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Prospectus for
VUL
Variable Universal Life
A Flexible Premium
Variable Insurance Policy
Prospectus for
Flexible Premium Variable
Life Insurance
Issued by
The Manufacturers Life Insurance
Company of America
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Prospectus
The Manufacturers Life Insurance
Company of America
Separate Account Four
Flexible Premium Variable Life Insurance Policy
This prospectus describes the flexible premium variable life insurance policy
(the "Policy") issued by The Manufacturers Life Insurance Company of America
("Manufacturers Life of America" or the "Company"), a stock life insurance
company that is an indirect wholly-owned subsidiary of The Manufacturers Life
Insurance Company ("Manufacturers Life"). The Policies are designed to provide
lifetime insurance protection together with flexibility as to the timing and
amount of premium payments, the investments underlying the Policy Value and the
amount of insurance coverage. This flexibility allows the policyowner to pay
premiums and adjust insurance coverage in light of his or her current financial
circumstances and insurance needs. The Policies provide for: (1) a Net Cash
Surrender Value that can be obtained by surrendering the Policy; (2) policy
loans; and (3) an insurance benefit payable at the life insured's death. As long
as a Policy remains in force, the death benefit will not be less than the
current face amount of the Policy.
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 Four (the "Separate Account") to which the policyowner allocates net
premiums. The assets of each sub-account will be used to purchase shares of a
particular investment portfolio ( a "Portfolio") of NASL Series Trust. The
accompanying prospectus for NASL Series Trust, and the corresponding statement
of additional information, describe the investment objectives of the Portfolios
in which net premiums may be invested. The Portfolios available for allocation
of net premiums are the following: the Emerging Growth Trust, the Balanced
Trust, the Capital Growth Bond Trust, the Money Market Trust, the Quantitative
Equity Trust (formerly, the Common Stock Fund), the Real Estate Securities
Trust, the International Trust, the Pacific Rim Emerging Markets Trust, the
Equity Index Trust, the Equity-Income Trust, the U.S. Government Securities
Trust, the Growth and Income Trust, the Equity Trust, the Conservative Asset
Allocation Trust, the Moderate Asset Allocation Trust, the Aggressive Asset
Allocation Trust, the Blue Chip Growth Trust and the International Small Cap
Trust. Other sub-accounts and Portfolios may be added in the future.
Prospective purchasers should note that it may not be advisable to purchase a
Policy as a replacement for existing insurance.
Because of the substantial nature of the surrender charges, the Policy is not
suitable for short-term investment purposes. A policyowner contemplating
surrender of a Policy should pay special attention to the refund rights
described in this prospectus, which are available only during the first two
years following issuance of the Policy or following an increase in face amount.
Also,
(i)
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policyowners should note that their Policy could be a modified endowment
contract under federal tax law and any policy loan or surrender may result in
adverse tax consequences and a penalty.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR NASL SERIES TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Manufacturers Life Insurance
Company of America
500 North Woodward Avenue,
Bloomfield Hills, Michigan 48304
Service Office:
200 Bloor Street East
Toronto, Ontario, Canada M4W 1E5
TELEPHONE: 1 (800) 827-4546
1 (800) VARILIN(E)
The date of this Prospectus is December 31, 1996.
(ii)
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Prospectus Contents
Page
Definitions....................................................................1
Introduction To Policies.......................................................2
General Information About Manufacturers Life of America, Separate Account Four,
and NASL Series Trust..................................................12
Who Are Manufacturers Life of America And Manufacturers Life?.................12
What Is Manufacturers Life of America's Separate Account Four?................13
What Is NASL Series Trust?....................................................13
What Are The Investment Objectives and Certain Policies Of The Portfolios?....15
Detailed Information About The Policies.......................................17
PREMIUM PROVISIONS............................................................17
What Are The Requirements And Procedures For Issuance Of A Policy?............17
What Limitations Apply To Premium Amounts?....................................18
Is There A Death Benefit Guarantee?...........................................18
When Does A Policy Go Into Default?...........................................19
How Can A Terminated Policy Be Reinstated?....................................20
How May Net Premiums Be Invested?.............................................20
Is There A Short-Term Cancellation Right, Or "Free Look"?.....................20
What Are The Conversion Privileges Of The Policy?.............................21
INSURANCE BENEFIT.............................................................21
What Is The Insurance Benefit?................................................21
What Death Benefit Options Are Available?.....................................21
Can The Death Benefit Option Be Changed?......................................23
Can The Face Amount Of A Policy Be Changed?...................................24
POLICY VALUES.................................................................25
What Is The Policy Value And How Is It Determined?............................25
Transfers Of Policy Value.....................................................27
What Are The Provisions Governing Policy Loans?...............................28
How May A Policyowner Obtain The Net Cash Surrender Value?....................32
CHARGES.......................................................................33
What Deductions Are Made From Premiums?.......................................33
What Are The Surrender Charges?...............................................34
What Are The Monthly Deductions?..............................................38
Are There Special Provisions For Group Or Sponsored Arrangements?.............39
Are There Special Provisions For Exchanges?...................................40
What Are The Risk Charges Assessed Against Separate Account Assets?...........41
Are There Other Relevant Charges?.............................................41
THE GENERAL ACCOUNT...........................................................42
What Is The General Account?..................................................43
OTHER PROVISIONS..............................................................43
What Supplementary Benefits Are Available?....................................43
Under What Circumstances May Portfolio Shares Be Substituted?.................44
What Are The Other General Policy Provisions?.................................44
When Are Proceeds Paid?.......................................................45
What Reports Will Be Sent To Policyowners?....................................45
Other Matters.................................................................46
What Is The Federal Tax Treatment Of The Policies?............................46
Tax Status Of The Policy......................................................46
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Page
What Is The Tax Treatment Of Policy Benefits?.................................48
What Are The Company's Tax Considerations?....................................50
Who Sells The Policies And What Are The Sales Commissions?....................50
What Responsibilities Has Manufacturers Life Assumed?.........................51
What Are The Voting Rights?...................................................51
Who Are The Directors And Officers Of Manufacturers Life of America?..........52
What State Regulations Apply?.................................................54
Is There Any Litigation Pending?..............................................54
Where Can Further Information Be Found?.......................................54
Legal Considerations..........................................................54
Legal Matters.................................................................55
Experts.......................................................................55
Financial Statements..........................................................56
Appendix......................................................................86
What Are Some Illustrations Of Policy Values, Cash Surrender Values And Death
Benefits?..............................................................86
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS OF MANULIFE SERIES FUND OR NASL SERIES TRUST, OR
THE STATEMENT OF ADDITIONAL INFORMATION OF NASL SERIES TRUST.
You are urged to examine this prospectus carefully. The INTRODUCTION TO POLICIES
will briefly describe the Flexible Premium Variable Life Insurance Policy. More
detailed information will be found further in the prospectus.
(iv)
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Definitions
Business Day-any day that the net asset value of the underlying shares of a
sub-account of the Separate Account is determined.
Cash Surrender Value-the Policy Value less the deferred sales charge, the
deferred underwriting charge and any outstanding monthly deductions due.
Guaranteed Interest Account-that part of the Policy Value which reflects the
value the policyowner has in the general account of Manufacturers Life of
America.
Investment Account-that part of the Policy Value which reflects the value the
policyowner has in one of the sub-accounts of the Separate Account.
Loan Account-that part of the Policy Value which reflects policy loans and
interest credited to the Policy Value in connection with such loans.
Modified Policy Debt-as of any date the Policy Debt plus the amount of interest
to be charged to the next policy anniversary, all discounted from the next
policy anniversary to such date at an annual rate of 4%.
Net Cash Surrender Value-the Cash Surrender Value less the value in the Loan
Account.
Net Policy Value-the Policy Value less the value in the Loan Account.
Policy Debt-as of any date the aggregate amount of policy loans, including
borrowed interest, less any loan repayments.
Policy Value-the sum of the values in the Loan Account, the Guaranteed Interest
Account and the Investment Accounts.
Service Office-the office we designate to service the Policies, which is shown
on the cover page of this prospectus.
Target Premium-a premium amount used to measure the maximum deferred sales
charge under a Policy. The Target Premium for the initial face amount is set
forth in the Policy. The policyowner will be advised of the Target Premium for
any increase in face amount.
Withdrawal Tier Amount-as of any date the product of the Net Cash Surrender
Value at the previous policy anniversary multiplied by 10%.
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Introduction To Policies
The following summary is intended to provide a general description of the most
important features of the Policy. It is not comprehensive and is qualified in
its entirety by the more detailed information contained in this prospectus.
Unless otherwise indicated or required by the context, the discussion throughout
this prospectus assumes that the Policy has not gone into default, there is no
outstanding Policy Debt and the death benefit is not determined by the corridor
percentage test.
General. The Policy provides a death benefit in the event of the death of the
life insured. There are two death benefit options. The policyowner may change
death benefit options and may increase or decrease the face amount of the
Policy.
Premium payments may be made at any time and in any amount, subject to certain
limitations.
After certain deductions, premiums will be allocated, according to the
policyowner's instructions, to one or more of the general account and the
sub-accounts of Manufacturers Life of America's Separate Account Four. Assets of
the sub-accounts of Separate Account Four are invested in shares of a particular
Portfolio of NASL Series Trust. Allocation instructions may be changed at any
time and transfers among the accounts may be made.
The Portfolios currently offered are the: Emerging Growth Trust, Quantitative
Equity Trust (formerly, the Common Stock Fund), Real Estate Securities Trust,
Balanced Assets Trust, Capital Growth Bond Trust, Money Market Trust,
International Stock Trust, Pacific Rim Emerging Markets Trust, Equity Index
Trust, Equity-Income Trust, U.S. Government Securities Trust, Growth and Income
Trust, Equity Trust, Conservative Asset Allocation Trust, Moderate Asset
Allocation Trust, Aggressive Asset Allocation Trust, Blue Chip Growth Trust, and
International Small Cap Trust.
The Policy has a Policy Value reflecting premiums paid, certain charges for
expenses and cost of insurance, and the investment performance of the accounts
to which the policyowner has allocated premiums. The policyowner may obtain a
portion of the Policy Value by taking a policy loan or a partial withdrawal, or
by full surrender of the Policy.
Death Benefit.
Death Benefit Options. The policyowner elects to have the Policy's death benefit
determined under one of two options:
- - a death benefit equal to the face amount of the Policy, and
- - a death benefit equal to the face amount of the Policy plus the Policy
Value.
Under either option, the death benefit may be increased to a multiple of the
Policy Value to satisfy the corridor percentage test under the definition of
life insurance in the Internal Revenue Code. (See Detailed Information About The
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Policies: Insurance Benefit "What Is The Insurance Benefit?" and "What Death
Benefit Options Are Available?")
The Policyowner May Change The Death Benefit Option. A change in the death
benefit option may be requested after the Policy has been in force for two
years. A change in death benefit option will be effective on a policy
anniversary. (See Detailed Information About The Policies; Insurance Benefit
"Can The Death Benefit Option Be Changed?")
The Policyowner May Increase The Face Amount. After the Policy has been in force
for one year, an increase in the face amount of the Policy may be requested once
per policy year. An increase in the face amount is subject to satisfactory
evidence of insurability and will usually result in the Policy's being subject
to new surrender charges. (See Detailed Information About The Policies;
Insurance Benefit "Can The Face Amount Of A Policy Be Changed?")
The Policyowner May Decrease The Face Amount. A decrease in the face amount may
be requested after the Policy has been in force for one year, except during the
one-year period following any increase in face amount. In addition, during the
two-year period following an increase in face amount, the policyowner may elect
at any time to cancel the increase and have the deferred sales charge for the
increase reduced by the refund of any excess sales load attributable to the
increase. A decrease in face amount will be effective only on a policy
anniversary and may result in certain surrender charges being deducted from the
Policy Value. (See Detailed Information About The Policies; Insurance Benefit
"Can The Face Amount Of A Policy Be Changed?")
Premium Payments Are Flexible.
The policyowner may pay premiums at any time and in any amount, subject to
certain limitations. (See Detailed Information About The Policies; Premium
Provisions "What Are The Requirements And Procedures For Issuance Of A Policy?"
and "What Limitations Apply To Premium Amounts?")
In the first two policy years the policyowner must pay a minimum premium to keep
the Policy in force. (See Detailed Information About The Policies; Premium
Provisions "What Limitations Apply To Premium Amounts?" and "Is There A Death
Benefit Guarantee?")
After the second policy year there is no minimum premium required; however, by
complying with the minimum premium schedule for the Policy, the policyowner can
ensure the Policy will not go into default prior to the life insured's reaching
age 70. (See Detailed Information About The Policies; Premium Provisions "Is
There A Death Benefit Guarantee?")
Certain maximum premium limitations apply to the Policy, ensuring the Policy
qualifies as life insurance under rules defined in the Internal Revenue Code.
(See Detailed Information About The Policies; Premium Provisions "What
Limitations Apply To Premium Amounts?")
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Summary of Charges And Deductions.
Charges under the Policy are assessed as:
(1) deductions from premiums
- 3% sales charge
- 2% state premium tax
(2) surrender charges upon surrender, partial withdrawal, decrease in face
amount or lapse
- deferred underwriting charge of $2-$6 for each $1,000 of face amount
- deferred sales charge of up to 47% of two Target Premiums
(3) monthly deductions
- administration charge of $6
- cost of insurance charge (including $1 per $1,000 of face amount for
policies less than $25,000)
- supplementary benefits charge
(4) Certain transfers
- a Dollar Cost Averaging transfer charge of $5 when Policy Value does
not exceed $15,000
- a charge of $25 per transfer for each transfer in excess of 12 in a
policy year
(5) Separate Account charges
- mortality and expense risk charge of .65% per annum assessed daily
against the value of the Separate Account assets
(6) Other Charges
Investment management fees paid by NASL Series Trust range from .25% to
1.10% of the assets of the Portfolios. Expenses range from .15% to .75%
of the assets of the Portfolios.
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For a complete discussion of charges and deductions see the heading Charges And
Deductions in this Introduction and the references therein.
Investment Options.
After deductions for sales charges of 3% and state premium taxes of 2%, net
premiums will be allocated, according to the policyowner's instructions, to any
combination of the general account or one or more of the sub-accounts of
Manufacturers Life of America's Separate Account Four.
Each of the sub-accounts of Separate Account Four invests its assets in the
shares of one of the following:
- - Emerging Growth Trust
- - Balanced Trust
- - Capital Growth Bond Trust
- - Money Market Trust
- - Quantitative Equity Trust (formerly, the Common Stock Fund)
- - Real Estate Securities Trust
- - International Stock Trust
- - Pacific Rim Emerging Markets Trust
- - Equity Index Trust
- - Equity-Income Trust
- - U.S. Government Securities Trust
- - Growth and Income Trust
- - Equity Trust
- - Conservative Asset Allocation Trust
- - Moderate Asset Allocation Trust
- - Aggressive Asset Allocation Trust
- - Blue Chip Growth Trust
- - International Small Cap Trust
The policyowner may change the allocation of net premiums among the general
account and the sub-accounts at any time. (See General Information About
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Manufacturers Life of America, Separate Account Four, And NASL Series Trust and
Detailed Information About The Policies; Premium Provisions "How May Net
Premiums Be Invested?" and Policy Values "What Is The Policy Value And How Is It
Determined?")
The Policy Value.
The Policy has a Policy Value which reflects the following: premium payments
made; deduction of charges described under "Charges And Deductions" below;
investment performance of the sub-accounts to which amounts have been allocated;
and interest credited by the Company to amounts allocated to the general
account.
The Policy Value is the sum of the values in the Investment Accounts, the
Guaranteed Interest Account and the Loan Account.
Investment Account. An Investment Account is established under the Policy for
each sub-account of the Separate Account to which net premiums or transfer
amounts have been allocated. An Investment Account measures the interest of the
Policy in the corresponding sub-account.
The value of each Investment Account under the Policy varies each Business Day
and reflects the investment performance of the Portfolio shares held in the
corresponding sub-account.
(See Detailed Information About The Policies; Policy Values "What Is The Policy
Value And How Is It Determined?")
Guaranteed Interest Account. The Guaranteed Interest Account consists of that
portion of the Policy Value based on net premiums allocated to and amounts
transferred to the general account of the Company.
Manufacturers Life of America credits interest on amounts in the Guaranteed
Interest Account at an effective annual rate guaranteed to be at least 4%. (See
Detailed Information About The Policies; The General Account "What Is The
General Account?")
Loan Account. When a policy loan is made, Manufacturers Life of America will
establish a Loan Account under the Policy and will transfer an amount from the
Investment Accounts and the Guaranteed Interest Account to the Loan Account.
The Company will credit interest to amounts in the Loan Account at an effective
annual rate of at least 4%. The actual rate credited will be the rate charged on
policy loans less an interest rate differential, which is currently 1.25%.
Under certain conditions the Company will credit interest to a portion of the
amounts in the Loan Account at an effective annual rate equal to the rate
charged on policy loans less 0.50%. (See Detailed Information About The
Policies; Policy Values "What Are The Provisions Governing Policy Loans?")
Transfers Are Permitted. A policyowner may change the extent to which the Policy
Value is based upon any specific sub-account of Separate Account Four or the
Company's general account by requesting a transfer of a portion or all amounts
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in one account to another account.
Twelve transfers per policy year may be made. Excess transfers will be permitted
at a cost of $25 per transfer. All transfer requests received at the same time
are treated as a single transfer request. In addition transfers may be effected
through the Dollar Cost Averaging or Asset Allocation Balancer transfer
programs.
Certain restrictions may apply to transfer requests. (See Detailed Information
About The Policies; Policy Values "What Is The Policy Value And How Is It
Determined?" (Transfer of Policy Value))
Using The Policy Value.
Borrowing Against The Policy Value. After the first policy
anniversary, the policyowner may borrow against the Policy
Value. The minimum loan amount is $500.
Loan interest will be charged either on a fixed basis or on a variable basis.
Interest on a fixed basis will be at an effective annual rate of 8%. Interest on
a variable basis will be at an effective annual rate equal to the greater of 6%
or the Moody's Corporate Bond Yield Average Monthly Average Corporates. (See
Detailed Information About The Policies; Policy Values "What Are The Provisions
Governing Policy Loans?")
A Policyowner May Make A Partial Withdrawal Of The Policy Value. After a Policy
has been in force for two years the policyowner may make a partial withdrawal of
the Policy Value. The minimum withdrawal amount is $500. The policyowner may
specify that the withdrawal is to be made from a specific Investment Account or
the Guaranteed Interest Account.
A partial withdrawal may result in a reduction in the face amount of the Policy.
A partial withdrawal may also result in the assessment of a portion of the
surrender charges to which the Policy is subject. (See Detailed Information
About The Policies; Policy Values "How May A Policyowner Obtain The Net Cash
Surrender Value?" and Charges "What Are The Surrender Charges?")
The Policy May Be Surrendered For Its Net Cash Surrender Value. A Policy may be
surrendered for its Net Cash Surrender Value at any time while the life insured
is living.
The Net Cash Surrender Value is equal to the Policy Value less surrender charges
and outstanding monthly deductions due minus the value of the Loan Account.
Surrender of a Policy within 15 years after policy issue or following an
increase in the face amount will usually result in assessment of surrender
charges. (See Detailed Information About The Policies; Policy Values "How May A
Policyowner Obtain The Net Cash Surrender Value?" and Charges "What Are The
Surrender Charges?")
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Charges And Deductions.
Charges Made From Premium Payments. Two deductions are made when premiums are
paid:
- - a sales charge of 3% of premium, and
- - a charge of 2% for state premium taxes.
The 3% sales charge and the deferred sales charge described below compensate the
Company for some of the expenses of selling and distributing the Policies. (See
Detailed Information About The Policies; Charges "What Deductions Are Made From
Premiums?") A portion of the sales charge and the deferred sales charge may be
subject to refund under certain circumstances. (See Detailed Information About
The Policies; Charges "What Are The Surrender Charges?"; Refund Of Excess Sales
Charges)
Charges On Surrender. Manufacturers Life of America will usually deduct a
deferred underwriting charge and a deferred sales charge if, during the 15 years
following Policy issue or an increase in the face amount:
- - the Policy is surrendered for its Net Cash Surrender Value,
- - a partial withdrawal is made in excess of the Withdrawal Tier Amount,
- - a decrease in face amount is requested, or
- - the Policy lapses.
The deferred underwriting charge ranges from $2.00 to $6.00 for each $1,000 of
face amount depending on the age of the life insured. The charge is guaranteed
not to exceed $1,000 for each level of coverage.
The maximum deferred sales charge is 47% of premiums paid up to two Target
Premiums.
The full amount of charges will be in effect for up to five years following
issue of the Policy. Beginning no later than the sixth year these charges grade
downward each month over a 10-year period. In the event of a face amount
increase, the charges applicable to the increase, which will be at the same
rates that would apply if a Policy were issued to the life insured at his or her
then attained age, will be in effect for up to five years following such
increase and thereafter grade downward over a 10-year period. (See Detailed
Information About The Policies; Charges "What Are The Surrender Charges?")
Sales Charge Refund. If the Policy is surrendered at any time during the first
two years following issuance or following an increase in face amount or if the
increase is cancelled during the two-year period following the increase or face
amount decreased during the second year after issuance or after increase in face
amount, Manufacturers Life of America will refund the difference, if any,
between total sales charges deducted and the maximum sales charge allowable with
respect to the Policy or the increase, as applicable. (See Detailed Information
About The
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Policies; Charges "What Are The Surrender Charges?") If the Policy is
surrendered after such two- year period, no refund will be available and the
full amount of the surrender charge will apply.
Monthly Charges. At the beginning of each month Manufacturers Life of America
deducts from the Policy Value:
- - an administration charge of $6,
- - a charge for the cost of insurance (plus, if applicable, $1 per $1,000 of
face amount for policies with a face amount of less than $25,000), and
- - a charge for any supplementary benefits added to the Policy.
The cost of insurance charge varies based on the net amount at risk under the
Policy and the applicable cost of insurance rate. Cost of insurance rates vary
according to age, amount of coverage, duration of coverage, and sex and risk
class of the life insured. The maximum cost of insurance rate that can be
charged is guaranteed not to exceed the 1980 Commissioners Standard Ordinary
Smoker/ Nonsmoker Mortality Tables. Currently, the cost of insurance rates
assessed under the Policies are less than the maximum rates that can be charged.
The cost of insurance charge will reflect any extra charges for additional
ratings as indicated in the Policy. (See Detailed Information About The
Policies; Charges "What Are The Monthly Deductions?")
Charges For Certain Transfers. Charges will be imposed on certain transfers of
Policy Values, including a $25 charge for each transfer in excess of twelve in a
policy year, and a $5 charge for each Dollar Cost Averaging transfer when Policy
Value does not exceed $15,000. See Policy Values "Transfers of Policy Value."
Charges Assessed Against Assets Of The Separate Account. Manufacturers Life of
America makes a daily charge to the Separate Account at an annual rate of .65%
of the value of the Separate Account assets for the mortality and expense risks
it assumes under the Policies. (See Detailed Information About The Policies;
Charges "What Are The Risk Charges Assessed Against Separate Account Assets?")
Other Charges. Manufacturers Life of America reserves the right to charge or
establish a provision for any federal, state or local taxes that may be
attributable to the Separate Account or the operations of the Company with
respect to the Policies. No such charge is currently made.
Certain expenses are, or will be, assessed against the assets of Portfolios, as
follows:
Investment Management Fees
- investment management fee of 1.05% assessed against the assets of
the Emerging Growth Trust
- investment management fee of .70% assessed against the assets of
the Quantitative Equity Trust (formerly, the Common Stock Fund)*
- investment management fee of .70% assessed against the assets of
the Real Estate Securities Trust*
- investment management fee of .80% assessed against the assets of the
Balanced Trust
- investment management fee of .65% assessed against the assets of
the Capital Growth Bond Trust*
- investment management fee of .50% assessed against the assets of
the Money Market Trust
- investment management fee of 1.05% assessed against the assets of the
International Stock Trust
- investment management fee of .85% assessed against the assets of
the Pacific Rim Emerging Markets Trust
- investment management fee of .25% assessed against the assets of
the Equity Index Trust
- investment management fee of .925% assessed against the assets of
the Blue Chip Growth Trust
- investment management fee of 1.10% assessed against the assets of the
International Small Cap Trust
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- investment management fee of .80% assessed against the assets of
the Equity-Income Trust
- investment management fee of .65% assessed against the assets of the
U.S. Government Securities Trust
- investment management fee of .75% assessed against the assets of the
Growth and Income Trust
- investment management fee of .75% assessed against the assets of the
Equity Trust
- investment management fee of .75% assessed against the assets of the
Conservative Asset Allocation Trust
- investment management fee of .75% assessed against the assets of the
Moderate Asset Allocation Trust
- investment management fee of .75% assessed against the assets of the
Conservative Asset Allocation Trust
Expenses
- expenses of up to .75% assessed against the assets of the Pacific
Rim Emerging Markets Trust and International Stock Trust
- expenses of up to .15% assessed against the assets of the Equity
Index Trust
- expenses of up to .50% assessed against the assets of all other
Trusts*
*NASL Financial Services, Inc. has voluntarily agreed to waive fees payable to
it and/or to reimburse expenses for a period of one year beginning the
effective date of this prospectus to the extent necessary to prevent the total
of advisory fees and expenses for the Common Stock Trust, Real Estate
Securities Trust and Capital Growth Bond Trust for such period from exceeding
.50% of average net assets.
Supplementary Benefits.
A policyowner may choose to include certain supplementary benefits to the
Policy. These supplementary benefits include life insurance for additional
insured persons and a change of life insured option (corporate-owned Policies
only) for Policies purchased before October 1, 1996 and a change of life insured
option and flexible term insurance option for Policies purchased on or after
October 1, 1996 and, if permitted by applicable state law, an accelerated death
benefit. The cost of any supplementary benefits will be deducted from
the Policy Value monthly. (See Detailed Information About The Policies; Other
Provisions "What Supplementary Benefits Are Available?")
Default.
The Policy will go into default (a) during the first two policy years, if the
policyowner does not pay the required minimum premiums, or (b) after the second
policy anniversary, if at the beginning of any policy month the Policy's Net
Cash Surrender Value would go below zero after deducting the monthly charges
then due. The Company will notify the policyowner in the event the Policy goes
into default, and will allow a grace period in which the policyowner may make a
premium payment sufficient to bring the Policy out of default. If the required
premium is not paid during the grace period the Policy will terminate. (See
Detailed Information About The Policies; Premium Provisions "When Does A Policy
Go Into Default?")
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Death Benefit Guarantee.
As long as the premiums paid by the policyowner at least equal the minimum
premiums for the Policy, the Company guarantees that the Policy will not go into
default prior to the life insured's age 70, regardless of the investment
performance of the Funds underlying the Policy Value. (See Detailed Information
About The Policies; Premium Provisions "Is There A Death Benefit Guarantee?")
Reinstatement.
A terminated policy may be reinstated by the policyowner within the five-year
period following the date of termination, providing certain conditions are met.
(See Detailed Information About The Policies; Premium Provisions "How Can A
Terminated Policy Be Reinstated?")
Free Look.
A Policy may be returned for a full refund within the later of:
- - 10 days after it is received
- - 45 days after the application for the Policy is signed
- - 10 days after Manufacturers Life of America mails or delivers a notice of
this right of withdrawal.
If a policyowner requests an increase in face amount which results in new
surrender charges, these rights to cancel the increase will also apply. (See
Detailed Information About The Policies; Premium Provisions "Is There A
Short-Term Cancellation Right, Or `Free Look'?")
Conversion.
At any time, the policyowner may convert the Policy to a fixed benefit Policy
with a Policy Value, other values based on the Policy Value and a death benefit
which is determinable and guaranteed. The conversion is effected by transferring
the Policy Value in all of the Investment Accounts to the Guaranteed Interest
Account. (See Detailed Information About The Policies; Premium Provisions "What
Are The Conversion Privileges Of The Policy?")
Federal Tax Matters.
Manufacturers Life of America believes that a Policy issued on a standard risk
class basis should meet the definition of a life insurance contract as set forth
in Section 7702 of the Internal Revenue Code of 1986. With respect to a Policy
issued on a substandard basis, there is less guidance available to determine if
such a Policy would satisfy the Section 7702 definition of a life insurance
contract, particularly if the policyowner pays the full amount of premiums
permitted under such a Policy. Assuming that a Policy qualifies as a life
insurance contract for federal income tax payments, a policyowner should not be
deemed to be in constructive receipt of Policy Value under a Policy until there
is a distribution from the Policy. Moreover, death benefits payable under a
11
<PAGE> 17
Policy should be completely excludable from the gross income of the beneficiary.
As a result, the beneficiary generally should not be taxed on these proceeds.
See Other Matters "What Is The Federal Tax Treatment Of The Policies?" (Tax
Status Of The Policy).
Under certain circumstances, a Policy may be treated as a "Modified Endowment
Contract." If the Policy is a Modified Endowment Contract, then all pre-death
distributions, including Policy loans, will be treated first as a distribution
of taxable income and then as a return of investment in the Policy. In addition,
prior to age 59 1/2 any such distributions generally will be subject to a 10%
(Please type or print) penalty tax. See Other Matters "What Is The Tax
Treatment Of Policy Benefits?" (Tax Treatment Of Policy Benefits).
If the Policy is not a Modified Endowment Contract, distributions generally will
be treated first as a return of investment in the Policy and then a disbursement
of taxable income. Moreover, loans will not be treated as distributions. A
policyowner considering the use of systematic policy loans as one element of a
comprehensive retirement income plan should consult his or her personal tax
adviser regarding the potential tax consequences if such loans were to so reduce
Policy Value that the Policy would lapse, absent additional payments. The
premium payment necessary to avert lapse would increase with the age of the
insured. Finally, neither distributions nor loans under a Policy that is not a
Modified Endowment Contract are subject to the 10% penalty tax. See Other
Matters "What Is The Tax Treatment Of Policy Benefits?" (Distributions From
Policies Not Classified As Modified Endowment Contracts).
The United States Congress has in the past considered, and in the future may
consider legislation that, if enacted, could change the tax treatment of life
insurance policies. In addition, the Treasury Department may amend existing
regulations, or adopt new interpretations of existing laws, state tax laws or,
if the policyowner is not a United States resident, foreign tax laws, which may
affect the tax consequences to him or her, the lives insured or the beneficiary.
These laws may change from time to time without notice and, as a result, the tax
consequences may be altered. There is no way of predicting whether, when or in
what form any such change would be adopted. Any such change could have a
retroactive effect regardless of the date of enactment. The Company suggests
that a tax adviser be consulted.
Estate and Generation-Skipping Taxes
The proceeds of this life insurance policy may be taxable under Estate and
Generation-Skipping Tax provisions of the Internal Revenue Code. The policyowner
should consult his or her tax adviser regarding these taxes.
General Information About Manufacturers Life of America, Separate Account Four,
And NASL Series Trust
Who Are Manufacturers Life of America And Manufacturers Life?
Manufacturers Life of America, a wholly-owned subsidiary of The Manufacturers
Life Insurance Company (U.S.A.) ("Manufacturers USA"), is a stock life insurance
company organized under the laws of Pennsylvania on April 11, 1977 and
redomesticated under the laws of Michigan on December 9, 1992. It is a licensed
life insurance company in the District of Columbia and all states of the United
States except New York. Manufacturers USA, a life insurance company organized in
1955 under the laws of Maine and redomesticated under the laws of Michigan on
December 30, 1992, is a wholly-owned subsidiary of Manulife Reinsurance
Corporation (U.S.A.), a life insurance company organized in 1983 under the laws
of Michigan which in turn is a wholly-owned subsidiary of Manufacturers Life, a
mutual life insurance company based in Toronto, Canada. Manufacturers Life and
its subsidiaries, together, constitute one of the largest life insurance
companies in North America and ranks among the 60 largest life insurers in the
world as measured by assets. Manufacturers Life and Manufacturers Life of
America have received the following ratings from independent rating agencies:
Standard and Poor's Insurance Rating Service -- AA+ (for claims paying ability),
A.M. Best Company -- A++ (for financial strength), Duff & Phelps Credit Rating
Co. -- AAA (for claims paying ability), and Moody's Investors Service, Inc. --
Aa3 (for financial strength). However, neither Manufacturers Life of America
nor Manufacturers Life guarantees the investment performance of the Separate
Account.
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<PAGE> 18
What Is Manufacturers Life of America's Separate Account Four?
Manufacturers Life of America established its Separate Account Four on March 17,
1987 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.
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.
The Separate Account is registered with the Securities and Exchange Commission
("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. A unit investment trust is a type of investment company which
invests its assets in specified securities, such as the shares of one or more
investment companies, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the S.E.C.
of the management or investment policies or practices of the Separate Account.
For state law purposes the Separate Account is treated as a part or division of
Manufacturers Life of America.
What is NASL Series Trust?
Each sub-account of the Separate Account will purchase shares only of a
particular NASL Trust. NASL Series Trust is registered under the 1940 Act as an
open-end management investment company. The Separate Account will purchase and
redeem shares of the NASL Trusts 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
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<PAGE> 19
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.
NASL Series 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
will 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 NASL Series Trust prospectus.
NASL Series Trust receives investment advisory services from NASL Financial
Services, Inc. NASL Financial Services, Inc. is a registered investment adviser
under the Investment Advisers Act of 1940. NASL Series Trust also employs
subadvisers. The following subadvisers provide investment subadvisory services
to the indicated portfolios:
<TABLE>
<CAPTION>
<S> <C> <C>
Portfolio SUBADVISER
Aggressive Growth Portfolios
Pacific Rim Emerging Markets Trust Manufacturers Adviser Corporation*
International Small Cap Trust Founders Asset Management, Inc.
Emerging Growth Trust Warburg, Pincus Counsellors, Inc.
International Stock Trust Rowe Price-Fleming International, Inc.
Equity Portfolios
Equity Trust Fidelity Management Trust Company
Quantitative Equity Trust
(formerly Common Stock Fund) Manufacturers Adviser Corporation*
Equity Index Trust Manufacturers Adviser Corporation*
Blue Chip Growth Trust T. Rowe Price Associates, Inc.
Growth and Income Trust Wellington Management Company
Equity Income Trust T. Rowe Price Associates, Inc.
Real Estate Securities Trust Manufacturers Adviser Corporation*
Balanced Portfolios
Balanced Trust Founders Asset Management, Inc.
Aggressive Asset Allocation Trust Fidelity Management Trust Company
Moderate Asset Allocation Trust Fidelity Management Trust Company
Conservative Asset Allocation Trust Fidelity Management Trust Company
Bond Portfolios
Capital Growth Bond Trust Manufacturers Adviser Corporation*
U.S. Government Securities Trust Salomon Brothers Asset Management Inc
Money Market Portfolio
Money Market Trust Manufacturers Adviser Corporation*
</TABLE>
*Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
14
<PAGE> 20
What Are The Investment Objectives and Certain Policies 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.
AGGRESSIVE GROWTH PORTFOLIOS
Pacific Rim Emerging Markets Trust. The investment objective of the Pacific Rim
Emerging Markets Trust is to achieve long-term growth of capital. Manufacturers
Adviser Corporation manages the Pacific Rim Emerging Markets Trust and seeks to
achieve this investment objective by investing in a diversified portfolio that
is comprised primarily of common stocks and equity-related securities of
corporations domiciled in countries of the Pacific Rim region.
International Small Cap Trust. The investment objective of the International
Small Cap Trust is to seek long term capital appreciation. Founders Asset
Management, Inc. manages the International Small Cap Trust and will pursue this
objective by investing primarily in securities issued by foreign companies
which have total market capitalizations or annual revenues of $1 billion or
less. These securities may represent companies in both established and emerging
economies throughout the world.
Emerging Growth Trust. The investment objective of the Emerging Growth Trust is
maximum capital appreciation. Warburg, Pincus Counsellors, Inc. manages the
Emerging Growth Trust and will pursue this objective by investing primarily in
a portfolio or equity securities of domestic companies. The Emerging Growth
Trust ordinarily will invest at least 65% of its total assets in common stocks
or warrants of emerging growth companies that represent attractive
opportunities for maximum capital appreciation.
International Stock Trust. The investment objective of the International Stock
Trust is to achieve long-term growth of capital. Rowe Price-Fleming
International, Inc. manages the International Stock Trust and seeks to obtain
this objective by investing primarily in common stocks of established, non-U.S.
companies.
EQUITY PORTFOLIOS
Equity Trust. The principal investment objective of the Equity Trust is growth
of capital. Current income is a secondary consideration although growth of
income may accompany growth of capital. Fidelity Management Trust Company
manages the Equity Trust and seeks to attain the foregoing objective by
investing primarily in common stocks of United States issuers or securities
convertible into or which carry the right to buy common stocks.
Quantitative Equity Trust (formerly Common Stock Fund). The investment objective
of the Quantitative Equity Trust is to achieve intermediate and long-term growth
through capital appreciation and current income by investing in common stocks
and other equity securities of well established companies with promising
prospects for providing an above-average rate of return. Manufacturers Adviser
Corporation manages the Quantitative Equity Trust.
Equity Index Trust. The Investment objective of the Equity Index trust is to
achieve investment results which approximate the total return of publicly
traded common stocks in the aggregate, as represented by the Standard & Poor's
500 Composite Stock Price Index. Manufacturers Adviser Corporation manages the
Equity Index Trust.
Blue Chip Growth Trust. The primary investment objective of the Blue Chip Growth
Trust is to provide long-term growth of capital. Current income is a secondary
objective, and many of the stocks in the Portfolio are expected to pay
dividends. T. Rowe Price Associates, Inc. manages the Blue Chip Growth Trust.
Growth and Income Trust. The investment objective of the Growth and Income
Trust is to provide long-term growth of capital and income consistent with
prudent investment risk. Wellington Management Company manages the Growth and
Income Trust and seeks to achieve the Trust's objective by investing primarily
in a diversified portfolio of common stocks of U.S. issuers which Wellington
Management Company believes are of high quality.
15
<PAGE> 21
Equity-Income Trust. The investment objective of the Equity-Income Trust (prior
to December 31, 1996, the "Value Equity Trust") is to provide substantial
dividend income and also long term capital appreciation. T. Rowe Price
Associates, Inc. manages the Equity-Income Trust and seeks to attain this
objective by investing primarily in dividend-paying common stocks, particularly
of established companies with favorable prospects for both increasing dividends
and capital appreciation.
Real Estate Securities Trust. The investment objective of the Real Estate
Securities Trust is to achieve a combination of long-term capital appreciation
and satisfactory current income by investing in real estate related equity and
debt securities. Manufacturers Adviser Corporation manages the Real Estate
Securities Trust.
BALANCED PORTFOLIOS
Balanced Trust. The investment objective of the Balanced Trust is current
income and capital appreciation. Founders Asset Management, Inc. is the manager
of the Balanced Trust and seeks to attain this objective by investing in a
balanced portfolio of common stocks, U.S. and foreign government obligations
and a variety of corporate fixed-income securities.
Automatic Asset Allocation Trusts (Aggressive, Moderate and Conservative). The
investment objective of each of the Automatic Asset Allocation Trusts is to
realize the highest potential total return consistent with a specified level of
risk tolerance -- conservative, moderate or aggressive. The amount of each
Portfolio's assets invested in each category of securities -- debt, equity, and
money markets -- is dependent upon the judgment of Fidelity Management Trust
Company as to what percentages of each Portfolio's assets in each category will
contribute to the limitation of risk and the achievement of its investment
objective.
BOND PORTFOLIOS
Capital Growth Bond Trust. The investment objective of the Capital Growth Bond
Trust is to achieve growth of capital by investing in medium-grade or better
debt securities, with income as a secondary consideration. Manufacturers
Adviser Corporation manages the Capital Growth Bond Trust. The Capital Growth
Bond Trust differs from most "bond" funds in that its primary objective is
capital appreciation, not income.
U.S. Government Securities Trust. The investment objective of the U.S.
Government Securities Trust is to obtain a high level of current income
consistent with preservation of capital and maintenance of liquidity. Salomon
Brothers Asset Management Inc manages the U.S. Government Securities Trust and
seeks to attain its objective by investing a substantial portion of its assets
in debt obligations and mortgage-backed securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities and derivative securities
such as collateralized mortgage obligations backed by such securities.
MONEY MARKET PORTFOLIO
Money Market Trust. The investment objective of the Money Market Trust is to
obtain maximum current income consistent with preservation of principal and
liquidity. Manufacturers Adviser Corporation manages the Money Market Trust and
seeks to achieve this objective by investing in high quality, U.S. dollar
denominated money market instruments.
A full description of the NASL Series Trust, its investment objectives,
policies and restrictions, the risks associated therewith, its expenses, and
other aspects of its operation is contained in the accompanying NASL Series
Trust prospectus, which should be read together with this prospectus.
16
<PAGE> 22
Detailed Information About The Policies
Premium Provisions
What Are The Requirements And Procedures For Issuance Of A Policy?
To purchase a Policy, an applicant must submit a completed application.
Manufacturers Life of America will issue a Policy only if it has a face amount
of at least $25,000, except for Policies issued under group or sponsored
arrangements in which case the minimum face amount is $10,000. A Policy will
generally be issued to persons between ages 00 and 80 prior to October 1, 1996
and between ages 20 and 80 on and after October 1, 1996. In certain
circumstances the Company may at its sole discretion issue a Policy to persons
above age 80. Before issuing a Policy, Manufacturers Life of America will
require evidence of insurability satisfactory to it. A life insured meeting
standard underwriting rules will have a risk class of either "standard" or
"nonsmoker." Persons failing to meet standard underwriting requirements may be
eligible for a Policy with an additional rating assigned to it. Acceptance of an
application is subject to the Company's insurance underwriting rules. Each
Policy is issued with a policy date from which policy years, policy months and
policy anniversaries are all determined. Each Policy also has an effective date
which is the date the Company becomes obligated under the Policy and when the
first monthly deductions are taken. If an application is accompanied by a check
for all or a portion of the initial premium and the application is accepted, the
policy date will be the date the application and check were received at the
Manufacturers Life of America Service Office and the effective date will be the
date Manufacturers Life of America's underwriters approve issuance of the
Policy. If an application is accompanied by a check for all or a portion of the
initial premium, the life insured may be covered under the terms of a
conditional insurance agreement until the effective date. If an application
accepted by the Company is not accompanied by a check for the initial premium,
the Policy will be issued with a policy date which is seven days after issuance
of the Policy and with an effective date which is the date the Service Office
receives at least the initial planned premium. In certain situations a different
policy date may be used. The initial planned premium must be received within 60
days after the policy date. If the premium is not paid or if the application is
rejected, the Policy will be cancelled and any partial premiums paid will be
returned to the applicant.
Under certain circumstances a Policy may be issued with a backdated policy date.
A Policy will not be backdated more than six months before the date of the
application for the Policy. Monthly deductions will be made for the period the
policy date is backdated.
All premiums received prior to the effective date of a Policy will be credited
17
<PAGE> 23
with interest from the date of receipt at the rate of return then being earned
on amounts allocated to the Money Market Trust. On the effective date, the
premiums paid plus interest credited, net of deductions for federal, state and
local taxes, will be allocated among the Investment Accounts or the Guaranteed
Interest Account in accordance with the policyowner's instructions.
All premiums received on or after the effective date will be allocated among
Investment Accounts or the Guaranteed Interest Account as of the date the
premiums were received at the Manufacturers Life of America 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.
What Limitations Apply To Premium Amounts?
After the payment of the initial premium, premiums may be paid at any time and
in any amount during the lifetime of the life insured, subject to the
limitations on premium amount and the minimum premium requirement described
below. Premiums after the first must be paid to the Manufacturers Life of
America Service Office. Unlike traditional insurance, premiums are not payable
at specified intervals and in specified amounts. A Policy will be issued with a
planned premium, which is based on the amount of premium the policyowner wishes
to pay. The planned premium during the first two policy years must be such that
the minimum premium requirement will be met. Manufacturers Life of America will
send notices to the policyowner setting forth the planned premium at the payment
interval selected by the policyowner, unless payment is being made pursuant to a
pre-authorized payment plan. However, the policyowner is under no obligation to
make the indicated payment.
Manufacturers Life of America will not accept any premium payment which is less
than $50, unless the premium is payable pursuant to a pre-authorized payment
plan. In that case the Company will accept a payment of as little as $10.
Manufacturers Life of America may change these minimums on 90 days' written
notice. The Policies also limit the sum of the premiums that may be paid at any
time so as to preserve the qualification of the Policies as life insurance for
federal tax purposes. These limitations are set forth in each Policy.
Manufacturers Life of America reserves the right to refuse or refund any premium
payments that may cause the Policy to fail to qualify as life insurance under
applicable tax law.
Minimum Premium Requirement. The Policy provides for a minimum premium
requirement. The minimum premium requirement is met if at the beginning of each
policy month the sum of all premiums paid less any partial withdrawals and any
Policy Debt is at least equal to the sum of the minimum monthly premiums since
the policy date. The minimum premium as an annualized amount is set forth in the
Policy. It is subject to change if the face amount of the Policy or the death
benefit option is changed (see Insurance Benefit "Can The Death Benefit Option
Be Changed?" and "Can The Face Amount Of A Policy Be Changed?") or if there is
any change in the supplementary benefits added to the Policy or in the rate
classification of the life insured.
Is There A Death Benefit Guarantee?
18
<PAGE> 24
If the minimum premium requirement is met, Manufacturers Life of America will
guarantee that the Policy will not go into default even if a combination of
policy loans, adverse investment experience or other factors should cause the
Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deduction due at the beginning of a policy month. If the guarantee is in effect,
Manufacturers Life of America will not allow the Net Policy Value to go below
zero, although it will continue to assess a monthly deduction at the beginning
of each policy month until the Net Policy Value should fall to zero. The
guarantee provides assurance to the policyowner that the Policy will remain in
force regardless of the investment performance of the sub-accounts selected by
the policyowner, provided the policyowner has satisfied the minimum premium
requirement.
The death benefit guarantee will expire on the policy anniversary on which the
life insured is 70 years old, or two years after the policy date if later. While
the guarantee is in effect, Manufacturers Life of America will determine at the
beginning of each policy month whether the minimum premium requirement has been
met. If it has not been met, the Company will notify the policyowner of that
fact and allow a 61-day grace period in which the policyowner may make a premium
payment sufficient to keep the death benefit guarantee in effect. The required
payment will be equal to the minimum premium due at the date the minimum premium
requirement was not met plus the minimum premium due for the next two policy
months. If the required payment is not received by the end of the grace period,
the death benefit guarantee will terminate. Once it is terminated, it cannot be
reinstated.
When Does A Policy Go Into Default?
Default Prior To Second Policy Anniversary. If the minimum premium requirement
should not be met at the beginning of any policy month during the first two
policy years, the Policy will go into default. Manufacturers Life of America
will notify the policyowner of the default and allow a 61-day grace period in
which the policyowner may make a premium payment sufficient to bring the Policy
out of default. The required premium will be equal to the minimum premium due at
the date of default plus the minimum premium due for the next two policy months.
If the required payment is not received by the end of the grace period, the
Policy will terminate and the Net Cash Surrender Value as of the date of default
less the monthly deduction then due will be paid to the policyowner together
with any refund of excess sales loading to which the policyowner is entitled.
See Charges "What Are The Surrender Charges?"
Default After Second Policy Anniversary. If the death benefit guarantee is no
longer in effect, a Policy will go into default after the second policy
anniversary if at the beginning of any policy month the Policy's Net Cash
Surrender Value would go below zero after deducting the monthly deduction then
due. As with a default during the first two policy years, Manufacturers Life of
America will notify the policyowner of the default and will allow a 61-day grace
period in which the policyowner may make a premium payment sufficient to bring
the Policy out of default. The required payment will be equal to the amount
necessary to bring the Net Cash Surrender Value to zero, if it was less than
zero at 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. If the
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<PAGE> 25
required payment is not received by the end of the grace period, the Policy will
terminate and the Net Cash Surrender Value as of the date of default less the
monthly deduction then due will be paid to the policyowner together with any
refund of excess sales loading to which the policyowner is entitled. See Charges
"What Are The Surrender Charges?" If the life insured should die during the
grace period following a Policy's going into default, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit payable will be reduced by any outstanding
monthly deductions due at the time of death.
How Can A Terminated Policy Be Reinstated?
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the five-year period following the date of
termination subject to the following conditions:
(a) The Policy must not have been surrendered for its Net Cash Surrender
Value;
(b) Evidence of the life insured's insurability satisfactory to Manufacturers
Life of America is furnished to it;
(c) A premium equal to the payment required during the grace period
following default to keep the Policy in force is paid to Manufacturers
Life of America; and
(d) An amount equal to any amounts paid by Manufacturers Life of America in
connection with the termination of the Policy is repaid to
Manufacturers Life of America.
If the reinstatement is approved, the date of reinstatement will be the later of
the date of the policyowner's written request or the date the required payment
is received at the Manufacturers Life of America Service Office.
How May Net Premiums Be Invested?
Net premiums (gross premiums less the premium tax deduction and sales charge)
may be allocated to either the Guaranteed Interest Account for accumulation at a
rate of interest equal to at least 4% or to one or more of the Investment
Accounts for investment in the Portfolio shares held by the corresponding
sub-account of the Separate Account. Allocations among the Investment Accounts
and the Guaranteed Interest Account are made as a percentage of the net premium.
The percentage allocation to any account may be any whole number between zero
and 100, provided the total percentage allocations equal 100. A policyowner may
change the way in which net premiums are allocated at any time without charge.
The change will take effect on the date a written or telephonic request for
change satisfactory to the Company is received at the Manufacturers Life of
America Service Office.
Is There A Short-Term Cancellation Right, Or "Free Look"?
A Policy may be returned for a full refund within 10 days after it is received,
within 45 days after the application for the Policy is signed, or within 10 days
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<PAGE> 26
after Manufacturers Life of America mails or delivers a notice of right of
withdrawal, whichever is latest. The Policy can be mailed or delivered to the
Manufacturers Life of America agent who sold it or to the Manufacturers Life of
America Service Office. Immediately on such delivery or mailing, the Policy
shall be deemed void from the beginning. Within seven days after receipt of the
returned Policy at its Service Office, Manufacturers Life of America will refund
any premium paid. Manufacturers Life of America reserves the right to delay the
refund of any premium paid by check until the check has cleared.
If a policyowner requests an increase in face amount which results in new
surrender charges, he or she will have the same rights as described above to
cancel the increase. If cancelled, the Policy Value and the surrender charges
will be recalculated to the amounts they would have been had the increase not
taken place. A policyowner may request a refund of all or any portion of
premiums paid during the free look period, and the Policy Value and the
surrender charges will be recalculated to the amounts they would have been had
the premiums not been paid.
What Are The Conversion Privileges Of The Policy?
The policyowner may effectively convert his or her Policy to a fixed benefit
policy by transferring the Policy Value in all of the Investment Accounts to the
Guaranteed Interest Account and by changing his or her allocation of net
premiums entirely to the Guaranteed Interest Account. As long as the entire
Policy Value is allocated to the Guaranteed Interest Account, the Policy Value,
other values based thereon and the death benefit will be determinable and
guaranteed. The Investment Account values to be transferred to the Guaranteed
Interest Account will be determined as of the Business Day on which
Manufacturers Life of America receives the request for conversion. There will be
no change in the issue age, risk class of the life insured or face amount as a
result of the conversion. A transfer of any or all of the Policy Value to the
Guaranteed Interest Account can be made at any time, even if a prior transfer
has been made during the policy month.
Insurance Benefit
What Is The Insurance Benefit?
If the Policy is in force at the time of the life insured's death, Manufacturers
Life of America will pay an insurance benefit based on the death benefit option
selected by the policyowner upon receipt of due proof of death. The amount
payable will be the death benefit under the selected option, plus any amounts
payable under any supplementary benefits added to the Policy, less the value of
the Loan Account at the date of death. The insurance benefit will be paid in one
sum unless another form of settlement option is agreed to by the beneficiary and
the Company. If the insurance benefit is paid in one sum, Manufacturers Life of
America will pay interest from the date of death to the date of payment. If the
life insured should die after the Company's receipt of a request for surrender,
no insurance benefit will be payable, and Manufacturers Life of America will pay
only the Net Cash Surrender Value.
What Death Benefit Options Are Available?
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<PAGE> 27
The Policies permit the policyowner to select one of two death benefit options
Option 1 and Option 2. Under Option 1 the death benefit is the face amount of
the Policy at the date of death or, if greater, the Policy Value at the date of
death multiplied by the applicable percentage in the table set forth below.
Under Option 2 the death benefit is the face amount of the Policy plus the
Policy Value at the date of death or, if greater, the Policy Value at the date
of death multiplied by the applicable percentage in the following table:
<TABLE>
<CAPTION>
Attained Corridor
Age Percentage
<S> <C>
40 & below 250%
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
62 126
63 124
64 122
65 120
66 119
</TABLE>
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<PAGE> 28
<TABLE>
<CAPTION>
Attained Corridor
Age Percentage
<S> <C>
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75-90 105
91 104
92 103
93 102
94 101
95 & above 100
</TABLE>
Regardless of which death benefit option is in effect, the relationship of
Policy Value to death benefit will change whenever the "corridor percentages"
are used to determine the amount of the death benefit, in other words, whenever
multiplying the Policy Value by the applicable percentage set forth in the above
table results in a greater death benefit than would otherwise apply under the
selected option. For example, assume the life insured under a Policy with a face
amount of $100,000 has an attained age of 40. If Option 1 is in effect, the
corridor percentage will produce a greater death benefit whenever the Policy
Value exceeds $40,000 (250% X $40,000 = $100,000). If the Policy Value is less
than $40,000, an incremental change in Policy Value, up or down, will have no
effect on the death benefit. If the Policy Value is greater than $40,000, an
incremental change in Policy Value will result in a change in the death benefit
by a factor of 2.5. Thus, if the Policy Value were to increase to $40,010, the
death benefit would be increased to $100,025 (250% X $40,010 = $100,025).
If Option 2 were in effect in the above example, the corridor percentage would
produce a greater death benefit whenever the Policy Value exceeded $66,667. At
that point the death benefit produced by multiplying the Policy Value by 250%
would result in a greater amount than adding the Policy Value to the face amount
of the Policy. If the Policy Value is less than $66,667, an incremental change
in Policy Value will have a dollar-for-dollar effect on the death benefit. If
the Policy Value is greater than $66,667, an incremental change in Policy Value
will result in a change in the death benefit by a factor of 2.5 in the same
manner as would be the case under Option 1 when the corridor percentage
determined the death benefit.
Can The Death Benefit Option Be Changed?
The death benefit option is selected initially by the policyowner in the
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<PAGE> 29
application. After the Policy has been in force for two years the death benefit
option may be changed effective with a policy anniversary. Written request for a
change must be received by Manufacturers Life of America at least 30 days prior
to a policy anniversary in order to become effective on that date. The Company
reserves the right to limit a request for change if the change would cause the
Policy to fail to qualify as life insurance for tax purposes.
A change in death benefit option will result in a change in the Policy's face
amount in order to avoid any change in the amount of the death benefit. If the
change in death benefit is from Option 1 to Option 2, the new face amount will
be equal to the face amount prior to the change minus the Policy Value on the
effective date of the change. If the change in death benefit is from Option 2 to
Option 1, the new face amount will be equal to the face amount prior to the
change plus the Policy Value on the effective date of the change. The increase
in face amount resulting from a change to Option 1 will not affect the amount of
surrender charges to which a Policy may be subject. A change to Option 2 will be
subject to satisfactory evidence of insurability and will not be allowed if it
would cause the face amount of the Policy to go below the minimum face amount of
$25,000.
Policyowners who wish to have level insurance coverage should generally select
Option 1. Under Option 1, increases in Policy Value usually will reduce the net
amount of risk under a Policy which will reduce cost of insurance charges. This
means that favorable investment performance should result in a faster increase
in Policy Value than would occur under an identical Policy with Option 2 in
effect. However, the larger Policy Value which may result under Option 1 will
not affect the amount of the death benefit unless the corridor percentages are
used to determine the death benefit.
Policyowners who want to have the Policy Value reflected in the death benefit so
that any increases in Policy Value will increase the death benefit should
generally select Option 2. Under Option 2 the net amount at risk will remain
level unless the corridor percentages are used to determine death benefit, in
which case increases in Policy Value will increase the net amount at risk.
Can The Face Amount Of A Policy Be Changed?
Subject to certain limitations, a policyowner may, upon written request,
increase or decrease the face amount of the Policy. A change in face amount will
usually affect the minimum premium requirement, the monthly deduction and
surrender charges (see "Charges"). Currently, a change in face amount must be at
least $10,000, except in the case of group or sponsored arrangements where the
minimum change is $5,000. Manufacturers Life of America reserves the right to
increase or decrease the minimum face amount change on 90 days' written notice
to the policyowner. The Company also 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.
Increases. Increases in face amount are subject to satisfactory evidence of
insurability. Increases may be made only once per policy year and only after the
first policy year. An increase will become effective at the beginning of the
policy month following the date Manufacturers Life of America approves the
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<PAGE> 30
requested increase. The Company reserves the right to refuse a requested
increase if the life insured's age at the effective date of the increase would
be greater than the maximum issue age for new Policies at that time.
An increase in face amount will usually result in the Policy's 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. For purposes of
determining the new deferred sales charge, a portion of the Policy Value at the
time of the increase, and a portion of the premiums paid on or subsequent to the
increase, will be deemed to be premiums attributable to the increase. See
Charges "What Are The Surrender Charges?" Any increase in face amount to a level
less than the highest face amount previously in effect will have no effect on
the surrender charges to which the Policy is subject, since surrender charges,
if applicable, will have been assessed in connection with the prior decrease in
face amount. As with the purchase of a Policy, a policyowner will have free look
and refund rights with respect to any increase resulting in new surrender
charges.
No additional premium is required for a face amount increase. However, a premium
payment may be necessary to avoid the Policy's going into default, since new
surrender charges resulting from an increase would automatically reduce the Net
Cash Surrender Value of the Policy. Moreover, a new minimum premium will be
determined for purposes of the death benefit guarantee. The insurance coverage
eliminated by the decrease of the oldest face amount will be deemed to be
restored first.
Decreases. A decrease in the face amount may be requested after the Policy has
been in force for one year, except during the one-year period following any
increase in face amount. In addition, during the two-year period following an
increase in face amount, the policyowner may elect at any time to cancel the
increase and have the deferred sales charge for the increase reduced by the
refund of any excess sales load attributable to the increase. A decrease in face
amount will be effective only on a policy anniversary. Written request for a
decrease must be received by Manufacturers Life of America at least 30 days
prior to a policy anniversary in order to become effective on that date. A
decrease will not be allowed if it would cause the face amount to go below the
minimum face amount of $25,000, or $10,000 in the case of group or sponsored
arrangements.
A decrease in face amount during the 15-year period following issuance of the
Policy or any increase in face amount will usually result in surrender charges
being deducted from the Policy Value. See Charges "What Are The Surrender
Charges?" For purposes of determining surrender and cost of insurance charges, a
decrease will reduce face amount in the following order: (a) the face amount
provided by the most recent increase, then (b) the face amounts provided by the
next most recent increases successively, and finally (c) the initial face
amount.
Policy Values
What Is The Policy Value And How Is It Determined?
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.
25
<PAGE> 31
See "What Are The Provisions Governing Policy Loans?" and "How May A Policyowner
Obtain The Net Cash Surrender Value?" below. The Policy Value may also affect
the amount of the death benefit (see Insurance Benefit "What Death Benefit
Options Are Available?"). The Policy Value at any time is equal to the sum of
the Values in the Investment Accounts, the Guaranteed Interest Account and the
Loan Account. The following discussion relates only to the Investment Accounts.
Policy loans are discussed under "What Are The Provisions Governing Policy
Loans?" and the Guaranteed Interest Account is discussed under "The General
Account." The portion of the Policy Value based on the Investment Accounts is
not guaranteed and will vary each Business Day with the investment performance
of the underlying Portfolios.
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.
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 cancelled whenever amounts are deducted, transferred
or withdrawn from the sub-account. The number of units credited or cancelled for
a specific transaction is based on the dollar amount of the transaction divided
by the value of the unit on the Business Day on which the transaction occurs.
The number of units credited with respect to a premium payment will be based on
the applicable unit values for the Business Day on which the premium is received
at the Manufacturers Life of America Service Office or other office or entity so
designated by Manufacturers Life of America, except for any premiums received
before the policy date as to which the applicable unit values will be the values
determined on such date.
Units are valued at the end of each Business Day, which is any day that the net
asset value of the Fund shares held by the applicable sub-account is determined.
A Business Day is deemed to end at the time of such determination. When an order
involving the crediting or cancelling of units is received after the end of a
Business Day or on a day which is not a Business Day, the order will be
processed on the basis of unit values determined on the next Business Day.
Similarly, any determination of Policy Value, Investment Account value or death
benefit to be made on a day which is not a Business Day will be made on the next
Business Day.
The value of a unit of each sub-account was initially fixed at $10.00. For each
subsequent Business Day the unit value is determined by taking the value of the
adjusted net assets of the particular sub-account at the end of the Business Day
divided by the total number of units. 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. The unit value for a sub-account for any
Business Day is equal to (a) minus (b), divided by (c), where:
(a) is the net asset value of the sub-account at the end of such Business Day;
(b) is a charge not exceeding 0.000017866 for each calendar day since the
26
<PAGE> 32
preceding Business Day, multiplied by the net assets of the sub-account
as of the end of such Business Day, corresponding to a charge not
exceeding 0.65% per year for mortality and expense risks; and
(c) is the total number of units of the sub-account.
Manufacturers Life of America reserves the right to adjust the above formula for
any taxes determined by it to be attributable to the operations of the
sub-account.
Transfers Of Policy Value.
Under the Policies a policyowner may change the extent to which his or her
Policy Value is based upon any specific sub-account of the Separate Account or
the Company's general account. Such changes are made by transferring amounts
from one or more Investment Accounts or the Company's general account to other
Investment Accounts or the Company's general account. A policyowner is permitted
to make twelve transfers each policy year free of charge. Additional transfers
in each policy year may be made at a cost of $25 per transfer. This charge will
be allocated among the Investment Accounts and the Guaranteed Interest Account
in the same proportion as the amount transferred from each bears to the total
amount transferred. For this purpose all transfer requests received by
Manufacturers Life of America on the same Business Day are treated as a single
transfer request.
The maximum amount that may be transferred from the Guaranteed Interest Account
in any one policy year is the greater of $500 or 15% of the Guaranteed Interest
Account value at the previous policy anniversary. Any transfer which involves a
transfer out of the Guaranteed Interest Account may not involve a transfer to
the Investment Account for the Money Market Trust.
Transfer requests must be in a format satisfactory to Manufacturers Life of
America and in writing, or by telephone if a currently valid telephone transfer
authorization form is on file. Although failure to follow reasonable procedures
may result in Manufacturers Life of America's liability for any losses resulting
from unauthorized or fraudulent telephone transfers, Manufacturers Life of
America will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. Manufacturers Life of America will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures shall consist of confirming a valid
telephone authorization form is on file, tape recording all telephone
transactions and providing written confirmation thereof.
The policyowner may effectively convert his or her Policy to a fixed benefit
policy by transferring the Policy Value in all of the Investment Accounts to the
Guaranteed Interest Account and by changing his or her allocation of net
premiums entirely to the Guaranteed Interest Account. As long as the entire
Policy Value is allocated to the Guaranteed Interest Account, the Policy Value,
other values based thereon and the death benefit will be determinable and
guaranteed. The Investment Account values to be transferred to the Guaranteed
Interest Account will be determined as of the Business Day on which
Manufacturers Life of America receives the request for conversion. There will be
no change in the issue age, risk class of the life insured or face amount as a
result of the conversion. A transfer of any or all of the Policy Value to the
Guaranteed Interest Account can
27
<PAGE> 33
be made at any time, even if a prior transfer has been made during the policy
month.
Dollar Cost Averaging. Manufacturers Life of America will offer policyowners a
Dollar Cost Averaging program. Under this program amounts will be automatically
transferred at predetermined intervals from one Investment Account to any other
Investment Account(s) or the Guaranteed Interest Account.
Under the Dollar Cost Averaging program the policyowner will designate an amount
to be transferred each month from one Investment Account into any other
Investment Account(s) or the Guaranteed Interest Account. Each transfer under
the Dollar Cost Averaging program must be of a minimum amount as set by
Manufacturers Life of America. Once set, this minimum may be changed at any time
at the discretion of Manufacturers Life of America. Currently, no charge will be
made for this program if the Policy Value exceeds $15,000 on the date of
transfer. Otherwise, there will be a charge of $5 for each transfer under this
program. The charge will be deducted from the value of the Investment Account
out of which the transfer occurs. If insufficient funds exist to effect a Dollar
Cost Averaging transfer, including the charge, if applicable, the transfer will
not be effected and the policyowner will be so notified. Manufacturers Life of
America reserves the right to cease to offer this program on 90 days' written
notice to the policyowner.
Asset Allocation Balancer Transfers. Manufacturers Life of America will also
offer policyowners the ability to have amounts automatically transferred among
stipulated Investment Accounts to maintain an allocated percentage in each
stipulated Investment Account.
Under the Asset Allocation Balancer program the policyowner will designate
an allocation of Policy Value among Investment Accounts. At six month intervals,
beginning six months after the policy date, Manufacturers Life of America will
move 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 instructs Manufacturers Life of America otherwise or a dollar cost
averaging request is in effect. Currently there is no charge for this program;
however, Manufacturers Life of America reserves the right to institute a charge
on 90 days' written notice to the policyowner. Manufacturers Life of America
reserves the right to cease to offer this program on 90 days' written notice to
the policyowner.
What Are The Provisions Governing Policy Loans?
On or after the first policy anniversary, while the Policy is in force, the
policyowner may borrow against the Policy Value of his or her Policy. The
one-year waiting period for borrowing against the Policy Value is waived in the
case of policies which are exchanged for Manufacturers Life of America Policies
and a policy loan will be permitted in an amount equal to the lesser of (a) the
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<PAGE> 34
amount rolled over into the Manufacturers Life of America Policy and (b) the
loan value of the Policy. The Policy serves as the only security for the loan.
The amount of any loan must be at least $500 and cannot exceed the amount which
would cause the Modified Policy Debt to equal the loan value of the Policy on
the date of the loan. The loan value is the Policy's Cash Surrender Value less
the monthly deductions due to the next policy anniversary. The Modified Policy
Debt as of any date is the Policy Debt (the aggregate amount of policy loans,
including borrowed interest, less any loan repayments) plus the amount of
interest to be charged to the next policy anniversary, all discounted from the
next policy anniversary to such date at an annual rate of 4%. An amount equal to
the Modified Policy Debt is transferred to the Loan Account to ensure that a
sufficient amount will be available to pay interest on the Policy Debt at the
next policy anniversary.
For example, assume a Policy with a loan value of $5,000, no outstanding policy
loans and a loan interest rate of 8%. The maximum amount that can be borrowed is
an amount that will cause the Modified Policy Debt to equal $5,000. If the loan
is made on a policy anniversary, the maximum loan will be $4,815. This amount at
8% interest will equal $5,200 one year later; $5,200 discounted to the date of
the loan at 4% (the Modified Policy Debt) equals $5,000. Because the minimum
rate of interest credited to the Loan Account is 4%, $5,000 must be transferred
to the Loan Account to ensure that $5,200 will be available at the next policy
anniversary to cover the interest accrued on the Policy Debt.
When a loan is made, Manufacturers Life of America will deduct from the
Investment Accounts or the Guaranteed Interest Account, and transfer to the Loan
Account, an amount which will result in the Loan Account value being equal to
the Modified Policy Debt. The policyowner may designate how the amount to be
transferred to the Loan Account is allocated among the accounts from which the
transfer is to be made. In the absence of instructions, the amount to be
transferred will be allocated to each account in the same proportion as the
value in each Investment Account and the Guaranteed Interest Account bears to
the Net Policy Value. A transfer from an Investment Account will result in the
cancellation of units of the underlying sub-account equal in value to the amount
transferred from the Investment Account. However, since the Loan Account is part
of the Policy Value, transfers made in connection with a loan will not change
the Policy Value.
A policy loan may result in a Policy's failing to satisfy the minimum premium
requirement, since the Policy Debt is subtracted from the sum of the premiums
Paid in determining whether the minimum premium requirement is met. See Premium
Provisions "What Limitations Apply To Premium Amounts?; Minimum Premium
Requirement." As a result, the Policy may go into default if the minimum premium
requirement is not met during the first two policy years, or the death benefit
guarantee may terminate if the minimum premium requirement is not met either
before or after the second policy anniversary. See Premium Provisions "Is There
A Death Benefit Guarantee?" and "When Does A Policy Go Into Default?" Moreover,
if the death benefit guarantee is not in force, a policy loan may cause a Policy
to be more susceptible to going into default, since a policy loan will be
reflected in the Net Cash Surrender Value. See Premium Provisions "When Does A
Policy Go Into Default?" A policy loan will also 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
29
<PAGE> 35
of the underlying Funds selected by the policyowner or increasing in value at
the rate of interest credited for amounts allocated to the Guaranteed Interest
Account. Finally, a policy loan will affect the amount payable on the death of
the life insured, since the death benefit is reduced by the value of the Loan
Account at the date of death in arriving at the insurance benefit. Interest
Charged On Policy Loans. Interest on the Policy Debt will accrue daily and be
payable annually on the policy anniversary. The rate of interest charged will be
either on a fixed basis or a variable basis as selected by the policyowner in
the application. The policyowner may change the interest basis on any policy
anniversary provided a written request for change is received by the Company at
least 60 days before the anniversary on which such change is to be effective.
If the policyowner elects to have interest charged on a fixed basis, interest
will be at an effective annual rate of 8%. If the policyowner elects to have
interest charged on a variable basis, the rate will be determined by
Manufacturers Life of America at the beginning of each policy year, and the rate
so determined will be effective until the next policy anniversary at which time
it will be recalculated. Except as described below, the variable rate will not
exceed the greater of 6% per year or the Moody's Corporate Bond Yield Average
Monthly Average Corporates for the calendar month ending two months before the
beginning of the month in which the policy anniversary falls. On each policy
anniversary, the annual rate of interest may be adjusted up or down, but no
adjustment will be made unless the Moody's Average for the month ending two
months before the date of determination is at least one-half of one percent
greater or less than the rate in effect for the year then ending. If the
interest due on a policy anniversary is not paid by the policyowner, the
interest will be borrowed against the policy.
Interest Credited To The Loan Account. Manufacturers Life of America will credit
interest to any amount in the Loan Account at an effective annual rate of at
least 4%. The actual rate credited is:
- - the rate of interest charged on the policy loan less .50% on amounts up
to the Policy's "loan tier amount"; and
- - the rate of interest charged on the policy loan less an interest rate
differential (currently 1.25%) on amounts in excess of the "loan tier
amount."
Manufacturers Life of America may change the interest rate differential on 90
days' written notice to the policyowner. The loan tier amount at any time is
equal to 25% of (a) minus (b) where (a) is the Policy's Cash Surrender Value at
the previous policy anniversary and (b) is the sum of the minimum monthly
premiums since issuance of the Policy to that date (see Premium Provisions "What
Limitations Apply To Premium Amounts?"). The loan tier amount cannot be a
negative number.
To illustrate the application of the loan tier amount, assume a Policy with a
Cash Surrender Value at the previous policy anniversary of $10,000, the sum of
the minimum monthly premiums since issuance to the previous policy anniversary
of $6,000 and a Loan Account value of $8,000. The loan tier amount is $1,000
[25%
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<PAGE> 36
X ($10,000 - $6,000)]. If loan interest is being charged at the fixed rate of
8%, $1,000 of the Loan Account value will accrue interest at 7.5% and the
remaining $7,000 will accrue interest at 6.75%.
Loan Account Adjustments. When a loan is first taken out, and at specified
events thereafter, the value of the Loan Account is adjusted. Whenever the Loan
account is adjusted, the difference between (i) the Loan Account before any
adjustment and (ii) the Modified Policy Debt at the time of adjustment, is
transferred between the Loan Account and the Investment Accounts or the
Guaranteed Interest Account. The amount transferred to or from the Loan Account
will be such that the value of the Loan Account is equal to the Modified Policy
Debt after the adjustment.
The specified events which cause an adjustment to the Loan Account are (i) a
policy anniversary, (ii) a partial or full loan repayment, (iii) a new loan
being taken out, or (iv) when an amount is needed to meet a monthly deduction. A
loan repayment may be implicit in that policy debt is effectively repaid upon
termination, that is upon death of the life insured, surrender or lapse of the
policy. In each of these instances, the Loan Account will be adjusted with any
excess of the Loan Account over the Modified Policy Debt after the repayment
being included in the termination proceeds.
Except as noted below in the Loan Repayments section, amounts transferred from
the Loan Account will be allocated to the Investment Accounts and the Guaranteed
Interest Account in the same proportion as the value in the corresponding "loan
sub-account" bears to the value of the Loan Account. A "loan sub-account" exists
for each Investment Account and for the Guaranteed Interest Account. Amounts
transferred to the Loan Account are allocated to the appropriate loan
sub-account to reflect the account from which the transfer was made.
Loan Account Illustration. The operation of the Loan Account may be illustrated
by consideration of the Policy previously described with a loan value of $5,000,
a loan interest rate of 8%, and a maximum loan amount on a policy anniversary of
$4,815. For purposes of the illustration, assume that the loan tier amount is
zero. If a loan in the maximum amount of $4,815 is made, an amount equal to the
Modified Policy Debt, $5,000, is transferred to the Loan Account. At the next
policy anniversary the value of the Loan Account will have increased to
$5,337.50 ($5,000 X 1.0675) reflecting interest credited at an effective annual
rate of 6.75%. At that time the loan will have accrued interest charges of $385
($4,815 X .08) bringing the Policy Debt to $5,200.
If the accrued interest charges are paid on the policy anniversary, the Policy
Debt will continue to be $4,815, and the Modified Policy Debt, reflecting
interest for the next policy year and discounting the Policy Debt and such
interest at 4%, will be $5,000. An amount will be transferred from the Loan
Account to the Guaranteed Interest Account or the Investment Accounts so that
the Loan Account value will equal the Modified Policy Debt.
Since the Loan Account value was $5,337.50, a transfer of $337.50 will be
required ($5,337.50 - $5,000).
If, however, the accrued interest charges of $385 are borrowed, an amount will
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<PAGE> 37
be transferred from the Investment Accounts and the Guaranteed Interest Account
so that the Loan Account value will equal the Modified Policy Debt recomputed at
the policy anniversary. The new Modified Policy Debt is the Policy Debt, $5,200,
plus loan interest to be charged to the next policy anniversary, $416 ($5,200 X
.08), discounted at 4%, which results in a figure of $5,400. Since the value of
the Loan Account was $5,337.50, a transfer of $62.50 will be required. This
amount is equivalent to the 1.25% interest rate differential on the $5,000
transferred to the Loan Account on the previous policy anniversary.
Loan Repayments. Policy Debt may be repaid in whole or in part at any time prior
to the death of the life insured provided the Policy is in force. When a
repayment is made, the amount is credited to the Loan Account and a transfer is
made to the Guaranteed Interest Account or the Investment Accounts so that the
Loan Account at that time equals the Modified Policy Debt. Loan repayments will
first be allocated to the Guaranteed Interest Account until the associated loan
sub-account is reduced to zero. Any other amounts transferred from the Loan
Account will be allocated to the Guaranteed Interest Account and 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.
How May A Policyowner Obtain The Net Cash Surrender Value?
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any surrender charges and outstanding monthly deductions due (the
"Cash Surrender Value") minus the value of the Loan Account. The Net Cash
Surrender Value will be determined at the end of the Business Day on which
Manufacturers Life of America receives the Policy and a written request for
surrender at its Service Office. After a Policy is surrendered, the insurance
coverage and all other benefits under the Policy will terminate. Surrender of a
Policy within 15 years of issuance or an increase in face amount will usually
result in the assessment by Manufacturers Life of America of surrender charges.
(See Charges "What Are The Surrender Charges?")
After a Policy has been in force for two policy years, the policyowner may make
a partial withdrawal of the Net Cash Surrender Value. The minimum amount that
may be withdrawn is $500. The policyowner should specify the portion of the
withdrawal to be taken from each Investment Account and the Guaranteed Interest
Account. In the absence of instructions, the withdrawal will be allocated among
such accounts in the same proportion as the Policy Value in each account bears
to the Net Policy Value. No more than one partial withdrawal may be made in any
one policy month.
Like surrender of a Policy, a partial withdrawal made within 15 years following
issuance of the Policy or a face amount increase will result in the assessment
of a portion of the surrender charges to which the Policy is subject if the
withdrawal is in excess of the Withdrawal Tier Amount. The Withdrawal Tier
Amount is equal to 10% of the Net Cash Surrender Value determined as of the
previous policy anniversary. In determining what, if any, portion of a partial
Net Cash Surrender Value withdrawal is in excess of the Withdrawal Tier Amount,
all
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<PAGE> 38
previous partial Net Cash Surrender Value withdrawals that have occurred in the
current policy year are included. The portion of the surrender charges assessed
will be based on the ratio of the amount of the withdrawal which exceeds the
Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy immediately
prior to the withdrawal. The surrender charges will be deducted from each
Investment Account and the Guaranteed Interest Account in the same proportion as
the amount of the withdrawal taken from such account bears to the total amount
of the withdrawal (see Charges "What Are The Surrender Charges?"). If the amount
in the account is not sufficient to pay the portion of the surrender charges
allocated to that account, then the portion of the withdrawal allocated to that
account will be reduced so that the withdrawal plus the portion of the surrender
charges allocated to that account equal the value of that account. Units equal
to the amount of the partial withdrawal taken, and surrender charges deducted,
from each Investment Account will be cancelled based on the value of such units
determined at the end of the Business Day on which Manufacturers Life of America
receives a written request for withdrawal at its Service Office.
If the Option 1 death benefit is in effect under a Policy from which a partial
withdrawal is made, the face amount of the Policy will be reduced. If the death
benefit is equal to the face amount at the time of withdrawal, the face amount
will be reduced by the amount of the withdrawal plus the portion of the
surrender charges assessed. If the death benefit is based upon the Policy Value
times the applicable percentage set forth under Insurance Benefit "What Death
Benefit Options Are Available?" above, the face amount will be reduced only to
the extent that the amount of the withdrawal plus the portion of the surrender
charges assessed exceeds the difference between the death benefit and the face
amount. Reductions in face amount resulting from partial withdrawals will not
incur any surrender charges above the surrender charges applicable to the
withdrawal. When the face amount of a Policy is based on one or more increases
subsequent to issuance of the Policy, a reduction resulting from a partial
withdrawal will be applied in the same manner as a requested decrease in face
amount, i.e., 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.
Charges
Charges under the Policies are assessed as (i) deductions from premiums when
made, (ii) surrender charges upon surrender, partial withdrawals, decreases in
face amount or termination following default, (iii) monthly deductions from the
Policy Value, and (iv) risk charges assessed against Separate Account assets.
These charges are described below.
What Deductions Are Made From Premiums?
Manufacturers Life of America deducts a sales charge of 3% of each premium
payment. A deferred sales charge in the maximum amount of 47% of premiums paid
up to two Target Premiums is deducted from the Policy Value upon certain
transactions. See "What Are The Surrender Charges?" below. These charges
compensate the Company for some of the expenses of selling and distributing the
Policies, including agents' commissions, advertising, agent training and the
printing of prospectuses and sales literature.
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<PAGE> 39
The sales charges deducted in any policy year are not specifically related to
sales expenses incurred in that year. Instead, the Company expects that the
major portion of the sales expenses attributable to a Policy will be incurred
during the first policy year, although the sales charge deducted from premiums
and any deferred sales charge may be spread out over the period the Policy is in
force. Manufacturers Life of America anticipates that the aggregate amounts
received under the Policies for sales loading will be insufficient to cover
aggregate sales expenses. To the extent that sales expenses exceed sales
charges, Manufacturers Life of America will pay the excess from its other assets
or surplus, including amounts derived from the mortality and expense risks
charge described below. A portion of the sales charge and the deferred sales
charge may be subject to refund if the Policy is surrendered for its Net Cash
Surrender Value at any time during the first two years following issuance or
following an increase in face amount or if the increase is cancelled during the
two-year period following the increase. See "What Are The Surrender Charges?"
(Refund Of Excess Sales Charges).
Manufacturers Life of America deducts a premium tax charge of 2% of each premium
payment. State and local premium taxes differ from state to state. The 2% rate,
which cannot be changed, is expected to be sufficient, on average, to pay
premium taxes where required.
What Are The Surrender Charges?
Manufacturers Life of America will assess surrender charges upon surrender or
lapse of a Policy, a partial withdrawal of Policy Value in excess of the
Withdrawal Tier Amount or a requested decrease in face amount. The charges will
be assessed if any of the above transactions occurs within 15 years after
issuance of the Policy or any increase in face amount unless the charges have
been previously deducted. There are two surrender charges a deferred
underwriting charge and a deferred sales charge.
Deferred Underwriting Charge. The deferred underwriting charge is a dollar
amount for each $1,000 of face amount of insurance in accordance with the
following schedule:
<TABLE>
<S> <C> <C> <C> <C> <C>
Age: 0-20 21-40 41-50 51-60 61 & above
Charge Per $1,000: $2.00 $3.00 $4.00 $5.00 $6.00
</TABLE>
The charge per $1,000 will be determined on the basis of the age of the life
insured at issue or upon increase of the face amount, as applicable. The
deferred underwriting charge applicable to each level of insurance coverage
cannot exceed $1,000. The amount of the charge remains level for five years.
Following the fifth year after issuance of the Policy or a face amount increase,
the charge applicable to the initial face amount or increase will decrease each
month by .83%, or 10% per year. After the monthly deduction is taken for the
last policy month preceding the end of the fifteenth year after issuance or face
amount increase, the charge will have decreased to zero. The applicable
percentage of the surrender charges to which the Policy would otherwise be
subject is
34
<PAGE> 40
illustrated on an annual basis by the following table:
<TABLE>
<CAPTION>
Transaction Occurs
After Monthly Deduction
Taken for Last Month Percent of
Preceding End of Year Surrender Charges
<S> <C>
5 & below 100%
6 90%
7 80%
8 70%
9 60%
10 50%
11 40%
12 30%
13 20%
14 10%
15 & above 0%
</TABLE>
The surrender charges begin to grade downward before the beginning of the sixth
year for issue ages above 69. For issue ages 70, 71, 72, 73, and issue ages 74
to 80, the surrender charges begin to grade downward at the beginning of the
fifth, fourth, third, second, and first years, respectively.
The deferred underwriting charge is designed to cover the administrative
expenses associated with underwriting and policy issue, including the costs of
processing applications, conducting medical examinations, determining the life
insured's risk class and establishing policy records. Manufacturers Life of
America does not expect to recover from the deferred underwriting charge any
amount in excess of its expenses associated with underwriting and policy issue.
Deferred Sales Charge. The maximum deferred sales charge is equal to 47% of the
premiums paid under the Policy up to two Target Premiums described below. For
life insureds over age 69 at issue or face amount increase, the applicable
percentage of premiums will be reduced in accordance with the following table:
<TABLE>
<CAPTION>
Applicable
Age Percentage of Premiums
<S> <C>
70 45%
71 43%
72 41%
73 39%
74 37%
75 35%
76 34%
77 33%
78 32%
79 31%
80 30%
</TABLE>
Like the deferred underwriting charge, the percentage deferred sales charge
35
<PAGE> 41
applicable to the initial face amount or face amount increase will remain level
for five years (or less for issue ages above 69) and following such period will
decrease .83% per month, or 10% per year, from the charge that would otherwise
apply. See chart under "Deferred Underwriting Charge" above.
As noted above, the deferred sales charge may not exceed 47% of two Target
Premiums. The Target Premium for the initial face amount is set forth in the
Policy. A Target Premium will be computed for each increase in face amount above
the highest face amount of coverage previously in effect, and the policyowner
will be advised of such Target Premium. Target Premiums are determined on the
basis of a target premium rate and the face amount of insurance provided at
issue or by the increase. The applicable rate varies with the issue age and sex
(unless unisex rates are required by law) of the life insured and, in the case
of certain Policies issued in group or sponsored arrangements providing for
reduction in cost of insurance charges (see "Are There Special Provisions For
Group Or Sponsored Arrangements?"), the amount of insurance coverage. In order
to determine the deferred sales charge applicable to a face amount increase,
Manufacturers Life of America will treat a portion of the Policy Value on the
date of increase as a premium attributable to the increase. In addition, a
portion of each premium paid subsequent to the increase will be attributed to
the increase. In each case, the portion attributable to the increase will be the
ratio of the guideline annual premium (described below) for the increase to the
sum of the guideline annual premiums for the initial face amount and all
increases including the requested increase.
Refund Of Excess Sales Charges. If a Policy is surrendered for its Net Cash
Surrender Value at any time during the first two years following issuance or
following an increase in face amount or the face amount decreased during the
second year after issuance or after increase in face amount, Manufacturers Life
of America will refund that part of the total sales charges deducted (the sum of
the deferred sales charge and the sales charge deducted from premiums) with
respect to "premiums" paid for the initial face amount or such increase
(including premiums allocated to the increase as described in the preceding
paragraph), whichever is applicable, which is in excess of (i) the sum of 30% of
the "premiums" paid up to one guideline annual premium plus 10% of the
"premiums" paid in excess of one guideline annual premium up to two guideline
annual premiums and (ii) up to 9% of the "premiums" paid in excess of two
guideline annual premiums. Since Target Premiums are always less than guideline
annual premiums, with the deferred sales charge structure described above, there
will be no refund with respect to "premiums" paid in excess of two guideline
annual premiums and these excess "premiums" will not reduce the refund
applicable to "premiums" paid up to two guideline annual premiums.
A policyowner may also elect to cancel an increase in face amount during the
first two years following the increase and have the deferred sales charge for
the increase reduced by the refund of any excess sales load attributable to the
increase. The guideline annual premium, which is set forth in the Policy, is the
level annual premium that would be payable for the life of the Policy for a
specific amount of coverage if premiums were fixed as to both timing and amount
and based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality
Tables, net investment earnings at an effective annual rate of 5% and fees and
charges as set forth in the Policy. In determining the maximum sales charge
36
<PAGE> 42
allowable, "premiums" will be attributed to the initial face amount and each
increase in the same manner as used in determining the deferred sales charge
applicable to the face amount and each increase, and the guideline annual
premium will be determined separately for the initial face amount and each
increase.
The operation of the maximum sales charge allowable is illustrated by the
following example. Assume that the policyowner has paid $3,000 in premiums under
a Policy with a guideline annual premium of $2,000 and a Target Premium of
$1,500 and decides to surrender his or her Policy during the second policy year.
In the absence of the refund right, the deferred sales charge would be $1,410
(47% of $3,000).
However, under the formula described above, the maximum sales charge allowable
is the sum of $600 (30% of $2,000) and $100 (10% of $1,000), or $700. Since a
sales load of $90 (3% of $3,000) was deducted from the premiums when received,
and therefore only $610 ($700 - $90) of the deferred sales charge may be
retained by the Company, a refund of $800 ($1,410 - $610) will be payable to the
policyowner. Since a deferred sales charge is deducted in the event a Policy
terminates for failure to make the required payment following the Policy's going
into default, the refund right will apply if such termination occurs during the
two-year period following issuance of the Policy or any increase in face amount.
If the Policy terminates during the two years after a face amount increase, the
refund will relate only to the sales charges assessed against premiums
attributable to the increase.
Charges On Partial Withdrawals. As noted above, both the deferred sales charge
and the deferred underwriting charge are applicable in the event of a partial
withdrawal of the Net Cash Surrender Value in excess of the Withdrawal Tier
Amount. A portion of the surrender charges applicable to the initial face amount
and to each increase in face amount will be deducted as a result of the
withdrawal. The portion to be deducted will be the same as the ratio of the
amount of the withdrawal to the Net Cash Surrender Value prior to the
withdrawal.
The charges will be deducted from the Policy Value, and the amount so deducted
will be allocated among the Investment Accounts and the Guaranteed Interest
Account in the same proportion that the withdrawal is allocated among such
accounts. Whenever a portion of the surrender charges are deducted as a result
of a partial withdrawal, the Policy's remaining surrender charges will be
reduced by the amount of the charges taken. The surrender charges not assessed
as a result of the 10% free withdrawal provision remain in effect under the
Policy and may be assessed upon surrender or lapse, other partial withdrawals or
a requested decrease in face amount.
Charges On Decreases In Face Amount. As with partial withdrawals, a portion of a
Policy's surrender charges will be deducted upon a decrease in or cancellation
of face amount requested by the policyowner. Since surrender charges are
determined separately for the initial face amount and each face amount increase
and since a decrease in face amount will have a different impact on each level
of insurance coverage, the portion of the surrender charges to be deducted with
respect to each level of insurance coverage will be determined separately. Such
portion will be the same as the ratio of the amount of the reduction in such
coverage to the amount of such coverage prior to the reduction. As noted under
37
<PAGE> 43
Insurance Benefit "Can The Face Amount Of A Policy Be Changed?" decreases are
applied to the most recent increase first and thereafter to the next most recent
increases successively. The charges will be deducted from the Policy Value, and
the amount so deducted will be allocated among the Investment Accounts and the
Guaranteed Interest Account in the same proportion as the Policy Value in each
bears to the Net Policy Value. Whenever a portion of the surrender charges is
deducted as a result of a decrease in face amount, the Policy's remaining
surrender charges will be reduced by the amount of the charges taken.
What Are The Monthly Deductions?
On the policy date and at the beginning of each policy month, a deduction is due
from the Policy Value to cover certain charges in connection with the Policy.
Monthly deductions due prior to the effective date will be taken on the
effective date instead of the dates they were due. The charges consist of (i) a
monthly administration charge, (ii) a monthly charge for the cost of insurance,
and (iii) a monthly charge for any supplementary benefits added to the Policy
(see Other Provisions "What Supplementary Benefits Are Available?"). The monthly
deduction will be allocated among the Investment Accounts and the Guaranteed
Interest Account in the same proportion as the Policy Value in each bears to the
Net Policy Value.
The monthly administration charge is $6.00. The charge is designed to cover
certain administrative expenses associated with the Policy, including
maintaining policy records, collecting premiums and processing death claims,
surrender and withdrawal requests and various changes permitted under a Policy.
Manufacturers Life of America does not expect to recover from the monthly
administration charge any amount in excess of its accumulated administrative
expenses relating to the Policies and the Separate Account. Even though
administrative expenses may increase, the Company guarantees that it will not
increase the amount of the monthly administration charge.
The monthly charge for the cost of insurance is determined by multiplying the
applicable cost of insurance rate times the net amount at risk at the beginning
of each policy month. The charge for the cost of insurance will reflect any
extra charges for additional ratings indicated in the Policy. The cost of
insurance rate is based on the life insured's age, sex (unless unisex rates are
required by law), risk class, the duration of the insurance coverage and, in the
case of certain Policies issued in group or sponsored arrangements providing for
reduction in cost of insurance charges (see "Are There Special Provisions For
Group Or Sponsored Arrangements?"), the face amount of the Policy. See Other
Matters Legal Considerations. The rate is determined separately for the initial
face amount and for each increase in face amount. Cost of insurance rates will
generally increase with the life insured's age.
The cost of insurance rates used by Manufacturers Life of America reflect its
expectations as to future mortality experience. The rates may be changed from
time to time on a basis which does not unfairly discriminate within the class of
lives insured. In no event will the cost of insurance rate 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 or if
simplified underwriting is granted in a group or sponsored arrangement (see "Are
38
<PAGE> 44
There Special Provisions For Group Or Sponsored Arrangements?"). The guaranteed
rates are based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker
Mortality Tables.
The net amount at risk to which the cost of insurance rate is applied is the
difference between the death benefit, divided by 1.0032737 (a factor which
reduces the net amount at risk for cost of insurance charge purposes by taking
into account assumed monthly earnings at an annual rate of 4%), and the Policy
Value. Because different cost of insurance rates may apply to different levels
of insurance coverage, the net amount at risk will be calculated separately for
each level of insurance coverage. When the Option 1 death benefit is in effect,
for purposes of determining the net amount at risk applicable to each level of
insurance coverage, the Policy Value is attributed first to the initial face
amount and then, if the Policy Value is greater than the initial face amount, to
each increase in face amount in the order made.
Because the calculation of the net amount at risk is different under the death
benefit options when more than one level of insurance coverage is in effect, a
change in the death benefit option may result in a different net amount at risk
for each level of insurance coverage than would have occurred had the death
benefit option not been changed. Since the cost of insurance is calculated
separately for each level of insurance coverage, any change in the net amount at
risk for a level of insurance coverage resulting from a change in the death
benefit option may affect the amount of the charge for the cost of insurance.
Partial withdrawals and decreases in face amount will also affect the manner in
which the net amount at risk for each level of insurance coverage is calculated.
In group or sponsored arrangements where Manufacturers Life of America issues
Policies with a face amount of less than $25,000 but not less than $10,000,
Policies issued with a face amount of less than $25,000 may be subject to an
additional premium deduction equal to $1.00 per $1,000 face amount. This amount
is added to the cost of insurance and deducted monthly. The amount so added will
not cause the cost of insurance deducted to exceed the guaranteed rates set
forth in the Policy.
Are There Special Provisions For Group Or Sponsored Arrangements?
Where permitted by state insurance laws, Policies may be purchased under group
or sponsored arrangements, as well as on an individual basis. As noted
previously, the minimum face amount and minimum change in face amount are
reduced to $10,000 and $5,000, respectively, for Policies issued pursuant to
such arrangements. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases Policies covering a group of
individuals on a group basis. In California all participants of group
arrangements will be individually underwritten. A "sponsored arrangement"
includes a program under which an employer permits group solicitation of its
employees or an association permits group solicitation of its members for the
purchase of Policies on an individual basis.
The sales charge, monthly deductions, surrender charges, and other charges
described above may be reduced for Policies issued in connection with group or
sponsored arrangements. Such arrangements may include sales without withdrawal
39
<PAGE> 45
charges and deductions to employees, officers, directors, agents, immediate
family members of the foregoing, and employees of agents of Manufacturers Life
and its subsidiaries. In addition, pursuant to an exemptive order granted by the
SEC on April 10, 1996, Manufacturers Life of America may issue Policies in group
or sponsored arrangements which Policies have a surrender charge structure which
increases over the life of the Policy. Manufacturers Life of America will issue
these Policies in accordance with its rules in effect as of the date an
application for a Policy is approved. To qualify for such a reduction, a group
or sponsored arrangement must satisfy certain criteria as to, for example, size
of the group, expected number of participants and anticipated premium payments
from the group. Generally, the sales contacts and effort, administrative costs
and mortality cost per Policy vary based on such factors as the size of the
group or sponsored arrangements, the purposes for which Policies are purchased
and certain characteristics of its members. The amount of reduction and the
criteria for qualification will reflect the reduced sales effort and
administrative costs resulting from, and the different mortality experience
expected as a result of, sales to qualifying groups and sponsored arrangements.
Manufacturers Life of America may modify from time to time, on a uniform basis,
both the amounts of reductions and the criteria for qualification. Reductions in
these charges will not be unfairly discriminatory against any person, including
the affected policyowners and all other policyowners funded by the Separate
Account.
In addition, groups or persons purchasing under a sponsored arrangement may
apply for simplified underwriting. If simplified underwriting is granted, the
cost of insurance charge may increase as a result of higher anticipated
mortality experience. In addition, groups or persons purchasing under a
sponsored arrangement may request changes in death benefit option and increases
and decreases in face amount at any time after issue and decreases in face
amount at any time after an increase in face amount. Increases in face amount
requested by groups or persons purchasing under a sponsored arrangement are not
subject to a minimum amount and will be issued utilizing the flexible term
insurance option rider. Decreases in face amount may involve imposition of a
surrender charge.
Are There Special Provisions For Exchanges?
Manufacturers Life of America will permit owners of certain fixed benefit life
insurance policies issued either by the Company or Manufacturers Life to
exchange their policies for the Policies described in this prospectus. A portion
of the cash values transferred from such policies will be credited to the
Policies without deduction of the 3% sales charge. Moreover, surrender charges
under the policies being exchanged or the Policies issued in exchange therefor
may be reduced or eliminated. Policy loans made under policies being exchanged
may be carried over to the new Policies without repayment at the time of
exchange. Policyowners considering an exchange should consult their tax advisers
as to the tax consequences of an exchange.
Manufacturers Life of America has obtained an order from the Securities and
Exchange Commission dated November 28, 1990 pursuant to which holders of
Manufacturers Life of America's scheduled premium variable life ("Director
2000") insurance policies may elect to exchange those policies for the Policies
40
<PAGE> 46
described in this prospectus (the "Exchange Offer").
The terms and conditions under which Director 2000 policyowners may exchange
their policies for the Policies differ from the terms and conditions set forth
in this prospectus and are available only to Director 2000 policyowners who
accept the Exchange Offer.
Those Director 2000 policyowners who accept the Exchange Offer will be able to
exchange their existing policies for Policies of like face amount without any
new evidence of insurability. No direct or deferred sales charge will be imposed
on the cash values rolled over into the Policy. No deferred sales charges or
underwriting charges will be imposed on surrenders of Policies acquired through
this Exchange Offer except in connection with premium payments attributable to
an increase in face amount. Increases in the face amount of a Policy issued
pursuant to the Exchange Offer will be permitted one month after issuance. In
addition, a Policy may be issued with a face amount less than $25,000 if issued
pursuant to the Exchange Offer.
What Are The Risk Charges Assessed Against Separate Account Assets?
Manufacturers Life of America makes a daily charge to the Separate Account for
the mortality and expense risks it assumes under the Policies. This charge is
made each Business Day at an annual rate of .65% of the value of the Separate
Account's assets. The mortality risk assumed is that lives insured may live for
a shorter period of time than the Company estimated. The expense risk assumed is
that expenses incurred in issuing and administering the Policies will be greater
than the Company estimated. Manufacturers Life of America will realize a gain
from this charge to the extent it is not needed to provide benefits and pay
expenses under the Policies.
Are There Other Relevant Charges?
Currently, Manufacturers Life of America makes no charge against the Separate
Account for federal, state or local taxes that may be attributable to the
Separate Account or to the operations of the Company with respect to the
Policies. However, if Manufacturers Life of America incurs any such taxes, it
may make a charge or establish a provision for those taxes.
Charges will be imposed on certain transfers of Policy Values, including a $25
charge for each transfer in excess of twelve in a policy year and a $5 charge
for each Dollar Cost Averaging transfer when Policy Value does not exceed
$15,000. See Policy Values "Transfers Of Policy Value."
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects:
(i) an investment management fee of 1.05% assessed against the assets of
the Emerging Growth Trust
(ii) an investment management fee of .70% assessed against the assets of
the Quantitative Equity Trust (formerly, the Common Stock Fund)*
(iii) an investment management fee of .70% assessed against the assets of
the Real Estate Securities Trust*
(iv) an investment management fee of .80% assessed against the assets of
the Balanced Trust
(v) an investment management fee of .65% assessed against the assets of
the Capital Growth Bond Trust*
(vi) an investment management fee of .50% assessed against the assets of
the Money Market Trust
(vii) an investment management fee of 1.05% assessed against the assets of
the International Stock Trust
(viii) an investment management fee of .85% assessed against the assets of
the Pacific Rim Emerging Markets Trust
(ix) an investment management fee of .25% assessed against the assets of
the Equity Index Trust
(x) an investment management fee of .925% assessed against the assets of
the Blue Chip Growth Trust
(xi) an investment management fee of 1.10% assessed against the assets of
the International Small Cap Trust
41
<PAGE> 47
(xii) investment management fee equivalent to an annual rate of .80% of the
value of the average daily net assets of the Equity-Income Trust;
(xiii) investment management fee equivalent to an annual rate of .65% of the
value of the average daily net assets of the U.S. Government Securities
Trust;
(xiv) investment management fee equivalent to an annual rate of .75% of the
value of the average daily net assets of the Growth and Income Trust;
(xv) investment management fee equivalent to an annual rate of .75% of the
value of the average daily net assets of the Equity Trust;
(xvi) investment management fee equivalent to an annual rate of .75% of the
average daily net assets of the Conservative Asset Allocation Trust;
(xvii) investment management fee equivalent to an annual rate of .75% of the
average daily net assets of the Moderate Asset Allocation Trust;
(xviii)investment management fee equivalent to an annual rate of .75% of the
average daily net assets of the Conservative Asset Allocation Trust;
(xix) expenses of up to .75% assessed against the assets of the Pacific Rim
Emerging Markets Trust and International Stock Trust
(xx) expenses of up to .15% assessed against the assets of the
Equity Index Trust
(xxi) expenses of up to .50% assessed against the assets of all other Trusts*
(xxii) other expenses already deducted from the assets of the NASL Trusts
*NASL Financial Services, Inc. has voluntarily agreed to waive fees payable to
it and/or to reimburse expenses for a period of one year beginning the
effective date of this prospectus to the extent necessary to prevent the total
of advisory fees and expenses for the Common Stock Trust, Real Estate
Securities Trust and Capital Growth Bond Trust for such period from exceeding
.50% of average net assets.
Detailed information concerning such fees and expenses is set forth under the
caption "Management of The Trust" in the Prospectus for the NASL Series Trust
that accompanies this Prospectus.
The General Account
42
<PAGE> 48
By virtue of exclusionary provisions, interests in the general account of
Manufacturers Life of America have not been registered under the Securities Act
of 1933 and the general account has not been registered as an investment company
under the Investment Company Act of 1940. Accordingly, neither the general
account nor any interests therein are subject to the provisions of these acts,
and as a result the staff of the Securities and Exchange Commission 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.
What Is 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.
A policyowner may elect to allocate net premiums to the Guaranteed Interest
Account or to transfer all or a portion of the Policy Value to the Guaranteed
Interest Account from the Investment Accounts. Manufacturers Life of America
will hold the reserves required for any portion of the Policy Value allocated to
the Guaranteed Interest Account in its general account. However, an allocation
of Policy Value to the Guaranteed Interest Account does not entitle the
policyowner to share in the investment experience of the general account.
Instead, Manufacturers Life of America guarantees that the Policy Value in the
Guaranteed Interest Account will accrue interest daily at an effective annual
rate of at least 4%, without regard to the actual investment experience of the
general account. Consequently, if a policyowner pays the planned premiums,
allocates all net premiums only to the general account and makes no transfers,
partial withdrawals, or policy loans, the minimum amount and duration of his or
her death benefit will be determinable and guaranteed. Transfers from the
Guaranteed Interest Account to the Investment Accounts are subject to
restrictions (see Policy Values "What Is The Policy Value And How Is It
Determined?").
The Policy Value in the Guaranteed Interest Account is equal to the portion of
the net premiums allocated to it, plus any amounts transferred to it and
interest credited to it minus any charges deducted from it or partial
withdrawals or amounts transferred from it. Manufacturers Life of America
guarantees that the interest credited to the Policy Value in the Guaranteed
Interest Account will not be less than an effective annual rate of 4%. The
Company may, at its sole discretion, credit a higher rate of interest, although
it is not obligated to do so. The policyowner assumes the risk that interest
credited may not exceed the guaranteed minimum rate of 4% per year.
Other Provisions
What Supplementary Benefits Are Available?
Subject to certain requirements, one or more supplementary benefits may be added
to a Policy, including those providing term insurance for various persons
43
<PAGE> 49
and, in the case of corporate-owned Policies, permitting a change of the life
insured for Policies purchased before October 1, 1996 and a change of life
insured option and flexible term insurance option for Policies purchased on or
after October 1, 1996 and, if permitted by the applicable state, an accelerated
death benefit. More detailed information concerning these supplementary benefits
may be obtained from an authorized agent of the Company. The cost of any
supplementary benefits will be deducted as part of the monthly deduction. See
Charges "What Are The Monthly Deductions?"
Under What Circumstances May Portfolio Shares Be Substituted?
Although Manufacturers Life of America believes it to be highly unlikely, it is
possible that in the judgment of its management, one or more of the Trusts may
become unsuitable for investment by the Separate Account because of a change in
investment policy or a change in the applicable laws or regulations, 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 Trust or of an entirely different mutual fund. Before this can be done,
the approval of the S.E.C. and one or more state insurance departments may be
required.
Manufacturers Life of America also reserves the right to combine other separate
accounts with the Separate Account, to establish additional sub-accounts within
the Separate Account, 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.
The investment objective of the Separate Account will not be changed materially
without first filing the change with the Insurance Commissioner of the State of
Michigan. Policyowners will be advised of any such change at the time it is
made.
What Are The Other General Policy Provisions?
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. There after the beneficiary may be
changed by the policyowner during the life insured's lifetime by giving written
notice to Manufacturers Life of America in a form satisfactory to it unless an
irrevocable designation has been elected. If the life insured dies and there is
no surviving beneficiary, the policyowner, or the policyowner's estate if the
policyowner is the life insured, will be the beneficiary. If a beneficiary dies
before the seventh day after the death of the life insured, the Company will pay
the insurance benefit as if the beneficiary had died before the life insured.
44
<PAGE> 50
Incontestability. Manufacturers Life of America will not contest the validity of
a Policy after it has been in force during the life insured's lifetime for two
years from the policy date. It will not contest the validity of an increase in
face amount or the addition of a supplementary benefit after such increase or
addition has been in force during the life insured's lifetime for two years. If
a Policy has been reinstated and been in force for less than two years from the
reinstatement date, the Company can contest any misrepresentation of a fact
material to the reinstatement.
Misstatement Of Age Or Sex. If the life insured's stated age or sex or both in
the Policy are incorrect, Manufacturers Life of America will change the face
amount of insurance so that the death benefit will be that which the most recent
monthly charge for the cost of insurance would have bought for the correct age
and sex.
Suicide Exclusion. If the life insured, whether sane or insane, dies by suicide
within one year from the policy date, Manufacturers Life of America will pay
only the premiums paid less any partial withdrawals of the Net Cash Surrender
Value and any amount in the Loan Account. If the life insured should die by
suicide within one year after a face amount increase, the death benefit for the
increase will be limited to the monthly deduction for the increase.
Assignment. Manufacturers Life of America will not be bound by an assignment
until it receives a copy of it at its Service Office. Manufacturers Life of
America assumes no responsibility for the validity or effects of any assignment.
When Are Proceeds Paid?
As long as the Policy is in force, Manufacturers Life of America will ordinarily
pay any policy loans, partial withdrawals, Net Cash Surrender Value or any
insurance benefit within seven days after receipt at the Manufacturers Life of
America Service Office of all the documents required for such a payment. The
Company may delay the payment of any policy loans, partial withdrawals, Net Cash
Surrender Value or the portion of any insurance benefit that depends on
Investment Account values for up to six months if such payments are based on
values which do not depend on the investment performance of the sub-accounts;
otherwise for any period during which the New York Stock Exchange is closed for
trading (except for normal holiday closings) or when the Securities and Exchange
Commission has determined that a state of emergency exists which may make such
payment impracticable.
What Reports Will Be Sent 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 the
death benefit, the Policy Value and its allocation among the Investment
Accounts, the Guaranteed Interest Account and the Loan Account, the value of the
units in each Investment Account to which the Policy Value is allocated, any
Loan Account balance and any interest charged since the last report, the
premiums paid and policy transactions made during the period since the last
statement and any other information required by law.
45
<PAGE> 51
Each policyowner will also be sent an annual and a semi-annual report for NASL
Series Trust which will include a list of the securities held in each Portfolio
as required by the 1940 Act.
Other Matters
What Is The Federal Tax Treatment Of Policies?
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon the Company's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present federal income tax laws nor of the
current interpretations by the Service. WE DO NOT MAKE ANY GUARANTEE REGARDING
THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION REGARDING THE POLICIES.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans 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 tax
consequences, is contemplated, a qualified tax adviser should be consulted for
advice on the tax attributes of the particular arrangement.
Tax Status Of The Policy
Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code") sets
forth a definition of a life insurance contract for federal tax purposes. The
Secretary of Treasury (the "Treasury") is authorized to prescribe regulations
implementing Section 7702. However, while proposed regulations and other interim
guidance have been issued, final regulations have not been adopted and guidance
as to how Section 7702 is to be applied is limited. If a Policy were determined
not to be a life insurance contract for purposes of Section 7702, such Policy
would not provide the tax advantages normally provided by a life insurance
policy.
With respect to a Policy 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 premium
class involving higher-than-standard mortality risk), there is less guidance, in
particular as to how mortality and other expense requirements of Section 7702
are to be applied in determining whether such a Policy meets the Section 7702
46
<PAGE> 52
definition of a life insurance contract. Thus, it is not clear whether or not
such a Policy would satisfy Section 7702, particularly if the policyowner pays
the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
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.
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 NASL Series Trust, intends
to comply with the diversification requirements prescribed in Treas. Reg.
Sec.1.817-5, which affect how NASL Series 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.
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 subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
owner has additional flexibility in allocating premium payments and Policy
Values. These differences could result in an owner being treated as the owner of
a pro rata portion of the assets of the Separate Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance
47
<PAGE> 53
contract for federal income tax purposes.
What Is The Tax Treatment Of Policy Benefits?
In General. 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. Thus, the death benefit under
the Policy should be excludable from the gross income of the beneficiary under
Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, a change of insured, 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.
Generally, the policyowner will not be deemed to be in constructive receipt of
the Policy Value, including increments thereof, until there is a distribution.
The tax consequences of distributions from, and loans taken from or secured by,
a Policy depend on whether the Policy is classified as a "Modified Endowment
Contract." Upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax, regardless of whether
the Policy is or is not a Modified Endowment Contract.
Modified Endowment Contracts. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts," which applies
to Policies entered into or materially changed after June 20, 1988.
Because of the Policy's flexibility, classification as a Modified Endowment
Contract will depend on the individual circumstances of each Policy. In general,
a Policy will be a Modified Endowment Contract if the accumulated premiums paid
at any time during the first seven policy years exceed the sum of the net level
premiums which would have been paid on or before such time if the Policy
provided for paid-up future benefits after the payment of seven level annual
premiums. The determination of whether a Policy will be a Modified Endowment
Contract after a material change generally depends upon the relationship of the
death benefit and Policy Value at the time of such change and the additional
premiums paid in the seven years following the material change. If a premium is
received which would cause the Policy to become a Modified Endowment Contract
(MEC) within 23 days of the next policy anniversary, the Company will not apply
the portion of the premium which would cause MEC status (excess premium) to the
Policy when received. The excess premium will be placed in a suspense account
until the next anniversary date, at which point the excess premium along with
interest, earned on the excess premium at a rate of 3.5% from the date the
premium was received, will be applied to the Policy. The policyowner will be
advised of this action and will be offered the opportunity to have the premium
credited as of the original date received or to have the premium returned. If
the policyowner does not respond, the premium and interest will be applied to
the Policy as of the first day of the next anniversary.
If a premium is received which would cause the Policy to become a MEC more than
23 days prior to the next policy anniversary, the Company will refund any excess
premium to the policyowner. The portion of the premium which is not excess will
be applied as of the date received. The policyowner will be advised of this
action and will be offered the opportunity to return the premium and have it
credited to the account as of the original date received.
If, in connection with the application or issue of the Policy, the policyowner
acknowledges that the Policy is or will become a MEC, excess premiums that would
cause MEC status will be credited as of the date received.
Further, if a transaction occurs which reduces the face amount of the Policy,
the Policy will be retested, retroactive to the date of purchase, to determine
compliance with the seven-pay test based on the lower face amount. Failure to
48
<PAGE> 54
comply would result in classification as a Modified Endowment Contract
regardless of any efforts by the Company to provide a payment schedule that will
not violate the seven-pay test.
The rules relating to whether a Policy will be treated as a Modified Endowment
Contract 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 Modified Endowment Contract.
Distributions From Policies Classified As Modified Endowment Contracts. Policies
classified as Modified Endowment Contracts will be subject to the following tax
rules: First, all partial withdrawals from such a Policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of the
Policy Value immediately before the distribution over the investment in the
Policy (described below) at such time. Second, loans taken from or secured by
such a Policy are treated as partial withdrawals from the Policy and taxed
accordingly. Past-due loan interest that is added to the loan amount is treated
as a loan. Third, a 10% additional income tax is imposed on the portion of any
distribution (including distributions upon surrender) from, or loan taken from
or secured by, such a Policy that is included in income except where the
distribution or loan is made on or after the policyowner attains age 59 1/2, is
attributable to the policyowner's 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.
Distributions From Policies Not Classified As Modified Endowment Contracts. A
distribution from a Policy that is not a Modified Endowment Contract is
generally treated as a tax-free recovery by the policyowner of the investment in
the Policy (described below) to the extent of such investment in the Policy, and
as a distribution of taxable income only to the extent the distribution exceeds
the investment in the Policy. An exception to this general rule occurs in the
case of a decrease in the Policy's death benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in a cash distribution to the policyowner in order for
the Policy to continue complying with the Section 7702 definitional limits. Such
a cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as
indebtedness of the policyowner. Select Loans may, however, be treated as a
distribution.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10% additional tax.
Policy Loan Interest. Generally, personal interest paid on any loan under a
Policy which is owned by an individual is not deductible. In addition, interest
on any loan under a Policy owned by a taxpayer and covering the life of any
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<PAGE> 55
individual who is an officer or employee of or is financially interested in the
business carried on by that taxpayer will not be tax deductible to the extent
the aggregate amount of such loans with respect to contracts covering such
individual exceeds $50,000. The deduction of interest on Policy loans may also
be subject to other restrictions under Section 264 of the Code.
Investment In The Policy. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which has been excluded from gross
income of the policyowner (except that the amount of any loan from, or secured
by, a Policy that is a Modified Endowment Contract, to the extent such amount
has been excluded from gross income, will be disregarded), plus (iii) the amount
of any loan from, or secured by, a Policy that is a Modified Endowment Contract
to the extent that such amount has been included in the gross income of the
policyowner.
Multiple Policies. All Modified Endowment Contracts that are issued by the
Company (or its affiliates) to the same policyowner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in the gross income under Section 72(e) of the Code.
What Are The Company's Tax Considerations?
As a result of the Omnibus Budget Reconciliation Act of 1990, insurance
companies are generally required to capitalize and amortize certain policy
acquisition expenses over a 10-year period rather than currently deducting such
expenses. This treatment applies to the deferred acquisition expenses of a
Policy and results in a significantly higher corporate income tax liability for
the Company.
At the present time, the Company makes no charge to the Separate Account for any
federal, state or local taxes that the Company incurs that may be attributable
to such Account or to the Policies. The Company, however, reserves the right in
the future to make a charge for any such tax or other economic burden resulting
from the application of the tax laws that it determines to be properly
attributable to the Separate Account or to the Policies.
Who Sells The Policies And What Are The Sales Commissions?
ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life, will
act as the principal underwriter of, and continuously offer, the Policies
pursuant to a Distribution Agreement with Manufacturers Life of America.
ManEquity, Inc. is registered as a broker-dealer under the Securities Exchange
Act of 1934 and is a member of the National Association of Securities Dealers.
The Policies will be sold by registered representatives of either ManEquity,
Inc. or other broker-dealers having distribution agreements with ManEquity, Inc.
who are also authorized by state insurance departments to do so. A registered
representative will receive first-year commissions not to exceed 50% of premiums
paid up to the "target commissionable premium," commissions of 5% of premiums in
excess thereof (3% prior to October 1, 1996) and, on and after the third
anniversary, 0.15% of the Policy Value per annum. In addition, representatives
may be eligible for bonuses of up to 90% of first-year commissions.
Representatives who meet certain productivity standards with regard to the sale
of the Policies and certain other policies
50
<PAGE> 56
issued by Manufacturers Life of America or Manufacturers Life will be eligible
for additional compensation.
What Responsibilities Has Manufacturers Life Assumed?
Manufacturers Life and Manufacturers USA have entered into an agreement with
ManEquity, Inc. pursuant to which Manufacturers Life or Manufacturers USA, on
behalf of ManEquity, Inc., will pay the sales commissions in respect of the
Policies and certain other policies issued by Manufacturers Life of America,
prepare and maintain all books and records required to be prepared and
maintained by ManEquity, Inc. with respect to the Policies and such other
policies, and send all confirmations required to be sent by ManEquity, Inc. with
respect to the Policies and such other policies. ManEquity, Inc. will promptly
reimburse Manufacturers Life or Manufacturers USA for all sales commissions paid
by Manufacturers Life or Manufacturers USA and will pay Manufacturers Life or
Manufacturers USA for its other services under the agreement in such amounts and
at such times as agreed to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and recordkeeping functions on behalf of
Manufacturers Life of America with respect to all of its insurance policies
including the Policies.
Finally, Manufacturers USA has entered into a Stoploss Reinsurance Agreement
with Manufacturers Life of America under which Manufacturers Life reinsures all
aggregate claims in excess of 110% of the expected claims for all Flexible
Premium Variable Life Insurance Policies. Under the agreement Manufacturers USA
will automatically reinsure the risk for any one life up to a maximum of
$7,500,000, except in the case of aviation risks where the maximum will be
$5,000,000. However, Manufacturers USA may also consider reinsuring any
non-aviation risk in excess of $7,500,000 and any aviation risk in excess of
$5,000,000.
What Are The Voting Rights?
As stated above, all of the assets held in the sub-accounts of the Separate
Account will be invested in shares of a particular Portfolio of NASL Series
Trust. Manufacturers Life of America is the legal owner of those shares and as
such has the right to vote upon certain matters that are required by the 1940
Act to be approved or ratified by the shareholders of a mutual fund and to vote
upon any other matters that may be voted upon at a shareholders' meeting.
However, Manufacturers Life of America will vote shares held in the sub-accounts
in accordance with instructions received from policyowners having an interest in
such sub-accounts. Shares held in each sub-account for which no timely
instructions from policyowners are received, including shares not attributable
to 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.
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<PAGE> 57
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 NASL Trust. 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 insurance 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, Manufacturers Life of America 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.
Who Are The Directors And Officers Of Manufacturers Life of America?
The directors and executive officers of Manufacturers Life of America, together
with their principal occupations during the past five years, are as follows:
<TABLE>
<CAPTION>
Position With
Manufacturers Life
Name of America Principal Occupation
<S> <C> <C>
Sandra M. Cotter Director Attorney 1989-present, Dykema
(34) Gossett
James D. Gallagher Director, Secretary, Vice President, Legal Services
(42) and General Counsel --January 1996-present, The
Manufacturers Life Insurance
Company; Vice President,
Secretary and General Counsel--
1994-present, North American
Security Life; Vice President
and Associate General Counsel--
1991-1994, The Prudential
Insurance Company of America
</TABLE>
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<PAGE> 58
<TABLE>
<CAPTION>
Position With
Manufacturers Life
Name of America Principal Occupation
<S> <C> <C>
Bruce Gordon Director Vice President, U.S. Operations
(53) - Pensions -- 1990-present, The
Manufacturers Life Insurance
Company
Donald A. Guloien Director and President Senior Vice President, Business
(39) Development 1994-present, The
Manufacturers Life Insurance
Company; Vice President, U.S.
Individual Business -- 1990-1994,
The Manufacturers Life Insurance
Company
Theodore Kilkuskie, Jr. Director Vice President, U.S. Individual
(41) Insurance -- June 1995-present,
The Manufacturers Life Insurance
Company; Executive Vice President,
Mutual Funds -- January 1995-May 1995,
State Street Research; Vice President,
Mutual Funds -- 1987-1994, Metropolitan
Life Insurance Company
Joseph J. Pietroski Director Senior Vice President, General
(58) Counsel and Corporate Secretary --
1988-present, The Manufacturers
Life Insurance Company
John D. Richardson Chairman and Director Senior Vice President and General
(58) Manager, U.S. Operations
1995-present, The Manufacturers
Life Insurance Company; Senior
Vice President and General
Manager, Canadian Operations
1992-1994, The Manufacturers Life
Insurance Company; Senior Vice
President, Financial Services
1992, The Manufacturers Life
Insurance Company; Executive Vice
Chairman and CFO -- 1989-1991,
Canada Trust
John R. Ostler Vice President, Chief Financial Vice President -- 1992-
(43) Actuary and Treasurer present, The Manufacturers Life
Insurance Company; Vice President,
Insurance Products -- 1990-1992,
The Manufacturers Life Insurance
Company
</TABLE>
53
<PAGE> 59
<TABLE>
<CAPTION>
Position With
Manufacturers Life
Name of America Principal Occupation
<S> <C> <C>
Douglas H. Myers Vice President, Assistant Vice President and
(42) Finance and Compliance Controller, U.S. Operations --
Controller 1988-present, The Manufacturers
Life Insurance Company
Hugh McHaffie Vice President Vice President & Product Actuary --
(37) June 1990-present, North American
Security Life
</TABLE>
What State Regulations Apply?
Manufacturers Life of America is subject to 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.
Is There Any Litigation Pending?
No litigation is pending that would have a material effect upon the Separate
Account or NASL Series Trust.
Where Can Further Information Be Found?
A registration statement under the Securities Act of 1933 has been filed with
the S.E.C. relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. The omitted information may be obtained from the S.E.C.'s principal
office in Washington, D.C. upon payment of the prescribed fee.
For further information you may also contact Manufacturers Life of America's
Service Office, the address and telephone number of which are on the first page
of this prospectus.
Legal Considerations
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<PAGE> 60
On July 6, 1983, the Supreme Court of The United States held in Arizona
Governing Committee v. Norris that certain annuity benefits provided by
employers' retirement and fringe benefit programs may not, under Title VII of
the Civil Rights Act of 1964, vary between men and women. Unless requested by
the applicant, the Policy which will be issued by Manufacturers Life of America
will be based on actuarial tables which distinguish between men and women and
thus provide different benefits to men and women of the same age. Accordingly,
employers and employee organizations should consider, in consultation with legal
counsel, the effect of Norris or any other applicable law on any
employment-related insurance benefit program before purchasing a Policy. If
requested by the applicant, Manufacturers Life of America may offer the Policy
with provisions based on actuarial tables that do not differentiate on the basis
of sex to such prospective purchasers in states where the unisex version of the
Policy has been approved.
The State of Montana currently prohibits the use of actuarial tables that
distinguish between men and women in determining premiums and policy benefits
for policies issued on the life of any of its residents. Consequently, a Policy
will be issued pursuant to the offer contained in this prospectus to a Montana
resident having premiums and benefits which are based on actuarial tables that
do not differentiate on the basis of sex.
Legal Matters
The legal validity of the policies has been passed on by James D. Gallagher,
Esq., Secretary and General Counsel of Manufacturers Life of America.
Jones & Blouch L.L.P., Washington D.C., has passed on certain matters relating
to the federal securities laws.
Experts
The financial statements of The Manufacturers Life Insurance Company of America
and of Separate Account Four of The Manufacturers Life Insurance Company of
America appearing in this prospectus for the periods ending December 31, 1995
have been audited by Ernst & Young LLP, independent auditors to the extent
indicated in their reports thereon also appearing elsewhere herein. Such
financial statements have been included herein in reliance upon such reports
given upon the authority of such firm as experts in auditing and accounting.
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<PAGE> 61
FINANCIAL STATEMENTS
The financial statements of Manufacturers Life of America included herein should
be distinguished from the financial statements of the Account and should be
considered only as bearing upon the ability of Manufacturers Life of America to
meet its obligations under the Policies.
56
<PAGE> 62
THE FOLLOWING FINANCIAL STATEMENTS OF SEPARATE ACCOUNT FOUR
OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF
AMERICA AND THE MANUFACTURERS LIFE INSURANCE COMPANY OF
AMERICA FOR THE PERIOD ENDED SEPTEMBER 30, 1996 ARE
UNAUDITED.
57
<PAGE> 63
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
MANULIFE SERIES FUND INC
-------------------------------------------------------------------------------------
EMERGING GROWTH REAL ESTATE BALANCED CAPITAL GROWTH
EQUITY COMMON STOCK SECURITIES ASSETS BOND MONEY-MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Manulife Series Fund, Inc.
at market value
Emerging Growth Equity Fund, $56,270,997
2,676,245 shares (cost $54,210,236)
Common Stock Fund, $24,453,102
1,282,893 shares (cost $19,477,003)
Real Estate Securities Fund, $15,766,596
985,277 shares (cost $14,215,387)
Balanced Assets Fund, $43,128,170
2,468,360 shares (cost $38,093,133)
Capital Growth Bond Fund, $13,687,569
1,219,002 shares (cost $13,635,635)
Money Market Fund, $5,815,549
536,792 shares (cost $5,820,247)
International Fund,
295,165 shares (cost $3,118,465)
Pacific Rim Emerging Markets Fund,
312,184 shares (cost $3,327,027)
Equity Index Fund,
88,799 shares (cost $893,672)
Investment in NASL Series Trust
at market value
Equity Trust
140,692 shares (cost $2,922,478)
Value Equity Trust
106,076 shares (cost $1,477,382)
Growth and Income Trust
65,186 shares (cost $1,107,121)
U.S. Government Securities Trust
8,778 shares (cost $112,399)
Conservative Asset Allocation Trust
13,096 shares (cost $142,464)
Moderate Asset Allocation Trust
41,839 shares (cost $486,537)
Aggressive Asset Allocation Trust
18,973 shares (cost $236,371)
----------- ----------- ----------- ----------- ----------- -----------
56,270,997 24,453,102 15,766,596 43,128,170 13,687,569 5,815,549
Receivable for Policy-related
Transactions 18,552 (3,757) 25,144 14,527 523 (3,055)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS $56,289,549 $24,449,345 $15,791,740 $43,142,697 $13,688,092 $ 5,812,494
=========== =========== =========== =========== =========== ===========
Units Outstanding 1,075,908 806,433 531,081 1,775,529 704,558 382,069
=========== =========== =========== =========== =========== ===========
Net asset value per unit $52.32 $30.32 $29.74 $24.30 $19.43 $15.21
=========== =========== =========== =========== =========== ===========
<CAPTION>
MANULIFE SERIES FUND INC NASL SERIES TRUST
-------------------------------------------- -------------------------------------
PACIFIC RIM *VALUE *GROWTH
INTERNATIONAL EMERGING MARKETS *EQUITY INDEX *EQUITY EQUITY AND INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ---------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Manulife Series Fund, Inc.
at market value
Emerging Growth Equity Fund,
2,676,245 shares (cost $54,210,236)
Common Stock Fund,
1,282,893 shares (cost $19,477,003)
Real Estate Securities Fund,
985,277 shares (cost $14,215,387)
Balanced Assets Fund,
2,468,360 shares (cost $38,093,133)
Capital Growth Bond Fund,
1,219,002 shares (cost $13,635,635)
Money Market Fund,
536,792 shares (cost $5,820,247)
International Fund, $3,327,803
295,165 shares (cost $3,118,465)
Pacific Rim Emerging Markets Fund, $3,496,711
312,184 shares (cost $3,327,027)
Equity Index Fund, $944,332
88,799 shares (cost $893,672)
Investment in NASL Series Trust
at market value
Equity Trust $3,002,153
140,692 shares (cost $2,922,478)
Value Equity Trust $1,536,780
106,076 shares (cost $1,477,382)
Growth and Income Trust $1,164,199
65,186 shares (cost $1,107,121)
U.S. Government Securities Trust
8,778 shares (cost $112,399)
Conservative Asset Allocation Trust
13,096 shares (cost $142,464)
Moderate Asset Allocation Trust
41,839 shares (cost $486,537)
Aggressive Asset Allocation Trust
18,973 shares (cost $236,371)
---------- ---------- ---------- ---------- ---------- ----------
3,327,803 3,496,711 944,332 3,002,153 1,536,780 1,164,199
Receivable for Policy-related
Transactions 1,723 1,098 1,404 4,437 1,323 18
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS $3,329,526 $3,497,809 $ 945,736 $3,006,590 $1,538,103 $1,164,217
========== ========== ========== ========== ========== ==========
Units Outstanding 293,637 311,293 89,305 281,069 144,478 107,994
========== ========== ========== ========== ========== ==========
Net asset value per unit $11.34 $11.24 $10.59 $10.70 $10.65 $10.78
========== ========== ========== ========== ========== ==========
<CAPTION>
NASL SERIES TRUST
-------------------------------------------------------------------------
*U.S. GOVERNMENT *CONSERVATIVE *MODERATE *AGGRESSIVE
SECURITIES ASSET ALLOCATION ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
---------------- ---------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Manulife Series Fund, Inc.
at market value
Emerging Growth Equity Fund, $56,270,997
2,676,245 shares (cost $54,210,236)
Common Stock Fund, 24,453,102
1,282,893 shares (cost $19,477,003)
Real Estate Securities Fund, 15,766,596
985,277 shares (cost $14,215,387)
Balanced Assets Fund, 43,128,170
2,468,360 shares (cost $38,093,133)
Capital Growth Bond Fund, 13,687,569
1,219,002 shares (cost $13,635,635)
Money Market Fund, 5,815,549
536,792 shares (cost $5,820,247)
International Fund, 3,327,803
295,165 shares (cost $3,118,465)
Pacific Rim Emerging Markets Fund, 3,496,711
312,184 shares (cost $3,327,027)
Equity Index Fund, 944,332
88,799 shares (cost $893,672)
Investment in NASL Series Trust
at market value
Equity Trust 3,002,153
140,692 shares (cost $2,922,478)
Value Equity Trust 1,536,780
106,076 shares (cost $1,477,382)
Growth and Income Trust 1,164,199
65,186 shares (cost $1,107,121)
U.S. Government Securities Trust $113,939 113,939
8,778 shares (cost $112,399)
Conservative Asset Allocation Trust $147,459 147,459
13,096 shares (cost $142,464)
Moderate Asset Allocation Trust $501,649 501,649
41,839 shares (cost $486,537)
Aggressive Asset Allocation Trust $243,080 243,080
18,973 shares (cost $236,371)
---------- -------- -------- -------- ------------
113,939 147,459 501,649 243,080 173,600,888
Receivable for Policy-related
Transactions 0 0 0 (37) 61,900
---------- -------- -------- -------- ------------
NET ASSETS $ 113,939 $147,459 $501,649 $243,043 $173,661,988
========== ======== ======== ======== ============
Units Outstanding 11,464 14,547 49,025 23,454
========== ======== ======== ========
Net asset value per unit $9.94 $10.14 $10.23 $10.36
========== ======== ======== ========
</TABLE>
* Reflects the period from commencement of operations February 14, 1996 through
September 30, 1996
58
<PAGE> 64
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED SEPTEMBER 30, 1996 and DECEMBER 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
MANULIFE SERIES FUND INC
------------------------------------------------------------------------------
EMERGING GROWTH COMMON STOCK
EQUITY SUB-ACCOUNT SUB-ACCOUNT
---------------------------------- ----------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/96 DEC. 31/95 SEPT. 30/96 DEC. 31/95
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 5,377,784 $ 954,799 $ 143,583 $ (105,143)
Net realized gain (loss) 1,589,569 625,908 503,665 209,069
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations (6,327,489) 8,277,189 1,725,396 4,034,771
----------- ----------- ----------- -----------
639,864 9,857,896 2,372,644 4,138,697
----------- ----------- ----------- -----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 11,513,815 15,756,405 3,970,044 5,345,309
Transfer of terminations (4,144,600) (4,775,355) (1,489,342) (2,397,088)
Transfer of policy loans (370,065) (383,960) (86,072) (139,168)
Net interfund transfers (3,613,700) 808,068 (604,239) 601,941
----------- ----------- ----------- -----------
3,385,450 11,405,158 1,790,391 3,410,994
----------- ----------- ----------- -----------
Net increase in net assets 4,025,314 21,263,054 4,163,035 7,549,691
NET ASSETS
Beginning of Year 52,264,235 31,001,181 20,286,310 12,736,619
----------- ----------- ----------- -----------
End of Period $56,289,549 $52,264,235 $24,449,345 $20,286,310
=========== =========== =========== ===========
<CAPTION>
MANULIFE SERIES FUND INC
------------------------------------------------------------------------------
REAL ESTATE SECURITIES BALANCED ASSETS
SUB-ACCOUNT SUB-ACCOUNT
---------------------------------- ----------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/96 DEC. 31/95 SEPT. 30/96 DEC. 31/95
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 784,287 $ 148,117 $ 1,420,614 $ (165,971)
Net realized gain (loss) 101,008 168,151 494,987 191,394
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 721,817 1,396,739 278,327 7,012,384
----------- ----------- ----------- -----------
1,607,112 1,713,007 2,193,928 7,037,807
----------- ----------- ----------- -----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 2,191,345 4,283,407 7,095,718 10,932,103
Transfer of terminations (1,151,118) (1,478,397) (2,977,772) (3,544,462)
Transfer of policy loans (22,573) (43,920) (146,139) (305,026)
Net interfund transfers (714,776) (1,220,289) (2,250,571) (1,831,364)
----------- ----------- ----------- -----------
302,878 1,540,801 1,721,236 5,251,251
----------- ----------- ----------- -----------
Net increase in net assets 1,909,990 3,253,808 3,915,164 12,289,058
NET ASSETS
Beginning of Year 13,881,750 10,627,942 39,227,533 26,938,475
----------- ----------- ----------- -----------
End of Period $15,791,740 $13,881,750 $43,142,697 $39,227,533
=========== =========== =========== ===========
<CAPTION>
MANULIFE SERIES FUND INC
------------------------------------------------------------------------------
CAPITAL GROWTH MONEY-MARKET
BOND SUB-ACCOUNT SUB-ACCOUNT
---------------------------------- ----------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/96 DEC. 31/95 SEPT. 30/96 DEC. 31/95
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (62,422) $ 818,203 $ 195,380 $ (36,158)
Net realized gain (loss) (89,111) (18,323) 162,381 109,650
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 22,183 1,042,903 (170,530) 197,256
----------- ----------- ----------- -----------
(129,350) 1,842,783 187,231 270,748
----------- ----------- ----------- -----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 2,314,915 3,119,374 1,410,213 2,577,889
Transfer of terminations (711,703) (1,316,692) (686,249) (782,380)
Transfer of policy loans (39,378) (67,747) (5,929) (36,007)
Net interfund transfers (506,424) 730,548 (1,057,964) (642,476)
----------- ----------- ----------- -----------
1,057,410 2,465,483 (339,929) 1,117,026
----------- ----------- ----------- -----------
Net increase in net assets 928,060 4,308,266 (152,698) 1,387,774
NET ASSETS
Beginning of Year 12,760,032 8,451,766 5,965,192 4,577,418
----------- ----------- ----------- -----------
End of Period $13,688,092 $12,760,032 $ 5,812,494 $ 5,965,192
=========== =========== =========== ===========
<CAPTION>
MANULIFE SERIES FUND INC
----------------------------------------------------------------------------------------
PACIFIC RIM
INTERNATIONAL EMERGING MARKETS *EQUITY INDEX
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------------------- ------------------------------- -------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/96 DEC. 31/95 SEPT. 30/96 DEC. 31/95 SEPT. 30/96
------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (4,910) $ 35,276 $ (8,333) $ 10,988 $ (2,276)
Net realized gain (loss) 31,615 2,338 93,512 (788) 758
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 98,914 111,348 55,366 119,803 50,660
----------- ----------- ----------- ----------- -----------
125,619 148,962 140,545 130,003 49,142
----------- ----------- ----------- ----------- -----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 614,885 468,861 476,591 339,577 226,774
Transfer of terminations (145,220) (114,292) (132,960) (84,460) (23,225)
Transfer of policy loans (25,271) (8,567) (18,266) (7,956) (2,045)
Net interfund transfers 948,096 1,045,046 1,640,178 839,514 695,090
----------- ----------- ----------- ----------- -----------
1,392,490 1,391,048 1,965,543 1,086,675 896,594
----------- ----------- ----------- ----------- -----------
Net increase in net assets 1,518,109 1,540,010 2,106,088 1,216,678 945,736
NET ASSETS
Beginning of Year 1,811,417 271,407 1,391,721 175,043 0
----------- ----------- ----------- ----------- -----------
End of Period $ 3,329,526 $ 1,811,417 $ 3,497,809 $ 1,391,721 $ 945,736
=========== =========== =========== =========== ===========
<CAPTION>
NASL SERIES TRUST
--------------------------------------------------------------------------------
*VALUE *GROWTH *U.S. GOVERNMENT
*EQUITY EQUITY AND INCOME SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ ----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/96 SEPT. 30/96 SEPT. 30/96 SEPT. 30/96
------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 31,483 $ 11,593 $ (1,279) $ (690)
Net realized gain (loss) (683) (791) (55) 4,202
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 79,675 59,398 57,078 1,540
----------- ----------- ----------- -----------
110,475 70,200 55,744 5,052
----------- ----------- ----------- -----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 686,090 230,649 234,874 10,877
Transfer of terminations (38,959) (19,858) (10,990) (294,362)
Transfer of policy loans (440) (4,251) 0 0
Net interfund transfers 2,249,424 1,261,363 884,589 392,372
----------- ----------- ----------- -----------
2,896,115 1,467,903 1,108,473 108,887
----------- ----------- ----------- -----------
Net increase in net assets 3,006,590 1,538,103 1,164,217 113,939
NET ASSETS
Beginning of Year 0 0 0 0
----------- ----------- ----------- -----------
End of Period $ 3,006,590 $ 1,538,103 $ 1,164,217 $ 113,939
=========== =========== =========== ===========
<CAPTION>
NASL SERIES TRUST
-----------------------------------------------------------
*CONSERVATIVE *MODERATE *AGGRESSIVE
ASSET ALLOCATION ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/96 SEPT. 30/96 SEPT. 30/96
---------------- --------------- ----------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (643) $ (1,131) $ 1,434
Net realized gain (loss) 392 311 603
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations 4,995 15,112 6,709
----------- ----------- -----------
4,744 14,292 8,746
----------- ----------- -----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 32,535 81,952 50,493
Transfer of terminations (3,931) (10,944) (4,594)
Transfer of policy loans 0 0 0
Net interfund transfers 114,111 416,349 188,398
----------- ----------- -----------
142,715 487,357 234,297
----------- ----------- -----------
Net increase in net assets 147,459 501,649 243,043
NET ASSETS
Beginning of Year 0 0 0
----------- ----------- -----------
End of Period $ 147,459 $ 501,649 $ 243,043
=========== =========== ===========
<CAPTION>
TOTAL
----------------------------------
PERIOD ENDED YEAR ENDED
SEPT. 30/95 DEC. 31/95
------------ -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 7,884,474 $ 1,660,111
Net realized gain (loss) $ 2,892,363 1,287,399
Unrealized appreciation (depreciation)
of investments during the period
Increase (decrease) in net assets
derived from operations $ (3,320,849) 22,192,393
------------- ------------
$ 7,455,988 25,139,903
------------- ------------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums $ 31,141,770 42,822,925
Transfer of terminations $ (11,845,827) (14,493,126)
Transfer of policy loans $ (720,429) (992,351)
Net interfund transfers $ 42,296 330,988
------------- ------------
$ 18,617,810 27,668,436
------------- ------------
Net increase in net assets $ 26,073,798 52,808,339
NET ASSETS
Beginning of Year $ 147,588,190 94,779,851
------------- ------------
End of Period $ 173,661,988 $147,588,190
============= ============
</TABLE>
* Reflects the period from commencement of operations February 14, 1996 through
September 30, 1996
See accompanying notes.
59
<PAGE> 65
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS
PERIOD ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MANULIFE SERIES FUND INC
-------------------------------------------------------------------------
EMERGING REAL ESTATE
GROWTH EQUITY COMMON STOCK SECURITIES BALANCED ASSETS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Investment Income: $ 5,649,052 $ 251,477 $ 852,904 $ 1,617,985
Dividend Income
Expenses
Mortality and expense risk charge 271,268 107,894 68,617 197,371
----------- ----------- ----------- -----------
Net investment income (loss) 5,377,784 143,583 784,287 1,420,614
----------- ----------- ----------- -----------
Realized and unrealized gain (loss) from
security transactions:
Proceeds from sales 4,933,208 1,883,983 1,260,693 3,048,926
Cost of securities sold 3,343,639 1,380,318 1,159,685 2,553,939
----------- ----------- ----------- -----------
Net realized gain (loss) 1,589,569 503,665 101,008 494,987
----------- ----------- ----------- -----------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 8,388,250 3,250,703 829,392 4,756,710
End of Period 2,060,761 4,976,099 1,551,209 5,035,037
----------- ----------- ----------- -----------
Net unrealized depreciation
during the period (6,327,489) 1,725,396 721,817 278,327
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments (4,737,920) 2,229,061 822,825 773,314
----------- ----------- ----------- -----------
Net increase (decrease) in net
assets derived from operations $ 639,864 $ 2,372,644 $ 1,607,112 $ 2,193,928
=========== =========== =========== ===========
<CAPTION>
CAPITAL PACIFIC RIM
GROWTH BOND MONEY-MARKET INTERNATIONAL EMERGING MARKETS *EQUITY INDEX
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Investment Income: $ 506 $ 223,396 $ 7,599 $ 3,918 $ 0
Dividend Income
Expenses
Mortality and expense risk charge 62,928 28,016 12,509 12,251 2,276
----------- ----------- ----------- ----------- ---------
Net investment income (loss) (62,422) 195,380 (4,910) (8,333) (2,276)
----------- ----------- ----------- ----------- ---------
Realized and unrealized gain (loss) from
security transactions:
Proceeds from sales 1,760,235 3,085,905 278,623 554,614 22,040
Cost of securities sold 1,849,346 2,923,524 247,008 461,102 21,282
----------- ----------- ----------- ----------- ---------
Net realized gain (loss) (89,111) 162,381 31,615 93,512 758
----------- ----------- ----------- ----------- ---------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 29,751 165,832 110,424 114,318 0
End of Period 51,934 (4,698) 209,338 169,684 50,660
----------- ----------- ----------- ----------- ---------
Net unrealized depreciation
during the period 22,183 (170,530) 98,914 55,366 50,660
----------- ----------- ----------- ----------- ---------
Net realized and unrealized gain (loss)
on investments (66,928) (8,149) 130,529 148,878 51,418
----------- ----------- ----------- ----------- ---------
Net increase (decrease) in net
assets derived from operations $ (129,350) $ 187,231 $ 125,619 $ 140,545 $ 49,142
=========== =========== =========== =========== =========
<CAPTION>
NASL SERIES TRUST
-------------------------------------------------------------------------
*VALUE *GROWTH *U.S. GOVERNMENT
*EQUITY EQUITY AND INCOME SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Investment Income: $ 37,137 $ 14,881 $ 461 $ 0
Dividend Income
Expenses
Mortality and expense risk charge 5,654 3,288 1,740 690
----------- ----------- ----------- -----------
Net investment income (loss) 31,483 11,593 (1,279) (690)
----------- ----------- ----------- -----------
Realized and unrealized gain (loss) from
security transactions:
Proceeds from sales 28,872 26,995 15,466 297,478
Cost of securities sold 29,555 27,786 15,521 293,276
----------- ----------- ----------- -----------
Net realized gain (loss) (683) (791) (55) 4,202
----------- ----------- ----------- -----------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 0 0 0 0
End of Period 79,675 59,398 57,078 1,540
----------- ----------- ----------- -----------
Net unrealized depreciation
during the period 79,675 59,398 57,078 1,540
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 78,992 58,607 57,023 5,742
----------- ----------- ----------- -----------
Net increase (decrease) in net
assets derived from operations $ 110,475 $ 70,200 $ 55,744 $ 5,052
=========== =========== =========== ===========
<CAPTION>
*CONSERVATIVE *MODERATE *AGGRESSIVE
ASSET ALLOCATION ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Investment Income: $ 0 $ 0 $ 2,110 $ 8,661,426
Dividend Income
Expenses
Mortality and expense risk charge 643 1,131 676 776,952
----------- ----------- ----------- -----------
Net investment income (loss) (643) (1,131) 1,434 7,884,474
----------- ----------- ----------- -----------
Realized and unrealized gain (loss) from
security transactions:
Proceeds from sales 1,701 10,543 3,803 17,213,085
Cost of securities sold 1,309 10,232 3,200 14,320,722
----------- ----------- ----------- -----------
Net realized gain (loss) 392 311 603 2,892,363
----------- ----------- ----------- -----------
Unrealized appreciation (depreciation)
of Investments
Beginning of Year 0 0 0 17,645,380
End of Period 4,995 15,112 6,709 14,324,531
----------- ----------- ----------- -----------
Net unrealized depreciation
during the period 4,995 15,112 6,709 (3,320,849)
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 5,387 15,423 7,312 (428,486)
----------- ----------- ----------- -----------
Net increase (decrease) in net
assets derived from operations $ 4,744 $ 14,292 $ 8,746 $ 7,455,988
=========== =========== =========== ===========
</TABLE>
* Reflects the period from commencement of operations February 14, 1996 through
September 30, 1996
60
<PAGE> 66
Separate Account Four of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
September 30, 1996
1. ORGANIZATION
Separate Account Four of The Manufacturers Life Insurance Company of America
(the "Separate Account") is a unit investment trust registered under the
Investment Company Act of 1940, as amended. The Separate Account is currently
comprised of sixteen investment sub-accounts, nine investment sub-accounts for
Manulife Series Fund, Inc., and seven investment sub-accounts for NASL Series
Trust, available for allocation of net premiums under variable universal life
insurance policies (the "Policies") issued by The Manufacturers Life Insurance
Company of America ("Manufacturers Life of America").
The Separate Account was established by Manufacturers Life of America, a
wholly-owned subsidiary of Manulife Reinsurance Corporation (U.S.A.)(the
Parent), (formerly The Manufacturers Life Insurance Company of Michigan), as a
separate investment account on March 17, 1987. The Parent is a wholly-owned
subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"),
a mutual life insurance company based in Toronto, Canada.
The assets of the Separate Account are the property of The Manufacturers Life
of America. The portion of the Separate Account's assets applicable to the
Policies will not be chargeable with liabilities arising out of any other
business The Manufacturers Life of America may conduct.
The net assets may not be less than the amount required under state insurance
law to provide for death (without regard to the minimum death benefit
guarantee) and other Policy benefits.
Additional assets are held in Manufacturers Life of America'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.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Separate Account in preparation of its financial statements:
a. Valuation of Investments - Investments are made among the nine Funds of
Manulife Series Fund, Inc. and among the seven Funds of the NASL Series
Trust and are valued at the reported net asset values of these Funds.
Transactions are recorded on the trade date. Net investment income and net
realized and unrealized gain (loss) on investments in Manulife Series Fund,
Inc. are reinvested.
b. Realized gains and losses on the sale of investments are computed on the
first-in, first-out basis.
c. Dividend income is recorded on the ex-dividend date.
d. Federal Income Taxes - Manufacturers Life of America, the Separate
Account's sponsor, is taxed as a "life insurance company" under the
Internal Revenue Code. Under these provisions of the Code, the operations
of the Separate Account form part of the sponsor's total operations and
are not taxed separately.
61
<PAGE> 67
Separate Account Four of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The current year's operations of the Separate Account are not expected to
affect the sponsor's tax liabilities and, accordingly, no charges were made
against the Separate Account for federal, state and local taxes. However, in
the future, should the sponsor incur significant tax liabilities related to
Separate Account operations, it intends to make a charge or establish a
provision within the Separate Account for such taxes.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. MORTALITY AND EXPENSE RISKS CHARGE
Manufacturers Life of America deducts from the assets of the Separate Account a
daily charge equivalent to an annual rate of 0.65% of the average net value of
the Separate Account's assets for mortality and expense risks.
4. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts a sales charge of 3% and a charge of 2%
to cover state premium taxes from the gross single premium and any additional
premiums before placing the remaining net premiums in the sub-accounts.
5. PURCHASES AND SALES OF MANULIFE SERIES FUND, INC. SHARES
Purchases and sales of the shares of common stock of Manulife Series Fund, Inc.
for the period ended September 30, 1996 were $43,759,605 and $17,213,085
respectively, and for the year ended December 31, 1995 were $43,364,307 and
$13,876,105 respectively.
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 Policies
pursuant to a Distribution Agreement with Manufacturers Life of America.
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
Policies. Registered representatives are compensated on a commission basis.
Manufacturers Life of America has a formal service agreement with its
affiliates, Manulife Financial, which can be terminated by either party upon
two months' notice. Under this Agreement, Manufacturers Life of America pays
for legal, actuarial, investment and certain other administrative services.
62
<PAGE> 68
THE FOLLOWING FINANCIAL STATEMENTS OF SEPARATE ACCOUNT FOUR OF THE
MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA FOR THE PERIOD ENDED DECEMBER
31, 1995 ARE AUDITED.
63
<PAGE> 69
Report of Independent Auditors
To the Board of Directors
The Manufacturers Life Insurance
Company of America
We have audited the accompanying statement of assets and liabilities of Separate
Account Four of The Manufacturers Life Insurance Company of America (comprising,
respectively, the Emerging Growth Equity Sub-Account, Common Stock Sub-Account,
Real Estate Securities Sub-Account, Balanced Assets Sub-Account, Capital Growth
Bond Sub-Account, Money Market Sub-Account, International Sub-Account, and
Pacific Rim Emerging Markets Sub-Account) as of December 31, 1995 and the
related statement of operations for the year then ended, and the statements of
changes in net assets for each of the periods presented herein. These financial
statements are the responsibility of The Manufacturers Life Insurance Company of
America's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 Separate Account Four of The
Manufacturers Life Insurance Company of America at December 31, 1995, and the
results of its operations for the year then ended and changes in its net assets
for each of the periods presented herein, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
February 2, 1996
64
<PAGE> 70
Separate Account Four of
The Manufacturers Life Insurance Company of America
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
EMERGING COMMON REAL ESTATE
GROWTH EQUITY STOCK SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in Manulife Series Fund, Inc.--
at market value:
Emerging Growth Equity Fund,
2,259,310 shares (cost $43,821,087) $52,209,337
Common Stock Fund,
1,174,532 shares (cost $17,032,473) $20,283,176
Real Estate Securities Fund,
919,394 shares (cost $13,056,459) $13,885,851
Balanced Assets Fund,
2,284,961 shares (cost $34,437,481)
Capital Growth Bond Fund,
1,128,394 shares (cost $12,717,152)
Money Market Fund,
550,064 shares (cost $5,796,572)
International Fund,
169,513 shares (cost $1,698,017)
Pacific Rim Emerging Markets Fund,
134,397 shares (cost $1,277,433)
----------------------------------------------
52,209,337 20,283,176 13,885,851
Receivable (payable) for policy-related
transactions 54,898 3,134 (4,101)
==============================================
Net assets $52,264,235 $20,286,310 $13,881,750
==============================================
Units outstanding 1,007,406 742,544 520,501
==============================================
Net asset value per unit $ 51.88 $ 27.32 $ 26.67
==============================================
</TABLE>
See accompanying notes.
65
<PAGE> 71
<TABLE>
<CAPTION>
BALANCED CAPITAL
ASSETS GROWTH BOND MONEY MARKET INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment in Manulife Series Fund, Inc.--
at market value:
Emerging Growth Equity Fund,
2,259,310 shares (cost $43,821,087)
Common Stock Fund,
1,174,532 shares (cost $17,032,473)
Real Estate Securities Fund,
919,394 shares (cost $13,056,459)
Balanced Assets Fund,
2,284,961 shares (cost $34,437,481) $39,194,191
Capital Growth Bond Fund,
1,128,394 shares (cost $12,717,152) $12,746,903
Money Market Fund,
550,064 shares (cost $5,796,572) $5,962,404
International Fund,
169,513 shares (cost $1,698,017) $1,808,441
Pacific Rim Emerging Markets Fund,
134,397 shares (cost $1,277,433)
---------------------------------------------------------------
39,194,191 12,746,903 5,962,404 1,808,441
Receivable (payable) for policy-related
transactions 33,342 13,129 2,788 2,976
===============================================================
Net assets $39,227,533 $12,760,032 $5,965,192 $1,811,417
===============================================================
Units outstanding 1,700,370 649,696 404,694 168,347
===============================================================
Net asset value per unit $ 23.07 $ 19.64 $ 14.74 $ 10.76
===============================================================
</TABLE>
<TABLE>
<CAPTION>
PACIFIC RIM
EMERGING MARKETS
SUB-ACCOUNT TOTAL
-----------------------------------
<S> <C> <C>
ASSETS
Investment in Manulife Series Fund, Inc.--
at market value:
Emerging Growth Equity Fund,
2,259,310 shares (cost $43,821,087) $ 52,209,337
Common Stock Fund,
1,174,532 shares (cost $17,032,473) 20,283,176
Real Estate Securities Fund,
919,394 shares (cost $13,056,459) 13,885,851
Balanced Assets Fund,
2,284,961 shares (cost $34,437,481) 39,194,191
Capital Growth Bond Fund,
1,128,394 shares (cost $12,717,152) 12,746,903
Money Market Fund,
550,064 shares (cost $5,796,572) 5,962,404
International Fund,
169,513 shares (cost $1,698,017) 1,808,441
Pacific Rim Emerging Markets Fund,
134,397 shares (cost $1,277,433) $1,391,751 1,391,751
-----------------------------------
1,391,751 147,482,054
Receivable (payable) for policy-related
transactions (30) 106,136
===================================
Net assets $ 1,391,721 $147,588,190
===================================
Units outstanding 133,434
============
Net asset value per unit $ 10.43
============
</TABLE>
66
<PAGE> 72
Separate Account Four of
The Manufacturers Life Insurance Company of America
Statement of Operations
Year ended December 31, 1995
<TABLE>
<CAPTION>
EMERGING REAL ESTATE
GROWTH EQUITY COMMON STOCK SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-----------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividend income $1,225,634 $ - $ 226,773
Expenses:
Mortality and expense risks charge 270,835 105,143 78,656
--------------------------------------------
Net investment income (loss) 954,799 (105,143) 148,117
--------------------------------------------
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) from security
transactions:
Proceeds from sales 2,832,896 1,361,365 1,615,880
Cost of securities sold 2,206,988 1,152,296 1,447,729
--------------------------------------------
Net realized gain (loss) 625,908 209,069 168,151
--------------------------------------------
Unrealized appreciation (depreciation)
of investments:
Beginning of year 111,061 (784,068) (567,347)
End of year 8,388,250 3,250,703 829,392
--------------------------------------------
Net unrealized appreciation
during the year 8,277,189 4,034,771 1,396,739
--------------------------------------------
Net realized and unrealized gain
on investments 8,903,097 4,243,840 1,564,890
--------------------------------------------
Net increase in net assets derived
from operations $9,857,896 $4,138,697 $1,713,007
============================================
</TABLE>
See accompanying notes.
67
<PAGE> 73
<TABLE>
<CAPTION>
BALANCED CAPITAL PACIFIC RIM
ASSETS GROWTH BOND MONEY MARKET INTERNATIONAL EMERGING MARKETS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 46,122 $ 886,880 $ 268 $ 42,811 $ 16,639 $ 2,445,127
Expenses:
Mortality and expense risks charge 212,093 68,677 36,426 7,535 5,651 785,016
----------------------------------------------------------------------------------------
Net investment income (loss) (165,971) 818,203 (36,158) 35,276 10,988 1,660,111
----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) from security
transactions:
Proceeds from sales 3,475,264 933,993 3,529,055 71,517 56,135 13,876,105
Cost of securities sold 3,283,870 952,316 3,419,405 69,179 56,923 12,588,706
----------------------------------------------------------------------------------------
Net realized gain (loss) 191,394 (18,323) 109,650 2,338 (788) 1,287,399
----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation)
of investments:
Beginning of year (2,255,674) (1,013,152) (31,424) (924) (5,485) (4,547,013)
End of year 4,756,710 29,751 165,832 110,424 114,318 17,645,380
----------------------------------------------------------------------------------------
Net unrealized appreciation
during the year 7,012,384 1,042,903 197,256 111,348 119,803 22,192,393
----------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 7,203,778 1,024,580 306,906 113,686 119,015 23,479,792
----------------------------------------------------------------------------------------
Net increase in net assets derived
from operations $ 7,037,807 $ 1,842,783 $ 270,748 $148,962 $130,003 $25,139,903
========================================================================================
</TABLE>
68
<PAGE> 74
Separate Account Four of
The Manufacturers Life Insurance Company of America
Statements of Changes in Net Assets
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
EMERGING GROWTH COMMON STOCK REAL ESTATE SECURITIES
EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 954,799 $ (53,653) $ (105,143) $ 554,517 $ 148,117 $ 177,093
Net realized gain (loss) 625,908 259,712 209,069 92,981 168,151 108,207
Unrealized appreciation
(depreciation) of investments
during the period 8,277,189 (1,227,841) 4,034,771 (1,183,509) 1,396,739 (691,776)
--------------------------------------------------------------------------------------------
Increase (decrease) in net
assets derived from operations 9,857,896 (1,021,782) 4,138,697 (536,011) 1,713,007 (406,476)
--------------------------------------------------------------------------------------------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 15,756,405 14,531,343 5,345,309 5,946,303 4,283,407 4,968,671
Transfer of terminations (4,775,355) (2,706,223) (2,397,088) (1,073,532) (1,478,397) (931,394)
Transfer of policy loans (383,960) (308,656) (139,168) (97,701) (43,920) (85,424)
Net interfund transfers 808,068 322,712 601,941 (252,248) (1,220,289) 267,605
--------------------------------------------------------------------------------------------
11,405,158 11,839,176 3,410,994 4,522,822 1,540,801 4,219,458
--------------------------------------------------------------------------------------------
Net increase in net assets 21,263,054 10,817,394 7,549,691 3,986,811 3,253,808 3,812,982
NET ASSETS
Beginning of year 31,001,181 20,183,787 12,736,619 8,749,808 10,627,942 6,814,960
--------------------------------------------------------------------------------------------
End of year $ 52,264,235 $ 31,001,181 $ 20,286,310 $ 12,736,619 $ 13,881,750 $ 10,627,942
============================================================================================
</TABLE>
See accompanying notes.
69
<PAGE> 75
<TABLE>
<CAPTION>
BALANCED ASSETS CAPITAL GROWTH MONEY MARKET
SUB-ACCOUNT BOND SUB-ACCOUNT SUB-ACCOUNT
---------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94 DEC. 31/95 DEC. 31/94
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (165,971) $ 1,257,677 $ 818,203 $ 492,509 $ (36,158) $ 120,825
Net realized gain (loss) 191,394 72,510 (18,323) (29,791) 109,650 11,641
Unrealized appreciation
(depreciation) of investments
during the period 7,012,384 (2,560,365) 1,042,903 (822,528) 197,256 (19,907)
---------------------------------------------------------------------------------------
Increase (decrease) in net
assets derived from operations 7,037,807 (1,230,178) 1,842,783 (359,810) 270,748 112,559
---------------------------------------------------------------------------------------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 10,932,103 11,014,712 3,119,374 3,088,112 2,577,889 2,895,838
Transfer of terminations (3,544,462) (3,111,863) (1,316,692) (628,592) (782,380) (1,071,814)
Transfer of policy loans (305,026) (287,843) (67,747) (55,847) (36,007) (42,089)
Net interfund transfers (1,831,364) (396,171) 730,548 (86,125) (642,476) (234,848)
---------------------------------------------------------------------------------------
5,251,251 7,218,835 2,465,483 2,317,548 1,117,026 1,547,087
---------------------------------------------------------------------------------------
Net increase in net assets 12,289,058 5,988,657 4,308,266 1,957,738 1,387,774 1,659,646
NET ASSETS
Beginning of year 26,938,475 20,949,818 8,451,766 6,494,028 4,577,418 2,917,772
---------------------------------------------------------------------------------------
End of year $ 39,227,533 $ 26,938,475 $ 12,760,032 $ 8,451,766 $ 5,965,192 $ 4,577,418
=======================================================================================
</TABLE>
70
<PAGE> 76
Separate Account Four of
The Manufacturers Life Insurance Company of America
Statements of Changes in Net Assets (continued)
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
INTERNATIONAL PACIFIC RIM EMERGING
SUB-ACCOUNT MARKETS SUB-ACCOUNT TOTAL
-------------------------------------------------------------------------------------------
YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED YEAR ENDED
DEC. 31/95 DEC. 31/94 DEC 31//95 DEC. 31/94 DEC. 31/95 DEC. 31/94
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 35,276 $ 533 $ 10,988 $ 572 $ 1,660,111 $ 2,550,073
Net realized gain (loss) 2,338 (215) (788) (31) 1,287,399 515,014
Unrealized appreciation
(depreciation) of investments
during the period 111,348 (924) 119,803 (5,485) 22,192,393 (6,512,335)
-------------------------------------------------------------------------------------------
Increase (decrease) in net assets
derived from operations 148,962 (606) 130,003 (4,944) 25,139,903 (3,447,248)
-------------------------------------------------------------------------------------------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 468,861 36,857 339,577 37,942 42,822,925 42,519,778
Transfer of terminations (114,292) (2,007) (84,460) (1,460) (14,493,126) (9,526,885)
Transfer of policy loans (8,567) - (7,956) - (992,351) (877,560)
Net interfund transfers 1,045,046 237,163 839,514 143,505 330,988 1,593
-------------------------------------------------------------------------------------------
1,391,048 272,013 1,086,675 179,987 27,668,436 32,116,926
-------------------------------------------------------------------------------------------
Net increase in net assets 1,540,010 271,407 1,216,678 175,043 52,808,339 28,669,678
NET ASSETS
Beginning of year 271,407 - 175,043 - 94,779,851 66,110,173
-------------------------------------------------------------------------------------------
End of year $ 1,811,417 $ 271,407 $ 1,391,721 $ 175,043 $ 147,588,190 $ 94,779,851
===========================================================================================
</TABLE>
*Reflects the period from commencement of operations October 4, 1994 through
December 31, 1994.
See accompanying notes.
71
<PAGE> 77
Separate Account Four of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION
Separate Account Four of The Manufacturers Life Insurance Company of America
(the "Separate Account") is a unit investment trust registered under the
Investment Company Act of 1940, as amended. The Separate Account is currently
comprised of eight investment sub-accounts, one for each series of shares of
Manulife Series Fund, Inc., available for allocation of net premiums under
variable universal life insurance policies (the "Policies") issued by The
Manufacturers Life Insurance Company of America ("Manufacturers Life of
America").
The Separate Account was established by Manufacturers Life of America, a
wholly-owned subsidiary of Manulife Reinsurance Corporation (U.S.A.) ("MRC"), as
a separate investment account on March 17, 1987. MRC is a life insurance holding
company organized in 1983 under Michigan law and a wholly-owned subsidiary of
The Manufacturers Life Insurance Company ("Manulife Financial"), a mutual life
insurance company based in Toronto, Canada.
The assets of the Separate Account are the property of Manufacturers Life of
America. The portion of the Separate Account's assets applicable to the Policies
will not be charged with liabilities arising out of any other business
Manufacturers Life of America may conduct.
The net assets may not be less than the amount required under state insurance
law to provide for death (without regard to the minimum death benefit guarantee)
and other Policy benefits.
Additional assets are held in Manufacturers Life of America'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.
72
<PAGE> 78
Separate Account Four of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Separate Account in preparation of its financial statements.
a. Valuation of Investments - Investments are made among the eight Funds of
Manulife Series Fund, Inc. and are valued at the reported net asset values
of these Funds. Transactions are recorded on the trade date. Net investment
income and net realized and unrealized gain (loss) on investments in
Manulife Series Fund, Inc. are reinvested.
b. Realized gains and losses on the sale of investments are computed on the
first-in, first-out basis.
c. Dividend income is recorded on the ex-dividend date.
d. Federal Income Taxes - Manufacturers Life of America, the Separate
Account's sponsor, is taxed as a "life insurance company" under the
Internal Revenue Code. Under these provisions of the Code, the operations
of the Separate Account form part of the sponsor's total operations and are
not taxed separately.
The current year's operations of the Separate Account are not expected to
affect the sponsor's tax liabilities and, accordingly, no charges were made
against the Separate Account for federal, state and local taxes. However,
in the future, should the sponsor incur significant tax liabilities related
to Separate Account operations, it intends to make a charge or establish a
provision within the Separate Account for such taxes.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial state in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
73
<PAGE> 79
Separate Account Four of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. MORTALITY AND EXPENSE RISKS CHARGE
Manufacturers Life of America deducts from the assets of the Separate Account a
daily charge equivalent to an annual rate of 0.65% of the average net value of
the Separate Account's assets for mortality and expense risks.
4. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts a sales charge of 3% and a charge of 2% to
cover state premium taxes from the gross single premium and any additional
premiums before placing the remaining net premiums in the sub-accounts.
5. PURCHASES AND SALES OF MANULIFE SERIES FUND, INC. SHARES
Purchases and sales of the shares of common stock of Manulife Series Fund, Inc.
for the year ended December 31, 1995 were $43,364,307 and $13,876,105,
respectively, and for the year ended December 31, 1994 were $41,461,367 and
$7,038,820, respectively.
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 Policies
pursuant to a Distribution Agreement with Manufacturers Life of America.
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
Policies. Registered representatives are compensated on a commission basis.
Manufacturers Life of America has a formal service agreement with its affiliate,
Manulife Financial, which can be terminated by either party upon two months'
notice. Under this Agreement, Manufacturers Life of America pays for legal,
actuarial, investment and certain other administrative services.
74
<PAGE> 80
The following financial statements of The Manufacturers Life Insurance Company
of America for the period ended September 30, 1996 are unaudited.
<PAGE> 81
The Manufacturers Life Insurance Company of America
Balance Sheet
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Bonds, at amortized cost (market $58,250,725 --1996
and $66,046,733- - 1995) $57,763,786 $62,757,202
Stocks 19,658,787 22,584,259
Short-term investments 1,666,000 0
Policy loans 8,633,442 6,955,292
------------ ------------
Total investments 87,722,015 92,296,753
Cash on hand and on deposit 7,118,793 9,674,362
Insurance premiums deferred and uncollected 1,329,534 504,818
Accrued investment income 1,050,518 1,059,536
Separate account assets 603,572,134 480,404,450
Funds receivable on reinsurance ceded 74,035 73,300
Receivable for undelivered securities 1,864,999 146,328
Taxes recoverable 8,926,316 3,308,316
Investment in subsidiary 1,590,846 1,080,184
Other assets 199,392 193,715
------------ ------------
$713,448,582 $588,741,762
============ ============
Liabilities, capital and surplus
Aggregate policy reserves $69,370,778 $63,426,096
Contract deposit funds 6,044,164 6,462,516
Amounts due from separate accounts (52,800,170) (39,799,129)
Interest maintenance and asset valuation reserves 5,503,906 4,742,400
Policy and contract claims 294,457 582,853
Provision for policyholder dividends payable 1,792,087 2,346,258
Amounts due to affiliates 11,529,256 9,049,217
Accrued liabilities 5,361,074 5,147,865
Amounts payable for undelivered securities 1,666,000 80,821
Separate account liabilities 603,572,134 480,404,450
------------ ------------
Total liabilities 652,333,686 532,443,347
Capital and surplus:
Common shares, par value $1.00; authorized,
5,000,000 shares; issued and outstanding shares
(4,501,858 -- 1996, 4,501,857 -- 1995) 4,501,858 4,501,857
Preferred shared, par value $100; authorized,
5,000,000 shares; issued and outstanding shares
(105,000 -- 1996 and 1995) 10,500,000 10,500,000
Surplus note 8,500,000 8,500,000
Capital paid in excess of par value 78,500,179 63,500,180
Surplus (40,887,141) (30,703,622)
------------ ------------
Total capital and surplus 61,114,896 56,298,415
------------ ------------
Total liabilities, capital, and surplus $713,448,582 $588,741,762
============ ============
</TABLE>
75
<PAGE> 82
The Manufacturers Life Insurance Company of America
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Life premiums $37,441,887 $26,917,056 $115,841,149 $82,246,124
Annuity deposits 9,109,896 9,176,744 27,904,066 29,606,973
Life premiums, reinsurance assumed (831,831) (372,238) 1,101,533 5,540,618
Investment income, net of investment expenses 1,437,890 1,197,939 4,188,644 3,854,192
Amortization of interest maintenance reserve 6,169 8,353 23,309 14,172
Commission and expense allowances on
reinsurance ceded 43,397 0 147,093
Foreign exchange gain (loss) (1,451) (329,945) 40,625 (329,662)
Other revenue (19,985) 37,106 68,843 92,821
----------- ----------- ------------ -----------
Total revenues 47,185,972 36,635,015 149,315,262 121,025,238
Benefits paid or provided:
Increase (decrease) in aggregate policy reserves (2,507,208) 412,750 5,944,682 10,575,029
Increase (decrease) in liability for deposit funds 531,581 (381,781) (418,352) (223,494)
Transfers to separate accounts, net 26,345,507 19,094,364 83,952,586 65,495,626
Death benefits (68,162) 694,831 2,782,394 2,163,196
Annuity benefits 66,181 (506,892) 401,929 30,802
Disability benefits 46,294 0 151,750
Surrender benefits 8,169,058 6,683,913 17,953,597 12,938,150
----------- ----------- ------------ -----------
32,583,251 25,997,185 110,768,586 90,979,309
Insurance expenses:
Management fee 6,587,000 5,289,000 16,820,000 16,764,000
Commissions 6,896,707 4,471,643 20,718,353 13,449,277
General expenses 3,908,813 4,665,024 15,695,580 9,470,575
Commission and expense allowances
on reinsurance assumed 55,942 13,329 386,701 942,979
Interest expense 142,375 0 427,125 0
----------- ----------- ------------ -----------
17,590,837 14,438,996 54,047,759 40,626,831
----------- ----------- ------------ -----------
Loss before policyholder's dividends
and federal income tax (2,988,116) (3,801,166) (15,501,083) (10,580,902)
Dividends to policyholders 45,402 263,345 569,900 2,172,621
----------- ----------- ------------ -----------
Loss before federal income tax (3,033,518) (4,064,511) (16,070,983) (12,753,523)
Federal income tax benefit (1,009,802) 0 (5,388,798) 0
----------- ----------- ------------ -----------
Net loss from operations after policyholders'
dividends and federal income tax (2,023,716) (4,064,511) (10,682,185) (12,753,523)
Net realized capital loss 48,859 38,348 (90,480) 630,788
----------- ----------- ------------ -----------
Net loss from operations ($1,974,857) ($4,026,163) ($10,772,665) ($12,122,735)
=========== =========== ============ ===========
</TABLE>
76
<PAGE> 83
The Manufacturers Life Insurance Company of America
Statement of Changes in Capital and Surplus
(Unaudited)
<TABLE>
<CAPTION>
Capital
Paid in
Excess of
Capital Par Value Surplus Total
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $23,501,857 $63,500,180 ($30,703,622) $56,298,415
Net loss from operations (10,772,665) (10,772,665)
Issuance of common shares 1 14,999,999 15,000,000
Increase in asset valuation reserve (1,118,541) (1,118,541)
Increase in nonadmitted assets 58,854 58,854
Change in net unrealized capital
gains 1,754,077 1,754,077
Change in liability for reinsurance
in unauthorized companies (105,244) (105,244)
----------- ----------- ------------ -----------
Balance, September 30, 1996 $23,501,858 $78,500,179 ($40,887,141) $61,114,896
=========== =========== ============ ===========
</TABLE>
77
<PAGE> 84
The Manufacturers Life Insurance Company of America
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1996 1995
------------ ------------
<S> <C> <C>
Operating activities:
Premiums collected, net $144,041,813 $117,159,968
Policy benefits paid, net (21,547,307) (15,137,221)
Commissions and other expenses paid (51,399,430) (43,854,220)
Net investment income 4,116,058 3,569,190
Other income and expenses (2,402,311) (1,351,829)
Transfers to separate accounts, net (96,953,627) (72,596,690)
------------ ------------
Net cash (used in) provided by
operating activities (24,144,804) (12,210,802)
Investing activities
Sale, maturity, or repayment of investments 85,756,967 62,744,420
Purchase of investments (77,501,732) (67,892,880)
------------ ------------
Net cash used in investing activities 8,255,235 (5,148,460)
Financing activities
Issuance of stock 15,000,000 5,150,000
------------ ------------
Net cash provided by financing activities 15,000,000 5,150,000
------------ ------------
Net increase in cash and short-term
investments (889,569) (12,209,262)
Cash and short-term investments
at beginning of year 9,674,362 15,983,758
------------ ------------
Cash and short-term investments
at end of year $ 8,784,793 $ 3,774,496
============ ============
</TABLE>
78
<PAGE> 85
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
September 30, 1996
1. ORGANIZATION
ORGANIZATION
The Manufacturers Life Insurance Company of America (Manufacturers Life of
America or the Company) is a wholly-owned subsidiary of Manulife Reinsurance
Corporation (USA) (The Parent), (formerly Manufacturers Life Insurance Company
of Michigan), which is in turn a wholly-owned subsidiary of The Manufacturers
Life Insurance Company (Manulife Financial), a Canadian-based mutual life
insurance company (Notes 4 and 5).
The Company issues and sells variable universal life and variable annuity
products in the United States. The Company also has a branch operation in
Taiwan to develop and market traditional insurance for the Taiwanese market. At
September 30, 1996 the Company had assets of $16,056,539 and liabilities of
$10,333,710 in the Taiwan branch.
During the nine months ended September 30, 1996, the Company received a capital
contribution of $15,000,000 from the Parent in return for one share of common
stock (par value $1).
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements of The Manufacturers Life
Insurance Company of America have been prepared in accordance with accounting
practices for interim financial information and with the instructions to Form
10-Q and Article 10 of regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in conjunction
with the financial statements and footnotes thereto included in the Annual
Report on Form 10-K of the Company the year ended December 31, 1995. In the
opinion of management, all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of the financial statements for
these interim periods have been included. The results of interim periods are
not necessarily indicative of the results to be obtained for a full fiscal
year.
79
<PAGE> 86
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
In April 1993, the Financial Accounting Standard Board issued Interpretation
40, "Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises." The Interpretation as amended is effective
for 1996 annual financial statements and thereafter, will no longer allow
statutory financial statements to be described as being prepared in conformity
with generally accepted accounting principles (GAAP). Upon the effective date
of the Interpretation, in order for financial statements to be described as
being prepared in accordance with GAAP, life insurance companies will be
required to adopt all applicable standards promulgated by the FASB in any
general purpose financial statements such companies may issue. While GAAP
standards have recently been developed for mutual life insurance companies, the
Company has not yet completed the complex and extensive historical calculations
and thus is unable to quantify the effects of the Interpretation on its
financial statements. Thus the accompanying financial statements are presented
in accordance with statutory accounting practices prescribed by the Insurance
Department of the State of Michigan.
All amounts presented are expressed in U.S. Dollars.
STOCKS
Stocks are carried at market value.
BONDS
Bonds not backed by other loans are carried at amortized cost as computed using
the interest method. Loan backed bonds and other structured securities are
valued at amortized cost using the interest method including anticipated
prepayments. Prepayment assumptions are updated periodically and are accounted
for using the prospective method. Gains and losses on sales of bonds are
calculated on the specific identification method and recognized into income
based on NAIC prescribed formulas. Short-term investments include investments
with maturities of less than one year at the date of acquisition. Market
values disclosed are based on NAIC quoted values.
POLICY LOANS
Policy loans are reported at unpaid principal balances which approximate fair
value.
ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
The Asset Valuation Reserve and Interest Maintenance Reserve were determined by
NAIC prescribed formulas and are reported as liabilities rather than as
valuation allowances or appropriations of surplus.
POLICY AND CONTRACT CLAIMS
Policy and contract claims are determined on an individual case basis for
reported losses. Estimates of incurred but not reported losses are developed
on the basis of past experience.
80
<PAGE> 87
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
Separate account assets and liabilities reported in the accompanying financial
statements represent funds that are separately administered, principally for
variable annuity and variable life contracts. For the majority of these
contracts the contractholder, 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.
REVENUE RECOGNITION
Both premium and investment income are recorded when due.
REINSURANCE
Reinsurance premiums 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 and claims are reported net of reinsured
amounts.
POLICY RESERVES
Certain policy reserves are calculated based on statutorily required interest
and mortality assumptions.
3. INVESTMENTS AND INVESTMENT INCOME
The amortized cost and market value of investments in fixed maturities (bonds)
as of September 30, 1996 is summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZE MARKET
COST GAINS LOSSES VALUE
----------- ----------- ----------- -----------
<S> <C <C> <C> <C>
U.S. Government $23,574,727 $432,425 $(199,428) $23,807,724
Foreign Government 9,258,320 75,039 (43,707) 9,289,652
Corporate 24,930,739 558,435 (335,825) 25,153,349
----------- ---------- ---------- -----------
$57,763,786 $1,065,899 $(578,960) $58,250,725
=========== ========== ========== ===========
</TABLE>
81
<PAGE> 88
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
Proceeds from sales of investments in debt securities during 1996 were
$81,149,600. Gross gains of $1,101,200 and gross losses of $1,615,209 were
realized on those sales.
The amortized cost and market value of investments in fixed maturities (bonds)
as of December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
United States Government $15,145,033 $ 681,032 $(57,916) $15,768,149
Foreign Government 6,071,376 157,635 -- 6,229,011
Corporate 31,046,219 2,508,780 -- 33,554,999
Mortgage-backed securities:
U.S. Government agencies 9,522,771 -- -- 9,522,771
Corporate 971,803 -- -- 971,803
----------- ---------- -------- -----------
$62,757,202 $3,347,447 $(57,916) $66,046,733
=========== ========== ======== ===========
</TABLE>
The amortized cost and market value of fixed maturities at September 30, 1996
by contractual maturities, 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.
<TABLE>
<CAPTION>
YEARS TO MATURITY AMORTIZED COST MARKET VALUE
----------------- -------------- ------------
<S> <C> <C>
One year or less $ 3,370,562 $ 3,370,561
Greater than 1; up to 5 years 3,177,517 3,207,447
Greater than 5; up to 10 years 27,522,948 27,717,746
Due after 10 years 23,692,759 23,954,971
----------- -----------
$57,763,786 $58,250,725
=========== ===========
</TABLE>
At September 30, 1996, $10,644,347 of bonds at amortized cost were on deposit
with government insurance departments to satisfy regulatory regulations.
82
<PAGE> 89
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
Major categories of net investment income for the first nine months were as
follows:
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
1996 1995
--------- ----------
<S> <C> <C>
Gross investment income:
Bond Income $3,285,074 $3,190,652
Policy Loans 434,845 296,205
Short-term investments 645,903 624,593
Dividend Income 95,983 7,848
---------- ----------
4,461,805 4.119,298
Investment Expenses (273,161) (265,106)
---------- ----------
Net investment income $4,188,644 $3,854,192
========== ==========
</TABLE>
4. RELATED PARTY TRANSACTIONS
Manufacturers Life of America has a formal service agreement with Manulife
Financial which can be terminated by either party upon two months' notice.
Under the Agreement, Manufacturers Life of America will pay direct operating
expenses incurred each year by Manulife Financial on behalf of Manufacturers
Life of America. Services provided under the Agreement include legal,
actuarial, investment, data processing and certain other administrative
services. Costs incurred under this Agreement were $17,090,426 in the first
nine months of 1996, and $17,029,106 in 1995. In addition, there was
$4,916,476 agents' bonuses in 1996 and $3,697,487 in 1995 which were allocated
to the Company and are included in commissions.
In addition, the Company has several reinsurance agreements with Manulife
Financial which may be terminated upon the specified notice by either party.
These agreements are summarized as follows:
(a) The Company assumes two blocks of insurance from Manulife Financial under
coinsurance treaties. The Company's risk is limited to $100,000 of
initial face amount per claim plus a pro-rata share of any increase in
face amount.
(b) The Company cedes the risk in excess of $25,000 per life to Manulife
Financial under the terms of an automatic reinsurance agreement.
(c) The Company cedes a substantial portion of its risk on its Flexible
Premium Variable Life policies to Manulife Financial under the terms of a
stop loss reinsurance agreement.
83
<PAGE> 90
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
(d) Under the terms of an automatic coinsurance agreement, the Company cedes
its risk on structured settlements to Manulife Financial.
Selected amounts relating to the above treaties reflected in the financial
statements are as follows:
<TABLE>
<CAPTION>
1996 1995
__________ __________
<S> <C> <C>
Life and annuity premiums assumed $ 1,101,533 $ 5,540,618
Other life and annuity
consideration ceded (371,518) (431,357)
Commissions and expense allowances
on reinsurance assumed (386,701) (942,979)
Policy reserves assumed 45,019,396 47,386,235
Policy reserves ceded 3,853,375 3,833,247
</TABLE>
5. FEDERAL INCOME TAX
The Company joins the Parent, The Manufacturers Life Insurance Co. (USA) and
Manulife Reinsurance Limited 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 dated December 29, 1983, the
Company's income tax provision (or benefit) is computed as if the Company filed
a separate income tax return. The Company receives no surtax exemption. 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. Taxes recoverable in the financial
statements represent tax-related amounts receivable from affiliates.
84
<PAGE> 91
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
6. STATUTORY RESTRICTIONS ON DIVIDENDS
The Company is subject to statutory limitations on the payment of dividends to
its Parent. The Company cannot pay dividends during 1996 without the prior
approval of insurance regulatory authorities.
7. INVESTMENT IN SEPARATE ACCOUNTS
The Company markets variable life insurance and variable annuity products
through Separate Accounts which use Manulife Series Fund, Inc. as an
investment vehicle.
Common stock in the amount of $19,658,787 represents the Company's seed money
investment in Manulife Series Fund, Inc..
85
<PAGE> 92
THE FOLLOWING FINANCIAL STATEMENTS OF THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA FOR THE PERIOD ENDED DECEMBER 31, 1995 ARE AUDITED.
86
<PAGE> 93
Report of Independent Auditors
The Board of Directors
The Manufacturers Life Insurance
Company of America
We have audited the accompanying balance sheets of The Manufacturers Life
Insurance Company of America as of December 31, 1995 and 1994, and the related
statements of operations, changes in capital and surplus, and cash flows for
each of the three years in the period ended December 31, 1995. 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 generally accepted auditing
standards. 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 at December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles and with reporting practices prescribed or permitted by the Insurance
Department of the State of Michigan.
Philadelphia, Pennsylvania ERNST & YOUNG LLP
February 2, 1996
87
<PAGE> 94
The Manufacturers Life Insurance Company of America
Balance Sheets
<TABLE>
DECEMBER 31
1995 1994
-----------------------------
<S> <C> <C>
ASSETS
Bonds, at amortized cost (market $66,046,733--
1995 and $51,082,395--1994) $ 62,757,202 $ 52,149,080
Stocks 22,584,259 25,629,580
Short-term investments -- 10,914,561
Policy loans 6,955,292 4,494,390
------------ ------------
Total investments 92,296,753 93,187,611
Cash 9,674,362 5,069,197
Life insurance premiums deferred and uncollected 504,818 13,646
Accrued investment income 1,059,536 796,333
Separate account assets 480,404,450 302,736,198
Funds receivable on reinsurance assumed -- 880,284
Receivable for undelivered securities 146,328 69,003
Taxes recoverable 3,308,316 --
Investment in subsidiary 1,080,184 --
Other assets 267,015 333,651
------------ ------------
Total assets $588,741,762 $403,085,923
============ ============
LIABILITIES, CAPITAL AND SURPLUS
Aggregate policy reserves $26,683,090 $29,761,174
Other contract deposits 1,238,943 3,938,425
Interest maintenance and asset valuation reserves 4,742,400 111,566
Policy and contract claims 582,853 94,346
Provision for policyholder dividends payable 2,346,258 1,385,409
Amounts due to affiliates 9,049,217 7,377,108
Payable for undelivered securities 80,821 3,512,459
Accrued liabilities 7,315,315 4,773,565
Separate account liabilities 480,404,450 302,736,198
------------ ------------
Total liabilities 532,443,347 353,690,250
Capital and surplus:
Common shares, par value $1.00; authorized,
5,000,000 shares; issued and outstanding
4,501,857 shares (4,501,855 shares in 1994) 4,501,857 4,501,855
Preferred shares, par value $100; authorized
5,000,000 shares; issued and outstanding
105,000 shares 10,500,000 10,500,000
Surplus note 8,500,000 --
Capital paid in excess of par value 63,500,180 49,849,998
Deficit (30,703,622) (15,456,180)
------------ ------------
Total capital and surplus 56,298,415 49,395,673
------------ ------------
Total liabilities, capital and surplus $588,741,762 $403,085,923
============ ============
</TABLE>
See accompanying notes.
88
<PAGE> 95
The Manufacturers Life Insurance Company of America
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Revenues:
Life and annuity premiums, principally
reinsurance assumed $5,956,997 $25,385,628 $12,745,981
Other life and annuity considerations 153,859,957 168,075,003 113,332,974
Investment income, net of investment
expenses 5,840,560 3,588,629 3,323,962
Amortization of interest maintenance reserve 23,975 19,527 32,866
Commission and expense allowance
on reinsurance ceded 147,109 187,694 --
Foreign exchange (loss) gain (284,127) 114,728 (197,971)
Other revenue 211,191 54,763 33,935
------------ ------------ ------------
Total revenues 165,755,662 197,425,972 129,271,747
Benefits paid or provided:
(Decrease) increase in aggregate policy reserves (3,078,084) 16,741,569 5,168,484
(Decrease) increase in liability for deposit funds (2,699,482) 654,214 2,820,520
Transfers to separate accounts, net 99,807,392 136,896,150 98,601,141
Death benefits 3,981,377 640,875 582,534
Disability benefits 123,786 -- --
Maturity benefits 207,719 580,615 79,253
Surrender benefits 22,028,224 3,701,591 2,319,926
------------ ------------ ------------
120,370,932 159,215,014 109,571,858
Insurance expenses:
Management fee 22,864,000 21,222,310 12,378,288
Commissions 21,411,198 23,416,110 14,742,130
General expenses 15,475,621 8,260,467 5,108,104
Commissions and expense allowances
on reinsurance assumed 1,014,163 810,252 329,634
------------ ------------ ------------
60,764,982 53,709,139 32,558,156
------------ ------------ ------------
Loss before policyholders' dividends
and federal income tax (15,380,252) (15,498,181) (12,858,267)
Dividends to policyholders 2,367,002 1,149,719 837,454
------------ ------------ ------------
Loss before federal income tax (17,747,254) (16,647,900) (13,695,721)
Federal income tax benefit (4,115,770) -- (324,643)
------------ ------------ ------------
Net loss from operations after policyholders'
dividends and federal income tax (13,631,484) (16,647,900) (13,371,078)
Net realized capital gains (net of capital
gains tax of $807,453 in 1995; $0 in 1994,
and $236,415 in 1993, and $1,567,770 in
1995, $(554,000) in 1994, and $347,292 in
1993 transferred (from) to the interest
maintenance reserve) (73,343) (3,012,485) 93,618
------------ ------------ ------------
Net loss from operations $(13,704,827) $(19,660,385) $(13,277,460)
============ ============ ============
</TABLE>
See accompanying notes.
89
<PAGE> 96
The Manufacturers Life Insurance Company of America
Statements of Changes in Capital and Surplus
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF SURPLUS
CAPITAL PAR VALUE (DEFICIT) TOTAL
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992 $35,001,853 $4,000,000 $16,542,195 $55,544,048
Net loss from operations (13,277,460) (13,277,460)
Issuance of preferred shares 1 5,849,999 5,850,000
Increase in asset valuation reserve (13,076) (13,076)
Increase in nonadmitted assets (133,575) (133,575)
Change in net unrealized capital
losses (1,592,242) (1,592,242)
Change in liability for reinsurance
in unauthorized companies (29,905) (29,905)
Company's share of increase in
separate account assets, net 4,308,148 4,308,148
----------- ----------- ------------ -----------
Balance, December 31, 1993 35,001,854 9,849,999 5,804,085 50,655,938
Net loss from operations (19,660,385) (19,660,385)
Issuance of common stocks 1 19,999,999 20,000,000
Capital restructuring of preference
shares (20,000,000) 20,000,000 --
Increase in asset valuation reserve (55,286) (55,286)
Increase in nonadmitted assets (1,021,357) (1,021,357)
Change in net unrealized capital
losses (425,082) (425,082)
Change in liability for reinsurance
in unauthorized companies (98,155) (98,155)
----------- ----------- ------------ -----------
Balance, December 31, 1994 15,001,855 49,849,998 (15,456,180) 49,395,673
Net loss from operations (13,704,827) (13,704,827)
Issuance of common shares 2 12,569,998 12,570,000
Issuance of surplus note 8,500,000 8,500,000
Contribution of Manufacturers
Adviser Corporation 1,080,184 1,080,184
Increase in asset valuation reserve (3,285,208) (3,285,208)
Increase in nonadmitted assets (1,053,124) (1,053,124)
Change in net unrealized capital
losses 2,921,742 2,921,742
Change in liability for reinsurance
in unauthorized companies (126,025) (126,025)
----------- ----------- ------------ -----------
Balance, December 31, 1995 $23,501,857 $63,500,180 $(30,703,622) $56,298,415
=========== =========== ============ ===========
</TABLE>
See accompanying notes.
90
<PAGE> 97
The Manufacturers Life Insurance Company of America
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums collected, net $159,337,079 $193,478,637 $126,075,035
Policy benefits paid, net (25,827,767) (4,982,444) (2,829,812)
Commissions and other expenses paid (62,302,890) (48,141,400) (35,203,997)
Net investment income 5,570,951 3,343,515 3,197,892
Other income and expenses (3,607,415) (1,946,063) (1,592,957)
Transfers to separate accounts, net (98,031,353) (136,950,482) (98,220,292)
Net cash (used in) provided by ------------ ------------ ------------
operating activities (24,861,395) 4,801,763 (8,574,131)
INVESTING ACTIVITIES
Sale, maturity, or repayment of investments 74,009,501 73,187,733 28,248,633
Purchase of investments (77,607,686) (91,063,874) (73,688,735)
------------ ------------ ------------
Net cash used in investing activities (3,598,185) (17,876,141) (45,440,102)
FINANCING ACTIVITIES
Issuance of shares 12,570,000 20,000,000 5,850,000
Contribution of Manufacturers Adviser
Corporation 1,080,184 -- --
Issuance of surplus notes 8,500,000 -- --
Surplus withdrawn from separate account -- -- 48,701,076
------------ ------------ ------------
Net cash provided by financing activities 22,150,184 20,000,000 54,551,076
------------ ------------ ------------
Net (decrease) increase in cash and
short-term investments (6,309,396) 6,925,622 536,843
Cash and short-term investments
at beginning of year 15,983,758 9,058,136 8,521,293
------------ ----------- ------------
Cash and short-term investments
at end of year $ 9,674,362 $15,983,758 $ 9,058,136
============ =========== ============
</TABLE>
See accompanying notes.
91
<PAGE> 98
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION
ORGANIZATION
The Manufacturers Life Insurance Company of America (Manufacturers Life of
America or the Company) is a wholly-owned subsidiary of Manulife Reinsurance
Corporation (U.S.A.) (the Parent), (formerly Manufacturers Life Insurance
Company of Michigan), which is in turn a wholly-owned subsidiary of The
Manufacturers Life Insurance Company (Manulife Financial), a Canadian-based
mutual life insurance company (Notes 4 and 5).
The Company issues and sells variable universal life and variable annuity
products in the United States. The Company also has a branch operation in Taiwan
to develop and market traditional insurance for the Taiwanese market. At
December 31, 1995 the Company had assets of $11,234,000 and liabilities of
$5,696,000 in the Taiwan branch.
During 1995, the Company's parent contributed $12,570,000 of capital in return
for 2 shares of the Company's common stock par value $1 with the remaining
$12,569,998 being recorded as contributed surplus. During 1995, the Company's
parent transferred 100% of the outstanding stock of Manufacturers Adviser
Corporation to the Company which was recorded at book values as contributed
surplus. During 1995, the Company's parent also contributed $8,500,000 in return
for a 10-year surplus note bearing interest at 6.625%.
Subsequent to the year end, the Parent contributed $15,000,000 capital in return
for 1 share of the Company's common stock par value $1 with the remaining
$14,999,999 being recorded as contributed surplus.
During 1994, the Company's parent contributed $20,000,000 of capital in return
for 1 share of the Company's common stock par value $1 with the remaining
$19,999,999 being recorded as contributed surplus. During 1994, the Company
restructured its capital by exchanging 230,000 shares of preferred stock with a
par value of $23,000,000 for 3,000,000 shares of common stock par value
$3,000,000 with the remaining $20,000,000 being recorded as contributed surplus.
The Parent contributed $5,850,000 in capital in return for 1 share of common
stock during 1993.
92
<PAGE> 99
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements of Manufacturers Life of America have been
prepared in accordance with accounting practices prescribed or permitted by the
Insurance Department of Michigan, which are considered generally accepted
accounting principles for mutual life insurance companies and their wholly-owned
direct and indirect subsidiaries. Such practices differ in certain respects from
generally accepted accounting principles followed by stock life insurance
companies in determining financial position and results of operations. In
general, the differences are: (1) commissions and other costs of acquiring and
writing policies are charged to expense in the year incurred rather than being
amortized over the related policy term; (2) certain non-admitted assets are
excluded from the balance sheet; (3) deferred income taxes are not provided for
timing differences in recording certain items for financial statement and tax
purposes; (4) certain transactions are reflected directly to surplus rather than
reflected in net income from operations (for example, certain transactions
related to the separate accounts); and (5) debt securities are carried at
amortized cost.
In April 1993, the Financial Accounting Standards Board issued Interpretation
No. 40, "Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises." The Interpretation as amended is
effective for 1996 annual financial statements and thereafter, and will no
longer allow statutory financial statements to be described as being prepared in
conformity with generally accepted accounting principles (GAAP). Upon the
effective date of the Interpretation, in order for financial statements to be
described as being prepared in accordance with GAAP, life insurance companies
will be required to adopt all applicable standards promulgated by the FASB in
any general purpose financial statements such companies may issue. While GAAP
standards have recently been developed for mutual life insurance companies, the
Company has not yet completed the complex and extensive historical calculations
and thus is unable to quantify the effects of the Interpretation on its
financial statements.
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect 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.
All amounts presented are expressed in U.S. Dollars. Certain amounts from prior
periods have been reclassified to conform with current-period presentation.
93
<PAGE> 100
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCKS
Stocks are carried at market value.
BONDS
Bonds not backed by other loans are carried at amortized cost as computed using
the interest method. Loan backed bonds and other structured securities are
valued at amortized cost using the interest method including anticipated
prepayments. Prepayment assumptions are updated periodically and are accounted
for using the prospective method. Gains and losses on sales of bonds are
calculated on the specific identification method and recognized into income
based on NAIC prescribed formulas. Short-term investments include investments
with maturities of less than one year at the date of acquisition. Market values
disclosed are based on NAIC quoted values.
POLICY LOANS
Policy loans are reported at unpaid principal balances which approximate fair
value.
ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
The Asset Valuation Reserve and Interest Maintenance Reserve were determined by
NAIC prescribed formulas and are reported as liabilities rather than as
valuation allowances or appropriations of surplus.
POLICY AND CONTRACT CLAIMS
Policy and contract claims are determined on an individual case basis for
reported losses. Estimates of incurred but not reported losses are developed on
the basis of past experience.
94
<PAGE> 101
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
Separate account assets and liabilities reported in the accompanying financial
statements represent funds that are separately administered, principally for
variable annuity and variable life contracts. For the majority of these
contracts the contractholder, 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.
REVENUE RECOGNITION
Both premium and investment income are recorded when due.
INVESTMENT IN SUBSIDIARIES
The investment in Manufacturers Adviser Corporation ("MAC") is carried at net
equity of MAC as computed under generally accepted accounting principles.
Undistributed income and loss is treated as a component of unrealized gains and
losses and applies directly to capital and surplus.
REINSURANCE
Reinsurance premiums 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 and claims are reported net of reinsured
amounts.
POLICY RESERVES
Certain policy reserves are calculated based on statutorily required interest
and mortality assumptions.
95
<PAGE> 102
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME
The amortized cost and market value of investments in fixed maturities (bonds)
as of December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
NAME OF PERSON COST GAINS LOSSES VALUE
- -------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Government $15,145,033 $681,032 $ (57,916) $15,768,149
Foreign governments 6,071,376 157,635 -- 6,229,011
Corporate 31,046,219 2,508,780 -- 33,554,999
Mortgage-backed securities:
U.S. Government agencies 9,522,771 -- -- 9,522,771
Corporate 971,803 -- -- 971,803
----------- ---------- ---------- -----------
$62,757,202 $3,347,447 $ (57,916) $66,046,733
=========== ========== ========== ===========
</TABLE>
Proceeds from sales of investments in debt securities during 1995 were
$67,506,660. Gross gains of $2,630,790 and gross losses of $218,778 were
realized on those sales.
The amortized cost and market value of investments in fixed maturities (bonds)
as of December 31, 1994 is summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
NAME OF PERSON COST GAINS LOSSES VALUE
- -------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Government $31,784,581 $ 243,971 $(441,592) $31,586,960
Foreign governments 7,388,458 -- (294,385) 7,094,073
Corporate 9,986,244 2,457 (577,136) 9,411,565
Mortgage-backed securities:
U.S. Government agencies 2,480,571 -- -- 2,480,571
Corporate 509,226 -- -- 509,226
----------- --------- ----------- -----------
$52,149,080 $ 246,428 $(1,313,113) $51,082,395
=========== ========= =========== ===========
</TABLE>
Proceeds from sales of investments in debt securities during 1994 were
$43,175,845. Gross gains of $167,738 and gross losses of $1,006,702 were
realized on those sales.
96
<PAGE> 103
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
The amortized cost and market value of fixed maturities at December 31, 1995 by
contractual maturities, 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.
<TABLE>
<CAPTION>
YEARS TO MATURITY AMORTIZED COST MARKET VALUE
- ------------------------------ -------------- ------------
<S> <C> <C>
One year or less $564,857 $564,857
Greater than 1; up to 5 years 4,079,679 4,181,361
Greater than 5; up to 10 years 14,786,283 15,858,075
Due after 10 years 32,831,809 34,947,866
Mortgage-backed securities 10,494,574 10,494,574
----------- -----------
$62,757,202 $66,046,733
=========== ===========
</TABLE>
At December 31, 1995, $6,617,749 of bonds at amortized cost were on deposit
with government insurance departments to satisfy regulatory regulations.
Major categories of net investment income for each year were as follows:
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Dividends; Manulife Series Fund,
Inc. (Note 9) $645,908 $1,244,794 $1,440,392
Bond income 4,430,236 1,712,294 1,422,064
Policy loans 360,406 236,972 166,514
Short-term investments 754,346 501,477 384,178
---------- ---------- ----------
6,190,896 3,695,537 3,413,148
Investment expenses (350,336) (106,908) (89,186)
---------- ---------- ----------
Net investment income $5,840,560 $3,588,629 $3,323,962
========== ========== ==========
</TABLE>
97
<PAGE> 104
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS
Manufacturers Life of America has a formal service agreement with Manulife
Financial which can be terminated by either party upon two months' notice. Under
the Agreement, Manufacturers Life of America will pay direct operating expenses
incurred each year by Manulife Financial on behalf of Manufacturers Life of
America. Services provided under the Agreement include legal, actuarial,
investment, data processing and certain other administrative services. Costs
incurred under this Agreement were $23,211,484 in 1995, $21,326,446 in 1994, and
$12,467,474 in 1993. In addition, there were $5,052,062 agents' bonuses in 1995,
$7,795,184 in 1994, and $5,363,558 in 1993 which were allocated to the Company
and are included in commissions.
In addition, the Company has several reinsurance agreements with Manulife
Financial which may be terminated upon the specified notice by either party.
These agreements are summarized as follows:
(a) The Company assumes two blocks of insurance from Manulife Financial under
coinsurance treaties. The Company's risk is limited to $100,000 of initial
face amount per claim plus a pro-rata share of any increase in face amount.
(b) The Company cedes the risk in excess of $25,000 per life to Manulife
Financial under the terms of an automatic reinsurance agreement.
(c) The Company cedes a substantial portion of its risk on its Flexible Premium
Variable Life policies to Manulife Financial under the terms of a stop loss
reinsurance agreement.
(d) Under the terms of an automatic coinsurance agreement, the Company cedes
its risk on structured settlements to Manulife Financial.
98
<PAGE> 105
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
Selected amounts relating to the above treaties reflected in the financial
statements are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Life and annuity premiums
assumed $5,956,997 $25,385,628 $12,745,981
Other life and annuity
considerations ceded (598,330) (437,650) (201,685)
Commissions and expense
allowances
on reinsurance assumed (1,014,163) (810,252) (329,634)
Policy reserves assumed 48,714,791 47,672,591 23,070,952
Policy reserves ceded 3,833,247 3,786,647 3,782,156
</TABLE>
During 1993, the Company assumed the first $50,000 of initial face amount on
two blocks of business. This resulted in transfers of $10,837,000 to establish
the initial reserves. In 1994 the treaties were amended to assume the first
$100,000 of initial face amount for the same blocks of business. This resulted
in a transfer of $21,477,000 to establish the additional reserve. Commissions
equal to 17% are charged for all renewed premiums related to these contracts.
During 1994, the Company terminated another treaty resulting in a premium to
Manulife Financial to transfer the reserve of $799,874.
Manulife Financial provides a claims paying guarantee to all U.S. policyholders.
5. FEDERAL INCOME TAX
The Company joins the Parent, The Manufacturers Life Insurance Co. (U.S.A.) and
Manufacturers Reinsurance Limited 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 dated December 29, 1983, the
Company's income tax provision (or benefit) is computed as if the Company filed
a separate income tax return. The Company receives no surtax exemption. 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. Taxes recoverable in the financial statements
represent tax-related amounts receivable from affiliates.
99
<PAGE> 106
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
5. FEDERAL INCOME TAX
The Company, Parent and The Manufacturers Life Insurance Co. (U.S.A.) have
available consolidated net operating losses of approximately $51,400,000 which
will expire in the year 2009 and capital loss carryforwards of approximately
$102,800,000 which will expire in 1999. The losses of the Company, Parent and
the Manufacturers Life Insurance Co. (U.S.A.) may be used to offset the
ordinary and capital gain income of Manufacturers Reinsurance Limited.
6. STATUTORY RESTRICTIONS ON DIVIDENDS
The Company is subject to statutory limitations on the payment of dividends to
its Parent. The Company cannot pay dividends during 1995 without the prior
approval of insurance regulatory authorities.
7. REINSURANCE
The Company cedes reinsurance as a party to several reinsurance treaties with
major unrelated insurance companies. The Company remains obligated for amounts
ceded in the event reinsurers do not meet their obligations.
Summary financial information related to these reinsurance activities is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Life insurance premiums ceded $275,145 $218,767 $130,913
</TABLE>
100
<PAGE> 107
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
8. RESERVES
Aggregate policy reserves for life policies including variable life, are based
on statutory mortality tables and interest assumptions using either the net
level or commissioners' reserve valuation method. The composition of the
aggregate policy reserves at December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
MORTALITY INTEREST
AGGREGATE RESERVES TABLE RATES
------------------ ----- --------
1995 1994
---- ----
<S> <C> <C> <C>
$25,561,456 $28,553,885 1980 CSO 4%
(173,768) (189,080) Reinsurance ceded
1,295,402 1,396,369 Miscellaneous
- ----------- -----------
$26,683,090 $29,761,174
=========== ===========
</TABLE>
At December 31, 1995 the Company's annuity reserves and deposit fund liabilities
are comprised as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------ -------
(in 000's)
<S> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment $222,994 97.8%
At book value less current surrender charge 1,239 .5%
Not subject to discretionary withdrawal 3,863 1.7%
-------- -----
Total gross annuity actuarial reserves and
deposit fund liabilities $228,096 100%
======== =====
</TABLE>
9. INVESTMENT IN SEPARATE ACCOUNTS
During 1984, the Company initiated plans to market variable life insurance
products through Separate Account One of The Manufacturers Life Insurance
Company of America ("Separate Account One") using Manulife Series Fund, Inc. as
its investment vehicle. Initial capitalization was $15,000,000. Through 1988,
the Company provided an additional capitalization of $6,000,000.
101
<PAGE> 108
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
9. INVESTMENT IN SEPARATE ACCOUNTS (CONTINUED)
In December 1993, the Company transferred all of its shares, related to seed
money, in Manulife Series Fund, Inc. out of Separate Account One to the General
Account. At December 31, 1995, the $22,584,259 common stock represents the
Company's seed money investment in Manulife Series Fund, Inc.
During 1995, 1994, and 1993, the following dividends were received from Manulife
Series Fund, Inc.:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Separate Account One $24,041 $38,732 $1,610,693
Separate Account Two 3,520,461 4,574,620 7,377,861
Separate Account Three 1,693,796 1,490,374 666,141
Separate Account Four 2,445,127 3,072,376 4,966,559
General Account 645,908 1,244,794 1,440,392
</TABLE>
Dividends have been reinvested by the Company in Manulife Series Fund, Inc.
During 1993, the Company withdrew $8,000,000 of its seed money and accumulated
earnings from Separate Account One and the Manulife Series Fund, Inc. and
utilized these funds to pay down its intercompany debt.
During 1994, the Company withdrew $13,011,137 of its seed money and accumulated
earnings from the Manulife Series Fund, Inc. and utilized these funds to pay
down its intercompany debt.
During 1995, the Company withdrew $6,500,000 of its seed money and accumulated
earnings from the Manulife Series Fund, Inc. and utilized these funds to pay
down its intercompany debt.
102
<PAGE> 109
APPENDIX
What Are Some 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
Guaranteed Interest Account or Loan Account. The Cash Surrender Value is the
Policy Value less the deferred sales charge and deferred underwriting charge.
The tables illustrate how Policy Values and Cash Surrender Values, which reflect
the deduction of all applicable charges including the premium tax charge and the
sales charge, and death benefits of the Policy on an insured of a 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 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 daily charge to the Separate Account for assuming mortality and
expense risks (0.65% on an annual basis) and the expenses and fees borne by NASL
Series Trust are deducted from the gross return. The illustrations reflect an
average of those Portfolios' expenses, which is approximately 0.90% per annum
(for current charges) and 1.27% per annum (for guaranteed charges). The gross
annual rates of return of 0%, 6% and 12% correspond to approximate net annual
rates of return of -1.54%, 4.37%, and 10.28% (for current charges) and -1.91%,
3.98% and 9.86% (for guaranteed charges).
The tables assume that no premiums have been allocated to the Guaranteed
Interest 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 will 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 male nonsmokers, one based on current cost of insurance charges assessed by
the Company and the other based on the maximum cost of insurance charges based
on the 1980 Commissioners Standard Ordinary Smoker/ Nonsmoker Mortality Tables.
Current cost of insurance charges are not guaranteed and may be changed. Upon
request, Manufacturers Life of America will furnish a comparable illustration
based on the proposed life insured's age, sex and risk class, 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
103
<PAGE> 110
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.
The Policies were first sold to the public on December 7, 1987. 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 the same as for the
first full year the Policies were offered.
104
<PAGE> 111
The following illustrations of Policy Values, Cash Surrender Values and Death
Benefits are applicable to Policies purchased on or after October 1, 1996.
105
<PAGE> 112
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 25
$100,000 Face Amount Death Benefit Option 1
$575 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
0% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $320 $0 $100,000
2 1,238 639 0 100,000
3 1,903 956 189 100,000
4 2,602 1,270 503 100,000
5 3,336 1,579 812 100,000
6 4,107 1,884 1,194 100,000
7 4,916 2,182 1,569 100,000
8 5,765 2,474 1,937 100,000
9 6,657 2,757 2,297 100,000
10 7,594 3,031 2,647 100,000
15 13,028 4,254 4,254 100,000
20 19,964 5,100 5,100 100,000
25 28,815 5,680 5,680 100,000
30 40,112 5,504 5,504 100,000
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
106
<PAGE> 113
<TABLE>
6% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $345 $0 $100,000
2 1,238 710 0 100,000
3 1,903 1,093 326 100,000
4 2,602 1,495 728 100,000
5 3,336 1,915 1,148 100,000
6 4,107 2,354 1,664 100,000
7 4,916 2,811 2,197 100,000
8 5,765 3,286 2,749 100,000
9 6,657 3,777 3,317 100,000
10 7,594 4,285 3,902 100,000
15 13,028 7,098 7,098 100,000
20 19,964 10,284 10,284 100,000
25 28,815 14,054 14,054 100,000
30 40,112 18,053 18,053 100,000
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
107
<PAGE> 114
<TABLE>
12% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $371 $0 $100,000
2 1,238 784 17 100,000
3 1,903 1,243 475 100,000
4 2,602 1,750 983 100,000
5 3,336 2,311 1,544 100,000
6 4,107 2,931 2,240 100,000
7 4,916 3,612 2,998 100,000
8 5,765 4,362 3,825 100,000
9 6,657 5,186 4,726 100,000
10 7,594 6,090 5,706 100,000
15 13,028 12,141 12,141 100,000
20 19,964 21,751 21,751 100,000
25 28,815 37,409 37,409 100,000
30 40,112 62,799 62,799 102,945
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
108
<PAGE> 115
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 25
$100,000 Face Amount Death Benefit Option 1
$575 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
0% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $318 $0 $100,000
2 1,238 632 0 100,000
3 1,903 942 175 100,000
4 2,602 1,249 482 100,000
5 3,336 1,550 783 100,000
6 4,107 1,846 1,155 100,000
7 4,916 2,134 1,520 100,000
8 5,765 2,413 1,876 100,000
9 6,657 2,683 2,223 100,000
10 7,594 2,943 2,560 100,000
15 13,028 4,042 4,042 100,000
20 19,964 4,698 4,698 100,000
25 28,815 4,738 4,738 100,000
30 40,112 3,847 3,847 100,000
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
109
<PAGE> 116
<TABLE>
6% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $344 0 $100,000
2 1,238 702 0 100,000
3 1,903 1,078 311 100,000
4 2,602 1,471 704 100,000
5 3,336 1,880 1,113 100,000
6 4,107 2,306 1,616 100,000
7 4,916 2,747 2,133 100,000
8 5,765 3,203 2,666 100,000
9 6,657 3,673 3,213 100,000
10 7,594 4,157 3,774 100,000
15 13,028 6,750 6,750 100,000
20 19,964 9,544 9,544 100,000
25 28,815 12,382 12,382 100,000
30 40,112 14,941 14,941 100,000
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
110
<PAGE> 117
<TABLE>
12% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $369 $0 $100,000
2 1,238 776 9 100,000
3 1,903 1,226 458 100,000
4 2,602 1,722 955 100,000
5 3,336 2,269 1,502 100,000
6 4,107 2,870 2,180 100,000
7 4,916 3,529 2,915 100,000
8 5,765 4,251 3,714 100,000
9 6,657 5,040 4,580 100,000
10 7,594 5,903 5,519 100,000
15 13,028 11,549 11,549 100,000
20 19,964 20,266 20,266 100,000
25 28,815 33,835 33,835 100,000
30 40,112 55,272 55,272 100,000
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
111
<PAGE> 118
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 25
$100,000 Face Amount Death Benefit Option 2
$575 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
0% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $319 $0 $100,319
2 1,238 637 0 100,637
3 1,903 953 186 100,953
4 2,602 1,265 497 101,265
5 3,336 1,572 804 101,572
6 4,107 1,874 1,183 101,874
7 4,916 2,169 1,555 102,169
8 5,765 2,458 1,920 102,458
9 6,657 2,737 2,276 102,737
10 7,594 3,006 2,622 103,006
15 13,028 4,197 4,197 104,197
20 19,964 4,989 4,989 104,989
25 28,815 5,498 5,498 105,498
30 40,112 5,209 5,209 105,209
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES TRUST. THE
POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY
WOULD BE
112
<PAGE> 119
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.
113
<PAGE> 120
<TABLE>
6% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $345 $0 $100,345
2 1,238 708 0 100,708
3 1,903 1,090 322 100,090
4 2,602 1,489 722 101,489
5 3,336 1,906 1,139 101,906
6 4,107 2,341 1,651 102,341
7 4,916 2,793 2,179 102,793
8 5,765 3,262 2,725 103,262
9 6,657 3,747 3,287 103,747
10 7,594 4,247 3,863 104,247
15 13,028 6,992 6,992 106,992
20 19,964 10,033 10,003 110,003
25 28,815 13,545 13,545 113,545
30 40,112 17,020 17,020 117,020
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
114
<PAGE> 121
<TABLE>
12% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $370 $0 $100,370
2 1,238 782 15 100,782
3 1,903 1,238 471 101,238
4 2,602 1,743 976 101,743
5 3,336 2,300 1,523 102,300
6 4,107 2,914 2,223 102,914
7 4,916 3,588 2,974 103,588
8 5,765 4,329 3,792 104,329
9 6,657 5,142 4,681 105,142
10 7,594 6,031 5,648 106,031
15 13,028 11,943 11,943 111,943
20 19,964 21,173 21,173 121,173
25 28,815 35,936 35,936 135,936
30 40,112 59,009 59,009 159,009
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
115
<PAGE> 122
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 25
$100,000 Face Amount Death Benefit Option 2
$575 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
0% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 318 $0 $100,318
2 1,238 630 0 100,630
3 1,903 939 172 100,939
4 2,602 1,244 477 101,244
5 3,336 1,543 775 101,543
6 4,107 1,836 1,145 101,836
7 4,916 2,120 1,507 102,120
8 5,765 2,397 1,860 102,397
9 6,657 2,663 2,203 102,663
10 7,594 2,918 2,534 102,918
15 13,028 3,985 3,985 103,985
20 19,964 4,586 4,586 104,586
25 28,815 4,543 4,543 104,543
30 40,112 3,539 3,539 103,539
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
116
<PAGE> 123
<TABLE>
6% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $343 $0 $100,343
2 1,238 700 0 100,700
3 1,903 1,074 307 101,074
4 2,602 1,465 698 101,465
5 3,336 1,871 1,104 101,871
6 4,107 2,293 1,603 102,293
7 4,916 2,730 2,116 102,730
8 5,765 3,180 2,643 103,180
9 6,657 3,643 3,183 103,643
10 7,594 4,119 3,735 104,119
15 13,028 6,644 6,644 106,644
20 19,964 9,292 9,292 109,292
25 28,815 11,834 11,834 111,834
30 40,112 13,819 13,819 113,819
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
117
<PAGE> 124
<TABLE>
12% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $368 $0 $100,368
2 1,238 774 7 100,774
3 1,903 1,221 454 101,221
4 2,602 1,715 948 101,715
5 3,336 2,258 1,490 102,258
6 4,107 2,854 2,163 102,854
7 4,916 3,305 2,892 103,505
8 5,765 4,218 3,681 104,218
9 6,657 4,996 4,536 104,996
10 7,594 5,845 5,461 105,845
15 13,028 11,353 11,353 111,353
20 19,964 19,686 19,686 119,686
25 28,815 32,251 32,251 132,251
30 40,112 51,101 51,101 151,101
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
118
<PAGE> 125
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 45
$100,000 Face Amount Death Benefit Option 1
$1,325 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
0% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $997 $0 $100,000
2 2,852 1,903 343 100,000
3 4,386 2,729 1,169 100,000
4 5,996 3,503 1,943 100,000
5 7,688 4,239 2,679 100,000
6 9,463 4,902 3,498 100,000
7 11,328 5,535 4,287 100,000
8 13,285 6,146 5,054 100,000
9 15,341 6,706 5,770 100,000
10 17,499 7,212 6,432 100,000
15 30,021 8,838 8,838 100,000
20 46,003 8,144 8,144 100,000
25 66,400 4,724 4,724 100,000
30 92,433 0(5) 0(5) 0(5)
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
(5) In the absence of additional premium payments, the Policy
will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE
ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND
THE INVESTMENT RETURNS FOR THE FUNDS OF NASL SERIES 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.
119
<PAGE> 126
<TABLE>
6% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,063 $41 $100,000
2 2,852 2,096 536 100,000
3 4,386 3,105 1,545 100,000
4 5,996 4,120 2,560 100,000
5 7,688 5,153 3,593 100,000
6 9,463 6,169 4,765 100,000
7 11,328 7,212 5,964 100,000
8 13,285 8,290 7,198 100,000
9 15,341 9,376 8,440 100,000
10 17,499 10,467 9,687 100,000
15 30,021 15,945 15,945 100,000
20 46,003 20,661 20,661 100,000
25 66,400 24,320 24,320 100,000
30 92,433 23,591 23,591 100,000
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
120
<PAGE> 127
<TABLE>
12% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,130 $107 $100,000
2 2,852 2,297 737 100,000
3 4,386 3,514 1,954 100,000
4 5,996 4,817 3,257 100,000
5 7,688 6,229 4,669 100,000
6 9,463 7,725 6,321 100,000
7 11,328 9,360 8,112 100,000
8 13,285 11,156 10,064 100,000
9 15,341 13,101 12,165 100,000
10 17,499 15,211 14,431 100,000
15 30,021 28,947 28,947 100,000
20 46,003 50,203 50,203 100,000
25 66,400 85,970 85,970 100,000
30 92,433 145,806 145,806 156,012
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to
waive fees payable to it and/or to reimburse expenses for a period of one
year from December 31, 1996 to the extent necessary to prevent the total
of advisory fees and expenses for the Quantitative Equity Trust, Real
Estate Securities Trust and Capital Growth Bond Trust for such period from
exceeding .50% of average net assets. The investment management fees and
expenses used to calculate the policy values do not reflect this waiver.
If this waiver were reflected in the calculations, Policy Values and Cash
Surrender Values would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
121
<PAGE> 128
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 45
$100,000 Face Amount Death Benefit Option 1
$1,325 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
0% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $993 $0 $100,000
2 2,852 1,790 230 100,000
3 4,386 2,548 988 100,000
4 5,996 3,264 1,704 100,000
5 7,688 3,937 2,377 100,000
6 9,463 4,565 3,161 100,000
7 11,328 5,142 3,894 100,000
8 13,285 5,665 4,573 100,000
9 15,341 6,128 5,192 100,000
10 17,499 6,524 5,744 100,000
15 30,021 7,321 7,321 100,000
20 46,003 5,333 5,333 100,000
25 66,400 0(4) 0(4) 100,000(4)
30 92,433 0(5) 0(5) 0(5)
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
(4) Provided the Minimum Premium Requirement has been met, the
death benefit guarantee will have kept the Policy in force until this
point, i.e. the policy anniversary on which the life insured is 70 years
old, at which time the death benefit guarantee will expire and in the
absence of additional premium payments the Policy will lapse.
(5) In the absence of additional premium payments, the Policy
will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE
ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND
THE INVESTMENT RETURNS FOR THE FUNDS OF NASL SERIES 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.
122
<PAGE> 129
<TABLE>
6% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,059 $36 $100,000
2 2,852 1,979 419 100,000
3 4,386 2,910 1,350 100,000
4 5,996 3,852 2,292 100,000
5 7,688 4,801 3,241 100,000
6 9,463 5,758 4,354 100,000
7 11,328 6,715 5,467 100,000
8 13,285 7,668 6,576 100,000
9 15,341 8,611 7,675 100,000
10 17,499 9,537 8,757 100,000
15 30,021 13,698 13,698 100,000
20 46,003 16,145 16,145 100,000
25 66,400 14,382 14,382 100,000
30 92,433 2,946 2,946 100,000
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
123
<PAGE> 130
<TABLE>
12% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,126 $103 $100,000
2 2,852 2,176 616 100,000
3 4,386 3,304 1,744 100,000
4 5,996 4,518 2,956 100,000
5 7,688 5,822 4,262 100,000
6 9,463 7,225 5,821 100,000
7 11,328 8,732 7,484 100,000
8 13,285 10,349 9,257 100,000
9 15,341 12,082 11,146 100,000
10 17,499 13,939 13,159 100,000
15 30,021 25,468 25,468 100,000
20 46,003 42,260 42,260 100,000
25 66,400 68,220 68,220 100,000
30 92,433 113,056 113,056 120,969
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
124
<PAGE> 131
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 45
$100,000 Face Amount Death Benefit Option 2
$1,325 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
0% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $995 $0 $100,995
2 2,852 1,896 336 101,896
3 4,386 2,712 1,152 102,712
4 5,996 3,473 1,913 103,473
5 7,688 4,191 2,631 104,191
6 9,463 4,831 3,427 104,831
7 11,328 5,437 4,189 105,437
8 13,285 6,017 4,925 106,017
9 15,341 6,540 5,604 106,540
10 17,499 7,002 6,222 107,002
15 30,021 8,302 8,302 108,302
20 46,003 7,067 7,067 107,067
25 66,400 3,067 3,067 103,067
30 92,433 0(5) 0(5) 0(5)
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver were
reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
(5) In the absence of additional premium payments, the Policy
will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE
ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND
THE INVESTMENT RETURNS FOR THE FUNDS OF NASL SERIES 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
125
<PAGE> 132
THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
126
<PAGE> 133
<TABLE>
6% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,061 $39 $101,061
2 2,852 2,088 528 102,088
3 4,386 3,086 1,526 103,086
4 5,996 4,084 2,524 104,084
5 7,688 5,094 3,534 105,094
6 9,463 6,078 4,674 106,078
7 11,328 7,080 5,832 107,080
8 13,285 8,109 7,017 108,109
9 15,341 9,133 8,197 109,133
10 17,499 10,147 9,367 110,147
15 30,021 14,931 14,931 114,931
20 46,003 18,030 18,030 118,030
25 66,400 18,610 18,610 118,610
30 92,433 12,079 12,079 112,079
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver were
reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
127
<PAGE> 134
<TABLE>
12% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,128 $105 $101,128
2 2,852 2,289 729 102,289
3 4,386 3,493 1,933 103,493
4 5,996 4,775 3,215 104,775
5 7,688 6,157 4,597 106,157
6 9,463 7,608 6,204 107,608
7 11,328 9,183 7,935 109,183
8 13,285 10,903 9,811 110,903
9 15,341 12,747 11,811 112,747
10 17,499 14,726 13,946 114,726
15 30,021 27,033 27,033 127,033
20 46,003 43,832 43,832 143,832
25 66,400 67,520 67,520 167,520
30 92,433 97,842 97,842 197,842
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver were
reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
128
<PAGE> 135
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 45
$100,000 Face Amount Death Benefit Option 2
$1,325 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
0% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $991 $0 $100,991
2 2,852 1,781 221 101,781
3 4,386 2,528 968 102,528
4 5,996 3,230 1,670 103,230
5 7,688 3,885 2,325 103,885
6 9,463 4,490 3,086 104,490
7 11,328 5,040 3,792 105,040
8 13,285 5,530 4,438 105,530
9 15,341 5,954 5,018 105,954
10 17,499 6,305 5,525 106,305
15 30,021 6,769 6,769 106,769
20 46,003 4,301 4,301 104,301
25 66,400 0(4) 0(4) 100,000(4)
30 92,433 0(5) 0(5) 0(5)
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
(4) Provided the Minimum Premium Requirement has been met, the
death benefit guarantee will have kept the Policy in force until this
point, i.e. the policy anniversary on which the life insured is 70 years
old, at which time the death benefit guarantee will expire and in the
absence of additional premium payments the Policy will lapse.
(5) In the absence of additional premium payments, the Policy
will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE
ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND
THE INVESTMENT RETURNS FOR THE FUNDS OF NASL SERIES 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.
129
<PAGE> 136
<TABLE>
6% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,057 $34 $101,057
2 2,852 1,969 409 101,969
3 4,386 2,888 1,328 102,888
4 5,996 3,812 2,252 103,812
5 7,688 4,736 3,177 104,736
6 9,463 5,661 4,257 105,661
7 11,328 6,577 5,329 106,577
8 13,285 7,477 6,385 107,477
9 15,341 8,356 7,420 108,356
10 17,499 9,202 8,422 109,202
15 30,021 12,641 12,641 112,641
20 46,003 13,510 13,510 113,510
25 66,400 8,860 8,860 108,860
30 92,433 0(4) 0(4) 0(4)
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
(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 NASL SERIES 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.
130
<PAGE> 137
<TABLE>
12% Hypothetical
Gross Investment Return
<CAPTION>
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,123 $101 $101,123
2 2,852 2,165 605 102,165
3 4,386 3,279 1,719 103,279
4 5,996 4,470 2,910 104,470
5 7,688 5,742 4,182 105,742
6 9,463 7,100 5,696 107,100
7 11,328 8,547 7,299 108,547
8 13,285 10,083 8,991 110,083
9 15,341 11,710 10,774 111,710
10 17,499 13,429 12,649 113,429
15 30,021 23,455 23,455 123,455
20 46,003 35,716 35,716 135,716
25 66,400 48,797 48,797 148,797
30 92,433 59,042 59,042 159,042
</TABLE>
(1) All values shown are as of the end of the policy year
indicated and assume that (a) premiums paid after the initial premium are
received on the policy anniversary, (b) no policy loan has been made, (c)
no partial withdrawal of the Cash Surrender Value has been made and (d) no
premiums have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and
continues to be met, the death benefit guarantee will keep the Policy in
force until the policy anniversary on which the life insured is 70 years
old.
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 NASL SERIES 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.
131
<PAGE> 138
The following illustrations of Policy Values, Cash Surrender Values and Death
Benefits are applicable to Policies purchased prior to October 1, 1996.
132
<PAGE> 139
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 25
$100,000 Face Amount Death Benefit Option 1
$575 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $383 $0 $100,000
2 1,238 754 0 100,000
3 1,903 1,111 344 100,000
4 2,602 1,457 690 100,000
5 3,336 1,790 1,023 100,000
6 4,107 2,111 1,421 100,000
7 4,916 2,419 1,805 100,000
8 5,765 2,717 2,180 100,000
9 6,657 3,005 2,545 100,000
10 7,594 3,280 2,896 100,000
15 13,028 4,444 4,444 100,000
20 19,964 5,199 5,199 100,000
25 28,815 5,363 5,363 100,000
30 40,112 4,731 4,731 100,000
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
133
<PAGE> 140
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $410 $0 $100,000
2 1,238 832 65 100,000
3 1,903 1,265 497 100,000
4 2,602 1,709 942 100,000
5 3,336 2,167 1,399 100,000
6 4,107 2,636 1,946 100,000
7 4,916 3,119 2,505 100,000
8 5,765 3,617 3,080 100,000
9 6,657 4,132 3,671 100,000
10 7,594 4,661 4,277 100,000
15 13,028 7,521 7,521 100,000
20 19,964 10,729 10,729 100,000
25 28,815 14,177 14,177 100,000
30 40,112 17,723 17,723 100,000
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
134
<PAGE> 141
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $437 $0 $100,000
2 1,238 914 147 100,000
3 1,903 1,431 664 100,000
4 2,602 1,994 1,227 100,000
5 3,336 2,609 1,842 100,000
6 4,107 3,279 2,589 100,000
7 4,916 4,010 3,397 100,000
8 5,765 4,812 4,275 100,000
9 6,657 5,691 5,231 100,000
10 7,594 6,653 6,269 100,000
15 13,028 13,018 13,018 100,000
20 19,964 23,114 23,114 100,000
25 28,815 39,267 39,267 100,000
30 40,112 65,570 65,570 102,945
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
135
<PAGE> 142
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 25
$100,000 Face Amount Death Benefit Option 1
$575 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $381 $0 $100,000
2 1,238 693 0 100,000
3 1,903 1,002 235 100,000
4 2,602 1,308 541 100,000
5 3,336 1,608 841 100,000
6 4,107 1,903 1,212 100,000
7 4,916 2,189 1,576 100,000
8 5,765 2,468 1,931 100,000
9 6,657 2,737 2,277 100,000
10 7,594 2,996 2,612 100,000
15 13,028 4,090 4,090 100,000
20 19,964 4,741 4,741 100,000
25 28,815 4,777 4,777 100,000
30 40,112 3,882 3,882 100,000
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
136
<PAGE> 143
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $408 0 $100,000
2 1,238 769 2 100,000
3 1,903 1,148 381 100,000
4 2,602 1,544 776 100,000
5 3,336 1,956 1,189 100,000
6 4,107 2,385 1,695 100,000
7 4,916 2,829 2,215 100,000
8 5,765 3,288 2,751 100,000
9 6,657 3,762 3,302 100,000
10 7,594 4,249 3,866 100,000
15 13,028 6,862 6,862 100,000
20 19,964 9,680 9,680 100,000
25 28,815 12,549 12,549 100,000
30 40,112 15,146 15,146 100,000
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
137
<PAGE> 144
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $435 $0 $100,000
2 1,238 849 82 100,000
3 1,903 1,306 539 100,000
4 2,602 1,811 1,044 100,000
5 3,336 2,366 1,599 100,000
6 4,107 2,977 2,287 100,000
7 4,916 3,647 3,033 100,000
8 5,765 4,380 3,843 100,000
9 6,657 5,182 4,722 100,000
10 7,594 6,059 5,675 100,000
15 13,028 11,799 11,799 100,000
20 19,964 20,668 20,668 100,000
25 28,815 34,485 34,485 100,000
30 40,112 56,333 56,333 100,000
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
138
<PAGE> 145
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 25
$100,000 Face Amount Death Benefit Option 2
$575 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $382 $0 $100,382
2 1,238 753 0 100,753
3 1,903 1,109 342 101,109
4 2,602 1,453 686 101,453
5 3,336 1,784 1,017 101,784
6 4,107 2,102 1,412 102,102
7 4,916 2,407 1,794 102,407
8 5,765 2,702 2,164 102,702
9 6,657 2,985 2,525 102,985
10 7,594 3,255 2,872 103,255
15 13,028 4,384 4,384 104,384
20 19,964 5,079 5,079 105,079
25 28,815 5,151 5,151 105,151
30 40,112 4,393 4,393 104,393
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES TRUST. THE
POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE
139
<PAGE> 146
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.
140
<PAGE> 147
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $409 $0 $100,409
2 1,238 831 63 100,831
3 1,903 1,262 495 101,262
4 2,602 1,704 937 101,704
5 3,336 2,159 1,392 102,159
6 4,107 2,625 1,935 102,625
7 4,916 3,103 2,489 103,103
8 5,765 3,595 3,058 103,595
9 6,657 4,103 3,643 104,103
10 7,594 4,623 4,240 104,623
15 13,028 7,410 7,410 107,410
20 19,964 10,457 10,457 110,457
25 28,815 13,574 13,574 113,574
30 40,112 16,483 16,483 116,483
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
141
<PAGE> 148
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $604 $437 $0 $100,437
2 1,238 912 145 100,912
3 1,903 1,428 661 101,428
4 2,602 1,989 1,222 101,989
5 3,336 2,600 1,833 102,600
6 4,107 3,265 2,574 103,265
7 4,916 3,989 3,375 103,989
8 5,765 4,782 4,245 104,782
9 6,657 5,650 5,189 105,650
10 7,594 6,597 6,213 106,597
15 13,028 12,811 12,811 112,811
20 19,964 22,484 22,484 122,484
25 28,815 37,504 37,504 137,504
30 40,112 60,908 60,908 160,908
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
142
<PAGE> 149
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 25
$100,000 Face Amount Death Benefit Option 2
$575 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 380 $0 $100,381
2 1,238 692 0 100,692
3 1,903 999 232 100,999
4 2,602 1,303 536 101,303
5 3,336 1,601 833 101,601
6 4,107 1,893 1,202 101,893
7 4,916 2,176 1,562 102,176
8 5,765 2,451 1,914 102,451
9 6,657 2,716 2,256 102,716
10 7,594 2,970 2,587 102,970
15 13,028 4,031 4,031 104,031
20 19,964 4,627 4,627 104,627
25 28,815 4,580 4,580 104,580
30 40,112 3,571 3,571 103,571
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
143
<PAGE> 150
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $408 $0 $100,408
2 1,238 768 1 100,768
3 1,903 1,144 377 101,144
4 2,602 1,537 770 101,537
5 3,336 1,947 1,179 101,947
6 4,107 2,372 1,681 102,372
7 4,916 2,811 2,197 102,811
8 5,765 3,264 2,727 103,264
9 6,657 3,731 3,271 103,731
10 7,594 4,210 3,826 104,210
15 13,028 6,754 6,754 106,754
20 19,964 9,424 9,424 109,424
25 28,815 11,992 11,992 111,992
30 40,112 14,008 14,008 114,008
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
144
<PAGE> 151
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $604 $435 $0 $100,435
2 1,238 847 80 100,847
3 1,903 1,302 535 101,302
4 2,602 1,803 1,036 101,803
5 3,336 2,355 1,587 102,355
6 4,107 2,960 2,270 102,960
7 4,916 3,622 3,008 103,622
8 5,765 4,346 3,809 104,346
9 6,657 5,137 4,677 105,137
10 7,594 5,999 5,616 105,999
15 13,028 11,597 11,597 111,597
20 19,964 20,074 20,074 120,074
25 28,815 32,866 32,866 132,866
30 40,112 52,077 52,077 152,077
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
145
<PAGE> 152
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 45
$100,000 Face Amount Death Benefit Option 1
$1,325 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $895 $0 $100,000
2 2,852 1,758 198 100,000
3 4,386 2,583 1,023 100,000
4 5,996 3,370 1,810 100,000
5 7,688 4,109 2,549 100,000
6 9,463 4,804 3,400 100,000
7 11,328 5,449 4,201 100,000
8 13,285 6,050 4,958 100,000
9 15,341 6,601 5,665 100,000
10 17,499 7,104 6,324 100,000
15 30,021 8,817 8,817 100,000
20 46,003 8,758 8,758 100,000
25 66,400 4,418 4,418 100,000
30 92,433 0(5) 0(5) 0(5)
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF NASL SERIES 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.
146
<PAGE> 153
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $958 $0 $100,000
2 2,852 1,940 380 100,000
3 4,386 2,940 1,380 100,000
4 5,996 3,957 2,397 100,000
5 7,688 4,985 3,425 100,000
6 9,463 6,024 4,620 100,000
7 11,328 7,071 5,823 100,000
8 13,285 8,131 7,039 100,000
9 15,341 9,199 8,263 100,000
10 17,499 10,277 9,497 100,000
15 30,021 15,767 15,767 100,000
20 46,003 21,101 21,101 100,000
25 66,400 24,058 24,058 100,000
30 92,433 21,932 21,932 100,000
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
147
<PAGE> 154
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,022 $0 $100,000
2 2,852 2,130 570 100,000
3 4,386 3,327 1,767 100,000
4 5,996 4,621 3,061 100,000
5 7,688 6,015 4,455 100,000
6 9,463 7,520 6,116 100,000
7 11,328 9,143 7,895 100,000
8 13,285 10,904 9,812 100,000
9 15,341 12,812 11,876 100,000
10 17,499 14,887 14,107 100,000
15 30,021 28,440 28,440 100,000
20 46,003 49,939 49,939 100,000
25 66,400 85,104 85,104 100,000
30 92,433 144,224 144,224 154,319
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
148
<PAGE> 155
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 45
$100,000 Face Amount Death Benefit Option 1
$1,325 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $891 $0 $100,000
2 2,852 1,690 130 100,000
3 4,386 2,449 889 100,000
4 5,996 3,166 1,606 100,000
5 7,688 3,840 2,280 100,000
6 9,463 4,469 3,065 100,000
7 11,328 5,048 3,800 100,000
8 13,285 5,572 4,480 100,000
9 15,341 6,036 5,100 100,000
10 17,499 6,433 5,653 100,000
15 30,021 7,233 7,233 100,000
20 46,003 5,244 5,244 100,000
25 66,400 0(4) 0(4) 100,000(4)
30 92,433 0(5) 0(5) 0(5)
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
(4) Provided the Minimum Premium Requirement has been met, the death benefit
guarantee will have kept the Policy in force until this point, i.e. the
policy anniversary on which the life insured is 70 years old, at which
time the death benefit guarantee will expire and in the absence of
additional premium payments the Policy will lapse.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF NASL SERIES 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.
149
<PAGE> 156
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $954 $0 $100,000
2 2,852 1,869 309 100,000
3 4,386 2,795 1,235 100,000
4 5,996 3,732 2,172 100,000
5 7,688 4,676 3,116 100,000
6 9,463 5,626 4,222 100,000
7 11,328 6,577 5,329 100,000
8 13,285 7,523 6,431 100,000
9 15,341 8,460 7,524 100,000
10 17,499 9,379 8,599 100,000
15 30,021 13,493 13,493 100,000
20 46,003 15,873 15,873 100,000
25 66,400 14,001 14,001 100,000
30 92,433 2,369 2,369 100,000
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
150
<PAGE> 157
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,017 $0 $100,000
2 2,852 2,056 496 100,000
3 4,386 3,172 1,612 100,000
4 5,996 4,372 2,812 100,000
5 7,688 5,661 4,101 100,000
6 9,463 7,047 5,643 100,000
7 11,328 8,535 7,287 100,000
8 13,285 10,130 9,038 100,000
9 15,341 11,840 10,904 100,000
10 17,499 13,671 12,891 100,000
15 30,021 25,014 25,014 100,000
20 46,003 41,465 41,465 100,000
25 66,400 66,757 66,757 100,000
30 92,433 110,438 110,438 118,169
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
151
<PAGE> 158
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 45
$100,000 Face Amount Death Benefit Option 2
$1,325 Annual Planned Premium
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $892 $0 $100,892
2 2,852 1,749 189 101,749
3 4,386 2,566 1,006 102,566
4 5,996 3,340 1,780 103,340
5 7,688 4,062 2,502 104,062
6 9,463 4,736 3,332 104,736
7 11,328 5,355 4,107 105,355
8 13,285 5,924 4,832 105,924
9 15,341 6,438 5,502 106,438
10 17,499 6,897 6,117 106,897
15 30,021 8,298 8,298 108,298
20 46,003 7,738 7,738 107,738
25 66,400 2,729 2,729 102,729
30 92,433 0(5) 0(5) 0(5)
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
net assets. The investment management fees and expenses used to calculate
calculatethe policy values do not reflect this waiver. If this waiver were
reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF NASL SERIES 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
152
<PAGE> 159
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.
153
<PAGE> 160
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $955 $0 $100,955
2 2,852 1,931 371 101,931
3 4,386 2,920 1,360 102,920
4 5,996 3,921 2,361 103,921
5 7,688 4,926 3,366 104,926
6 9,463 5,936 4,532 105,936
7 11,328 6,944 5,696 106,944
8 13,285 7,955 6,863 107,955
9 15,341 8,961 8,025 108,961
10 17,499 9,963 9,183 109,963
15 30,021 14,787 14,787 114,787
20 46,003 18,648 18,648 118,648
25 66,400 18,294 18,294 118,294
30 92,433 10,150 10,150 110,150
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
154
<PAGE> 161
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value(3) Value(3,4) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,018 $0 $101,018
2 2,852 2,120 560 102,102
3 4,386 3,304 1,744 103,304
4 5,996 4,579 3,019 104,579
5 7,688 5,943 4,383 105,943
6 9,463 7,406 6,002 107,406
7 11,328 8,973 7,725 108,973
8 13,285 10,658 9,566 110,658
9 15,341 12,467 11,531 112,467
10 17,499 14,412 13,632 114,412
15 30,021 26,592 26,592 126,593
20 46,003 44,054 44,054 144,054
25 66,400 66,668 66,668 166,668
30 92,433 94,682 94,682 194,682
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) NASL Financial Services, Inc. has voluntarily agreed to waive fees payable
to it and/or to reimburse expenses for a period of one year from December
31, 1996 to the extent necessary to prevent the total of advisory fees and
expenses for the Quantitative Equity Trust, Real Estate Securities Trust
and Capital Growth Bond Trust for such period from exceeding .50% of
average net assets. The investment management fees and expenses used to
calculate the policy values do not reflect this waiver. If this waiver
were reflected in the calculations, Policy Values and Cash Surrender Values
would be slightly higher.
(4) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
155
<PAGE> 162
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Male Nonsmoker Issue Age 45
$100,000 Face Amount Death Benefit Option 2
$1,325 Annual Planned Premium
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
0% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $888 $0 $100,888
2 2,852 1,680 120 101,680
3 4,386 2,429 869 102,429
4 5,996 3,133 1,573 103,133
5 7,688 3,789 2,229 103,789
6 9,463 4,396 2,992 104,396
7 11,328 4,948 3,700 104,948
8 13,285 5,439 4,347 105,439
9 15,341 5,864 4,928 105,864
10 17,499 6,217 5,437 106,127
15 30,021 6,688 6,688 106,688
20 46,003 4,226 4,226 104,226
25 66,400 0(4) 0(4) 100,000(4)
30 92,433 0(5) 0(5) 0(5)
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
(4) Provided the Minimum Premium Requirement has been met, the death benefit
guarantee will have kept the Policy in force until this point, i.e. the
policy anniversary on which the life insured is 70 years old, at which
time the death benefit guarantee will expire and in the absence of
additional premium payments the Policy will lapse.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE
ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF NASL SERIES 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.
156
<PAGE> 163
<TABLE>
<CAPTION>
6% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $951 $0 $100,951
2 2,852 1,858 298 101,858
3 4,386 2,773 1,213 102,773
4 5,996 3,692 2,132 103,692
5 7,688 4,612 3,052 104,612
6 9,463 5,531 4,127 105,531
7 11,328 6,441 5,193 106,441
8 13,285 7,336 6,244 107,336
9 15,341 8,209 7,273 108,209
10 17,499 9,049 8,269 109,049
15 30,021 12,452 12,452 112,452
20 46,003 13,278 13,278 113,278
25 66,400 8,575 8,575 108,575
30 92,433 0(4) 0(4) 0(4)
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
(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 NASL SERIES 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.
157
<PAGE> 164
<TABLE>
<CAPTION>
12% Hypothetical
Gross Investment Return
End of Cash
Policy Accumulated Policy Surrender Death
Year(1) Premiums(2) Value Value(3) Benefit
<S> <C> <C> <C> <C>
1 $1,391 $1,014 $0 $101,014
2 2,852 2,044 484 102,044
3 4,386 3,146 1,586 103,146
4 5,996 4,324 2,764 104,324
5 7,688 5,581 4,021 105,581
6 9,463 6,924 5,520 106,924
7 11,328 8,353 7,105 108,353
8 13,285 9,869 8,777 109,869
9 15,341 11,475 10,539 111,475
10 17,499 13,170 12,390 113,170
15 30,021 23,037 23,037 123,037
20 46,003 35,039 35,039 135,039
25 66,400 47,704 47,704 147,704
30 92,433 57,280 57,280 157,280
</TABLE>
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the
policy anniversary, (b) no policy loan has been made, (c) no partial
withdrawal of the Cash Surrender Value has been made and (d) no premiums
have been allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old.
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 NASL SERIES 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.
158
