<PAGE> 1
As filed with the Securities and Exchange Commission on April 29, 1998.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT FOUR
(Exact name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
(Name of Depositor)
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of Depositor's Principal Executive Offices)
James D. Gallagher
Vice President, Secretary
and General Counsel
The Manufacturers Life Insurance Company Copy to:
of America J. Sumner Jones, Esq.
73 Tremont Street Jones & Blouch L.L.P.
Boston, MA 02108 1025 Thomas Jefferson Street, NW
(Name and Address of Agent for Service) Washington, DC 20007
Title of Securities
Being
Registered: Variable Life Insurance Contracts
- ----------
Approximate date of commencement of proposed public offering: As soon after the
effective date of this Registration Statement as is practicable.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
Separate Account 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 (Separate Account
Four)
2 Cover Page; General Information About Manufacturers (Manufacturers
Life of America)
3 *
4 Other Information (Distribution of the Policy)
5 General Information About Manufacturers Life (Separate Account Four)
6 General Information About Manufacturers (Separate Account Four)
7 *
8 *
9 Other Information (Litigation)
10 Death Benefits; Premium Payments; Charges and Deductions; Policy
Value; Policy Loans; Policy Surrender and Partial Withdrawals; Lapse
and Reinstatement; Other Provisions of the Policy; Other Information
11 General Information About Manufacturers (Manufacturers Investment
Trust)
12 General Information About Manufacturers (Manufacturers Investment
Trust)
13 Charges and Deductions
14 Issuing A Policy; Other Information (Responsibilities Assumed By
Manufacturers Life)
15 Issuing A Policy
16 **
17 Policy Surrender and Partial Withdrawals
18 General Information About Manufacturers
19 Other Information (Reports to Policyholders; Responsibilities Assumed
By Manufacturers Life)
20 *
21 Policy Loans
<PAGE> 3
22 *
23 **
24 Other Provisions of the Policy
25 General Information About Manufacturers (Manufacturers Life of
America)
26 *
27 **
28 Other Information (Officers and Directors)
29 General Information About Manufacturers (Manufacturers Life of
America)
30 *
31 *
32 *
33 *
34 *
35 **
36 *
37 *
38 Other Information (Distribution of the Policies; Responsibilities of
Manufacturers Life)
39 Other Information (Distribution of the Policies)
40 *
41 **
42 *
43 *
44 Policy Values --Determination of Policy Value; Units and Unit Values)
45 *
46 Policy Surrender and Partial Withdrawals; Other Information -- Payment
of Proceeds)
47 General Information About Manufacturers (Manufacturers Investment
Trust)
48 *
<PAGE> 4
49 *
50 General Information About Manufacturers
51 Issuing a Policy; Death Benefits; Premium Payments; Charges and
Deductions; Policy Value; Policy Loans; Policy Surrender and Partial
Withdrawals; Lapse and Reinstatement; Other Policy Provisions
52 Other Information (Substitution of Portfolio Shares)
53 **
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
* Omitted since answer is negative or item is not applicable.
** Omitted.
<PAGE> 5
COVER PAGE
This prospectus describes Corporate VUL, a flexible premium variable universal
life insurance policy (the "Policy") offered by The Manufacturers Life Insurance
Company of America (the "Company" or "Manufacturers Life Of America"), a stock
life insurance company that is an indirect wholly-owned subsidiary of The
Manufacturers Life Insurance Company ("Manufacturers Life"). The Policy is
designed for use by corporations and other employers, to provide life insurance
and to fund other employee benefits.
The Policy is designed to provide lifetime insurance protection together with
flexibility as to the timing and amount of premium payments, the investments
underlying the Policy Value, and the amount of insurance coverage.
The Policy provides for:
(1) a Net Cash Surrender Value that can be obtained by surrendering the Policy;
(2) policy loans and partial withdrawals; and
(3) an insurance benefit payable at the life insured's death.
The Policy will remain in force so long as the Net Cash Surrender Value is
sufficient to cover charges assessed against the Policy.
Policy Value may be accumulated on a fixed basis or vary with the investment
performance of the sub-accounts of Manufacturer Life of America's Separate
Account Four (the "Separate Account") to which the policyholder allocates net
premiums. The assets of each sub-account will be used to purchase shares of a
particular investment portfolio (a "Portfolio") of Manufacturers Investment
Trust (the "Trust"). The accompanying prospectus for the Trust, and the
corresponding statement of additional information, describe the investment
objectives of the Portfolios. The Portfolios available for allocation of net
premiums are shown in the Policy Summary under "Investment Options and Fees".
Other sub-accounts and Portfolios may be added in the future.
BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT
SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. ALSO, PROSPECTIVE PURCHASERS SHOULD
NOTE THAT IT MAY NOT BE ADVISABLE TO PURCHASE A POLICY AS A REPLACEMENT FOR
EXISTING INSURANCE.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE TRUST.
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
The date of this Prospectus is _____, 1998.
<PAGE> 6
TABLE OF CONTENTS
Cover Page.................................................................. 1
Table of Contents........................................................... 2
Definitions................................................................. 4
Policy Summary.............................................................. 5
General.................................................................. 5
Death Benefits........................................................... 6
Premiums................................................................. 6
Policy Value............................................................. 6
Policy Loans............................................................. 6
Surrender and Partial Withdrawals........................................ 6
Lapse and Reinstatement.................................................. 6
Charges and Deductions................................................... 6
Investment Options and Investment Advisers............................... 7
Table of Charges and Deductions.......................................... 8
Table of Investment Options and Investment Advisers...................... 9
Table of Investment Management Fees and Expenses......................... 10
General Information about Manufacturers..................................... 12
Manufacturers Life of America............................................ 12
Separate Account Four.................................................... 12
Manufacturers Investment Trust........................................... 13
Investment Objectives of the Portfolios.................................. 13
Issuing A Policy............................................................ 17
Use of the Policy........................................................ 17
Requirements............................................................. 18
Temporary Insurance Agreement............................................ 19
Underwriting............................................................. 19
Right to Examine the Policy.............................................. 19
Death Benefits.............................................................. 20
Life Insurance Qualification............................................. 20
Death Benefit Options.................................................... 22
Changing the Face Amount................................................. 22
Premium Payments............................................................ 23
Initial Premiums......................................................... 23
Subsequent Premiums...................................................... 24
Maximum Premium Limitation............................................... 24
Premium Allocation....................................................... 24
Charges and Deductions...................................................... 24
Premium Loads............................................................ 24
Surrender Charges........................................................ 24
Monthly Charges.......................................................... 25
Charges Assessed Against Assets of the Investment Accounts............... 27
Charges for Transfers.................................................... 27
Company Tax Considerations
Policy Value................................................................ 27
Determination of the Policy Value........................................ 27
Units and Unit Values.................................................... 28
Transfers of Policy Value................................................ 29
Policy Loans................................................................ 29
Maximum Loan............................................................. 29
Effect of Policy Loan.................................................... 30
Interest Charged on Policy Loans......................................... 30
Loan Account............................................................. 30
2
<PAGE> 7
Policy Surrender and Partial Withdrawals.................................... 31
Policy Surrender......................................................... 31
Partial Withdrawals...................................................... 31
Lapse and Reinstatement..................................................... 31
Lapse.................................................................... 31
Reinstatement............................................................ 32
The General Account......................................................... 32
Guaranteed Interest Account.............................................. 32
Other Provisions of the Policy.............................................. 33
Policyholder Rights...................................................... 33
Beneficiary.............................................................. 33
Incontestability......................................................... 33
Misstatement of Age or Sex............................................... 33
Suicide Exclusion........................................................ 34
Supplementary Benefits................................................... 34
Tax Treatment of the Policy................................................. 34
Life Insurance Qualification............................................. 34
Tax Treatment of Policy Benefits......................................... 36
Alternate Minimum Tax.................................................... 39
Income Tax Reporting..................................................... 39
Other Information........................................................... 39
Payment of Proceeds...................................................... 39
Reports to Policyholders................................................. 40
Distribution of the Policies............................................. 40
Responsibilities of Manufacturers Life................................... 40
Voting Rights............................................................ 41
Substitution of Portfolio Shares......................................... 41
Records and Accounts..................................................... 42
State Regulations........................................................ 42
Litigation............................................................... 42
Accountants.............................................................. 42
Further Information...................................................... 42
Officers and Directors................................................... 42
Impact of Year 2000 Disclosure........................................... 42
Death Benefit Schedule with Flexible Term Insurance Option............... 42
Illustrations............................................................ 44
Assumptions.............................................................. 45
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS OF MANUFACTURERS INVESTMENT TRUST, OR THE
STATEMENT OF ADDITIONAL INFORMATION OF MANUFACTURERS INVESTMENT TRUST.
Examine this prospectus carefully. The Policy Summary will briefly describe the
Policy. More detailed information will be found further in the prospectus.
3
<PAGE> 8
DEFINITIONS
Attained Age
is the Issue Age of the life insured plus the number of completed Policy Years.
Business Day
is any day that the New York Stock Exchange is open for business. A Business Day
ends at the close of regularly scheduled trading of the New York Stock Exchange
(currently 4:00 p.m. Eastern Time) on that day.
Case
is a group of Policies covering individuals with common employment or other
relationship, independent of the Policies.
Cash Surrender Value
is the Policy Value less the Surrender Charge and any outstanding monthly
deductions due.
Due Proof of Death
Due Proof of Death is required upon the death of the insured. One of the
following must be received at the Service Office:
(a) A certified copy of a death certificate;
(b) A certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
(c) Any other proof satisifactory to the Company.
Effective Date
is the date the Company becomes obligated under the Policy, and when the first
monthly deductions are taken. The Effective Date is the later of:
(a) the date the Company approves issuance of the Policy; and
(b) the date the Company receives at least the initial premium.
Guaranteed Interest Account
is that part of the Policy Value which reflects the value the policyholder has
in the general account of the Company.
Home Office
is the main office of the Company.
Investment Account
is that part of the Policy Value which reflects the value the policyholder has
in one of the sub-accounts of the Separate Account.
Issue Age
is the life insured's age on the birthday closer to the Policy Date.
Issue Date
is the date the Company issued the Policy. The Issue Date is also the date from
which the Suicide and Validity provisions of the Policy are measured.
4
<PAGE> 9
Loan Account
is that part of the Policy Value which reflects policy loans and interest
credited to the Policy Value in connection with such loans.
Net Cash Surrender Value
is the Cash Surrender Value less the Policy Debt.
Net Policy Value
is the Policy Value less the value in the Loan Account.
Net Premium
is the premium paid less the Premium Load.
Policy Anniversary
is the same date each year as the Policy Date.
Policy Date
is the date from which charges for the first monthly deduction are calculated,
and the date from which Policy Years, Policy Months, and Policy Anniversaries
are determined.
Policy Debt
as of any date is the aggregate amount of policy loans, including borrowed and
accrued interest, less any loan repayments.
Policy Year
is a period beginning on a Policy Anniversary and ending on the day immediately
preceding the next Policy Anniversary
Policy Value
is the sum of the values in the Loan Account, the Guaranteed Interest Account,
and the Investment Accounts.
Service Office
is McCamish Systems, L.L.C., 6425 Powers Ferry Road, Atlanta, Georgia 30339, or
such other service center or address as the Company may hereafter specify to the
policyholder by written notice.
Target Premium
is an amount used to measure the Surrender Charge under a Policy. The Target
Premium is based on the Face Amount, as well as the insured's age at issue and
sex, and is set forth in the Policy.
POLICY SUMMARY
GENERAL
The Policy is a flexible premium variable universal life insurance policy. The
following summary is intended to provide a general description of the most
important features of the Policy. It is not comprehensive and is qualified in
its entirety by the more detailed information contained in this prospectus.
Unless otherwise indicated or required by the context, the discussion throughout
this prospectus assumes that the Policy has not gone into default, there is no
outstanding Policy Debt, and the death benefit is not determined by the minimum
death benefit percentage. The Policy's provisions may vary in some states.
5
<PAGE> 10
DEATH BENEFITS
The Policy provides a death benefit in the event of the death of the life
insured. There are two death benefit options. Under Option 1 the death benefit
is the Face Amount of the Policy at the date of death or, if greater, the
Minimum Death Benefit. Under Option 2 the death benefit is the Face Amount plus
the Policy Value of the Policy at the date of death or, if greater, the Minimum
Death Benefit. The policyholder may change the death benefit option and increase
or decrease the Face Amount.
PREMIUMS
Premium payments may be made at any time and in any amount, subject to certain
limitations as described under "Premium Payments - Subsequent Premiums." Net
Premiums will be allocated, according to the policyholder's instructions, to one
or more of the general account and the sub-accounts of Manufacturers Life of
America's Separate Account Four. Allocation instructions may be changed at any
time and transfers among the accounts may be made.
POLICY VALUE
The Policy has a Policy Value reflecting premiums paid, certain charges for
expenses and cost of insurance, and the investment performance of the accounts
to which the policyholder has allocated premiums. The policyholder may obtain a
portion of the Policy Value by taking a policy loan or a partial withdrawal, or
by full surrender of the Policy.
POLICY LOANS
The policyholder may borrow against the Cash Surrender Value of the Policy. Loan
interest at a rate of 5.00% is due and payable in arrears on each Policy
Anniversary. All outstanding Policy Debt will be deducted from proceeds payable
at the insured's death, or upon surrender.
SURRENDER AND PARTIAL WITHDRAWALS
The policyholder may make a partial withdrawal of the Policy Value. A partial
withdrawal may result in a reduction in the Face Amount of the Policy and an
assessment of a portion of the surrender charges to which the Policy is subject.
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less Surrender Charges and outstanding monthly deductions due minus the
Policy Debt.
LAPSE AND REINSTATEMENT
A Policy will lapse (and terminate without value) when the Net Cash Surrender
Value is insufficient to pay the next monthly deduction and a grace period of 61
days expires without an adequate payment being made by the policyholder.
The Policies, therefore, differ in two important respects from conventional life
insurance policies. First, the failure to make planned premium payments will not
itself cause a Policy to lapse. Second, a Policy can lapse even if planned
premiums have been paid.
A lapsed Policy may be reinstated by the policyholder at any time within the
five year period following lapse if the Policy was not surrendered for its Net
Cash Surrender Value. Evidence of insurability is required, along with a certain
amount of premium as described under "Reinstatement."
CHARGES AND DEDUCTIONS
The Company assesses certain charges and deductions in connection with the
Policy. These include charges assessed monthly for cost of insurance and
administration expenses, charges assessed daily
6
<PAGE> 11
against the assets invested in the Separate Account, and loads deducted from
premiums paid. These charges are summarized in the Table of Charges and
Deductions.
INVESTMENT OPTIONS AND INVESTMENT ADVISERS
Net Premiums may be allocated to the general account or to one or more of the
sub-accounts of Manufacturers Life of America's Separate Account Four. Each of
the sub-accounts invests in the shares of one of the Portfolios of the Trust.
The Trust receives investment advisory services from Manufacturers Securities
Services, LLC ("MSS"). MSS is a registered investment adviser under the
Investment Advisers Act of 1940. The Trust also employs subadvisers. The Table
of Investment Options and Investment Advisers shows the subadvisers that provide
investment subadvisery services to the indicated Portfolios.
INVESTMENT MANAGEMENT FEES AND EXPENSES
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects investment management fees and certain
expenses. The maximum fees and expenses are shown in the Table of Investment
Management Fees and Expenses.
7
<PAGE> 12
TABLE OF CHARGES AND DEDUCTIONS
Premium Load 2.00% of the premium paid.
Surrender Charges The following charges will be assessed on a surrender or
lapse. Charges are expressed as a percentage of total
premiums paid from the Effective Date to the Policy Year
shown. However, premiums paid in any year in excess of
the Target Premium, and premiums paid after the fifth
Policy Year are not included in the determination of
total premiums paid. Percentages are as follows:
<TABLE>
<CAPTION>
Policy Year Percentage Policy Year Percentage
<S> <C> <C> <C>
1 10.00% 6 5.00%
2 7.50% 7 4.00%
3 5.00% 8 3.00%
4 5.00% 9 2.00%
5 5.00% 10+ 0.00%
</TABLE>
A portion of this charge may be assessed on a partial
withdrawal or a decrease in the Face Amount.
Monthly Deductions An administration charge of $12. The cost of
insurance charge. Any additional charges for
supplementary benefits.
Separate Account Charges A mortality and expense risk charge is
assessed daily against the value of the Separate Account
assets. This charge varies by Policy Year as follows:
<TABLE>
<CAPTION>
Annual Mortality and
Policy Years Expense Risk Charge
<S> <C>
1-10 0.75%
11+ 0.40%
</TABLE>
Loan Charges A fixed loan interest rate of 5.00%. Interest credited
to amounts in the Loan Account will be equal to the
5.00% rate charged to the loan less the following Loan
Spread:
<TABLE>
<CAPTION>
Policy Years Loan Spread
<S> <C>
1-10 1.00%
11-20 0.50%
21+ 0.25%
</TABLE>
Transfer Charge A charge of $25 per transfer for each transfer in excess
of 12 in a Policy Year.
8
<PAGE> 13
<TABLE>
TABLE OF INVESTMENT OPTIONS AND INVESTMENT ADVISERS
<CAPTION>
Portfolio Subadviser
<S> <C>
Aggressive Growth
Pacific Rim Emerging Market Trust Manufacturers Adviser Corporation*
Science and 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
Worldwide Growth Trust Founders Asset Management, Inc.
Global Equity Trust Morgan Stanley Asset Management, Inc.
Small Company Value Trust Rosenberg Institutional Equity Management
Equity Trust Fidelity Management Trust Company
Growth Trust Founders Asset Management, Inc.
Quantitative Equity Trust Manufacturers Adviser Corporation*
Equity Index Trust Manufacturers Adviser Corporation*
Blue Chip Growth Trust T. Rowe Price Associates, Inc.
Real Estate Securities Trust Manufacturers Adviser Corporation*
Growth and Income
Value Trust Miller Anderson & Sherrerd, LLP
International Growth and Income Trust J.P. Morgan Investment Management, Inc.
Growth and Income Trust Wellington Management Company
Equity Income Trust T. Rowe Price Associates, Inc.
Balanced
Balanced Trust Founders Asset Management LLC
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
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.
Money Market
Money Market Trust Manufacturers Adviser Corporation*
Lifestyle
Lifestyle Aggressive Growth 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.
9
<PAGE> 14
TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES
<TABLE>
<CAPTION>
Investment Maximum
Management Expense
Portfolio Fees Charges*
<S> <C> <C>
Aggressive Growth
Pacific Rim Emerging Market Trust .850% .75%
Science and 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%
Growth
Worldwide Growth Trust 1.000% .75%
Global Equity Trust .900% .75%
Small Company Value Trust 1.05% .75%
Equity Trust .750% .15%
Growth Trust .850% .50%
Quantitative Equity Trust .700% .50%
Equity Index Trust .250% .50%
Blue Chip Growth Trust .925% .50%
Real Estate Securities Trust .700% .75%
Growth and Income .
Value Trust .800% .50%
International Growth and Income Trust .950% .50%
Growth and Income Trust .750% .50%
Equity Income Trust .800% .50%
Balanced
Balanced Trust .800% .50%
Aggressive Asset Allocation Trust .750% .50%
Moderate Asset Allocation Trust .750% .50%
Conservative Asset Allocation Trust .750% .50%
Bond
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
Money Market Trust .500% .50%
Lifestyle
Lifestyle Aggressive Growth 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>
10
<PAGE> 15
* Advisory fees are reduced or the Adviser reimburses the Trust if the total
of all expenses (excluding advisory fees, taxes, portfolio brokerage
commission, interest, litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Trust's
business) applicable to the portfolio exceeds the expense limit. The
maximum expense limits will continue in effect from year to year unless
otherwise terminated at any year end by the Adviser on 30 days' notice to
the Trust. The percentages shown in this column of the table are maximum
expenses. Actual expenses may be lower. Actual expenses for the prior
fiscal year are set forth in the "Management of the Trust - Expenses"
section of the accompanying Trust prospectus.
** Because each Lifestyle Trust will invest in shares of other portfolios of
the Trust ("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). This expense
reimbursement may be terminated at any time. Absent this reimbursement,
expenses of each Lifestyle Trust (excluding expenses of the Underlying
Portfolios were as follows for the year ended December 31, 1997: ___%,
Aggressive Growth 1000; ____%, Growth 820; ___% Balanced 640; ___% Moderate
460; ___% Conservative 280.
Detailed information concerning such fees and expenses is set forth under the
caption "Management of The Trust" in the Prospectus for the Trust that
accompanies this prospectus.
11
<PAGE> 16
GENERAL INFORMATION ABOUT MANUFACTURERS
MANUFACTURERS LIFE OF AMERICA
Manufacturers Life of America is a stock life insurance company organized under
the laws of Pennsylvania on April 11, 1977 and redomesticated under the laws of
Michigan on December 9, 1992. It is a licensed life insurance company in the
District of Columbia and all states of the United States except New York. The
ultimate parent of Manufacturers Life of America is Manufacturers Life, a mutual
life insurance company based in Toronto, Canada. Manufacturers Life and its
subsidiaries, together, constitute one of the largest life insurance companies
in North America and rank among the 60 largest life insurers in the world as
measured by assets. However, neither Manufacturers Life of America nor
Manufacturers Life guarantees the investment performance of the Separate
Account.
On January 20, 1998, the Board of Directors of Manulife asked the management of
Manulife to prepare a plan for conversion of Manulife from a mutual life
insurance company to an investor owned, publicly traded stock company. Any
demutualization plan for Manulife is subject to the approval of the Manuife
Board of Directors and policyholders as well as regulatory approval.
RATINGS
Manufacturers Life and Manufacturers Life of America have received the following
ratings from independent rating agencies:
Standard and Poor's Insurance Ratings Service: AA+ (for claims paying ability)
A.M.Best Company: A++ (for financial strength)
Duff & Phelps Credit Rating Co.: AAA (for claims paying ability)
Moody's Investors Service, Inc.: Aa2 (for financial strength)
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.
ASSETS OF THE SEPARATE ACCOUNT
Manufacturers Life of America is the legal owner of the assets in the Separate
Account. The income, gains, and losses of the Separate Account, whether or not
realized, are, in accordance with applicable contracts, credited to or charged
against the Account without regard to the other income, gains, or losses of
Manufacturers Life of America. Manufacturers Life of America will at all times
maintain assets in the Separate Account with a total market value at least equal
to the reserves and other liabilities relating to variable benefits under all
policies participating in the Separate Account. These assets may not be charged
with liabilities which arise from any other business Manufacturers Life of
America conducts. However, all obligations under the variable life insurance
policies are general corporate obligations of Manufacturers Life of America.
REGISTRATION
The Separate Account is registered with the Securities and Exchange Commission
("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. A unit investment trust is a type of investment company which
invests its assets in specified securities, such as the shares of one or more
investment companies, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the S.E.C.
of the management or investment policies or
12
<PAGE> 17
practices of the Separate Account. For state law purposes the Separate Account
is treated as a part or division of Manufacturers Life of America.
MANUFACTURERS INVESTMENT TRUST
Each sub-account of the Separate Account will purchase shares only of a
particular Portfolio. The Trust is registered under the 1940 Act as an open-end
management investment company. The Separate Account will purchase and redeem
shares of the Portfolios at net asset value. Shares will be redeemed to the
extent necessary for Manufacturers Life of America to provide benefits under the
Policies, to transfer assets from one sub-account to another or to the general
account as requested by policyholders, and for other purposes not inconsistent
with the Policies. Any dividend or capital gain distribution received from a
Portfolio with respect to the policies will be reinvested immediately at net
asset value in shares of that Portfolio and retained as assets of the
corresponding sub-account.
The Trust shares are issued to fund benefits under both variable annuity
contracts and variable life insurance policies issued by the Company or life
insurance companies affiliated with the Company. Manufacturers Life of America
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 Trust prospectus.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The investment objectives and certain policies of the Portfolios currently
available to policyholders through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met. A
full description of the Trust, its investment objectives, policies and
restrictions, the risks associated therewith, its expenses, and other aspects of
its operation is contained in the accompanying Trust prospectus, which should be
read together with this prospectus.
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 and 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 LLC ("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.
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<PAGE> 18
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 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.
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 throughout the world, including U.S. issuers.
SMALL COMPANY VALUE TRUST
The investment objective of the Small Company Vlaue Trust is to seek long-term
growth of capital. Rosenberg Institutional Equity Management ("Rosenberg")
manages the Small Company Value Trust and intends to pursue this objective by
investing in equity securities of smaller companies which are traded principally
in the markets of the United States.
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.
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.
QUANTITATIVE EQUITY TRUST
The investment objective of the Quantitative Equity Trust (formerly the "Common
Stock Fund") is to achieve intermediate and long-term growth through capital
appreciation and current income by investing
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<PAGE> 19
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.
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 is the manager of the Balanced Trust and seeks to attain
this objective by investing in a balanced portfolio
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<PAGE> 20
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> 21
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 manages
the Lifestyle Aggressive 1000 Trust and 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
manages the Lifestyle Growth 820 Trust and 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 the 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 manages the Lifestyle Balanced 640
Trust and 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 high level of current income and growth of capital with a
greater emphasis given to high income. MAC manages the Lifestyle Moderate 460
Trust and 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 manages the Lifestyle Conservative 280 Trust and 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 20% of its assets in Underlying Portfolios which invest primarily
in equity securities.
ISSUING A POLICY
USE OF THE POLICY
The Policy is designed to provide to corporations and other entities life
insurance coverage on their employees or other persons in whose lives they have
an insurable interest. The Policy may be owned individually or by a corporation,
trust, association, or similar entity. The Policy may be used for such purposes
as funding non-qualified executive deferred compensation or salary continuation
plans, as a
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<PAGE> 22
means of funding death benefit liabilities incurred under executive retirement
plans, or as a source for funding cash flow obligations under such plans.
REQUIREMENTS
To purchase a Policy, an applicant must submit a completed application. A Policy
will not be issued until the underwriting process has been completed to the
Company's satisfaction.
Policies may be issued on a basis which does not distinguish between the
insured's sex and/or smoking status, with prior approval from the Company. A
Policy will only be issued on the lives of insureds from ages 20 through 80.
Each Policy is issued with a Policy Date, an Effective Date and an Issue Date.
The Policy Date is the date from which the first monthly deductions are
calculated and from which Policy Years, Policy Months and Policy Anniversaries
are determined. The Effective Date is the date the Company becomes obligated
under the Policy and when the first monthly deductions are deducted from the
Policy Value. The Issue Date is the date from which the Suicide and
Incontestability are measured.
If an application is accompanied by a check for the initial premium and the
application is accepted:
(i) the Policy Date will be the date the application and check were received at
the Service Office (unless a special Policy Date is requested (See "Backdating a
Policy" below);
(ii) the Effective Date will be the date the Company's underwriters approve
issuance of the Policy; and
(iii) the Issue Date will be the date the Company issues the Policy.
If an application accepted by the Company is not accompanied by a check for the
initial premium:
(i) the Policy Date will be the date the Company issues the Policy (unless a
special Policy Date is requested (See "Backdating a Policy" below);
(ii) the Effective Date will be the date the Service Office receives the initial
premium; and
(iii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Policy Date. If
the premium is not paid or if the application is rejected, the Policy will be
cancelled and any partial premiums paid will be returned to the applicant.
MINIMUM INITIAL FACE AMOUNT
Manufacturers Life of America will issue a Policy only if it has a Face Amount
of at least $50,000.
BACKDATING A POLICY
Under limited circumstances, the Company may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
However, in no event will a Policy be backdated earlier than the earliest date
allowed by state law, which is generally three months to one year prior to the
date of application for the Policy. Monthly deductions will be made for the
period the Policy Date is backdated. Regardless of whether or not a policy is
backdated, Net Premiums received prior to the Effective Date of a Policy will be
credited with interest from the date of receipt at the rate of return then being
earned on amounts allocated to the Money Market portfolio. As of the Effective
Date, the premiums paid plus interest credited, net of the premium load, will be
allocated among the Investment Accounts and/or Guaranteed Interest Account in
accordance with the policyholder's instructions unless such amount is first
allocated to the Money Market portfolio for the duration of the Right to Examine
period.
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<PAGE> 23
TEMPORARY INSURANCE AGREEMENT
In accordance with the Company's underwriting practices, temporary insurance
coverage may be provided under the terms of a Temporary Insurance Agreement.
Generally, temporary life insurance may not exceed $1,000,000 and may not be in
effect for more than 90 days. This temporary insurance coverage will be issued
on a conditional receipt basis, which means that any benefits under such
temporary coverage will only be paid if the life insured meets the Company's
usual and customary underwriting standards for the coverage applied for.
UNDERWRITING
The policies are offered on three underwriting bases, which vary by the amount
of information required of the prospective insured. These bases are: short form
underwriting, simplified underwriting, and regular (medical) underwriting. These
are described in more detail below. Regardless of which underwriting procedure
is used, the acceptance of an application is subject to the Company's
underwriting rules, and the Company reserves the right to request additional
information or to reject an application for any reason.
SHORT FORM UNDERWRITING
Generally, the availability of short form underwriting depends on the
characteristics of the Case, such as the number of lives to be insured and the
amounts of insurance. Under Short Form underwriting, a proposed Insured is
required to answer qualifying questions in the application, but is not required
to submit to a medical or paramedical exam. Short form underwriting is generally
available only up to issue age 65.
SIMPLIFIED UNDERWRITING
Like short form underwriting the availability of simplified underwriting depends
on the characteristics of the Case. Under Simplified Underwriting, the proposed
insured is required to respond satisfactorily to certain health questions in the
application. Medical records, such as "Attending Physician's Statements" (APS's)
are generally required. In some instances, a blood test may also be required.
REGULAR UNDERWRITING
If the requirements for short form or simplified underwriting are not satisfied,
the Company will require satisfactory evidence of insurability. This may include
medical exams and other information. Persons failing to meet standard
underwriting classification may be eligible for a Policy with an additional
rating assigned to it.
RIGHT TO EXAMINE THE POLICY
A Policy may be returned for a refund within 10 days after it is received. Some
states provide a longer period of time to exercise this right. The Policy will
indicate if the policyholder has a longer time. The Policy can be mailed or
delivered to the Manufacturers Life of America agent who sold it or to the
Service Office. Immediately on such delivery or mailing, the Policy shall be
deemed void from the beginning. Within seven days after receipt of the returned
Policy at its Service Office, the Company will refund to the policyholder an
amount equal to:
(a) the difference between payments made and amounts allocated to the Separate
Account and the Guaranteed Interest Account; plus
(b) the value of the amount allocated to the Separate Account and the
Guaranteed Interest Account as of the date the returned Policy is received
by the Company; minus
(c) any partial withdrawals made and policy loans taken.
Some state laws require the refund of all premiums paid, without adjustment for
the investment gains and losses of the Separate Account. In these states, all
Net Premiums will be allocated to the Money Market Trust during the right to
examine period, and the policyholder will receive a refund of all payments made
less any partial withdrawals and policy loans taken.
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<PAGE> 24
If a policyholder 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 policyholder may request a refund of all or any portion of
premiums paid during the free look period, and the Policy Value and the
surrender charges will be recalculated to the amounts they would have been had
the premiums not been paid.
The Company reserves the right to delay the refund of any premium paid by check
until the check has cleared.
DEATH BENEFITS
If the Policy is in force at the time of the life insured's death, the Company
will pay an insurance benefit upon receipt of Due Proof of Death. The amount
payable will be the death benefit under the selected death benefit option, plus
any amounts payable under any supplementary benefits added to the Policy, less
the Policy Debt and any outstanding monthly deductions due. The insurance
benefit will be paid in one lump sum unless another form of settlement option is
agreed to by the beneficiary and the Company. If the insurance benefit is paid
in one sum, the Company will pay interest from the date of death to the date of
payment. If the life insured should die after the Company's receipt of a request
for surrender, no insurance benefit will be payable, and the Company will pay
only the Net Cash Surrender Value.
LIFE INSURANCE QUALIFICATION
A Policy must satisfy either of two tests to qualify as a life insurance
contract for purposes of Section 7702 of the Internal Revenue Code of 1986, as
amended. At the time of application, the policyholder may choose a Policy which
uses either the Cash Value Accumulation Test or the Guideline Premium Test. The
test cannot be changed once the Policy is issued.
CASH VALUE ACCUMULATION TEST
Under the Cash Value Accumulation Test ("CVA Test"), the Policy's death benefit
must be at least equal to the Minimum Death Benefit. There is no restriction on
the amount of premiums that may be paid into a Policy.
GUIDELINE PREMIUM TEST
The Guideline Premium Test ("GLP Test") restricts the maximum premiums that may
be paid into a life insurance policy for a given death benefit. The policy's
death benefit must also be at least equal to the Minimum Death Benefit
(described below). However, the Minimum Death Benefit Percentages are lower than
those required under the Cash Value Accumulation Test.
Changes to the Policy may affect the maximum amount of premiums, such as:
- - A change in the policy's Face Amount.
- - A change in the death benefit option.
- - Partial Withdrawals.
Any of the above changes could cause the total premiums paid to exceed the new
maximum limit. In this situation, the Company will require the policyholder to
take a partial withdrawal. In addition, these changes could reduce the future
premium limitations.
MINIMUM DEATH BENEFIT
Both the Cash Value Accumulation Test and the Guideline Premium Test require a
life insurance policy to meet minimum ratios of life insurance coverage to
policy value. This is achieved by ensuring that the death benefit is at all
times at least equal to the Minimum Death Benefit. The Minimum Death Benefit on
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any date is defined as the Policy Value on that date times the applicable
Minimum Death Benefit Percentage for the Attained Age of the life insured. The
Minimum Death Benefit Percentages for each test are shown in the Table of
Minimum Death Benefit Percentages.
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
CVA Test Percent CVA Test Percent
------------------------ -------------------------
GLP Test GLP Test
Age Percent Male Female Age Percent Male Female
<S> <C> <C> <C> <C> <C> <C> <C>
20 250% 653% 779% 60 130% 192% 221%
21 250% 634% 754% 61 128% 187% 214%
22 250% 615% 730% 62 126% 182% 208%
23 250% 597% 706% 63 124% 178% 203%
24 250% 580% 684% 64 122% 174% 197%
25 250% 562% 662% 65 120% 170% 192%
26 250% 545% 640% 66 119% 166% 187%
27 250% 528% 619% 67 118% 162% 182%
28 250% 511% 599% 68 117% 159% 177%
29 250% 494% 580% 69 116% 155% 173%
30 250% 479% 561% 70 115% 152% 169%
31 250% 463% 542% 71 113% 149% 164%
32 250% 448% 525% 72 111% 146% 160%
33 250% 433% 507% 73 109% 144% 156%
34 250% 419% 491% 74 107% 141% 153%
35 250% 406% 475% 75 105% 139% 149%
36 250% 392% 459% 76 105% 136% 146%
37 250% 380% 444% 77 105% 134% 143%
38 250% 367% 430% 78 105% 132% 140%
39 250% 356% 416% 79 105% 130% 138%
40 250% 344% 403% 80 105% 129% 135%
41 243% 333% 390% 81 105% 127% 133%
42 236% 323% 378% 82 105% 125% 130%
43 229% 313% 366% 83 105% 124% 128%
44 222% 303% 355% 84 105% 122% 126%
45 215% 294% 344% 85 105% 121% 124%
46 209% 285% 333% 86 105% 120% 123%
47 203% 277% 323% 87 105% 119% 121%
48 197% 268% 313% 88 105% 118% 119%
49 191% 260% 304% 89 105% 116% 118%
50 185% 253% 295% 90 105% 116% 117%
51 178% 245% 286% 91 104% 115% 115%
52 171% 238% 278% 92 103% 114% 114%
53 164% 232% 270% 93 102% 112% 113%
54 157% 225% 262% 94 101% 111% 112%
55 150% 219% 254% 95 100% 110% 110%
56 146% 213% 247% 96 100% 109% 109%
57 142% 207% 240% 97 100% 107% 107%
58 138% 202% 233% 98 100% 106% 106%
59 134% 197% 227% 99 100% 105% 105%
</TABLE>
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DEATH BENEFIT OPTIONS
There are two death benefit options, described below.
DEATH BENEFIT OPTION 1
Under Option 1 the death benefit is the Face Amount of the Policy at the date of
death or, if greater, the Minimum Death Benefit.
DEATH BENEFIT OPTION 2
Under Option 2 the death benefit is the Face Amount plus the Policy Value of the
Policy at the date of death or, if greater, the Minimum Death Benefit.
CHANGING THE DEATH BENEFIT OPTION
The death benefit option may be changed on the first day of any Policy month.
The change will occur on the first day of the next Policy month which is 30 days
after a written request for a change is received at the Service Office. The
Company reserves the right to limit a request for a change if the change would
cause the Policy to fail to qualify as life insurance for tax purposes.
A change in the death benefit option will result in a change in the Policy's
Face Amount, in order to avoid any change in the amount of the death benefit, as
follows:
CHANGE FROM OPTION 1 TO OPTION 2
The new Face Amount will be equal to the Face Amount prior to the change minus
the Policy Value on the date of the change. The Policy will not be assessed a
Surrender Charge for a reduction in Face Amount solely due to a change in the
death benefit option.
CHANGE FROM OPTION 2 TO OPTION 1
The new Face Amount will be equal to the Face Amount prior to the change plus
the Policy Value on the date of the change. No new Surrender Charges will apply
to an increase in Face Amount solely due to a change in the death benefit
option.
CHANGING THE FACE AMOUNT
Subject to the limitations stated in this Prospectus, a policyholder may, upon
written request, increase or decrease the Face Amount of the Policy. The Company
reserves the right to limit a change in Face Amount so as to prevent the Policy
from failing to qualify as life insurance for tax purposes.
INCREASE IN FACE AMOUNT
Increases in Face Amount are subject to satisfactory evidence of insurability.
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
Attained Age at the effective date of the increase would be greater than the
maximum Issue Age for new Policies at that time.
NEW SURRENDER CHARGES FOR AN INCREASE
An increase in Face Amount will 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 Surrender Charges a portion of the premiums paid on or
subsequent to the increase will be deemed to be premiums attributable to the
increase. The portion
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attributable to the increase in any Policy Year will be the amount of premiums
in excess of the sum of the Target Premiums for the (i) inital Face Amount
during the first five Policy Years and (ii) all prior increases that are in
effect at the time of the increase in Face Amount and have been in effect for
less than five years.
INCREASE WITH PRIOR DECREASES
If, at the time of the increase, there have been prior decreases in Face Amount,
these prior decreases will be restored first. There will be no new Surrender
Charges associated with these increases, since Surrender Charges will have
already been assessed at the time of the prior decrease.
DECREASE IN FACE AMOUNT
A written request from a policyholder for a decrease in the Face Amount must be
received by Manufacturers Life of America at least 30 days prior to the first
day of a policy month for the change to take effect on the first day of that
policy month. If there have been previous increases in Face Amount, the decrease
will be applied to the most recent increase first and thereafter to the next
most recent increases successively.
SURRENDER CHARGES ASSESSED ON A DECREASE
A portion of a Policy's Surrender Charge will be deducted from the Policy Value
on a decrease in Face Amount. Since Surrender Charges are determined separately
for the initial Face Amount and each Face Amount Increase, the portion of the
Surrender Charges to be deducted with respect to each level of insurance
coverage will be determined separately. The portion of the Surrender Charge
deducted with respect to a level of coverage will be equal to:
(a) the amount of the decrease; divided by
(b) the amount of the coverage prior to the decrease; multiplied by
(c) the Surrender Charge for the coverage.
The charges 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 are deducted as a result of a
decrease in Face Amount, the Policy's remaining surrender charges will be
reduced in the same proportion that the surrender charge deducted bears to the
total surrender charge immediately prior to the decrease in Face Amount.
PREMIUM PAYMENTS
INITIAL PREMIUMS
No premiums will be accepted prior to receipt of a completed application by the
Company. All premiums received prior to the Effective Date of the Policy will be
held in the general account and credited with interest from the date of receipt
at the rate of return then being earned on amounts allocated to the Money Market
Trust.
On the Effective Date, the Net Premiums paid plus interest credited will be
allocated among the Investment Accounts or the Guaranteed Interest Account in
accordance with the policyholder's instructions.
All Net 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 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.
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<PAGE> 28
EXCEPTION FOR CERTAIN STATES
Some state laws require the refund of all premiums paid, without adjustment for
gains and losses of the Separate Account, if a Policy is returned during the
right to examine period. In these states, all Net Premiums will be allocated to
the Money Market Trust during the right to examine period. At the end of this
period, the Policy Value in the Money Market Trust will be allocated among the
Investment Accounts or the Guaranteed Interest Account. The Policy will state if
a return of premiums is required.
SUBSEQUENT PREMIUMS
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 described below.
A Policy will be issued with a planned premium, which is based on the amount of
premium the policyholder wishes to pay. Manufacturers Life of America will send
notices to the policyholder setting forth the planned premium at the payment
interval selected by the policyholder. However, the policyholder is under no
obligation to make the indicated payment.
Payment of premiums will not guarantee that the Policy will stay in force.
Conversely, failure to pay premiums will not necessarily cause the Policy to
lapse.
MAXIMUM PREMIUM LIMITATION
If the Policy is issued under the Guideline Premium Test, in no event may the
total of all premiums paid exceed the then-current maximum premium limitations
established by federal income tax law for a Policy to qualify as life insurance.
If, at any time, a premium is paid which would result in total premiums
exceeding the above maximum premium limitation, the Company will only accept
that portion of the premium which will make the total premiums equal to the
maximum. Any part of the premium in excess of that amount will be returned and
no further premiums will be accepted until allowed by the then-current maximum
premium limitation. The maximum premium limitations are set forth in the Policy.
PREMIUM ALLOCATION
Premiums 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 premium. The percentage allocation to any account may be any number
between zero and 100, provided the total allocation equals 100. Alternatively, a
policyholder may specify the allocation of a specific premium payment in dollar
amounts, so long as the total allocation among the Investment Accounts equals
the Net Premium paid. A policyholder may change the way in which premiums are
allocated at any time without charge. The change will take effect on the date a
written request for change satisfactory to the Company is received at the
Service Office.
CHARGES AND DEDUCTIONS
PREMIUM LOADS
Manufacturers Life of America deducts a Premium Load from each premium payment,
equal to 2.00% of the premium.
SURRENDER CHARGES
The Company will deduct a Surrender Charge if during the first 10 years
following the Policy Date, or the effective date of a Face Amount increase:
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<PAGE> 29
- - the Policy is surrendered for its Net Cash Surrender Value,
- - a partial withdrawal is made in excess of the Free Partial Withdrawal
Amount,
- - the Face Amount is decreased, or
- - the Policy lapses.
The Surrender Charge is expressed as a percentage of the total premiums paid
from the Effective Date. However, premiums paid in any Policy Year in excess of
the Target Premium, and premiums paid after the fifth Policy Year, are not
counted in the determination of total premiums paid. Therefore, the timing of
premium payments may affect the amount of the Surrender Charge. The percentages
vary by Policy Year as follows:
<TABLE>
<CAPTION>
Policy Year Percentage
<S> <C>
1 10.00%
2 7.50%
3 5.00%
4 5.00%
5 5.00%
6 5.00%
7 4.00%
8 3.00%
9 2.00%
10+ 0.00%
</TABLE>
Although the percentages remain level or decrease as the Policy Year increases,
the total dollar amount of Surrender Charges may increase, as the total premium
paid increases.
SURRENDER CHARGES ON A PARTIAL WITHDRAWAL
A partial withdrawal will result in the assessment of a portion of the Surrender
Charges to which the Policy is subject. The portion of the Surrender Charges
assessed will be based on the ratio of the amount of the withdrawal which
exceeds the Free Withdrawal Amount to the Net Cash Surrender Value of the Policy
immediately prior to the withdrawal. The Surrender Charges will be deducted on a
pro-rata basis from each of the Investment Accounts and the Guaranteed Interest
Account. If the amount in the accounts are not sufficient to pay the Surrender
Charges assessed, then the amount of the withdrawal will be reduced.
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 in
the same proportion that the surrender charge deducted bears to the total
surrender charge immediately before the partial withdrawal.
FREE WITHDRAWAL AMOUNT
The Free Withdrawal Amount is equal to 10% of the Net Cash Surrender Value at
the time of the withdrawal. In determining what, if any, portion of a partial
withdrawal is in excess of the Free Withdrawal Amount, all previous partial
withdrawals that have occurred in the current Policy Year are included.
MONTHLY CHARGES
On the Policy Date and at the beginning of each policy month, a deduction is due
from the Policy Value to cover certain charges in connection with the Policy
until the insured reaches age 100. 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:
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<PAGE> 30
(i) a monthly administration charge;
(ii) a monthly charge for the cost of insurance;
(iii) a monthly charge for any supplementary benefits added to the Policy.
Unless otherwise allowed by the Company and specified by the policyholder, 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.
ADMINISTRATION CHARGE
This charge will be equal to $12 per policy month, which is guaranteed not to
increase. 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 change permitted under a Policy.
COST OF INSURANCE CHARGE
The monthly charge for the cost of insurance is determined by multiplying the
applicable cost of insurance rate times the net amount at risk at the beginning
of each policy month. The cost of insurance rate and the net amount at risk are
determined separately for the initial Face Amount and for each increase in Face
Amount. In determining the net amount at risk, if there have been increases in
the Face Amount, the Policy Value shall first be considered a part of the
initial Face Amount. If the Policy Value exceeds the initial Face Amount, it
shall then be considered a part of the additional increases in Face Amount
resulting from the increases in the order of the increases.
The net amount at risk is equal to the greater of zero, or the result of
(a)minus (b) where:
(a) is the death benefit as of the first day of the month, divided by
1.0032737; and
(b) is the Policy Value as of the first day of the month.
The cost of insurance rate is based upon the following factors:
- - the issue age, sex (unless unisex rates are required by law) and smoking
status of the life insured;
- - the underwriting class of the Policy;
- - the number of years since issue or since an increase in Face Amount;
- - the amount of the Death Benefit in excess of the Face Amount,
- - any extra charges for additional ratings indicated in the Policy.
Cost of insurance rates will generally increase with the life insured's age.
The cost of insurance rates reflect the Company's 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. The guaranteed rates are based
on the 1980 Commissioners Standard Ordinary Mortality Tables.
CHARGES FOR SUPPLEMENTARY BENEFITS
If the Policy includes Supplementary Benefits, a charge will be made applicable
to such Supplementary Benefit.
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<PAGE> 31
CHARGES ASSESSED AGAINST ASSETS OF THE INVESTMENT ACCOUNTS
A daily charge is assessed against amounts in the Investment Accounts equal to a
percentage of the value of the Investment Account. This charge is to compensate
the Company for the mortality and expense risks it assumes under the Policy. The
mortality risk assumed is that lives insured may live for a shorter period of
time than the Company estimated. The expense risk assumed is that expenses
incurred in issuing and administering the Policy will be greater than the
Company estimated. The Company will realize a gain from this charge to the
extent it is not needed to provide benefits and pay expenses under the Policy.
The charge varies by Policy Year as follows:
<TABLE>
<CAPTION>
Equivalent Annual
Daily Mortality and Mortality and Expense
Policy Year Expense Risk Charge Risk Charge
<S> <C> <C>
1-10 0.000020625% 0.75%
11+ 0.000010981% 0.40%
</TABLE>
CHARGES FOR TRANSFERS
A charge of $25 will be imposed on each transfer in excess of twelve in a policy
year.
REDUCTION IN CHARGES
The Policy is available for purchase by corporations and other groups or
sponsoring organizations for multiple life sales. Manufacturers Life of America
reserves the right to reduce any of the Policy's loads or charges on certain
Cases where it is expected that the amount or nature of such Cases will result
in savings of sales, underwriting, administrative or other costs. Eligibility
for these reductions and the amount of reductions will be determined by a number
of factors, including the number of lives to be insured, the total premiums
expected to be paid, total assets under management for the policyholder, the
nature of the relationship among the insured individuals, the purpose for which
the policies are being purchased, expected persistency of the individual
policies, and any other circumstances which Manufacturers Life of America
believes to be relevant to the expected reduction of its expenses. Some of these
reductions may be guaranteed and others may be subject to withdrawal or
modification, on a uniform Case basis. Reductions in charges will not be
unfairly discriminatory to any policyholders.
COMPANY TAX CONSIDERATIONS
At the present time, the Company makes no charge to the Separate Account for any
federal, state, or local taxes that the Company incurs that may be attributable
to such Account or to the Policies. The Company, however, reserves the right in
the future to make a charge for any such tax or other economic burden resulting
from the application of the tax laws that it determines to be properly
attributable to the Separate Account or to the Policies.
POLICY VALUE
DETERMINATION OF THE POLICY VALUE
A Policy has a Policy Value, a portion of which is available to the policyholder
by making a policy loan or partial withdrawal, or upon surrender of the Policy.
The Policy Value may also affect the amount of the death benefit. The Policy
Value at any time is equal to the sum of the values in the Investment Accounts,
the Guaranteed Interest Account, and the Loan Account.
INVESTMENT ACCOUNTS
An Investment Account is established under each Policy for each sub-account of
the Separate Account to which net premiums or transfer amounts have been
allocated. Each Investment Account under a
27
<PAGE> 32
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.
GUARANTEED INTEREST ACCOUNT
Amounts in the Guaranteed Interest Account do not vary with the investment
performance of any sub-account. Instead, these amounts are credited with
interest at a rate determined by Manufacturers Life of America. For a detailed
description of the Guaranteed Interest Account, see "The General Account -
Guaranteed Interest Account".
LOAN ACCOUNT
Amounts borrowed from the Policy are transferred to the Loan Account. Amounts in
the Loan Account do not vary with the investment performance of any sub-account.
Instead, these amounts are credited with interest at a rate which is equal to
the amount charged on the outstanding Policy Debt less the Loan Spread. For a
detailed description of the Loan Account, see "Policy Loans - Loan Account".
UNITS AND UNIT VALUES
CREDITING AND CANCELING UNITS
Units of a particular sub-account are credited to a Policy when net premiums are
allocated to that sub-account or amounts are transferred to that sub-account.
Units of a sub-account are 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 Service Office, except for any premiums received before the Effective
Date. For premiums received before the Effective Date, the values will be
determined on the Effective Date.
Units are valued at the end of each Business Day. When an order involving the
crediting or canceling of units is received after the end of a Business Day, or
on a day which is not a Business Day, the order will be processed on the basis
of unit values determined on the next Business Day. Similarly, any determination
of Policy Value, Investment Account value or death benefit to be made on a day
which is not a Business Day will be made on the next Business Day.
UNIT VALUES
The value of a unit of each sub-account was initially fixed at $10.00. For each
subsequent Business Day the unit value for that sub-account is determined by
multiplying the unit value for the immediately preceding Business Day by the net
investment factor for the that sub-account on such subsequent Business Day.
The net investment factor for a sub-account on any Business Day is equal to (a)
divided by (b) minus (c), where:
(a) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of such Business Day before any policy transactin are
made on that day;
(b) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of the immediately preceding Business Day after all
policy transaction were made for that day; and
(c) is a charge not exceeding the daily mortality and expense risk charge shown
in the "Charges and Deductions Charges Assessed Against Assets of the Investment
Accounts" section.
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<PAGE> 33
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.
Due to the fact that the daily mortality and expense risk charge varies by
Policy Years, two unit values will be calculated for each sub-account commencing
10 years after the effective date of the first Policy.
TRANSFERS OF POLICY VALUE
At any time, a policyholder may transfer Policy Value from one sub-account to
another or to the Guaranteed Interest Account. Transfer requests must be in
writing in a format satisfactory to the Company, or by telephone if a currently
valid telephone transfer authorization form is on file.
These transfer privileges are subject to the Company's consent. The Company
reserves the right to impose limitations on transfers, including the maximum
amount that may be transferred. In addition, transfer privileges are subject to
any restrictions that may be imposed by the Trust.
If a transfer would result in more than a 5% reduction in the number of shares
outstanding at the close of the previous Business Day in the Equity Index
sub-account, the Company may decline the transfer. If at a later date you wish
to make a previously declined transfer, the Company will require a new transfer
request.
TRANSFER CHARGES
A policyholder may make up to twelve transfers each policy year free of charge.
Additional transfers in each policy year may be made at a cost of $25 per
transfer. This charge will be 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. All transfer requests received
by the Company on the same Business Day are treated as a single transfer
request.
TRANSFERS INVOLVING GUARANTEED INTEREST ACCOUNT
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.
TELEPHONE TRANSFERS
Although failure to follow reasonable procedures may result in the Company being
liable for any losses resulting from unauthorized or fraudulent telephone
transfers, Manufacturers Life of America will not be liable for following
instructions communicated by telephone that the Company reasonably believes to
be genuine. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures shall
consist of confirming that a valid telephone authorization form is on file, tape
recording of all telephone transactions and providing written confirmation
thereof.
POLICY LOANS
At any time while this Policy is in force, a policyholder may borrow against the
Policy Value of the Policy. The Policy serves as the only security for the loan.
Policy loans may have tax consequences, see "Tax Treatment of Policy Benefits -
Policy Loan Interest."
MAXIMUM LOAN
The amount of any loan cannot exceed the amount which would cause the Policy
Debt to equal the Loan Value of the Policy on the date of the loan.
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<PAGE> 34
LOAN VALUE
The Loan Value is equal to the Policy's Cash Surrender Value less the monthly
deductions due to the next Policy Anniversary.
EFFECT OF POLICY LOAN
A policy loan will have an effect on future Policy Values, since that portion of
the Policy Value in the Loan Account will increase in value at the crediting
interest rate rather than varying with the performance of the underlying
Portfolios or increasing in value at the rate of interest credited for amounts
allocated to the Guaranteed Interest Account. A policy loan may cause a Policy
to be more susceptible to going into default since a policy loan will be
reflected in the Net Cash Surrender Value. See "Lapse and Reinstatement."
Finally, a policy loan will affect the amount payable on the death of the life
insured, since the death benefit is reduced by the Policy Debt at the date of
death in arriving at the insurance benefit.
INTEREST CHARGED ON POLICY LOANS
Interest on the Policy Debt will accrue daily and be payable annually on the
Policy Anniversary. The rate of interest charged will be an effective annual
rate of 5.00%.
LOAN ACCOUNT
When a loan is made, an amount equal to the loan will be deducted from the
Investment Accounts or the Guaranteed Interest Account and transferred to the
Loan Account. The policyholder 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.
INTEREST CREDITED TO THE LOAN ACCOUNT
Interest will be credited to amounts in the Loan Account at an effective annual
rate of at least 4.00%. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Spread. The Loan Spread varies
by policy year as follows:
<TABLE>
<CAPTION>
Policy Year Loan Spread
<S> <C>
1-10 1.00%
11-20 0.50%
21+ 0.25%
</TABLE>
LOAN ACCOUNT ADJUSTMENTS
On the first day of each policy month the difference between the Loan Account
and the Policy Debt is transferred to the Loan Account from the Investment
Accounts or the Guaranteed Interest Account. 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 each Investment Account and the
Guaranteed Interest Account bears to the Net Policy Value.
LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the death of
the life insured, provided that the Policy is in force. When a repayment is
made, the amount is credited to the Loan Account and transferred to the
Guaranteed Interest Account or the Investment Accounts. Loan repayments will be
30
<PAGE> 35
allocated to the Guaranteed Interest Account and each Investment Account in the
same proportion as the value in each Investment Account and the Guaranteed
Interest Account bears to the Net Policy Value.
Amounts paid to the Company not specifically designated in writing as loan
repayments will be treated as premiums.
POLICY SURRENDER AND PARTIAL WITHDRAWALS
POLICY SURRENDER
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any surrender charges and outstanding monthly deductions due (the
"Cash Surrender Value") minus the Policy Debt. 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.
PARTIAL WITHDRAWALS
A policyholder may make a partial withdrawal of the Net Cash Surrender Value.
The policyholder may 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.
For information on Surrender Charges on a Partial Withdrawal see "Charges and
Deductions - Surrender Charges."
REDUCTION IN FACE AMOUNT DUE TO A PARTIAL WITHDRAWAL
If Death Benefit Option 1 is in effect when a partial withdrawal is made, the
Face Amount of the Policy will be reduced by the amount of the withdrawal plus
any applicable Surrender Charges. Reductions in Face Amount resulting from
partial withdrawals will not incur any Surrender Charges above the Surrender
Charges applicable to the withdrawal.
If the death benefit is based upon the Policy Value times the minimum death
benefit percentage set forth under "Death Benefit - Minimum Death Benefit," the
Face Amount will be reduced only to the extent that the amount of the withdrawal
plus the portion of the Surrender Charge assessed exceeds the difference between
the death benefit and the Face Amount. When the Face Amount of a Policy is based
on one or more increases subsequent to issuance of the Policy, a reduction
resulting from a partial withdrawal will be applied in the same manner as a
requested decrease in Face Amount, i.e., against the Face Amount provided by the
most recent increase, then against the next most recent increases successively
and finally against the initial Face Amount.
LAPSE AND REINSTATEMENT
LAPSE
A Policy will go into default 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. Manufacturers Life of America will notify the
policyholder of the default and will allow a 61 day grace period in which the
policyholder may make a premium payment sufficient to bring the Policy out of
default. The required payment will be equal to the amount necessary to bring the
Net Cash Surrender Value to zero, if it was less than zero on the date of
default, plus the monthly deductions due at the date of default and payable at
the beginning of each of the two policy months thereafter, plus any appliable
premium load.. If the required payment is not received by the end of the grace
period, the Policy will terminate with no value.
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<PAGE> 36
DEATH DURING GRACE PERIOD
If the life insured should die during the grace period, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit will be reduced by any outstanding monthly
deductions due at the time of death.
REINSTATEMENT
A policyholder 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 the Company; and
(c) A premium equal to the payment required during the grace period following
default to keep the Policy in force is paid to the Company.
THE GENERAL ACCOUNT
The general account of Manufacturers Life of America consists of all assets
owned by the Company other than those in the Separate Account and other separate
accounts of the Company. Subject to applicable law, Manufacturers Life of
America has sole discretion over the investment of the assets of the general
account.
By virtue of exclusionary provisions, interests in the general account of
Manufacturers Life of America have not been registered under the Securities Act
of 1933 and the general account has not been registered as an investment company
under the Investment Company Act of 1940. Accordingly, neither the general
account nor any interests therein are subject to the provisions of these acts,
and as a result the staff of the S.E.C. has not reviewed the disclosures in this
prospectus relating to the general account. Disclosures regarding the general
account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in a prospectus.
GUARANTEED INTEREST ACCOUNT
A policyholder 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. Transfers from the
Guaranteed Interest Account to the Investment Accounts are subject to
restrictions.
POLICY VALUE IN THE GUARANTEED INTEREST ACCOUNT
The Policy Value in the Guaranteed Interest Account is equal to:
(a) the portion of the net premiums allocated to it; plus
(b) any amounts transferred to it; plus
(c) interest credited to it; less
(d) any charges deducted from it; less
(e) any partial withdrawals from it; less
(f) any amounts transferred from it.
INTEREST ON THE GUARANTEED INTEREST ACCOUNT
An allocation of Policy Value to the Guaranteed Interest Account does not
entitle the policyholder 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
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<PAGE> 37
effective annual rate of at least 4%, without regard to the actual investment
experience of the general account. Consequently, if a policyholder pays the
planned premiums, allocates all net premiums only to the general account and
makes no transfers, partial withdrawals, or policy loans, the minimum amount and
duration of the death benefit of the Policy will be determinable and guaranteed.
OTHER PROVISIONS OF THE POLICY
POLICYHOLDER RIGHTS
Unless otherwise restricted by a separate agreement, the policyholder may:
- - Vary the premiums paid under the Policy.
- - Change the death benefit option.
- - Change the premium allocation for future premiums.
- - Transfer amounts between sub-accounts.
- - Take loans and/or partial withdrawals.
- - Surrender the contract.
- - Transfer ownership to a new owner.
- - Name a contingent owner that will automatically become owner if the
policyholder dies before the insured.
- - Change or revoke a contingent owner.
- - Change or revoke a beneficiary.
ASSIGNMENT OF RIGHTS
Manufacturers Life of America will not be bound by an assignment until it
receives a copy of the assignment at its Service Office. Manufacturers Life of
America assumes no responsibility for the validity or effects of any assignment.
BENEFICIARY
One or more beneficiaries of the Policy may be appointed by the policyholder by
naming them in the application. Beneficiaries may be appointed in three classes
- - primary, secondary, and final. Beneficiaries may also be revocable or
irrevocable. Unless an irrevocable designation has been elected, the beneficiary
may be changed by the policyholder during the life insured's lifetime by giving
written notice to Manufacturers Life of America in a form satisfactory to the
Company. If the life insured dies and there is no surviving beneficiary, the
policyholder, or the policyholder's estate if the policyholder 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
Issue Date. It will not contest the validity of an increase in Face Amount,
after such increase or addition has been in force during the 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, and if applicable, so
that the death benefit will be that which the most recent monthly charge for the
cost of insurance would have purchased for the correct age and sex.
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<PAGE> 38
SUICIDE EXCLUSION
If the life insured, whether sane or insane, dies by suicide within two years
from the Issue Date (or within the maximum period permitted by the state in
which the Policy was delivered, if less than two years), Manufacturers Life of
America will pay only the premiums paid less any partial withdrawals and any
Policy Debt. If the life insured should die by suicide within two year after a
Face Amount increase, the death benefit for the increase will be limited to the
monthly deduction for the increase. At the discretion of the Company, this
provision may be waived under some circumstances, such as policies purchased in
conjunction with certain existing benefit plans.
SUPPLEMENTARY BENEFITS
Subject to certain requirements, one or more supplementary benefits may be added
to a Policy, including, in the case of a Policy owned by a corporation or other
similar entity, a benefit permitting a change in the life insured. More detailed
information concerning these supplementary benefits may be obtained from an
authorized agent of the Company. The cost of any supplementary benefits will be
deducted as part of the monthly deduction.
TAX TREATMENT OF THE POLICY
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon the Company's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present federal income tax laws nor of the
current interpretations by the Service. MANUFACTURERS LIFE OF AMERICA DOES NOT
MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION
REGARDING THE POLICIES.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the use of such
Policies in any such arrangement, the value of which depends in part on the tax
consequences, is contemplated, a qualified tax adviser should be consulted for
advice on the tax attributes of the particular arrangement.
LIFE INSURANCE QUALIFICATION
There are several requirements that must be met for a Policy to be considered a
Life Insurance Contract under the Internal Revenue Code, and thereby to enjoy
the tax benefits of such a contract:
1. The Policy must satisfy the definition of life insurance under Section 7702
of the Internal Revenue Code of 1986 (the "Code").
2. The investments of the Separate Account must be "adequately diversified" in
accordance with Section 817(h) of the Code and Treasury Regulations.
3. The Policy must be a valid life insurance contract under applicable state
law.
4. The Policyholder must not possess "incidents of ownership" in the assets of
the Separate Account.
These four items are discussed in detail below.
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. For a Policy to be a life insurance contract, it must
satisfy either the Cash Value Accumulation Test or the Guideline Premium Test.
The Cash Value Accumulation Test requires a minimum death benefit for a given
Policy Value. The Guideline Premium Test also requires a minimum death benefit,
but in addition limits the total premiums that can be paid into a Policy for a
given amount of death benefit.
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<PAGE> 39
With respect to a Policy which is issued on the basis of a standard rate class,
the Company believes (largely in reliance on IRS Notice 88-128 and the proposed
mortality charge regulations under Section 7702, issued on July 5, 1991) that
such a Policy should meet the Section 7702 definition of a life insurance
contract.
With respect to a Policy that is issued on a substandard basis (i.e., a rate
class involving higher-than-standard mortality risk), there is less guidance, in
particular as to how mortality and other expense requirements of Section 7702
are to be applied in determining whether such a Policy meets the Section 7702
definition of a life insurance contract. Thus it is not clear whether or not
such a Policy would satisfy Section 7702, particularly if the policyholder pays
the full amount of premiums permitted under the Policy.
The Secretary of the Treasury (the "Treasury") is authorized to prescribe
regulations implementing Section 7702. However, while proposed regulations and
other interim guidance have been issued, final regulations have not been adopted
and guidance as to how Section 7702 is to be applied is limited. If a Policy
were determined not to be a life insurance contract for purposes of Section
7702, such a Policy would not provide the tax advantages normally provided by a
life insurance policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company may take whatever steps are appropriate and reasonable to attempt to
cause such a Policy to comply with Section 7702. For these reasons, the Company
reserves the right to restrict Policy transactions as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
DIVERSIFICATION
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
code (discussed above). The Separate Account, through the Trust, intends to
comply with the diversification requirements prescribed in Treas. Reg. Sec.
1.817-5, which affect how the Trust's assets are to be invested. The Company
believes that the Separate Account will thus meet the diversification
requirement, and the Company will monitor continued compliance with the
requirement.
STATE LAW
State regulations require that the policyholder have appropriate insurable
interest in the life insured. Failure to establish an insurable interest may
result in the Policy not qualifying as a life insurance contract for federal tax
purposes.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance Policies may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their policies. In those circumstances, income
and gains from the separate account assets would be includible in the variable
policyholder's gross income. The IRS has stated in published rulings that a
variable policyholder will be considered the owner of separate account assets if
the policyholder 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 policyholder), 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 policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets". As of the date of this prospectus, no such guidance has been
issued.
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<PAGE> 40
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 policyholders were not owners of separate account assets. For example, the
policyholder has additional flexibility in allocating premium payments and
Policy Values. These differences could result in an owner being treated as the
owner of a pro-rata portion of the assets of the Separate Account. In addition,
the Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The company therefore reserves the right to modify the Policy as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Separate Account.
TAX TREATMENT OF POLICY BENEFITS
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes. The Company believes that
the proceeds and cash value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for federal income tax
purposes.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, partial withdrawal, surrender,
change in ownership, the addition of an accelerated death benefit rider, or an
assignment of the Policy may have federal income tax consequences. In addition,
federal, state and local transfer, and other tax consequences of ownership or
receipt of Policy proceeds depend on the circumstances of each policyholder or
beneficiary.
DEATH BENEFIT
The death benefit under the Policy should be excludible from the gross income of
the beneficiary under Section 101(a)(1) of the Code.
CASH VALUES
Generally, the policyholder will not be deemed to be in constructive receipt of
the Policy Value until there is a distribution. This includes additions
attributable to interest, dividends, appreciation or gains realized on transfers
among sub-accounts.
INVESTMENT IN THE POLICY Investment in the Policy means:
(a) the aggregate amount of any premiums or other consideration paid for a
Policy; minus
(b) the aggregate amount, other than loan amounts, received under the Policy
which has been excluded from the gross income of the policyholder (except
that the amount of any loan from, or secured by, a Policy that is a MEC, to
the extent such amount has been excluded from gross income, will be
disregarded); plus
(c) the amount of any loan from, or secured by a Policy that is a MEC to the
extent that such amount has been included in the gross income of the
policyholder.
The repayment of a policy loan, or the payment of interest on a loan, does not
affect the Investment in the Policy.
SURRENDER OR LAPSE
Upon a complete surrender or lapse of a Policy or when benefits are paid at a
Policy's maturity date, if the amount received plus the amount of Policy Debt
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
DISTRIBUTIONS
The tax consequences of distributions from, and loans taken from or secured by,
a Policy depend on whether the Policy is classified as a "Modified Endowment
Contract" or "MEC".
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<PAGE> 41
DISTRIBUTIONS FROM NON-MEC'S
A distribution from a non-MEC is generally treated as a tax-free recovery by the
policyholder of the Investment in the Policy to the extent of such Investment in
the Policy, and as a distribution of taxable income only to the extent the
distribution exceeds the Investment in the Policy. Loans from, or secured by, a
non-MEC are not treated as distributions. Instead, such loans are treated as
indebtedness of the policyholder.
Force Outs
An exception to this general rule occurs in the case of a decrease in the
Policy's death benefit or any other change that reduces benefits under the
Policy in the first 15 years after the Policy is issued and that results in a
cash distribution to the policyholder in order for the Policy to continue to
comply with the Section 7702 definitional limits. Such a cash distribution will
be taxed in whole or in part as ordinary income (to the extent of any gain in
the Policy) under rules prescribed in Section 7702. Changes include partial
withdrawals and death benefit option changes.
DISTRIBUTIONS FROM MEC'S
Policies classified as MEC's will be subject to the following tax rules:
(a) First, all partial withdrawals from such a Policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of the
Policy Value immediately before the distribution over the Investment in the
Policy at such time.
(b) 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.
(c) Third, a 10% additional income tax is imposed on the portion of any
distribution (including distributions on surrender) from, or loan taken
from or secured by, such a policy that is included in income except where
the distribution or loan:
(i) is made on or after the policyholder attains age 59 1/2;
(ii) is attributable to the policyholder becoming disabled; or
(iii) is part of a series of substantially equal periodic payments for
the life (or life expectancy) of the policyholder or the joint
lives (or joint life expectancies) of the policyholder and the
policyholder's beneficiary.
These exceptions are not likely to apply in situations where the Policy is not
owned by an individual.
Definition of Modified Endowment Contracts
Section 7702A establishes a class of life insurance contracts designated as
"Modified Endowment Contracts," which applies to Policies entered into or
materially changed after June 20, 1988.
In general, a Policy will be a Modified Endowment Contract if the accumulated
premiums paid at any time during the first seven policy years exceed the
"seven-pay premium limit". The seven-pay premium limit on any date is equal to
the sum of the net level premiums that would have been paid on or before such
date if the policy provided for paid-up future benefits after the payment of
seven level annual premiums (the "seven-pay premium").
The rules relating to whether a Policy will be treated as a MEC are extremely
complex and cannot be adequately described in the limited confines of this
summary. Therefore, a current or prospective policyholder should consult with a
competent adviser to determine whether a transaction will cause the Policy to be
treated as a MEC.
Material Changes
A policy that is not a MEC may become a MEC if it is "materially changed". If
there is a material change to the policy, the seven year testing period for MEC
status is restarted. The material change rules for determining whether a Policy
is a MEC are complex. In general, however, the determination of whether
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<PAGE> 42
a Policy will be a MEC after a material change generally depends upon the
relationship among the death benefit of the Policy at the time of such change,
the Policy Value at the time of the change, and the additional premiums paid
into the Policy during the seven years starting with the date on which the
material change occurs.
Reductions in Face Amount
If there is a reduction in benefits during the first seven policy years, the
seven-pay premium limit is recalculated as if the policy had been originally
issued at the reduced benefit level. Failure to comply would result in
classification as a MEC regardless of any efforts by the Company to provide a
payment schedule that will not violate the seven pay test.
Exchanges
A life insurance contract received in exchange for a MEC will also be treated as
a MEC.
Processing of Premiums
If a premium is received which would cause the Policy to become a MEC within 23
days of the next Policy Anniversary, the Company will not apply the portion of
the premium which would cause MEC status ("excess premium") to the Policy when
received. The excess premium will be placed in a suspense account until the next
anniversary date, at which point the excess premium, along with interest, earned
on the excess premium at a rate of 3.5% from the date the premium was received,
will be applied to the Policy. The policyholder 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 policyholder 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 policyholder. The portion of the premium which is not excess will
be applied as of the date received. The policyholder 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.
Multiple Policies
All MEC's that are issued by a Company (or its affiliates) to the same
policyholder during any calendar year are treated as one MEC for purposes of
determining the amount includible in gross income under Section 72(e) of the
Code.
POLICY LOAN INTEREST
Generally, personal interest paid on any loan under a Policy which is owned by
an individual is not deductible. For policies purchased on or after January 1,
1996, interest on any loan under a Policy owned by a taxpayer and covering the
life of any individual who is an officer or employee of or is financially
interested in the business carried on by the taxpayer will not be tax deductible
unless the employee is a key person within the meaning of Section 264 of the
Code. A deduction will not be permitted for interest on a loan under a Policy
held on the life of a key person to the extent the aggregate of such loans with
respect to contracts covering the key person exceed $50,000. The number of
employees who can qualify as key persons depends in part on the size of the
employer but cannot exceed 20 individuals.
Furthermore, if a non-natural person owns a Policy, or is the direct or indirect
beneficiary under a Policy, section 264(f) of the Code disallows a pro-rata
portion of the taxpayer's interest expense allocable to unborrowed Policy cash
values attributable to insurance held on the lives of individuals who are not
20% (or more) owners of the taxpayer-entity, officers, employees, or former
employees of the taxpayer.
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<PAGE> 43
The portion of the interest expense that is allocable to unborrowed Policy cash
values is an amount that bears the same ratio to that interest expense as the
taxpayer's average unborrowed Policy cash values under such life insurance
policies bear to the average adjusted bases for all assets of the taxpayer.
If the taxpayer is not the Policyholder, but is the direct or indirect
beneficiary under the Policy, then the amount of unborrowed cash value of the
Policy taken into account in computing the portion of the taxpayer's interest
expense allocable to unborrowed Policy cash values cannot exceed the benefit to
which the taxpayer is directly or indirectly entitled under the Policy.
POLICY EXCHANGES
A policyholder generally will not recognize gain upon the exchange of a Policy
for another life insurance policy issued by the Company or another insurance
company, except to the extent that the policyholder receives cash in the
exchange or is relieved of Policy indebtedness as a result of the exchange. In
no event will the gain recognized exceed the amount by which the Policy Value
(including any unpaid loans) exceeds the policyholder's Investment in the
Policy.
OTHER TRANSACTIONS
A transfer of the Policy, a change in the owner, a change in the beneficiary,
and certain other changes to the Policy, as well as particular uses of the
Policy (including use in a so called "split-dollar" arrangement) may have tax
consequences depending upon the particular circumstances and should not be
undertaken prior to consulting with a qualified tax adviser. For instance, if
the owner transfers the Policy or designates a new owner in return for valuable
consideration (or, in some cases, if the transferor is relieved of a liability
as a result of the transfer), then the Death Benefit payable upon the death of
the Insured may in certain circumstances be includible in taxable income to the
extent that the Death Benefit exceeds the prior consideration paid for the
transfer and any premiums or other amounts subsequently paid by the transferee.
Further, in such a case, if the consideration received exceeds the transferor's
Investment in the Policy, the difference will be taxed to the transferor as
ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the individual
circumstances of each policyholder and beneficiary.
ALTERNATE MINIMUM TAX
Corporate owners may be subject to Alternate Minimum Tax on the annual increases
in Cash Surrender Values and on the Death Benefit proceeds.
INCOME TAX REPORTING
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income tax
purposes, one or more of the following:
(a) the value each year of the life insurance protection provided;
(b) an amount equal to any employer-paid premiums; or
(c) some or all of the amount by which the current value exceeds the employer's
interest in the Policy.
Participants should consult with their tax adviser to determine the tax
consequences of these arrangements.
OTHER INFORMATION
PAYMENT OF PROCEEDS
As long as the Policy is in force, Manufacturers Life of America will ordinarily
pay any policy loans, surrenders, partial withdrawals or insurance benefit
within seven days after receipt at its Service Office of all the documents
required for such a payment. The Company may delay the payment of any policy
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loans, surrenders, partial withdrawals, or insurance benefit that depends on
Guaranteed Interest Account values for up to six months or in the case of any
Investment Account for any period during which (i) the New York Stock Exchange
is closed for trading (except for normal weekend and holiday closings), (ii)
trading on the New York Stock Exchange is restricted (iii) an emergency exists
as a result of which disposal of securities held in the Separate Account is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Separate Account's net assets or (iv) the SEC, by order, so permits
for the protection of security holders; provided that applicable rules and
regulations of the SEC shall govern as to whether the conditions described in
(2) and (3) exist.
REPORTS TO POLICYHOLDERS
Within 30 days after each Policy Anniversary, Manufacturers Life of America will
send the policyholder a statement showing, among other things:
- - the amount of 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;
- - the Policy Debt and any loan interest charged since the last report;
- - the premiums paid and other Policy transactions made during the period
since the last report;
- - and any other information required by law.
Each policyholder will also be sent an annual and a semi-annual report for
theTrust which will include a list of the securities held in each Portfolio as
required by the 1940 Act.
DISTRIBUTION OF THE POLICIES
ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life, will
act as the principal underwriter of, and continuously offer, the Policies
pursuant to a Distribution Agreement with 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 or
other broker-dealers having distribution agreements with ManEquity who are also
authorized by state insurance departments to do so.
A registered representative will receive commissions not to exceed 15% of
premiums paid up to the Target Premium, and 2.5% of premiums paid in excess of
the Target Premium in Policy Years 1 through 5, commissions of 2.5% of premiums
paid in Policy Years 6 and later, and after the fifth anniversary 0.20% of the
Policy Value per year. In addition representatives may be eligible for an
additional commission of $100 per Policy per year. Representatives who meet
certain productivity standards with regard to the sale of the Policies and
certain other policies issued by Manufacturers Life of America or Manufacturers
Life will be eligible for additional compensation.
RESPONSIBILITIES OF MANUFACTURERS LIFE
Manufacturers Life and Manufacturers USA have entered into an agreement with
ManEquity, Inc. pursuant to which Manufacturers Life or Manufacturers USA, on
behalf of ManEquity, Inc. will pay the sales commissions in respect of the
Policies and certain other policies issued by Manufacturers Life of America,
prepare and maintain all books and records required to be prepared and
maintained by ManEquity, Inc. with respect to the policies and such other
policies, and send all confirmations required to be sent by ManEquity, Inc. with
respect to the Policies and such other policies. ManEquity, Inc. will promptly
reimburse Manufacturers Life or Manufacturers USA for all sales commissions paid
by Manufacturers Life or Manufacturers USA and will pay Manufacturers Life or
Manufacturers USA for its other services under the agreement in such amounts and
at such times as agreed to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and recordkeeping functions
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<PAGE> 45
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 (or
Manufacturers USA) reinsures all aggregate claims in excess of 110% of the
expected claims for all flexible premium variable life insurance policies issued
by Manufacturers Life of America. 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.
VOTING RIGHTS
As stated previously, all of the assets held in the sub-accounts of the Separate
Account will be invested in shares of a particular Portfolio of the Trust.
Manufacturers Life of America is the legal owner of those shares and as such has
the right to vote upon certain matters that are required by the 1940 Act to be
approved or ratified by the shareholders of a mutual fund and to vote upon any
other matters that may be voted upon at a shareholders' meeting. However,
Manufacturers Life of America will vote shares held in the sub-accounts in
accordance with instructions received from policyholders having an interest in
such sub-accounts. Shares held in each sub-account for which no timely
instructions from policyholders are received, including shares not attributable
to the Policies, will be voted by Manufacturers Life of America in the same
proportion as those shares in that sub-account for which instructions are
received. Should the applicable federal securities laws or regulations change so
as to permit Manufacturers Life of America to vote shares held in the Separate
Account in its own right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyholder is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding Portfolio. The number will be determined as of a date chosen by
Manufacturers Life of America, but not more than 90 days before the
shareholders' meeting. Fractional votes are counted. Voting instructions will be
solicited in writing at least 14 days prior to the meeting.
Manufacturers Life of America may, if required by state officials, disregard
voting instructions if such instructions would require shares to be voted so as
to cause a change in the sub-classification or investment policies of one or
more of the Portfolios, or to approve or disapprove an investment management
contract. In addition, the Company itself may disregard voting instructions that
would require changes in the investment policies or investment adviser, provided
that Manufacturers Life of America reasonably disapproves such changes in
accordance with applicable federal regulations. If Manufacturers Life of America
does disregard voting instructions, it will advise policyholders of that action
and its reasons for such action in the next communication to policyholders.
SUBSTITUTION OF PORTFOLIO SHARES
It is possible that in the judgment of the management of Manufacturers Life of
America, one or more of the Portfolios may become unsuitable for investment by
the Separate Account because of a change in investment policy or a change in the
applicable laws or regulation, because the shares are no longer available for
investment, or for some other reason. In that event, Manufacturers Life of
America may seek to substitute the shares of another Portfolio or of an entirely
different mutual fund. Before this can be done, the approval of the S.E.C. and
one or more state insurance departments may be required.
Manufacturers Life of America also reserves the right (i) to combine other
separate accounts with the Separate Account, (ii) to create new separate
accounts, (iii) to establish additional sub-accounts within the Separate Account
to invest in additional portfolios of the Trust or another management investment
company, (iv) to eliminate existing sub-accounts and to stop accepting new
alllocations and transfers into the corresponding portfolio, (v) to combine
sub-accounts or to transfer assets in one sub-account to another sub-account or
(vi) to transfer assets from the Separate Account to another separate account
and from another separate account to the Separate Account. The Company also
reserves the right to
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<PAGE> 46
operate the Separate Account as a management investment company or other form
permitted by law, and to de-register the Separate Account under the 1940 Act.
Any such change would be made only if permissible under applicable federal and
state law.
RECORDS AND ACCOUNTS
McCamish Systems, L.L.C., 6425 Powers Ferry Road, Atlanta, Georgia 30339, will
act as a Transfer Agent on behalf of Manufacturers Life of America as it relates
to the Policies described in this Prospectus. In the role of a Transfer Agent,
McCamish Systems will perform administrative functions, such as decreases,
increases, surrenders and partial withdrawals, fund transfers on behalf of the
Company.
All records and accounts relating to the Separate Account and the Portfolios
will be maintained by the Company. All financial transactions will be handled by
the Company. All reports required to be made and information required to be
given will be provided by McCamish Systems on behalf of the Company.
STATE REGULATIONS
Manufacturers Life of America is subject to the regulation and supervision by
the Michigan Department of Insurance, which periodically examines its financial
condition and operations. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business. The
Policies have been filed with insurance officials, and meet all standards set by
law, in each jurisdiction where they are sold.
Manufacturers Life of America is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business for the purposes of determining
solvency and compliance with local insurance laws and regulations.
LITIGATION
No litigation is pending that would have a material effect upon the Separate
Account or the Trust.
ACCOUNTANTS
The financial statements of The Manufacturers Life Insurance Company of America
and Separate Account Four of The Manufacturers Life Insurance Company of America
at December 31, 1997 and for the year then ended appearing in this prospectus
have been audited by Ernst & Young L.L.P., 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 firms as experts in auditing and accounting.
FURTHER INFORMATION
A registration statement under the Securities Act of 1933 has been filed with
the S.E.C. relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. The omitted information may be obtained from the S.E.C.'s principal
office in Washington D.C. upon payment of the prescribed fee. The Commission
also maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission which is located at http://www.sec.gov.
For further information you may also contact Manufacturers Life of America's
Home Office, the address and telephone number of which are on the first page of
the prospectus.
OFFICERS AND DIRECTORS
Position with
Manufacturers Life
Name of America Principal Occupation
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<TABLE>
<S> <C> <C>
Sandra M. Cotter(35) Director Attorney 1989 - present, Dykema
Gosset
James D. Gallagher(43) Director, Secretary Vice President, Secretary and
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, The Manufacturers
Life Insurance Company of
North America; Vice President
and Associate General Counsel
- 1991 - 1994, The Prudential
Insurance Company of America
Bruce Gordon(54) Director Vice President, U.S.
Operations - Pensions - 1990 -
present, The Manufacturers
Life Insurance Company
Donald A. Guloien(41) 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.(42) 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, Metropolitan Life
Insurance Company
Joseph J. Pietroski(59) Director Senior Vice President, General
Counsel and Corporate
Secretary - 1988 - present,
The Manufacturers Life
Insurance Company
John D. Richardson(60) Chairman and Director Executive 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.
John R. Ostler(45) Vice President, Chief Financial Vice President -
Actuary and Treasurer 1992 - present, The
Manufacturers Life Insurance
Company.
Douglas H. Myers(43) Vice President, Finance Assistant Vice President and
and Compliance Controller Controller, U.S. Operations -
1988 - present, The
Manufacturers Life Insurance
Company
Victor Apps(49) Senior Vice President Senior Vice President and
and General Manager General Manager, Greater 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(43) 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>
43
<PAGE> 48
IMPACT OF YEAR 2000
Preparing computer systems to deal with the Year 2000 risk has become a
major issue for businesses throughout the world. Within Manufacturers Life, a
group-wide program has been underway since 1996 to make all critical systems
compliant by the end of 1998 and other systems compliant by the end of 1999.
Included in this program are all system applicable to and shared by the Company
with Manufacturers Life. Based on a detailed assessment, Manufacturers Life
determined that a portion of its sofware needs to be modified or replaced so
that its computer systems will function properly into the Year 2000 and beyond.
Like most companies, the Year 2000 issue represents a significant challenge for
Manufacturers Life and extensive resources have been dedicated to modifying
existing software and to converting to new software. However, there can be no
assurances that Manufacturers Life's systems, nor those of other companies on
which Manufacturers Life relies, will be fully converted on a timely basis and
therefore that all adverse effect on the Company due to the Year 2000 risk will
be avoided. Manufacturers Life is presently consulting with vendors, customers,
subsidiaries, third-parties and other businesses with which it deals to ensure
that no material aspect of its, or the Company's, operations will be hindered by
the Year 2000 risk.
The costs of the project and the date on which Manufacturers Life plans to
complete the modifications are based on management's best estimates and are
subject to some uncertainty. Manufacturers Life is using both internal and
external resources to reprogram, or replace, and test the software for Year 2000
modifications. The total cost of this program to Manufacturers Life is estimated
to be $64 million, comprised of $55 million for specifically budgeted programs
and $9 million for general contingencies. Manufacturers Life has incurred $15
million as at December 31, 1997 of which the Company will receive an allocation
due to its shared systems. The costs allocated are not expected to have a
material effect on the net operating income of the Company.
DEATH BENEFIT SCHEDULE WITH FLEXIBLE TERM INSURANCE OPTION
A Policy can be issued with a schedule of death benefits which may vary by
Policy Year. The entire schedule is called the Death Benefit Schedule. The Death
Benefit Schedule will provide flexible term insurance to age 100. The amount of
death benefit shown in the Death Benefit Schedule for any Policy Year is called
the Scheduled Annual Death Benefit for that Policy Year. Any amount of Scheduled
Annual Death Benefit over and above the death benefit provided by the Policy
will be provided by Flexible Term Insurance (the "Rider"). The combined death
benefit of the Policy and Rider may be the Scheduled Annual Death Benefit alone
(similar to Death Benefit Option 1), or the Scheduled Annual Death Benefit plus
the Policy Value (similar to Death Benefit Option 2).
A Policy may be combined with the Rider to result in an initial Scheduled Annual
Death Benefit equal to the same Face Amount that could be acquired under the
Policy alone. Depending upon the amount of premium paid into the Policy,
combining the Policy and the Rider may result in a surrender charge for the
Policy that is lower than the surrender charge provided under the Policy alone.
In addition, current cost of insurance rates for the Rider are less than those
for the Policy in the first fifteen Policy years, but greater than the rates for
the Policy in Policy Year 16 and later.
A policyholder may, upon written request, change the Death Benefit Schedule. A
written request for a change which results in a decrease to the Scheduled Annual
Death Benefit must be received at least 30 days prior to the first day of a
policy month for the change to take effect as of that policy month. A written
request for a change which results in an increase to the Scheduled Annual Death
Benefit in any Policy Year will take effect at the befinning of the month
following the date the Company approves the request. Increases in the Death
Benefit Schedule are subject to evidence of insurability satisfactory to the
Company, A requested decrease in the Schedule will require a decrease in the
Policy's Face Amount if the new Death Benefit Schedule in any year is less than
the Face Amount. In this case, the Face Amount will be reduced to the Scheduled
Annual Death Benefit. If a decrease in Face Amount is required, Surrender
Charges will be assessed as provided under "Decrease in Face Amount - Surrender
Charges Assessed on a Decrease".
44
<PAGE> 49
If the policyholder changes the Death Benefit Option of the Policy from
Death Benefit Option 2 to Death Benefit Option 1 and if the Face Amount of the
Policy after the change would be greater than the Scheduled Annual Death Benefit
in effect at the time of the change, then the Face Amount after the change will
be equal to the Scheduled Annual Death Benefit.
If the Face Amount of the Policy is increased then the Scheduled Annual
Death Benefit for all Policy Years after and including the effective date of the
change will be increased by the same amount. If the Face Amount of the Policy is
decreased then the Scheduled Annual Death Benefit for all Policy Years after and
including the effective date of the change will be decreased by the same amount.
This provision does not apply to increases or decreases in Face Amount due to a
change in the Death Benefit Option.
If in any Policy Year, the Face Amount is greater than the Scheduled Annual
Death Benefit for that Policy Year, the Face Amount will be reduced to be equal
to the Scheduled Annual Death Benefit. If the Face Amount is decreased,
Surrender Charges will be assessed as provided under "Decrease in Face Amount -
Surrender Charged Assessed on a Decrease."
Year to year changes within the Death Benefit Schedule, as well as a change in
the Death Benefit Schedule itself, may also have an effect on the maximum amount
of premium that a policyholder may pay into a Policy. The Company will inform
you of any such change. The Company reserves the right to limit a change in the
Death Benefit Schedule so as to prevent the Policy from failing to qualify as
life insurance for tax purposes.
The Rider is subject to the same Incontestability, Misstatement of Age or Sex,
and Suicide Exclusion provisions as the Policy.
The Rider terminates on the termination date of the Policy. The policyholder
may, however, terminate the Rider prior to the termination date of the Policy by
sending the Company a written request to terminate the Rider. The Rider will
then terminate at the end of the month in which the Company receives the
request.
ILLUSTRATIONS
The following tables illustrate the way in which a Policy's Death Benefit,
Policy Value, and Cash Surrender Value could vary over an extended period of
time.
ASSUMPTIONS
- - Hypothetical gross annual investment returns for the Portfolios (i.e.,
investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross annual rates of 0%, 6%, and 12% over the
periods indicated.
- - An Insured who is a male, Issue Age 45, non-smoker.
- - A Face Amount of $365,000 in all Policy Years.
- - Payment of an annual premium of $20,000 each year for the first seven
Policy Years. Premiums are paid on the Policy Anniversary.
- - All Premiums are allocated to and remain in the Variable Account for the
entire period shown.
- - There are no transfers, partial withdrawals, or policy loans.
- - Tables 1, 2, and 3 assume full underwriting. Tables 4, 5, and 6 assume
short form underwriting.
- - Each table shows which tax test is assumed.
- - The illustrations assume all charges currently assessed against the Policy,
including monthly cost of insurance charges and administrative charges and
mortality and expense risk charges. The first set of columns in each table,
under the heading "Current Charges", assumes cost of insurance rates
currently expected to be charged. The second set of columns, under the
heading "Guaranteed Charges", assumes maximum cost of insurance rates.
45
<PAGE> 50
- - The amounts shown in the Tables also take into account the Portfolios'
advisory fees and operating expenses, which are assumed to be at an annual
rate of 0.938% of the average daily net assets of the portfolio.
The Death Benefits, Policy Values, and Cash Surrender Values would be different
from those shown if the returns averaged 0%, 6%, and 12%, but fluctuated over
and under those averages throughout the years. The values would also be
different depending on the allocation of a Policy's total Policy Value among the
sub-accounts, if the actual rates of return averaged 0%, 6%, or 12%, but the
rates of each Portfolio varied above and below such averages.
The gross annual rates of returns correspond to net annual rates of return
according to the table below:
<TABLE>
<CAPTION>
Gross Rate of Return
Policy Year 0.00% 6.00% 12.00%
<S> <C> <C> <C> <C>
Net Rate 1-10 -1.677% 4.223% 10.123%
of Return 11+ -1.330% 4.591% 10.511%
</TABLE>
Current cost of insurance charges are not guaranteed and may be changed.
Upon request, Manufacturers Life of America will furnish a comparable
illustration based on the proposed life insured's Issue Age, sex and risk class,
any additional ratings and the death benefit option, Face Amount, Death Benefit
Schedule (if applicable), and planned premium requested. Illustrations for
smokers would show less favorable results than the illustration shown in this
prospectus.
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 or 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 [ ]. 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.
46
<PAGE> 51
Table 1
Cash Value Accumulation Test - Short Form Issue
Hypothetical Gross Investment Return of 6.00%
[For Illustration Purposes Onlyl]
<TABLE>
<CAPTION>
Current Charges
------------------------------------------------------------------------------
Policy Plus Less Less Plus Policy Net Cash Death
Policy Annual Accum Value Net Admin Cost of Invest Value Surr Surrender Benefit
Year Premium Premiums Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 1,120 799 19,134 2,000 17,134 365,000
2 20,000 43,050 19,134 19,600 144 1,142 1,606 39,054 3,000 36,054 365,000
3 20,000 66,203 39,054 19,600 144 1,159 2,446 59,797 3,000 56,797 365,000
4 20,000 90,513 59,797 19,600 144 1,395 3,316 81,174 4,000 77,174 365,000
5 20,000 116,038 81,174 19,600 144 1,398 4,219 103,450 5,000 98,450 365,000
6 20,000 142,840 103,450 19,600 144 1,380 5,159 126,685 6,000 120,685 365,000
7 20,000 170,982 126,685 19,600 144 1,358 6,140 150,923 5,250 145,673 369,763
8 0 179,531 150,923 0 144 1,460 6,334 155,654 3,500 152,154 370,456
9 0 188,508 155,654 0 144 1,569 6,531 160,472 1,750 158,722 372,295
10 0 197,933 160,472 0 144 1,690 6,732 165,370 0 165,370 372,083
11 0 207,830 165,370 0 144 1,368 7,551 171,409 0 171,409 375,385
12 0 218,221 171,409 0 144 1,477 7,825 177,613 0 177,613 378,316
13 0 229,132 177,613 0 144 1,585 8,107 183,991 0 183,991 380,861
14 0 240,589 183,991 0 144 1,704 8,397 190,540 0 190,540 384,890
15 0 252,619 190,540 0 144 1,830 8,694 197,260 0 197,260 388,601
16 0 265,249 197,260 0 144 1,967 8,999 204,148 0 204,148 391,963
17 0 278,512 204,148 0 144 2,103 9,312 211,212 0 211,212 394,966
18 0 292,438 211,212 0 144 2,249 9,632 218,451 0 218,451 397,581
19 0 307,059 218,451 0 144 2,424 9,960 225,843 0 225,843 402,000
20 0 322,412 225,843 0 144 2,608 10,295 233,385 0 233,385 406,090
25 0 411,489 266,974 0 144 3,141 12,169 275,858 0 275,858 427,579
30 0 525,176 313,458 0 144 4,122 14,278 323,470 0 323,470 456,092
<CAPTION>
Guaranteed Charges
-------------------------------------------------------------------------------
Policy Plus Less Less Plus Policy Net Cash Death
Value Net Admin Cost of Invest Value Surr Surrender Benefit
Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 19,600 144 1,120 818 19,154 2,000 17,154 365,000
19,154 19,600 144 1,600 1,636 38,647 3,000 35,647 365,000
38,647 19,600 144 1,623 2,479 58,959 3,000 55,959 365,000
58,959 19,600 144 1,632 3,357 80,139 4,000 76,139 365,000
80,139 19,600 144 1,634 4,273 102,234 5,000 97,234 365,000
102,234 19,600 144 1,613 5,230 125,307 6,000 119,307 365,000
125,307 19,600 144 1,582 6,228 149,409 5,250 144,159 366,052
149,409 0 144 1,690 6,421 153,996 3,500 150,496 366,510
153,996 0 144 1,812 6,616 158,656 1,750 156,906 368,082
158,656 0 144 1,944 6,815 163,383 0 163,383 367,612
163,383 0 144 2,081 7,016 168,174 0 168,174 368,301
168,174 0 144 2,222 7,220 173,028 0 173,028 368,550
173,028 0 144 2,360 7,427 177,950 0 177,950 368,357
177,950 0 144 2,507 7,636 182,935 0 182,935 369,529
182,935 0 144 2,656 7,848 187,984 0 187,984 370,329
187,984 0 144 2,813 8,063 193,091 0 193,091 370,734
193,091 0 144 2,979 8,280 198,248 0 198,248 370,724
198,248 0 144 3,155 8,499 203,448 0 203,448 370,275
203,448 0 144 3,368 8,719 208,656 0 208,656 371,407
208,656 0 144 3,592 8,940 213,859 0 213,859 372,115
234,627 0 144 4,677 10,038 239,844 0 239,844 371,758
260,091 0 144 6,187 11,104 264,865 0 264,865 373,460
</TABLE>
- - 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 POLICYHOLDER, AND THE INVESTMENT RETURN FOR THE PORTFOLIOS OF
MANUFACTURERS INVESTMENT TRUST.
- - THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED
THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS.
47
<PAGE> 52
- - 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.
48
<PAGE> 53
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 contract 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 48 pages
Representation pursuant to Section 26 of the Investment Company Act of
1940;
the Signatures;
Written consents of the following persons:
Ernst & Young LLP [to be filed by amendment]
John Vrysen [to be filed by amendment]
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 (the "Company") establishing
Separate Account Four, previously filed as Exhibit A(1) to
Registrant's registration statement on Form S-6 (File
No.33-13774), filed April 24, 1987 (the "Registration
Statement").
A(3)(a)(i) Distribution Agreement between the Company and ManEquity,
Inc., previously filed as Exhibit (A)(3) to Pre-Effective
Amendment No. 1 to the Registration Statement, filed 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 to the
Registration Statement., filed 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 to the Registration Statement
filed February 28, 1992.
A(3)(b)(ii) Specimen agreement between ManEquity, Inc. and
<PAGE> 54
dealers, previously filed as Exhibit A(3)(b)(ii) to
Post-Effective Amendment No. 11 to the Registration
Statement filed February 26, 1993.
A(3)(c) Schedule of Sales Commissions - [To be Filed by Amendment]
A(5)(a) Form of Flexible Premium Variable Universal Life Insurance
Policy FTIO Rider Form 121 and Unisex Endorsement Form -
Filed herewith.
A(6)(a) Restated Articles of Redomestication of the Company.
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 Company on December 9, 1996 (File No.
33-57020) ("PEA No. 6").
A(6)(b) By-Laws of the Company. Incorporated by reference to Exhibit
(3)(b)(i) to PEA No. 6.
A(8)(a) Service Agreement between the Company and The Manufacturers
Life Insurance Company, previously fled as Exhibit 1.A(8) to
Post-Effective Amendment No. 7 to the registration statement
on Form N-4 of Separate Account One of the Company (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 to the
Registration Statement filed 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 to the Registration Statement
filed March 1,1994.
A(8)(b) Stoploss Reinsurance Agreement between the Company and The
Manufacturers Life Insurance Company, previously filed as
Exhibit A(8)(b) to Pre-Effective Amendment No. 1 to the
Registration Statement, filed August 13, 1987.
A(8)(c) Automatic Coinsurance Agreemeny between the Company 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 Company (File No. 33-1499) filed September 4, 1987.
A(8)(d) Service Agreement between the Company and ManEquity, Inc.
dated January 2, 1991 as amended
<PAGE> 55
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 [To Be Filed by Amendment]
2. See Exhibit A(5)
3 Not Applicable
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 Vrysen, Vice President, Chief
Actuary and treasurer of the Company. [To be filed by
Amendment]
7 Form of Notice of short term cancellation right and request
for refund [To be filed by Amendment]
8 Form of Notice and right of surrender and refund [To be
filed by Amendment]
9 Memorandum Regarding Issuance, Face Amount Increase,
Redemption and Transfer Procedures for the Policies [To Be
Filed by Amendment]
10 Consent of Ernst & Young LLP [To Be Filed by Amendment]
11 Not Applicable
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 Company on February 28,
1997 (File No. 33-52310).
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant and the Depositor have caused
this Registration Statement to be signed on their behalf in the City of Toronto,
Province of Ontario, Canada, on this 29th day of April, 1998.
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
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
By: /s/ Donald A. Guloien
------------------------------------
DONALD A. GULOIEN
President
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 29th day of April, 1998.
Signature Title
- --------- -----
* 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
<PAGE> 58
EXHIBIT INDEX
a(5)(a) Form of Flexible Premium Variable Life Insurance
Policy, Rider and Endorsement
<PAGE> 1
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
SUPPLEMENTARY BENEFIT
BENEFIT FLEXIBLE TERM INSURANCE OPTION
LIFE INSURED JOHN M. DOE
AGE AT EFFECTIVE DATE 35
EFFECTIVE DATE JAN 1, 1998
BENEFICIARY AS DESIGNATED IN THE APPLICATION OR
SUBSEQUENTLY CHANGED
INITIAL AMOUNT $10,000
DEATH BENEFIT SCHEDULE SEE NEXT PAGE
RISK CLASSIFICATION NON-SMOKER
ADDITIONAL RATING NOT APPLICABLE
PAGE 3.5
<PAGE> 2
POLICY INFORMATION (CONTINUED) - POLICY 12 345 678
DEATH BENEFIT SCHEDULE
POLICY SCHEDULED ANNUAL POLICY SCHEDULED ANNUAL
YEAR DEATH BENEFIT YEAR DEATH BENEFIT
1 $ 60,000 34 $100,000
2 $ 70,000 35 $100,000
3 $ 80,000 36 $100,000
4 $ 90,000 37 $100,000
5 $100,000 38 $100,000
6 $100,000 39 $100,000
7 $100,000 40 $100,000
8 $100,000 41 $100,000
9 $100,000 42 $100,000
10 $100,000 43 $100,000
11 $100,000 42 $100,000
12 $100,000 45 $100,000
13 $100,000 46 $100,000
14 $100,000 47 $100,000
15 $100,000 48 $100,000
16 $100,000 49 $100,000
17 $100,000 50 $100,000
18 $100,000 51 $100,000
19 $100,000 52 $100,000
20 $100,000 53 $100,000
21 $100,000 54 $100,000
22 $100,000 55 $100,000
23 $100,000 56 $100,000
24 $100,000 57 $100,000
25 $100,000 58 $100,000
26 $100,000 59 $100,000
27 $100,000 60 $100,000
28 $100,000 61 $100,000
29 $100,000 62 $100,000
30 $100,000 63 $100,000
31 $100,000 64 $100,000
32 $100,000 65 $100,000
33 $100,000
PAGE 3.6
<PAGE> 3
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
MALE
<TABLE>
<CAPTION>
LIFE LIFE LIFE
INSURED'S INSURED'S INSURED'S
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE RATE AGE RATE AGE RATE
$ $ $
<S> <C> <C> <C> <C> <C>
20 0.1583 47 0.4433 74 4.8491
21 0.1591 48 0.4783 75 5.3491
22 0.1575 49 0.5175 76 5.8775
23 0.1550 50 0.5591 77 6.4266
24 0.1516 51 0.6083 78 6.9916
25 0.1475 52 0.6633 79 7.5875
26 0.1441 53 0.7258 80 8.2366
27 0.1425 54 0.7966 81 8.9566
28 0.1416 55 0.8725 82 9.7708
29 0.1425 56 0.9550 83 10.6883
30 0.1441 57 1.0408 84 11.6875
31 0.1483 58 1.1325 85 12.7458
32 0.1525 59 1.2308 86 13.8408
33 0.1591 60 1.3400 87 14.9625
34 0.1666 61 1.4616 88 16.1058
35 0.1758 62 1.5991 89 17.2741
36 0.1866 63 1.7550 90 18.4808
37 0.2000 64 1.9283 91 19.7483
38 0.2150 65 2.1183 92 21.1208
39 0.2325 66 2.3208 93 22.6758
40 0.2516 67 2.5366 94 24.6583
41 0.2741 68 2.7658 95 27.4966
42 0.2966 69 3.0141 96 32.0458
43 0.3225 70 3.2925 97 40.0166
44 0.3491 71 3.6083 98 54.8316
45 0.3791 72 3.9708 99 83.3333
46 0.4100 73 4.3866
</TABLE>
The above rates will be adjusted for any Additional Rating shown in the Policy
Information section.
Page 4
<PAGE> 4
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
FEMALE
<TABLE>
<CAPTION>
LIFE LIFE LIFE
INSURED'S INSURED'S INSURED'S
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE RATE AGE RATE AGE RATE
$ $ $
<S> <C> <C> <C> <C> <C>
20 0.0875 47 0.3375 74 2.8275
21 0.0891 48 0.3608 75 3.1866
22 0.0908 49 0.3858 76 3.5808
23 0.0925 50 0.4133 77 4.0033
24 0.0950 51 0.4425 78 4.4541
25 0.0966 52 0.4750 79 4.9458
26 0.0991 53 0.5125 80 5.4991
27 0.1016 54 0.5508 81 6.1333
28 0.1050 55 0.5908 82 6.8666
29 0.1083 56 0.6308 83 7.7108
30 0.1125 57 0.6691 84 8.6508
31 0.1166 58 0.7058 85 9.6750
32 0.1208 59 0.7450 86 10.7741
33 0.1250 60 0.7891 87 11.9433
34 0.1316 61 0.8441 88 13.1816
35 0.1375 62 0.9133 89 14.4950
36 0.1466 63 1.0016 90 15.8958
37 0.1575 64 1.1041 91 17.4058
38 0.1700 65 1.2158 92 19.0675
39 0.1850 66 1.3333 93 20.9591
40 0.2016 67 1.4525 94 23.2758
41 0.2200 68 1.5700 95 26.4433
42 0.2391 69 1.6966 96 31.3116
43 0.2575 70 1.8425 97 39.5808
44 0.2766 71 2.0191 98 54.6541
45 0.2966 72 2.2391 99 83.3333
46 0.3166 73 2.5091
</TABLE>
The above rates will be adjusted for any Additional Rating shown in the Policy
Information section.
Page 4
<PAGE> 5
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
UNISEX
<TABLE>
<CAPTION>
LIFE LIFE LIFE
INSURED'S INSURED'S INSURED'S
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE RATE AGE RATE AGE RATE
$ $ $
<S> <C> <C> <C> <C> <C>
20 0.1450 47 0.4225 74 4.3641
21 0.1458 48 0.4541 75 4.8200
22 0.1441 49 0.4908 76 5.3041
23 0.1425 50 0.5300 77 5.8083
24 0.1408 51 0.5750 78 6.3291
25 0.1375 52 0.6250 79 6.8808
26 0.1358 53 0.6825 80 7.4858
27 0.1341 54 0.7466 81 8.1616
28 0.1341 55 0.8150 82 8.9316
29 0.1358 56 0.8891 83 9.8041
30 0.1375 57 0.9650 84 10.7583
31 0.1416 58 1.0450 85 11.7816
32 0.1458 59 1.1308 86 12.8475
33 0.1525 60 1.2266 87 13.9575
34 0.1591 61 1.3333 88 15.1033
35 0.1683 62 1.4558 89 16.2950
36 0.1783 63 1.5966 90 17.5441
37 0.1916 64 1.7541 91 18.8758
38 0.2058 65 1.9258 92 20.3441
39 0.2233 66 2.1075 93 22.0033
40 0.2416 67 2.3008 94 24.1133
41 0.2633 68 2.5025 95 27.0741
42 0.2850 69 2.7216 96 31.7475
43 0.3100 70 2.9658 97 39.8075
44 0.3341 71 3.2458 98 54.7816
45 0.3625 72 3.5700 99 83.3333
46 0.3916 73 3.9441
</TABLE>
The above rates will be adjusted for any Additional Rating shown in the Policy
Information section.
Page 4
<PAGE> 6
DEFINITIONS
THE FOLLOWING TERMS HAVE SPECIFIC MEANINGS IN YOUR POLICY. PLEASE REFER TO THESE
DEFINITIONS AS YOU READ YOUR POLICY.
ADDITIONAL RATING is an adjustment to the Cost of Insurance that is applied when
a life insured does not meet, at a minimum, our underwriting requirements for
the standard Risk Classification.
ATTAINED AGE is the Issue Age plus the number of completed Policy Years the
policy has been in force since the Policy Date.
BUSINESS DAY is any day that the New York Stock Exchange is open business. The
net asset value of the underlying shares of a Sub-Account will be determined at
the end of each Business Day. We will deem each Business Day to end at the close
of regularly scheduled trading of the New York Stock Exchange (currently 4:00
p.m. Eastern Time) on that day.
CASH SURRENDER VALUE equals the Policy Value less the Surrender Charge and less
any outstanding Monthly Deductions due.
EFFECTIVE DATE is the date we become obligated under this policy and when we
take the first Monthly Deductions. It is the later of the date our underwriters
approve issuance of this policy, or the date we receive at least the initial
premium at our Service Office.
GUARANTEED INTEREST ACCOUNT is that part of the Policy Value which reflects the
value you have in our general account.
INVESTMENT ACCOUNT is that part of the Policy Value which reflects the value you
have in one of our Sub-Accounts.
ISSUE AGE is the life insured's age on the birthday closer to the Policy Date.
LOAN ACCOUNT is that part of the Policy Value that reflects the value you have
transferred from the Guaranteed Interest Account or the Investment Accounts as
collateral for a policy loan.
NET CASH SURRENDER VALUE equals the Cash Surrender Value less the Policy Debt.
NET POLICY VALUE equals the Policy Value less the value in the Loan Account.
NET PREMIUM is the gross premium less any Premium Load. It is the amount of
premium allocated to the Guaranteed Interest Account and/or Investment Accounts.
POLICY DATE is the date from which charges for the first Monthly Deductions are
calculated. The Policy Date is shown in the Policy Information section of this
policy.
POLICY DEBT as of any date equals (a) plus (b) plus (c), minus (d), where:
(a) is the total amount of loans borrowed as of such date;
(b) is the total amount of any unpaid loan interest charges borrowed against the
policy on a Policy Anniversary;
(c) is any interest charges accrued from the last Policy Anniversary to the
current date; and
(d) is the total amount of loan repayments as of such date.
POLICY VALUE equals the sum of the values in the Loan Account. The Guaranteed
Interest Account, and the Investment Accounts.
POLICY YEARS, POLICY MONTHS AND POLICY ANNIVERSARIES are determined from the
Policy Date.
SEPARATE ACCOUNT refers to Separate Account Four of The Manufacturers Life
Insurance Company of America.
(continued)
Page 5
<PAGE> 7
DEFINITIONS (continued)
SERVICE OFFICE is the office that we designate to service this policy.
SUB-ACCOUNT refers to one of the sub-accounts of the Separate Account.
SURRENDER CHARGE PERIOD is the period following issuance of the policy or
following any increase in Face Amount during which we will assess surrender
charges. Surrender charges will apply during this period if you surrender or
lapse the policy, decrease the Face Amount or make a partial withdrawal.
WRITTEN REQUEST must be in a form satisfactory to us, signed and dated by you,
and filed at our Service Office.
PAYMENT OF PREMIUMS
Premiums are payable during the life insured's lifetime. The Planned Premium and
the Premium Mode you requested in the application are shown in the Policy
Information section. The initial premium is due as of the Policy Date.
You can pay subsequent premiums in any amount and at any frequency. On request,
we will give you a receipt signed by one of our officers.
We have the right to refuse or refund any premium payments that may cause this
policy to fail to qualify as life insurance under applicable tax law. Any such
Premium Limitations are shown in the Policy Information section.
INSURANCE BENEFIT
If the life insured dies while the policy is in force, we will pay the Insurance
Benefit to the beneficiary on receiving any due proof of death, subject to the
Age and Sex, Suicide, and the Validity provisions.
If the life insured dies after we receive a Written Request from you to
surrender the policy, there will be no Insurance Benefit. We will pay the amount
payable under the Surrender for Cash provision instead.
If the life insured dies during the grace period, the Insurance Benefit payable
will be the same as defined below with the following modifications:
(a) we will reduce the Insurance Benefit by any outstanding Monthly Deductions
due; and
(b) in calculating the Death Benefit, we will use the Policy Value as of the
default date.
INSURANCE BENEFIT. The Insurance Benefit payable is:
(a) the Death Benefit as described below; plus
(b) any amounts payable under any Supplementary Benefit that are part of the
policy; less
(c) the value of the Policy Debt as of the date of death.
DEATH BENEFIT. The Death Benefit will depend upon whether Option 1 or Option 2
is in effect as of the date of death.
Under Option 1, the Death Benefit will be equal to the Face Amount as of the
date of death.
Under Option 2, the Death Benefit will equal the sum of (a) and (b), where:
(a) is the Face Amount as of the date of death; and
(b) is the Policy Value as of the date of death.
MINIMUM DEATH BENEFIT. To ensure that the policy continues to qualify as life
insurance under the Internal Revenue Code, the Death Benefit will never be less
than the Minimum Death Benefit. The Minimum Death Benefit is equal to the Policy
Value on the date of death multiplied by the Minimum Death Benefit Factor for
the Attained Age of the life insured. The Minimum Death Benefit Factors are
shown in the Table of Minimum Death Benefit Factors in the Policy Information
section.
(continued)
Page 6
<PAGE> 8
INSURANCE BENEFIT (continued)
INTEREST. We will pay the Insurance Benefit in one lump sum with interest
calculated from the date of the life insured's death to the date of payment. The
rate will be at least the minimum required by the law of the state in which this
policy was delivered. If the state does not specify the interest rate, we will
use the rate for insurance benefits left on deposit with us.
POLICY VALUE
NET PREMIUMS ADDED. As of the Business Day we receive your premium payments at
our Service Office, we add your Net Premium to your Policy Value. We will do
this before we take any deductions due on that Business Day.
For premiums received prior to the Effective Date, your Net Premiums plus any
interest credited will be added to your Policy Value as of the Business Day
coincident with or next following the Effective Date. Any premium received prior
to the Effective Date of the policy will be credited with interest from the date
of receipt. Interest will be credited at the rate of return then being earned on
allocations to the Money Market Trust.
MONTHLY DEDUCTIONS. A deduction is due from your policy as of the beginning of
each Policy Month to cover monthly administration charges and the cost to
provide the insurance coverage. We will take the deductions as of the date they
are due. However, if at issue your Policy Date is set to an earlier date for
purposes of determining Issue Age, any Monthly Deductions due from the Policy
Date up to the Effective Date will be taken as of the Effective Date.
Unless otherwise agreed to by us, we will take Monthly Deductions from the
Guaranteed Interest Account and the Investment Accounts in the same proportion
that the Policy Value in each of these accounts bears to the Net Policy Value
immediately prior to the deduction.
Monthly Deductions are due until the life insured reaches Attained Age 100.
The Monthly Deduction for any Policy Month is the sum of the following amounts
determined as of the beginning of that month.
(a) The Monthly Administrative Charge shown in the Table of Expense Charges in
the Policy Information section.
(b) The monthly cost of any Supplementary Benefits that are a part of this
policy, as determined in accordance with such Supplementary Benefits.
(c) The monthly Cost of Insurance for the life insured.
COST OF INSURANCE. The Cost of Insurance for a specific Policy Month is the rate
for the Cost of Insurance for that month, as described below, multiplied by the
net amount at risk. The net amount at risk is equal to the greater of zero, or
the result of (a) minus (b) where:
(a) is the Death Benefit as of the first day of the month, divided by the Death
Benefit Discount Factor shown in the Policy Information section; and
(b) is the Policy Value as of the first day of the month.
The rates for the Cost of Insurance, as of the Policy Date and subsequently for
each increase in Face Amount, are based on the life insured's Issue Age, Sex and
Risk Classification, and the duration that the coverage has been in force. We
will determine Cost of Insurance Rates from time to time, on a basis which does
not discriminate unfairly within any class of lives insured.
The Cost of Insurance calculation will reflect any Additional Rating shown in
the Policy Information section. The Cost of Insurance Rates will never be more
than those shown in the Table of Maximum Cost of Insurance Rates on page 4 plus
any Additional Rating.
(continued)
Page 7
<PAGE> 9
POLICY VALUE (continued)
SURRENDER CHARGE. We deduct a Surrender Charge from your Policy Value if during
the Surrender Charge Period:
(a) you surrender the policy for its Net Cash Surrender Value;
(b) you make a partial withdrawal of the Net Cash Surrender Value above the Free
Withdrawal Amount;
(c) you reduce the Face Amount; or
(d) this policy goes into default and terminates at the end of a Grace Period.
See the Surrender for Cash provision for details.
POLICY VALUE COMPOSITION
Your Policy Value at any time is equal to the sum of the values you have in the
Loan Account, the Guaranteed Interest Account, and the Investment Accounts.
LOAN ACCOUNT VALUE. The amount you have in the Loan Account at any time equals:
(a) amounts transferred to it for loans or borrowed loan interest; plus
(b) interest credited to it; less
(c) amounts transferred from it for loan repayment.
For details of the Loan Account see the Policy Loan Conditions provision.
GUARANTEED INTEREST ACCOUNT VALUE. The amount you have in the Guaranteed
Interest Account at any time equals:
(a) Net Premiums allocated to it; plus
(b) amounts transferred to it; plus
(c) interest credited to it; less
(d) amounts deducted from it; less
(e) amounts transferred from it; less
(f) amounts withdrawn from it.
Interest will be credited to amounts in the Guaranteed Interest Account, at an
effective annual rate of no less than the Guaranteed Interest Account Minimum
Annual Rate shown in the Policy Information section. The actual rates will be
set by us from time to time. For all transactions, interest is calculated from
the date of the transaction.
INVESTMENT ACCOUNTS VALUE. The amount you have in an Investment Account at any
time equals the number of units in that Investment Account multiplied by the
unit value of the corresponding Sub-Account at that time.
The number of units in an Investment Account at any time equals (a) minus (b),
where:
(a) is the number of units credited to the Investment Account because of:
(1) Net Premiums allocated to it; and
(2) amounts transferred to it; and
(b) is the number of units canceled from the Investment Account because of:
(1) amounts deducted from it;
(2) amounts transferred from it; and
(3) amounts withdrawn from it.
The number of units credited or canceled for a given transaction is equal to the
dollar amount of the transaction, divided by the unit value on the Business Day
of the transaction. See the Unit Value Calculation section of the Separate
Account and Sub-Accounts provision for details on how unit values are
determined.
SEPARATE ACCOUNT AND SUB-ACCOUNTS
The Separate Account is authorized to invest in the shares of Manufacturers
Investment Trust or another management investment company. Each Sub-Account of
the Separate Account purchases shares of a corresponding Fund of Manufacturers
Investment Trust or another management investment company. The Funds are listed
in the Policy Information section.
(continued)
Page 8
<PAGE> 10
SEPARATE ACCOUNT AND SUB-ACCOUNTS (continued)
FUND SUBSTITUTION. A Fund might, in our judgment, become unsuitable for
investment by a Sub-Account. This might happen because of a change of investment
policy; or a change in the applicable laws or regulations; or because the shares
are no longer available for investment; or for some other reason.
If a Fund becomes unsuitable for investment, we have the right to substitute
another Fund or another management investment company. Before doing this, we
would first seek, where required, approval from the Securities and Exchange
Commission and the Insurance Commissioner of the state in which this policy is
delivered.
To the extent permitted by applicable federal and state law, we also have the
right, without your approval, to:
(a) create new separate accounts;
(b) combine any two or more separate accounts including the Separate Account;
(c) make available additional Sub-Accounts investing in additional Funds of
Manufacturers Investment Trust or another management investment company;
(d) eliminate existing Sub-Accounts and stop accepting new allocations and
transfers into the corresponding Fund;
(e) operate the Separate Account as a management investment company under the
Investment Company Act of 1940 or in any other form permitted by law;
(f) de-register the Separate Account under the Investment Company Act of 1940;
(g) transfer assets between the Separate Account and other separate accounts;
and
(h) transfer assets in one Sub-Account to another Sub-Account.
The investment objectives of a Sub-Account within the Separate Account will not
be changed materially without first filing the change with the Insurance
Commissioner of our state of domicile. We will inform you of any changes deemed
to be material.
UNIT VALUE CALCULATION. We will determine the unit values for each Sub-Account
as of the end of each Business Day. When we need to determine a Policy Value or
an amount after the end of a Business Day, or on a day that is not a Business
Day, we will do so as of the next Business Day.
The unit value for each Sub-Account was established at $10 for the first
Business Day that an amount was allocated, or transferred to the particular
Sub-Account. For any subsequent Business Day, the unit value for that
Sub-Account is obtained by multiplying the unit value for the immediately
preceding Business Day by the net investment factor for the particular
Sub-Account on such subsequent Business Day.
NET INVESTMENT FACTOR. The net investment factor for a Sub-Account on any
Business Day is equal to (a) divided by (b) minus (c), where:
(a) is the net asset value of the underlying Fund shares held by that
Sub-Account as of the end of such Business Day before any policy
transactions are made on that day;
(b) is the net asset value of the underlying Fund shares held by that
Sub-Account as of the end of the immediately preceding Business Day after
all policy transactions were made for that day; and
(c) is a charge not exceeding the daily Mortality and Expense Risk Charge shown
in the Table of Expense Charges in the Policy Information section.
We reserve the right to adjust the above formula for any taxes determined by us
to be attributable to the operations of the Sub-Account.
SEPARATE ACCOUNT ASSETS. The assets held in each Sub-Account are used to support
the Policy Values of Single and Flexible Premium Variable Life Insurance
policies. The Separate Account will be used to fund only variable life insurance
benefits.
Income, gains and losses of the Separate Account are credited to, or charged
against, the applicable Sub-Accounts without regard to our other income, gains
and losses.
(continued)
Page 9
<PAGE> 11
SEPARATE ACCOUNT AND SUB-ACCOUNTS (continued)
The assets of the Separate Account are our property. The part of the assets that
is equal to the Investment Account values in respect of all Single and Flexible
Premium Variable Life Insurance policies will not be charged with liabilities
from any other business we conduct. We can transfer any Separate Account assets
in excess of those Investment Account values to our general account.
INVESTMENT OPTIONS
ALLOCATIONS. Net Premiums may be allocated to the Guaranteed Interest Account or
any of the Investment Accounts. You specified the initial premium allocation in
your application for this policy, a copy of which is attached to this policy.
Unless these allocation percentages are changed, they will continue to apply to
subsequent premium payments. Allocation percentages must be greater than or
equal to zero and less than or equal to 100, and the sum of the allocation
percentages must equal 100. You may change the allocation percentages by Written
Request to our Service Office. The change will take effect on the date we
receive it at our Service Office.
Premiums received prior to the Initial Allocation Date, shown in the Policy
Information section, will initially be invested in the Money Market Trust, on
the later of the Effective Date or the Business Day they are received by us. On
the Initial Allocation Date, the amount in the Money Market Trust will be
transferred to the Guaranteed Interest Account and the Investment Accounts
according to your initial premium allocation.
TRANSFERS. After the Initial Allocation Date, by Written Request, you may
transfer portions of your Policy Value among the Investment Accounts and the
Guaranteed Interest Account. Transfers will incur a Transfer Charge, which is
shown in the Policy Information section. Transfers involving the Guaranteed
Interest Account are subject to the following restrictions:
(a) the maximum amount that can be transferred out of the Guaranteed Interest
Account in any one Policy Year is limited to the Maximum Guaranteed Interest
Account Transfer Amount shown in the Policy Information section;
(b) 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;
(c) we will consider all transfer requests received on the same Business Day as
one transfer; and
(d) if a transfer would result in more than a 5% reduction in the number of
shares outstanding at the close of the previous Business Day in the Equity
Index Sub-Account, we can decline the transfer. If at a later date you wish
to make a previously declined transfer, we will require a new transfer
request.
POLICY LOAN CONDITIONS
At any time while this policy is in force and has a loan value, you can get a
loan by Written Request. We will require a loan agreement from you as the policy
is the only security for the loan.
AVAILABLE LOAN VALUE. The available loan value on any date is the Net Cash
Surrender Value, less the monthly deductions due to the next Policy Anniversary.
LOAN ACCOUNT. When you take out a loan, or when loan interest charges are
borrowed, we will do a transfer from the Guaranteed Interest Account and/or one
or more of the Investment Accounts into the Loan Account.
You may tell us how much of the amount to be transferred to the Loan Account you
wish to allocate to your value in the Guaranteed Interest Account and each of
the Investment Accounts. If you do not tell us, we will allocate the amounts to
be transferred in the same proportion that your value in the Guaranteed Interest
Account and the Investment Accounts bears to the Net Policy Value.
(continued)
Page 10
<PAGE> 12
POLICY LOAN CONDITIONS (continued)
When an amount to be transferred is allocated to an Investment Account, we will
redeem units of that Investment Account sufficient in value to cover the
allocated amount. These transfers do not count as a transfer for the purposes of
the Transfers section of the Investments Options provision.
LOAN INTEREST CHARGED. Interest will accrue daily on loans. In the event that
you do not pay the Loan Interest Charged in any Policy Year, it will be borrowed
against the policy and added to the Policy Debt in arrears as of the Policy
Anniversary. We will allocate the amount borrowed for interest payment in the
same proportion that your value in the Guaranteed Interest Account and the
Investment Accounts bears to the Net Policy Value as of the Policy Anniversary.
The rate of interest charged is fixed at the effective annual Loan Interest
Charged Rate shown in the Policy Information section.
LOAN INTEREST CREDITED. Interest will accrue daily to amounts in the Loan
Account at an effective annual rate of no less than the Guaranteed Loan Interest
Credited Minimum Annual Rate shown in the Policy Information section.
The difference between the rate at which interest is credited to the Loan
Account and the rate at which it is being charged to the Policy Debt is called
the Loan Spread. The Loan Spread is shown in the Policy Information section.
LOAN REPAYMENT. You may repay the Policy Debt in whole or in part at any time
prior to the death of the life insured, and while the policy is in force.
When you repay a loan, we will transfer an amount equal to the amount paid from
the Loan Account to the Guaranteed Interest Account and/or the Investment
Accounts. The amount transferred will be allocated to the Guaranteed Interest
Account and the Investment Accounts in the same proportion that the Policy Value
in each of these accounts bears to the Net Policy Value.
While a loan exists, we will treat the amounts you pay as premiums unless you
request in writing that they be treated as loan repayments.
CHANGING THE DEATH BENEFIT OPTION OR FACE AMOUNT
You may change your Death Benefit Option or your Face Amount by Written Request.
CHANGE FROM DEATH BENEFIT OPTION 1 TO OPTION 2. The Face Amount after the change
from Option 1 to Option 2 will be (a) minus (b), where:
(a) is the Face Amount immediately before the change, and
(b) is the Policy Value as of the effective date of the change.
A Surrender Charge will not be deducted from the Policy Value due to the
decrease in Face Amount.
CHANGE FROM DEATH BENEFIT OPTION 2 TO OPTION 1. The Face Amount after the change
from Option 2 to Option 1 will be (a) plus (b), where:
(a) is the Face Amount immediately before the change, and
(b) is the Policy Value as of the effective date of the change.
We will not increase the Surrender Charge because of the increase in the Face
Amount of insurance resulting from this change.
DECREASE IN FACE AMOUNT. A decrease in Face Amount will reduce the Face Amount
in the following order:
(a) the Face Amount provided by the most recent increase first; followed by
(b) the next most recent increase until all increases are reduced; then
(c) the initial Face Amount.
(continued)
Page 11
<PAGE> 13
CHANGING THE DEATH BENEFIT OPTION OR FACE AMOUNT (continued)
If you decrease the initial Face Amount or an increase in Face Amount during the
Surrender Charge Period, we will deduct a Surrender Charge from the Policy
Value. See the Decreases in Face Amount Section of the Surrender For Cash
provision for details.
INCREASE IN FACE AMOUNT. For an increase in the Face Amount of insurance, you
must provide us with evidence of insurability on the life insured that is
satisfactory to us.
We reserve the right to refuse increases if the life insured's Attained Age at
the effective date of the increase is greater than the maximum issue age for new
policies at that time.
If, at the time of the increase, there have been prior decreases in Face Amount
such that the current Face Amount is less than the previous highest Face Amount,
then these prior decreases will be increased first. The insurance coverage
eliminated by the decrease of the oldest Face Amount will be deemed to be
restored first. There will be no new Surrender Charges associated with increases
of this type.
After all prior decreases have been increased, a new Face Amount coverage will
be added. There will be a new Target Premium amount as well as a new Surrender
Charge. We will inform you of these amounts at the time of the increase in Face
Amount. There is no additional premium necessarily required with an increase in
Face Amount, however the new Surrender Charge may require an additional premium
payment to avoid the policy going into default.
A portion of premiums paid concurrent with and subsequent to the increase will
be deemed attributable to such increase for Surrender Charge purposes. In any
Policy Year, the premiums attributable to the increase in Face Amount will be
the amount of premiums in excess of the sum of (a) and (b) where:
(a) is the Target Premium for the initial Face Amount, if the increase occurs
during the first five Policy Years; and
(b) is the Target Premium for all prior increases that are in effect at the time
of the increase and have been in effect for less than five years.
EFFECTIVE DATE OF CHANGES. Changes may be made only on the first day of a Policy
Month. A Written Request for a change in Death Benefit Option or decrease in the
Face Amount must be received at least 30 days prior to the first day of a Policy
Month for the change to take effect as of that Policy Month. Increases in the
Face Amount will take effect at the beginning of the Policy Month following the
date we approve the request.
EFFECT ON PREMIUM LIMITATIONS. A change in Death Benefit Option or Face Amount
may cause a change in the maximum amount of premium that is allowed to be paid
into the policy. We will inform you of any such change.
We reserve the right to refuse or limit any request for a change if the change
would cause the policy to fail to qualify as life insurance for tax purposes.
SURRENDER FOR CASH
You may surrender this policy for its Net Cash Surrender Value at any time prior
to the death of the life insured. We will determine the Net Cash Surrender Value
as of the end of the Business Day on which we receive the policy and your
Written Request for surrender at our Service Office. We will pay you the Net
Cash Surrender Value. After the date of surrender, no insurance will be in
force.
SURRENDER CHARGE. If you surrender this policy for its Net Cash Surrender Value,
or if it terminates at the end of a Grace Period during the period that
Surrender Charges apply, we will deduct a Surrender Charge from the Policy
Value. The amount of the Surrender Charge is shown in the Policy Information
section.
(continued)
Page 12
<PAGE> 14
SURRENDER FOR CASH (continued)
DECREASES IN FACE AMOUNT. If the Face Amount is reduced, we will deduct from the
Policy Value a pro-rata Surrender Charge. Such deduction will be allocated to
the Guaranteed Interest Account and the Investment Account in the same
proportion as the Policy Value in each of these accounts bears to the Net Policy
Value. The pro-rata Surrender Charge will equal the sum of the pro-rata
Surrender Charges for the initial Face Amount and any previous increase in Face
Amount. The pro-rata Surrender Charge for the initial Face Amount or any
increase in Face Amount will equal (a) divided by (b), multiplied by (c), where:
(a) is the amount of the decrease in the initial Face Amount or previous
increase in Face Amount,
(b) is the amount of the corresponding initial Face
(c) Amount or previous increase in Face Amount, prior to the decrease and,
(d) is the Surrender Charge for the corresponding initial Face Amount or
previous increase in Face Amount, immediately prior to the decrease.
When a pro-rate Surrender Charge is taken, the remaining Surrender Charge will
be reduced by the amount of the charges taken. We will send you a new table
which reflects this change.
Decreases in Face Amount caused by:
(a) a change from Death Benefit Option 1 to Option 2, or
(b) a partial Net Cash Surrender Value withdrawal when Death Benefit Option 1 is
in effect,
are exempt from this provision and will not incur the pro-rata Surrender Charge
described above.
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. While there is a Net Cash Surrender
Value for this policy, you may request a partial Net Cash Surrender Value
withdrawal. The partial Net Cash Surrender Value withdrawal will be done as of
the end of the Business Day on which we receive your Written Request.
You may specify the accounts from which we should make the Partial Net Cash
Surrender Value withdrawal. If we do not receive such instructions, we will make
the withdrawal in the same proportion that the value in the Guaranteed Interest
Account and the Investment Accounts bears to the Net Policy Value.
FREE WITHDRAWAL AMOUNT. The Free Withdrawal Amount at any date is equal to (a)
multiplied by (b), minus (c) where:
(a) is the Free Withdrawal Percentage shown in the Policy Information section;
(b) is the Net Cash Surrender Value on the date of the partial Net Cash
Surrender Value withdrawal; and
(c) is the sum of all previous partial Net Cash Surrender Value withdrawals
taken during the current Policy Year.
PRO-RATA SURRENDER CHARGE. If a partial Net Cash Surrender Value withdrawal is
above the Free Withdrawal Amount, we will deduct from the Policy Value a
pro-rata Surrender Charge. We will not deduct any Surrender Charge from the
Policy Value if the sum of partial Net Cash Surrender Value withdrawals in any
Policy Year is below the Free Withdrawal Amount.
The pro-rata Surrender Charge is equal to the sum of the pro-rata Surrender
Charges for the initial Face Amount and any previous increase in Face Amount.
The pro-rata Surrender Charge for the initial Face Amount or any increase in
Face Amount will equal (a) divided by (b), multiplied by (c), where:
(a) is the amount of partial Net Cash Surrender Value withdrawal above the Free
Withdrawal Amount,
(b) is the Net Cash Surrender Value prior to the withdrawal, and
(c) is the Surrender Charge for the corresponding initial Face Amount or
previous increase in Face Amount immediately prior to the withdrawal.
(continued)
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<PAGE> 15
SURRENDER FOR CASH (continued)
When a pro-rata Surrender Charge is taken, the remaining Surrender Charge will
be reduced by the amount of the charges taken. We will send you a new table
which reflects this change.
If Death Benefit Option 1 is in effect at the time of the withdrawal, then the
Face Amount will be reduced by:
(a) the amount of the withdrawal plus the pro-rata Surrender Charge, if at the
time of the withdrawal the Death Benefit equals the Face Amount; otherwise
(b) the amount, if any, by which the withdrawal plus the pro-rata Surrender
Charge exceeds the difference between the Death Benefit and the Face Amount.
If there has been a prior increase in Face Amount, then the Face Amount will be
decreased in the same order as if the decrease was requested. See the Decrease
in Face Amount section of the Changing the Death Benefit Option or Face Amount
provision.
RIGHT TO POSTPONE PAYMENT OF BENEFITS
Except when used to pay premiums, we reserve the right to postpone the payment
of Net Cash Surrender Values, partial Net Cash Surrender Value withdrawals,
policy loans and the portion of Insurance Benefit that depends on Investment
Account values, for any period during which:
(a) the New York Stock Exchange (Exchange) is closed for trading (other than
customary week-end and holiday closings), or trading on the Exchange is
otherwise restricted;
(b) an emergency exists as defined by the Securities and Exchange Commission
(SEC), or the SEC requires that trading be restricted; or
(c) the SEC permits a delay for the protection of policyholders.
We also reserve the right to postpone payments for up to six months if such
payments are based on values that do not depend on the investment performance of
the Sub-Accounts.
In addition, we may deny transfers under the circumstances stated in (a), (b)
and (c) above, and in the Transfers section of the Investment Options provision.
TERMINATION
DEFAULT. This policy will go into default if at the beginning of any Policy
Month, the Net Cash Surrender Value would go below zero after we take Monthly
Deductions that are due.
GRACE PERIOD. We will allow 61 days from the date that the policy goes into
default, for you to pay the amount that is required to bring the policy out of
default. At least 30 days prior to the termination of coverage, we will send a
notice to your last known address, specifying the amount you must pay to bring
the policy out of default. The amount is equal to (a) plus (b) plus (c) where:
(a) is the amount necessary to bring the Net Cash Surrender Value to zero if it
is less than zero at the date of default; and
(b) is the Monthly Deductions due, plus the next two Monthly Deductions; and
(c) is the applicable Premium Load.
TERMINATION DATE. This policy terminates on the earliest of the following dates:
(a) at the end of the grace period for which you have not paid any amount that
is due;
(b) on the date you surrender the policy for its Net Cash Surrender Value; or
(c) on the date the life insured dies.
If you surrender the policy for its Net Cash Surrender Value, as in (b) above,
we will pay you the Net Cash Surrender Value as of the date of termination.
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<PAGE> 16
REINSTATEMENT
You can reinstate this policy only if it terminated at the end of a grace period
in which you did not make a required payment. You can reinstate the policy if
you:
(a) make a Written Request for reinstatement within five years after your policy
terminates;
(b) provide us with written evidence of the life insured's insurability that is
satisfactory to us; and
(c) pay a premium equal to the amount that was required during the 61-day grace
period following default; plus the amount required to carry your policy to
the next scheduled date for payment of the Planned Premium.
If we approve your request, the reinstatement date will be the later of the date
of your request or the date we receive the required payment at our Service
Office.
RIGHT TO CANCEL INCREASES
If you request an increase in Face Amount which results in a new Surrender
Charge, you have the same rights to cancel the increase as described under the
Right to Return Policy. If canceled, the Policy Value and the Surrender Charge
will be recalculated to the amounts they would have been, had the increase not
taken place.
AGE AND SEX
If the life insured's age or sex was misstated in the application, we will
change the Face Amount. The new Face Amount will be determined so that the Death
Benefit will be that which the most recent Cost of Insurance deduction would
have purchased for the correct age and sex.
SUICIDE
If the life insured dies by suicide, whether sane or insane, within two years
after the Issue Date, we will pay only the premiums paid, less any partial Net
Cash Surrender Value withdrawals, less the amount of the Policy Debt. If the
life insured dies by suicide, whether sane or insane, within two years after the
date an increase in Face Amount takes effect, the Death Benefit for that
increase will be limited to the Monthly Deductions for the increase.
We reserve the right under this provision to obtain evidence of the manner and
cause of death.
BENEFICIARY
The following four sections will apply unless there is a beneficiary appointment
in force which provides otherwise.
BENEFICIARY CLASSIFICATION. You can appoint beneficiaries for any Insurance
Benefit in three classes: primary, secondary, and final. Beneficiaries in the
same class will share equally in any Insurance Benefit payable to them.
PAYMENT TO BENEFICIARIES. We will pay the Insurance Benefit:
(a) to any primary beneficiaries who are alive when the life insured dies; or
(b) if no primary beneficiary is then alive, to any secondary beneficiaries who
are then alive; or
(c) if no primary or secondary beneficiary is then alive, to any final
beneficiaries who are then alive.
CHANGE OF BENEFICIARY. Until the life insured's death you can change the
beneficiary by Written Request, unless you make an irrevocable designation. We
are not responsible if the change does not achieve your purpose.
(continued)
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<PAGE> 17
BENEFICIARY (continued)
DEATH OF BENEFICIARY. If no beneficiary is alive when the life insured dies, the
Insurance Benefit will belong to you; or to your estate if you are the life
insured. If a beneficiary dies before the seventh day after the death of the
life insured, we will pay the Insurance Benefit as if the beneficiary had died
before the life insured.
OWNERSHIP AND ASSIGNMENT
Until the life insured's death, without the consent of any beneficiary, except
an irrevocable beneficiary, you as owner can:
(a) receive any amount payable under your policy;
(b) exercise all rights and privileges granted by your policy; and
(c) assign the policy.
An assignment does not bind us until we receive it at our Service Office. We are
not responsible for its validity or its effects. It should be filed with us in
duplicate. We will return a copy.
TRUSTEE OWNER. Should the owner be a trustee, payment to the trustee(s) of any
amount to which the trustee(s) is (are) entitled under the policy, either by
death or otherwise, will fully discharge us from all liability under the policy
to the extent of the amount so paid.
SUCCESSOR OWNER. Upon the owner's death during the lifetime of the life insured,
a named successor owner will, if then living, have all the owner's rights and
interest in the policy. During the life insured's lifetime the owner, without
the consent of any beneficiary or any successor owner, can cancel or change the
designation of successor owner from time to time by agreement in writing with
us.
PROTECTION AGAINST CREDITORS
If permitted by state law, all payments shall be exempt from the payee's debts
and contracts of the owners and beneficiaries, and from seizure by court order.
CURRENCY AND PLACE OF PAYMENT
All payments to or by us will be in U.S. currency. We will make payments from
our Service Office. We may require proof that the person claiming any payment is
entitled to it.
CONTRACT
The policy and application form your whole contract. A copy of the application
is attached to the policy and deemed a part of it. We will not be bound by any
statement that is not in the application or the policy.
Only our President or one of our Vice-Presidents can agree to amend or modify
the policy or waive any of its provisions. Any change must be in writing.
Statements made by you or the life insured are representations, not warranties,
unless fraud is involved. We will not use any statement by you or the life
insured to deny a claim, unless it is written in the application.
VALIDITY
We have the right to contest the validity of this policy based on material
misstatements made in the initial application or an application for policy
change that requires evidence of insurability. However, we cannot contest the
validity of your policy after it has been in force during the lifetime of the
life insured for two years from the Issue Date.
We cannot contest the validity of an increase in Face Amount or an addition of a
Supplementary Benefit after such increase or addition has been in force during
the lifetime of the life insured for two years from the date of such increase or
addition.
We can contest after two years if the policy has been reinstated and has been in
force during the lifetime of the life insured for less than two years from the
reinstatement date. If this is the case, we can only contest the validity in
respect of any fact material to the reinstatement that was misrepresented.
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<PAGE> 18
NON-PARTICIPATING
Your policy is non-participating. It does not earn dividends.
HOW VALUES ARE COMPUTED
We provide Cash Surrender Values that are at least equal to those required by
law. A detailed statement of the method of computing the values of this policy
has been filed with the insurance department of the state in which this policy
is delivered.
We base minimum Cash Surrender Values and reserves on the Commissioners 1980
Standard Ordinary Mortality Table. We also use these tables as the basis for
determining maximum Cost of Insurance Rates. Values relating to amounts in the
Guaranteed Interest Account are computed at an interest rate of 4.00% per year.
ANNUAL STATEMENT
Within 30 days after each Policy Anniversary, we will send you a report showing:
(a) the Death Benefit;
(b) the Policy Value;
(c) the current allocation of money in the Guaranteed Interest Account, the Loan
Account and each of the Investment Accounts;
(d) the value of the units in each chosen Investment Account;
(e) any Policy Debt balance and loan interest charged since the last report;
(f) the premiums paid and policy transactions for the year; and
(g) any further information required by law.
TAX CONSIDERATIONS
It is the intent of this policy to be considered as life insurance for tax
purposes. The Death Benefit is designed to comply with Section 7702 of the
Internal Revenue Code of 1986 or any other equivalent section of the Code.
We do not give tax advice and this provision should not be construed to mean
that the Death Benefit and Policy Value will be exempt from the future actions
of any tax authority.
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<PAGE> 19
ENDORSEMENT
UNISEX
In order to provide insurance on a unisex basis, all references in this policy
to the sex of the life insured are hereby withdrawn. This policy is further
amended as described below.
AFFECTED PROVISION AMENDMENT
Age and Sex Reference to the life insured's sex does not
apply. No change will be made because of a
misstatement of sex.
How Values are Computed The Commissioners 1980 Standard Ordinary
Mortality Table B is used.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
/s/ [Signature]
--------------------------
President
<PAGE> 20
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THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
A STOCK COMPANY
Service Office: 200 Bloor Street East, Toronto, Canada, M4W 1E5
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<TABLE>
<S> <C>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. CASH SURRENDER VALUES AND BENEFITS FOR A PORTION OF THE
ADJUSTABLE DEATH BENEFIT. POLICY VALUES ALLOCATED TO AN INVESTMENT ACCOUNT REFLECT
FLEXIBLE PREMIUMS PAYABLE TO ATTAINED AGE 100 DURING THE LIFE THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS.
INSURED'S LIFETIME. INVESTMENT OPTIONS ARE DESCRIBED IN THE "POLICY VALUE
COMPOSITION" AND THE "INVESTMENT OPTIONS" PROVISIONS.
NON-PARTICIPATING (NOT ELIGIBLE FOR DIVIDENDS).
</TABLE>
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IMPORTANT NOTICE
To claim a benefit or request a change in your policy,
contact our nearest representative. Or write to our
Service Office at the address above.
Please tell us promptly of any change in your address.
WE STRONGLY URGE THAT, BEFORE YOU TAKE ANY ACTION TO REPLACE
THIS OR ANY OTHER POLICY, YOU ASK THE ADVICE OF THE COMPANY
THAT ISSUED THE POLICY.
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[MANULIFE FINANCIAL LOGO]
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Manulife Financial and the block design are registered service marks of The
Manufactures Life Insurance Company and are used by it and its subsidiaries.
<PAGE> 21
SUPPLEMENTARY BENEFIT
FLEXIBLE TERM INSURANCE OPTION
TERM LIFE INSURANCE
This benefit is a part of your policy. The effective date is the same as the
Effective Date of your policy. The amount of the Insurance Benefit may vary as
described below. The insurance provided will be flexible term insurance to
Attained Age 100.
DEFINITIONS
DEATH BENEFIT SCHEDULE is the schedule of death benefits shown in the Policy
Information section of your policy.
SCHEDULED ANNUAL DEATH BENEFIT is the amount shown in the Death Benefit Schedule
for a given Policy Year.
TERM INSURANCE BENEFIT is the amount payable under this Supplementary Benefit.
INSURANCE BENEFIT
If the life insured dies while the policy is in force, we will pay the Term
Insurance Benefit on receiving due proof of death, subject to the Age and Sex,
Suicide, and the Validity provisions. If the life insured dies after we receive
your request for surrender of the policy, there will be no Term Insurance
Benefit. The life insured for this benefit is the same as the life insured for
the policy to which this benefit is attached.
TERM INSURANCE BENEFIT. The Term Insurance Benefit is determined on the first
day of each Policy Month. It is equal to (a) minus (b), but not less than zero,
where:
(a) is the Scheduled Annual Death Benefit for the Policy Year; and
(b) is the then current Face Amount, or, if the Death Benefit of the Policy is
determined by the Policy's Minimum Death Benefit Provision, the Minimum
Death Benefit.
It is possible that the Term Insurance Benefit could be zero for a Policy Month.
However, this will not terminate the rider.
BENEFIT COST
The monthly cost of the benefit is one of the Monthly Deductions under the
policy. The monthly cost is equal to (a) multiplied by (b) where:
(a) is the monthly Cost of Insurance rate; and
(b) is the Term Insurance Benefit divided by the Death Benefit Discount Factor
shown in the Policy Information section of your policy.
The rates for the Cost of Insurance are based on the life insured's Issue Age,
Sex and Risk Classification, and the duration that the benefit has been in
force. We will determine monthly Cost of Insurance rates from time to time, on a
basis which does not discriminate unfairly within any class of insureds. The
monthly cost of the benefit will reflect any Additional Rating shown for this
benefit in the Policy Information section of your policy. The monthly Cost of
Insurance rates will never be more than those shown in the Table of Maximum Cost
of Insurance Rates on page 4 of your policy, plus any Additional Rating shown in
the Policy Information section.
CHANGING THE DEATH BENEFIT SCHEDULE
You may change your Death Benefit Schedule by Written Request, subject to the
following:
(a) satisfactory evidence of insurability is required before the Death Benefit
Schedule may be increased;
(b) changes may be made only on the first day of a Policy Month;
(c) a Written Request for a change which results in only a decrease to the Death
Benefit Schedule must be received at least 30 days prior to the first day of
a Policy Month for the change to take affect as of that Policy Month;
(d) a change which results in an increase to the Death Benefit Schedule in any
Policy Year will take effect at the beginning of the Policy Month following
the date we approve the request;
(e) a decrease to the Death Benefit Schedule which results in a Scheduled Annual
Death Benefit less than the Face Amount in any Policy Year will cause a
decrease in the Face Amount. The Face Amount will be reduced to be equal to
the Scheduled Annual Death Benefit for such Policy Year. Surrender Charges
may be assessed as described in your Policy.
(continued)
Page 1
<PAGE> 22
FLEXIBLE TERM INSURANCE OPTION
TERM LIFE INSURANCE
A change to the Death Benefit Schedule may cause a change in the maximum amount
of premium that can be paid into the policy. We will inform you of any such
change.
We reserve the right to refuse or limit any request for a change if the change
would cause the policy to fail to qualify as life insurance for tax purposes.
POLICY CHANGES
CHANGE FROM DEATH BENEFIT OPTION 2 TO OPTION 1. If the Face Amount of the Policy
after a change in Death Benefit Option would be greater than the Scheduled
Annual Death Benefit in effect at the time of the change, the Face Amount after
the change will be set equal to the Scheduled Annual Death Benefit.
INCREASE OR DECREASE IN FACE AMOUNT. If the Face Amount of the policy is
increased or decreased, a corresponding increase or decrease of the same amount
will also be made to the Scheduled Annual Death Benefit for all Policy Years
after and including the effective date of the change. This provision does not
apply to increases or decreases in Face Amount due to a change in Death Benefit
Option.
FACE AMOUNT GREATER THAN SCHEDULED ANNUAL DEATH BENEFIT. If in any Policy Year,
the Face Amount is greater than the Scheduled Annual Death Benefit for that
Policy Year, the Face Amount will be reduced to be equal to the Scheduled Annual
Death Benefit. Surrender Charges may be assessed as described in your Policy.
BENEFICIARY
The beneficiary will be as designated in the application for this benefit,
unless changed as provided for in the policy.
AGE AND SEX
If the life insured's age or sex (if applicable) was misstated in the
application, we will change the Death Benefit Schedule. The new Death Benefit
Schedule will be determined so that the Death Benefit will be that which the
most recent Cost of Insurance deduction would have purchased for the correct age
and sex (if applicable).
SUICIDE
The suicide period for this benefit will be the same as for the policy to which
it is attached, and it will start on the effective date of the benefit, or the
effective date of an increase in amount as appropriate. If the life insured dies
by suicide, whether sane or insane, during the suicide period, the Term
Insurance Benefit will be limited to the monthly cost for the benefit, or the
monthly cost for an increase to the Death Benefit Schedule as appropriate.
VALIDITY
The validity period for this benefit will be the same as for the policy to which
it is attached, and it will start on the effective date of the benefit, or the
effective date of an increase to the Death Benefit Schedule as appropriate.
GENERAL PROVISION
This benefit is part of the policy to which it is attached. Except where the
benefit provides otherwise, it is subject to all provisions of the policy.
TERMINATION
The benefit terminates on the termination date of the policy. By Written
Request, you can terminate the benefit at the end of the Policy Month in which
we receive your request.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
/s/ [Signature]
----------------------------
President
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