<PAGE> 1
Registration No. 33-13774
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
POST-EFFECTIVE
AMENDMENT NO. 23
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SEPARATE ACCOUNT FOUR
OF
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Exact name of trust)
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Name of depositor)
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of depositor's principal executive offices)
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JAMES D. GALLAGHER, ESQ.
Secretary and General Counsel Notice to:
The Manufacturers Life W. Randolph Thompson, Esq., Of Counsel
Insurance Company of America Jones & Blouch L.L.P., Suite 405W
500 N. Woodward Avenue 1025 Thomas Jefferson St., N.W.
Bloomfield Hills, Michigan 48304 Washington, D.C. 20007
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 1996 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on ____________________ pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
Registrant has registered, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, an indefinite number of variable life insurance policies
for sale under the Securities Act of 1933 and filed a Rule 24f-2 notice on
February 25, 1997 for its fiscal year ended December 31, 1996.
<PAGE> 2
SEPARATE ACCOUNT FOUR
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
Registration Statement on Form S-6
Cross-Reference Sheet
Form
N-8B-2
Item No. Caption in Prospectus
1 ----- Cover Page; General Information About Manufacturers Life of
America, Separate Account Four, and NASL Series Trust
(What Is Manufacturers Life of America's Separate Account Four?)
2 ----- Cover Page; General Information About Manufacturers Life of
America, Separate Account Four, and NASL Series Trust
(Who Are Manufacturers Life Of America And Manufacturers Life?)
3 ----- *
4 ----- Other Matters (Who Sells The Policies And What Are The Sales
Commissions?)
5 ----- General Information About Manufacturers Life Of America, Separate
Account Four, and NASL Series Trust (What Is Manufacturers Life of
America's Separate Account Four?)
6 ----- General Information About Manufacturers Life of America, Separate
Account Four, and NASL Series Trust (What Is Manufacturers Life of
America's Separate Account Four?)
7 ----- *
8 ----- *
9 ----- Other Matters (Is There Any Litigation Pending?)
10 ----- Detailed Information About The Policies
11 ----- General Information About Manufacturers Life Of America, Separate
Account Four, and NASL Series Trust (What Is NASL Series Trust?)
12 ----- General Information About Manufacturers Life Of America, Separate
Account Four, and NASL Series Trust (What Is NASL Series Trust?)
13 ----- Detailed Information About The Policies (Charges)
14 ----- Detailed Information About the Policies (Premium Provisions -- What
Are the Requirements and Procedures for Issuance of a Policy?); Other
Matters (What Responsibilities Has Manufacturers Life Assumed?)
15 ----- Detailed Information About The Policies (Premium Provisions -- What
Are the Requirements and Procedures for Issuance of a Policy?)
16 ----- **
17 ----- Detailed Information About The Policies (Policy Values -- How May a
Policyowner Obtain the Net Cash Surrender Value?; Other Provisions -- When
Are Proceeds Paid?)
18 ----- General Information About Manufacturers Life Of America, Separate
Account Four, and NASL Series Trust
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 3
Form
N-8B-2
Item No. Caption in Prospectus
19 ----- Detailed Information About The Policies (Other Provisions -- What
Reports Will Be Sent To Policyowners?); Other Matters (What
Responsibilities Has Manufacturers Life Assumed?)
20 ----- *
21 ----- Detailed Information About The Policies
22 ----- *
23 ----- **
24 ----- Detailed Information About the Policies (Other Provisions -- What
Are The Other General Policy Provisions?)
25 ----- General Information About Manufacturers Life Of America, Separate
Account Four, and NASL Series Trust (Who Are Manufacturers Life Of
America And Manufacturers Life?)
26 ----- *
27 ----- **
28 ----- Other Matters (Who Are The Directors And Officers Of Manufacturers
Life Of America?)
29 ----- General Information About Manufacturers Life Of America, Separate
Account Four, and NASL Series Trust (Who Are Manufacturers Life Of
America And Manufacturers Life?)
30 ----- *
31 ----- *
32 ----- *
33 ----- *
34 ----- *
35 ----- **
36 ----- *
37 ----- *
38 ----- Other Matters (Who Sells The Policies And What Are The Sales
Commissions?; What Responsibilities Has Manufacturers Life Assumed?)
39 ----- Other Matters (Who Sells The Policies And What Are The Sales
Commissions?)
40 ----- *
41 ----- **
42 ----- *
43 ----- *
44 ----- Detailed Information About The Policies (Policy Values -- What Is
the Policy Value and How Is It Determined?)
45 ----- *
46 ----- Detailed Information About The Policies (Policy Values -- How May a
Policyowner Obtain the Net Cash Surrender Value?; Other Provisions -- When
Are Proceeds Paid?)
47 ----- General Information About Manufacturers Life Of America, Separate
Account Four, and NASL Series Trust (What Is NASL Series Trust?)
48 ----- *
49 ----- *
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 4
Form
N-8B-2
Item No. Caption in Prospectus
50 ----- General Information About Manufacturers Life Of America, Separate
Account Four, and NASL Series Trust (What Is Manufacturers Life Of
America's Separate Account Four?)
51 ----- Detailed Information About The Policies
52 ----- Detailed Information About The Policies (Other Provisions -- Under
What Circumstances May Portfolio Shares Be Substituted?)
53 ----- **
54 ----- *
55 ----- *
56 ----- *
57 ----- *
58 ----- *
59 ----- Financial Statements
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 5
PART I
PROSPECTUS
<PAGE> 6
LOGO
<PAGE> 7
PROSPECTUS FOR
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE
ISSUED BY
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
<PAGE> 8
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: Pacific Rim Emerging Markets Trust, Science &
Technology Trust, International Small Cap Trust, Emerging Growth Trust, Pilgrim
Baxter Growth Trust, Small/Mid Cap Trust, International Stock Trust, Worldwide
Growth Trust, Global Equity Trust, Growth Trust, Equity Trust, Quantitative
Equity Trust (formerly the Common Stock Fund), Equity Index Trust, Blue Chip
Growth Trust, Real Estate Securities Trust, Value Trust, International Growth
and Income Trust, Growth and Income Trust, Equity-Income Trust, Balanced Trust,
Aggressive Asset Allocation Trust, Moderate Asset Allocation Trust, Conservative
Asset Allocation Trust, High Yield Trust, Strategic Bond Trust, Global
Government Bond Trust, Capital Growth Bond Trust, Investment Quality Bond Trust,
U.S. Government Securities Trust, Money Market Trust, Lifestyle Aggressive 1000
Trust, Lifestyle Growth 820 Trust, Lifestyle Balanced 640 Trust, Lifestyle
Moderate 460 Trust and Lifestyle Conservative 280 Trust (collectively the "NASL
Trusts"). 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, 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.
The Securities and Exchange Commission maintains a Web site (http://www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
<PAGE> 9
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 MAY 1, 1997.
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PROSPECTUS CONTENTS
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DEFINITIONS............................................................................ 1
INTRODUCTION TO POLICIES............................................................... 1
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, SEPARATE ACCOUNT FOUR, AND
NASL SERIES TRUST.................................................................... 10
Who Are Manufacturers Life of America And Manufacturers Life?..................... 10
What Is Manufacturers Life of America's Separate Account Four?.................... 10
What Is NASL Series Trust?........................................................ 10
What Are The Investment Objectives and Certain Policies Of The Portfolios?........ 12
DETAILED INFORMATION ABOUT THE POLICIES................................................ 15
PREMIUM PROVISIONS................................................................... 15
What Are The Requirements And Procedures For Issuance Of A Policy?................ 15
What Limitations Apply To Premium Amounts?........................................ 16
Is There A Death Benefit Guarantee?............................................... 17
When Does A Policy Go Into Default?............................................... 17
How Can A Terminated Policy Be Reinstated?........................................ 18
How May Net Premiums Be Invested?................................................. 18
Is There A Short-Term Cancellation Right, Or "Free Look"?......................... 18
What Are The Conversion Privileges Of The Policy?................................. 19
INSURANCE BENEFIT.................................................................... 19
What Is The Insurance Benefit?.................................................... 19
What Death Benefit Options Are Available?......................................... 19
Can The Death Benefit Option Be Changed?.......................................... 20
Can The Face Amount Of A Policy Be Changed?....................................... 20
POLICY VALUES........................................................................ 21
What Is The Policy Value And How Is It Determined?................................ 21
Transfers Of Policy Value......................................................... 22
What Are The Provisions Governing Policy Loans?................................... 23
How May A Policyowner Obtain The Net Cash Surrender Value?........................ 26
CHARGES.............................................................................. 27
What Deductions Are Made From Premiums?........................................... 27
What Are The Surrender Charges?................................................... 27
What Are The Monthly Deductions?.................................................. 31
Are There Special Provisions For Group Or Sponsored Arrangements?................. 32
Are There Special Provisions For Exchanges?....................................... 32
What Are The Risk Charges Assessed Against Separate Account Assets?............... 33
Are There Other Relevant Charges?................................................. 33
THE GENERAL ACCOUNT.................................................................. 35
What Is The General Account?...................................................... 35
OTHER PROVISIONS..................................................................... 35
What Supplementary Benefits Are Available?........................................ 35
Under What Circumstances May Portfolio Shares Be Substituted?..................... 35
What Are The Other General Policy Provisions?..................................... 36
When Are Proceeds Paid?........................................................... 36
What Reports Will Be Sent To Policyowners?........................................ 37
OTHER MATTERS........................................................................ 37
What Is The Federal Tax Treatment Of The Policies?................................ 37
Tax Status Of The Policy.......................................................... 37
What Is The Tax Treatment Of Policy Benefits?..................................... 38
What Are The Company's Tax Considerations?........................................ 40
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Who Sells The Policies And What Are The Sales Commissions?........................ 41
What Responsibilities Has Manufacturers Life Assumed?............................. 41
What Are The Voting Rights?....................................................... 41
Who Are The Directors And Officers Of Manufacturers Life of America?.............. 42
What State Regulations Apply?..................................................... 43
Is There Any Litigation Pending?.................................................. 43
Where Can Further Information Be Found?........................................... 43
Legal Considerations.............................................................. 43
Legal Matters..................................................................... 44
Experts........................................................................... 44
Financial Statements.............................................................. 45
Appendix.......................................................................... 73
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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 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.
<PAGE> 12
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%.
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 (see "What Death Benefit Options are Available").
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 (see "What Limitations Apply to Premium Amounts").
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 (see "Transfers of Policy
Value").
1
<PAGE> 13
The Portfolios currently offered are the: Pacific Rim Emerging Markets Trust,
Science & Technology Trust, International Small Cap Trust, Emerging Growth
Trust, Pilgrim Baxter Growth Trust, Small/Mid Cap Trust, International Stock
Trust, Worldwide Growth Trust, Global Equity Trust, Growth Trust, Equity Trust,
Quantitative Equity Trust (formerly the Common Stock Fund), Equity Index Trust,
Blue Chip Growth Trust, Real Estate Securities Trust, Value Trust, International
Growth and Income Trust, Growth and Income Trust, Equity-Income Trust, Balanced
Trust, Aggressive Asset Allocation Trust, Moderate Asset Allocation Trust,
Conservative Asset Allocation Trust, High Yield Trust, Strategic Bond Trust,
Global Government Bond Trust, Capital Growth Bond Trust, Investment Quality Bond
Trust, U.S. Government Securities Trust, Money Market Trust, Lifestyle
Aggressive 1000 Trust, Lifestyle Growth 820 Trust, Lifestyle Balanced 640 Trust,
Lifestyle Moderate 460 Trust and Lifestyle Conservative 280 Trust (collectively
the "NASL Trusts"). Other sub-accounts and Portfolios may be added in the
future.
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
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 choose
to decrease the increased face amount 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?")
2
<PAGE> 14
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?")
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 (excluding the
Lifestyle Trusts) range from .25% to 1.10% of the assets of the Portfolios.
Maximum expenses range from .15% to .75% of the assets of the Portfolios
(excluding the Lifestyle Trusts). Because each Lifestyle Trust will invest
in shares of Underlying Portfolios (all of the Portfolios except the
Lifestyle Trusts) each will bear its pro rata share of the fees and
expenses incurred by the Underlying Portfolios.
For a complete discussion of charges and deductions see the heading Charges And
Deductions in this Introduction and the references therein.
3
<PAGE> 15
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:
- Pacific Rim Emerging Markets Trust
- Science & Technology Trust
- International Small Cap Trust
- Emerging Growth Trust
- Pilgrim Baxter Growth Trust
- Small/Mid Cap Trust
- International Stock Trust
- Worldwide Growth Trust
- Global Equity Trust
- Growth Trust
- Equity Trust
- Quantitative Equity Trust
- Equity Index Trust
- Blue Chip Growth Trust
- Real Estate Securities Trust
- Value Trust
- International Growth and Income Trust
- Growth and Income Trust
- Equity-Income Trust
- Balanced Trust
- Aggressive Asset Allocation Trust
- Moderate Asset Allocation Trust
- Conservative Asset Allocation Trust
- High Yield Trust
- Strategic Bond Trust
- Global Government Bond Trust
- Capital Growth Bond Trust
- Investment Quality Bond Trust
- U.S. Government Securities Trust
- Money Market Trust
- Lifestyle Aggressive 1000 Trust
- Lifestyle Growth 820 Trust
- Lifestyle Balanced 640 Trust
- Lifestyle Moderate 460 Trust
- Lifestyle Conservative 280 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
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?")
4
<PAGE> 16
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 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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<PAGE> 17
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 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?")
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<PAGE> 18
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 and Expenses
Investment management fees paid by NASL Series Trust (excluding the Lifestyle
Trusts) range from .25% to 1.10% of the assets of the Portfolios.* Maximum
expenses range from .15% to .75% of the assets of the Portfolios (excluding the
Lifestyle Trusts).* Because each Lifestyle Trust will invest in shares of
Underlying Portfolios each will bear its pro rata share of the fees and expenses
incurred by the Underlying Portfolios. See Detailed Information About The
Policies; Charges and Deductions -- "Other Charges."
*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 January 1,
1997 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?")
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?")
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<PAGE> 19
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
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%
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).
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<PAGE> 20
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.
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<PAGE> 21
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 rank 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.
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 with the Policies. Any dividend or capital gain distribution
received from a
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<PAGE> 22
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>
PORTFOLIO SUBADVISER
- ---------------------------------------------------------------------------------------------
<S> <C>
AGGRESSIVE GROWTH PORTFOLIOS
Pacific Rim Emerging Markets Trust Manufacturers Adviser Corporation*
Science & Technology Trust T. Rowe Price Associates, Inc.
International Small Cap Trust Founders Asset Management, Inc.
Emerging Growth Trust Warburg, Pincus Counsellors, Inc.
Pilgrim Baxter Growth Trust Pilgrim Baxter & Associates, Ltd.
Small/Mid Cap Trust Fred Alger Management, Inc.
International Stock Trust Rowe Price-Fleming International, Inc.
GROWTH PORTFOLIOS
Worldwide Growth Trust Founders Asset Management, Inc.
Global Equity Trust Morgan Stanley Asset Management Inc.
Growth Trust Founders Asset Management, Inc.
Equity Trust Fidelity Management Trust Company
Quantitative Equity Trust Manufacturers Adviser Corporation*
(formerly Common Stock Fund)
Equity Index Trust Manufacturers Adviser Corporation*
Blue Chip Growth Trust T. Rowe Price Associates, Inc.
Real Estate Securities Trust Manufacturers Adviser Corporation*
GROWTH & INCOME PORTFOLIOS
Value Trust Miller Anderson & Sherrerd, LLP
International Growth and J.P. Morgan Investment Management Inc.
Income Trust
Growth and Income Trust Wellington Management Company
Equity-Income Trust T. Rowe Price Associates, Inc.
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
High Yield Trust Miller Anderson & Sherrerd, LLP
Strategic Bond Trust Salomon Brothers Asset Management Inc
Global Government Bond Trust Oechsle International Advisors, L.P.
Capital Growth Bond Trust Manufacturers Adviser Corporation*
Investment Quality Bond Trust Wellington Management Company
U.S. Government Securities Trust Salomon Brothers Asset Management Inc
</TABLE>
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<PAGE> 23
<TABLE>
<CAPTION>
PORTFOLIO SUBADVISER
- ---------------------------------------------------------------------------------------------
<S> <C>
MONEY MARKET PORTFOLIOS
Money Market Trust Manufacturers Adviser Corporation*
LIFESTYLE PORTFOLIOS
Lifestyle Aggressive 1000 Trust Manufacturers Adviser Corporation*
Lifestyle Growth 820 Trust Manufacturers Adviser Corporation*
Lifestyle Balanced 640 Trust Manufacturers Adviser Corporation*
Lifestyle Moderate 460 Trust Manufacturers Adviser Corporation*
Lifestyle Conservative 280 Trust Manufacturers Adviser Corporation*
</TABLE>
- ---------------
* Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
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 ("MAC") 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.
SCIENCE & TECHNOLOGY TRUST. The investment objective of the Science &
Technology Trust is long-term growth of capital. Current income is incidental to
the portfolio's objective. T. Rowe Price Associates, Inc. manages the Science &
Technology Trust.
INTERNATIONAL SMALL CAP TRUST. The investment objective of the International
Small Cap Trust is to seek long-term capital appreciation. Founders Asset
Management, Inc. ("Founders") manages the International Small Cap Trust and will
pursue this objective by investing primarily in securities issued by foreign
companies which have total market capitalizations or annual revenues of $1
billion or less. These securities may represent companies in both established
and emerging economies throughout the world.
EMERGING 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 of 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.
PILGRIM BAXTER GROWTH TRUST. The investment objective of the Pilgrim Baxter
Growth Trust is capital appreciation. Pilgrim Baxter & Associates, Ltd. ("PBHG")
manages the Pilgrim Baxter Growth Trust and seeks to achieve its objective by
investing in companies believed by PBHG to have an outlook for strong earnings
growth and the potential for significant capital appreciation.
SMALL/MID CAP TRUST. The investment objective of the Small/Mid Cap Trust is to
seek long term capital appreciation. Fred Alger Management, Inc. manages the
Small/Mid Cap Trust and will pursue this objective by investing at least 65% of
the portfolio's total assets (except during temporary defensive periods) in
small/mid cap equity securities.
INTERNATIONAL STOCK TRUST. The investment objective of the International Stock
Trust is to achieve long-term growth of capital. Rowe Price-Fleming
International, Inc. manages the International Stock Trust and seeks to obtain
this objective by investing primarily in common stocks of established, non-U.S.
companies.
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<PAGE> 24
GROWTH PORTFOLIOS
WORLDWIDE GROWTH TRUST. The investment objective of the Worldwide Growth Trust
is long-term growth of capital. Founders manages the Worldwide Growth Trust and
seeks to attain this objective by normally investing at least 65% of its total
assets in equity securities of growth companies in a variety of markets
throughout the world.
GLOBAL EQUITY TRUST. The investment objective of the Global Equity Trust is
long-term capital appreciation. Morgan Stanley Asset Management Inc. manages the
Global Equity Trust and intends to pursue this objective by investing primarily
in equity securities of issuers throughout the world, including U.S. issuers.
GROWTH TRUST. The investment objective of the Growth Trust is to seek long-term
growth of capital. Founders manages the Growth Trust and will pursue this
objective by investing, under normal market conditions, at least 65% of its
total assets in common stocks of well-established, high-quality growth companies
that Founders believes have the potential to increase earnings faster than the
rest of the market.
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. MAC manages
the Quantitative Equity Trust.
EQUITY INDEX TRUST. The investment objective of the Equity Index Trust is to
achieve investment results which approximate the total return of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. MAC manages the Equity Index Trust.
BLUE CHIP GROWTH TRUST. The primary investment objective of the Blue Chip
Growth Trust is to provide long-term growth of capital. Current income is a
secondary objective, and many of the stocks in the Portfolio are expected to pay
dividends. T. Rowe Price Associates, Inc. manages the Blue Chip Growth Trust.
REAL ESTATE SECURITIES TRUST. The investment objective of the Real Estate
Securities Trust is to achieve a combination of long-term capital appreciation
and satisfactory current income by investing in real estate related equity and
debt securities. MAC manages the Real Estate Securities Trust.
GROWTH & INCOME PORTFOLIOS
VALUE TRUST. The investment objective of the Value Trust is to realize an
above-average total return over a market cycle of three to five years,
consistent with reasonable risk. Miller Anderson & Sherrerd, LLP ("MAS") manages
the Value Trust and seeks to attain this objective by investing primarily in
common and preferred stocks, convertible securities, rights and warrants to
purchase common stocks, ADRs and other equity securities of companies with
equity capitalizations usually greater than $300 million.
INTERNATIONAL GROWTH AND INCOME TRUST. The investment objective of the
International Growth and Income Trust is to seek long-term growth of capital and
income. The portfolio is designed for investors with a long-term investment
horizon who want to take advantage of investment opportunities outside the
United States. J.P. Morgan Investment Management Inc. manages the International
Growth and Income Trust.
GROWTH AND INCOME TRUST. The investment objective of the Growth and Income
Trust is to provide long-term growth of capital and income consistent with
prudent investment risk. Wellington Management Company 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.
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<PAGE> 25
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.
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 market -- 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
HIGH YIELD TRUST. The investment objective of High Yield Trust is to realize an
above-average total return over a market cycle of three to five years,
consistent with reasonable risk. MAS manages the High Yield Trust and seeks to
attain this objective by investing primarily in high yield debt securities,
including corporate bonds and other fixed-income securities.
STRATEGIC BOND TRUST. The investment objective of the Strategic Bond Trust is
to seek a high level of total return consistent with preservation of capital.
The Strategic Bond Trust seeks to achieve its objective by giving its
Subadviser, Salomon Brothers Asset Management Inc ("SBAM") broad discretion to
deploy the Strategic Bond Trust's assets among certain segments of the
fixed-income market as SBAM believes will best contribute to the achievement of
the portfolio's objective.
GLOBAL GOVERNMENT BOND TRUST. The investment objective of the Global Government
Bond Trust is to seek a high level of total return by placing primary emphasis
on high current income and the preservation of capital. Oechsle International
Advisors, L.P. manages the Global Government Bond Trust and intends to pursue
this objective by investing primarily in a selected global portfolio of
high-quality, fixed-income securities of foreign and U.S. governmental entities
and supranational issuers.
CAPITAL GROWTH BOND TRUST. The investment objective of the Capital Growth Bond
Trust is to achieve growth of capital by investing in medium-grade or better
debt securities, with income as a secondary consideration. MAC manages the
Capital Growth Bond Trust. The Capital Growth Bond Trust differs from most
"bond" funds in that its primary objective is capital appreciation, not income.
INVESTMENT QUALITY BOND TRUST. The investment objective of the Investment
Quality Bond Trust is to provide a high level of current income consistent with
the maintenance of principal and liquidity. Wellington Management Company
manages the Investment Quality Bond Trust and seeks to achieve the Trust's
objective by investing primarily in a diversified portfolio of investment grade
corporate bonds and U.S. Government bonds with intermediate to longer term
maturities.
U.S. GOVERNMENT SECURITIES TRUST. The investment objective of the U.S.
Government Securities Trust is to obtain a high level of current income
consistent with preservation of capital and maintenance of liquidity. SBAM
manages the U.S. Government Securities Trust and seeks to attain its objective
by investing a substantial portion of its assets in debt obligations and
mortgage-backed securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and derivative securities such as collateralized
mortgage obligations backed by such securities.
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<PAGE> 26
MONEY MARKET PORTFOLIO
MONEY MARKET TRUST. The investment objective of the Money Market Trust is to
obtain maximum current income consistent with preservation of principal and
liquidity. MAC manages the Money Market Trust and seeks to achieve this
objective by investing in high quality, U.S. dollar denominated money market
instruments.
LIFESTYLE PORTFOLIOS
LIFESTYLE AGGRESSIVE 1000 TRUST. The investment objective of the Lifestyle
Aggressive 1000 Trust is to provide long term growth of capital. Current income
is not a consideration. MAC seeks to achieve this objective by investing
approximately 100% of the Lifestyle Trust's assets in Underlying Portfolios
which invest primarily in equity securities.
LIFESTYLE GROWTH 820 TRUST. The investment objective of the Lifestyle Growth
820 Trust is to provide long term growth of capital with consideration also
given to current income. MAC seeks to achieve this objective by investing
approximately 20% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 80% of its assets
in Underlying Portfolios which invest primarily in equity securities.
LIFESTYLE BALANCED 640 TRUST. The investment objective of the Lifestyle
Balanced 640 Trust is to provide a balance between high level of current income
and growth of capital with a greater emphasis given to capital growth. MAC seeks
to achieve this objective by investing approximately 40% of the Lifestyle
Trust's assets in Underlying Portfolios which invest primarily in fixed income
securities and approximately 60% of its assets in Underlying Portfolios which
invest primarily in equity securities.
LIFESTYLE MODERATE 460 TRUST. The investment objective of the Lifestyle
Moderate 460 Trust is to provide a balance between a high level of current
income and growth of capital with a greater emphasis given to high income. MAC
seeks to achieve this objective by investing approximately 60% of the Lifestyle
Trust's assets in Underlying Portfolios which invest primarily in fixed income
securities and approximately 40% of its assets in Underlying Portfolios which
invest primarily in equity securities.
LIFESTYLE CONSERVATIVE 280 TRUST. The investment objective of the Lifestyle
Conservative 280 Trust is to provide a high level of current income with some
consideration also given to growth of capital. MAC seeks to achieve this
objective by investing approximately 80% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 60% of its assets in Underlying Portfolios which invest primarily
in equity securities.
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.
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 0 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
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<PAGE> 27
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
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
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<PAGE> 28
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?
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,
except for Policies issued in Massachusetts. The death benefit guarantee for
Policies issued in Massachusetts will expire five years after the policy date.
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 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
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<PAGE> 29
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
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.
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<PAGE> 30
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?
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
<CAPTION>
ATTAINED CORRIDOR
AGE PERCENTAGE
<S> <C>
51 178%
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
<CAPTION>
ATTAINED CORRIDOR
AGE PERCENTAGE
<S> <C>
62 126%
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
<CAPTION>
ATTAINED CORRIDOR
AGE PERCENTAGE
<S> <C>
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
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<PAGE> 31
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
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
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.
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<PAGE> 32
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 choose to decrease the increased
face amount 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.
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.
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<PAGE> 33
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
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
22
<PAGE> 34
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 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
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
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<PAGE> 35
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 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
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<PAGE> 36
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% 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
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<PAGE> 37
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
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 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
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<PAGE> 38
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.
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.
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<PAGE> 39
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 illustrated on an annual basis by the following table:
<TABLE>
<CAPTION>
TRANSACTION OCCURS
AFTER MONTHLY DEDUCTION PERCENT OF
TAKEN FOR LAST MONTH SURRENDER
PRECEDING END OF YEAR 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.
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<PAGE> 40
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
PERCENTAGE OF
AGE 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
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 choose to decrease an increased 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
29
<PAGE> 41
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 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
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.
30
<PAGE> 42
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.
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
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
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<PAGE> 43
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
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, 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.
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<PAGE> 44
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
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."
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<PAGE> 45
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects:
<TABLE>
<CAPTION>
INVESTMENT EXPENSES
MANAGEMENT FEES OF UP TO
--------------- --------
<S> <C> <C>
Pacific Rim Emerging Markets Trust................................. .850% .75%
Science & Technology Trust......................................... 1.100% .50%
International Small Cap Trust...................................... 1.100% .75%
Emerging Growth Trust.............................................. 1.050% .50%
Pilgrim Baxter Growth Trust........................................ 1.050% .50%
Small/Mid Cap Trust................................................ 1.000% .50%
International Stock Trust.......................................... 1.050% .75%
Worldwide Growth Trust............................................. 1.000% .75%
Global Equity Trust................................................ .900% .75%
Growth Trust....................................................... .850% .50%
Equity Trust....................................................... .750% .50%
Quantitative Equity Trust*......................................... .700% .50%
Equity Index Trust................................................. .250% .15%
Blue Chip Growth Trust............................................. .925% .50%
Real Estate Securities Trust*...................................... .700% .50%
Value Trust........................................................ .800% .50%
International Growth and Income Trust.............................. .950% .75%
Growth and Income Trust............................................ .750% .50%
Equity-Income Trust................................................ .800% .50%
Balanced Trust..................................................... .800% .50%
Aggressive Asset Allocation Trust.................................. .750% .50%
Moderate Asset Allocation Trust.................................... .750% .50%
Conservative Asset Allocation Trust................................ .750% .50%
High Yield Trust................................................... .775% .50%
Strategic Bond Trust............................................... .775% .50%
Global Government Bond Trust....................................... .800% .75%
Capital Growth Bond Trust*......................................... .650% .50%
Investment Quality Bond Trust...................................... .650% .50%
U.S. Government Securities Trust................................... .650% .50%
Money Market Trust................................................. .500% .50%
Lifestyle Aggressive 1000 Trust.................................... None** N/A***
Lifestyle Growth 820 Trust......................................... None** N/A***
Lifestyle Balanced 640 Trust....................................... None** N/A***
Lifestyle Moderate 460 Trust....................................... None** N/A***
Lifestyle Conservative 280 Trust................................... None** N/A***
</TABLE>
- ---------------
* 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 January 1,
1997 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.
** Because each Lifestyle Trust will invest in shares of Underlying Portfolios
each will bear its pro rata share of the fees and expenses incurred by the
Underlying Portfolios.
***The Adviser has agreed to pay the expenses of each of the Lifestyle Trusts
(other than the expenses of the Underlying Portfolios) for a period of one
year commencing January 1, 1997. After this one year period, this expense
reimbursement may be terminated at any time.
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.
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<PAGE> 46
THE GENERAL ACCOUNT
By virtue of exclusionary provisions, interests in the general account of
Manufacturers Life of America have not been registered under the Securities Act
of 1933 and the general account has not been registered as an investment company
under the Investment Company Act of 1940. Accordingly, neither the general
account nor any interests therein are subject to the provisions of these acts,
and as a result the staff of the 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 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
35
<PAGE> 47
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. Thereafter 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.
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
36
<PAGE> 48
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.
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 its 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
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
37
<PAGE> 49
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
Policy has many more Portfolios to which policyowners may allocate premium
payments and Policy Values than were available in the policies described in the
rulings. These differences could result in 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 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.
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<PAGE> 50
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
during the first seven years, 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. As well, if a reduction of the face amount occurs within
seven years of a material change, the Policy will be retested for compliance
retroactive to the date of the material change. Failure to 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
39
<PAGE> 51
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
individual who is an officer or employee of or is financially interested in the
business carried on by the taxpayer will not be tax deductible unless the
employee is a key person within the meaning of Section 264 of the Code. A
deduction will not be permitted for interest on a loan under a policy held on
the life of a key person to the extent the aggregate of such loans with respect
to contracts covering the key person exceeds $50,000. The number of employees
who can qualify as key persons depends in part on the size of the employer but
cannot exceed 20 individuals.
For policies issued after June 20, 1986 and prior to January 1, 1994 a
transition rule permits all or a portion of the interest paid on policy debt
incurred before January 1, 1996 to be deducted. For policies issued in 1994 or
1995 the transition rule applies to indebtedness incurred before January 1,
1997. To be deducted the interest must be paid or accrued prior to January 1,
1999, and must meet other rules contained in Section 264 of the Code and section
501 of the Health Insurance Portability and Accountability Act of 1996.
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. The Company makes a charge to premiums to compensate it for the
anticipated higher corporate income taxes.
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.
40
<PAGE> 52
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 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 their other services under the agreement in such amounts
and at such times as agreed to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with 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.
41
<PAGE> 53
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 (34) Director Attorney 1989-present, Dykema Gossett
James D. Gallagher (42) Director, Secretary and Vice President, Secretary and General Counsel --
General Counsel January 1997-present, ManUSA; Vice President, Legal
Services U.S. Operations -- January 1996 -present, The
Manufacturers Life Insurance Company; Vice President,
Secretary and General Counsel -- 1994-present, North
American Security Life; Vice President and Associate
General Counsel -- 1991-1994, The Prudential Insurance
Company of America
Bruce Gordon (53) Director Vice President, U.S. Operations - Pensions --
1990-present, The Manufacturers Life Insurance Company
Donald A. Guloien (40) Director and President Senior Vice President, Business Development --
1994-present, The Manufacturers Life Insurance Company;
Vice President, U.S. Individual Business -- 1990-1994,
The Manufacturers Life Insurance Company
Theodore Kilkuskie, Jr. (41) Director Vice President, U.S. Individual Insurance -- January
1997-present, ManUSA; Vice President, U.S. Individual
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,
Metropolitain Life Insurance Company
Joseph J. Pietroski (58) Director Senior Vice President, General Counsel and Corporate
Secretary -- 1988-present, The Manufacturers Life
Insurance Company
John D. Richardson (59) Chairman and Director Senior Vice President and General 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
</TABLE>
42
<PAGE> 54
<TABLE>
<CAPTION>
POSITION WITH
MANUFACTURERS LIFE
NAME OF AMERICA PRINCIPAL OCCUPATION
- ---------------------------- ---------------------------- -------------------------------------------------------
<S> <C> <C>
John R. Ostler (44) Vice President, Chief Financial Vice President -- 1992-present, The
Actuary and Treasurer Manufacturers Life Insurance Company; Vice President,
Insurance Products -- 1990-1992, The Manufacturers Life
Insurance Company
Douglas H. Myers (42) Vice President, Finance and Assistant Vice President and Controller, U.S.
Compliance Controller Operations -- 1988-present, The Manufacturers Life
Insurance Company
Joseph Mounsey (48) Senior Vice President Senior Vice President, Investment -- 1994-present, The
Manufacturers Life Insurance Company; Senior Vice
President, International Investments -- 1991-1994, The
Manufacturers Life Insurance Company
Victor Apps (48) Senior Vice President and Senior Vice President and General Manager, Greater
General Manager China Division -- 1995-present, The Manufacturers Life
Insurance Company; Vice President and General Manager,
Greater China Division -- 1993-1995, The Manufacturers
Life Insurance Company; International Vice President --
1988-1993, Asia Pacific Division, The Manufacturers
Life Insurance Company
Robert A. Cook (42) Vice President Vice President, Product Management -- 1996-present, The
Manufacturers Life Insurance Company; Sales and
Marketing Director, U.S. Division -- 1994-1995,The
Manufacturers Life Insurance Company; Vice President,
Corporation Strategic Review -- 1992-1993, The
Manufacturers Life Insurance Company
</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
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,
43
<PAGE> 55
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 Separate Account Four of the The Manufacturers Life Insurance Company of
America appearing in this prospectus for the periods ending December 31, 1996
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.
44
<PAGE> 56
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.
45
<PAGE> 57
Financial Statements
Separate Account Four of
The Manufacturers Life Insurance
Company of America
Years ended December 31, 1996 and 1995
with Report of Independent Auditors
46
<PAGE> 58
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 Sub-Account, Quantitative Equity Sub-Account,
Real Estate Securities Sub-Account, Balanced Sub-Account, Capital Growth Bond
Sub-Account, Money Market Sub-Account, International Stock Sub-Account, Pacific
Rim Emerging Markets Sub-Account, Equity Index Sub-Account, Equity Sub-Account,
Value Equity Sub-Account, Growth and Income Sub-Account, U.S. Government
Securities Sub-Account, Conservative Asset Allocation Sub-Account, Moderate
Asset Allocation Sub-Account and Aggressive Asset Allocation Sub-Account) as of
December 31, 1996, the related statements of operations 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, 1996, the
results of its operations and the changes in its net assets for each of the
periods presented herein, in conformity with generally accepted accounting
principles.
LOGO
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
January 31, 1997
47
<PAGE> 59
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
EMERGING QUANTITATIVE REAL ESTATE CAPITAL MONEY
GROWTH EQUITY SECURITIES BALANCED GROWTH BOND MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in NASL Series Trust--
at market value:
Emerging Growth Trust,
2,840,803 shares (cost $57,934,157)....... $58,520,544
Quantitative Equity Trust,
1,474,983 shares (cost $23,166,346)....... $25,561,458
Real Estate Securities Trust,
1,109,461 shares (cost $16,447,535)....... $18,805,363
Balanced Trust,
2,770,764 shares (cost $43,235,187)....... $45,468,244
Capital Growth Bond Trust,
1,274,185 shares (cost $14,211,368)....... $13,888,614
Money Market Trust,
672,818 shares (cost $7,003,994).......... $6,728,168
International Stock Trust,
336,968 shares (cost $3,633,833)..........
Pacific Rim Emerging Markets Trust,
338,294 shares (cost $3,682,082)..........
Equity Index Trust,
108,941 shares (cost $1,118,404)..........
Equity Trust,
182,861 shares (cost $3,865,666)..........
Value Equity Trust,
135,940 shares (cost $1,932,410)..........
Growth and Income Trust,
106,640 shares (cost $1,920,964)..........
U.S. Government Securities Trust,
13,175 shares (cost $171,706).............
Conservative Asset Allocation Trust,
12,303 shares (cost $136,001).............
Moderate Asset Allocation Trust,
56,973 shares (cost $675,127).............
Aggressive Asset Allocation Trust,
26,944 shares (cost $342,525).............
----------- ----------- ----------- ----------- ----------- ----------
Net assets................................. $58,520,544 $25,561,458 $18,805,363 $45,468,244 $13,888,614 $6,728,168
=========== =========== =========== =========== =========== ==========
Units outstanding.......................... 1,081,129 798,727 526,919 1,794,924 694,493 437,653
=========== =========== =========== =========== =========== ==========
Net asset value per unit................... $ 54.13 $ 32.00 $ 35.69 $ 25.33 $ 20.00 $ 15.37
=========== =========== =========== =========== =========== ==========
<CAPTION>
PACIFIC RIM
INTERNATIONAL EMERGING *EQUITY
STOCK MARKETS INDEX
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investment in NASL Series Trust--
at market value:
Emerging Growth Trust,
2,840,803 shares (cost $57,934,157).......
Quantitative Equity Trust,
1,474,983 shares (cost $23,166,346).......
Real Estate Securities Trust,
1,109,461 shares (cost $16,447,535).......
Balanced Trust,
2,770,764 shares (cost $43,235,187).......
Capital Growth Bond Trust,
1,274,185 shares (cost $14,211,368).......
Money Market Trust,
672,818 shares (cost $7,003,994)..........
International Stock Trust,
336,968 shares (cost $3,633,833).......... $3,865,018
Pacific Rim Emerging Markets Trust,
338,294 shares (cost $3,682,082).......... $3,687,402
Equity Index Trust,
108,941 shares (cost $1,118,404).......... $1,164,577
Equity Trust,
182,861 shares (cost $3,865,666)..........
Value Equity Trust,
135,940 shares (cost $1,932,410)..........
Growth and Income Trust,
106,640 shares (cost $1,920,964)..........
U.S. Government Securities Trust,
13,175 shares (cost $171,706).............
Conservative Asset Allocation Trust,
12,303 shares (cost $136,001).............
Moderate Asset Allocation Trust,
56,973 shares (cost $675,127).............
Aggressive Asset Allocation Trust,
26,944 shares (cost $342,525).............
---------- ---------- ----------
Net assets................................. $3,865,018 $3,687,402 $1,164,577
========== ========== ==========
Units outstanding.......................... 327,403 324,163 101,971
========== ========== ==========
Net asset value per unit................... $ 11.81 $ 11.38 $ 11.42
========== ========== ==========
</TABLE>
* Reflects the period from commencement of operations February 14, 1996 through
December 31, 1996.
See accompanying notes.
48
<PAGE> 60
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1996
<TABLE>
<CAPTION>
*GROWTH *U.S. GOVERNMENT *CONSERVATIVE
*EQUITY *VALUE EQUITY AND INCOME SECURITIES ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in NASL Series Trust--
at market value:
Emerging Growth Trust, 2,840,803
shares (cost $57,934,157).........
Quantitative Equity Trust,
1,474,983 shares (cost
$23,166,346)......................
Real Estate Securities Trust,
1,109,461 shares (cost
$16,447,535)......................
Balanced Trust, 2,770,764 shares
(cost $43,235,187)................
Capital Growth Bond Trust,
1,274,185 shares (cost
$14,211,368)......................
Money Market Trust, 672,818 shares
(cost $7,003,994).................
International Stock Trust, 336,968
shares (cost $3,633,833)..........
Pacific Rim Emerging Markets Trust,
338,294 shares (cost
$3,682,082).......................
Equity Index Trust, 108,941 shares
(cost $1,118,404).................
Equity Trust, 182,861 shares (cost
$3,865,666)....................... $4,136,323
Value Equity Trust, 135,940 shares
(cost $1,932,410)................. $2,094,838
Growth and Income Trust, 106,640
shares (cost $1,920,964).......... $2,066,683
U.S. Government Securities Trust,
13,175 shares (cost $171,706)..... $175,486
Conservative Asset Allocation
Trust, 12,303 shares (cost
$136,001)......................... $143,209
Moderate Asset Allocation Trust,
56,973 shares (cost $675,127).....
Aggressive Asset Allocation Trust,
26,944 shares (cost $342,525).....
---------- ---------- ---------- -------- --------
Net assets......................... $4,136,323 $2,094,838 $2,066,683 $175,486 $143,209
========== ========== ========== ======== ========
Units outstanding.................. 365,910 185,452 176,958 17,235 13,688
========== ========== ========== ======== ========
Net asset value per unit........... $ 11.30 $ 11.30 $ 11.68 $ 10.18 $ 10.46
========== ========== ========== ======== ========
<CAPTION>
*MODERATE *AGGRESSIVE
ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT TOTAL
---------------- ---------------- -----------
<S> <C> <C> <C>
ASSETS
Investment in NASL Series Trust--
at market value:
Emerging Growth Trust, 2,840,803
shares (cost $57,934,157)......... $58,520,544
Quantitative Equity Trust,
1,474,983 shares (cost
$23,166,346)...................... 25,561,458
Real Estate Securities Trust,
1,109,461 shares (cost
$16,447,535)...................... 18,805,363
Balanced Trust, 2,770,764 shares
(cost $43,235,187)................ 45,468,244
Capital Growth Bond Trust,
1,274,185 shares (cost
$14,211,368)...................... 13,888,614
Money Market Trust, 672,818 shares
(cost $7,003,994)................. 6,728,168
International Stock Trust, 336,968
shares (cost $3,633,833).......... 3,865,018
Pacific Rim Emerging Markets Trust,
338,294 shares (cost
$3,682,082)....................... 3,687,402
Equity Index Trust, 108,941 shares
(cost $1,118,404)................. 1,164,577
Equity Trust, 182,861 shares (cost
$3,865,666)....................... 4,136,323
Value Equity Trust, 135,940 shares
(cost $1,932,410)................. 2,094,838
Growth and Income Trust, 106,640
shares (cost $1,920,964).......... 2,066,683
U.S. Government Securities Trust,
13,175 shares (cost $171,706)..... 175,486
Conservative Asset Allocation
Trust, 12,303 shares (cost
$136,001)......................... 143,209
Moderate Asset Allocation Trust,
56,973 shares (cost $675,127)..... $711,589 711,589
Aggressive Asset Allocation Trust,
26,944 shares (cost $342,525)..... $362,396 362,396
-------- -------- ------------
Net assets......................... $711,589 $362,396 $187,379,912
======== ======== ============
Units outstanding.................. 66,867 33,360
======== ========
Net asset value per unit........... $ 10.64 $ 10.86
======== ========
</TABLE>
*Reflects the period from commencement of operations February 14, 1996 through
December 31, 1996.
See accompanying notes.
49
<PAGE> 61
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS
Year ended December 31, 1996
<TABLE>
<CAPTION>
EMERGING QUANTITATIVE REAL ESTATE CAPITAL
GROWTH EQUITY SECURITIES BALANCED GROWTH BOND MONEY MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income....................... $8,843,524 $3,890,071 $3,089,196 $6,191,018 $ 813,220 $ 522,633
Expenses:
Mortality and expense risks charge.... 368,823 151,076 97,165 274,346 86,787 38,258
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss)........... 8,474,701 3,738,995 2,992,031 5,916,672 726,433 484,375
---------- ---------- ---------- ---------- ---------- ----------
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) from security
transactions:
Proceeds from sales................. 6,561,190 3,065,148 2,069,989 3,782,322 2,257,680 4,574,935
Cost of securities sold............. 4,628,761 2,226,724 1,848,111 3,146,020 2,354,529 4,366,887
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain (loss).............. 1,932,429 838,424 221,878 636,302 (96,849) 208,048
---------- ---------- ---------- ---------- ---------- ----------
Unrealized (depreciation) appreciation
of investments:
Beginning of year................... 8,388,250 3,250,703 829,392 4,756,710 29,751 165,832
End of year......................... 586,387 2,395,112 2,357,828 2,233,057 (322,754) (275,826)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized (depreciation)
appreciation during the year........ (7,801,863) (855,591) 1,528,436 (2,523,653) (352,505) (441,658)
---------- ---------- ---------- ---------- ---------- ----------
Net realized and unrealized (loss)
gain on investments................. (5,869,434) (17,167) 1,750,314 (1,887,351) (449,354) (233,610)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets derived
from operations..................... $2,605,267 $3,721,828 $4,742,345 $4,029,321 $ 277,079 $ 250,765
========== ========== ========== ========== ========== ==========
<CAPTION>
PACIFIC RIM
INTERNATIONAL EMERGING *EQUITY
STOCK MARKETS INDEX
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
Investment income:
Dividend income....................... $ 102,007 $ 152,468 $ 79,858
Expenses:
Mortality and expense risks charge.... 18,357 18,290 4,113
---------- ---------- ----------
Net investment income (loss)........... 83,650 134,178 75,745
---------- ---------- ----------
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) from security
transactions:
Proceeds from sales................. 481,615 936,603 42,748
Cost of securities sold............. 416,277 774,951 39,927
---------- ---------- ----------
Net realized gain (loss).............. 65,338 161,652 2,821
---------- ---------- ----------
Unrealized (depreciation) appreciation
of investments:
Beginning of year................... 110,424 114,318 --
End of year......................... 231,185 5,325 46,173
---------- ---------- ----------
Net unrealized (depreciation)
appreciation during the year........ 120,761 (108,993) 46,173
---------- ---------- ----------
Net realized and unrealized (loss)
gain on investments................. 186,099 52,659 48,994
---------- ---------- ----------
Net increase in net assets derived
from operations..................... $ 269,749 $ 186,837 $ 124,739
========== ========== ==========
</TABLE>
*Reflects the period from commencement of operations February 14, 1996 through
December 31, 1996.
See accompanying notes.
50
<PAGE> 62
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS (CONTINUED)
Year ended December 31, 1996
<TABLE>
<CAPTION>
*U.S.
*GROWTH GOVERNMENT *CONSERVATIVE *MODERATE
*EQUITY *VALUE EQUITY AND INCOME SECURITIES ASSET ALLOCATION ASSET ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income............... $ 37,137 $ 14,881 $ 461 $ -- $ -- $ --
Expenses:
Mortality and expense risks
charge...................... 12,389 6,019 4,797 849 685 2,050
-------- -------- -------- -------- ------- -------
Net investment income (loss).... 24,748 8,862 (4,336) (849) (685) (2,050)
-------- -------- -------- -------- ------- -------
Realized and unrealized gain
(loss) on investments:
Realized gain (loss) from
security transactions:
Proceeds from sales......... 646,845 90,317 376,632 322,161 43,255 31,213
Cost of securities sold..... 622,356 88,968 332,811 317,325 40,504 29,641
-------- -------- -------- -------- ------- -------
Net realized gain (loss)...... 24,489 1,349 43,821 4,836 2,751 1,572
-------- -------- -------- -------- ------- -------
Unrealized (depreciation)
appreciation of investments:
Beginning of year........... -- -- -- -- -- --
End of year................. 270,657 162,428 145,719 3,780 7,208 36,462
-------- -------- -------- -------- ------- -------
Net unrealized (depreciation)
appreciation during the
year........................ 270,657 162,428 145,719 3,780 7,208 36,462
-------- -------- -------- -------- ------- -------
Net realized and unrealized
(loss) gain on
investments................. 295,146 163,777 189,540 8,616 9,959 38,034
-------- -------- -------- -------- ------- -------
Net increase in net assets
derived from operations....... $319,894 $172,639 $185,204 $ 7,767 $ 9,274 $35,984
======== ======== ======== ======== ======= =======
<CAPTION>
*AGGRESSIVE
ASSET ALLOCATION
SUB-ACCOUNT TOTAL
---------------- ------------
<S> <C> <C>
Investment income:
Dividend income............... $ 2,110 $23,738,584
Expenses:
Mortality and expense risks
charge...................... 1,342 1,085,346
------- -----------
Net investment income (loss).... 768 22,653,238
------- -----------
Realized and unrealized gain
(loss) on investments:
Realized gain (loss) from
security transactions:
Proceeds from sales......... 86,943 25,369,596
Cost of securities sold..... 82,784 21,316,576
------- -----------
Net realized gain (loss)...... 4,159 4,053,020
------- -----------
Unrealized (depreciation)
appreciation of investments:
Beginning of year........... -- 17,645,380
End of year................. 19,871 7,902,612
------- -----------
Net unrealized (depreciation)
appreciation during the
year........................ 19,871 (9,742,768)
------- -----------
Net realized and unrealized
(loss) gain on
investments................. 24,030 (5,689,748)
------- -----------
Net increase in net assets
derived from operations....... $24,798 $16,963,490
======= ===========
</TABLE>
*Reflects the period from commencement of operations February 14, 1996 through
December 31, 1996.
See accompanying notes.
51
<PAGE> 63
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
EMERGING GROWTH QUANTITATIVE EQUITY REAL ESTATE SECURITIES BALANCED
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------------- ------------------------- ------------------------- -----------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/96 DEC. 31/95 DEC. 31/96 DEC. 31/95 DEC. 31/96 DEC. 31/95 DEC. 31/96
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income
(loss)................ $ 8,474,701 $ 954,799 $ 3,738,995 $ (105,143) $ 2,992,031 $ 148,117 $ 5,916,672
Net realized gain
(loss)................ 1,932,429 625,908 838,424 209,069 221,878 168,151 636,302
Net unrealized
(depreciation)
appreciation of
investments during the
year.................. (7,801,863) 8,277,189 (855,591) 4,034,771 1,528,436 1,396,739 (2,523,653)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase in net
assets derived from
operations............ 2,605,267 9,857,896 3,721,828 4,138,697 4,742,345 1,713,007 4,029,321
----------- ----------- ----------- ----------- ----------- ----------- -----------
FROM CAPITAL
TRANSACTIONS
Additions (deductions)
from:
Transfer of net
premiums.............. 14,023,834 15,756,405 4,853,989 5,345,300 2,765,182 4,283,407 8,726,978
Transfer of
terminations.......... (5,184,577) (4,775,355) (1,960,658) (2,397,088) (1,467,190) (1,478,397) (3,748,227)
Transfer of policy
loans................. (629,038) (383,960) (199,046) (139,168) (101,471) (43,920) (345,242)
Net interfund
transfers............. (4,559,177) 808,068 (1,140,965) 601,941 (1,015,253) (1,220,289) (2,422,119)
----------- ----------- ----------- ----------- ----------- ----------- -----------
3,651,042 11,405,158 1,553,320 3,410,994 181,268 1,540,801 2,211,390
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase in net
assets................ 6,256,309 21,263,054 5,275,148 7,549,691 4,923,613 3,253,808 6,240,711
NET ASSETS
Beginning of year...... 52,264,235 31,001,181 20,286,310 12,736,619 13,881,750 10,627,942 39,227,533
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year............ $58,520,544 $52,264,235 $25,561,458 $20,286,310 $18,805,363 $13,881,750 $45,468,244
=========== =========== =========== =========== =========== =========== ===========
<CAPTION>
CAPITAL GROWTH MONEY MARKET
BOND SUB-ACCOUNT SUB-ACCOUNT
------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/95 DEC. 31/96 DEC. 31/95 DEC. 31/96 DEC. 31/95
----------- ----------- ----------- ----------- ----------
<S> <<C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income
(loss)................ $ (165,971) $ 726,433 $ 818,203 $ 484,375 $ (36,158)
Net realized gain
(loss)................ 191,394 (96,849) (18,323) 208,048 109,650
Net unrealized
(depreciation)
appreciation of
investments during the
year.................. 7,012,384 (352,505) 1,042,903 (441,658) 197,256
----------- ----------- ----------- ----------- ----------
Net increase in net
assets derived from
operations............ 7,037,807 277,079 1,842,783 250,765 270,748
----------- ----------- ----------- ----------- ----------
FROM CAPITAL
TRANSACTIONS
Additions (deductions)
from:
Transfer of net
premiums.............. 10,932,103 2,665,999 3,119,374 2,628,791 2,577,889
Transfer of
terminations.......... (3,544,462) (923,256) (1,316,692) (956,767) (782,380)
Transfer of policy
loans................. (305,026) (81,852) (67,747) (13,756) (36,007)
Net interfund
transfers............. (1,831,364) (809,388) 730,548 (1,146,057) (642,476)
----------- ----------- ----------- ----------- ----------
5,251,251 851,503 2,465,483 512,211 1,117,026
----------- ----------- ----------- ----------- ----------
Net increase in net
assets................ 12,289,058 1,128,582 4,308,266 762,976 1,387,774
NET ASSETS
Beginning of year...... 26,938,475 12,760,032 8,451,766 5,965,192 4,577,418
----------- ----------- ----------- ----------- ----------
End of year............ $39,227,533 $13,888,614 $12,760,032 $ 6,728,168 $5,965,192
=========== =========== =========== =========== ==========
</TABLE>
*Reflects the period from commencement of operations February 14, 1996 through
December 31, 1996.
See accompanying notes.
52
<PAGE> 64
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
*EQUITY *VALUE
INTERNATIONAL STOCK PACIFIC RIM EMERGING INDEX *EQUITY EQUITY
SUB-ACCOUNT MARKETS SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------------- ----------------------- ------------ ------------ ------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
DEC. 31/96 DEC. 31/95 DEC. 31/96 DEC. 31/95 DEC. 31/96 DEC. 31/96 DEC. 31/96
---------- ---------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..... $ 83,650 $ 35,276 $ 134,178 $ 10,988 $ 75,745 $ 24,748 $ 8,862
Net realized gain (loss)......... 65,338 2,338 161,652 (788) 2,821 24,489 1,349
Net unrealized (depreciation)
appreciation of investments
during the year................. 120,761 111,348 (108,993) 119,803 46,173 270,657 162,428
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
derived from operations......... 269,749 148,962 186,837 130,003 124,739 319,894 172,639
---------- ---------- ---------- ---------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums........ 870,119 468,861 683,676 339,577 279,042 961,034 351,584
Transfer of terminations........ (194,570) (114,292) (201,928) (84,460) (38,180) (85,993) (35,519)
Transfer of policy loans........ (27,661) (8,567) (20,049) (7,956) (3,251) (8,149) (4,090)
Net interfund transfers......... 1,135,964 1,045,046 1,647,145 839,514 802,227 2,949,537 1,610,224
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,783,852 1,391,048 2,108,844 1,086,675 1,039,838 3,816,429 1,922,199
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets....... 2,053,601 1,540,010 2,295,681 1,216,678 1,164,577 4,136,323 2,094,838
NET ASSETS
Beginning of year................ 1,811,417 271,407 1,391,721 175,043 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
End of year...................... $3,865,018 $1,811,417 $3,687,402 $1,391,721 $1,164,577 $4,136,323 $2,094,838
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
*U.S. *CONSERVATIVE *MODERATE *AGGRESSIVE
*GROWTH AND GOVERNMENT ASSET ASSET ASSET
INCOME SECURITIES ALLOCATION ALLOCATION ALLOCATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
------------ ------------ ------------ ------------ ------------ ------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
DEC. 31/96 DEC. 31/96 DEC. 31/96 DEC. 31/96 DEC. 31/96 DEC. 31/96
------------ ------------ ------------ ------------ ------------ ------------
<S> <C>
FROM OPERATIONS
Net investment income (loss)..... $ (4,336) $ (849) $ (685) $ (2,050) $ 768 $ 22,653,238
Net realized gain (loss)......... 43,821 4,836 2,751 1,572 4,159 4,053,020
Net unrealized (depreciation)
appreciation of investments
during the year................. 145,719 3,780 7,208 36,462 19,871 (9,742,768)
---------- -------- -------- -------- -------- ------------
Net increase in net assets
derived from operations......... 185,204 7,767 9,274 35,984 24,798 16,963,490
---------- -------- -------- -------- -------- ------------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums........ 316,929 18,521 44,311 131,528 67,783 39,389,300
Transfer of terminations........ (36,051) (299,154) (5,606) (12,696) (10,117) (15,160,489)
Transfer of policy loans........ (439) -- -- (1,206) (1,206) (1,436,456)
Net interfund transfers......... 1,601,040 448,352 95,230 557,979 281,138 35,877
---------- -------- -------- -------- -------- ------------
1,881,479 167,719 133,935 675,605 337,598 22,828,232
---------- -------- -------- -------- -------- ------------
Net increase in net assets....... 2,066,683 175,486 143,209 711,589 362,396 39,791,722
NET ASSETS
Beginning of year................ -- -- -- -- -- 147,588,190
---------- -------- -------- -------- -------- ------------
End of year...................... $2,066,683 $175,486 $143,209 $711,589 $362,396 $187,379,912
========== ======== ======== ======== ======== ============
<CAPTION>
TOTAL
------------
YEAR ENDED
DEC. 31/95
------------
FROM OPERATIONS
Net investment income (loss)..... $ 1,660,111
Net realized gain (loss)......... 1,287,399
Net unrealized (depreciation)
appreciation of investments
during the year................. 22,192,393
------------
Net increase in net assets
derived from operations......... 25,139,903
------------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums........ 42,822,925
Transfer of terminations........ (14,493,126)
Transfer of policy loans........ (992,351)
Net interfund transfers......... 330,988
------------
27,668,436
------------
Net increase in net assets....... 52,808,339
NET ASSETS
Beginning of year................ 94,779,351
------------
End of year...................... $147,588,190
============
</TABLE>
* Reflects the period from commencement of operations February 14, 1996 through
December 31, 1996.
See accompanying notes.
53
<PAGE> 65
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS
December 31, 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 comprised of
investment sub-accounts 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 life
insurance company organized in 1983 under Michigan law. Manufacturers Life of
America is an indirect, wholly-owned subsidiary of The Manufacturers Life
Insurance Company ("Manulife Financial"), a Canadian mutual life insurance
company. On January 1, 1996, Manulife Financial merged with North American Life
Assurance Company and as a result, acquired control of the NASL Series Trust.
The Equity Index Fund, Equity, Value Equity, Growth and Income, U.S. Government
Securities, Conservative Asset Allocation, Moderate Asset Allocation, and
Aggressive Asset Allocation Trusts, were added to the Separate Account on
February 14, 1996 as investment options for policy holders of Manufacturers Life
of America.
Effective December 31, 1996, Manulife Series Fund, Inc. was merged into the NASL
Series Trust. As a result, the following sub-accounts of the Separate Account
were renamed to correspond with the fund names of the NASL Series Trust.
<TABLE>
<CAPTION>
MANULIFE SERIES FUND, INC. NASL SERIES TRUST
SUB-ACCOUNTS SUB-ACCOUNTS
- --------------------------------------------------------------------------------------------
<S> <C>
Emerging Growth Equity Fund Emerging Growth Trust
Common Stock Fund Quantitative Equity Trust
Real Estate Securities Fund Real Estate Securities Trust
Balanced Assets Fund Balanced Trust
Capital Growth Bond Fund Capital Growth Bond Trust
Money Market Fund Money Market Trust
International Fund International Stock Trust
Pacific Rim Emerging Markets Fund Pacific Rim Emerging Markets Trust
Equity Index Fund Equity Index Trust
</TABLE>
All references hereinafter to NASL Series Trust would have been to Manulife
Series Fund, Inc. prior to December 31, 1996.
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.
54
<PAGE> 66
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
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 sixteen Trusts
of NASL Series Trust and are valued at the reported net asset values of
these Trusts. Transactions are recorded on the trade date. Net investment
income and net realized gains on investments in NASL Series Trust 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 the Separate Account's 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 NASL SERIES TRUST SHARES
Purchases and sales of the shares of common stock of NASL Series Trust for the
year ended December 31, 1996 were $70,957,210 and $25,369,596, respectively, and
for the year ended December 31, 1995 were $43,364,307 and $13,876,820,
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
55
<PAGE> 67
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
FINANCIAL STATEMENTS -- (CONTINUED)
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.
56
<PAGE> 68
CONSOLIDATED FINANCIAL STATEMENTS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
WITH REPORT OF INDEPENDENT AUDITORS
57
<PAGE> 69
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
We have audited the accompanying consolidated balance sheets of The
Manufacturers Life Insurance Company of America as of December 31, 1996 and
1995, and the related consolidated statements of income, changes in capital and
surplus and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion 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 financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of The Manufacturers
Life Insurance Company of America at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the financial statements, in 1996 the Company adopted
certain accounting changes to conform with generally accepted accounting
principles for mutual life insurance enterprises, and retroactively restated the
1995 and 1994 financial statements for the change.
LOGO
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
March 21, 1997
58
<PAGE> 70
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS AT DECEMBER 31
----------------------
1996 1995
--------- --------
($ THOUSANDS)
<S> <C> <C>
ASSETS
INVESTMENTS:
Securities available-for-sale, at fair value: (note 4)
Fixed maturity (amortized cost: 1996 $50,456; 1995 $62,757)...... $ 51,708 $ 66,968
Equity (cost: 1996 $19,450; 1995 $22,441)........................ 21,572 23,345
Mortgage loans..................................................... 645 7,314
Policy loans....................................................... 9,822 6,955
Cash and short-term investments.................................... 17,493 17,881
---------- --------
Total Investments.................................................. $ 101,240 $122,463
========== ========
Guaranteed annuity contracts (note 5).............................. 171,691 155,335
Deferred acquisition costs (note 6)................................ 102,610 78,829
Income taxes recoverable........................................... 10,549 5,156
Deferred income taxes (note 7)..................................... 1,041 1,616
Other assets....................................................... 7,378 11,010
Separate account assets............................................ 668,094 480,405
---------- --------
TOTAL ASSETS....................................................... $1,062,603 $854,814
========== ========
LIABILITIES, CAPITAL AND SURPLUS
LIABILITIES:
Policyholder Liabilities and accruals.............................. $ 91,915 $ 86,129
Bonds payable (note 8)............................................. 158,760 158,890
Surplus note (note 9).............................................. 8,500 8,500
Due to affiliates.................................................. 11,122 463
Other liabilities.................................................. 7,582 9,907
Separate account liabilities....................................... 668,094 480,405
---------- --------
TOTAL LIABILITIES.................................................. $ 945,973 $744,294
========== ========
CAPITAL AND SURPLUS:
Common shares (note 10)............................................ 4,502 4,502
Preferred shares (note 10)......................................... 10,500 10,500
Contributed surplus................................................ 98,569 83,569
Retained earnings.................................................. 1,726 10,133
Net unrealized gain on securities available-for-sale (note 4)...... 1,333 1,816
---------- --------
TOTAL CAPITAL AND SURPLUS.......................................... 116,630 110,520
========== ========
TOTAL LIABILITIES, CAPITAL AND SURPLUS............................. $1,062,603 $854,814
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
59
<PAGE> 71
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- --------
($ THOUSANDS)
<S> <C> <C> <C>
REVENUE:
Premiums................................................. $ 12,898 $ 15,293 $ 27,578
Fee income............................................... 40,434 24,986 18,259
Net investment income (note 4)........................... 19,651 18,729 17,691
Realized investment gains (losses)....................... (119) 3,084 (3,567)
Other.................................................... 668 82 361
-------- -------- --------
TOTAL REVENUE............................................ 73,532 62,174 60,322
======== ======== ========
BENEFITS AND EXPENSES:
Policyholder benefits and claims......................... 14,473 16,905 28,768
Operating costs and expenses............................. 34,581 30,728 16,395
Commissions.............................................. 10,431 5,859 8,923
Amortization of deferred acquisition costs (note 6)...... 13,240 5,351 3,289
Interest expense......................................... 12,251 12,251 12,251
Policyholder dividends................................... 872 1,886 965
-------- -------- --------
TOTAL BENEFITS AND EXPENSES.............................. 85,848 72,980 70,591
-------- -------- --------
LOSS BEFORE INCOME TAXES................................. (12,316) (10,806) (10,269)
-------- -------- --------
INCOME TAX BENEFIT (note 7).............................. 3,909 3,960 3,543
-------- -------- --------
NET LOSS................................................. $ (8,407) $ (6,846) $ (6,726)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
60
<PAGE> 72
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------------------------------------
NET UNREALIZED
GAINS (LOSSES) TOTAL
CAPITAL CONTRIBUTED RETAINED ON SECURITIES CAPITAL
STOCK SURPLUS EARNINGS AVAILABLE-FOR-SALE AND SURPLUS
------- ----------- -------- ------------------ -----------
($ THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996
Balance, January 1................... $15,002 $83,569 $ 10,133 $ 1,816 $ 110,520
Net loss during the year............. (8,407) (8,407)
Change in unrealized gain(loss),
net of taxes (note 4).............. (483) (483)
Issuance of shares (note 10)......... 15,000 15,000
------- ------- -------- ------- ---------
BALANCE, DECEMBER 31 (NOTE 10)....... $15,002 $98,569 $ 1,726 $ 1,333 $ 116,630
======= ======= ======== ======= =========
1995
Balance, January 1................... $15,002 $70,999 $ 16,979 $ (1,141) $ 101,839
Net loss during the year............. (6,846) (6,846)
Change in unrealized gain(loss),
net of taxes (note 4).............. 2,957 2,957
Issuance of shares (note 10)......... 12,570 12,570
------- ------- -------- ------- ---------
BALANCE, DECEMBER 31................. $15,002 $83,569 $ 10,133 $ 1,816 $ 110,520
======= ======= ======== ======= =========
1994
Balance, January 1................... $35,002 $30,999 $ 7,396 $ (1,592) $ 71,805
Cumulative effect of accounting
change (note 2).................... 16,309 1,353 17,662
Net loss during the year............. (6,726) (6,726)
Change in unrealized gain(loss),
net of taxes....................... (902) (902)
Capital restructuring of preferred
shares............................. (20,000) 20,000 0
Issuance of shares (note 10)......... 20,000 20,000
------- ------- -------- ------- ---------
BALANCE, DECEMBER 31................. $15,002 $70,999 $ 16,979 $ (1,141) $ 101,839
======= ======= ======== ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
61
<PAGE> 73
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------
1996 1995 1994
--------- -------- --------
($ THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Loss................................................ $ (8,407) $ (6,846) $ (6,726)
Adjustments to reconcile net loss to net cash used in
operating activities:
Additions to Policy liabilities....................... 3,287 7,329 27,338
Deferred acquisition costs............................ (36,024) (28,147) (31,125)
Amortization of deferred acquisition costs............ 13,240 5,351 3,289
Realized gain (losses) on investments................. 119 (3,084) 3,567
Decreases (additions) to deferred income taxes........ 473 1,168 (4,001)
Other................................................. 6,844 (5,336) 17,673
--------- -------- --------
Net cash provided by (used in) operating activities..... (20,468) (29,565) 10,015
========= ======== ========
INVESTING ACTIVITIES:
Fixed maturity securities sold.......................... 120,234 67,507 43,176
Fixed maturity securities purchased..................... (108,401) (76,402) (72,819)
Equities sold........................................... 25,505 6,500 30,011
Equities purchased...................................... (22,203) (1,726) (18,245)
Mortgages purchased..................................... -- -- --
Mortgages sold/principal repayments..................... 6,669 77,086 22,656
Policy loans advanced, net.............................. (2,867) (2,461) (1,471)
Guaranteed annuity contracts............................ (16,356) (79,710) (36,236)
--------- -------- --------
Cash provided by (used in) investing activities......... 2,581 (9,206) (32,928)
========= ======== ========
FINANCING ACTIVITIES:
Receipts from variable life and annuity policies
credited to policyholder account balances............. 5,493 9,017 10,533
Withdrawals of policyholder account balances on variable
life and annuity policies............................. (2,994) (3,173) (1,284)
Issuance of shares...................................... 15,000 12,570 20,000
Issuance of surplus notes............................... -- 8,500 --
--------- -------- --------
Cash provided by financing activities................... 17,499 26,914 29,249
========= ======== ========
CASH AND SHORT-TERM INVESTMENTS:
Increase (decrease) during the year..................... (388) (11,857) 6,336
Balance, beginning of year.............................. 17,881 29,738 23,402
--------- -------- --------
BALANCE, END OF YEAR.................................... $ 17,493 $ 17,881 $ 29,738
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
62
<PAGE> 74
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(In Thousands of Dollars)
1. ORGANIZATION
The Manufacturers Life Insurance Company of America ("ManAmerica" or the
"Company") is a wholly-owned subsidiary of The Manufacturers Life Insurance
Company (U.S.A.) ("ManUSA" or the "Parent"), which is in turn a wholly-owned
subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"), a
Canadian-based mutual life insurance company. The Company markets variable
annuity and variable life products in the United States and traditional
insurance products in Taiwan.
2. BASIS OF PRESENTATION
A) ADOPTION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The accompanying consolidated financial statements of The Manufacturers Life
Insurance Company of America and its wholly-owned subsidiaries have been
prepared in accordance with generally accepted accounting principles ("GAAP").
Prior to 1996, the Company prepared its financial statements in conformity with
statutory accounting practices prescribed or permitted by the Insurance
Department of the State of Michigan which practices were considered GAAP for
mutual life insurance companies and their wholly-owned direct and indirect
subsidiaries. Financial Accounting Standard Board Interpretation 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises" ("FIN 40") as amended, which is effective for
1996 annual financial statements and thereafter, no longer permits statutory
based financial statements to be described as being prepared in conformity with
GAAP. Accordingly, the Company has adopted GAAP including Statement of Financial
Accounting Standards 120 ("FAS 120"), "Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long Duration
Participating Contracts", which addresses the accounting for long-duration
insurance and reinsurance contracts, including all participating business.
Pursuant to the requirements of FIN 40 and FAS 120, the effect of the changes in
accounting have been applied retroactively and the previously issued 1995 and
1994 financial statements have been restated for the change. The effect of the
changes applicable to years prior to January 1, 1994 has been presented as a
restatement of surplus as of that date. As a result, surplus at January 1, 1994
increased by $17,662 net of applicable deferred taxes.
The adoption had the effect of increasing net income for 1996, 1995 and 1994 by
approximately $7,554, $6,859 and $12,934, respectively.
B) REORGANIZATION
On December 20, 1995, Manulife Reinsurance Corporation (U.S.A) ("MRC")
transferred to the Company all of the common and preferred shares of
Manufacturers Advisor Corporation ("MAC"), an investment fund management
company.
On December 31, 1996, ManUSA transferred to the Company all of the common and
preferred shares of Manulife Holding Corporation ("Holdco"), an investment
holding company. Holdco has primarily two wholly-owned subsidiaries, ManEquity
Inc., a registered broker/dealer, and the Manufacturers Life Mortgage Securities
Corporation ("MLMSC"), an issuer of mortgage-backed US Dollar bonds. The Company
then transferred all the common and preferred shares of MAC to Holdco for two
shares of $1 common stock of Holdco.
63
<PAGE> 75
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
These transfers have been accounted for using the pooling-of-interests method of
accounting. Under this method, the assets, liabilities, capital and surplus,
revenues and expenses of each separate entity are combined retroactively at
their historical carrying values to form the financial statements of the Company
for all periods presented to give effect to the reorganization as if the
structure in place at December 31, 1996 had been in place as of the earliest
period presented in these consolidated financial statements. The accounts of all
subsidiary companies are therefore combined and all significant inter-company
balances and transactions are eliminated on combination. In addition, the
capital and surplus of the Company has been restated retroactively to January 1,
1994 to reflect the capital structure in place at December 31, 1996.
The revenues and net income reported by the separate entities and the combined
amounts presented in the accompanying consolidated financial statements are as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1996 1995 1994
------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C>
REVENUE:
ManAmerica.................................................. $54,404 $45,655 $44,432
Holdco...................................................... 15,543 13,828 14,087
MAC......................................................... 3,585 2,691 1,803
------- ------- -------
TOTAL REVENUE............................................... $73,532 $62,174 $60,322
======= ======= =======
NET INCOME (LOSS):
ManAmerica.................................................. $(8,676) $(7,402) $(7,221)
Holdco...................................................... (670) (10) 257
MAC......................................................... 939 566 238
------- ------- -------
TOTAL NET LOSS.............................................. $(8,407) $(6,846) $(6,726)
======= ======= =======
</TABLE>
3. SIGNIFICANT ACCOUNTING POLICIES
A) 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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those estimates.
B) INVESTMENTS
The Company classifies all of its fixed maturity and equity securities as
available-for-sale and records these securities at fair value. Realized gains
and losses on sales of securities classified as available-for-sale are
recognized in net income using the specific identification method. Changes in
the fair value of securities available-for-sale are reflected directly in
surplus after adjustments for deferred taxes and DAC. Discounts and premiums on
investments are amortized using the effective interest method.
Mortgage loans are reported at amortized cost, net of a provision for losses.
The provision for losses is established for mortgage loans which are considered
to be impaired when the Company has determined that it is probable that all
amounts due under contractual terms will not be collected. Impaired loans are
reported at the lower of unpaid principal or fair value of the underlying
collateral.
Policy loans are reported at aggregate unpaid balances which approximate fair
value.
Short-term investments include investments with maturities of less than one year
at the date of acquisition.
64
<PAGE> 76
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C) DEFERRED ACQUISITION COSTS (DAC)
Commissions and other expenses which vary with and are primarily related to the
production of new business are deferred to the extent recoverable and included
as an asset. DAC associated with variable annuity and variable life insurance
contracts is charged to expense in relation to the estimated gross profits of
those contracts. The amortization is adjusted retrospectively when estimates of
current or future gross profits are revised. DAC associated with traditional
life insurance policies is charged to expense over the premium paying period of
the related policies. DAC is adjusted for the impact on estimated future gross
profits assuming the unrealized gains or losses on securities had been realized
at year-end. The impact of any such adjustments is included in net unrealized
gains (losses) in Capital and Surplus. DAC is reviewed annually to determine
recoverability from future income and, if not recoverable, it is immediately
expensed.
D) POLICYHOLDER LIABILITIES
For variable annuity and variable life contracts reserves equal the policyholder
account value. Account values are increased for deposits received and interest
credited and are reduced by withdrawals, mortality charges and administrative
expenses charged to the policyholders. Policy charges which compensate the
Company for future services are deferred and recognized in income over the
period earned, using the same assumptions used to amortize DAC.
Policyholder liabilities for traditional life insurance policies sold in Taiwan
are computed using the net level premium method and are based upon estimates as
to future mortality, persistency, maintenance expense and interest rate yields
that were established in the year of issue.
E) SEPARATE ACCOUNTS
Separate account assets and liabilities represent funds that are separately
administered, principally for variable annuity and variable life contracts, and
for which the contract holder, rather than the Company, bears the investment
risk. Separate account contract holders have no claim against the assets of the
general account of the Company. Separate account assets are recorded at market
value. Operations of the separate accounts are not included in the accompanying
financial statements.
F) REVENUE RECOGNITION
Fee income from variable annuity and variable life insurance policies consists
of policy charges for the cost of insurance, expenses and surrender charges that
have been assessed against the policy account balances. Policy charges that are
designed to compensate the company for future services are deferred and
recognized in income over the period benefited, using the same assumptions used
to amortize DAC. Premiums on long-duration life insurance contracts are
recognized as revenue when due. Investment income is recorded when due.
G) EXPENSES
Expenses for variable annuity and variable life insurance policies include
interest credited to policy account balances and benefit claims incurred during
the period in excess of policy account balances.
H) REINSURANCE
The Company is routinely involved in reinsurance transactions in order to
minimize exposure to large risks. Life reinsurance is accomplished through
various plans including yearly renewable term, co-insurance and modified
co-insurance. 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
65
<PAGE> 77
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
claims are reported net of reinsured amounts. Amounts paid with respect to ceded
reinsurance contracts are reported as reinsurance receivables in other assets.
I) FOREIGN EXCHANGE
The Company's Taiwanese branch balance sheet and statement of income are
translated at the current exchange and average exchange rates for the year
respectively. Translation adjustments for foreign currency transactions that
affect cash flows are reported in earnings.
J) INCOME TAX
Income taxes have been provided for in accordance with Statement of Financial
Accounting Standards 109 ("FAS 109") "Accounting for Income Taxes." The Company
joins ManUSA, MRC and Manulife Reinsurance Limited ("MRL") in filing a U.S.
consolidated income tax return as a life insurance group under provisions of the
Internal Revenue Code. In accordance with an income tax sharing agreement, the
Company's income tax provision (or benefit) is computed as if the Company filed
a separate income tax return. Tax benefits from operating losses are provided at
the U.S. statutory rate plus any tax credits attributable to the Company,
provided the consolidated group utilizes such benefits currently. Deferred
income taxes result from temporary differences between the tax basis of assets
and liabilities and their recorded amounts for financial reporting purposes.
Income taxes recoverable represents amounts due from ManUSA in connection with
the consolidated return.
4. INVESTMENTS AND INVESTMENT INCOME
A) FIXED MATURITY AND EQUITY SECURITIES
At December 31, 1996, all fixed maturity and equity securities have been
classified as available-for-sale and reported at fair value. The amortized cost
and fair value is summarized as follows:
<TABLE>
<CAPTION>
AS AT DECEMBER 31,
------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
------------------ ------------------ ------------------ ------------------
1996 1995 1996 1995 1996 1995 1996 1995
------- ------- ------- ------- ------- ------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED MATURITY SECURITIES:
U.S. government....................... $ 9,219 $15,145 $ 386 $ 690 $ (98) $ (98) $ 9,507 $15,737
Foreign governments................... 9,227 6,071 221 219 (8) -- 9,440 6,290
Corporate............................. 32,010 32,018 981 3,147 (230) (13) 32,761 35,152
Mortgage backed....................... -- 9,523 -- 272 -- (6) -- 9,789
------- ------- ------- ------- ------- ------- ------- -------
Total fixed maturity securities....... $50,456 $62,757 $ 1,588 $ 4,328 $ (336) $ (117) $51,708 $66,968
Equity securities..................... $19,450 $22,441 $ 2,134 $ 923 $ (12) $ (19) $21,572 $23,345
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Proceeds from sales of fixed maturity securities during 1996 were $120,234 (1995
$67,507; 1994 $43,176). Gross gains of $1,858 and gross losses of $1,837 were
realized on those sales (1995 $2,630 and $218; 1994 $168 and $1,007
respectively).
Proceeds from sale of equity securities during 1996 were $26,584 (1995 $6,500;
1994 $30,011). Gross gains of $NIL and gross losses of $140 were realized on
those sales (1995 $785 and $113; 1994 $48 and $2,776 respectively).
The contractual maturities of fixed maturity securities at December 31, 1996 are
shown below. Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay
66
<PAGE> 78
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
obligations with or without prepayment penalties. Corporate requirements and
investment strategies may result in the sale of investments before maturity.
<TABLE>
<CAPTION>
AMORTIZED COST FAIR VALUE
-------------- ----------
($ THOUSANDS)
<S> <C> <C>
Fixed maturity securities, including mortgage-backed securities
One year or less.................................................... $ 3,315 $ 3,367
Greater than 1; up to 5 years....................................... 2,568 2,658
Greater than 5; up to 10 years...................................... 19,539 19,959
Due after 10 years.................................................. 24,993 25,724
------- -------
TOTAL FIXED MATURITY SECURITIES..................................... $ 50,415 $ 51,708
======= =======
</TABLE>
UNREALIZED GAINS (LOSSES) ON SECURITIES AVAILABLE-FOR-SALE
Net unrealized gains (losses) on fixed maturity and equity securities included
in capital and surplus were as follows:
<TABLE>
<CAPTION>
AS AT DECEMBER 31
-------------------
1996 1995
------- -------
($ THOUSANDS)
<S> <C> <C>
Gross unrealized gains................................................. $ 3,722 $ 5,251
Gross unrealized losses................................................ (348) (136)
DAC and other fair value adjustments................................... (1,321) (2,317)
Deferred income taxes.................................................. (720) (982)
------- -------
NET UNREALIZED GAINS (LOSSES) ON SECURITIES AVAILABLE-FOR-SALE......... $ 1,333 $ 1,816
======= =======
</TABLE>
B) INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1996 1995 1994
------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C>
Fixed maturity securities................................... $ 4,447 $ 4,430 $ 1,712
Mortgage loans.............................................. 278 3,076 8,844
Equity securities........................................... 671 646 1,245
Guaranteed annuity contracts................................ 13,196 9,691 5,040
Other investments........................................... 1,419 1,235 957
------- ------- -------
Gross investment income..................................... 20,011 19,078 17,798
------- ------- -------
Investment expenses......................................... 360 349 107
------- ------- -------
NET INVESTMENT INCOME....................................... $19,651 $18,729 $17,691
======= ======= =======
</TABLE>
5. GUARANTEED ANNUITY CONTRACTS
The Company's wholly-owned subsidiary, MLMSC, invests amounts received as
repayments of mortgage loans in annuities issued by ManUSA. These annuities are
collateral for the 8 1/4% mortgage-backed bonds payable disclosed in note 8
below.
67
<PAGE> 79
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEFERRED ACQUISITION COSTS
The components of the change in DAC were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- --------
($ THOUSANDS)
<S> <C> <C> <C>
Balance at January 1..................................... $ 78,829 $ 60,124 $ 30,887
Capitalization........................................... 36,024 28,147 31,125
Accretion of interest.................................... 6,344 4,992 3,351
Amortization............................................. (19,159) (10,852) (6,295)
Effect of net unrealized gains (losses) on securities
available for sale..................................... 996 (4,091) 1,401
Other.................................................... (424) 509 (345)
-------- -------- --------
BALANCE AT DECEMBER 31................................... $102,610 $ 78,829 $ 60,124
======== ======== ========
</TABLE>
7. INCOME TAXES
Components of income tax benefit were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- --------
($ THOUSANDS)
<S> <C> <C> <C>
Current expense (benefit)................................ $ (4,686) $ (5,128) $ 458
Deferred expense (benefit)............................... 777 1,168 (4,001)
-------- -------- --------
TOTAL BENEFIT............................................ $ (3,909) $ (3,960) $ (3,543)
======== ======== ========
</TABLE>
The Company's deferred income tax asset, which results from tax effecting the
differences between financial statement values and tax values of assets and
liabilities at each balance sheet date, relates to the following:
<TABLE>
<CAPTION>
AS AT DECEMBER 31
-------------------
1996 1995
------- -------
($ THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Differences in computing policy reserves............................. $28,508 $22,503
Policyholder dividends payable....................................... 283 411
Other deferred tax assets............................................ -- 402
Net operating loss carryforwards..................................... -- 1,061
------- -------
DEFERRED TAX ASSETS.................................................... 28,791 24,377
Deferred tax liabilities:
Deferred acquisition costs........................................... 25,522 19,398
Investments.......................................................... 928 1,737
Other deferred tax liabilities....................................... 1,300 1,626
------- -------
Gross deferred tax liabilities......................................... 27,750 22,761
======= =======
NET DEFERRED TAX ASSETS................................................ $ 1,041 $ 1,616
======= =======
</TABLE>
The Company and its US insurance affiliates have available capital loss
carryforwards of $83,500 which will expire in 1999.
68
<PAGE> 80
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. BONDS PAYABLE
Bonds payable represent 8 1/4% Mortgage-backed US Dollar Bonds due March 1, 1997
which are collateralized by annuities disclosed in note 5 above. The bonds were
repaid on March 1, 1997.
9. SURPLUS NOTE
The Company has an outstanding surplus debenture in the amount of $8,500 plus
interest at 6.7% issued on December 31, 1995 to ManUSA which matures on December
31, 2005. Payments of principal and interest cannot be made without prior
approval of the Insurance Commissioner of the State of Michigan and the
Company's Board of Directors, and to the extent the Company has sufficient
unassigned surplus on a statutory basis available for such payment.
10. CAPITAL AND SURPLUS
The Company has two classes of capital stock, as follows:
<TABLE>
<CAPTION>
AS AT DECEMBER 31
---------------------------
1996 1995
----------- -----------
($ THOUSANDS)
<S> <C> <C>
AUTHORIZED:
5,000,000 Common shares, Par value $1.00
5,000,000 Preferred shares, Par value $100.00
ISSUED AND OUTSTANDING:
4,501,860 Common shares......................................... $ 4,501,860 $ 4,501,859
105,000 Preferred shares........................................ 10,500,000 10,500,000
----------- -----------
TOTAL........................................................... $15,001,860 $15,001,859
=========== ===========
</TABLE>
During the year, the Company issued one common share to its Parent Company in
return for a capital contribution of $15,000.
During 1995, the Company issued two common shares to its Parent Company in
return for a capital contribution of $12,570.
During 1994, the Company issued one common share to its Parent Company in return
for a capital contribution of $20,000.
The Company is subject to statutory limitations on the payment of dividends to
its Parent. Under Michigan Insurance Law, the payment of dividends to
shareholders is restricted to the surplus earnings of the Company, unless prior
approval is obtained from the Michigan Insurance Bureau.
The aggregate statutory capital and surplus of the Company at December 31, 1996
was $76,202 (1995 $56,298). The aggregate statutory net loss of the Company for
the year ended 1996 was $15,961 (1995 $13,705; 1994 $19,660). State regulatory
authorities prescribe statutory accounting practices that differ in certain
respects from generally accepted accounting principles followed by stock life
insurance companies. The significant differences relate to investments, deferred
acquisition costs, deferred income taxes, non-admitted asset balances and
reserve calculation assumptions.
69
<PAGE> 81
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and the estimated fair values of certain of the Company's
financial instruments at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
-------------- ----------
($ THOUSANDS)
<S> <C> <C>
ASSETS:
Fixed maturity and equity securities................................ $ 73,280 $ 73,280
Mortgage loans...................................................... 645 645
Policy loans........................................................ 9,822 9,822
Guaranteed annuity contract......................................... 171,691 171,691
LIABILITIES:
Bond payable........................................................ 158,760 158,760
Surplus note........................................................ 8,500 8,266
</TABLE>
The following methods and assumptions were used to estimate the fair values of
the above financial instruments:
FIXED MATURITY AND EQUITY SECURITIES: Fair values of fixed maturity and equity
securities were based on quoted market prices, where available. Fair values were
estimated using values obtained from independent pricing services.
MORTGAGE LOANS: Fair value of mortgage loans was estimated using discounted
cash flows using contractual maturities and discount rates that were based on
U.S. Treasury rates for similar maturity ranges, adjusted for risk, based on
property type.
POLICY LOANS: Carrying values approximate fair values.
GUARANTEED ANNUITY CONTRACT: Carrying values approximate fair values.
BOND PAYABLE: Carrying values approximate fair values.
SURPLUS NOTE: Fair value was estimated using current interest rates that were
based on U.S. Treasuries for similar maturity ranges.
12. RELATED PARTY TRANSACTIONS
The Company has a formal service agreement with Manulife Financial which can be
terminated by either party upon two months' notice. Under the Agreement, the
Company will pay direct operating expenses incurred each year by Manulife
Financial on its behalf. Services provided under the agreement include legal,
actuarial, investment, data processing and certain other administrative
services. Costs incurred under this agreement were $26,982, $23,210 and $21,326
in 1996, 1995 and 1994 respectively. In addition, there were $6,934, $5,052 and
$7,795 of agents bonuses allocated to the Company during 1996, 1995 and 1994,
respectively, which are included in commissions.
The Company has several reinsurance agreements with affiliated companies which
may be terminated upon the specified notice by either party. These agreements
are summarized as follows:
(a) The Company assumes two blocks of insurance from ManUSA 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.
70
<PAGE> 82
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) The Company cedes the risk in excess of $25,000 per life to MRC under the
terms of an automatic reinsurance agreement
(c) The Company cedes a substantial portion of its risk on its Flexible Premium
Variable Life policies to MRC under the terms of a stop loss reinsurance
agreement.
Selected amounts relating to the above treaties reflected in the financial
statements are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1996 1995 1994
------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C>
Life and annuity premiums assumed........................... $ 676 $ 5,959 $25,386
Policy reserves assumed..................................... 44,497 47,386 47,673
Policy reserves ceded....................................... 304 3,838 3,806
</TABLE>
The Company markets variable life insurance and variable annuity products
through Separate Accounts which use NASL Series Trust as its investment vehicle.
The NASL Series Trust is an entity sponsored by an affiliated company, North
American Security Life Insurance Company.
13. REINSURANCE
In the normal course of business, the Company assumes and cedes reinsurance as a
party to several reinsurance treaties with major unrelated insurance companies.
The Company remains liable for amounts ceded in the event that reinsurers do not
meet their obligations.
The effects of reinsurance on premiums were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31
-----------------------------
1996 1995 1994
------- ------ ------
($ THOUSANDS)
<S> <C> <C> <C>
Direct premiums............................................... $12,998 $9,809 $2,380
Reinsurance assumed........................................... -- -- --
Reinsurance ceded............................................. 776 475 188
------- ------ ------
TOTAL PREMIUMS................................................ $12,222 $9,334 $2,192
======= ====== ======
</TABLE>
Reinsurance recoveries on ceded reinsurance contracts were $357, $170 and $57
during 1996, 1995 and 1994 respectively.
14. FOREIGN OPERATIONS
The Company markets traditional life insurance products in Taiwan through its
Taiwanese Branch. The carrying amount of net assets located in Taiwan as at
December 31, 1996 and 1995 was $15,080 and $1,125 respectively.
The income (loss) before taxes related to the Taiwan and U.S. business was as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------
1996 1995 1994
-------- ------- -------
($ THOUSANDS)
<S> <C> <C> <C>
Taiwan..................................................... $(17,530) $(9,332) $(3,763)
U.S........................................................ 9,123 2,486 (2,963)
-------- ------- -------
TOTAL...................................................... $ (8,407) $(6,846) $(6,726)
======== ======= =======
</TABLE>
71
<PAGE> 83
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. CONTINGENCIES
The Company is subject to various lawsuits that have arisen in the course of its
business. Contingent liabilities arising from litigation, income taxes and other
matters are not considered material in relation to the financial position of the
Company.
72
<PAGE> 84
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' current expenses, which is approximately 0.938% per
annum. The gross annual rates of return of 0%, 6% and 12% correspond to
approximate net annual rates of return of -1.577%, 4.328%, and 10.234%.
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 the 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 that the
illustration shown below.
From time to time, in advertisements or sales literature for the Policies that
quote performance data of one or more of the Portfolios, the Company may include
cash surrender values and death benefit figures computed using the same
methodology as that used in the following illustrations, but with the average
annual total return of the Portfolio for which performance data is shown in the
advertisement replacing the hypothetical rates of return shown in the following
tables.
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.
THE FOLLOWING ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER
VALUES AND DEATH BENEFITS ARE APPLICABLE TO POLICIES PURCHASED ON
OR AFTER OCTOBER 1, 1996.
73
<PAGE> 85
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>
12%
Hypothetical
Gross
0% Hypothetical 6% Hypothetical Investment
Gross Investment Return Gross Investment Return Return
------------------------------------ ------------------------------------ --------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy
Year(1) (2) Value(3) Value(3,4) Benefit Value(3) Value(3,4) Benefit Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 604 $ 320 $ 0 $100,000 $ 345 $ 0 $100,000 $ 371
2 1,238 639 0 100,000 709 0 100,000 783
3 1,903 955 188 100,000 1,092 325 100,000 1,242
4 2,602 1,268 501 100,000 1,494 726 100,000 1,749
5 3,336 1,577 810 100,000 1,913 1,146 100,000 2,308
6 4,107 1,881 1,191 100,000 2,351 1,661 100,000 2,926
7 4,916 2,179 1,565 100,000 2,806 2,193 100,000 3,606
8 5,765 2,470 1,933 100,000 3,280 2,743 100,000 4,354
9 6,657 2,752 2,292 100,000 3,769 3,309 100,000 5,174
10 7,594 3,024 2,641 100,000 4,275 3,892 100,000 6,075
15 13,028 4,241 4,241 100,000 7,073 7,073 100,000 12,094
20 19,964 5,079 5,079 100,000 10,234 10,234 100,000 21,633
25 28,815 5,649 5,649 100,000 13,965 13,965 100,000 37,145
30 40,112 5,464 5,464 100,000 17,907 17,907 100,000 62,241
<CAPTION>
12% Hypothetical
Gross Investment
Return
------------------------
End of Cash
Policy Surrender Death
Year(1) Value(3,4) Benefit
<S> <C> <C>
1 $ 0 $100,000
2 16 100,000
3 474 100,000
4 981 100,000
5 1,541 100,000
6 2,236 100,000
7 2,992 100,000
8 3,817 100,000
9 4,714 100,000
10 5,691 100,000
15 12,094 100,000
20 21,633 100,000
25 37,145 100,000
30 62,241 102,945
</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 January 1,
1997 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.
74
<PAGE> 86
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
--------------------------------- ---------------------------------- ---------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 604 $ 320 $ 0 $100,000 $ 345 0 $100,000 $ 371 $ 0
2 1,238 636 0 100,000 707 0 100,000 780 13
3 1,903 949 182 100,000 1,086 319 100,000 1,235 468
4 2,602 1,260 493 100,000 1,485 718 100,000 1,739 972
5 3,336 1,567 800 100,000 1,901 1,134 100,000 2,295 1,528
6 4,107 1,869 1,178 100,000 2,337 1,646 100,000 2,909 2,219
7 4,916 2,164 1,550 100,000 2,788 2,174 100,000 3,584 2,970
8 5,765 2,451 1,914 100,000 3,257 2,720 100,000 4,326 3,789
9 6,657 2,730 2,270 100,000 3,742 3,282 100,000 5,140 4,680
10 7,594 2,999 2,616 100,000 4,243 3,860 100,000 6,033 5,650
15 13,028 4,156 4,156 100,000 6,963 6,963 100,000 11,948 11,948
20 19,964 4,879 4,879 100,000 9,966 9,966 100,000 21,258 21,258
25 28,815 4,990 4,990 100,000 13,122 13,122 100,000 36,049 36,049
30 40,112 4,161 4,161 100,000 16,144 16,144 100,000 59,922 59,922
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $100,000
2 100,000
3 100,000
4 100,000
5 100,000
6 100,000
7 100,000
8 100,000
9 100,000
10 100,000
15 100,000
20 100,000
25 100,000
30 100,000
</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.
75
<PAGE> 87
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>
12%
Hypothetical
Gross
0% Hypothetical 6% Hypothetical Investment
Gross Investment Return Gross Investment Return Return
------------------------------------ ------------------------------------ --------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy
Year(1) (2) Value(3) Value(3,4) Benefit Value(3) Value(3,4) Benefit Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 604 $ 319 $ 0 $100,319 $ 344 $ 0 $100,344 $ 370
2 1,238 637 0 100,637 707 0 100,707 781
3 1,903 952 185 100,952 1,089 321 101,089 1,237
4 2,602 1,263 496 101,263 1,488 720 101,488 1,741
5 3,336 1,570 803 101,570 1,904 1,137 101,904 2,297
6 4,107 1,871 1,181 101,871 2,338 1,647 102,338 2,909
7 4,916 2,166 1,552 102,166 2,788 2,175 102,788 3,582
8 5,765 2,453 1,916 102,453 3,256 2,719 103,256 4,321
9 6,657 2,731 2,271 102,731 3,739 3,279 103,739 5,130
10 7,594 2,999 2,616 102,999 4,237 3,853 104,237 6,016
15 13,028 4,184 4,184 104,184 6,967 6,967 106,967 11,898
20 19,964 4,968 4,968 104,968 9,985 9,985 109,985 21,059
25 28,815 5,468 5,468 105,468 13,460 13,460 113,460 35,684
30 40,112 5,171 5,171 105,171 16,883 16,883 116,883 58,486
<CAPTION>
12% Hypothetical
Gross Investment
Return
------------------------
End of Cash
Policy Surrender Death
Year(1) Value(3,4) Benefit
<S> <C> <C>
1 $ 0 $100,370
2 14 100,782
3 470 101,237
4 974 101,741
5 1,530 102,297
6 2,219 102,909
7 2,968 103,582
8 3,784 104,321
9 4,670 105,130
10 5,633 106,016
15 11,898 111,898
20 21,059 121,059
25 35,684 135,684
30 58,486 158,486
</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 January 1,
1997 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.
76
<PAGE> 88
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
--------------------------------- ---------------------------------- ---------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 604 $ 319 $ 0 $100,319 $ 344 $ 0 $100,344 $ 370 $ 0
2 1,238 634 0 100,634 705 0 100,705 778 11
3 1,903 946 179 100,946 1,083 315 101,083 1,231 464
4 2,602 1,255 488 101,255 1,479 712 101,479 1,732 964
5 3,336 1,559 792 101,559 1,892 1,125 101,892 2,284 1,517
6 4,107 1,859 1,168 101,859 2,323 1,633 102,323 2,892 2,202
7 4,916 2,150 1,537 102,150 2,770 2,156 102,770 3,560 2,946
8 5,765 2,435 1,898 102,435 3,233 2,696 103,233 4,293 3,756
9 6,657 2,709 2,249 102,709 3,711 3,251 103,711 5,096 4,635
10 7,594 2,974 2,590 102,974 4,204 3,821 104,204 5,974 5,590
15 13,028 4,096 4,096 104,096 6,853 6,853 106,853 11,744 11,744
20 19,964 4,762 4,762 104,762 9,701 9,701 109,701 20,647 20,647
25 28,815 4,783 4,783 104,783 12,539 12,539 112,539 34,356 34,356
30 40,112 3,831 3,831 103,831 14,933 14,933 114,933 55,396 55,396
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
-------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $100,370
2 100,778
3 101,231
4 101,732
5 102,284
6 102,892
7 103,560
8 104,293
9 105,096
10 105,974
15 111,744
20 120,647
25 134,356
30 155,396
</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.
77
<PAGE> 89
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>
12%
Hypothetical
Gross
0% Hypothetical 6% Hypothetical Investment
Gross Investment Return Gross Investment Return Return
------------------------------------ ------------------------------------ --------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy
Year(1) (2) Value(3) Value(3,4) Benefit Value(3) Value(3,4) Benefit Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $ 996 $ 0 $100,000 $ 1,063 $ 40 $100,000 $ 1,130
2 2,852 1,902 342 100,000 2,095 535 100,000 2,296
3 4,386 2,726 1,166 100,000 3,103 1,543 100,000 3,511
4 5,996 3,499 1,939 100,000 4,116 2,556 100,000 4,812
5 7,688 4,233 2,673 100,000 5,146 3,586 100,000 6,221
6 9,463 4,894 3,491 100,000 6,160 4,756 100,000 7,713
7 11,328 5,526 4,278 100,000 7,199 5,952 100,000 9,343
8 13,285 6,135 5,043 100,000 8,274 7,182 100,000 11,133
9 15,341 6,692 5,756 100,000 9,355 8,419 100,000 13,071
10 17,499 7,195 6,415 100,000 10,441 9,661 100,000 15,171
15 30,021 8,805 8,805 100,000 15,882 15,882 100,000 28,825
20 46,003 8,095 8,095 100,000 20,536 20,536 100,000 49,894
25 66,400 4,659 4,659 100,000 24,100 24,100 100,000 85,250
30 92,433 0(5) 0(5) 0(5) 23,213 23,213 100,000 144,382
<CAPTION>
12% Hypothetical
Gross Investment
Return
-----------------------
End of Cash
Policy Surrender Death
Year(1) Value(3,4) Benefit
<S> <C> <C>
1 $ 107 $100,000
2 736 100,000
3 1,951 100,000
4 3,252 100,000
5 4,661 100,000
6 6,309 100,000
7 8,095 100,000
8 10,041 100,000
9 12,135 100,000
10 14,391 100,000
15 28,825 100,000
20 49,894 100,000
25 85,250 100,000
30 144,382 156,012
</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 January 1,
1997 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.
78
<PAGE> 90
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
--------------------------------- ---------------------------------- ----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $ 996 $ 0 $100,000 $ 1,063 $ 40 $100,000 $ 1,130 $ 107
2 2,852 1,801 241 100,000 1,990 430 100,000 2,188 628
3 4,386 2,567 1,007 100,000 2,932 1,372 100,000 3,330 1,770
4 5,996 3,295 1,735 100,000 3,889 2,329 100,000 4,562 3,002
5 7,688 3,981 2,421 100,000 4,857 3,297 100,000 5,891 4,331
6 9,463 4,624 3,220 100,000 5,836 4,432 100,000 7,327 5,923
7 11,328 5,220 3,972 100,000 6,820 5,572 100,000 8,875 7,627
8 13,285 5,761 4,669 100,000 7,805 6,713 100,000 10,542 9,450
9 15,341 6,245 5,309 100,000 8,785 7,849 100,000 12,338 11,402
10 17,499 6,663 5,883 100,000 9,753 8,973 100,000 14,270 13,490
15 30,021 7,581 7,581 100,000 14,209 14,209 100,000 26,462 26,462
20 46,003 5,712 5,712 100,000 17,130 17,130 100,000 44,752 44,752
25 66,400 0(4) 0(4) 100,000(4) 16,094 16,094 100,000 74,073 74,073
30 92,433 0(5) 0(5) 0(5) 5,798 5,798 100,000 125,165 125,165
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
-------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $100,000
2 100,000
3 100,000
4 100,000
5 100,000
6 100,000
7 100,000
8 100,000
9 100,000
10 100,000
15 100,000
20 100,000
25 100,000
30 133,927
</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.
79
<PAGE> 91
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>
12%
Hypothetical
Gross
0% Hypothetical 6% Hypothetical Investment
Gross Investment Return Gross Investment Return Return
------------------------------------ ------------------------------------ --------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy
Year(1) (2) Value(3) Value(3,4) Benefit Value(3) Value(3,4) Benefit Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $ 994 $ 0 $100,994 $ 1,061 $ 38 $101,061 $ 1,127
2 2,852 1,895 335 101,895 2,087 527 102,087 2,287
3 4,386 2,710 1,150 102,710 3,084 1,524 103,084 3,490
4 5,996 3,469 1,909 103,469 4,080 2,520 104,080 4,770
5 7,688 4,186 2,626 104,186 5,087 3,527 105,087 6,148
6 9,463 4,824 3,420 104,824 6,068 4,664 106,068 7,596
7 11,328 5,428 4,180 105,428 7,068 5,820 107,068 9,167
8 13,285 6,006 4,914 106,006 8,093 7,001 108,093 10,880
9 15,341 6,526 5,590 106,526 9,112 8,176 109,112 12,718
10 17,499 6,986 6,206 106,986 10,122 9,342 110,122 14,687
15 30,021 8,271 8,271 108,271 14,872 14,872 114,872 26,919
20 46,003 7,024 7,024 107,024 17,921 17,921 117,921 43,563
25 66,400 3,016 3,016 103,016 18,435 18,435 118,435 66,949
30 92,433 0(5) 0(5) 0(5) 11,828 11,828 111,828 96,714
<CAPTION>
12% Hypothetical
Gross Investment
Return
-----------------------
End of Cash
Policy Surrender Death
Year(1) Value(3,4) Benefit
<S> <C> <C>
1 $ 105 $101,127
2 727 102,287
3 1,930 103,490
4 3,210 104,770
5 4,588 106,148
6 6,192 107,596
7 7,919 109,167
8 9,788 110,880
9 11,782 112,718
10 13,907 114,687
15 26,919 126,919
20 43,563 143,563
25 66,949 166,949
30 96,714 196,714
</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 January 1,
1997 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.
80
<PAGE> 92
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
--------------------------------- ---------------------------------- ---------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $ 994 $ 0 $100,994 $ 1,061 $ 38 $101,061 $ 1,127 $ 105
2 2,852 1,792 232 101,792 1,980 420 101,980 2,177 617
3 4,386 2,547 987 102,547 2,910 1,350 102,910 3,304 1,744
4 5,996 3,261 1,701 103,261 3,848 2,288 103,848 4,513 2,953
5 7,688 3,928 2,368 103,928 4,791 3,231 104,791 5,810 4,250
6 9,463 4,549 3,145 104,549 5,737 4,333 105,737 7,200 5,796
7 11,328 5,116 3,868 105,116 6,680 5,432 106,680 8,686 7,438
8 13,285 5,624 4,532 105,624 7,611 6,519 107,611 10,270 9,178
9 15,341 6,067 5,131 106,067 8,524 7,588 108,524 11,957 11,021
10 17,499 6,438 5,658 106,438 9,409 8,629 109,409 13,747 12,967
15 30,021 7,009 7,009 107,009 13,111 13,111 113,111 24,368 24,368
20 46,003 4,625 4,625 104,625 14,349 14,349 114,349 37,833 37,833
25 66,400 0(4) 0(4) 0(4) 10,125 10,125 110,125 53,147 53,147
30 92,433 0(5) 0(5) 0(5) 0(4) 0(4) 0(4) 67,287 67,287
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
-------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $101,127
2 102,177
3 103,304
4 104,513
5 105,810
6 107,200
7 108,686
8 110,270
9 111,957
10 113,747
15 124,368
20 137,833
25 153,147
30 167,287
</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.
81
<PAGE> 93
The following illustrations of Policy Values,
Cash Surrender Values and Death Benefits
are applicable to Policies purchased prior to
October 1, 1996.
82
<PAGE> 94
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>
12%
Hypothetical
Gross
0% Hypothetical 6% Hypothetical Investment
Gross Investment Return Gross Investment Return Return
------------------------------------ ------------------------------------ --------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy
Year(1) (2) Value(3) Value(3,4) Benefit Value(3) Value(3,4) Benefit Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 604 $ 382 $ 0 $100,000 $ 410 $ 0 $100,000 $ 437
2 1,238 753 0 100,000 832 64 100,000 913
3 1,903 1,110 343 100,000 1,263 496 100,000 1,430
4 2,602 1,455 688 100,000 1,707 940 100,000 1,992
5 3,336 1,788 1,021 100,000 2,164 1,397 100,000 2,605
6 4,107 2,108 1,417 100,000 2,632 1,942 100,000 3,274
7 4,916 2,415 1,801 100,000 3,113 2,499 100,000 4,003
8 5,765 2,712 2,175 100,000 3,610 3,072 100,000 4,801
9 6,657 2,998 2,538 100,000 4,122 3,662 100,000 5,677
10 7,594 3,272 2,888 100,000 4,649 4,265 100,000 6,635
15 13,028 4,429 4,429 100,000 7,492 7,492 100,000 12,963
20 19,964 5,174 5,174 100,000 10,671 10,671 100,000 22,977
25 28,815 5,330 5,330 100,000 14,075 14,075 100,000 38,958
30 40,112 4,688 4,688 100,000 17,556 17,556 100,000 64,921
<CAPTION>
12% Hypothetical
Gross Investment
Return
-----------------------
End of Cash
Policy Surrender Death
Year(1) Value(3,4) Benefit
<S> <C> <C>
1 $ 0 $100,000
2 146 100,000
3 662 100,000
4 1,225 100,000
5 1,838 100,000
6 2,583 100,000
7 3,389 100,000
8 4,264 100,000
9 5,217 100,000
10 6,251 100,000
15 12,963 100,000
20 22,977 100,000
25 38,958 100,000
30 64,921 101,927
</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 January 1,
1997 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.
83
<PAGE> 95
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
--------------------------------- ---------------------------------- ---------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 604 $ 382 $ 0 $100,000 $ 410 $ 0 $100,000 $ 437 $ 0
2 1,238 698 0 100,000 774 7 100,000 854 87
3 1,903 1,010 243 100,000 1,157 390 100,000 1,316 549
4 2,602 1,320 553 100,000 1,559 791 100,000 1,829 1,061
5 3,336 1,626 859 100,000 1,978 1,211 100,000 2,394 1,627
6 4,107 1,927 1,237 100,000 2,417 1,727 100,000 3,019 2,328
7 4,916 2,221 1,607 100,000 2,872 2,259 100,000 3,705 3,091
8 5,765 2,508 1,971 100,000 3,345 2,808 100,000 4,459 3,922
9 6,657 2,786 2,326 100,000 3,834 3,374 100,000 5,287 4,827
10 7,594 3,055 2,671 100,000 4,339 3,956 100,000 6,196 5,812
15 13,028 4,207 4,207 100,000 7,082 7,082 100,000 12,215 12,215
20 19,964 4,927 4,927 100,000 10,116 10,116 100,000 21,698 21,698
25 28,815 5,036 5,036 100,000 13,311 13,311 100,000 36,780 36,780
30 40,112 4,205 4,205 100,000 16,384 16,384 100,000 61,146 61,146
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
-------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $100,000
2 100,000
3 100,000
4 100,000
5 100,000
6 100,000
7 100,000
8 100,000
9 100,000
10 100,000
15 100,000
20 100,000
25 100,000
30 100,000
</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.
84
<PAGE> 96
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>
12%
Hypothetical
Gross
0% Hypothetical 6% Hypothetical Investment
Gross Investment Return Gross Investment Return Return
------------------------------------ ------------------------------------ --------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy
Year(1) (2) Value(3) Value(3,4) Benefit Value(3) Value(3,4) Benefit Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 604 $ 382 $ 0 $100,382 $ 409 $ 0 $100,409 $ 437
2 1,238 752 0 100,752 830 63 100,830 912
3 1,903 1,108 341 101,108 1,261 494 101,261 1,426
4 2,602 1,451 684 101,451 1,703 935 101,703 1,986
5 3,336 1,782 1,015 101,782 2,156 1,389 102,156 2,596
6 4,107 2,099 1,409 102,099 2,621 1,930 102,621 3,259
7 4,916 2,403 1,789 102,403 3,097 2,483 103,097 3,982
8 5,765 2,696 2,159 102,696 3,588 3,051 103,588 4,772
9 6,657 2,979 2,519 102,979 4,094 3,634 104,094 5,636
10 7,594 3,248 2,864 103,248 4,612 4,228 104,612 6,579
15 13,028 4,369 4,369 104,369 7,381 7,381 107,381 12,757
20 19,964 5,055 5,055 105,055 10,400 10,400 110,400 22,351
25 28,815 5,118 5,118 105,118 13,476 13,476 113,476 37,211
30 40,112 4,353 4,353 104,353 16,327 16,327 116,327 60,306
<CAPTION>
12% Hypothetical
Gross Investment
Return
-----------------------
End of Cash
Policy Surrender Death
Year(1) Value(3,4) Benefit
<S> <C> <C>
1 $ 0 $100,437
2 144 100,912
3 659 101,426
4 1,219 101,986
5 1,829 102,596
6 2,569 103,259
7 3,368 103,982
8 4,234 104,772
9 5,176 105,636
10 6,195 106,579
15 12,757 112,757
20 22,351 122,351
25 37,211 137,211
30 60,306 160,306
</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 January 1,
1997 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.
85
<PAGE> 97
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
--------------------------------- ---------------------------------- ---------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 604 $ 382 $ 0 $100,382 $ 409 $ 0 $100,409 $ 437 $ 0
2 1,238 696 0 100,696 772 5 100,772 852 85
3 1,903 1,007 240 101,007 1,153 386 101,153 1,312 545
4 2,602 1,315 548 101,315 1,552 785 101,552 1,821 1,054
5 3,336 1,618 851 101,618 1,969 1,202 101,969 2,382 1,615
6 4,107 1,917 1,226 101,917 2,403 1,713 102,403 3,001 2,311
7 4,916 2,208 1,594 102,208 2,854 2,240 102,854 3,680 3,066
8 5,765 2,491 1,954 102,491 3,321 2,783 103,321 4,425 3,888
9 6,657 2,765 2,304 102,765 3,802 3,342 103,802 5,241 4,781
10 7,594 3,028 2,645 103,028 4,299 3,915 104,299 6,135 5,751
15 13,028 4,147 4,147 104,147 6,970 6,970 106,970 12,005 12,005
20 19,964 4,809 4,809 104,809 9,846 9,846 109,846 21,072 21,072
25 28,815 4,827 4,827 104,827 12,718 12,718 112,718 35,049 35,049
30 40,112 3,870 3,870 103,870 15,154 15,154 115,154 56,523 56,523
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
-------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $100,437
2 100,852
3 101,312
4 101,821
5 102,382
6 103,001
7 103,680
8 104,425
9 105,241
10 106,135
15 112,005
20 121,072
25 135,049
30 156,523
</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.
86
<PAGE> 98
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>
12%
Hypothetical
Gross
0% Hypothetical 6% Hypothetical Investment
Gross Investment Return Gross Investment Return Return
------------------------------------ ------------------------------------ --------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy
Year(1) (2) Value(3) Value(3,4) Benefit Value(3) Value(3,4) Benefit Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $ 894 $ 0 $100,000 $ 957 $ 0 $100,000 $ 1,021
2 2,852 1,757 197 100,000 1,939 379 100,000 2,129
3 4,386 2,581 1,021 100,000 2,937 1,377 100,000 3,324
4 5,996 3,366 1,806 100,000 3,953 2,393 100,000 4,616
5 7,688 4,104 2,544 100,000 4,978 3,418 100,000 6,006
6 9,463 4,797 3,393 100,000 6,014 4,610 100,000 7,507
7 11,328 5,439 4,191 100,000 7,057 5,809 100,000 9,125
8 13,285 6,038 4,946 100,000 8,114 7,022 100,000 10,880
9 15,341 6,586 5,650 100,000 9,177 8,241 100,000 12,780
10 17,499 7,086 6,306 100,000 10,250 9,470 100,000 14,845
15 30,021 8,783 8,783 100,000 15,700 15,700 100,000 28,312
20 46,003 8,705 8,705 100,000 20,968 20,968 100,000 49,616
25 66,400 4,349 4,349 100,000 23,819 23,819 100,000 84,338
30 92,433 0(5) 0(5) 0(5) 21,519 21,519 100,000 142,707
<CAPTION>
12% Hypothetical
Gross Investment
Return
-----------------------
End of Cash
Policy Surrender Death
Year(1) Value(3,4) Benefit
<S> <C> <C>
1 $ 0 $100,000
2 569 100,000
3 1,764 100,000
4 3,056 100,000
5 4,446 100,000
6 6,103 100,000
7 7,877 100,000
8 9,788 100,000
9 11,844 100,000
10 14,065 100,000
15 28,312 100,000
20 49,616 100,000
25 84,338 100,000
30 142,707 152,696
</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 January 1,
1997 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.
87
<PAGE> 99
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
--------------------------------- ---------------------------------- ----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $ 894 $ 0 $100,000 $ 957 $ 0 $100,000 $ 1,021 $ 0
2 2,852 1,700 140 100,000 1,880 320 100,000 2,068 508
3 4,386 2,467 907 100,000 2,817 1,257 100,000 3,197 1,637
4 5,996 3,196 1,636 100,000 3,768 2,208 100,000 4,415 2,855
5 7,688 3,883 2,323 100,000 4,730 3,170 100,000 5,728 4,168
6 9,463 4,528 3,124 100,000 5,703 4,299 100,000 7,146 5,742
7 11,328 5,124 3,876 100,000 6,681 5,433 100,000 8,674 7,426
8 13,285 5,667 4,575 100,000 7,658 6,566 100,000 10,320 9,228
9 15,341 6,151 5,215 100,000 8,631 7,695 100,000 12,092 11,156
10 17,499 6,570 5,790 100,000 9,591 8,811 100,000 13,997 13,217
15 30,021 7,492 7,492 100,000 13,999 13,999 100,000 25,996 25,996
20 46,003 5,623 5,623 100,000 16,850 16,850 100,000 43,931 43,931
25 66,400 0(4) 0(4) 100,000(4) 15,699 15,699 100,000 72,552 72,552
30 92,433 0(5) 0(5) 0(5) 5,191 5,191 100,000 122,560 122,560
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
-------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $100,000
2 100,000
3 100,000
4 100,000
5 100,000
6 100,000
7 100,000
8 100,000
9 100,000
10 100,000
15 100,000
20 100,000
25 100,000
30 131,139
</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.
88
<PAGE> 100
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
----------------------------------- ----------------------------------- ----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value(3) Value(3,4) Benefit Value(3) Value(3,4) Benefit Value(3) Value(3,4)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $ 891 $ 0 $100,891 $ 954 $ 0 $100,954 $ 1,018 $ 0
2 2,852 1,748 188 101,748 1,929 369 101,929 2,118 558
3 4,386 2,563 1,003 102,563 2,917 1,357 102,917 3,301 1,741
4 5,996 3,336 1,776 103,336 3,917 2,357 103,917 4,573 3,013
5 7,688 4,057 2,497 104,057 4,920 3,360 104,920 5,934 4,374
6 9,463 4,729 3,325 104,729 5,927 4,523 105,927 7,394 5,990
7 11,328 5,345 4,097 105,345 6,931 5,683 106,931 8,955 7,707
8 13,285 5,913 4,821 105,913 7,938 6,846 107,938 10,635 9,543
9 15,341 6,423 5,487 106,423 8,939 8,003 108,939 12,435 11,500
10 17,499 6,880 6,100 106,880 9,937 9,157 109,937 14,371 13,591
15 30,021 8,266 8,266 108,266 14,725 14,725 114,725 26,474 26,474
20 46,003 7,692 7,692 107,692 18,352 18,352 118,352 43,770 43,770
25 66,400 2,674 2,674 102,674 18,105 18,105 118,105 66,062 66,062
30 92,433 0(5) 0(5) 0(5) 9,880 9,880 109,880 93,485 93,485
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
-------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $101,018
2 102,118
3 103,301
4 104,573
5 105,934
6 107,394
7 108,955
8 110,635
9 112,435
10 114,371
15 126,474
20 143,770
25 166,062
30 193,485
</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 January 1,
1997 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.
89
<PAGE> 101
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>
12% Hypothetical
0% Hypothetical 6% Hypothetical Gross Investment
Gross Investment Return Gross Investment Return Return
--------------------------------- ---------------------------------- ---------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,391 $ 891 $ 0 $100,891 $ 954 $ 0 $100,954 $ 1,018 $ 0
2 2,852 1,690 130 101,690 1,869 309 101,869 2,056 496
3 4,386 2,448 888 102,448 2,794 1,234 102,794 3,171 1,611
4 5,996 3,163 1,603 103,163 3,727 2,167 103,727 4,366 2,806
5 7,688 3,832 2,272 103,832 4,665 3,105 104,665 5,648 4,088
6 9,463 4,453 3,050 104,453 5,606 4,202 105,606 7,021 5,617
7 11,328 5,022 3,774 105,022 6,542 5,294 106,542 8,489 7,241
8 13,285 5,531 4,439 105,531 7,467 6,375 107,467 10,054 8,962
9 15,341 5,976 5,040 105,976 8,374 7,438 108,374 11,718 10,782
10 17,499 6,349 5,569 106,349 9,253 8,473 109,253 13,484 12,704
15 30,021 6,927 6,927 106,927 12,918 12,918 112,918 23,939 23,939
20 46,003 4,549 4,549 104,549 14,110 14,110 114,110 37,135 37,135
25 66,400 0(4) 0(4) 100,000(4) 9,830 9,830 109,830 52,011 52,011
30 92,433 0(5) 0(5) 0(5) 0(4) 0(4) 0(4) 65,438 65,438
<CAPTION>
12%
Hypothetical
Gross
Investment
Return
-------------
End of
Policy Death
Year(1) Benefit
<S> <C>
1 $101,018
2 102,056
3 103,171
4 104,366
5 105,648
6 107,021
7 108,489
8 110,054
9 111,718
10 113,484
15 123,939
20 137,135
25 152,011
30 165,438
</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.
90
<PAGE> 102
LOGO
<PAGE> 103
<PAGE> 104
PART II
<PAGE> 105
PART II. OTHER INFORMATION
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The Manufacturers Life Insurance Company of America hereby represents that the
fees and charges deducted under the contracts issued pursuant to this
registration statement in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The Prospectus, consisting of 90 pages;
Representation pursuant to Section 26 of the Investment Company Act of
1940;
The signatures;
Written consents of the following persons:
Jones & Blouch L.L.P
Ernst & Young LLP
John R. Ostler
The following exhibits are filed herewith or are incorporated herein by
reference to the designated filings:
1. Copies of all exhibits required by paragraph A of the
instructions as to exhibits in Form N-8B-2 are set forth below
under designations based on such instructions:
A(1) Resolutions of Board of Directors of The Manufacturers Life
Insurance Company of America establishing Separate Account Four,
previously filed as Exhibit A(1) to Registrant's registration
statement on Form S-6, April 24, 1987.
A(3)(a)(i) Distribution Agreement between The Manufacturers Life
Insurance Company of America and ManEquity, Inc., previously filed
as Exhibit (A)(3)(a) to Pre-Effective Amendment No. 1, August 13,
1987.
A(3)(a)(ii) Amendment to Distribution Agreement, previously filed as Exhibit
A(3)(a)(ii) to Post-Effective Amendment No. 9, February 28, 1992.
A(3)(b)(i) Specimen agreement between ManEquity, Inc. and registered
representatives, previously filed as Exhibit A(3)(b)(i) to
Post-Effective Amendment No.9, February 28, 1992.
A(3)(b)(ii) Specimen agreement between ManEquity, Inc. and dealers, previously
filed as Exhibit A(3)(b)(ii) to Post-Effective Amendment No. 11,
February 26, 1993.
<PAGE> 106
A(3)(c) Schedule of Sales Commissions, previously filed as Exhibit
A(3)(c) to Post-Effective Amendment No. 9, February 28, 1992.
A(5)(a) Form of Flexible Premium Variable Life Insurance Policy, as
amended, previously filed as Exhibit A(5) to Pre-Effective
Amendment No. 2, November 19, 1987.
A(5)(b) Endorsement to Flexible Premium Variable Life Insurance
Policy, previously filed as Exhibit A(5)(b) to Post-Effective
Amendment No. 9, February 28, 1992.
A(5)(c) Endorsement to Flexible Premium Variable Life Insurance
Policy re redomestication, previously filed as Exhibit A(5)(c) to
Post-Effective Amendment No. 11, February 26, 1993.
A(5)(d) Endorsement No. 770-9ua to Flexible Premium Variable Life Insurance
Policy.
A(6)(a) Restated Articles of Redomestication of the Manufacturers Life
Insurance Company of America. Incorporated by reference to Exhibit
3(a)(i) to Post Effective Amendment No. 6 to the Registration
Statement on Form S-1 filed by The Manufacturers Life Insurance
Company of America on December 9, 1996 (File No. 33-57020).**
A(6)(b) By-Laws of The Manufacturers Life Insurance Company of America.
Incorporated by reference to Exhibit (3)(b)(i) to Post Effective
Amendment No. 6 to the Registration Statement on Form S-1 filed by
The Manufacturers Life Insurance Company of America on December 9,
1996 (File No. 33-57020)**
A(8)(a) Service Agreement between The Manufacturers Life Insurance
Company of America and The Manufacturers Life Insurance Company,
previously filed as Exhibit 1.A(8)(a) to Post-Effective Amendment
No. 7 to the registration statement on Form N-4 of Separate
Account One of The Manufacturers Life Insurance Company of America
(File No. 2-88607), March 2, 1989.
A(8)(a)(i) Amendment to Service Agreement, previously filed as Exhibit
A(8)(a)(i) to Post-Effective Amendment No. 11, February 26, 1993.
A(8)(a)(ii) Amendments to Service Agreement: May 31, 1993 and June 30, 1993.
Previously filed as Exhibit A(8)(a)(ii) to Post-Effective
Amendment No. 13, March 1, 1994.
A(8)(b) Stoploss Reinsurance Agreement between The Manufacturers Life
Insurance Company of America and The Manufacturers Life Insurance
Company, previously filed as Exhibit A(8)(b) to Pre-Effective
Amendment No. 1, August 13, 1987.
A(8)(c) Automatic Coinsurance Agreement between The Manufacturers Life
Insurance Company of America and The Manufacturers Life Insurance
Company, previously filed as Exhibit (7) to Pre-Effective Amendment
No. 1 to the registration statement on Form N-4 of Separate Account
Two of The Manufacturers Life Insurance Company of America (File
No. 33-14499), September 4, 1987.
A(8)(d) Service Agreement between The Manufacturers Life Insurance Company
and ManEquity, Inc. dated January 2, 1991 as amended March 1, 1994,
previously filed as Exhibit A(8)(d) to Post-Effective Amendment No.
14, April 26, 1994.
A(10)(a) Form of Application for Flexible Premium Variable Life Insurance
Policy, previously filed as Exhibit A(10)(a) to Post Effective
Amendment No. 20, April 26, 1996.**
<PAGE> 107
A(10)(b) Form of Streamlined Application for Flexible Premium Variable Life
Insurance Policy, previously filed as Exhibit A(10)(b) to
Post-Effective Amendment No. 5, March 2, 1990.
A(10)(c) Form of Short Form Application for Flexible Premium Variable Life
Insurance Policy, previously filed as Exhibit A(10)(c) to
Post-Effective Amendment No. 5, March 2, 1990.
A(10)(d) Form of Application Supplement for Flexible Premium Variable Life
Insurance Policy, previously filed as Exhibit A(10)(d) to
Post-Effective Amendment No. 22, December 23, 1996.**
2. See Exhibit A(5).
3. Opinion and consent of James D. Gallagher, Esq., General Counsel
of The Manufacturers Life Insurance Company of America,
previously filed as Exhibit 3 to Post-Effective Amendment
No. 22, December 23, 1996.**
4. No financial statements are omitted from the prospectus pursuant to
instruction 1(b) or (c) of Part I.
5. Not applicable.
6. Opinion and consent of John R. Ostler, Vice-President, Chief
Actuary and Treasurer of The Manufacturers Life Insurance Company
of America.**
7. Form of notice of short term cancellation right and request for
refund, previously filed as Exhibit 7 to pre-Effective Amendment
No. 1, August 13, 1987.
8(a). Form of notice of right of surrender and refund, previously filed
as Exhibit 8 to Pre-Effective Amendment No. 1, August 13, 1987.
8(b). Form of notice of right of surrender and refund (face amount
increase), previously filed as Exhibit 8(b) to Post-Effective
Amendment No. 9, February 28, 1992.
9. Memorandum Regarding Issuance, Face Amount Increase, Redemption and
Transfer Procedures for the Policies, previously filed as Exhibit
9 to Post-Effective Amendment No. 21, October 31, 1996.**
10. Consent of Ernst & Young LLP.**
11. Consent of Jones & Blouch L.L.P.**
12. Power of Attorney. Incorporated by reference to Exhibit 12 to Post
Effective Amendment No. 10 to the Registration Statement on Form
S-6 filed by The Manufacturers Life Insurance Company of America on
February 28, 1997 (File No. 33-52310)
13. Financial Data Schedules.**
** Filed Electronically
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the
registrant, SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA, and the depositor, THE MANUFACTURERS LIFE INSURANCE COMPANY OF
AMERICA, certify that the registrant meets all of the requirements for
effectiveness of this amended registration statement pursuant to Rule 485(b)
under the Securities Act of 1933 and have duly caused this amendment to the
registration statement to be signed on their behalf by the undersigned
thereunto duly authorized, and the seal of the depositor to be hereunto affixed
and attested, all in the City of Toronto, Province of Ontario, Canada, on the
28th day of April, 1997.
SEPARATE ACCOUNT FOUR OF THE
MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
--------------------------------
(Registrant)
By: THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
----------------------------
(Depositor)
By: /s/ Donald A. Guloien
-----------------------------
DONALD A. GULOIEN
President
[SEAL] THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Donald A. Guloien
-----------------------------
DONALD A. GULOIEN
President
Attest
/s/ James D. Gallagher
- ----------------------
JAMES D. GALLAGHER
Secretary
<PAGE> 109
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated on this 28th day of April 1997.
<TABLE>
<CAPTION>
Signature Title Date
- ----------- ------- ------
<S> <C> <C>
* Chairman and Director
- ---------------------- ---------------------
JOHN D. RICHARDSON
* President and Director
- ---------------------- (Principal Executive Officer) ---------------------
DONALD A. GULOIEN
* Director
- ---------------------- ---------------------
SANDRA M. COTTER
/s/ James D. Gallagher Director
- ---------------------- ---------------------
JAMES D. GALLAGHER
* Director
- ---------------------- ---------------------
BRUCE GORDON
* Director
- ---------------------- ---------------------
JOSEPH J. PIETROSKI
* Director ----------------------
- ----------------------
THEODORE KILKUSKIE, JR.
* Vice President, Finance
- ---------------------- (Principal Financial and ---------------------
DOUGLAS H. MYERS Accounting Officer)
* /s/ James D. Gallagher
---------------------- ---------------------
JAMES D. GALLAGHER
Pursuant to Power of Attorney
</TABLE>
139
<PAGE> 110
EXHIBIT INDEX
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
27 Financial Data Schedules.
99.1-A(1) Resolutions of Board Previously filed as
of Directors of The Exhibit A(1) to Regis-
Manufacturers Life trant's registration
Insurance Company of statement on Form S-6,
America establishing April 24, 1987.
Separate Account Four
99.1-A(3)(a)(i) Distribution Agreement Previously filed as
between The Manufacturers Exhibit (A)(3)(a) to
Life Insurance Company of Pre-Effective Amendment
America and ManEquity, Inc. No. 1, August 13, 1987.
99.1-A(3)(a)(ii) Amendment to Distribution Previously filed as
Agreement. Exhibit A(3)(a)(ii) to
Post-Effective Amendment
No.9, February 28, 1992.
99.1-A(3)(b)(i) Specimen agreement Previously filed as
between ManEquity, Inc. Exhibit A(3)(b)(i) to
and registered repre- Post-Effective Amendment
sentatives. No. 9, February 28, 1992.
99.1-A(3)(b)(ii) Specimen agreement Previously filed as
between ManEquity, Inc. Exhibit A(3)(b)(ii) to
and dealers. Post-Effective Amendment
No. 11, February 26, 1993.
99.1-A(3)(c) Schedule of Sales Previously filed as
Commissions. Exhibit A(3)(c) to
Post-Effective Amendment
No. 9, February 28, 1992.
99.1-A(5)(a) Form of Flexible Premium Previously filed as
Variable Life Insurance Exhibit A(5) to Pre-
Policy, as amended Effective Amendment
No. 2, November 19, 1987.
99.1-A(5)(b) Endorsement to Flexible Previously filed as
Premium Variable Life Exhibit A(5)(b) to Post-
Insurance Policy. Effective Amendment
No. 9, February 28, 1992.
99.1-A(5)(c) Endorsement to Flexible Previously filed as
Premium Variable Life Exhibit A(5)(c) to Post-
Insurance Policy re Effective Amendment No.
redomestication. 11, February 26, 1993.
99.1-A(5)(d) Endorsement No. 770-9ua
to Flexible Premium
Variable Life
Insurance Policy.
<PAGE> 111
99.1-A(6)(a) Restated Articles of Incorporated by reference
Redomestication of The to Exhibit 3(a)(i) to Post
Manufacturers Life Effective Amendment No. 6
Insurance Company of to the Registration
America. * * Statement on Form S-1
filed by The
Manufacturers Life
Insurance Company
of America on December 9,
1996 (File No. 33-57020).
99.1-A(6)(b) By-Laws of The Manu- Incorporated by reference
facturers Life Insurance to Exhibit (3)(b)(i) to
Company of America. * * Post Effective Amendment
No. 6 to the Registration
Statement on Form S-1
filed by The
Manufacturers Life
Insurance Company of
America on December 9,
1996 (File No. 33-57020).
99.1-A(8)(a) Service Agreement between Previously filed as
The Manufacturers Life Exhibit 1.A(8)(a) to
Insurance Company of Post-Effective Amend-
America and The Manu- ment No. 7 to the
facturers Life Insurance registration statement
Company. on Form N-4 of Separate
Account One of The
Manufacturers Life
Insurance Company of
America (File No.
2-88607), March 2, 1989.
99.1-A(8)(a)(i) Amendment to Service Previously filed as
Agreement Exhibit A(8)(a)(i) to
Post-Effective Amendment
No. 11, February 26, 1993.
99.1-A(8)(a)(ii) Amendments to Service Previously filed as
Agreement: May 31, 1993 Exhibit
and June 30, 1993 A(8)(ii) to
Post-Effective Amendment
No. 13, March 1, 1994.
99.1-A(8)(b) Stoploss Reinsurance Previously filed as
Agreement between The Exhibit A(8)(b) to
Manufacturers Life Pre-Effective Amend-
Insurance Company of ment No. 1, August 13,
America and The Manu- 1987.
facturers Life Insurance
Company.
99.1-A(8)(c) Automatic Coinsurance Previously filed as
Agreement between The Exhibit (7) to Pre-
Manufacturers Life Effective Amendment
Insurance Company of No. 1 to the regis-
America and The Manu- tration statement on
facturers Life Insurance Form N-4 of Separate
Company. Account Two of The Manu-
facturers Life Insurance
Company of America
(File No. 33-14499),
September 4, 1987.
99.1-A(8)(d) Service Agreement between Previously filed as
between The Manufacturers Exhibit A(8)(d) to Post-
Life Insurance Company and Effective Amendment
ManEquity, Inc. dated No. 14, April 26, 1994.
January 2, 1991 as amended
March 1, 1994.
<PAGE> 112
99.1-A(10)(a) Form of Application for Previously filed as
Flexible Premium Variable Exhibit A(10)(a) to Post
Life Insurance Policy. * * Effective Amendment No.
20, April 26, 1996.
99.1-A(10)(b) Form of Streamlined Previously filed as
Application for Flexible Exhibit A(10)(b) to Post
Premium Variable Life Effective Amendment No.
Insurance Policy. * * 5, March 2, 1990.
99.1-A(10)(c) Form of Short Form Previously filed as
Application for Flexible Exhibit A(10)(c) to
Premium Variable Life Post-Effective Amend-
Insurance Policy. ment No. 5, March 2, 1990.
99.1-A(10)(d) Form of Application Previously filed as
Supplement for Flexible Exhibit A(10)(d) to
Premium Variable Life Post-Effective Amendment
Insurance Policy. * * No. 22, December 23, 1996.
99.2. See Exhibit A(5).
99.3. Opinion and consent of Previously filed as
James D. Gallagher, Esq., Exhibit 3 to
General Counsel of The Post-Effective Amendment
Manufacturers Life Insurance No. 22, December 23, 1996.
Company of America. * *
99.4. No financial statements
are omitted from the
prospectus pursuant to instruction
1(b) or (c) of Part I.
99.5. Not applicable.
99.6. Opinion and consent of
John R. Ostler, Vice-
President, Chief Actuary
and Treasurer of The Manu-
facturers Life Insurance
Company of America.**
99.7. Form of notice of short- Previously filed as
term cancellation right Exhibit 7 to Post-
and request for refund. Effective Amendment
No. 9, February 28, 1992.
99.8(a). Form of notice of right Previously filed as
of surrender and refund. Exhibit 8 to Pre-
Effective Amendment No.
1, August 13, 1987.
99.8(b). Form of notice of right Previously filed as
of surrender and refund Exhibit 8(b) to Post-
(face amount increase). Effective Amendment
No. 9, February 28, 1992.
<PAGE> 113
99.9. Memorandum Regarding Previously filed as
Issuance, Face Amount Exhibit 9 to Post-
Increase, Redemption Effective Amendment
and Transfer Procedures No. 21, October 31, 1996.
for the Policies**
99.12. Power of Attorney** Incorporated by reference
to Exhibit 12 to Post
Effective Amendment
No. 10 to the Registration
Statement on Form S-6
filed by The Manufacturers
Life Insurance Company of
America on February 28,
1997 (File No. 33-52310.
99.C1. Consent of Ernst &
Young LLP.
99.C6. Consent of Jones &
Blouch L.L.P.
** Filed Electronically.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPARATE
ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 179,477,305
<INVESTMENTS-AT-VALUE> 187,379,912
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 187,379,912
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 137,662,712
<SHARES-COMMON-STOCK> 6,946,852
<SHARES-COMMON-PRIOR> 5,326,992
<ACCUMULATED-NII-CURRENT> 33,886,925
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,927,663
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,902,612
<NET-ASSETS> 187,379,912
<DIVIDEND-INCOME> 23,738,584
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (1,085,346)
<NET-INVESTMENT-INCOME> 22,653,238
<REALIZED-GAINS-CURRENT> 4,053,020
<APPREC-INCREASE-CURRENT> (9,742,768)
<NET-CHANGE-FROM-OPS> 16,963,490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,619,860
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 39,791,722
<ACCUMULATED-NII-PRIOR> 11,233,687
<ACCUMULATED-GAINS-PRIOR> 3,874,643
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
--------------------------------------------------
POLICY UPDATE PAGE
[Manulife Financial Logo]
MANULIFE FINANCIAL
The Manufacturers Life Insurance Company of America
This form is an update to the Policy Information Section of your policy. It
should be attached to your policy.
LIST OF INVESTMENT FUNDS
THE SEPARATE ACCOUNT IS AUTHORIZED TO INVEST IN SHARES OF MANULIFE SERIES FUND,
INC. OR ANOTHER INVESTMENT COMPANY. EACH SUB-ACCOUNT OF THE SEPARATE ACCOUNT
PURCHASES SHARES IN THE FUNDS LISTED BELOW. WE WILL INFORM YOU OF ANY CHANGES IN
THE AVAILABLE FUNDS.
YOU MAY ALLOCATE NET PREMIUMS TO ANY OF THE FUNDS. YOUR INITIAL INVESTMENT
ALLOCATION IS SHOWN IN THE APPLICATION FOR THE POLICY.
SEE THE FOLLOWING PROVISIONS FOR DETAILS: POLICY VALUE, POLICY VALUE
COMPOSITION, AND INVESTMENT OPTIONS.
THE FOLLOWING LIST OF INVESTMENT FUNDS REPLACES THE LIST SHOWN ON PAGE 9 OF YOUR
POLICY.
NASL SERIES TRUST PORTFOLIOS AND INVESTMENT OBJECTIVES
(1) THE PACIFIC RIM EMERGING MARKETS TRUST SEEKS TO PROVIDE LONG-TERM GROWTH
OF CAPITAL.
(2) THE SCIENCE AND TECHNOLOGY TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL. CURRENT INCOME IS INCIDENTAL TO THE PORTFOLIOS OBJECTIVE.
(3) THE INTERNATIONAL SMALL CAP TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL
APPRECIATION.
(4) THE EMERGING GROWTH TRUST SEEKS TO PROVIDE MAXIMUM CAPITAL APPRECIATION.
(5) THE PILGRIM BAXTER GROWTH TRUST SEEKS TO PROVIDE CAPITAL APPRECIATION.
(6) THE SMALL/MID CAP TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION.
(7) THE INTERNATIONAL STOCK TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL.
(8) THE WORLDWIDE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
(9) THE GLOBAL EQUITY TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION.
(10) THE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
(11) THE EQUITY TRUST SEEKS TO PROVIDE GROWTH OF CAPITAL. CURRENT INCOME IS A
SECONDARY CONSIDERATION ALTHOUGH GROWTH OF INCOME MAY ACCOMPANY GROWTH
OF CAPITAL.
(12) THE QUANTITATIVE EQUITY TRUST SEEKS TO ACHIEVE INTERMEDIATE AND
LONG-TERM GROWTH THROUGH CAPITAL APPRECIATION AND CURRENT INCOME.
(13) THE EQUITY INDEX TRUST SEEKS TO ACHIEVE INVESTMENT RESULTS WHICH
APPROXIMATE THE TOTAL RETURN OF PUBLICLY TRADED COMMON STOCKS IN THE
AGGREGATE, AS REPRESENTED BY THE STANDARD & POOR'S 500 COMPOSITE STOCK
PRICE INDEX.
(14) THE BLUE CHIP GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
CURRENT INCOME IS A SECONDARY OBJECTIVE, AND MANY OF THE STOCKS IN THE
PORTFOLIO ARE EXPECTED TO PAY DIVIDENDS.
(See Over)
- -------------------------------------------------------------------------------
Manulife Financial and the block design are registered service marks of The
Manufacturers Life Insurance Company and are used by it and its subsidiaries.
<PAGE> 2
- -----------------------------------------------------------------------------
(15) THE REAL ESTATE SECURITIES TRUST SEEKS TO ACHIEVE A COMBINATION OF
LONG-TERM CAPITAL APPRECIATION AND SATISFACTORY CURRENT INCOME.
(16) THE VALUE TRUST SEEKS TO PROVIDE AN ABOVE-AVERAGE TOTAL RETURN OVER A
MARKET CYCLE OF THREE TO FIVE YEARS, CONSISTENT WITH REASONABLE RISK.
(17) THE INTERNATIONAL GROWTH AND INCOME TRUST SEEKS TO PROVIDE LONG-TERM
GROWTH OF CAPITAL AND INCOME.
(18) THE GROWTH AND INCOME TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL
AND INCOME CONSISTENT WITH PRUDENT INVESTMENT RISK.
(19) THE EQUITY-INCOME TRUST SEEKS TO PROVIDE SUBSTANTIAL DIVIDEND INCOME AND
ALSO LONG-TERM CAPITAL APPRECIATION.
(20) THE BALANCED TRUST SEEKS TO PROVIDE CURRENT INCOME AND CAPITAL
APPRECIATION.
(21) THE AUTOMATIC ASSET ALLOCATION TRUSTS (AGGRESSIVE, MODERATE AND
CONSERVATIVE) SEEK TO OBTAIN THE HIGHEST POTENTIAL TOTAL RETURN
CONSISTENT WITH A SPECIFIED LEVEL OF RISK TOLERANCE - AGGRESSIVE, MODERATE
AND CONSERVATIVE.
(22) THE HIGH YIELD TRUST SEEKS TO REALIZE AN ABOVE-AVERAGE TOTAL RETURN OVER A
MARKET CYCLE OF THREE TO FIVE YEARS, CONSISTENT WITH REASONABLE RISK.
(23) THE STRATEGIC BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF TOTAL RETURN
CONSISTENT WITH PRESERVATION OF CAPITAL.
(24) THE GLOBAL GOVERNMENT BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF TOTAL
RETURN BY PLACING PRIMARY EMPHASIS ON HIGH CURRENT INCOME AND THE
PRESERVATION OF CAPITAL.
(25) THE CAPITAL GROWTH BOND TRUST SEEKS TO ACHIEVE GROWTH OF CAPITAL BY
INVESTING IN MEDIUM-GRADE OR BETTER DEBT SECURITIES, WITH INCOME AS A
SECONDARY CONSIDERATION.
(26) THE INVESTMENT QUALITY BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF CURRENT
INCOME CONSISTENT WITH THE MAINTENANCE OF PRINCIPAL AND LIQUIDITY.
(27) THE U.S. GOVERNMENT SECURITIES TRUST SEEKS TO OBTAIN A HIGH LEVEL OF
CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL AND MAINTENANCE OF
LIQUIDITY.
(28) THE MONEY MARKET TRUST SEEKS TO OBTAIN MAXIMUM CURRENT INCOME CONSISTENT
WITH PRESERVATION OF PRINCIPAL AND LIQUIDITY.
(29) THE LIFESTYLE AGGRESSIVE 1000 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL. CURRENT INCOME IS NOT A CONSIDERATION.
(30) THE LIFESTYLE GROWTH 820 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL WITH CONSIDERATION ALSO GIVEN TO CURRENT INCOME.
(31) THE LIFESTYLE BALANCED 640 TRUST SEEKS TO PROVIDE A BALANCE BETWEEN A HIGH
LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL WITH A GREATER EMPHASIS
GIVEN TO CAPITAL GROWTH.
(32) THE LIFESTYLE MODERATE 460 TRUST SEEKS TO PROVIDE A BALANCE BETWEEN A HIGH
LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL WITH A GREATER EMPHASIS
GIVEN TO HIGH INCOME.
(33) THE LIFESTYLE CONSERVATIVE 280 TRUST SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME WITH SOME CONSIDERATION ALSO GIVEN TO GROWTH OF CAPITAL.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
[LOGO SIGNATURE]
President
- -----------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99-6
April 28, 1997
The Manufacturers Life Insurance
Company of America
500 N. Woodward Avenue
Suite 250
Bloomfield Hills Michigan 48304
U.S.A.
Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 23 to Registration Statement No. 33-13774 on Form S-6
("Registration Statement") which covers premiums expected to be received
under Flexible Premium Variable Life Insurance Policies ("Policies") to be
offered by The Manufacturers Life Insurance Company of America
("Company"). The prospectus included in the Registration Statement
describes Policies which will be offered by the Company in each State
where they have been approved by appropriate State insurance authorities.
The Policy form was prepared under my direction, and I am familiar with
the amended Registration Statement and Exhibits thereto. In my opinion:
(l) The table of corridor percentages shown under the caption "What
Death Benefit Options Are Available?" is consistent with the
Policy's provisions.
(2) The illustrations of death benefits based on Policy Value
multiplied by corridor percentage shown under the caption "What
Death Benefit Options Are Available?", based on the assumptions
stated in the illustrations, are consistent with the provisions
of the Policy.
(3) The illustration of Modified Policy Debt shown in the second
paragraph under the caption "What Are The Provisions Governing
Policy Loans?", based on the assumptions stated in the
illustration, is consistent with the Policy's provisions.
(4) The illustration of an application of the loan tier amount shown
under the sub-caption "Interest Credited to the Loan Account" of
the caption "What Are The Provisions Governing Policy Loans?",
based on the assumptions stated in the illustration, is
consistent with the provisions of the Policy.
(5) The Loan Account illustration shown as a sub-caption under the
caption "What Are The Provisions Governing Policy Loans", based
on the assumption stated in the illustration, is consistent with
the Policy's provisions.
(6) The schedule of deferred underwriting charges shown under the
sub-caption "Deferred Underwriting Charge" of the caption "What Are
The Surrender Charges?" is consistent with the Policy's provisions.
(7) The table under the sub-caption "Deferred Underwriting Charge" of the
caption "What Are The Surrender Charges?" showing, on an annual basis,
the surrender charge applied to the Policy five years or more after
issuance of the Policy or a face amount increase, is consistent with
the provisions of the Policy.
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(8) The table under sub-section "Deferred Sales Charge" of the caption
"What Are The Surrender Charges?" showing for life insureds over age
69 at issue or face amount increase the applicable percent of premium
reduction against which the deferred sales charge is applied is
consistent with the Policy's sales charge structure.
(9) The illustration of the operation of the maximum sales charge under
the sub-caption "Refund of Excess Sales Charge" of the caption "What
Are The Surrender Charges?", based on the assumptions stated in the
illustration, is consistent with the Policy's sales charge structure.
(10) The illustrations of Accumulated Premiums, Policy Values, Cash
Surrender Values, and Death Benefits for the Policy shown in the
Appendix under the caption "What Are Some Illustration Of Policy
Values, Cash Surrender Values and Death Benefits?", based on the
assumptions stated in the illustrations, are consistent with the
provisions of the Policy. The rate structure of the Policy has not
been designed so as to make the relationship between premiums and
benefits, as shown in these illustrations, appear to be
correspondingly more favorable to a prospective purchaser of the
Policy for male ages 25 and 45, than to prospective purchasers of the
Policy for females or males at other ages.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
Prospectus.
Very truly yours,
John R. Ostler
Vice President, Treasurer and Chief Actuary
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EXHIBIT 99.C1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 21, 1997 accompanying the financial statements
of The Manufacturers Life Insurance Company of America and to the use of our
report dated January 31, 1997 accompanying the financial statements of Separate
Account Four of The Manufacturers Life Insurance Company of America, in
post-effective amendment No. 23 to the Registration Statement No. 33-13774 on
Form S-6 and related prospectus of Separate Account Four of The Manufacturers
Life Insurance Company of America.
Ernst & Young LLP
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 28, 1997
<PAGE> 1
EXHIBIT 99-C6
Jones & Blouch L.L.P.
1025 THOMAS JEFFERSON STREET, N.W.
WASHINGTON, D.C. 20007
(202) 965-8110
April 28, 1997
The Board of Directors
The Manufacturers Life Insurance
Company of America
500 N. Woodward Avenue
Bloomfield Hills, MI 48304
Dear Sirs:
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the prospectus contained in post-effective amendment No. 23 to the
registration statement on Form S-6 of Separate Account Four of The
Manufacturers Life Insurance company of America, File No. 33-13774, to be filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933.
Very truly yours,
Jones & Blouch L.L.P.
Jones & Blouch L.L.P.
