The Portfolios of the 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 INTERNET TECHNOLOGIES TRUST seeks long-term capital appreciation by
investing the portfolio's assets primarily in companies engaged in
Internet-related business (such businesses also include Intranet-related
businesses).
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital. By investing
at least 65% of the portfolio's total assets in common stocks of companies
expected to benefit from the development, advancement, and use of science &
technology. 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 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 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
at the time of purchase.
The DYNAMIC GROWTH TRUST seeks long-term growth of capital by investing the
portfolio's assets primarily in equity securities selected for their growth
potential. Normally at least 50% of its equity assets are invested in
medium-sized companies.
The MID CAP STOCK TRUST seeks long-term growth of capital by investing primarily
in equity securities with significant capital appreciation potential, with
emphasis on medium sized companies.
The ALL CAP GROWTH TRUST (formerly, Mid Cap Growth Trust) seeks long-term
capital appreciation by investing the portfolio's assets, under normal market
conditions, principally in common
17
<PAGE> 23
stocks of companies that are likely to benefit from new or innovative products,
services or processes, as well as those that have experienced above-average,
long-term growth in earnings and have excellent prospects for future growth.
The OVERSEAS TRUST seeks growth of capital by investing, under normal market
conditions, at least 65% of the portfolio's assets in foreign securities
(including American Depositary Receipts (ADRs) and European Depositary Receipts
(EDRs)). The portfolio expects to invest primarily in equity securities.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by investing
primarily in common stocks of established, non-U.S. companies.
The INTERNATIONAL VALUE TRUST seeks long-term growth of capital by investing,
under normal market conditions, primarily in equity securities of companies
located outside the U.S., including emerging markets.
The MID CAP BLEND TRUST seeks growth of capital by investing primarily in common
stocks of U.S. 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,
under normal circumstances, at least 65% of the portfolio's assets in common
stocks of companies with total market capitalization that approximately match
the range of capitalization of the Russell 2000 Index and are traded principally
in the markets of the United States.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by investing
primarily in equity securities throughout the world, including U.S. issuers and
emerging markets.
The GROWTH TRUST seeks long-term growth of capital by investing primarily in
large capitalization growth securities (market capitalizations of approximately
$1 billion or greater).
The LARGE CAP GROWTH 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) by investing at least 65% of the portfolio's
total assets in the common stocks of large and medium sized blue chip companies.
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.
18
<PAGE> 24
The TACTICAL ALLOCATION TRUST seeks total return, consisting of long-term
capital appreciation and current income, by allocating the portfolio's assets
between (i) a stock portion that is designed to track the performance of the S&P
500 Composite Stock Price Index, and (ii) a fixed income portion that consists
of either five-year U.S. Treasury notes or U.S. Treasury bills with remaining
maturities of 30 days.
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 Index. (The Equity Index Trust
is available only for policies issued for applications dated prior to May 1,
2000).
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 U.S. 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 seeks the balanced accomplishment of (a) conservation
of principal and (b) long-term growth of capital and income by investing the
portfolio's assets in both equity and fixed-income securities. The subadviser
has full discretion to determine the allocation between equity and fixed income
securities.
The BALANCED TRUST seeks current income and capital appreciation by investing in
a balanced portfolio of common stocks, U.S. and foreign government obligations
and a variety of corporate fixed income securities.
The HIGH YIELD TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in high yield debt securities, including corporate bonds and
other fixed-income securities.
The STRATEGIC BOND TRUST seeks a high level of total return consistent with
preservation of capital by giving its subadviser broad discretion to deploy the
portfolio's assets among certain segments of the fixed income market as the
subadviser believes will best contribute to achievement of the portfolio's
investment objective.
The GLOBAL BOND TRUST 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
19
<PAGE> 25
average portfolio duration will normally vary within a three- to six-year time
frame based on the subadviser'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 seeks high total return consistent with the
conservation of capital by investing at least 75% of the portfolio's assets in
fixed income securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income
consistent with preservation of capital and maintenance of liquidity, by
investing in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
derivative securities such as collateralized mortgage obligations backed by such
securities.
The MONEY MARKET TRUST seeks maximum current income consistent with preservation
of principal and liquidity by investing in high quality money market instruments
with maturities of 397 days or less issued primarily by U. S. entities.
The SMALL CAP INDEX TRUST seeks to approximate the aggregate total return of a
small cap U.S. domestic equity market index by attempting to track the
performance of the Russell 2000 Index.*
The INTERNATIONAL INDEX TRUST seeks to approximate the aggregate total return of
a foreign equity market index by attempting to track the performance of the
Morgan Stanley European Australian Far East Free Index (the "MSCI EAFE Index").*
The MID CAP INDEX TRUST seeks to approximate the aggregate total return of a mid
cap U.S. domestic equity market index by attempting to track the performance of
the S&P Mid Cap 400 Index.*
The TOTAL STOCK MARKET INDEX seeks to approximate the aggregate total return of
a broad U.S. domestic equity market index by attempting to track the performance
of the Wilshire 5000 Equity Index.*
The 500 INDEX TRUST seeks to approximate the aggregate total return of a broad
U.S. domestic equity market index by attempting to track the performance of the
S&P 500 Composite Stock Price Index.*
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.
20
<PAGE> 26
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 current
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.
*"Standard & Poor's(R)," AS&P 500(R)," Standard and Poor's 500(R)" and "Standard
and Poor's 400(R)" are trademarks of The McGraw-Hill Companies, Inc. "Russell
2000(R)" is a trademark of Frank Russell Company. "Wilshire 5000(R)" is a
trademark of Wilshire Associates. "Morgan Stanley European Australian Far East
Free" and "EAFE(R)" are trademarks of Morgan Stanley & Co. Incorporated. None of
the Index Trusts is sponsored, endorsed, managed, advised, sold or promoted by
any of these companies, and none of these companies makes any representation
regarding the advisability of investing in the Trust.
ISSUING A POLICY
REQUIREMENTS
To purchase a Policy, an applicant must submit a completed application. A Policy
will not be issued until the underwriting process has been completed to the
Company's satisfaction.
Policies may be issued on a basis which does not distinguish between the
insured's sex, with prior approval from the Company. A Policy will generally be
issued only on the lives of insureds from ages 0 through 90.
Each Policy has a Policy Date, an Effective Date and an Issue Date (See
"Definitions" above).
The Policy Date is the date from which the first monthly deductions are
calculated and from which Policy Years, Policy Months and Policy Anniversaries
are determined. The Effective Date is the date the Company becomes obligated
under the Policy and when the first monthly deductions are deducted from the
Policy Value. The Issue Date is the date from which Suicide and Validity
are measured.
If an application accepted by the Company is not accompanied by a check for the
initial premium and no request to backdate the Policy has been made:
(i) the Policy Date and the Effective Date will be the date the Company
receives the check at its Service Office, and
21
<PAGE> 27
(ii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Issue Date, and
the life insured must be in good health on the date the initial premium is
received.] If the premium is not paid or if the application is rejected, we will
cancel the Policy and return any partial premiums paid to the applicant.
MINIMUM INITIAL FACE AMOUNT
We will generally issue a Policy only if it has a Face Amount of at least
$100,000.
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, we will credit Net Premiums received prior to the Effective Date of a
Policy with interest from the date of receipt at the rate of return then being
earned on amounts allocated to the Money Market TRUST.
As of the Effective Date, the premiums paid plus interest credited, net of the
premium charge, will be allocated among the Investment Accounts and/or Fixed
Account in accordance with the policyowner's instructions unless such amount is
first allocated to the Money Market Trust for the duration of the Right to
Examine period.
TEMPORARY INSURANCE AGREEMENT
In accordance with the Company's underwriting practices, temporary insurance
coverage may be provided under the terms of a Temporary Insurance Agreement.
Generally, temporary life insurance may not exceed $1,000,000 and may not be in
effect for more than 90 days. This temporary insurance coverage will be issued
on a conditional receipt basis, which means that any benefits under such
temporary coverage will only be paid if the life insured meets the Company's
usual and customary underwriting standards for the coverage applied for.
The acceptance of an application is subject to the Company's underwriting rules,
and we reserve 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
You may return a Policy for a refund within 10 days after you received it. Some
states provide a longer period of time to exercise this right. The Policy will
indicate if a longer time period applies. The Policy may be mailed or delivered
to the Manufacturers Life of America agent who sold it or to our Service Office.
Immediately on such delivery or mailing, the Policy shall be deemed void from
the beginning. Within seven days after we receive the returned Policy at our
Service Office, we will refund to the policyowner an amount equal to either:
(1) the amount of all premiums paid or
22
<PAGE> 28
(2) (a) the difference between payments made and amounts allocated to the
Separate Account and the Fixed Account; plus
(b) the value of the amount allocated to the Separate Account and the Fixed
Account as of the date the returned Policy is received by the Company;
minus
(c) any partial withdrawals made and policy loans taken.
Whether the amount described in (1) or (2) is refunded depends on the
requirements of the applicable state.
If you request an increase in Face Amount which results in new Surrender
Charges, you will have the same rights as described above to cancel the
increase. If canceled, the Policy Value and the surrender charges will be
recalculated to the amounts they would have been had the increase not taken
place. You may request a refund of all or any portion of premiums paid during
the right to examine period, and the Policy Value and the surrender charges will
be recalculated to the amounts they would have been had the premiums not been
paid.
We reserve the right to delay the refund of any premium paid by check until the
check has cleared.
LIFE INSURANCE QUALIFICATION
A Policy must satisfy either one of two tests to qualify as a life insurance
contract for purposes of Section 7702 of the Internal Revenue Code of 1986, as
amended (the "Code"). At the time of application, the policyowner must choose
either the Cash Value Accumulation Test or the Guideline Premium Test. The test
cannot be changed once the Policy is issued.
CASH VALUE ACCUMULATION TEST
Under the Cash Value Accumulation Test ("CVAT"), the Policy Value may not at any
time EXCEED the Net Single Premium. The Net Single Premium is the one payment
that would be needed on a specific date to fund future Policy benefits, assuming
guaranteed charges and 4% net interest. To ensure that a Policy meets the CVAT,
the Company will generally increase the death benefit, temporarily, to the
required minimum amount. However, we reserve the right to require evidence of
insurability should a premium payment cause the death benefit to increase by
more than the premium payment amount. Any excess premiums will be refunded.
GUIDELINE PREMIUM TEST
Under the Guideline Premium Test, the sum of premiums paid into the Policy may
not at any time exceed the Guideline Premium Limitation as of such time. The
Guideline Premium Limitation is, as of any date, the greater of:
(a) the Guideline Single Premium, or
(b) the sum of the Guideline Level Premiums to such date.
If you elected this test, the Guideline Single Premium and the Guideline Level
Premium are as set forth in the Policy.
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
23
<PAGE> 29
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 life insured. see
"death benefits - minimum death benefit."
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.
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 may refund any excess premiums
paid. In addition, these changes could reduce the future premium limitations.
DEATH BENEFITS
If the Policy is in force at the time of the death of the life insured, the
Company will pay an insurance benefit. 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 we receive a request for surrender, no insurance
benefit will be payable, and we will pay only the Net Cash Surrender Value.
DEATH BENEFIT OPTIONS
There are three death benefit options, described below. The actual death benefit
is the amount shown below under the applicable death benefit option or, if
greater, the Minimum Death Benefit as described below.
DEATH BENEFIT OPTION 1
Under Option 1, the death benefit is the Face Amount of the Policy at the date
of death.
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.
DEATH BENEFIT OPTION 3
Under Option 3, the death benefit is the Face Amount plus the Premium Death
Benefit Account. The Premium Death Benefit Account is the sum of the premiums
paid to date less any Gross Withdrawals. But not less than zero. Gross
Withdrawals are the amounts of partial withdrawals plus any Surrender Charges
applicable thereto.
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<PAGE> 30
If any partial withdrawals are made, the death benefit, whether it is Option 1,
2 or 3, will be less than it would be if no withdrawals were made. Making a
partial withdrawal will result in a reduction in the face amount of insurance
for Death Benefit Option 1 and, in certain circumstances, Death Benefit Option
3. See "Policy Surrender and Partial Withdrawals - Reduction in Face Amount due
to a partial withdrawal."
If the life insured should die during a grace period, the death benefit will be
reduced by the amount of any monthly deductions due, and Policy Value will be
calculated as of the date of the default giving rise to the grace period.
MINIMUM DEATH BENEFIT.
The Minimum Death Benefit depends on whether the policyowner elected the
Guideline Premium Test or the Cash Value Accumulation Test for qualification of
the Policy as life insurance under the Code. See "Issuing a Policy - Life
Insurance Qualification."
If you elected the Guideline Premium Test, the sum of the death benefit as
described above and the benefit payable under any Supplementary Term Insurance
on the life insured will never be less than the Policy Value at the date of
death multiplied by the applicable minimum death benefit percentage in the table
below.
<TABLE>
<CAPTION>
---------------------------------------------------------
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
---------------------------------------------------------
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%
For ages not shown, the applicable percentage can be
found by reducing the above applicable percentages
proportionately.
---------------------------------------------------------
</TABLE>
If you elected the Cash Value Accumulation Test, on any date the sum of the
death benefit as described above, plus the benefit payable under any
Supplementary Term Insurance on the life insured, will always be equal to the
amount required on such date to produce a Policy Value that does not exceed the
Net Single Premium required to fund future benefits under the policy.
CHANGING THE DEATH BENEFIT OPTION
You may change the death benefit option as described below once each Policy Year
after the first Policy Year. The change will occur on the first day of the next
Policy Month after we receive a written request for a change at our 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.
25
<PAGE> 31
We will not allow a change in death benefit option if it would cause the Face
Amount to decrease below $100,000.
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.
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.
CHANGE FROM OPTION 3 TO OPTION 1
The new Face Amount will be equal to the Face Amount prior to the change plus
the Premium Death Benefit Account 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, you 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
You may increase the Face Amount once each Policy Year after the first Policy
Year. Any increase in Face Amount must be at least $50,000 or such other Minimum
Face Amount Increase as the Company may establish on 90 days written notice to
you. An increase will become effective at the beginning of the Policy Month
following the date we approve the requested increase. Increases in Face Amount
are subject to satisfactory evidence of insurability. We reserve the right to
refuse a requested increase if the life insured's Attained Age at the effective
date of the increase would be greater than the maximum issue age for new
Policies at that time.
NEW SURRENDER CHARGES FOR AN INCREASE
An increase in Face Amount will usually result in the Policy being subject to
new Surrender Charges. The new Surrender Charges will be computed as if a new
Policy were being purchased for the increase in Face Amount. The premiums
attributable to the new Face Amount will not exceed the Surrender Charge Premium
Limit associated with that increase. 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 a right to examine 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
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<PAGE> 32
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.
CHANGING BOTH THE FACE AMOUNT AND THE DEATH BENEFIT OPTION
If you request to change both the Face Amount and the death benefit option in
the same month, the death benefit option change shall be deemed to occur 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 or such other
Minimum Face Amount decrease as the Company may establish on 90 days written
notice to you. A written request from a policyowner for a decrease in the Face
Amount will be effective at the beginning of the Policy Month following the date
WE APPROVE 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. Under no
circumstances should the sum of all decreases cause the Policy to fall below the
minimum Face Amount of $100,000.
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 later of the Effective Date or the date a premium is received, the Net
Premiums paid plus interest credited will be allocated among the Investment
Accounts or the Fixed Account in accordance with the policyowner's instructions.
SUBSEQUENT PREMIUMS
After the payment of the initial premium, premiums may be paid at any time and
in any amount until the life insured's Attained Age 100, subject to the
limitations on premium amount described below.
A Policy will be issued with a planned premium, which is based on the amount of
premium the policyowner wishes to pay. We 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 Code. We also reserve 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.
27
<PAGE> 33
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 we receive the
premiums at our 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
If the Policy is issued under the Guideline Premium Test, 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 the Fixed Account for accumulation at a rate of
interest equal to at least 3% 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 whole number between zero and 100, provided the total
allocation equals 100. You 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. Changes may also be made by telephone if a valid authorization form is
on file with us.
CHARGES AND DEDUCTIONS
The Company makes various charges under the Policy. Charges are deducted from
premiums, monthly from Policy Values and upon surrender of a Policy, a partial
withdrawal or lapse of a Policy. These Charges are discussed below.
The Policy may be issued with either one of two optional riders, the Cash Value
Enhancement Rider and the Cash Value Enhancement Plus Rider. Adding either rider
to the Policy will alter certain charges under the Policy. The charges
associated with these riders are discussed under "Other Provisions of the Policy
- Cash Value Enhancement Riders."
PREMIUM CHARGES
During the first 10 Policy Years, Manufacturers Life of America deducts a
premium charge from each premium payment equal to 7.5% of the premium.
Thereafter, the premium charge is equal to 5.0% of the premium. The premium
charge is designed to cover a portion of the Company's acquisition and sales
expenses and premium taxes. Premium taxes vary from state to state, ranging from
0% to 3.5%.
SURRENDER CHARGES
The Company will deduct a Surrender Charge if, during the first 10 years
following the Policy Date or the effective date of a Face Amount increase:
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<PAGE> 34
- the Policy is surrendered for its Net Cash Surrender Value,
- a partial withdrawal is made, or
- the Policy lapses.
The Surrender Charge, together with a portion of the premium charge, is designed
to compensate the Company for some of the expenses it incurs in selling and
distributing the Policies, including agents' commissions, advertising, agent
training and the printing of prospectuses and sales literature. The Surrender
Charge is calculated separately for the initial Face Amount and each Face Amount
increase.
The Surrender Charge is the sum of (i) plus (ii), multiplied by (iii),
multiplied by the applicable Grading Percentage, where:
(i) is the rate per $1000 of initial Face Amount (or Face Amount increase);
(ii) is 80% of the lesser of (a) the premiums paid in the first two Policy
Years per $1000 of initial Face Amount (or the premiums attributable to
each $1000 of Face Amount increase in the two years following the
increase) or (b) the Surrender Charge Premium Limit set out in the Policy
for the initial Face Amount (or furnished by the Company with respect to a
Face Amount increase); and
(iii) is the initial Face Amount (or the Face Amount increase) divided by 1000.
The Rate per $1000 of initial Face Amount is based on the life insured's Age at
issuance of the Policy. The Rate per $1000 of Face Amount increase is based on
the life insured's Attained Age at the time of an increase. The Rates per $1000
are set forth in the following table.
TABLE OF GUARANTEED SURRENDER CHARGE RATES PER $ 1000
OF FACE AMOUNT OR FACE AMOUNT INCREASE
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
AGE AT ISSUANCE OR DEATH BENEFIT DEATH BENEFIT
ATTAINED AGE AT INCREASE OPTIONS 1 AND 3 OPTION 2
--------------------------------------------------------------------------------------
<S> <C> <C>
25 or less $7.30 $6.30
--------------------------------------------------------------------------------------
25 - 35 $6.40 $5.60
--------------------------------------------------------------------------------------
36 - 45 $5.90 $4.70
--------------------------------------------------------------------------------------
46 - 55 $4.00 $4.50
--------------------------------------------------------------------------------------
56 - 65 $2.90 $1.90
--------------------------------------------------------------------------------------
66 or greater $2.40 $1.90
--------------------------------------------------------------------------------------
</TABLE>
The Grading Percentage varies with the Policy Month in which the transaction
causing the assessment of the Surrender Charge occurs. As indicated in the
following table, the grading percentage starts at 100% for the first Policy
Month and grades down 10% each Policy Year (OR .833% each Policy Month) reaching
zero at the end of 10 years.
GRADING PERCENTAGES DURING THE SURRENDER CHARGE PERIOD
(APPLICABLE TO THE INITIAL FACE AMOUNT AND SUBSEQUENT INCREASES)
THE GRADING PERCENTAGES WILL NOT EXCEED THE FOLLOWING:
29
<PAGE> 35
<TABLE>
<CAPTION>
SURRENDER CHARGE GRADING
PERIOD PERCENTAGE*
(POLICY YEAR)
<S> <C>
1 100%
2 90%
3 80%
4 70%
5 60%
6 50%
7 40%
8 30%
9 20%
10 10%
11 0%
</TABLE>
* The Grading Percentages shown are at the beginning of each Policy Year.
Proportionate Grading Percentages apply for other Policy Months.
Illustration of Surrender Charge Calculation
Assumptions
- 45 year old male (standard risks and nonsmoker status)
- Death Benefit Option 1
- $20,000 in premiums HAVE been paid on the Policy in the first two Policy
Years
- Surrender Charge Premium Limit for the Policy is $16.74
- Face Amount of the Policy at issue is $500,000 and no increases have
occurred
- Policy is surrendered during the first month of the first policy year.
Surrender Charge
The Surrender Charge to be assessed would be $9,646 determined as follows:
(1) First, the applicable Rate per $1000 of initial Face Amount as set forth in
the table above ($5.90) is added to 80% of the lesser of the premiums paid per
$1000 of initial Face Amount or the Surrender Charge Premium Limit.
$5.90 PLUS (80%) X [THE LESSER OF $20,000/(500,000/1000) OR $16.74] = $19.29.
(2) Next, this figure is multiplied by the initial Face Amount divided by 1000.
$19.29 X [500,000/1000 OR 500] = $9,646.
(3) Finally, the figure obtained in step 2 is multiplied by the applicable
Grading Percentage for the first month of the first Policy Year (0%).
$9,646 X 0% = $9,646.
30
<PAGE> 36
Depending upon the Face Amount of the Policy, the Age of the life insured at
issuance, 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.
SURRENDER CHARGES ON A PARTIAL WITHDRAWAL
A partial withdrawal made during the Surrender Charge Period will result in the
assessment of a pro-rata 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 to the Net Cash Surrender Value of the
Policy as of the date OF the withdrawal. It will equal (a) divided by (b),
multiplied by (c), where:
(a) is the amount of the partial Net Cash Surrender Value withdrawal;
(b) is the Net Cash Surrender Value prior to the withdrawal; and
(c) is the current total Surrender Charge prior to the withdrawal.
The Surrender Charges will be deducted from the Policy Value at the time of the
partial withdrawal on a pro-rata basis from each of the Investment Accounts and
the Fixed Account unless you direct that the Surrender Charges be deducted from
one or more Investment Accounts or 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.
MONTHLY DEDUCTIONS
On the Policy Date and at the beginning of each Policy Month, a deduction is
taken from the Net Policy Value to cover certain charges in connection with the
Policy until the Policy Anniversary when the life insured reaches Attained Age
100, unless certain riders are in effect in which case such charges may
continue. If there is a Policy Debt under the Policy, loan interest and
principal will continue to be payable at the beginning of each Policy Month.
Monthly deductions due prior to the Effective Date will be taken on the
Effective Date instead of the dates they were due. These monthly deductions
consist of:
- an administration charge;
- an asset-based risk charge; and
- a cost of insurance charge.
If applicable, there may be additional monthly charges for any Supplementary
Benefits added to the Policy.
All of the monthly deductions, except for the asset-based risk charge, may be
allocated among the Investment Accounts and the Fixed Account as specified by
the policyowner and approved by us. Absent such specification, the monthly
deductions, except the asset-based risk charge, 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. The asset-based risk charge will be
allocated among the
31
<PAGE> 37
Investment Accounts in the same proportion as the value in each Investment
Account bears to the total value of all Investment Accounts.
ADMINISTRATION CHARGE
The Administration 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. During the first five Policy Years,
this monthly charge will be $40 plus a per $1000 of Face Amount Charge. For all
subsequent Policy Years, the monthly administration charge will be $20 plus a
per $1000 of Face Amount Charge. The per $1000 component of the administration
charge applies to the initial Face Amount for the first 10 Policy Years and
thereafter to the initial Face Amount less any Face Amount decreases. The per
$1000 charge is based on the life insured's Age at issuance or Attained Age at
the time of an increase and the death benefit option in effect as set forth in
the following table.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
DEATH BENEFIT DEATH BENEFIT
OPTIONS 1 AND 3 OPTION 2
-------------------------------------------------------------------------------------
AGE*/ FIRST FIVE SUBSEQUENT FIRST FIVE SUBSEQUENT
ATTAINED POLICY POLICY POLICY POLICY
AGE* YEARS YEARS YEARS YEARS
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25- 0.105 0.025 0.215 0.025
-------------------------------------------------------------------------------------
35 0.195 0.025 0.295 0.040
-------------------------------------------------------------------------------------
45 0.290 0.060 0.440 0.090
-------------------------------------------------------------------------------------
55 0.535 0.105 0.520 0.140
-------------------------------------------------------------------------------------
65 0.700 0.155 0.950 0.300
-------------------------------------------------------------------------------------
75 0.850 0.250 0.950 0.300
-------------------------------------------------------------------------------------
85+ 1.075 0.500 1.150 0.575
-------------------------------------------------------------------------------------
*THE MONTHLY CHARGE FOR NON-DECENNIAL AGES IS FOUND BY INTERPOLATING THE TWO NEAREST
TABULAR ENTRIES.
-------------------------------------------------------------------------------------
</TABLE>
ASSET-BASED RISK CHARGE
A charge is assessed against the investment accounts monthly at an annual rate
of 0.15%. This rate is guaranteed not to exceed 0.45%. this charge is to
compensate the Company for the sales, administrative and other expenses it may
incur. 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.
COST OF INSURANCE CHARGE
The monthly cost of insurance charge is determined as the rate of the cost of
insurance for a specific Policy Month, as described below, multiplied by the net
amount at risk.
For Death Benefit Options 1 and 3, 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
1.0024663; and
(b) is the Policy Value as of the first day of the Policy Month after the
deduction of the monthly cost of
32
<PAGE> 38
insurance.
For Death Benefit Option 2, the net amount at risk is equal to the Face Amount
of insurance.
The rates for the cost of insurance, as of the Policy Date and subsequently for
each Face Amount increase, are based on the life insured's Age, sex and Risk
Classification, the duration that coverage has been in force and the net amount
at risk.
The Company applies unisex rates where appropriate under the law. This currently
includes the state of Montana and policies purchased by employers and employee
organizations in connection with employment-related insurance or benefit
programs.
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 any class of life insured. In
no event will the cost of insurance rates exceed the guaranteed rates set forth
in the Policy except to the extent that an extra charge is imposed because of an
additional rating applicable to the life insured. After the first Policy Year,
the cost of insurance will generally increase on each Policy Anniversary. The
guaranteed rates are based on the 1980 Commissioners Smoker Distinct, Age
nearest Birthday, Mortality tables.
CHARGES FOR TRANSFERS
A charge of $25 will be imposed on each transfer in excess of twelve in a Policy
Year. The charge will be deducted from the Investment Account or the Fixed
Account to which the transfer is being made. All transfer requests received by
the Company on the same Business Day are treated as a single transfer request.
REDUCTION IN CHARGES
The Policy is available for purchase by corporations and other groups or
sponsoring organizations. Group or sponsored arrangements may include reduction
or elimination of withdrawal charges and deductions for employees, officers,
directors, agents and immediate family members of the foregoing. The Company
reserves the right to reduce any of the Policy's charges IN certain cases where
it is expected that the amount or nature of such cases will result in savings of
sales, underwriting, administrative, commission or other costs. Eligibility for
these reductions and the amount of reductions will be determined by a number of
factors, including the number of lives to be insured, the total premiums
expected to be paid, total assets under management for the policyowner, the
nature of the relationship among the insured individuals, the purpose for which
the Policies are being purchased, expected persistency of the individual
Policies, and any other circumstances which the Company believes to be relevant
to the expected reduction of its expenses. Some of these reductions may be
guaranteed and others may be subject to withdrawal or modification, on a uniform
case basis. Reductions in charges will not be unfairly discriminatory to any
policyowners. THE COMPANY may modify from time to time, on a uniform basis, both
the amounts of reductions and the criteria for qualification.
SPECIAL PROVISIONS FOR EXCHANGES
The Company will permit owners of certain fixed life insurance policies issued
either by the Company or The Manufacturers Life Insurance Company (U.S.A.) to
exchange their policies for the Policies described
33
<PAGE> 39
in this prospectus (and likewise, owners of policies described in this
prospectus may exchange their Policies for certain fixed policies issued either
by the Company or by The Manufacturers Life Insurance Company (U.S.A)).
Policyowners considering an exchange should consult their tax advisors as to the
tax consequences of an exchange.
COMPANY TAX CONSIDERATIONS
At the present time, the Company makes no charge to the Separate Account for any
federal, state, or local taxes that the Company incurs that may be attributable
to the Separate 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 Interest
Credited Differential. 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
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<PAGE> 40
to a premium payment will be based on the applicable unit values for the
Business Day on which the premium is received at the Service Office, except for
any premiums received before the Effective Date. For premiums received before
the Effective Date, the values will be determined on the Effective Date.
A Business Day is any day that the New York Stock Exchange is open for business.
A Business Day ends at the close of regularly scheduled day-time trading of the
New York Stock Exchange (currently 4:00 p.m. Eastern Time) on that day.
Units are valued at the end of each Business Day. When an order involving the
crediting or canceling of units is received after the end of a Business Day, or
on a day which is not a Business Day, the order will be processed on the basis
of unit values determined on the next Business Day. Similarly, any determination
of Policy Value, Investment Account value or death benefit to be made on a day
which is not a Business Day will be made on the next Business Day.
UNIT VALUES
The value of a unit of each sub-account was initially fixed at $10.00. For each
subsequent Business Day the unit value for that sub-account is determined by
multiplying the unit value for the immediately preceding Business Day by the net
investment factor for the sub-account on such subsequent Business Day.
The net investment factor for a sub-account on any Business Day is equal to (a)
divided by (b) where:
(a) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of such Business Day before any policy
transactions are made on that day; and
(b) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of the immediately preceding Business Day after
all policy transactions were made for that day.
The value of a unit may increase, decrease, or remain the same, depending on the
investment performance of a sub-account from one Business Day to the next.
TRANSFERS OF POLICY VALUE
At any time, the policyowner may transfer Policy Value from one sub-account to
another or to the Fixed Account. Transfers involving the Fixed Account are
subject to certain limitations noted below under "Transfers Involving Fixed
Accounts." Transfer requests must be in writing in a form satisfactory to the
Company, or by telephone if a currently valid telephone transfer authorization
form is on file.
We reserve the right to impose limitations on transfers, including the maximum
amount that may be transferred. We reserve the right to modify or terminate the
transfer privilege at any time in accordance with applicable law. Transfers may
also be delayed when any of the events described under items (i) through (iii)
in "Payment of Proceeds" occurs. Transfer privileges are also subject to any
restrictions that may be imposed by the Trust. In addition, we reserve the right
to defer the transfer privilege at any time when we are unable to purchase or
redeem shares of the Trust.
While the Policy is in force, you 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
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<PAGE> 41
(b) within 60 days of the effective date of a material change in the
investment objectives of any of the sub-accounts or within 60 days of
the date of notification of such change, whichever is later.
Such transfers will not count against the twelve transfers that may be made free
of charge in any Policy Year.
TRANSFERS INVOLVING FIXED ACCOUNT
The maximum amount that you may transfer from the Fixed Account in any one
Policy Year is the greater of $500 or 15% of the Fixed Account Value at the
previous Policy Anniversary. Any transfer which involves a transfer out of the
Fixed Account may not involve a transfer to the Investment Account for the Money
Market Trust.
TELEPHONE TRANSFERS
Although failure to follow reasonable procedures may result in the Company being
liable for any losses resulting from unauthorized or fraudulent telephone
transfers, the Company will not be liable for following instructions
communicated by telephone that the Company reasonably believes to be genuine.
The Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures shall consist of
confirming that a valid telephone authorization form is on file, tape recording
of all telephone transactions and providing written confirmation thereof.
DOLLAR COST AVERAGING
The Company offers policyowners an optional Dollar Cost Averaging ("DCA")
program. Under the DCA program, the policyowner will designate an amount which
will be transferred monthly from one Investment Account into any other
Investment Account(s) or the Fixed Account. The charge for a transfer made under
the DCA program will not exceed $5. The Company will provide you with 90 days'
written notice of any change in the current charge. If insufficient funds exist
to effect a DCA transfer, the transfer will not be effected and the policyowner
will be so notified.
The Company reserves the right to cease to offer this program as of 90 days
after written notice of termination is sent to the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS
Under the optional 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 transfer
amounts among the Investment Accounts as necessary to maintain the policyowner's
chosen allocation. A change to the policyowner's premium allocation instructions
will automatically result in a change in Asset Allocation Balancer instructions
so that the two are identical unless the policyowner either instructs The
Company otherwise or has elected the DCA program. The charge for a transfer made
under the Asset Allocation Balancer program will not exceed $15. The Company
will provide you with 90 days' written notice of any change in the current
charge.
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
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<PAGE> 42
While a Policy is in force and has an available loan value, a policyowner may
borrow against the Policy Value IN AN AMOUNT NOT TO EXCEED THE MAXIMUM LOANABLE
AMOUNT. The Policy serves as the only security for the loan. Policy loans may
have tax consequences. SEE "Tax Treatment of Policy Benefits - Interest on
Policy Loans After Year 10" and "Tax Treatment of Policy Benefits - Policy Loan
Interest."
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 life 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. During the first 10 Policy Years, the rate of interest
charged will be an effective annual rate of 5.25%. Thereafter, the rate of
interest charged will be an effective annual rate of 4%. If the interest due on
a Policy Anniversary is not paid by the policyowner, the interest will be
borrowed against the Policy and added to the Policy Debt.
Interest on the Policy Debt will continue to accrue daily if there is an
outstanding loan when monthly deductions and premium payments cease at the life
insured's Attained Age 100. The Policy will go into default at any time the
Policy Debt exceeds the Policy value. At least 61 days prior to termination, the
Company will send you a notice of the pending termination. Payment of interest
on the Policy Debt during the 61 day grace period will bring the Policy out of
default.
LOAN ACCOUNT
When a loan is made, an amount equal to the loan principal, plus interest to the
next Policy Anniversary, will be deducted from the Investment Accounts or the
Fixed Account and transferred to the Loan Account. Amounts transferred into the
Loan Account cover the loan principal plus loan interest due to the next Policy
Anniversary. The policyowner may designate how the amount to be transferred to
the Loan Account is allocated among the accounts from which the transfer is to
be made. In the absence of instructions, the amount to be transferred will be
allocated to each account in the same proportion as the value in each Investment
Account and the Fixed Account bears to the Net Policy Value. A transfer from an
Investment Account will result in the cancellation of units of the underlying
sub-account equal in value to the amount transferred from the Investment
Account. However, since the Loan Account is part of the Policy Value, transfers
made in connection with a loan will not change the Policy Value.
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<PAGE> 43
INTEREST CREDITED TO THE LOAN ACCOUNT
Interest will be credited to amounts in the Loan Account at an effective annual
rate of 4%. This rate is guaranteed not to be less than 4.00% during the first
10 policy years and 3.50% thereafter. The actual rate credited is equal to the
rate of interest charged on the policy loan less the Loan Interest Credited
Differential, which is currently 1.25% during the first ten policy years and 0%
thereafter, and is guaranteed not to exceed 1.25% during the first ten policy
years and 0.50% thereafter. The Company may change the Loan Interest Credited
Differential as of 90 days after sending you written notice of such change.
For a Policy that is not a Modified Endowment Contract ("MEC"), the tax
consequences associated with a loan interest credited differential of 0% are
unclear. A tax advisor 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, we retain 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.
LOAN ACCOUNT ADJUSTMENTS
On the first day of each Policy Anniversary the difference between the Loan
Account and the Policy Debt is transferred to the Loan Account from the
Investment Accounts or the Fixed Account. Amounts transferred to the Loan
Account will be taken from the Investment Accounts and the Fixed Account in the
same proportion as the value in each Investment Account and the Fixed Account
bears to the Net Policy Value.
LOAN REPAYMENTS
You may repay the Policy Debt in whole or in part at any time prior to the death
of the life insured, provided that the Policy is in force. When a repayment is
made, the amount is credited to the Loan Account and transferred to the Fixed
Account or the Investment Accounts. We will allocate loan repayments 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. Where permitted by applicable state law,
when a portion of the Loan Account amount is allocated to the Fixed Account, the
Company may require that any amounts paid to it be applied to outstanding loan
balances.
POLICY SURRENDER AND PARTIAL WITHDRAWALS
POLICY SURRENDER
You may surrender a Policy for its Net Cash Surrender Value at any time while
The life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less 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 we receive the Policy and your written request for surrender at our
Service Office. After a Policy is surrendered, the insurance coverage and all
other benefits under the Policy will terminate.
PARTIAL WITHDRAWALS
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<PAGE> 44
YOU may make a partial withdrawal of the Net Cash Surrender Value once each
Policy Month after the first Policy Anniversary. YOU 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."
Withdrawals will be limited if they would otherwise cause the Face Amount to
fall below $100,000.
REDUCTION IN FACE AMOUNT DUE TO A PARTIAL WITHDRAWAL
If Death Benefit Option 1 is in effect when a partial withdrawal is made and the
death benefit equals the Face Amount, the Face Amount of the Policy will be
reduced by the amount of the withdrawal plus any applicable Surrender Charge.
Otherwise, IF the death benefit is the Minimum Death Benefit as described under
"Death Benefit - Minimum Death Benefit," the Face Amount will be reduced by the
amount, if any, by which the withdrawal plus the PRO-RATA Surrender Charge
exceeds the difference between the death benefit and the Face Amount plus the
Premium Death Benefit Account.
If Death Benefit Option 3 is in effect when a partial withdrawal is made, the
withdrawal plus the pro-rata Surrender Charge exceeds the Premium Death Benefit
account and the death benefit equals the Face Amount plus the premium death
benefit account, the Face Amount of the Policy will be reduced by the amount by
which the withdrawal plus the pro-rata surrender charge exceeds the Premium
Death Benefit Account. If the death benefit is the Minimum Death Benefit, the
Face Amount will be reduced by the amount, if any, by which such excess exceeds
the difference between the death benefit and the Face Amount plus the Premium
Death Benefit Account.
If Death Benefit Option 2 is in effect, partial withdrawals do not affect the
Face Amount of a Policy.
When the Face Amount of a Policy is based on one or more increases subsequent to
issuance of the Policy, a reduction resulting from a partial withdrawal will be
applied in the same manner as a requested decrease in Face Amount, i.e., against
the Face Amount provided by the most recent increase, then against the next most
recent increases successively and finally against the initial Face Amount.
LAPSE AND REINSTATEMENT
LAPSE
Unless the No-Lapse Guarantee is in effect, a Policy will go into default if at
the beginning of any Policy Month the Policy's Net Cash Surrender Value would be
zero or below after deducting the monthly deduction then due. Therefore, a
Policy could lapse eventually if increases in Policy Value (prior to deduction
of Policy charges) are not sufficient to cover Policy charges. A lapse could
have adverse tax consequences as described under "Tax Treatment of the Policy -
Tax Treatment of Policy Benefits - Surrender or Lapse." The Company will notify
the policyowner of the default and will allow a 61 day grace period in which you
may make a premium payment sufficient to bring the Policy out of default. The
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
39
<PAGE> 45
charge. If we do not receive the required payment 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 fall to zero or below during such period.
The Monthly No-Lapse Guarantee Premium is one-twelfth of the No-Lapse Guarantee
Premium.
The No-Lapse Guarantee Premium is set at issuance of the Policy and reflects any
Additional Rating and Supplementary Benefits, if applicable. It is subject to
change if there is (i) a change in the Face Amount of the Policy, (ii) a change
of the death benefit option , (iii) a decrease in the Face Amount of insurance
due to a partial withdrawal, or (iv) any change in the Supplementary Benefits
added to the Policy or the Risk Classification of the life insured.
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 any Policy Month that a Policy would otherwise be in default,
whether the No-Lapse Guarantee Cumulative Premium Test, described below, has
been met. If the test has not been satisfied, the Company will notify the
policyowner of that fact and allow a 61-day grace period in which you may make a
premium payment sufficient to keep the policy from going into default. This
required payment, as described in the notification, 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 charge.
If we do not receive the required payment by the end of the grace period, the
No-Lapse Guarantee and the Policy will terminate.
NO-LAPSE GUARANTEE CUMULATIVE PREMIUM TEST
The No-Lapse Guarantee Cumulative Premium Test is satisfied if, as of the
beginning of the Policy Month that your Policy would otherwise be in default,
the sum of all premiums paid to date, less any Policy Debt and less any gross
withdrawals taken on or before the date of the test, is equal to or exceeds the
sum of the Monthly No-Lapse Guarantee Premiums due from the Policy Date to the
date of the test.
DEATH DURING GRACE PERIOD
If the life insured should die during the grace period, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit will be reduced by any outstanding monthly
deductions due at the time of death.
REINSTATEMENT
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A policyowner may, by making a written request, reinstate a Policy which has
terminated after going into default at any time within the five-year period
following the date of termination subject to the following conditions:
(a) Evidence of the life insured's insurability, satisfactory to the Company,
is provided to the Company; and
(b) A premium equal to the amount that was required to bring the Policy out of
default immediately prior to termination, plus the amount needed to keep
the Policy in force to the next scheduled date for payment of the Planned
Premium, must be paid to the Company.
If the reinstatement is approved, the date of reinstatement will be the later of
the date we approve the policyowner's request or the date we receive the
required payment at our 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 1940 Act. 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 SEC has not reviewed the disclosures in this prospectus relating to the
general account. Disclosures regarding the general account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in a
prospectus.
FIXED ACCOUNT
A policyowner may elect to allocate net premiums to the Fixed Account or to
transfer all or a portion of the Policy Value to the Fixed Account from the
Investment Accounts. The Company will hold the reserves required for any portion
of the Policy Value allocated to the Fixed Account in its general account.
Transfers from the Fixed Account to the Investment Accounts are subject to
restrictions.
POLICY VALUE IN THE FIXED ACCOUNT
The Policy Value in the Fixed Account is equal to:
(a) the portion of the net premiums allocated to it; plus
(b) any amounts transferred to it; plus
(c) interest credited to it; less
(d) any charges deducted from it; less
(e) any partial withdrawals from it; less
(f) any amounts transferred from it.
INTEREST ON THE FIXED ACCOUNT
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<PAGE> 47
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, we guarantee that the Policy Value in the Fixed Account will accrue
interest daily at an effective annual rate of at least 3%, without regard to the
actual investment experience of the general account. Consequently, if you pay
the planned premiums, allocate all net premiums only to the general account and
make 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
CASH VALUE ENHANCEMENT RIDERS
The Policy may be issued with one of two optional Cash Value Enhancement Riders:
(1) the Cash Value Enhancement Rider or (2) the Cash Value Enhancement Plus
Rider. The decision to add either one of these two riders to a Policy must be
made at issuance of the Policy and, once made, is irrevocable. The benefit of
these riders is that the Cash Surrender Value of a Policy is enhanced during the
period for which Surrender Charges are applicable. The enhancement is provided
by deducting a Surrender Charge that is less that the Surrender Charge that
would otherwise have applied. Under the Cash Value Enhancement Plus Rider, there
will be no Surrender Charge.
Under each of the riders, the enhancement in Cash Surrender Value is equal to
the Surrender Charge multiplied by the applicable Cash Value Enhancement Factor.
The applicable Cash Value Enhancement Factors under the two riders during the 10
years of the Surrender Charge Period are set forth below:
CASH VALUE ENHANCEMENT FACTORS
(APPLICABLE TO INITIAL FACE AMOUNT AND SUBSEQUENT INCREASES)
<TABLE>
<CAPTION>
CASH VALUE ENHANCEMENT CASH VALUE ENHANCEMENT PLUS
POLICY YEAR RIDER RIDER
<S> <C> <C>
1 - 2 80% 100%
3 60% 100%
4 40% 100%
5 20% 100%
6 - 10 0% 100%
</TABLE>
Adding either of the Cash Value Enhancement riders to a Policy will alter
certain of the charges under the Policy, As illustrated in the following table.
There will be no change in the monthly administration and cost of insurance
charges under the Policy.
COMPARATIVE MONTHLY CHARGES WITH ADDITION OF
CASH VALUE ENHANCEMENT RIDERS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
CHARGES
-------------------------------------------------------------------------------------------------------------
<S> <C>
THE POLICY
-------------------------------------------------------------------------------------------------------------
PREMIUM CHARGE 7.5% FOR FIRST 10 POLICY YEARS AND 5.0% THEREAFTER
-------------------------------------------------------------------------------------------------------------
ASSET-BASED RISK CHARGE 0.15% PER POLICY YEAR (GUARANTEED NOT TO EXCEED 0.45%)
-------------------------------------------------------------------------------------------------------------
THE POLICY WITH CASH VALUE ENHANCEMENT RIDER
-------------------------------------------------------------------------------------------------------------
PREMIUM CHARGE 8.5% FOR FIRST 10 POLICY YEARS AND 5.5% THEREAFTER
-------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 48
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
<S> <C>
ASSET-BASED RISK CHARGE 0.15% PER POLICY YEAR (GUARANTEED NOT TO EXCEED 0.45%)
-------------------------------------------------------------------------------------------------------------
THE POLICY WITH CASH VALUE ENHANCEMENT PLUS RIDER
-------------------------------------------------------------------------------------------------------------
PREMIUM CHARGE 3.25% FOR FIRST 10 POLICY YEARS AND 2.25% THEREAFTER
-------------------------------------------------------------------------------------------------------------
ASSET-BASED RISK CHARGE 1.00% PER POLICY YEAR FOR THE FIRST 15 POLICY YEARS
(GUARANTEED NOT TO EXCEED 1.30%) AND 0.25% THEREAFTER (GUARANTEED NOT TO
EXCEED 0.55%)
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
POLICYOWNER RIGHTS
Unless otherwise restricted by a separate agreement, the policyowner may, until
the life insured's death:
- 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. We assume 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 in the same class will share
equally in the insurance benefit payable to them. Beneficiaries may be revocable
or irrevocable. Unless an irrevocable designation has been elected, you may
change the beneficiary during the life insured's lifetime by giving written
notice to the Company in a form satisfactory to us. 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, we will pay the
insurance benefit as if the beneficiary had died before the life insured.
VALIDITY
The Company will not contest the validity of a Policy after it has been in force
during any life insured's lifetime for two years from the Issue Date. We will
not contest the validity of an increase in Face Amount, after such increase or
addition has been in force during the lifetime of the life insured for two
years. If a Policy has been reinstated and been in force during the lifetime of
the life insured for less than two years from the reinstatement date, the
Company can contest any misrepresentation of a fact material to the
reinstatement.
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<PAGE> 49
MISSTATEMENT OF AGE OR SEX
If the stated age or sex, or both, of the life insured in the Policy are
incorrect, WE will change the Face Amount so that the death benefit will be that
which the most recent monthly charge for the cost of insurance would have
purchased for the correct age and sex.
SUICIDE EXCLUSION
If the life insured dies by suicide within two years after the Issue Date (or
within the maximum period permitted by the state in which the Policy was
delivered, if less than two years), the Policy will terminate and the Company
will pay only the premiums paid less any partial Net Cash Surrender Value
withdrawal and less any Policy Debt.
If the life insured dies by suicide within two years after the effective date of
an increase in Face Amount, 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 life insured.
SUPPLEMENTARY BENEFITS
Subject to certain requirements, one or more Supplementary Benefits may be added
to a Policy, including those providing a death benefit guarantee, term insurance
for an additional insured, providing accidental death coverage, waiving monthly
deductions upon disability, accelerating benefits in the event of a terminal
illness, and, in the case of corporate-owned policies, permitting a change of
the life insured. More detailed information concerning these supplementary
benefits may be obtained from an authorized agent of the Company. The cost, if
any, for supplementary benefits will be deducted as part of the monthly
deductions.
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 advisors 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 "IRS"). No representation is made as to the
likelihood of continuation of the present federal income tax laws nor of the
current interpretations by the IRS. Manufacturers Life of America does not make
any guarantee regarding the tax status of any policy or any transaction
regarding the policy.
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 advisor 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 Code, and thereby to enjoy the tax benefits of
such a contract:
- The Policy must satisfy the definition of life insurance under Section 7702
of the Code.
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- The investments of the Separate Account must be "adequately diversified" in
accordance with Section 817(h) of the Code and Treasury Regulations.
- The Policy must be a valid life insurance contract under applicable state
law.
- 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 the
Cash Value Corridor Tests. 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
laws. State regulations
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require that the policyowner have appropriate insurable interest in the life
insured. Failure to establish an insurable interest may result in the Policy not
qualifying as a life insurance contract for federal tax purposes.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance policies may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their Policies. In those circumstances, income
and gains from the separate account assets would be includible in the variable
policyowner's gross income. The IRS has stated in published rulings that a
variable policyowner will be considered the owner of separate account assets if
the policyowner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury Department
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyowners may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets." As of the date of this prospectus, no such guidance has been
issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
policy has many more portfolios to which Policyowners may allocate premium
payments and Policy Values than were available in the policies described in the
ruling. 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 excludable from the gross income of
the beneficiary under Section 101(a)(1) of the Code.
In general, at the insured's death, an estate tax is imposed on assets that are
treated as part of the insured's estate. Death benefits are included in the
insured's estate if the estate is the beneficiary under the policy, if the
insured owned the policy at death, or if the insured had retained certain
incidents of ownership in the policy. In addition, if within three years of the
insured's death, the
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insured made a gift of the policy or relinquished those incidents of ownership
which would have otherwise caused the policy to be treated as part of the
insured's estate, the death benefit will be included in the insured's estate.
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 or when benefits are paid at a
Policy's maturity date, if the amount received plus the amount of Policy Debt
exceeds the total Investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
If, at the time of lapse 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.
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 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. In general, loans from, or
secured by, a non-MEC are not treated as distributions. Instead, such loans are
treated as indebtedness of the policyowner. (But see the discussion of the tax
treatment of loans made after year ten in the section "Interest on Policy Loans
After Year 10").
Force Outs
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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 591/2;
- 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" or "MECs," which applies to Policies entered into
or materially changed after June 20, 1988.
In general, a Policy will be a MEC if the accumulated premiums paid at any time
during the first seven Policy Years exceed the "seven-pay premium limit". The
seven-pay premium limit on any date is equal to the sum of the net level
premiums that would have been paid on or before such date if the policy provided
for paid-up future benefits after the payment of seven level annual premiums
(the "seven-pay premium").
The rules relating to whether a Policy will be treated as a MEC are extremely
complex and cannot be adequately described in the limited confines of this
summary. Therefore, a current or prospective policyowner should consult with a
competent adviser to determine whether a transaction will cause the Policy to be
treated as a MEC.
Material Changes
A Policy that is not a MEC may become a MEC if it is "materially changed." If
there is a material change to the Policy, the seven year testing period for MEC
status is restarted. The material change rules for determining whether a Policy
is a MEC are complex. In general, however, the determination of whether a Policy
will be a MEC after a material change generally depends upon the relationship
among the death benefit of the Policy at the time of such change, the Policy
Value at the time of the change, and the additional premiums paid into the
Policy during the seven years starting with the date on which the material
change occurs.
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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. The interest credited will be taxable to the
owner in the year earned.
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 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 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%
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(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 will be credited to amounts in the Loan Account at an effective annual
rate of 4%. The rate is guaranteed not to be less than 4.00% during the first
ten policy years and 3.50% thereafter. The actual rate credited is equal to the
rate of interest charged on the policy loan, less the Loan Interest Credited
Differential, which is currently 1.25% during the first ten policy years and 0%
thereafter, and is guaranteed not to exceed 1.25% during the first ten policy
years and 0.50% thereafter. 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 no differential between the credited interest
rate and the loan interest rate, the Company retains the right to decrease the
crediting rate under the loan 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 advisor. 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 life 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.
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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:
- the value each year of the life insurance protection provided;
- an amount equal to any employer-paid premiums; or
- 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 advisor 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, and (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; 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.
DISTRIBUTION OF THE POLICIES
ManEquity, Inc. ("ManEquity"), an indirect wholly-owned subsidiary of MFC, will
act as the principal underwriter of, and continuously offer, the Policies
pursuant to a Distribution Agreement with
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Manufacturers Life of America. ManEquity 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 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 are: Joseph Scott, Robert Cook and Gary
Buchanan. Its officers are: (i) Gary Buchanan - President, (ii) Thomas Reive -
Treasurer, (iii) 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.
The commissions payable to a registered representative on sales of the Policy
will not exceed: (a) 115% of premiums paid in the first year of the Policy plus
(b) 2% of all premiums paid in years after the first year plus (c) 1.00% of the
Net Policy Value per year. Commission relating to a particular premium payment
are generally paid in the year that the premium payment is made. However, these
commissions may also, under certain circumstances, be paid over a period of
time. 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
The Manufacturers Life Insurance Company ("Manufacturers Life") and The
Manufacturers Life Insurance Company (USA) ("Manufacturers USA") have entered
into an agreement with ManEquity pursuant to which Manufacturers Life or
Manufacturers USA, on behalf of ManEquity, 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 with respect to the Policies and such other
policies, and send all confirmations required to be sent by ManEquity with
respect to the Policies and such other policies. ManEquity 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
the 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
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voted upon at a shareholders' meeting. However, Manufacturers Life of America
will vote shares held in the sub-accounts in accordance with instructions
received from policyowners having an interest in such sub-accounts. Shares held
in each sub-account for which no timely instructions from policyowners are
received, including shares not attributable to the Policies, will be voted by
Manufacturers Life of America in the same proportion as those shares in that
sub-account for which instructions are received. Should the applicable federal
securities laws or regulations change so as to permit Manufacturers Life of
America to vote shares held in the Separate Account in its own right, it may
elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyowner is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding Portfolio. The number will be determined as of a date chosen by
Manufacturers Life of America, but not more than 90 days before the
shareholders' meeting. Fractional votes are counted. Voting instructions will be
solicited in writing at least 14 days prior to the meeting.
Manufacturers Life of America may, if required by state officials, disregard
voting instructions if such instructions would require shares to be voted so as
to cause a change in the sub-classification or investment policies of one or
more of the Portfolios, or to approve or disapprove an investment management
contract. In addition, the Company itself may disregard voting instructions that
would require changes in the investment policies or investment adviser, provided
that Manufacturers Life of America reasonably disapproves such changes in
accordance with applicable federal regulations. If 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
Although we believe it to be unlikely, 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 SEC 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
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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 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 and the financial statements of Separate
Account Three of The Manufacturers Life Insurance Company of America at December
31, 1999, and for each of the two years in the period ended December 31, 1999,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
on the authority of such firm as experts in accounting and auditing.
FURTHER INFORMATION
A registration statement under the Securities Act of 1933 has been filed with
the SEC 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 SEC also maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC 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 (38)* Director Attorney, Dykema Gossett, PLLC, 1989 to
(since December 1992) present.
</TABLE>
54
<PAGE> 60
<TABLE>
<CAPTION>
POSITION WITH
MANUFACTURERS LIFE
NAME OF AMERICA PRINCIPAL OCCUPATION
<S> <C> <C>
James D. Gallagher (46)** Director (since May 1996), President, The Manufacturers Life Insurance
Secretary and General Counsel Company of New York, August 1999 to Present,
Vice President, 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.
Donald A. Guloien (43)*** 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.
James O'Malley (55)*** 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 (62)*** 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 (63)*** 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.
</TABLE>
55
<PAGE> 61
<TABLE>
<CAPTION>
POSITION WITH
MANUFACTURERS LIFE
NAME OF AMERICA PRINCIPAL OCCUPATION
<S> <C> <C>
Victor Apps (53)*** 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
Felix Chee (54)*** 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.
Robert A. Cook (46)** 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, January
1996 to December 1998; Sales and Marketing
Director, The Manufacturers Life Insurance
Company, 1994 to 1995.
Douglas H. Myers (46)*** 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 Ostler (47)*** Vice President and Chief Vice President and Chief Financial Officer,
Financial Officer U.S. Operations, The Manufacturers Life
Insurance Company, October 1, 2000 to present;
Vice President and Corporate Actuary, The
Manufacturers Life Insurance Company, March
1998 to September 2000; Vice President & CFO
U.S. Individual Insurance, The Manufacturers
Life Insurance Company, 1992 to March 1998;
Vice President, U.S. Insurance Products, The
Manufacturers Life Insurance Company, 1990 -
1992; Assistant Vice President & Pricing
Actuary, U.S. Insurance, The Manufacturers Life
Insurance Company, 1988-1990.
</TABLE>
56
<PAGE> 62
<TABLE>
<CAPTION>
POSITION WITH
MANUFACTURERS LIFE
NAME OF AMERICA PRINCIPAL OCCUPATION
<S> <C> <C>
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, to January 1998,
Assistant Vice President, Corporate
Controllers, The Manufacturers Life Insurance
Company, January 1989 to October 1995.
</TABLE>
*Principal business address is Dykema Gossett, 800 Michigan National Tower,
Lansing, Michigan 48933.
**Principal business address is Manulife Financial, 73 Tremont Street, Boston,
MA 02108.
***Principal business address is Manulife Financial, 200 Bloor Street, Toronto,
Ontario Canada M4W 1E5.
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 will
always be less than or equal to the cost of insurance 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.
FINANCIAL STATEMENTS
57
<PAGE> 63
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 (excluding those of the Equity Index Trust), which
is approximately 0.945% per annum. The gross annual rates of return of 0%, 6%
and 12% correspond to approximate net annual rates of return of -0.941%, 5.0003%
and 10.947%. The illustrations reflect the current expense reimbursements in
effect for the Lifestyle Trusts and the Index Trusts. In the absence of such
expense reimbursements, the average of the Portfolio's current expenses would
have been 0.950% 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
-0.946%, 4.998% and 10.941%. The expense reimbursements for the Lifestyle Trusts
and the Index Trusts are expected to remain in effect during the fiscal year
ended December 31, 2000. Were the expense reimbursements 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 (assuming no optional riders are
elected):
- one based on current cost of insurance charges assessed by the Company and
reflecting a 20 year no lapse guarantee
- one based on the maximum cost of insurance charges based on the 1980
Commissioners Smoker Distinct Mortality Tables and reflecting a 20 year no
lapse guarantee.
In addition there is one table shown for death benefit option 3 issued to a male
non-smoker (assuming the Cash Value Enhancement Rider is elected) and one table
shown for death benefit option 1 issued to a male non-smoker (assuming the Cash
Value Enhancement Plus Rider is elected).
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.
The Policies have been offered to the public only since approximately _____,
2000. 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.
<PAGE> 64
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$250,000 Face Amount Death Benefit Option 1
$3,830 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(2) Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year(1) Value(3) Value(3) Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,022 2,389 0 250,000 2,563 0 250,000 2,738 0 250,000
2 8,245 4,741 1,947 250,000 5,240 2,446 250,000 5,761 2,967 250,000
3 12,679 7,050 4,601 250,000 8,028 5,580 250,000 9,090 6,642 250,000
4 17,334 9,322 7,219 250,000 10,940 8,837 250,000 12,767 10,664 250,000
5 22,223 11,560 9,803 250,000 13,983 12,225 250,000 16,831 15,074 250,000
6 27,356 14,502 13,091 250,000 17,927 16,515 250,000 22,111 20,699 250,000
7 32,745 17,394 16,329 250,000 22,043 20,978 250,000 27,941 26,876 250,000
8 38,404 20,236 19,516 250,000 26,341 25,621 250,000 34,384 33,664 250,000
9 44,346 23,030 22,656 250,000 30,833 30,458 250,000 41,508 41,134 250,000
10 50,585 25,773 25,744 250,000 35,522 35,493 250,000 49,384 49,355 250,000
15 86,783 39,065 39,065 250,000 62,746 62,746 250,000 103,833 103,833 250,000
20 132,983 50,598 50,598 250,000 96,385 96,385 250,000 194,336 194,336 305,107
25 191,946 60,016 60,016 250,000 138,248 138,248 250,000 344,220 344,220 461,255
30 267,200 66,638 66,638 250,000 191,134 191,134 250,000 592,006 592,006 722,248
35 363,245 68,899 68,899 250,000 258,609 258,609 299,986 1,000,255 1,000,255 1,160,296
40 485,825 63,512 63,512 250,000 343,283 343,283 367,313 1,673,994 1,673,994 1,791,173
45 642,273 43,238 43,238 250,000 450,263 450,263 472,776 2,791,543 2,791,543 2,931,121
50 841,944 0(4) 0(4) 250,000(4) 581,129 581,129 610,186 4,611,948 4,611,948 4,842,546
55 1,096,780 0(4) 0(4) 250,000(4) 737,637 737,637 774,519 7,534,071 7,534,071 7,910,774
60 1,422,022 0(4) 0(4) 250,000(4) 934,223 934,223 943,565 12,332,861 12,332,861 12,456,189
65 1,837,124 0(4) 0(4) 250,000(4) 1,202,835 1,202,835 1,202,835 20,599,937 20,599,937 20,599,937
</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. Provided the Death
Benefit Guarantee Cumulative Premium Test has been and continues to be
met, the Death Benefit Guarantee will keep the Policy in force until
age 100.
(4) In the absence of additional premium payments, the Policy will lapse,
unless the Death Benefit Guarantee is in effect.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of 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> 65
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$250,000 Face Amount Death Benefit Option 1
$3,830 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(2) Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year(1) Value(3) Value(3) Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,022 2,116 0 250,000 2,282 0 250,000 2,449 0 250,000
2 8,245 4,094 1,300 250,000 4,555 1,761 250,000 5,038 2,244 250,000
3 12,679 6,021 3,572 250,000 6,908 4,459 250,000 7,874 5,425 250,000
4 17,334 7,896 5,793 250,000 9,342 7,239 250,000 10,982 8,879 250,000
5 22,223 9,716 7,959 250,000 11,857 10,100 250,000 14,386 12,629 250,000
6 27,356 12,224 10,813 250,000 15,226 13,815 250,000 18,911 17,499 250,000
7 32,745 14,662 13,596 250,000 18,713 17,647 250,000 23,877 22,811 250,000
8 38,404 17,030 16,310 250,000 22,325 21,605 250,000 29,333 28,613 250,000
9 44,346 19,324 18,949 250,000 26,062 25,688 250,000 35,328 34,953 250,000
10 50,585 21,544 21,516 250,000 29,933 29,904 250,000 41,921 41,892 250,000
15 86,783 31,861 31,861 250,000 51,916 51,916 250,000 86,967 86,967 250,000
20 132,983 39,580 39,580 250,000 77,822 77,822 250,000 160,814 160,814 252,477
25 191,946 43,319 43,319 250,000 107,948 107,948 250,000 281,570 281,570 377,304
30 267,200 40,812 40,812 250,000 143,180 143,180 250,000 476,046 476,046 580,777
35 363,245 27,082 27,082 250,000 185,654 185,654 250,000 786,867 786,867 912,766
40 485,825 0(4) 0(4) 250,000(4) 242,245 242,245 259,202 1,286,416 1,286,416 1,376,466
45 642,273 0(4) 0(4) 250,000(4) 315,780 315,780 331,569 2,099,134 2,099,134 2,204,091
50 841,944 0(4) 0(4) 250,000(4) 401,770 401,770 421,858 3,375,771 3,375,771 3,544,559
55 1,096,780 0(4) 0(4) 250,000(4) 498,250 498,250 523,163 5,330,462 5,330,462 5,596,985
60 1,422,022 0(4) 0(4) 250,000(4) 618,321 618,321 624,504 8,470,343 8,470,343 8,555,047
65 1,837,124 0(4) 0(4) 250,000(4) 790,761 790,761 790,761 13,944,762 13,944,762 13,944,762
</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. Provided the Death
Benefit Guarantee Cumulative Premium Test has been and continues to be
met, the Death Benefit Guarantee will keep the Policy in force until
age 100.
(4) In the absence of additional premium payments, the Policy will lapse,
unless the Death Benefit Guarantee is in effect.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of Manufacturers Investment Trust. The policy value, cash surrender
value and death benefit for a policy would be different from those shown if
actual rates of investment return averaged the rate shown above over a period of
years, but also fluctuated above or below that average for individual policy
years. No representations can be made that these hypothetical rates of return
can be achieved for any one year or sustained over any period of time.
<PAGE> 66
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$250,000 Face Amount Death Benefit Option 2
$11,889 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(2) Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year(1) Value(3) Value(3) Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12,484 9,463 6,295 259,463 10,071 6,902 260,071 10,679 7,510 260,679
2 25,592 18,813 16,147 268,813 20,618 17,952 270,618 22,497 19,831 272,497
3 39,355 28,040 25,704 278,040 31,655 29,319 281,655 35,567 33,231 285,567
4 53,807 37,155 35,149 287,155 43,215 41,209 293,215 50,034 48,028 300,034
5 68,981 46,159 44,483 296,159 55,324 53,647 305,324 66,049 64,373 316,049
6 84,913 56,046 54,700 306,046 69,032 67,685 319,032 84,834 83,487 334,834
7 101,643 65,804 64,787 315,804 83,381 82,364 333,381 105,620 104,603 355,620
8 119,209 75,432 74,745 325,432 98,402 97,715 348,402 128,623 127,936 378,623
9 137,653 84,936 84,579 334,936 114,131 113,773 364,131 154,085 153,727 404,085
10 157,019 94,310 94,282 344,310 130,594 130,566 380,594 182,263 182,236 432,263
15 269,382 140,548 140,548 390,548 226,774 226,774 476,774 376,879 376,879 719,839
20 412,788 182,927 182,927 432,927 347,024 347,024 597,024 698,189 698,189 1,096,157
25 595,814 220,932 220,932 470,932 496,932 496,932 746,932 1,229,570 1,229,570 1,647,624
30 829,407 253,573 253,573 503,573 683,028 683,028 933,028 2,108,036 2,108,036 2,571,804
35 1,127,537 278,694 278,694 528,694 912,165 912,165 1,162,165 3,555,369 3,555,369 4,124,228
40 1,508,036 292,228 292,228 542,228 1,190,716 1,190,716 1,440,716 5,943,919 5,943,919 6,359,993
45 1,993,659 287,136 287,136 537,136 1,523,075 1,523,075 1,773,075 9,905,898 9,905,898 10,401,192
50 2,613,451 252,839 252,839 502,839 1,910,243 1,910,243 2,160,243 16,359,600 16,359,600 17,177,580
55 3,404,480 174,976 174,976 424,976 2,348,527 2,348,527 2,598,527 26,719,014 26,719,014 28,054,964
60 4,414,056 40,770 40,770 290,770 2,833,701 2,833,701 3,083,701 43,731,548 43,731,548 44,168,863
65 5,702,559 0(4) 0(4) 250,000(4) 3,370,638 3,370,638 3,620,638 72,714,172 72,714,172 72,964,172
</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. Provided the Death
Benefit Guarantee Cumulative Premium Test has been and continues to be
met, the Death Benefit Guarantee will keep the Policy in force until
age 100.
(4) In the absence of additional premium payments, the Policy will lapse,
unless the Death Benefit Guarantee is in effect.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of 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 VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$250,000 Face Amount Death Benefit Option 2
$11,889 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(2) Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year(1) Value(3) Value(3) Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12,484 9,166 5,998 259,166 9,764 6,595 259,764 10,362 7,194 260,362
2 25,592 18,091 15,425 268,091 19,851 17,185 269,851 21,684 19,018 271,684
3 39,355 26,865 24,529 276,865 30,368 28,031 280,368 34,160 31,823 284,160
4 53,807 35,488 33,482 285,488 41,330 39,324 291,330 47,907 45,901 297,907
5 68,981 43,956 42,280 293,956 52,753 51,077 302,753 63,054 61,378 313,054
6 84,913 53,268 51,922 303,268 65,686 64,339 315,686 80,806 79,460 330,806
7 101,643 62,407 61,390 312,407 79,158 78,141 329,158 100,366 99,349 350,366
8 119,209 71,374 70,687 321,374 93,195 92,508 343,195 121,921 121,234 371,921
9 137,653 80,165 79,808 330,165 107,815 107,458 357,815 145,673 145,316 395,673
10 157,019 88,782 88,755 338,782 123,043 123,016 373,043 171,852 171,825 421,852
15 269,382 130,521 130,521 380,521 210,756 210,756 460,756 350,241 350,241 668,960
20 412,788 167,003 167,003 417,003 317,424 317,424 567,424 637,420 637,420 1,000,749
25 595,814 196,633 196,633 446,633 445,510 445,510 695,510 1,100,785 1,100,785 1,475,052
30 829,407 216,946 216,946 466,946 596,977 596,977 846,977 1,847,005 1,847,005 2,253,346
35 1,127,537 223,301 223,301 473,301 771,548 771,548 1,021,548 3,039,571 3,039,571 3,525,903
40 1,508,036 208,404 208,404 458,404 965,551 965,551 1,215,551 4,956,253 4,956,253 5,303,191
45 1,993,659 159,942 159,942 409,942 1,167,879 1,167,879 1,417,879 8,074,642 8,074,642 8,478,374
50 2,613,451 64,299 64,299 314,299 1,362,423 1,362,423 1,612,423 12,972,837 12,972,837 13,621,479
55 3,404,480 0(4) 0(4) 250,000(4) 1,517,136 1,517,136 1,767,136 20,472,205 20,472,205 21,495,815
60 4,414,056 0(4) 0(4) 250,000(4) 1,601,374 1,601,374 1,851,374 32,518,812 32,518,812 32,844,000
65 5,702,559 0(4) 0(4) 250,000(4) 1,282,876 1,282,876 1,532,876 52,648,313 52,648,313 52,898,313
</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. Provided the Death
Benefit Guarantee Cumulative Premium Test has been and continues to be
met, the Death Benefit Guarantee will keep the Policy in force until
age 100.
(4) In the absence of additional premium payments, the Policy will lapse,
unless the Death Benefit Guarantee is in effect.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of 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> 68
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$250,000 Face Amount Death Benefit Option 3
$9,266 Annual Planned Premium for 7 Years
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(2) Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year(1) Value(3) Value(3) Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,729 7,270 6,646 259,266 7,737 7,114 259,266 8,205 7,582 259,266
2 19,945 14,448 13,918 268,532 15,837 15,306 268,532 17,282 16,751 268,532
3 30,672 21,528 20,598 277,798 24,308 23,378 277,798 27,317 26,387 277,798
4 41,934 28,517 27,319 287,064 33,177 31,979 287,064 38,421 37,223 287,064
5 53,761 35,417 34,082 296,330 42,463 41,129 296,330 50,711 49,376 296,330
6 66,178 42,968 41,628 305,596 52,951 51,610 305,596 65,102 63,762 305,596
7 79,216 50,412 49,400 314,862 63,924 62,912 314,862 81,026 80,014 314,862
8 83,177 49,365 48,681 314,862 66,519 65,835 314,862 89,257 88,573 314,862
9 87,336 48,307 47,952 314,862 69,220 68,865 314,862 98,363 98,007 315,738
10 91,702 47,232 47,204 314,862 72,028 72,001 314,862 108,425 108,397 336,856
15 117,038 41,406 41,406 314,862 87,710 87,710 314,862 176,618 176,618 467,490
20 149,374 34,299 34,299 314,862 106,311 106,311 314,862 287,418 287,418 652,244
25 190,643 25,057 25,057 314,862 128,227 128,227 314,862 466,481 466,481 916,586
30 243,314 12,118 12,118 314,862 153,904 153,904 314,862 754,133 754,133 1,298,451
35 310,537 0(4) 0(4) 0(4) 183,649 183,649 314,862 1,211,726 1,211,726 1,856,318
40 396,333 218,099 218,099 314,862 1,930,426 1,930,426 2,676,059
45 505,832 258,848 258,848 331,233 3,041,428 3,041,428 3,891,934
50 645,584 304,313 304,313 365,241 4,733,427 4,733,427 5,681,137
55 823,947 353,777 353,777 404,711 7,279,800 7,279,800 8,327,872
60 1,051,589 410,187 410,187 446,455 11,159,881 11,159,881 12,146,612
65 1,342,124 493,131 493,131 494,745 17,729,184 17,729,184 17,787,225
</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)
the Cash Value Accumulation Test is used, (c) no policy loan has been
made, (d) no partial withdrawal of the Cash Surrender Value has been
made, (e) no premiums have been allocated to the Fixed Account, and (f)
the Cash Value Enhancement Rider is used.
(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. Provided the Death
Benefit Guarantee Cumulative Premium Test has been and continues to be
met, the Death Benefit Guarantee will keep the Policy in force until
age 100.
(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 VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$250,000 Face Amount Death Benefit Option 3
$9,266 Annual Planned Premium for 7 Years
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(2) Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year(1) Value(3) Value(3) Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,729 6,978 6,354 259,266 7,436 6,813 259,266 7,895 7,272 259,266
2 19,945 13,739 13,209 268,532 15,086 14,555 268,532 16,489 15,958 268,532
3 30,672 20,375 19,445 277,798 23,052 22,122 277,798 25,952 25,021 277,798
4 41,934 26,883 25,685 287,064 31,345 30,147 287,064 36,372 35,174 287,064
5 53,761 33,259 31,924 296,330 39,976 38,641 296,330 47,848 46,513 296,330
6 66,178 40,247 38,906 305,596 49,727 48,387 305,596 61,283 59,943 305,596
7 79,216 47,085 46,072 314,862 59,874 58,862 314,862 76,088 75,076 314,862
8 83,177 45,415 44,731 314,862 61,576 60,892 314,862 83,048 82,364 314,862
9 87,336 43,708 43,352 314,862 63,306 62,950 314,862 90,704 90,349 314,862
10 91,702 41,962 41,935 314,862 65,065 65,038 314,862 99,137 99,109 314,862
15 117,038 32,378 32,378 314,862 74,119 74,119 314,862 155,145 155,145 410,652
20 149,374 20,411 20,411 314,862 82,970 82,970 314,862 242,387 242,387 550,053
25 190,643 3,507 3,507 314,862 89,671 89,671 314,862 376,037 376,037 738,873
30 243,314 0(4) 0(4) 0(4) 90,731 90,731 314,862 577,448 577,448 994,239
35 310,537 78,331 78,331 314,862 874,225 874,225 1,339,279
40 396,333 34,548 34,548 314,862 1,302,144 1,302,144 1,805,101
45 505,832 0(4) 0(4) 0(4) 1,902,006 1,902,006 2,433,883
50 645,584 2,734,864 2,734,864 3,282,428
55 823,947 3,870,505 3,870,505 4,427,741
60 1,051,589 5,488,869 5,488,869 5,974,182
65 1,342,124 8,023,130 8,023,130 8,049,395
</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)
the Cash Value Accumulation Test is used, (c) no policy loan has been
made, (d) no partial withdrawal of the Cash Surrender Value has been
made, (e) no premiums have been allocated to the Fixed Account, and (f)
the Cash Value Enhancement Rider is used.
(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. Provided the Death
Benefit Guarantee Cumulative Premium Test has been and continues to be
met, the Death Benefit Guarantee will keep the Policy in force until
age 100.
(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> 70
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$508,303 Face Amount Death Benefit Option 1
$100,000 Planned Single 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(2) Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year(1) Value(3) Value(3) Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 93,138 93,138 508,303 98,776 98,776 508,303 104,415 104,415 508,303
2 110,250 89,577 89,577 508,303 100,864 100,864 508,303 112,817 112,817 508,303
3 115,763 86,050 86,050 508,303 103,002 103,002 508,303 122,016 122,016 508,303
4 121,551 82,569 82,569 508,303 105,205 105,205 508,303 132,104 132,104 508,303
5 127,628 79,134 79,134 508,303 107,478 107,478 508,303 143,172 143,172 508,303
6 134,010 76,998 76,998 508,303 111,117 111,117 508,303 156,652 156,652 508,303
7 140,710 74,864 74,864 508,303 114,867 114,867 508,303 171,435 171,435 508,303
8 147,746 72,730 72,730 508,303 118,730 118,730 508,303 187,651 187,651 508,303
9 155,133 70,602 70,602 508,303 122,718 122,718 508,303 205,449 205,449 508,303
10 162,889 68,466 68,466 508,303 126,825 126,825 508,303 224,982 224,982 508,303
15 207,893 57,376 57,376 508,303 149,093 149,093 508,303 354,776 354,776 677,622
20 265,330 46,607 46,607 508,303 180,970 180,970 508,303 581,345 581,345 912,712
25 338,635 32,351 32,351 508,303 218,630 218,630 508,303 954,161 954,161 1,278,576
30 432,194 12,083 12,083 508,303 263,000 263,000 508,303 1,567,400 1,567,400 1,912,228
35 551,602 0(4) 0(4) 0(4) 315,019 315,019 508,303 2,572,535 2,572,535 2,984,141
40 703,999 376,720 376,720 508,303 4,222,992 4,222,992 4,518,601
45 898,501 454,692 454,692 508,303 6,947,347 6,947,347 7,294,714
50 1,146,740 561,186 561,186 589,245 11,361,805 11,361,805 11,929,895
55 1,463,563 688,397 688,397 722,817 18,410,224 18,410,224 19,330,735
60 1,867,919 847,649 847,649 856,125 29,928,540 29,928,540 30,227,825
65 2,383,990 1,066,346 1,066,346 1,066,346 49,683,220 49,683,220 49,683,220
</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) no policy loan
has been made, (b) no partial withdrawal of the Cash Surrender Value
has been made, (c) no premiums have been allocated to the Fixed
Account, and (d) the Cash Value Enhancement Plus Rider is used.
(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. Provided the Death
Benefit Guarantee Cumulative Premium Test has been and continues to be
met, the Death Benefit Guarantee will keep the Policy in force until
age 100.
(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 VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 35 (Standard)
$508,303 Face Amount Death Benefit Option 1
$100,000 Planned Single 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(2) Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year(1) Value(3) Value(3) Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 92,417 92,417 508,303 98,027 98,027 508,303 103,640 103,640 508,303
2 110,250 87,983 87,983 508,303 99,159 99,159 508,303 110,997 110,997 508,303
3 115,763 83,595 83,595 508,303 100,288 100,288 508,303 119,024 119,024 508,303
4 121,551 79,246 79,246 508,303 101,411 101,411 508,303 127,782 127,782 508,303
5 127,628 74,925 74,925 508,303 102,519 102,519 508,303 137,337 137,337 508,303
6 134,010 71,891 71,891 508,303 104,913 104,913 508,303 149,111 149,111 508,303
7 140,710 68,839 68,839 508,303 107,327 107,327 508,303 161,967 161,967 508,303
8 147,746 65,770 65,770 508,303 109,761 109,761 508,303 176,017 176,017 508,303
9 155,133 62,668 62,668 508,303 112,205 112,205 508,303 191,372 191,372 508,303
10 162,889 59,534 59,534 508,303 114,661 114,661 508,303 208,169 208,169 508,303
15 207,893 42,897 42,897 508,303 126,755 126,755 508,303 318,675 318,675 608,669
20 265,330 24,348 24,348 508,303 142,966 142,966 508,303 507,994 507,994 797,551
25 338,635 0(4) 0(4) 0(4) 156,380 156,380 508,303 812,043 812,043 1,088,137
30 432,194 161,895 161,895 508,303 1,299,229 1,299,229 1,585,060
35 551,602 148,132 148,132 508,303 2,073,573 2,073,573 2,405,344
40 703,999 89,310 89,310 508,303 3,311,863 3,311,863 3,543,694
45 898,501 0(4) 0(4) 0(4) 5,317,253 5,317,253 5,583,116
50 1,146,740 8,449,762 8,449,762 8,872,250
55 1,463,563 13,218,534 13,218,534 13,879,461
60 1,867,919 20,842,605 20,842,605 21,051,031
65 2,383,990 34,083,925 34,083,925 34,083,925
</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) no policy loan
has been made, (b) no partial withdrawal of the Cash Surrender Value
has been made, (c) no premiums have been allocated to the Fixed
Account, and (d) the Cash Value Enhancement Plus Rider is used.
(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. Provided the Death
Benefit Guarantee Cumulative Premium Test has been and continues to be
met, the Death Benefit Guarantee will keep the Policy in force until
age 100.
(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> 72
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
Nine Months ended September 30, 2000 and 1999
PREPARED IN CONFORMITY WITH ACCOUNTING
PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
<PAGE> 73
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As at As at
September 30 December 31
ASSETS ($ thousands) 2000 1999
------------------------------------------------------------------------------------------------
INVESTMENTS: (UNAUDITED)
<S> <C> <C>
Securities available-for-sale, at fair value:
Fixed maturity (amortized cost: 2000 $74,316; 1999 $73,780) $ 75,296 $ 73,081
Equity (cost: 2000 $798; 1999 $0) 798 0
Short-term investments 13,660 6,942
Policy loans 29,707 26,174
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $ 119,461 $ 106,197
------------------------------------------------------------------------------------------------
Cash and cash equivalents 15,386 17,383
Deferred acquisition costs 242,232 201,642
Due from affiliates 0 2,851
Deferred income taxes 6,608 1,596
Other assets 10,607 11,318
Separate account assets 1,603,431 1,399,527
------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,997,725 $1,740,514
================================================================================================
LIABILITIES, CAPITAL AND SURPLUS ($ thousands) 2000 1999
------------------------------------------------------------------------------------------------
LIABILITIES:
Policyholder liabilities and accruals $ 87,962 $ 75,688
Due to affiliates 150 0
Income taxes payable 22,143 11,122
Other liabilities 38,219 29,006
Separate account liabilities 1,603,431 1,399,527
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $1,751,905 $1,515,343
================================================================================================
CAPITAL AND SURPLUS:
Common shares $ 4,502 $ 4,502
Preferred shares 10,500 10,500
Contributed surplus 195,596 195,596
Retained earnings 39,175 19,256
Accumulated other comprehensive loss (3,953) (4,683)
------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS $ 245,820 $ 225,171
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $1,997,725 $1,740,514
================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE> 74
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
($ thousands) 2000 1999 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE:
Premiums $ 4,402 $ 2,640 $ 10,592 $ 7,092
Fee income 24,165 17,737 87,021 51,832
Net investment income 2,161 2,828 6,354 6,005
Realized investment gains (losses) (10) - (11) 1,051
Other 322 (87) 450 19
---------------------------------------------------------------------------------------------------
TOTAL REVENUE $ 31,040 $ 23,118 $ 104,406 $ 65,999
---------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES:
Policyholder benefits and claims $ 5,992 $ 6,134 $ 16,075 $ 11,619
Operating cost & expenses 14,393 8,126 44,666 29,587
Commission 659 550 3,488 1,893
Amortization of deferred acquisition costs 4,570 4,355 11,567 10,031
Interest expense 17 - 50 46
Policyholder dividends 52 34 139 144
---------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES $ 25,683 $ 19,199 $ 75,985 $ 53,320
---------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 5,357 3,919 28,421 12,679
---------------------------------------------------------------------------------------------------
INCOME TAX (BENEFIT) EXPENSE (140) 951 8,502 4,333
---------------------------------------------------------------------------------------------------
NET INCOME $ 5,497 $ 2,968 $ 19,919 $ 8,346
---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 75
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL AND SURPLUS (UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
CAPITAL CONTRIBUTED RETAINED COMPREHENSIVE CAPITAL AND
($ thousands) STOCK SURPLUS EARNINGS LOSS SURPLUS
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $15,002 $195,596 $19,256 $(4,683) $225,171
Net Income - - 19,919 - 19,919
Comprehensive income - - - 730 730
------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2000 $15,002 $195,596 $39,175 $(3,953) $245,820
======================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 76
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
($ thousands) 2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 19,919 $ 8,346
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Additions to policy liabilities 8,592 6,937
Deferred acquisition costs (52,369) (27,022)
Amortization of deferred acquisition costs 11,567 10,031
Realized (gain) loss on investments 11 (1,051)
Increases (decreases) to deferred income taxes (5,536) (2,444)
Other 23,691 11,053
-------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ 5,875 5,850
-------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Fixed maturity securities sold, matured or repaid $ 1,005 $ 1,102
Fixed maturity securities purchased (1,499) (26,313)
Equity securities sold - 20,284
Equity securities purchased (798) (14)
Net change in short-term investments (6,729) (6,322)
Net policy loans advanced (3,533) (5,910)
-------------------------------------------------------------------------------------
Cash provided by (used in) investing activities $(11,554) $ (17,173)
-------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Receipts from variable life and annuity policies
credited to policyholder account balances $ 10,476 $ 8,924
Withdrawals of policyholder account balances on
variable life and annuity policies (6,794) (2,320)
-------------------------------------------------------------------------------------
Cash provided by (used in) financing activities $ 3,682 $ 6,604
-------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS:
Increase (decrease) during the period $ (1,997) $ (4,719)
Balance, beginning of year 17,383 23,789
-------------------------------------------------------------------------------------
BALANCE, END OF PERIOD $ 15,386 $ 19,070
=====================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 77
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
1. ORGANIZATION
The Manufacturers Life Insurance Company of America (hereafter referred to
as "ManAmerica" or the "Company") is a direct wholly-owned U.S. subsidiary
of The Manufacturers Life Insurance Company (U.S.A.) ("ManUSA"), which is
an indirect wholly-owned subsidiary of Manulife Financial Corporation.
Manulife Financial Corporation and its subsidiaries are known collectively
as "Manulife Financial".
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of ManAmerica
have been prepared in accordance with accounting principles generally
accepted in the United States ("GAAP"), except that they do not contain
complete notes. However, in the opinion of management, these statements
include all normal recurring adjustments necessary for a fair presentation
of the results. These financial statements should be read in conjunction
with the financial statements and the related notes included in
ManAmerica's annual report on Form 10-K for the year ended December 31,
1999. Operating results for the nine months ended September 30, 2000 are
not necessarily indicative of the results that may be expected for the full
year ending December 31, 2000.
3. RECENT ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities.
The Statement also addresses contracts that contain embedded derivatives,
such as certain insurance contracts. SFAS No. 133 requires that an entity
recognizes all derivatives as either assets or liabilities on the balance
sheet at fair value. In July 1999, the FASB issued Statement 137, which
delayed the effective date of SFAS No. 133 to fiscal years beginning after
June 15, 2000. In June 2000, the FASB issued SFAS No. 138, which made
certain changes to the hedging provisions of SFAS No. 133, and is effective
concurrent with SFAS No. 133.
The Company has no derivative instruments as at September 30, 2000 nor as
at December 31, 1999. Therefore, there are no accounting implications to
the Company in regards to SFAS No. 133.
5
<PAGE> 78
4. COMPREHENSIVE INCOME
Total comprehensive income for the three months and nine months ended
September 30, 2000 and 1999 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
COMPREHENSIVE INCOME: 2000 1999 2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ 5,497 $ 2,968 $19,919 $ 8,346
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized holding gains (losses)
on available-for-sale securities 470 (268) 949 (2,725)
Foreign currency translation 180 140 (219) 456
-------------------------------------------------------------------------------------
Other comprehensive income (loss) $ 650 $ (128) $ 730 $ (2,269)
-------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 6,147 $ 2,840 $20,649 $ 6,077
-------------------------------------------------------------------------------------
</TABLE>
Other comprehensive income (loss) is reported net of taxes recoverable
(payable) of ($248) and $144 for the three months, and ($524) and $1,465
for the nine months ended September 30, 2000 and 1999, respectively.
5. INCOME TAXES
Income before federal income taxes differs from taxable income principally
due to tax-exempt investment income, dividends-received tax deductions,
policy acquisition costs, and differences in reserves for policy and
contract liabilities for tax and financial reporting purposes.
6. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
<PAGE> 79
AUDITED CONSOLIDATED
FINANCIAL STATEMENTS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
Years ended December 31, 1999, 1998 and 1997
<PAGE> 80
The Manufacturers Life Insurance Company of America
Audited Consolidated
Financial Statements
Years ended December 31, 1999, 1998 and 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors .......................................... 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets ............................................. 2
Consolidated Statements of Income ....................................... 3
Consolidated Statements of Changes in Shareholder's Equity .............. 4
Consolidated Statements of Cash Flows ................................... 5
Notes to Consolidated Financial Statements .............................. 6
</TABLE>
<PAGE> 81
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
The Manufacturers Life Insurance Company of America
We have audited the accompanying consolidated balance sheets of The
Manufacturers Life Insurance Company of America as of December 31, 1999 and
1998, and the related consolidated statements of income, changes in capital and
surplus and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Manufacturers
Life Insurance Company of America at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young, LLP
Philadelphia, Pennsylvania
March 3, 2000
1
<PAGE> 82
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As at December 31 ($ thousands)
ASSETS 1999 1998
---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS:
Securities available-for-sale, at fair value: (note 3)
Fixed-maturity (amortized cost: 1999 $73,780; 1998 $45,248) $ 73,081 $ 49,254
Equity (cost: 1999 $0; 1998 $19,219) -- 20,524
Short-term investments 6,942 459
Policy loans 26,174 19,320
---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $ 106,197 $ 89,557
---------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 17,383 $ 23,789
Deferred acquisition costs (note 5) 201,642 163,506
Due from affiliates 2,851 --
Income taxes recoverable -- 2,665
Deferred income taxes (note 6) 1,596 --
Other assets 11,318 9,062
Separate account assets 1,399,527 1,075,231
---------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,740,514 $ 1,363,810
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES, CAPITAL AND SURPLUS 1999 1998
---------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES:
Policyholder liabilities and accruals $ 75,688 $ 60,830
Due to affiliates -- 5,133
Deferred income taxes (note 6) -- 763
Income taxes payable 11,122 --
Other liabilities 29,006 18,656
Separate account liabilities 1,399,527 1,075,231
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 1,515,343 $ 1,160,613
===================================================================================================
CAPITAL AND SURPLUS:
Common shares (note 7) $ 4,502 $ 4,502
Preferred shares (note 7) 10,500 10,500
Contributed surplus 195,596 193,096
Retained earnings (deficit) 19,256 (2,664)
Accumulated other comprehensive loss (note 4) (4,683) (2,237)
---------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS $ 225,171 $ 203,197
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 1,740,514 $ 1,363,810
===================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 83
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Premiums $ 10,185 $ 9,290 $ 8,607
Consideration paid on reinsurance terminated (note 9) -- (40,975) --
Fee income 77,899 55,322 38,682
Net investment income (note 3) 6,784 6,128 8,275
Realized investment gains (losses) 1,051 (206) 118
Other 152 307 544
--------------------------------------------------------------------------------------------------------------
TOTAL REVENUE $ 96,071 $ 29,866 $ 56,226
--------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES:
Policyholder benefits and claims $ 14,820 $ 16,541 $ 6,733
Reduction of reserves on reinsurance terminated (note 9) -- (40,975) --
Operating costs and expenses 41,617 41,676 41,742
Commissions 2,189 2,561 2,838
Amortization of deferred acquisition costs (note 5) 2,718 9,266 4,860
Interest expense 50 1,722 2,750
Policyholder dividends 171 221 1,416
--------------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 61,565 31,012 60,339
--------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 34,506 (1,146) (4,113)
--------------------------------------------------------------------------------------------------------------
INCOME TAX (EXPENSE) BENEFIT (NOTE 6) (12,586) 392 477
--------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 21,920 $ (754) $ (3,636)
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 84
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
ACCUMULATED
COMMON AND RETAINED OTHER TOTAL
FOR THE YEARS ENDED DECEMBER 31 PREFERRED CONTRIBUTED EARNINGS COMPREHENSIVE CAPITAL AND
($ thousands) SHARES SURPLUS (DEFICIT) INCOME (LOSS) SURPLUS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 15,002 $ 98,569 $ 1,726 $ 1,333 $ 116,630
Comprehensive loss (note 4) -- -- (3,636) (6,225) (9,861)
-----------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $ 15,002 $ 98,569 $ (1,910) $ (4,892) $ 106,769
Capital contribution (note 7) -- 94,527 -- -- 94,527
Comprehensive income (loss) (note 4) -- -- (754) 2,655 1,901
-----------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 15,002 $ 193,096 $ (2,664) $ (2,237) $ 203,197
Capital contribution (note 7) -- 2,500 -- -- 2,500
Comprehensive income (loss) (note 4) -- -- 21,920 (2,446) 19,474
-----------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $ 15,002 $ 195,596 $ 16,655 $ (4,683) $ 225,171
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 85
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ 21,920 $ (754) $ (3,636)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Additions (deductions) to policy liabilities and accruals 6,563 (36,217) (2,147)
Deferred acquisition costs (39,540) (43,065) (33,544)
Amortization of deferred acquisition costs 2,718 9,266 4,860
Realized (gains) losses on investments (1,051) 206 (118)
(Increases) decreases to deferred income taxes (1,592) (1,796) 2,730
Income taxes 13,787 3,014 4,870
Other 2,866 53 2,788
---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ 6,671 $ (69,293) $ (24,197)
---------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Fixed-maturity securities sold, matured or repaid $ 1,193 $ 27,852 $ 73,772
Fixed-maturity securities purchased (29,498) (6,429) (89,763)
Equity securities sold 20,284 8,555 10,586
Equity securities purchased (14) (8,082) (11,289)
Net change in short-term investments (6,483) 1,671 4,558
Net policy loans advanced (6,854) (4,647) (4,851)
Guaranteed annuity contracts -- -- 171,691
---------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities $ (21,372) $ 18,920 $ 154,704
---------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Receipts from variable universal life and annuity policies
credited to policyholder account balances $ 11,526 $ 7,981 $ 7,582
Withdrawals of policyholder account balances on
variable universal life and annuity policies (3,231) (5,410) (3,252)
Bonds payable repaid -- -- (158,760)
Issuance of promissory note -- -- 33,000
Capital contribution -- 51,709 --
---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities $ 8,295 $ 54,280 $(121,430)
---------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS:
(Decrease) increase during the year (6,406) 3,907 9,077
Balance, beginning of year 23,789 19,882 10,805
---------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF YEAR $ 17,383 $ 23,789 $ 19,882
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 86
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(IN THOUSANDS OF DOLLARS)
1. ORGANIZATION
The Manufacturers Life Insurance Company of America (hereafter referred
to as "ManAmerica" or the "Company") is a direct wholly-owned U.S.
subsidiary of The Manufacturers Life Insurance Company (U.S.A.)
("ManUSA"), which is an indirect wholly-owned subsidiary of The
Manufacturers Life Insurance Company ("MLI"), which in turn is a
wholly-owned subsidiary of Manulife Financial Corporation, a publicly
traded company. Manulife Financial Corporation and its subsidiaries are
known collectively as "Manulife Financial."
The Company issues and sells variable universal life insurance products
in the United States. The Company also has a branch operation in Taiwan
to develop and market traditional life insurance products for the
Taiwanese market.
The Company owns 100% of Manulife Holding Corporation ("Holdco"), an
investment holding company. Holdco has primarily three wholly-owned
subsidiaries, ManEquity Inc., a registered broker/dealer, Manufacturers
Advisor Corporation ("MAC"), an investment fund management company, and
Manulife Capital Corporation ("MCC"), an investment holding company.
In October 1997, the Manufacturers Life Mortgage Securities Corporation
("MLMSC"), a subsidiary of Holdco, was absorbed into Holdco, and all of
the assets and liabilities of MLMSC were transferred to Holdco at their
respective book values. MLMSC had historically invested amounts
received as repayments of mortgage loans in annuities issued by ManUSA.
These annuities were collateral for the 8 1/4 % mortgage-backed bonds
payable outstanding as at December 31, 1996. On March 1, 1997 the
annuities matured and the proceeds were used to repay the bonds
payable.
2. SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company have
been prepared in conformity with accounting principles generally
accepted ("GAAP") in the United States and include the accounts and
operations, after intercompany eliminations, of the Company and its
wholly-owned subsidiary, Holdco.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those
estimates.
Certain reclassifications have been made to 1998 and 1997 financial
information to conform to the 1999 presentation.
6
<PAGE> 87
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
b) RECENT ACCOUNTING STANDARDS
i)In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain insurance contracts, are also addressed by the Statement. SFAS
No. 133 requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. In July 1999, the FASB issued
Statement 137, which delayed the effective date of SFAS No. 133 to
fiscal years beginning after June 15, 2000. The Company is evaluating
the accounting implications of SFAS No. 133 and has not determined its
impact on the Company's results of operations or its financial
condition.
ii)In December 1997, the American Institute of Certified Public
Accountant's Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments." SOP 97-3 provides
guidance on the recognition and measurement of liabilities for various
assessments related to insurance activities, including those by state
guaranty funds. The Company adopted SOP 97-3 during 1999. Prior to the
adoption of SOP 97-3, the Company expensed and recognized liabilities
for such assessments on a "pay-as-you-go" basis. The effect of adopting
SOP 97-3 did not have a material impact on the results of operations
and financial condition of the Company for the year ended December 31,
1999.
iii)In March 1998, AcSEC issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires the capitalization of certain costs incurred in connection
with developing or obtaining internal-use software. The Company adopted
SOP 98-1 during 1999. Prior to the adoption of SOP 98-1, the Company
expensed internal-use software-related costs as incurred. The effect of
adopting SOP 98-1 did not have a material impact on the results of
operations and financial condition of the Company for the year ended
December 31, 1999.
c) INVESTMENTS
The Company classifies all of its fixed maturity and equity securities
as available-for-sale and records these securities at fair value.
Realized gains and losses on sales of securities classified as
available-for-sale are recognized in net income using the specific
identification method. Changes in the fair value of securities
available-for-sale are reflected directly in accumulated other
comprehensive income after adjustments for deferred taxes and deferred
acquisition costs. Discounts and premiums on investments are amortized
using the effective interest method.
Policy loans are reported at aggregate unpaid balances, which
approximate fair value.
Short-term investments include investments with maturities of less than
one year at the date of acquisition.
7
<PAGE> 88
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d) CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
an original maturity date of three months or less to be cash
equivalents. Cash equivalents are stated at cost plus accrued interest,
which approximates fair value.
e) DEFERRED ACQUISITION COSTS (DAC)
Commissions and other expenses which vary with and are primarily
related to the production of new business are deferred to the extent
recoverable and included as an asset. DAC associated with variable
annuity and variable universal life insurance contracts is charged to
expense in relation to the estimated gross profits of those contracts.
The amortization is adjusted retrospectively when estimates of current
or future gross profits are revised. DAC associated with traditional
life insurance policies is charged to expense over the premium paying
period of the related policies. DAC is adjusted for the impact on
estimated future gross profits assuming the unrealized gains or losses
on securities had been realized at year-end. The impact of any such
adjustments is included in net unrealized gains (losses) in accumulated
other comprehensive income. DAC is reviewed annually to determine
recoverability from future income and, if not recoverable, it is
immediately expensed.
f) POLICYHOLDER LIABILITIES
For variable annuity and variable universal life contracts, reserves
equal the policyholder account value. Account values are increased for
deposits received and interest credited and are reduced by withdrawals,
mortality charges and administrative expenses charged to the
policyholders.
Policyholder liabilities for traditional life insurance policies sold
in Taiwan are computed using the net level premium method and are based
upon estimates as to future mortality, persistency, maintenance expense
and interest rate yields that were established in the year of issue.
g) SEPARATE ACCOUNTS
Separate account assets and liabilities represent funds that are
separately administered, principally for variable annuity and variable
universal life contracts, and for which the contract holder, rather
than the Company, bears the investment risk. Separate account assets
are recorded at market value. Operations of the separate accounts are
not included in the accompanying financial statements.
h) REVENUE RECOGNITION
Fee income from variable annuity and variable universal life insurance
policies consists of policy charges for the cost of insurance, expenses
and surrender charges that have been assessed against the policy
account balances. Policy charges that are designed to compensate the
Company for future services are deferred and recognized in income over
the period benefited, using the same assumptions used to amortize DAC.
Premiums on long-duration life insurance contracts are recognized as
revenue when due. Investment income is recorded when due.
8
<PAGE> 89
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
i) EXPENSES
Expenses for variable annuity and variable universal life insurance
policies include interest credited to policy account balances and
benefit claims incurred during the period in excess of policy account
balances.
j) REINSURANCE
The Company is routinely involved in reinsurance transactions in order
to minimize exposure to large risks. Life reinsurance is accomplished
through various plans including yearly renewable term, coinsurance and
modified coinsurance. Reinsurance premiums, policy charges for cost of
insurance and claims are accounted for on a basis consistent with that
used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums, fees and claims are reported net
of reinsured amounts. Amounts paid with respect to ceded reinsurance
contracts are reported as reinsurance receivables in other assets.
k) FOREIGN EXCHANGE
The Company's Taiwanese branch balance sheet and statement of income
are translated at the current exchange and average exchange rates for
the year respectively. The resultant translation adjustments are
included in accumulated other comprehensive income.
l) INCOME TAX
Income taxes have been provided for in accordance with SFAS No. 109
"Accounting for Income Taxes." The Company joins ManUSA, Manulife
Reinsurance Corporation ("MRC") and Manulife Reinsurance Limited
("MRL") in filing a U.S. consolidated income tax return as a life
insurance group under provisions of the Internal Revenue Code. In
accordance with an income tax sharing agreement, the Company's income
tax provision (or benefit) is computed as if the Company filed a
separate income tax return. Tax benefits from operating losses are
provided at the U.S. statutory rate plus any tax credits attributable
to the Company, provided the consolidated group utilizes such benefits
currently. Deferred income taxes result from temporary differences
between the tax basis of assets and liabilities and their recorded
amounts for financial reporting purposes. Income taxes recoverable
represents amounts due from ManUSA in connection with the consolidated
return.
9
<PAGE> 90
3. INVESTMENTS AND INVESTMENT INCOME
a) FIXED-MATURITY AND EQUITY SECURITIES
At December 31, 1999 and 1998, all fixed-maturity and equity securities
have been classified as available-for-sale and reported at fair value.
The amortized cost and fair value is summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED UNREALIZED FAIR VALUE
AS AT DECEMBER 31, GAINS LOSSES
($ thousands) 1999 1998 1999 1998 1999 1998 1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED-MATURITY SECURITIES:
U.S. government $50,714 $27,349 $ -- $ 2,578 $ (936) $ -- $49,778 $29,927
Foreign governments 13,218 9,353 385 709 -- -- 13,603 10,062
Corporate 9,848 8,546 39 719 (187) -- 9,700 9,265
-------------------------------------------------------------------------------------------------------------------
Total fixed-maturity securities $73,780 $45,248 $ 424 $ 4,006 $(1,123) $ -- $73,081 $49,254
===================================================================================================================
Equity securities $ -- $19,219 $ -- $ 3,217 $ -- $(1,912) $ -- $20,524
===================================================================================================================
</TABLE>
There were no sales of fixed-maturity securities during 1999. Proceeds
from sales of fixed-maturity securities were $26,105 and $70,914 for
1998 and 1997, respectively. Gross realized gains and gross realized
losses on those sales were $362 and $107 for 1998 and, $955 and $837
for 1997, respectively.
Proceeds from sales of equity securities during 1999 were $20,284 (1998
$8,555; 1997 $10,586). Gross gains of $1,051 and gross losses of $0
were realized on those sales (1998 $16 and $477; 1997 $0 and $0,
respectively).
The contractual maturities of fixed maturity securities at December 31,
1999 are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties. Corporate
requirements and investment strategies may result in the sale of
investments before maturity.
<TABLE>
<CAPTION>
($ thousands) AMORTIZED COST FAIR VALUE
-----------------------------------------------------------------------
<S> <C> <C>
Fixed maturity securities
One year or less $ 1,743 $ 1,772
Greater than 1; up to 5 years 27,321 27,185
Greater than 5; up to 10 years 29,468 28,549
Due after 10 years 15,248 15,575
-----------------------------------------------------------------------
TOTAL FIXED MATURITY SECURITIES $73,780 $73,081
-----------------------------------------------------------------------
</TABLE>
10
<PAGE> 91
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
b) INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
---------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 3,686 $ 4,078 $ 4,545
Equity securities - 227 331
Guaranteed annuity contracts - - 2,796
Other investments 3,371 2,082 772
---------------------------------------------------------------------
Gross investment income 7,057 6,387 8,444
---------------------------------------------------------------------
Investment expenses 273 259 169
---------------------------------------------------------------------
NET INVESTMENT INCOME $ 6,784 $ 6,128 $ 8,275
=====================================================================
</TABLE>
4. COMPREHENSIVE INCOME
Total comprehensive income was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME (LOSS) $19,319 $ (754) $(3,636)
-------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized holding gains (losses) arising during the period (3,965) 2,435 (1,030)
Reclassification adjustment for realized gains and losses included in
net income (loss) 683 134 77
Foreign currency translation 836 86 (5,272)
-------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (2,446) 2,655 (6,225)
-------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) $19,474 $ 1,901 $(9,861)
-------------------------------------------------------------------------------------------------------
</TABLE>
Other comprehensive income (loss) is reported net of taxes recoverable
(payable) of $1,767, ($1,430), and $513 for 1999, 1998, and 1997,
respectively.
Accumulated other comprehensive income is comprised of the following:
<TABLE>
<CAPTION>
AS AT DECEMBER 31
($ thousands) 1999 1998
----------------------------------------------------------------------
<S> <C> <C>
UNREALIZED GAINS (LOSSES):
Beginning balance $ 2,949 $ 380
Current period change (3,282) 2,569
----------------------------------------------------------------------
Ending balance $ (333) $ 2,949
----------------------------------------------------------------------
FOREIGN CURRENCY:
Beginning balance $(5,186) $(5,272)
Current period change 836 86
----------------------------------------------------------------------
Ending balance $(4,350) $(5,186)
----------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE LOSS $(4,683) $(2,237)
----------------------------------------------------------------------
</TABLE>
11
<PAGE> 92
5. DEFERRED ACQUISITION COSTS
The components of the change in DAC were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, $163,506 $130,355 $102,610
Capitalization 39,540 43,065 33,544
Accretion of interest 14,407 11,417 9,357
Amortization (17,125) (20,683) (14,217)
Effect of net unrealized gains (losses)
on securities available for sale 1,039 (784) 1,268
Foreign currency 275 136 (2,207)
-----------------------------------------------------------------------------------
BALANCE AT DECEMBER 31 $201,642 $163,506 $130,355
===================================================================================
</TABLE>
6. INCOME TAXES
Components of income tax (expense) benefit were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current (expense) benefit $(13,178) $(1,404) $ 3,207
Deferred (expense) benefit 592 1,796 (2,730)
-----------------------------------------------------------------------------------
TOTAL (EXPENSE) BENEFIT $(12,586) $ 392 $ 477
===================================================================================
</TABLE>
Income before federal income taxes differs from taxable income
principally due to tax-exempt investment income, dividends-received tax
deductions, policy acquisition costs, and differences in reserves for
policy and contract liabilities for tax and financial reporting
purposes.
The Company's deferred income tax asset (liability), which results from
tax effecting the differences between financial statement values and
tax values of assets and liabilities at each balance sheet date,
relates to the following:
<TABLE>
<CAPTION>
AS AT DECEMBER 31
($ thousands) 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Differences in computing policy reserves $ 47,884 $ 38,888
Investments 246 708
Other deferred tax assets 2,768 333
-----------------------------------------------------------------------------------
Deferred tax assets $ 50,898 $ 39,929
-----------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Deferred acquisition costs $ 49,103 $ 38,778
Investments 136 1,859
Policyholder dividends payable 63 55
-----------------------------------------------------------------------------------
Deferred tax liabilities $ 49,382 $ 40,692
-----------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS (LIABILITIES) $ 1,596 $ (763)
===================================================================================
</TABLE>
12
<PAGE> 93
6. INCOME TAXES (CONTINUED)
At December 31, 1999, the consolidated group has utilized all available
operating loss carryforwards and net capital loss carryforwards. The
losses of the Company, MRC and ManUSA may be used to offset the
ordinary and capital gain income of MRL. However, losses of MRL may not
be used to offset the income of the other members of the consolidated
group.
7. CAPITAL AND SURPLUS
The Company has two classes of capital stock, as follows:
<TABLE>
<CAPTION>
AS AT DECEMBER 31:
($ thousands, except per share amounts) 1999 1998
----------------------------------------------------------------------------
<S> <C> <C>
AUTHORIZED:
5,000,000 Common shares, Par value $1
5,000,000 Preferred shares, Par value $100
ISSUED AND OUTSTANDING:
4,501,861 Common shares $ 4,502 $ 4,502
105,000 Preferred shares 10,500 10,500
----------------------------------------------------------------------------
TOTAL $15,002 $15,002
----------------------------------------------------------------------------
</TABLE>
On January 29, 1999 and in exchange for one common share, ManUSA
contributed $1,722 which represented a receivable from a subsidiary to
the Company. On April 15, 1999, ManUSA contributed an additional amount
receivable of $778 from a subsidiary to the Company, which was recorded
as a capital contribution.
In 1998, the outstanding promissory note in the amount of $33,000 plus
interest at 6.95% issued on December 5, 1997 payable to ManUSA was
discharged and the amount due of $34,318 ($33,000 plus interest of
$1,318) was recorded as a capital contribution.
On December 31, 1998, the Company issued one common share to ManUSA in
exchange for a capital contribution of $60,209. Included in this
capital contribution was the discharge of the surplus debenture in the
amount of $8,500 issued on December 31, 1995 to ManUSA.
The Company is subject to statutory limitations on the payment of
dividends to its Parent. Under Michigan Insurance Law, the payment of
dividends to shareholders is restricted to the surplus earnings of the
Company, unless prior approval is obtained from the Michigan Insurance
Bureau.
The aggregate statutory capital and surplus of the Company at December
31, 1999 was $137,039 (1998 $121,799). The aggregate statutory net
income (loss) of the Company for the year ended 1999 was $5,770 (1998
$(23,491); 1997 $(2,550)). State regulatory authorities prescribe
statutory accounting practices that differ in certain respects from
accounting principles generally accepted in the United States followed
by stock life insurance companies. The significant differences relate
to investments, deferred acquisition costs, deferred income taxes,
non-admitted asset balances and reserve calculation assumptions.
13
<PAGE> 94
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and the estimated fair values of certain of the
Company's financial instruments at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
($ thousands) VALUE FAIR VALUE
---------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Fixed-maturity securities $ 73,081 $ 73,081
Short-term investments 6,942 6,942
Policy loans 26,174 26,174
Cash and cash equivalents 17,383 17,383
---------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used to estimate the fair
values of the above financial instruments:
FIXED-MATURITY SECURITIES: Fair values of fixed maturity securities
were based on quoted market prices, where available. Fair values were
estimated using values obtained from independent pricing services.
SHORT-TERM INVESTMENTS AND CASH AND CASH EQUIVALENTS: Carrying values
approximate fair values.
POLICY LOANS: Carrying values approximate fair values.
9. RELATED PARTY TRANSACTIONS
The Company has formal service agreements with MLI and ManUSA which can
be terminated by any party upon two months' notice. Under the
agreements, the Company will pay direct operating expenses incurred
each year by MLI and ManUSA on its behalf. Services provided under the
agreement include legal, actuarial, investment, data processing and
certain other administrative services. Costs incurred under these
agreements were $28,214, $34,070 and $32,733 in 1999, 1998 and 1997
respectively. At December 31, 1999 and 1998, the Company had a net
receivable from MLI and ManUSA for these services of $2,552 and $2,617,
respectively. In addition, there were $10,489, $12,817 and $11,249 of
agents bonuses allocated to the Company during 1999, 1998 and 1997,
respectively, which are included in deferred acquisition costs.
The Company shares office facilities and personnel with its affiliates.
Such shared costs and expenses are allocated to the Company and its
subsidiaries based on time and usage studies; such allocations would
vary depending on the assumptions underlying those studies.
The Company has several reinsurance agreements with affiliated
companies which may be terminated upon the specified notice by either
party. These agreements are summarized as follows:
(a) The Company cedes the risk in excess of $25 per life on its
variable and single premium variable life products to MRC under
the terms of an automatic reinsurance agreement. Under the same
treaty the Company cedes a substantial portion of its risk on its
flexible premium variable life and variable universal life
policies via stop loss reinsurance.
14
<PAGE> 95
9. RELATED PARTY TRANSACTIONS (CONTINUED)
(b) The Company cedes the excess of a $10 million retention limit up
to the consolidated group retention limit of $15 million on
survivorship cases via yearly-renewable-term (YRT) reinsurance.
Effective February 28, 1999, the Company recaptured the excess of
the $10 million retention limit up to the consolidated group
retention limit of $15 million on survivorship cases, effectively
retaining the full $15 million.
(c) The Company cedes the risk in excess of NTD$2,500 per life on its
Taiwan individual and group life business to MRL under the terms
of a YRT reinsurance agreement. The Company also cedes a small
portion of the Taiwan accident and health business under the same
treaty.
(d) On December 31, 1998, the coinsurance treaties under which the
Company had assumed two blocks of insurance from ManUSA were
terminated. The Company's risk under these treaties was limited to
$100 of initial face amount per claim plus a pro-rata share of any
increase in face amount. Upon the termination of the treaties, the
Company paid consideration in the amount of approximately $41.0
million to ManUSA and policyholder reserves totaling $41.0 million
were recaptured by ManUSA. No gain or loss resulted from the
termination of these treaties.
Selected amounts relating to the above treaties reflected in the
financial statements are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------
<S> <C> <C> <C>
Life and annuity premiums assumed $ - $ 48 $ 509
Life and annuity premiums ceded 84 76 69
Policy reserves assumed - - 40,975
Policy reserves ceded 84 145 130
-----------------------------------------------------------------------
</TABLE>
Reinsurance recoveries on ceded reinsurance contracts to affiliates
were $0, $0 and $3,972 during 1999, 1998 and 1997 respectively.
The Company and MLI have entered into an agreement whereby MLI provides
a claims paying guarantee to the Company's U.S. policyholders. This
claims paying guarantee does not apply to the Company's separate
account contract holders
10. REINSURANCE
In the normal course of business, the Company cedes reinsurance as a
party to several reinsurance treaties with major unrelated insurance
companies. The Company remains liable for amounts ceded in the event
that reinsurers do not meet their obligations.
15
<PAGE> 96
10. REINSURANCE (CONTINUED)
The effects of reinsurance on premiums were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
---------------------------------------------------------------------
<S> <C> <C> <C>
Direct premiums $10,699 $9,723 $8,607
Reinsurance ceded 430 405 440
---------------------------------------------------------------------
TOTAL PREMIUMS $10,269 $9,318 $8,167
---------------------------------------------------------------------
</TABLE>
Reinsurance recoveries on ceded reinsurance contracts with unrelated
insurance companies were $1,707, $1,362 and $909 during 1999, 1998 and
1997 respectively.
11. CONTINGENCIES
The Company is subject to various lawsuits that have arisen in the
course of its business. Contingent liabilities arising from litigation,
income taxes and other matters are not considered material in relation
to the financial position of the Company.
16
<PAGE> 97
Financial Statements
The Manufacturers Life Insurance
Company of America
Separate Account Three
Nine months ended September 30, 2000
(with December 31, 1999 comparative)
<PAGE> 98
The Manufacturers Life Insurance Company of America
Separate Account Three
Financial Statements
Nine months ended September 30, 2000
(with December 31, 1999 comparative)
CONTENTS
Financial Statements
Statement of Assets and Contract Owners' Equity 2
Statements of Operations and Changes in Contract Owners' Equity 3
Notes to Financial Statements 23
<PAGE> 99
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
STATEMENT OF ASSETS AND CONTRACT OWNERS' EQUITY
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments at market value:
Sub-Accounts:
Aggressive Growth Trust - 355,844 shares (cost $7,063,311) $ 7,586,584
All Cap Growth - 846,932 shares (cost $19,437,570) 22,435,241
Balanced Trust - 2,383,154 shares (cost $42,584,625) 41,490,711
Blue Chip Growth Trust - 1,564,183 shares (cost $31,063,629) 34,849,989
Diversified Bond Trust - 285,968 shares (cost $3,010,181) 2,879,701
Dynamic Growth Trust - 116,176 shares (cost $1,378,697) 1,367,388
Emerging Small Company Trust - 2,715,792 shares (cost $69,087,759) 120,282,447
Equity Income Trust - 1,487,017 shares (cost $24,039,057) 22,974,410
Equity Index Trust - 4,583,518 shares (cost $72,874,447) 81,586,627
Global Bond Trust 57,798 shares (cost $667,645) 631,729
Global Equity Trust - 522,525 shares (cost $8,877,498) 8,767,975
Growth Trust - 814,812 shares (cost $19,417,479) 18,903,647
Growth and Income Trust - 1,744,409 shares (cost $46,756,030) 52,733,478
High Yield Trust - 346,165 shares (cost $4,563,816) 4,292,444
Income and Value Trust - 547,150 shares (cost $6,549,591) 5,772,430
International Index Trust - 6,509 shares (cost $79,689) 75,832
International Small Cap Trust - 365,358 shares (cost $7,687,842) 7,431,389
International Stock Trust - 2,018,470 shares (cost $28,582,405) 27,451,192
International Value Trust - 89,164 shares (cost $1,109,512) 1,066,399
Internet Technologies Trust - 57,846 shares (cost $743,253) 708,041
Investment Quality Bond Trust - 2,226,456 shares (cost $25,912,225) 25,292,546
Large Cap Growth - 908,382 shares (cost $13,949,521) 12,998,951
Lifestyle Aggressive 1000 Trust - 334,348 shares (cost $4,528,474) 4,687,561
Lifestyle Balanced 640 Trust - 697,294 shares (cost $9,318,412) 9,615,679
Lifestyle Conservative 280 Trust - 16,018 shares (cost $210,648) 206,312
Lifestyle Growth 820 Trust - 1,671,356 shares (cost $23,167,225) 23,816,825
Lifestyle Moderate 460 Trust - 104,131 shares (cost $1,402,503) 1,354,744
Mid-Cap Blend Trust - 1,900,017 shares (cost $36,855,123) 35,568,309
Mid Cap Index Trust - 42,711 shares (cost $563,653) 591,971
Mid Cap Stock Trust - 71,622 shares (cost $940,758) 996,979
Money Market Trust - 5,313,826 shares (cost $53,138,257) 53,138,257
Overseas Trust - 511,830 shares (cost $6,909,229) 6,577,012
Pacific Rim Emerging Markets Trust - 1,111,221 shares (cost $11,139,644) 10,123,226
Quantitative Equity Trust - 2,519,826 shares (cost $56,906,673) 72,067,036
Real Estate Securities Trust - 1,505,059 shares (cost $23,942,978) 21,808,300
Science and Technology Trust - 1,143,646 shares (cost $39,401,712) 38,895,391
Small Cap Index Trust - 9,191 shares (cost $114,378) 116,170
Small Company Blend Trust - 102,575 shares (cost $1,708,424) 1,612,481
Small Company Value Trust - 202,358 shares (cost $2,463,969) 2,549,712
Strategic Bond Trust - 365,324 shares (cost $4,080,906) 3,876,092
Tactical Allocation Trust - 16,437 shares (cost $209,941) 207,108
Total Return Trust - 143,192 shares (cost $1,777,897) 1,828,561
Total Stock Market Index Trust - 11,167 shares (cost $140,002) 138,917
U.S. Government SecuritiesTrust - 351,186 shares (cost $4,665,559) 4,586,494
U.S. Large Cap Value Trust - 449,174 shares (cost $5,767,305) 5,965,033
Value Trust - 524,864 shares (cost $7,330,390) 7,447,824
500 Index Trust - 161,072 shares (cost $2,026,845) 1,973,132
-------------
Total assets $ 811,328,277
=============
CONTRACT OWNERS' EQUITY
Variable life contracts $ 811,328,277
=============
</TABLE>
See accompanying notes.
2
<PAGE> 100
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
----------------------------------------------------------------------
AGGRESSIVE GROWTH ALL CAP GROWTH
----------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/00 DEC. 31/99 SEPT. 30/00 DEC. 31/99
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Net investment income during the year $ - $ - $ 1,203,584 $ 893,908
Realized gain (loss) during the year 596,991 201,319 1,346,489 465,497
Unrealized appreciation (depreciation)
during the year 48,158 399,725 (355,068) 2,522,463
----------------------------------------------------------------------
Net increase (decrease) in assets from
operations 645,149 601,044 2,195,005 3,881,868
----------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 1,936,594 595,127 3,566,919 1,888,993
Transfer of termination (174,989) (133,411) (823,920) (645,925)
Transfer of policy loans (51,835) (156) (171,385) (17,003)
Net interfund transfers 2,771,795 (206,543) 3,700,510 2,996,672
----------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 4,481,565 255,017 6,272,124 4,222,737
----------------------------------------------------------------------
Total increase (decrease) in assets 5,126,714 856,061 8,467,129 8,104,605
Assets beginning of year 2,459,870 1,603,809 13,968,112 5,863,507
----------------------------------------------------------------------
Assets end of year $ 7,586,584 $ 2,459,870 $22,435,241 $13,968,112
======================================================================
</TABLE>
See accompanying notes.
3
<PAGE> 101
<TABLE>
<CAPTION>
SUB-ACCOUNT
---------------------------------------------------------------------------------------------
Balanced Blue Chip Growth Capital Growth Bond
---------------------------------------------------------------------------------------------
Period Ended Year Ended PERIOD ENDED YEAR ENDED YEAR ENDED
Sept. 30/00 Dec. 31/99 SEPT. 30/00 DEC. 31/99 DEC. 31/99
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,922,658 $ 3,363,625 $ 1,256,181 $ 704,256 $ 1,504,363
826,154 1,479,053 1,050,527 613,535 (404,112)
(1,765,443) (5,660,915) (320,905) 2,347,320 (1,309,718)
-----------------------------------------------------------------------------------------
983,369 (818,237) 1,985,803 3,665,111 (209,467)
-----------------------------------------------------------------------------------------
3,761,663 5,916,660 7,020,200 6,033,752 1,253,415
(3,942,024) (5,526,738) (1,766,602) (1,605,280) (627,273)
(153,994) (340,550) (257,990) (118,582) (25,224)
(4,510,719) (4,108,655) 2,068,837 7,106,796 (21,636,729)
-----------------------------------------------------------------------------------------
(4,845,074) (4,059,283) 7,064,445 11,416,686 (21,035,811)
-----------------------------------------------------------------------------------------
(3,861,705) (4,877,520) 9,050,248 15,081,797 (21,245,278)
45,352,416 50,229,936 25,799,741 10,717,944 21,245,278
-----------------------------------------------------------------------------------------
$41,490,711 $45,352,416 $34,849,989 $25,799,741 $ -
=========================================================================================
</TABLE>
4
<PAGE> 102
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------
DIVERSIFIED BOND DYNAMIC GROWTH
-----------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED**
SEPT. 30/00 DEC. 31/99 SEPT. 30/00
-----------------------------------------------
<S> <C> <C> <C>
Income:
Net investment income during the year $ 236,515 $ 96,499 $ -
Realized gain (loss) during the year (24,900) (9,175) 844
Unrealized appreciation (depreciation)
during the year (83,336) (72,120) (11,309)
----------------------------------------------
Net increase (decrease) in assets from
operations 128,279 15,204 (10,465)
----------------------------------------------
Changes from principal transactions:
Transfer of net premiums 497,194 561,745 556,357
Transfer of termination (81,346) (59,417) (26,772)
Transfer of policy loans - (1,024) -
Net interfund transfers 592,226 276,738 848,268
----------------------------------------------
Net increase (decrease) in assets from
principal transactions 1,008,074 778,042 1,377,853
----------------------------------------------
Total increase (decrease) in assets 1,136,353 793,246 1,367,388
Assets beginning of year 1,743,348 950,102 -
----------------------------------------------
Assets end of year $2,879,701 $ 1,743,348 $ 1,367,388
==============================================
</TABLE>
** Reflects the period from commencement of operations May 2, 2000 through
September 30, 2000.
See accompanying notes.
5
<PAGE> 103
<TABLE>
<CAPTION>
SUB-ACCOUNT
------------------------------------------------------------------------------------------------
Emerging Small Company Equity Income Equity Index
------------------------------------------------------------------------------------------------
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended
Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 10,861,111 $ 931,296 $ 2,760,281 $ 1,458,179 $ 221,869 $ 1,825,519
5,041,577 2,234,670 (69,175) 374,940 1,911,365 3,651,616
5,587,318 40,955,434 (1,942,851) (1,255,027) (3,418,552) 5,860,560
------------------------------------------------------------------------------------------------
21,490,006 44,121,400 748,255 578,092 (1,285,318) 11,337,695
------------------------------------------------------------------------------------------------
7,409,003 9,489,193 2,306,343 3,893,423 13,113,576 18,917,139
(7,910,859) (8,527,672) (905,113) (1,286,389) (5,129,017) (4,357,423)
(758,160) (504,673) (56,804) (77,443) (219,884) (494,140)
(2,517,281) (8,765,065) (1,113,775) 311,991 143,995 5,753,290
------------------------------------------------------------------------------------------------
(3,777,297) (8,308,217) 230,651 2,841,582 7,908,670 19,818,866
------------------------------------------------------------------------------------------------
17,712,709 35,813,183 978,906 3,419,674 6,623,352 31,156,561
102,569,738 66,756,555 21,995,504 18,575,830 74,963,275 43,806,714
------------------------------------------------------------------------------------------------
$120,282,447 $102,569,738 $22,974,410 $21,995,504 $81,586,627 $74,963,275
================================================================================================
</TABLE>
6
<PAGE> 104
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
----------------------------------------------------------
GLOBAL BOND GLOBAL EQUITY
----------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/00 DEC. 31/99 SEPT. 30/00 DEC. 31/99
----------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Net investment income during the year $ 18,358 $ 43,890 $1,026,287 $ 493,157
Realized gain (loss) during the year (6,633) (70,367) (620,680) (155,359)
Unrealized appreciation (depreciation)
during the year (27,310) (14,905) (234,185) (121,909)
----------------------------------------------------------
Net increase (decrease) in assets from
operations (15,585) (41,382) 171,422 215,889
----------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 146,850 124,531 1,388,110 1,527,332
Transfer of termination (23,806) (33,062) (361,329) (386,590)
Transfer of policy loans (2,036) (11) (14,575) (21,561)
Net interfund transfers (46,811) (117,727) 187,488 1,818,979
----------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 74,197 (26,269) 1,199,694 2,938,160
----------------------------------------------------------
Total increase (decrease) in assets 58,612 (67,651) 1,371,116 3,154,049
Assets beginning of year 573,117 640,768 7,396,859 4,242,810
----------------------------------------------------------
Assets end of year $631,729 $ 573,117 $8,767,975 $7,396,859
==========================================================
</TABLE>
See accompanying notes.
7
<PAGE> 105
<TABLE>
<CAPTION>
SUB-ACCOUNT
------------------------------------------------------------------------------------------------
Growth Growth and Income High Yield
------------------------------------------------------------------------------------------------
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended
Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,603,161 $ 447,543 $ 3,025,404 $ 1,278,189 $ 14,646 $ 340,814
688,215 530,120 889,292 1,264,337 (51,330) (57,295)
(3,355,602) 2,359,746 (4,802,628) 4,417,624 (92,683) (69,365)
-----------------------------------------------------------------------------------------------
(1,064,226) 3,337,409 (887,932) 6,960,150 (129,367) 214,154
-----------------------------------------------------------------------------------------------
4,023,005 2,817,768 8,042,011 7,477,562 826,645 799,494
(938,712) (500,367) (2,816,053) (3,261,292) (209,459) (179,923)
(104,346) (74,903) (402,467) (176,590) (56,250) (4,294)
2,336,311 2,324,764 1,724,849 2,945,525 37,717 891,770
-----------------------------------------------------------------------------------------------
5,316,258 4,567,262 6,548,340 6,985,205 598,653 1,507,047
-----------------------------------------------------------------------------------------------
4,252,032 7,904,671 5,660,408 13,945,355 469,286 1,721,201
14,651,615 6,746,944 47,073,070 33,127,715 3,823,158 2,101,957
-----------------------------------------------------------------------------------------------
$18,903,647 $14,651,615 $52,733,478 $47,073,070 $4,292,444 $ 3,823,158
===============================================================================================
</TABLE>
8
<PAGE> 106
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
Separate Account Three
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-------------------------------------------------
INCOME AND VALUE INTERNATIONAL INDEX
-------------------------------------------------
PERIOD ENDED YEAR ENDED PERIODENDED**
SEPT. 30/00 DEC. 31/99 SEPT. 30/00
-------------------------------------------------
<S> <C> <C> <C>
Income:
Net investment income during the year $1,092,315 $ 408,866 $ -
Realized gain (loss) during the year 6,293 13,556 (59)
Unrealized appreciation (depreciation)
during the year (865,978) (94,286) (3,857)
-------------------------------------------
Net increase (decrease) in assets from
operations 232,630 328,136 (3,916)
-------------------------------------------
Changes from principal transactions:
Transfer of net premiums 887,128 1,638,769 35,613
Transfer of termination (284,049) (330,215) (2,277)
Transfer of policy loans (208) (9,200) -
Net interfund transfers 182,422 1,531 46,412
-------------------------------------------
Net increase (decrease) in assets from
principal transactions 785,293 1,300,885 79,748
-------------------------------------------
Total increase (decrease) in assets 1,017,923 1,629,021 75,832
Assets beginning of year 4,754,507 3,125,486 -
-------------------------------------------
Assets end of year $5,772,430 $4,754,507 $75,832
===========================================
</TABLE>
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
** Reflects the period from commencement of operations May 2, 2000 through
September 30, 2000.
See accompanying notes.
9
<PAGE> 107
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------------------------------------
International Small Cap International Stock International Value
--------------------------------------------------------------------------------------------
Period Ended Year Ended Period Ended Year Ended Period Ended Period Ended*
Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,275,987 $ 9,451 $ 141,854 $ 2,378,902 $ 4,865 $ -
(498,160) 1,126,604 2,027,653 1,389,951 20,261 (6,853)
(1,817,659) 1,360,161 (5,502,810) 2,728,312 (76,877) 33,763
------------------------------------------------------------------------------------------
(1,039,832) 2,496,216 (3,333,303) 6,497,165 (51,751) 26,910
------------------------------------------------------------------------------------------
1,724,350 826,503 3,458,372 3,991,679 469,512 67,544
(313,087) (206,773) (1,360,170) (1,409,171) (36,245) (5,873)
(223,001) (11,684) (145,298) (245,714) (2,858) -
1,751,989 (266,727) (18,171) (561,839) 230,314 368,846
------------------------------------------------------------------------------------------
2,940,251 341,319 1,934,733 1,774,955 660,723 430,517
------------------------------------------------------------------------------------------
1,900,419 2,837,535 (1,398,570) 8,272,120 608,972 457,427
5,530,970 2,693,435 28,849,762 20,577,642 457,427 -
------------------------------------------------------------------------------------------
$ 7,431,389 $5,530,970 $27,451,192 $28,849,762 $1,066,399 $ 457,427
==========================================================================================
</TABLE>
10
<PAGE> 108
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------
INTERNET TECHNOLOGIES INVESTMENT QUALITY BOND
-----------------------------------------------------
PERIOD ENDED** PERIOD ENDED YEAR ENDED
SEPT. 30/00 SEPT. 30/00 DEC. 31/99
-----------------------------------------------------
<S> <C> <C> <C>
Income:
Net investment income during the year $ - $ 1,764,230 $ 115,157
Realized gain (loss) during the year 16,565 (53,145) (118,167)
Unrealized appreciation (depreciation)
during the year (35,212) (322,785) (330,836)
-----------------------------------------------------
Net increase (decrease) in assets from
operations (18,647) 1,388,300 (333,846)
-----------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 327,911 2,690,523 2,534,307
Transfer of termination (22,456) (1,647,877) (1,228,511)
Transfer of policy loans (4,030) (117,160) (45,188)
Net interfund transfers 425,263 (198,055) 20,819,872
-----------------------------------------------------
Net increase (decrease) in assets from
principal transactions 726,688 727,431 22,080,480
-----------------------------------------------------
Total increase (decrease) in assets 708,041 2,115,731 21,746,634
Assets beginning of year - 23,176,815 1,430,181
-----------------------------------------------------
Assets end of year $708,041 $25,292,546 $23,176,815
=====================================================
</TABLE>
** Reflects the period from commencement of operations May 2, 2000 through
September 30, 2000.
See accompanying notes.
11
<PAGE> 109
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------------------------------------
Large Cap Growth Lifestyle Aggressive 1000 Lifestyle Balanced 640
--------------------------------------------------------------------------------------------
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended
Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,441,638 $ 371,353 $ 206,955 $ 178,067 $ 565,281 $ 396,729
67,653 100,576 1,359 (51,566) 74,963 (30,994)
(1,972,272) 677,804 (145,653) 371,856 (294,421) 510,201
--------------------------------------------------------------------------------------------
(462,981) 1,149,733 62,661 498,357 345,823 875,936
--------------------------------------------------------------------------------------------
3,067,247 1,349,722 1,156,553 1,220,401 2,579,306 3,129,737
(690,036) (310,785) (370,447) (711,359) (630,023) (1,094,958)
(53,362) (20,962) (1,185) (3,817) (110,415) (64,221)
4,467,979 876,677 (114,256) (911,439) (805,116) (306,459)
--------------------------------------------------------------------------------------------
6,791,828 1,894,652 670,665 (406,214) 1,033,752 1,664,099
--------------------------------------------------------------------------------------------
6,328,847 3,044,385 733,326 92,143 1,379,575 2,540,035
6,670,104 3,625,719 3,954,235 3,862,092 8,236,104 5,696,069
--------------------------------------------------------------------------------------------
$12,998,951 $6,670,104 $4,687,561 $3,954,235 $9,615,679 $8,236,104
============================================================================================
</TABLE>
12
<PAGE> 110
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------
LIFESTYLE CONSERVATIVE 280 LIFESTYLE GROWTH 820
--------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/00 DEC. 31/99 SEPT. 30/00 DEC. 31/99
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Net investment income during the year $ 13,147 $ 11,447 $ 1,673,771 $ 962,278
Realized gain (loss) during the year (750) 1,866 88,523 (74,308)
Unrealized appreciation (depreciation)
during the year (2,344) (7,716) (1,398,751) 1,958,069
--------------------------------------------------------------
Net increase (decrease) in assets from
operations 10,053 5,597 363,543 2,846,039
--------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 17,229 42,811 4,276,880 5,461,863
Transfer of termination (6,596) (8,329) (1,416,422) (1,622,631)
Transfer of policy loans - - (135,498) (279,099)
Net interfund transfers 70,432 (32,902) 57,899 (1,593,145)
--------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 81,065 1,580 2,782,859 1,966,988
--------------------------------------------------------------
Total increase (decrease) in assets 91,118 7,177 3,146,402 4,813,027
Assets beginning of year 115,194 108,017 20,670,423 15,857,396
--------------------------------------------------------------
Assets end of year $206,312 $115,194 $23,816,825 $20,670,423
==============================================================
</TABLE>
** Reflects the period from commencement of operations May 2, 2000 through
September 30, 2000.
See accompanying notes.
13
<PAGE> 111
<TABLE>
<CAPTION>
SUB-ACCOUNT
----------------------------------------------------------------------------------
Lifestyle Moderate 460 Mid-Cap Blend Mid Cap Index
----------------------------------------------------------------------------------
Period Ended Year Ended Period Ended Year Ended Period Ended**
Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99 Sept. 30/00
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 162,470 $ 49,688 $ 4,905,140 $ 3,059,165 $ -
(6,851) (1,920) (278,846) (531,319) 1,497
(98,614) 30,959 (4,718,093) 4,461,702 28,318
--------------------------------------------------------------------------------
57,005 78,727 (91,799) 6,989,548 29,815
--------------------------------------------------------------------------------
286,541 324,816 4,067,336 5,041,183 19,667
(265,458) (80,708) (1,753,157) (1,858,127) (7,102)
(1,000) (61,993) (141,121) (108,303) -
1,774 336,696 806,681 (1,877,218) 549,591
--------------------------------------------------------------------------------
21,857 518,811 2,979,739 1,197,535 562,156
--------------------------------------------------------------------------------
78,862 597,538 2,887,940 8,187,083 591,971
1,275,882 678,344 32,680,369 24,493,286 -
--------------------------------------------------------------------------------
$1,354,744 $1,275,882 $35,568,309 $32,680,369 $591,971
================================================================================
</TABLE>
14
<PAGE> 112
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
Separate Account Three
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------
MID CAP STOCK MONEY MARKET
-----------------------------------------------------------------
PERIOD ENDED PERIOD ENDED* PERIOD ENDED YEAR ENDED
SEPT. 30/00 DEC. 31/99 SEPT. 30/00 DEC. 31/99
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Net investment income during the year $ - $ - $ 1,973,524 $ 1,699,216
Realized gain (loss) during the year 14,745 (158) - -
Unrealized appreciation (depreciation)
during the year 48,991 7,230 - -
-----------------------------------------------------------------
Net increase (decrease) in assets from
operations 63,736 7,072 1,973,524 1,699,216
-----------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 606,507 114,220 40,038,026 29,641,080
Transfer of termination (36,398) (9,534) (4,073,148) (5,654,160)
Transfer of policy loans (538) - (629,015) 266,827
Net interfund transfers 177,484 74,430 (29,773,109) (12,059,047)
-----------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 747,055 179,116 5,562,754 12,194,700
-----------------------------------------------------------------
Total increase (decrease) in assets 810,791 186,188 7,536,278 13,893,916
Assets beginning of year 186,188 - 45,601,979 31,708,063
-----------------------------------------------------------------
Assets end of year $ 996,979 $ 186,188 $ 53,138,257 $45,601,979
=================================================================
</TABLE>
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
See accompanying notes.
15
<PAGE> 113
<TABLE>
<CAPTION>
SUB-ACCOUNT
-------------------------------------------------------------------------------------------------------
Overseas Pacific Rim Emerging Markets Quantitative Equity
-------------------------------------------------------------------------------------------------------
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended
Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99
-------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 410,096 $ - $ 37,735 $ 188,217 $ 8,207,833 $ 5,044,334
(207,409) 588,825 1,435,899 1,967,184 2,714,249 3,505,103
(864,992) 485,470 (3,183,549) 1,745,251 (1,137,033) 2,911,530
-------------------------------------------------------------------------------------------------------
(662,305) 1,074,295 (1,709,915) 3,900,652 9,785,049 11,460,967
-------------------------------------------------------------------------------------------------------
1,723,890 516,783 1,405,912 1,679,389 5,642,061 7,800,323
(195,292) (73,681) (544,856) (471,769) (5,522,589) (5,396,356)
(138,323) (14,262) (28,082) (33,384) (179,267) (474,041)
1,476,686 1,464,007 490,042 (185,077) 485,263 (3,728,101)
-------------------------------------------------------------------------------------------------------
2,866,961 1,892,847 1,323,016 989,159 425,468 (1,798,175)
-------------------------------------------------------------------------------------------------------
2,204,656 2,967,142 (386,899) 4,889,811 10,210,517 9,662,792
4,372,356 1,405,214 10,510,125 5,620,314 61,856,519 52,193,727
-------------------------------------------------------------------------------------------------------
$ 6,577,012 $ 4,372,356 $10,123,226 $10,510,125 $ 72,067,036 $ 61,856,519
=======================================================================================================
</TABLE>
16
<PAGE> 114
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------------
REAL ESTATE SECURITIES SCIENCE AND TECHNOLOGY
--------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/00 DEC. 31/99 SEPT. 30/00 DEC. 31/99
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Net investment income during the year $ 725,501 $ 1,081,197 $ 875,644 $ 1,831,034
Realized gain (loss) during the year (284,241) 82,415 4,899,985 2,759,418
Unrealized appreciation (depreciation)
during the year 2,670,857 (2,907,686) (7,335,072) 5,368,742
--------------------------------------------------------------------
Net increase (decrease) in assets from
operations 3,112,117 (1,744,074) (1,559,443) 9,959,194
--------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 1,994,781 3,182,121 8,044,141 3,767,735
Transfer of termination (1,325,563) (2,092,541) (2,059,290) (796,754)
Transfer of policy loans (178,407) (117,862) (328,284) (98,286)
Net interfund transfers (837,595) (2,881,180) 8,339,027 8,691,040
--------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions (346,784) (1,909,462) 13,995,594 11,563,735
--------------------------------------------------------------------
Total increase (decrease) in assets 2,765,333 (3,653,536) 12,436,151 21,522,929
Assets beginning of year 19,042,967 22,696,503 26,459,240 4,936,311
--------------------------------------------------------------------
Assets end of year $ 21,808,300 $ 19,042,967 $38,895,391 $26,459,240
====================================================================
</TABLE>
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
** Reflects the period from commencement of operations May 2, 2000 through
September 30, 2000.
See accompanying notes.
17
<PAGE> 115
<TABLE>
<CAPTION>
SUB-ACCOUNT
------------------------------------------------------------------------------------
Small Cap Index Small Company Blend Small Company Value
------------------------------------------------------------------------------------
Period Ended** Period Ended Period Ended* Period Ended Year Ended
Sept. 30/00 Sept. 30/00 Dec. 31/99 Sept. 30/00 Dec. 31/99
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ - $ 8,443 $ 7,350 $ 2,245 $ 305
100 (157,047) 1,781 67,352 7,291
1,792 (137,106) 41,163 (13,549) 88,627
------------------------------------------------------------------------------------
1,892 (285,710) 50,294 56,048 96,223
------------------------------------------------------------------------------------
48,728 722,191 174,380 568,297 398,042
(2,502) (34,023) (10,104) (66,869) (50,211)
- - - (8,807) -
68,052 828,394 167,059 900,440 289,944
------------------------------------------------------------------------------------
114,278 1,516,562 331,335 1,393,061 637,775
------------------------------------------------------------------------------------
116,170 1,230,852 381,629 1,449,109 733,998
- 381,629 - 1,100,603 366,605
------------------------------------------------------------------------------------
$ 116,170 $ 1,612,481 $ 381,629 $ 2,549,712 $ 1,100,603
====================================================================================
</TABLE>
18
<PAGE> 116
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
Separate Account Three
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
------------------------------------------------------
STRATEGIC BOND TACTICAL ALLOCATION
------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED**
SEPT. 30/00 DEC. 31/99 SEPT. 30/00
------------------------------------------------------
<S> <C> <C> <C>
Income:
Net investment income during the year $ 286,876 $ 204,203 $ -
Realized gain (loss) during the year (63,142) (74,383) 20
Unrealized appreciation (depreciation)
during the year (82,006) (62,876) (2,833)
------------------------------------------------
Net increase (decrease) in assets from
operations 141,728 66,944 (2,813)
------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 684,689 747,221 166,860
Transfer of termination (169,820) (169,596) (1,226)
Transfer of policy loans (41,597) (15,952) -
Net interfund transfers (220,244) (49,496) 44,287
------------------------------------------------
Net increase (decrease) in assets from
principal transactions 253,028 512,177 209,921
------------------------------------------------
Total increase (decrease) in assets 394,756 579,121 207,108
Assets beginning of year 3,481,336 2,902,215 -
------------------------------------------------
Assets end of year $ 3,876,092 $ 3,481,336 $ 207,108
================================================
</TABLE>
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
** Reflects the period from commencement of operations May 2, 2000 through
September 30, 2000.
See accompanying notes.
19
<PAGE> 117
<TABLE>
<CAPTION>
SUB-ACCOUNT
------------------------------------------------------------------------------------------
Total Return Total Stock Market Index U.S. Government Securities
------------------------------------------------------------------------------------------
Period Ended Period Ended* Period Ended** Period Ended Year Ended
Sept. 30/00 Dec. 31/99 Sept. 30/00 Sept. 30/00 Dec. 31/99
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 29,836 - $ - $ 319,991 $ 143,586
(267) (252) 41 (20,860) 21,642
50,299 364 (1,085) (12,735) (173,224)
------------------------------------------------------------------------------------------
79,868 112 (1,044) 286,396 (7,996)
------------------------------------------------------------------------------------------
388,311 102,093 49,399 846,484 933,102
(40,112) (17,463) (1,630) (214,874) (302,051)
(2,036) - - (41,805) 75
922,993 394,795 92,192 (848,423) 630,563
------------------------------------------------------------------------------------------
1,269,156 479,425 139,961 (258,618) 1,261,689
------------------------------------------------------------------------------------------
1,349,024 479,537 138,917 27,778 1,253,693
479,537 - - 4,558,716 3,305,023
------------------------------------------------------------------------------------------
$1,828,561 479,537 $ 138,917 $ 4,586,494 $4,558,716
==========================================================================================
</TABLE>
20
<PAGE> 118
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT THREE
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
SUB-ACCOUNT
------------------------------------------------------------------
U.S. LARGE CAP VALUE VALUE
------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED* PERIOD ENDED YEAR ENDED
SEPT. 30/00 DEC. 31/99 SEPT. 30/00 DEC. 31/99
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Net investment income during the year $ 30,478 $ - $ - $ 160,502
Realized gain (loss) during the year (1,714) 18 (188,395) (36,495)
Unrealized appreciation (depreciation)
during the year 101,865 95,862 685,423 (317,742)
------------------------------------------------------------------
Net increase (decrease) in assets from
operations 130,629 95,880 497,028 (193,735)
------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 1,636,691 373,681 1,186,445 1,586,580
Transfer of termination (212,546) (40,839) (259,732) (292,517)
Transfer of policy loans (1,791) - (42,156) (4,081)
Net interfund transfers 2,518,120 1,465,208 983,192 419,572
------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 3,940,474 1,798,050 1,867,749 1,709,554
------------------------------------------------------------------
Total increase (decrease) in assets 4,071,103 1,893,930 2,364,777 1,515,819
Assets beginning of year 1,893,930 - 5,083,047 3,567,228
------------------------------------------------------------------
Assets end of year $5,965,033 $ 1,893,930 $ 7,447,824 $ 5,083,047
==================================================================
</TABLE>
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
** Reflects the period from commencement of operations May 2, 2000 through
September 30, 2000.
See accompanying notes.
21
<PAGE> 119
WORLDWIDE GROWTH SUB-ACCOUNT
-------------------------------------------------------------------------
500 INDEX TOTAL
-------------------------------------------------------------------------
Year Ended Period Ended** Period Ended Year Ended
Dec. 31/99 Sept. 30/00 Sept. 30/00 Dec. 31/99
-------------------------------------------------------------------------
$ 11,362 $ - $ 50,305,910 31,693,647
68,678 121 21,255,129 20,827,272
(14,108) (53,713) (37,265,850) 69,327,505
-------------------------------------------------------------------------
65,932 (53,592) 34,295,189 121,848,424
-------------------------------------------------------------------------
274,770 1,205,816 146,617,867 138,216,989
(16,702) (50,153) (48,726,026) (51,392,480)
(11,284) - (4,804,970) (3,208,585)
(1,392,780) 871,061 196,430 (253,364)
-------------------------------------------------------------------------
(1,145,996) 2,026,724 93,283,301 83,362,560
-------------------------------------------------------------------------
(1,080,064) 1,973,132 127,578,490 205,210,984
1,080,064 - 683,749,787 478,538,803
-------------------------------------------------------------------------
$ - $ 1,973,132 $811,328,277 683,749,787
=========================================================================
22
<PAGE> 120
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements
September 30, 2000
1. ORGANIZATION
The Manufacturers Life Insurance Company of America Separate Account Three (the
Account) is a separate account established by The Manufacturers Life Insurance
Company of America (the Company). The account operates as a Unit Investment
Trust under the Investment Company Act of 1940, as amended and invests in
forty-seven sub-accounts of Manufacturers Investment Trust (the Trust). The
account is a funding vehicle for allocation of net premiums under single premium
variable life and variable universal life insurance contracts (the Contracts)
issued by the Company. The Account was established by the Company, a life
insurance company organized in 1983 under Michigan law. The Company is an
indirect, wholly-owned subsidiary of the Manufacturers Life Insurance Company
(Manulife Financial), a Canadian life insurance company. Each investment
sub-account invests solely in shares of a particular portfolio the Trust. The
Trust is registered under the Investment Company Act of 1940 as open-end
management investment company.
The Company is required to maintain assets in the Account with a total market
value at least equal to the reserves and other liabilities relating to the
variable benefits under all contracts participating in the Account. These assets
may not be charged with liabilities which arise from any other business the
Company conducts. However, all obligations under the variable contracts are
general corporate obligations of the Company.
Additional assets are held in the Company's general account to cover the
contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
As the result of portfolio changes, effective May 2, 2000, the following
sub-account of the Account has been replaced with a new sub-account fund as
follows:
PREVIOUS FUND NEW FUND
------------- --------
Mid Cap Growth Trust All Cap Growth Trust
23
<PAGE> 121
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (unaudited)
(continued)
1. ORGANIZATION (CONTINUED)
The following sub-accounts of the Account were added as investment options for
variable life insurance contract holders of Manufacturers Life of America:
Commencement of Operations
Of the Sub-accounts
--------------------------
Dynamic Growth Trust May 2, 2000
International Index Trust May 2, 2000
International Value Trust May 1, 1999
Internet Technologies Trust May 2, 2000
Mid Cap Index Trust May 2, 2000
Mid Cap Stock Trust May 1, 1999
Small Cap Index Trust May 2, 2000
Small Company Blend Trust May 1, 1999
Tactical Allocation Trust May 2, 2000
Total Return Trust May 1, 1999
Total Stock Market Index Trust May 2, 2000
U.S. Large Cap Value Trust May 1, 1999
500 Index Trust May 2, 2000
2. SIGNIFICANT ACCOUNTING POLICIES
Investments are made in the portfolios of the Trust and are valued at the
reported net asset value of such portfolios. Transactions are recorded on the
trade date. Income from dividends is recorded on the ex-dividend date. Realized
gains and losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
24
<PAGE> 122
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (unaudited)
(continued)
In addition to the Account, a contract holder may also allocate funds to the
Fixed Account, which is part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933, and the Company's general
account has not been registered as an investment company under the Investment
Company Act of 1940.
The operations of the Account are included in the federal income tax return of
the Company, which is taxed as a life insurance company under the provisions of
the Internal Revenue Code (the Code). Under the current provisions of the Code,
the Company does not expect to incur federal income taxes on the earnings of the
Account to the extent the earnings are credited under the contracts. Based on
this, no charge is being made currently to the Account for federal income taxes.
The Company will review periodically the status of such decision based on
changes in the tax law. Such a charge may be made in future years for any
federal income taxes that would be attributable to the contract.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known, which could impact the amounts reported and
disclosed herein.
3. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges for state, local, and
federal taxes from the gross premium before placing the remaining net premiums
in the sub-accounts.
4. PURCHASES AND SALES OF MANUFACTURERS INVESTMENTS
The following table shows aggregate cost of shares purchased and proceeds from
sales of each Trust portfolio for the period ended September 30, 2000.
PURCHASES SALES
------------ ------------
<PAGE> 123
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (unaudited)
(continued)
Aggressive Growth Trust $ 6,145,460 $ 1,663,895
All Cap Growth Trust 12,665,664 5,189,957
Balanced Trust 3,711,085 6,633,500
Blue Chip Growth Trust 11,959,885 3,639,258
Diversified Bond Trust 1,411,779 167,190
Dynamic Growth Trust 1,417,001 39,148
Emerging Small Company Trust 17,055,258 9,971,444
Equity Income Trust 5,654,372 2,663,439
Equity Index Trust 16,741,490 8,610,951
Global Bond Trust 206,367 113,812
Global Equity Trust 14,570,086 12,344,105
Growth Trust 9,108,056 2,188,638
Growth & Income Trust 12,028,692 2,454,948
High Yield Trust 1,770,076 1,156,778
Income and Value Trust 2,200,552 322,943
International Index Trust 80,856 1,108
International Small Cap Trust 14,033,480 9,817,243
International Stock Trust 15,177,878 13,101,291
International Value Trust 1,325,594 660,007
Internet Technologies Trust 1,278,834 552,147
Investment Quality Bond Trust 4,947,601 2,455,941
Large Cap Growth Trust 9,104,662 871,196
Lifestyle Aggressive 1000 Trust 1,285,632 408,012
Lifestyle Balanced 640 Trust 3,326,231 1,727,198
Lifestyle Conservative 280 Trust 106,954 12,742
Lifestyle Growth 820 Trust 5,530,378 1,073,747
Lifestyle Moderate 460 Trust 448,685 264,357
Mid-Cap Blend Trust 9,832,341 1,947,461
Mid Cap Index Trust 583,069 20,914
Mid Cap Stock Trust 1,193,068 446,013
Money Market Trust 95,750,183 88,213,905
Overseas Trust 16,699,171 13,422,114
Pacific Rim Emerging Markets Trust 8,847,872 7,487,121
Quantitative Equity Trust 15,129,922 6,496,621
Real Estate Securities Trust 2,502,895 2,124,178
4. PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
PURCHASES SALES
------------ ------------
26
<PAGE> 124
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (unaudited)
(continued)
Science & Technology Trust 31,545,070 16,673,833
Small Cap Index Trust 115,939 1,661
Small Company Blend Trust 3,626,492 2,101,487
Small Company Value Trust 1,891,284 495,978
Strategic Bond Trust 1,216,826 676,922
Tactical Allocation Trust 210,943 1,022
Total Return Trust 1,482,745 183,754
Total Stock Market Index 140,574 613
U.S. Government Securities Trust 1,233,576 1,172,204
U.S. Large Cap Value Trust 4,463,419 492,467
Value Trust 2,995,041 1,127,291
500 Index Trust 2,074,584 47,860
----------------------------
Total $374,827,622 $231,238,414
============================
5. UNIT VALUES
A summary of the accumulation unit values at September 30, 2000 and December 31,
1999 and the accumulation units and dollar value outstanding at September 30,
2000 for the variable life contracts are as follows:
-------------------------------------------
1999 2000
-------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
-------------------------------------------
Aggressive Growth Trust $20.16 $24.79 306,041 $ 7,586,584
All Cap Growth Trust 28.33 32.43 691,900 22,435,241
Balanced Trust 29.49 30.11 1,377,794 41,490,711
Blue Chip Growth Trust 24.63 26.50 1,314,911 34,849,989
Diversified Bond Trust 13.07 13.87 207,646 2,879,701
Dynamic Growth Trust - 11.77 116,176 1,367,388
Emerging Small Company Trust 74.86 90.61 1,327,471 120,282,447
4. UNIT VALUES (CONTINUED)
-------------------------------------------
1999 2000
-------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
-------------------------------------------
27
<PAGE> 125
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (unaudited)
(continued)
Equity Income Trust 16.64 17.26 1,331,089 22,974,410
Equity Index Trust 23.78 23.41 3,485,207 81,586,627
Global Bond Trust 13.27 12.92 48,914 631,729
Global Equity Trust 16.97 17.29 507,137 8,767,975
Growth Trust 25.46 24.21 780,785 18,903,647
Growth and Income Trust 23.46 23.08 2,284,501 52,733,478
High Yield Trust 15.37 14.90 288,124 4,292,444
Income and Value Trust 15.51 16.26 354,953 5,772,430
International Index Trust - 11.65 6,509 75,832
International Small Cap Trust 26.16 22.98 323,369 7,431,389
International Stock Trust 18.12 16.05 1,710,586 27,451,192
International Value Trust 12.98 12.04 88,567 1,066,399
Internet Technologies Trust - 12.24 57,846 708,041
Investment Quality Bond Trust 14.51 15.36 1,646,833 25,292,546
Large Cap Growth Trust 19.42 18.94 686,217 12,998,951
Lifestyle Aggressive 1000 Trust 17.21 17.46 268,504 4,687,561
Lifestyle Balanced 640 Trust 16.76 17.49 549,696 9,615,679
Lifestyle Conservative 280 Trust 15.74 16.52 12,490 206,312
Lifestyle Growth 820 Trust 17.62 17.91 1,329,848 23,816,825
Lifestyle Moderate 460 Trust 16.40 17.07 79,348 1,354,744
Mid-Cap Blend Trust 18.95 18.95 1,876,520 35,568,309
Mid Cap Index Trust - 13.86 42,711 591,971
Mid Cap Stock Trust 12.60 13.92 71,622 996,979
Money Market Trust 19.15 19.97 2,660,450 53,138,257
Overseas Trust 18.96 16.62 395,600 6,577,012
Pacific Rim Emerging Markets Trust 11.85 9.96 1,016,361 10,123,226
Quantitative Equity Trust 53.10 61.48 1,172,287 72,067,036
Real Estate Securities Trust 30.30 35.44 615,306 21,808,300
Science & Technology Trust 40.21 38.80 1,002,436 38,895,391
Small Cap Index - 12.64 9,191 116,170
Small Company Blend Trust 16.07 16.14 99,923 1,612,481
Small Company Value Trust 9.21 9.47 269,180 2,549,712
Strategic Bond Trust 14.11 14.70 263,591 3,876,092
4. UNIT VALUES (CONTINUED)
-------------------------------------------
1999 2000
-------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
-------------------------------------------
28
<PAGE> 126
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (unaudited)
(continued)
Tactical Allocation Trust - 12.60 16,437 207,108
Total Return Trust 12.37 13.09 139,651 1,828,561
Total Stock Market Index Trust - 12.44 11,167 138,917
U.S. Government Securities Trust 11.91 12.71 360,805 4,586,494
U.S. Large Cap Value Trust 12.84 13.39 445,517 5,965,033
Value Trust 13.81 14.81 502,763 7,447,824
500 Index Trust - 12.25 161,072 1,973,132
------------
Total $811,328,277
============
6. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly-owned subsidiary
of Manulife Financial, acts as the principal underwriter of the Contracts
pursuant to a Distribution Agreement with the Company. Registered
representatives of either ManEquity, Inc. or other broker-dealers having
distribution agreements with ManEquity, Inc. who are also authorized as variable
life insurance agents under applicable state insurance laws, sell the Contracts.
Registered representatives are compensated on a commission basis.
The Company has a formal service agreement with its affiliates, Manulife
Financial and The Manufacturers Life Insurance Company (U.S.A.), which can be
terminated by either party upon two months notice. Under this Agreement, the
Company pays for legal, actuarial, investment and certain other administrative
services.
<PAGE> 127
Audited Financial Statements
The Manufacturers Life Insurance
Company of America
Separate Account Three
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
<PAGE> 128
The Manufacturers Life Insurance Company of America
Separate Account Three
Audited Financial Statements
Years ended December 31, 1999 and 1998
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors............................................. 1
Audited Financial Statements
Statement of Assets and Contract Owners' Equity............................ 2
Statements of Operations and Changes in Contract Owners' Equity............ 3
Notes to Financial Statements.............................................. 20
</TABLE>
<PAGE> 129
Report of Independent Auditors
To the Contract Owners of
The Manufacturers Life Insurance Company
of America Separate Account Three
We have audited the accompanying statement of assets and contract owners' equity
of The Manufacturers Life Insurance Company of America Separate Account Three as
of December 31, 1999, and the related statements of operations and changes in
contract owners' equity for each of the years presented therein. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Manufacturers Life
Insurance Company of America Separate Account Three at December 31, 1999, and
the results of its operations and the changes in its contract owners' equity for
each of the years presented therein, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young
Philadelphia, Pennsylvania
February 4, 2000
1
<PAGE> 130
The Manufacturers Life Insurance Company of America
Separate Account Three
Statement of Assets and Contract Owners' Equity
December 31, 1999
<TABLE>
<CAPTION>
ASSETS
Investments at market value:
Sub-Accounts:
<S> <C>
Emerging Small Company Trust - 2,517,667 shares (cost $56,962,368) $ 102,569,738
Quantitative Equity Trust - 2,196,609 shares (cost $45,559,122) 61,856,519
Real Estate Securities Trust - 1,477,344 shares (cost $23,848,502) 19,042,967
Balanced Trust - 2,545,029 shares (cost $44,680,885) 45,352,416
Money Market Trust - 4,560,198 shares (cost $45,601,979) 45,601,979
International Stock Trust - 1,869,719 shares (cost $24,478,165) 28,849,762
Pacific Rim Emerging Markets Trust - 966,004 shares (cost $8,342,994) 10,510,125
Equity Index Trust - 4,134,764 shares (cost $62,832,544) 74,963,275
Mid-Cap Blend Trust - 1,492,254 shares (cost $29,249,089) 32,680,369
Equity Income Trust - 1,290,059 shares (cost $21,117,300) 21,995,504
Growth and Income Trust - 1,440,865 shares (cost $36,292,994) 47,073,070
U.S. Government Securities Trust - 344,314 shares (cost $4,625,047) 4,558,716
Diversified Bond Trust - 161,123 shares (cost $1,790,492) 1,743,348
Income and Value Trust - 368,281 shares (cost $4,665,689) 4,754,507
Large Cap Growth Trust - 387,122 shares (cost $5,648,402) 6,670,104
Blue Chip Growth Trust - 1,192,225 shares (cost $21,692,475) 25,799,741
Science & Technology Trust - 731,524 shares (cost $19,630,490) 26,459,240
Aggressive Growth Trust - 141,861 shares (cost $1,984,755) 2,459,870
Mid Cap Growth Trust - 561,194 shares (cost $10,615,373) 13,968,112
Global Equity Trust - 393,659 shares (cost $7,272,197) 7,396,859
Growth Trust - 545,075 shares (cost $11,809,846) 14,651,615
Value Trust - 384,206 shares (cost $5,651,036) 5,083,047
Overseas Trust - 274,645 shares (cost $3,839,581) 4,372,356
High Yield Trust - 297,754 shares (cost $4,001,847) 3,823,158
Strategic Bond Trust - 312,508 shares (cost $3,604,143) 3,481,336
Global Bond Trust - 49,407 shares (cost $581,723) 573,117
Investment Quality Bond Trust - 1,998,001 shares (cost $23,473,710) 23,176,815
Lifestyle Aggressive 1000 Trust - 271,956 shares (cost $3,649,495) 3,954,235
Lifestyle Growth 820 Trust - 1,361,688 shares (cost $18,622,072) 20,670,423
Lifestyle Balanced 640 Trust - 578,378 shares (cost $7,644,416) 8,236,104
Lifestyle Moderate 460 Trust - 90,296 shares (cost $1,225,026) 1,275,882
Lifestyle Conservative 280 Trust - 8,760 shares (cost $117,186) 115,194
International Small Cap Trust - 196,412 shares (cost $3,969,765) 5,530,970
Small Company Value Trust - 89,699 shares (cost $1,001,311) 1,100,603
U.S. Large Cap Value Trust - 147,502 shares (cost $1,798,067) 1,893,930
Mid Cap Stock Trust - 14,777 shares (cost $178,958) 186,188
Small Company Blend Trust - 24,215 shares (cost $340,466) 381,629
International Value Trust - 35,241 shares (cost $423,664) 457,427
Total Return Trust - 38,766 shares (cost $479,173) 479,537
----------------
Total assets $ 683,749,787
================
CONTRACT OWNERS' EQUITY
Variable life contracts $ 683,749,787
================
</TABLE>
See accompanying notes.
2
<PAGE> 131
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity
<TABLE>
<CAPTION>
SUB-ACCOUNT
EMERGING SMALL COMPANY QUANTITATIVE EQUITY
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Net investment income during
the year $ 931,296 $ 995,471 $ 5,044,334 $ 5,169,494
Realized gain (loss) during the year 2,234,670 1,245,244 3,505,103 1,617,119
Unrealized appreciation (depreciation)
during the year 40,955,434 (2,091,940) 2,911,530 3,915,612
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 44,121,400 148,775 11,460,967 10,702,225
--------------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 9,489,193 12,733,443 7,800,323 7,242,095
Transfer on termination (8,527,672) (6,445,689) (5,396,356) (3,997,775)
Transfer on policy loans (504,673) (218,046) (474,041) (273,706)
Net interfund transfers (8,765,065) (5,805,034) (3,728,101) (1,628,360)
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions (8,308,217) 264,674 (1,798,175) 1,342,254
--------------------------------------------------------------------------------
Total increase (decrease) in assets 35,813,183 413,449 9,662,792 12,044,479
Assets beginning of year 66,756,555 66,343,106 52,193,727 40,149,248
--------------------------------------------------------------------------------
Assets end of year $ 102,569,738 $ 66,756,555 $ 61,856,519 $ 52,193,727
================================================================================
</TABLE>
See accompanying notes.
3
<PAGE> 132
<TABLE>
<CAPTION>
SUB-ACCOUNT
REAL ESTATE SECURITIES BALANCED CAPITAL GROWTH BOND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 1,081,197 $ 3,092,425 $ 3,363,625 $ 5,710,136 $ 1,504,363 $ 1,051,960
82,415 381,699 1,479,053 686,522 (404,112) 351,921
(2,907,686) (7,717,257) (5,660,915) (293,599) (1,309,718) 110,113
-----------------------------------------------------------------------------------------------------------------------------
(1,744,074) (4,243,133) (818,237) 6,103,059 (209,467) 1,513,994
-----------------------------------------------------------------------------------------------------------------------------
3,182,121 5,859,264 5,916,660 7,177,808 1,253,415 3,364,775
(2,092,541) (2,117,340) (5,526,738) (4,188,769) (627,273) (1,655,470)
(117,862) (77,402) (340,550) (150,786) (25,224) (32,638)
(2,881,180) (2,327,888) (4,108,655) (534,390) (21,636,729) (584,488)
-----------------------------------------------------------------------------------------------------------------------------
(1,909,462) 1,336,634 (4,059,283) 2,303,863 (21,035,811) 1,092,179
-----------------------------------------------------------------------------------------------------------------------------
(3,653,536) (2,906,499) (4,877,520) 8,406,922 (21,245,278) 2,606,173
22,696,503 25,603,002 50,229,936 41,823,014 21,245,278 18,639,105
-----------------------------------------------------------------------------------------------------------------------------
$ 19,042,967 $ 22,696,503 $ 45,352,416 $ 50,229,936 $ -- $ 21,245,278
=============================================================================================================================
</TABLE>
4
<PAGE> 133
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
MONEY INTERNATIONAL
MARKET STOCK
-------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Net investment income during
the year $ 1,699,216 $ 1,481,440 $ 2,378,902 $ 313,529
Realized gain (loss) during the year -- -- 1,389,951 674,744
Unrealized appreciation (depreciation)
during the year -- -- 2,728,312 1,511,476
--------------------------------------------------------------------------------
Net increase (decrease) in assets
from operations 1,699,216 1,481,440 6,497,165 2,499,749
--------------------------------------------------------------------------------
Changes in principal transactions:
Transfer of net premiums 29,641,080 22,297,227 3,991,679 4,538,425
Transfer on termination (5,654,160) (3,358,411) (1,409,171) (1,187,826)
Transfer on policy loans 266,827 (384,658) (245,714) (59,954)
Net interfund transfers (12,059,047) (17,755,116) (561,839) (574,437)
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 12,194,700 799,042 1,774,955 2,716,208
Total increase (decrease) in assets 13,893,916 2,280,482 8,272,120 5,215,957
Assets beginning of year 31,708,063 29,427,581 20,577,642 15,361,685
--------------------------------------------------------------------------------
Assets end of year $ 45,601,979 $ 31,708,063 $ 28,849,762 $ 20,577,642
================================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 134
<TABLE>
<CAPTION>
SUB-ACCOUNT
PACIFIC RIM EMERGING MARKETS EQUITY INDEX MID-CAP BLEND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 188,217 $ -- $ 1,825,519 $ 1,392,501 $ 3,059,165 $ 3,871,537
1,967,184 (2,620,543) 3,651,616 603,079 (531,319) (152,838)
1,745,251 2,542,198 5,860,560 5,782,122 4,461,702 (1,767,849)
-----------------------------------------------------------------------------------------------------------------------------------
3,900,652 (78,345) 11,337,695 7,777,702 6,989,548 1,950,850
-----------------------------------------------------------------------------------------------------------------------------------
1,679,389 1,563,148 18,917,139 12,850,700 5,041,183 5,682,311
(471,769) (436,588) (4,357,423) (2,024,088) (1,858,127) (1,536,387)
(33,384) (15,173) (494,140) (475,140) (108,303) (34,034)
(185,077) 229,348 5,753,290 6,006,985 (1,877,218) 19,738
-----------------------------------------------------------------------------------------------------------------------------------
989,159 1,340,735 19,818,866 16,358,457 1,197,535 4,131,628
-----------------------------------------------------------------------------------------------------------------------------------
4,889,811 1,262,390 31,156,561 24,136,159 8,187,083 6,082,478
5,620,314 4,357,924 43,806,714 19,670,555 24,493,286 18,410,808
-----------------------------------------------------------------------------------------------------------------------------------
$ 10,510,125 $ 5,620,314 $ 74,963,275 $ 43,806,714 $ 32,680,369 $ 24,493,286
===================================================================================================================================
</TABLE>
6
<PAGE> 135
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
EQUITY INCOME GROWTH AND INCOME
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Net investment income during
the year $ 1,458,179 $ 976,745 $ 1,278,189 $ 1,500,080
Net realized gain (loss)
during the year 374,940 287,480 1,264,337 800,716
Unrealized appreciation (depreciation)
during the year (1,255,027) 218,367 4,417,624 3,851,331
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 578,092 1,482,592 6,960,150 6,152,127
--------------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 3,893,423 3,243,426 7,477,562 6,862,398
Transfer on termination (1,286,389) (1,437,923) (3,261,292) (1,576,405)
Transfer on policy loans (77,443) (98,668) (176,590) (46,701)
Net interfund transfers 311,991 563,898 2,945,525 2,330,998
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 2,841,582 2,270,733 6,985,205 7,570,290
--------------------------------------------------------------------------------
Total increase (decrease) in assets 3,419,674 3,753,325 13,945,355 13,722,417
Assets beginning of year 18,575,830 14,822,505 33,127,715 19,405,298
--------------------------------------------------------------------------------
Assets end of year $ 21,995,504 $ 18,575,830 $ 47,073,070 $ 33,127,715
================================================================================
</TABLE>
See accompanying notes.
7
<PAGE> 136
<TABLE>
<CAPTION>
SUB-ACCOUNT
U.S. GOVERNMENT SECURITIES DIVERSIFIED BOND INCOME AND VALUE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 143,586 $ 109,401 $ 96,499 $ 72,830 $ 408,866 $ 247,923
21,642 31,818 (9,175) 4,682 13,556 10,961
(173,224) 39,816 (72,120) 7,436 (94,286) 81,935
------------------------------------------------------------------------------------------------------------------------
(7,996) 181,035 15,204 84,948 328,136 340,819
------------------------------------------------------------------------------------------------------------------------
933,102 664,545 561,745 176,976 1,638,769 895,345
(302,051) (154,411) (59,417) (52,005) (330,215) (208,435)
75 (32,573) (1,024) -- (9,200) (7,332)
630,563 423,298 276,738 46,253 1,531 230,395
------------------------------------------------------------------------------------------------------------------------
1,261,689 900,859 778,042 171,224 1,300,885 909,973
------------------------------------------------------------------------------------------------------------------------
1,253,693 1,081,894 793,246 256,172 1,629,021 1,250,792
3,305,023 2,223,129 950,102 693,930 3,125,486 1,874,694
------------------------------------------------------------------------------------------------------------------------
$ 4,558,716 $ 3,305,023 $ 1,743,348 $ 950,102 $ 4,754,507 $ 3,125,486
========================================================================================================================
</TABLE>
8
<PAGE> 137
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
LARGE CAP GROWTH BLUE CHIP GROWTH
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Net investment income during
the year $ 371,353 $ 312,103 $ 704,256 $ 98,459
Net realized gain (loss)
during the year 100,576 29,565 613,535 137,311
Unrealized appreciation (depreciation)
during the year 677,804 179,177 2,347,320 1,520,566
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 1,149,733 520,845 3,665,111 1,756,336
--------------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 1,349,722 953,535 6,033,752 3,950,204
Transfer on termination (310,785) (257,332) (1,605,280) (422,824)
Transfer on policy loans (20,962) (9,000) (118,582) (27,578)
Net interfund transfers 876,677 193,464 7,106,796 1,683,424
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 1,894,652 880,667 11,416,686 5,183,226
--------------------------------------------------------------------------------
Total increase (decrease) in assets 3,044,385 1,401,512 15,081,797 6,939,562
Assets beginning of year 3,625,719 2,224,207 10,717,944 3,778,382
--------------------------------------------------------------------------------
Assets end of year $ 6,670,104 $ 3,625,719 $ 25,799,741 $ 10,717,944
================================================================================
</TABLE>
See accompanying notes.
9
<PAGE> 138
<TABLE>
<CAPTION>
SUB-ACCOUNT
SCIENCE & TECHNOLOGY AGGRESSIVE GROWTH MID CAP GROWTH
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 1,831,034 $ -- $ -- $ -- $ 893,908 $ --
2,759,418 (371,868) 201,319 (17,790) 465,497 39,039
5,368,742 1,522,473 399,725 93,900 2,522,463 834,458
----------------------------------------------------------------------------------------------------------------------------
9,959,194 1,150,605 601,044 76,110 3,881,868 873,497
----------------------------------------------------------------------------------------------------------------------------
3,767,735 1,150,664 595,127 515,555 1,888,993 1,769,196
(796,754) (90,696) (133,411) (58,953) (645,925) (173,727)
(98,286) (13,553) (156) (11,158) (17,003) (9,934)
8,691,040 1,674,262 (206,543) 520,806 2,996,672 1,932,598
----------------------------------------------------------------------------------------------------------------------------
11,563,735 2,720,677 255,017 966,250 4,222,737 3,518,133
----------------------------------------------------------------------------------------------------------------------------
21,522,929 3,871,282 856,061 1,042,360 8,104,605 4,391,630
4,936,311 1,065,029 1,603,809 561,449 5,863,507 1,471,877
----------------------------------------------------------------------------------------------------------------------------
$ 26,459,240 $ 4,936,311 $ 2,459,870 $ 1,603,809 $ 13,968,112 $ 5,863,507
============================================================================================================================
</TABLE>
10
<PAGE> 139
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
WORLDWIDE GROWTH GLOBAL EQUITY
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Net investment income during
the year $ 11,362 $ 5,574 $ 493,157 $ 167,578
Net realized gain (loss)
during the year 68,678 14,712 (155,359) (35,168)
Unrealized appreciation (depreciation)
during the year (14,108) 18,500 (121,909) 214,456
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 65,932 38,786 215,889 346,866
-----------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 274,770 396,653 1,527,332 1,830,508
Transfer on termination (16,702) (41,648) (386,590) (146,797)
Transfer on policy loans (11,284) (6,172) (21,561) (6,447)
Net interfund transfers (1,392,780) 377,034 1,818,979 750,096
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions (1,145,996) 725,867 2,938,160 2,427,360
-----------------------------------------------------------------------------
Total increase (decrease) in assets (1,080,064) 764,653 3,154,049 2,774,226
Assets beginning of year 1,080,064 315,411 4,242,810 1,468,584
-----------------------------------------------------------------------------
Assets end of year $ -- $ 1,080,064 $ 7,396,859 $ 4,242,810
=============================================================================
</TABLE>
See accompanying notes.
11
<PAGE> 140
<TABLE>
<CAPTION>
SUB-ACCOUNT
GROWTH VALUE OVERSEAS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 447,543 $ 95,683 $ 160,502 $ 117,791 $ -- $ 51,082
530,120 123,525 (36,495) 22,516 588,825 (4,342)
2,359,746 466,535 (317,742) (229,473) 485,470 86,563
------------------------------------------------------------------------------------------------------------------------
3,337,409 685,743 (193,735) (89,166) 1,074,295 133,303
------------------------------------------------------------------------------------------------------------------------
2,817,768 3,294,658 1,586,580 1,600,753 516,783 515,640
(500,367) (107,258) (292,517) (117,194) (73,681) (50,349)
(74,903) (38,221) (4,081) (12,965) (14,262) (2,253)
2,324,764 1,662,737 419,572 1,104,824 1,464,007 23,545
------------------------------------------------------------------------------------------------------------------------
4,567,262 4,811,916 1,709,554 2,575,418 1,892,847 486,583
7,904,671 5,497,659 1,515,819 2,486,252 2,967,142 619,886
------------------------------------------------------------------------------------------------------------------------
6,746,944 1,249,285 3,567,228 1,080,976 1,405,214 785,328
------------------------------------------------------------------------------------------------------------------------
$ 14,651,615 $ 6,746,944 $ 5,083,047 $ 3,567,228 $ 4,372,356 $ 1,405,214
========================================================================================================================
</TABLE>
12
<PAGE> 141
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
HIGH YIELD STRATEGIC BOND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Net investment income during
the year $ 340,814 $ 151,912 $ 204,203 $ 86,088
Net realized gain (loss)
during the year (57,295) (7,914) (74,383) (17,942)
Unrealized appreciation (depreciation)
during the year (69,365) (95,871) (62,876) (70,640)
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 214,154 48,127 66,944 (2,494)
-----------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 799,494 943,552 747,221 1,272,907
Transfer on termination (179,923) (111,555) (169,596) (103,790)
Transfer on policy loans (4,294) (7,304) (15,952) (10,279)
Net interfund transfers 891,770 158,145 (49,496) 1,091,881
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 1,507,047 982,838 512,177 2,250,719
-----------------------------------------------------------------------------
Total increase (decrease) in assets 1,721,201 1,030,965 579,121 2,248,225
Assets beginning of year 2,101,957 1,070,992 2,902,215 653,990
-----------------------------------------------------------------------------
Assets end of year $ 3,823,158 $ 2,101,957 $ 3,481,336 $ 2,902,215
=============================================================================
</TABLE>
See accompanying notes.
13
<PAGE> 142
<TABLE>
<CAPTION>
SUB-ACCOUNT
GLOBAL BOND INVESTMENT QUALITY BOND LIFESTYLE AGGRESSIVE 1000
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 43,890 $ 27,334 $ 115,157 $ 20,278 $ 178,067 $ 168,006
(70,367) (8,230) (118,167) 6,554 (51,566) (9,962)
(14,905) 2,498 (330,836) 27,852 371,856 (56,069)
------------------------------------------------------------------------------------------------------------------------
(41,382) 21,602 (333,846) 54,684 498,357 101,975
------------------------------------------------------------------------------------------------------------------------
124,531 143,923 2,534,307 443,446 1,220,401 1,299,712
(33,062) (17,835) (1,228,511) (45,715) (711,359) (258,375)
(11) (6,107) (45,188) (46,096) (3,817) (26,714)
(117,727) 277,425 20,819,872 762,855 (911,439) 316,522
------------------------------------------------------------------------------------------------------------------------
(26,269) 397,406 22,080,480 1,114,490 (406,214) 1,331,145
------------------------------------------------------------------------------------------------------------------------
(67,651) 419,008 21,746,634 1,169,174 92,143 1,433,120
640,768 221,760 1,430,181 261,007 3,862,092 2,428,972
------------------------------------------------------------------------------------------------------------------------
$ 573,117 $ 640,768 $ 23,176,815 $ 1,430,181 $ 3,954,235 $ 3,862,092
========================================================================================================================
</TABLE>
14
<PAGE> 143
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
LIFESTYLE GROWTH 820 LIFESTYLE BALANCED 640
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Net investment income during
the year $ 962,278 $ 629,682 $ 396,729 $ 189,230
Net realized gain (loss)
during the year (74,308) (19,242) (30,994) (1,929)
Unrealized appreciation (depreciation)
during the year 1,958,069 115,020 510,201 37,708
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 2,846,039 725,460 875,936 225,009
--------------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 5,461,863 7,009,770 3,129,737 2,223,707
Transfer on termination (1,622,631) (827,050) (1,094,958) (520,437)
Transfer on policy loans (279,099) (176,891) (64,221) (28,495)
Net interfund transfers (1,593,145) 3,867,109 (306,459) 1,672,788
--------------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 1,966,988 9,872,938 1,664,099 3,347,563
--------------------------------------------------------------------------------
Total increase (decrease) in assets 4,813,027 10,598,398 2,540,035 3,572,572
Assets beginning of year 15,857,396 5,258,998 5,696,069 2,123,497
--------------------------------------------------------------------------------
Assets end of year $ 20,670,423 $ 15,857,396 $ 8,236,104 $ 5,696,069
================================================================================
</TABLE>
15
See accompanying notes.
<PAGE> 144
<TABLE>
<CAPTION>
SUB-ACCOUNT
LIFESTYLE MODERATE 460 LIFESTYLE CONSERVATIVE 280 INTERNATIONAL SMALL CAP
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 49,688 $ 20,025 $ 11,447 $ 552 $ 9,451 $ 5,687
(1,920) (8,653) 1,866 1,625 1,126,604 (30,291)
30,959 19,892 (7,716) 5,695 1,360,161 240,125
------------------------------------------------------------------------------------------------------------------------
78,727 31,264 5,597 7,872 2,496,216 215,521
------------------------------------------------------------------------------------------------------------------------
324,816 287,313 42,811 35,078 826,503 923,655
(80,708) (25,583) (8,329) (3,934) (206,773) (94,819)
(61,993) -- -- -- (11,684) (11,877)
336,696 282,970 (32,902) 67,660 (266,727) 258,711
------------------------------------------------------------------------------------------------------------------------
518,811 544,700 1,580 98,804 341,319 1,075,670
------------------------------------------------------------------------------------------------------------------------
597,538 575,964 7,177 106,676 2,837,535 1,291,191
678,344 102,380 108,017 1,341 2,693,435 1,402,244
------------------------------------------------------------------------------------------------------------------------
$ 1,275,882 $ 678,344 $ 115,194 $ 108,017 $ 5,530,970 $ 2,693,435
========================================================================================================================
</TABLE>
16
<PAGE> 145
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity
(continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
SMALL COMPANY U.S. LARGE
VALUE CAP VALUE
YEAR PERIOD PERIOD
ENDED ENDED* ENDED**
DEC. 31/99 DEC. 31/98 DEC. 31/99
<S> <C> <C> <C>
Income:
Net investment income during
the year $ 305 $ -- $ --
Net realized gain (loss)
during the year 7,291 (3,492) 18
Unrealized appreciation (depreciation)
during the year 88,627 10,664 95,862
---------------------------------------------------------------
Net increase (decrease) in assets
from operations 96,223 7,172 95,880
---------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 398,042 183,290 373,681
Transfer on termination (50,211) (6,126) (40,839)
Transfer on policy loans -- -- --
Net interfund transfers 289,944 182,269 1,465,208
---------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 637,775 359,433 1,798,050
---------------------------------------------------------------
Total increase (decrease) in assets 733,998 366,605 1,893,930
Assets beginning of year 366,605 -- --
---------------------------------------------------------------
Assets end of year $ 1,100,603 $ 366,605 $ 1,893,930
===============================================================
</TABLE>
* Reflects the period from commencement of operations May 1, 1998 through
December 31, 1998.
** Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
See accompanying notes.
17
<PAGE> 146
<TABLE>
<CAPTION>
SUB-ACCOUNT
MID CAP SMALL COMPANY INTERNATIONAL
STOCK BLEND VALUE
PERIOD PERIOD PERIOD
ENDED** ENDED** ENDED**
DEC. 31/99 DEC. 31/99 DEC. 31/99
<S> <C> <C>
$ - $ 7,350 $ -
(158) 1,781 (6,853)
7,230 41,163 33,763
-------------------------------------------------------------
7,072 50,294 26,910
-------------------------------------------------------------
114,220 174,380 67,544
(9,534) (10,104) (5,873)
- - -
74,430 167,059 368,846
-------------------------------------------------------------
179,116 331,335 430,517
-------------------------------------------------------------
186,188 381,629 457,427
- - -
-------------------------------------------------------------
$ 186,188 $ 381,629 $ 457,427
=============================================================
</TABLE>
18
<PAGE> 147
The Manufacturers Life Insurance Company of America
Separate Account Three
Statements of Operations and Changes in Contract Owners' Equity
(continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
TOTAL RETURN TOTAL
PERIOD YEAR YEAR
ENDED** ENDED ENDED
DEC. 31/99 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C>
Income:
Net investment income
during the year $ -- $ 31,693,647 $ 28,132,536
Net realized gain (loss)
during the year (252) 20,827,272 3,760,628
Unrealized appreciation (depreciation)
during the year 364 69,327,505 11,133,790
-------------------------------------------------------------------
Net increase (decrease) in net assets from
operations 112 121,848,424 43,026,954
-------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 102,093 138,216,989 125,895,605
Transfer on termination (17,463) (51,392,480) (33,859,519)
Transfer on policy loans -- (3,208,585) (2,357,855)
Net interfund transfers 394,795 (253,364) (497,675)
-------------------------------------------------------------------
Net increase (decrease) in net assets
from principal transactions 479,425 83,362,560 89,180,556
-------------------------------------------------------------------
Total increase (decrease) in net assets 479,537 205,210,984 132,207,510
Net assets beginning of year -- 478,538,803 346,331,293
-------------------------------------------------------------------
Net assets end of year $ 479,537 $ 683,749,787 $ 478,538,803
===================================================================
</TABLE>
** Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
See accompanying notes
19
<PAGE> 148
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION
The Manufacturers Life Insurance Company of America Separate Account Three (the
Account) is a separate account established by The Manufacturers Life Insurance
Company of America (the Company). The Account operates as a Unit Investment
Trust under the Investment Company Act of 1940, as amended and invests in thirty
nine sub-accounts of Manufacturers Investment Trust (the Trust). The Account is
a funding vehicle for allocation of net premiums under single premium variable
life and variable universal life insurance contracts (the Contracts) issued by
the Company. The Account was established by the Company, a life insurance
company organized in 1983 under Michigan law. The Company is an indirect,
wholly-owned subsidiary of The Manufacturers Life Insurance Company (Manulife
Financial), a Canadian life insurance company. Each investment sub-account
invests solely in shares of a particular portfolio of the Trust. The Trust is
registered under the Investment Company Act of 1940 as an open-end management
investment company.
The Company is required to maintain assets in the Account with a total market
value at least equal to the reserves and other liabilities relating to the
variable benefits under all contracts participating in the Account. These assets
may not be charged with liabilities which arise from any other business the
Company conducts. However, all obligations under the variable contracts are
general corporate obligations of the Company.
Additional assets are held in the Company's general account to cover the
contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
20
<PAGE> 149
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
As the result of portfolio changes, effective May 1, 1999, the following
sub-accounts of the Account have been replaced with new sub-account funds as
follows:
PREVIOUS FUND
Emerging Growth Trust
Conservative Asset Allocation Trust
Moderate Asset Allocation Trust
Aggressive Asset Allocation Trust
Pilgrim Baxter Growth Trust
Small/Mid Cap Trust
International Growth & Income Trust
Global Government Bond Trust
Equity Trust
NEW FUND
Emerging Small Company Trust
Diversified Bond Trust
Income & Value Trust
Large Cap Growth Trust
Aggressive Growth Trust
Mid Cap Growth Trust
Overseas Trust
Global Bond Trust
Mid-Cap Blend Trust
Effective May 1, 1999 the following sub-accounts of the Account were merged with
existing sub-account funds as follows:
Capital Growth Bond Trust merged with Investment Quality Bond Trust
Worldwide Growth Trust merged with Global Equity Trust
The following sub-accounts of the Account were added as investment options for
variable life insurance contract holders of Manufacturers Life of America:
<TABLE>
<CAPTION>
COMMENCEMENT OF OPERATIONS
OF THE SUB-ACCOUNTS
<S> <C>
U.S. Large Cap Value Trust May 1, 1999
Mid Cap Stock Trust May 1, 1999
Small Company Blend Trust May 1, 1999
International Value Trust May 1, 1999
Total Return Trust May 1, 1999
Small Company Value Trust May 1, 1998
</TABLE>
21
<PAGE> 150
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
Investments are made in the portfolios of the Trust and are valued at the
reported net asset value of such portfolios. Transactions are recorded on the
trade date. Income from dividends is recorded on the ex-dividend date. Realized
gains and losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
In addition to the Account, a contract holder may also allocate funds to the
Fixed Account, which is part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933, and the Company's general
account has not been registered as an investment company under the Investment
Company Act of 1940.
The operations of the Account are included in the federal income tax return of
the Company, which is taxed as a life insurance company under the provisions of
the Internal Revenue Code (the Code). Under the current provisions of the Code,
the Company does not expect to incur federal income taxes on the earnings of the
Account to the extent the earnings are credited under the contracts. Based on
this, no charge is being made currently to the Account for federal income taxes.
The Company will review periodically the status of such decision based on
changes in the tax law. Such a charge may be made in future years for any
federal income taxes that would be attributable to the contract.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known, which could impact the amounts reported and
disclosed herein.
3. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges for state, local and
federal taxes from the gross premium before placing the remaining net premiums
in the sub-accounts.
22
<PAGE> 151
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (continued)
4. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares purchased and proceeds from
sales of each Trust portfolio for the year ended December 31, 1999.
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Emerging Small Company Trust $ 4,930,767 $ 12,307,689
Quantitative Equity Trust 11,311,432 8,065,273
Real Estate Securities Trust 2,924,123 3,752,388
Balanced Trust 6,443,053 7,138,712
Money Market Trust 93,498,772 79,604,857
Capital Growth Bond Trust 2,220,395 21,751,843
International Stock Trust 12,891,686 8,737,829
Pacific Rim Emerging Markets Trust 8,625,380 7,448,004
Equity Index Trust 33,234,821 11,590,436
Mid-Cap Blend Trust 8,272,145 4,015,446
Equity Income Trust 6,544,272 2,244,511
Growth and Income Trust 12,009,895 3,746,501
U.S. Government Securities Trust 2,543,020 1,137,745
Diversified Bond Trust 1,294,441 419,899
Income and Value Trust 2,249,904 540,152
Large Cap Growth Trust 3,041,905 775,900
Blue Chip Growth Trust 14,098,770 1,977,828
Science & Technology Trust 22,500,094 9,105,324
Aggressive Growth Trust 2,481,840 2,226,824
Mid Cap Growth Trust 8,060,295 2,943,649
Worldwide Growth Trust 739,029 1,873,661
Global Equity Trust 23,224,517 19,793,199
Growth Trust 9,230,965 4,216,159
Value Trust 2,806,328 936,272
Overseas Trust 15,131,266 13,238,418
High Yield Trust 3,483,268 1,635,407
Strategic Bond Trust 1,325,957 609,577
Global Bond Trust 893,465 875,845
Investment Quality Bond Trust 24,878,917 2,683,280
Lifestyle Aggressive 1000 Trust 1,479,616 1,707,763
Lifestyle Growth 820 Trust 7,349,779 4,420,513
Lifestyle Balanced 640 Trust 3,774,746 1,683,917
</TABLE>
23
<PAGE> 152
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (continued)
4. PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Lifestyle Moderate 460 Trust 799,037 230,539
Lifestyle Conservative 280 Trust 156,102 143,075
International Small Cap Trust 7,291,927 6,941,156
Small Company Value Trust 1,103,975 465,895
U.S. Large Cap Value Trust 1,891,706 93,657
Mid Cap Stock Trust 340,725 161,609
Small Company Blend Trust 416,255 77,570
International Value Trust 665,242 234,725
Total Return Trust 528,471 49,046
---------------------------------
Total $ 366,688,303 $ 251,602,093
=================================
</TABLE>
5. UNIT VALUES
A summary of the accumulation unit values at December 31, 1999 and 1998 and the
accumulation units and dollar value outstanding at December 31, 1999 for the
variable life contracts are as follows:
<TABLE>
<CAPTION>
1998 1999
UNIT UNIT
VALUE VALUE UNITS DOLLARS
<S> <C> <C> <C> <C>
Emerging Small Company Trust $ 43.14 $ 74.86 1,370,106 $102,569,738
Quantitative Equity Trust 43.42 53.10 1,164,916 61,856,519
Real Estate Securities Trust 32.93 30.30 628,550 19,042,967
Balanced Trust 29.99 29.49 1,537,754 45,352,416
Money Market Trust 18.31 19.15 2,381,133 45,601,979
International Stock Trust 13.97 18.12 1,592,351 28,849,762
Pacific Rim Emerging Markets Trust 7.28 11.85 886,638 10,510,125
Equity Index Trust 19.72 23.78 3,152,866 74,963,275
Mid-Cap Blend Trust 14.83 18.95 1,724,867 32,680,369
Equity Income Trust 16.09 16.64 1,321,869 21,995,504
Growth and Income Trust 19.74 23.46 2,006,153 47,073,070
U.S. Government Securities Trust 11.94 11.91 382,656 4,558,716
Diversified Bond Trust 12.98 13.07 133,384 1,743,348
Income and Value Trust 14.27 15.51 306,506 4,754,507
Large Cap Growth Trust 15.50 19.42 343,487 6,670,104
</TABLE>
24
<PAGE> 153
5. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
UNIT UNIT
VALUE VALUE UNITS DOLLARS
<S> <C> <C> <C> <C>
Blue Chip Growth Trust $ 20.62 $ 24.63 1,047,662 $ 25,799,741
Science & Technology Trust 20.16 40.21 658,047 26,459,240
Aggressive Growth Trust 15.16 20.16 122,003 2,459,870
Mid Cap Trust 19.58 28.33 492,982 13,968,112
Global Equity Trust 16.37 16.97 435,835 7,396,859
Growth Trust 18.56 25.46 575,470 14,651,615
Value Trust 14.21 13.81 368,022 5,083,047
Overseas Trust 13.48 18.96 230,626 4,372,356
High Yield Trust 14.24 15.37 248,649 3,823,158
Strategic Bond Trust 13.80 14.11 246,780 3,481,336
Global Bond Trust 14.22 13.27 43,185 573,117
Investment Quality Bond Trust 14.77 14.51 1,597,533 23,176,815
Lifestyle Aggressive 1000 Trust 15.02 17.21 229,734 3,954,235
Lifestyle Growth 820 Trust 15.11 17.62 1,173,282 20,670,423
Lifestyle Balanced 640 Trust 14.91 16.76 491,434 8,236,104
Lifestyle Moderate 460 Trust 15.20 16.40 77,781 1,275,882
Lifestyle Conservative 280 Trust 15.11 15.74 7,318 115,194
International Small Cap Trust 14.14 26.16 211,460 5,530,970
Small Company Value Trust 8.53 9.21 119,484 1,100,603
U.S. Large Cap Value Trust - 12.84 147,502 1,893,930
Mid Cap Stock Trust - 12.60 14,777 186,188
Small Company Blend Trust - 16.07 23,747 381,629
International Value Trust - 12.98 35,241 457,427
Total Return Trust - 12.37 38,766 479,537
----------------
Total $ 683,749,787
================
</TABLE>
6. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly-owned subsidiary
of Manulife Financial, acts as the principal underwriter of the Contracts
pursuant to a Distribution Agreement with the Company. Registered
representatives of either ManEquity, Inc. or other broker-dealers having
distribution agreements with ManEquity, Inc. who are also authorized as variable
life insurance agents under applicable state
25
<PAGE> 154
The Manufacturers Life Insurance Company of America
Separate Account Three
Notes to Financial Statements (continued)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
insurance laws, sell the Contracts. Registered representatives are compensated
on a commission basis.
The Company has a formal service agreement with its affiliates, Manulife
Financial and The Manufacturers Life Insurance Company (U.S.A.), which can be
terminated by either party upon two months notice. Under this Agreement, the
Company pays for legal, actuarial, investment and certain other administrative
services.
26
<PAGE> 155
PART 2
OTHER INFORMATION
<PAGE> 156
PART II. OTHER INFORMATION
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The Manufacturers Life Insurance Company of America hereby represents that
the fees and charges deducted under the policies issued pursuant to this
registration statement in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
Cross-Reference Sheet;
The Prospectus, consisting of 192 pages;
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The signatures;
Written consents of the following persons:
A. Ernst & Young LLP - FILED HEREWITH
B. Opinion and Consent of Actuary - FILED HEREWITH
C. Opinion and Consent of James D. Gallagher, Attorney - FILED HEREWITH
The following exhibits are filed as part of this Registration Statement:
1. Copies of all exhibits required by paragraph A of the instructions as to
exhibits in Form N-8B-2 are set forth below under designations based on such
instructions:
A(1) Resolutions of Board of Directors of The Manufacturers Life
Insurance Company of America establishing Separate Account
Three. Incorporated by reference to Exhibit A(1) to the
registration statement on Form S-6, file number 333-66303
filed October 29, 1998 (the "SVUL Registration Statement").
A(3)(a)(i) Distribution Agreement between The Manufacturers Life
Insurance Company of America and ManEquity, Inc. dated
December 23, 1986. Incorporated by reference to Exhibit
A(3)(a)(i) to the SVUL Registration Statement.
A(3)(a)(ii) Amendment to Distribution Agreement between The Manufacturers
Life Insurance Company of America and ManEquity, Inc. dated
May 30, 1992. Incorporated by reference to Exhibit A(3)(a)(ii)
to the SVUL Registration Statement.
A(3)(a)(iii) Amendment to Distribution Agreement between The Manufacturers
Life Insurance Company of America and ManEquity, Inc. dated
February 23, 1994. Incorporated by reference to Exhibit
A(3)(a)(iii) to the SVUL Registration Statement.
A(3)(b)(i) Specimen Agreement between ManEquity, Inc. and registered
representatives. Incorporated by reference to Exhibit
A(3)(b)(i) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(3)(b)(ii) Specimen agreement between The Manufacturers Life Insurance
Company of America and registered representatives.
Incorporated by reference to Exhibit A(3)(b)(ii) to
pre-effective amendment no. 1 to the registration statement on
Form S-6, file number 333-51293 filed August 28, 1998.
A(3)(b)(iii) Specimen Agreement between ManEquity, Inc. and dealers.
Incorporated by reference to Exhibit A(3)(b)(iii) to
pre-effective amendment no. 1 to the registration statement on
Form S-6, file number 333-51293 filed August 28, 1998.
<PAGE> 157
A(3)(b)(iv) Specimen agreement between The Manufacturers Life Insurance
Company of America and dealers. Incorporated by reference to
Exhibit A(3)(b)(iv) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(5)(a) Specimen Flexible Premium Variable Life Insurance Policy -
FILED HEREWITH
A(6)(a) Restated Articles of Redomestication of The Manufacturers Life
Insurance Company of America. Incorporated by reference to
Exhibit A(6)(a) to post-effective amendment no. 20 to the
registration statement on Form S-6, file number 33-13774,
filed April 26, 1996.
A(6)(b) By-Laws of The Manufacturers Life Insurance Company of
America. Incorporated by reference to Exhibit A(6)(b) to
post-effective amendment no. 20 to the registration statement
on Form S-6, file number 33-13774, filed April 26, 1996.
A(8)(a)(i) Service Agreement between The Manufacturers Life Insurance
Company and The Manufacturers Life Insurance Company of
America dated June 1, 1988. Incorporated by reference to
Exhibit A(8)(a)(i) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(ii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated December 31, 1992. Incorporated by reference
to Exhibit A(8)(a)(ii) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(iii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated May 31, 1993. Incorporated by reference to
Exhibit A(8)(a)(iii) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(iv) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated June 30, 1993. Incorporated by reference to
Exhibit A(8)(a)(iv) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(v) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated December 31, 1996. Incorporated by reference
to Exhibit A(8)(a)(v) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(vi) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated May 31, 1998. Incorporated by reference to
Exhibit A(8)(a)(vi) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(a)(vii) Amendment to Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance Company
of America dated December 31, 1998. Incorporated by reference
to Exhibit A(8)(a)(vii) to post-effective amendment No. 11 to
the registration statement on Form N-4, file number 33-57018
filed March 1, 1999.
A(8)(b) Specimen Stoploss Reinsurance Agreement between The
Manufacturers Life Insurance Company of America and The
Manufacturers Life Insurance Company. Incorporated by
reference to Exhibit A(8)(b) to the SVUL Registration
Statement.
.
A(8)(c)(i) Service Agreement between The Manufacturers Life Insurance
Company and ManEquity, Inc. dated January 2, 1991.
Incorporated by reference to Exhibit A(8)(c)(i)
<PAGE> 158
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. 7 to the registration
statement on Form S-6, file number 33-52310, filed April 26,
1996.
A(10)(a)(ii) Specimen Rider for Flexible Premium Variable Life Insurance
Policy Incorporated by reference to Exhibit A(10(a)(ii) to
post effective amendment no. 1 to the registration statement
on Form S-6, file number 333-69719, filed February 25, 2000.
A(10)(b) Specimen Application Supplement for Flexible Premium Variable
Life Insurance Policy. Incorporated by reference to Exhibit
A(10)(a) to post effective amendment no. 9 to the registration
statement on Form S-6, file number 33-52310, filed December
23, 1996.
2. Consents of the following:
A. Opinion and consent of James D. Gallagher, Esq., Secretary and
General Counsel of The Manufacturers Life Insurance Company of
America - FILED HEREWITH
B. Opinion and consent of Brian Koop, Actuary, of The Manufacturers
Life Insurance Company of America - FILED HEREWITH
C. Consent of Ernst & Young LLP- FILED HEREWITH
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. FILED HEREWITH
7. Powers of Attorney for all Directors of The Manufacturers Life Insurance
Company of America-Incorporated by reference to Exhibit 7 to post-effective
amendment no 1 to the registration statement S-6, file number 333-69719,
filed February 25, 2000.
8. Power of Attorney Denis Turner, Principal Financial and Accounting Officer -
Incorporated by reference to Exhibit 8 to the initial registration statement
filed September 15, 2000.
<PAGE> 159
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
and the Depositor have duly caused this amendment to its Registration Statement
to be signed on their behalf in the City of Toronto, Province of Ontario,
Canada, on this 5th day of January, 2001.
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> 160
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities indicated on this 5th day of January, 2001.
Signature Title
--------- -----
* Chairman and Director
---------------------------
JOHN D. RICHARDSON
/s/ Donald A. Guloien President and Director
--------------------------- (Principal Executive Officer)
DONALD A. GULOIEN
* Director
---------------------------
SANDRA M. COTTER
/s/ James D. Gallagher Director
---------------------------
JAMES D. GALLAGHER
* Director
---------------------------
JAMES O'MALLEY
* Director
---------------------------
JOSEPH J. PIETROSKI
* Vice President and Treasurer
--------------------------- (Principal Financial and
Denis Turner Accounting Officer)
*/s/ James D. Gallagher
---------------------------
JAMES D. GALLAGHER
Pursuant to Power of Attorney
<PAGE> 161
EXHIBIT INDEX
Item No. Description
(5)(a) Specimen Flexible Premium Variable Life Insurance Policy
2. Consents of the following:
A. Opinion and consent of James D. Gallagher, Esq.
B. Opinion and consent of Brian Koop, Actuary
C. Consent of Ernst & Young LLP
6. Memorandum Regarding Issuance, Face Amount Increase, Redemption
and Transfer Procedures for the Policies.
