<PAGE> 1
As filed with the Securities and Exchange Commission on April 27, 2000.
Registration No. 333-51293
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT ON 1933 OF
SECURITIES ON UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
POST-EFFECTIVE AMENDMENT NO. 2
SEPARATE ACCOUNT FOUR OF
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA
(Exact name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
(Name of Depositor)
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of Depositor's Principal Executive Offices)
<TABLE>
<CAPTION>
<S> <C>
James D. Gallagher Copy to:
Secretary and General Counsel J. Sumner Jones, Esq.
The Manufacturers Life Insurance Company of America Jones & Blouch L.L.P.
73 Tremont Street 1025 Thomas Jefferson Street, NW
Boston, MA 02108 Washington, DC 20007
(Name and Address of Agent for Service)
</TABLE>
It is proposed that this filing will become effective:
[___] immediately upon filing pursuant to paragraph (b) of Rule 485
[_X_] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[___] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[___] on (date) pursuant to paragraph (a)(2) of Rule 485
<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 *
<PAGE> 3
21 Policy Loans
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)
<PAGE> 4
47 General Information About Manufacturers (Manufacturers Investment
Trust)
48 *
49 *
50 General Information About Manufacturers
51 Issuing a Policy; Death Benefits; Premium Payments; Charges and
Deductions; Policy Value; Policy Loans; Policy Surrender and Partial
Withdrawals; Lapse and Reinstatement; Other Policy Provisions
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
PART I
INFORMATION CONTAINED IN THE PROSPECTUS
<PAGE> 6
PROSPECTUS
SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CORPORATE VUL
A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
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," "Manufacturers Life Of America," "we" or
"us").
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 Manufacturers 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 (the "SEC") maintains a web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the SEC.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE TRUST.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Manufacturers Life Insurance Company of America
500 North Woodward Avenue
Bloomfield Hills, Michigan 48304
THE DATE OF THIS PROSPECTUS IS MAY 1, 2000.
COLI.PRO5/2000
2
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Cover Page........................................................................................................3
Table of Contents.................................................................................................3
Definitions.......................................................................................................5
Policy Summary....................................................................................................6
General........................................................................................................6
Death Benefits.................................................................................................7
Premiums.......................................................................................................7
Policy Value...................................................................................................7
Policy Loans...................................................................................................7
Surrender and Partial Withdrawals..............................................................................7
Lapse and Reinstatement........................................................................................7
Charges and Deductions.........................................................................................7
Investment Options and Investment Advisers.....................................................................8
Table of Charges and Deductions................................................................................8
Table of Investment Management Fees and Expenses...............................................................9
Table of Investment Options and Investment Subadvisers........................................................11
General Information about Manufacturers Life of America, the Separate Account and the Trust......................13
Manufacturers Life of America.................................................................................13
The Separate Account..........................................................................................13
The Trust.....................................................................................................14
Investment Objectives of the Portfolios.......................................................................14
Issuing A Policy.................................................................................................18
Use of the Policy.............................................................................................18
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......................................................................................23
Premium Payments.................................................................................................24
Initial Premiums..............................................................................................24
Subsequent Premiums...........................................................................................24
Maximum Premium Limitation....................................................................................24
Premium Allocation............................................................................................25
Charges and Deductions...........................................................................................25
Amount Deducted from Premiums................................................................................25
Surrender Charges.............................................................................................25
Monthly Charges...............................................................................................26
Charges Assessed Against Assets of the Investment Accounts....................................................27
Charges for Transfers.........................................................................................27
Company Tax Considerations....................................................................................28
Policy Value.....................................................................................................28
Determination of the Policy Value.............................................................................28
Units and Unit Values.........................................................................................28
Transfers of Policy Value.....................................................................................29
Policy Loans.....................................................................................................30
Maximum Loan..................................................................................................30
Effect of Policy Loan.........................................................................................30
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
Interest Charged on Policy Loans..............................................................................30
Loan Account..................................................................................................30
Policy Surrender and Partial Withdrawals.........................................................................31
Policy Surrender..............................................................................................31
Partial Withdrawals...........................................................................................31
Lapse and Reinstatement..........................................................................................32
Lapse.........................................................................................................32
Reinstatement.................................................................................................32
The General Account..............................................................................................32
Guaranteed Interest Account...................................................................................32
Other Provisions of the Policy...................................................................................33
Policyholder Rights...........................................................................................33
Beneficiary...................................................................................................33
Incontestability..............................................................................................34
Misstatement of Age or Sex....................................................................................34
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..........................................................................................40
Other Information................................................................................................40
Payment of Proceeds...........................................................................................40
Reports to Policyholders......................................................................................40
Distribution of the Policies..................................................................................40
Responsibilities of Manufacturers Life........................................................................41
Voting Rights.................................................................................................41
Substitution of Portfolio Shares..............................................................................42
Records and Accounts..........................................................................................42
State Regulations.............................................................................................42
Litigation....................................................................................................42
Independent Auditors..........................................................................................43
Further Information...........................................................................................43
Officers and Directors........................................................................................43
Year 2000 Issues..............................................................................................46
Death Benefit Schedule with Flexible Term Insurance Option.......................................................46
Appendix A -- Illustrations......................................................................................48
Appendix F -- Audited Financial Statements.......................................................................59
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS OF MANUFACTURERS INVESTMENT TRUST, OR THE
STATEMENT OF ADDITIONAL INFORMATION OF MANUFACTURERS INVESTMENT TRUST.
Examine this prospectus carefully. The Policy Summary will briefly describe the
Policy. More detailed information will be found further in the prospectus.
4
<PAGE> 9
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 satisfactory to the Company.
Effective Date
is the date 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 Incontestability provisions of the Policy are measured.
Loan Account
5
<PAGE> 10
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 coverage takes effect under the Policy, provided the Company
receives the minimum initial premium at its Service Office, and the date from
which charges for the first monthly deduction are calculated and 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.
6
<PAGE> 11
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 against the assets
7
<PAGE> 12
invested in the Investment 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 Subadvisers shows the subadvisers that
provide investment subadvisory services to the indicated Portfolios.
Allocating net premiums only to one or a small number of the investment options
(other than the Lifestyle Trusts) should not be considered a balanced investment
strategy. In particular, allocating net premiums to a small number of investment
options that concentrate their investments in a particular business or market
sector will increase the risk that the value of the Policy will be more volatile
since these investment options may react similarly to business or market
specific events. Examples of business or market sectors where this risk
historically has been and may continue to be particularly high include: (a)
technology related businesses, including internet related businesses, (b) small
cap securities and (c) foreign securities. The Company does not provide advice
regarding appropriate investment allocations, the policyowner should discuss
this matter with his or her financial adviser.
INVESTMENT MANAGEMENT FEES AND EXPENSES
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects investment management fees and certain
expenses. The fees and expenses of each Portfolio for the Trust's last fiscal
year are shown in the Table of Investment Management Fees and Expenses. These
fees and expenses are described in detail in the accompanying Trust prospectus
to which reference should be made.
TABLE OF CHARGES AND DEDUCTIONS
Amount Deducted from Premiums 2.00% of the premium paid.
Surrender Charges The Company will assess a Surrender Charge
if, during the first 10 years following
the Policy Date or the effective date of a
Face Amount increase, the Policy is
surrendered or lapses. The Surrender
Charge is 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> <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>
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.
8
<PAGE> 13
A portion of the Surrender Charge may be
assessed on a partial withdrawal or a
decrease in the Face Amount. See "Charges
and Deductions - Surrender Charges on a
Partial Withdrawal" and "Death Benefits -
Changing the Face Amount - Surrender
Charges Assessed on a Decrease."
Monthly Deductions The following charges will be deducted
from Net Policy Value:
An administration charge of $12.
The cost of insurance charge.
Any additional charges for supplementary
benefits.
Investment Account Charges A mortality and expense risk charge is
assessed daily against the value of the
Investment Account assets. This charge
varies by Policy Year as follows:
<TABLE>
<CAPTION>
Annual Mortality and
Policy Years Expense Risk Charge
<S> <C> <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> <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.
TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets for the fiscal year ended December
31, 1999)
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT) ANNUAL EXPENSES
- --------------- ---- -------------- ---------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets........ 0.850% 0.260% 1.110%
Internet Technologies............... 1.150% 0.136%(A) 1.286%
Science & Technology................ 1.100% 0.060% 1.160%
International Small Cap............. 1.100% 0.270% 1.370%
Aggressive Growth................... 1.000%(F) 0.130% 1.130%
Emerging Small Company.............. 1.050% 0.070% 1.120%
Small Company Blend................. 1.050% 0.250%(A) 1.300%(E)
Dynamic Growth...................... 1.000%(F) 0.132%(A) 1.132%
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Mid Cap Stock....................... 0.925% 0.100%(A) 1.025%(E)
All Cap Growth(H)................... 0.950%(F) 0.070% 1.020%
Overseas............................ 0.950% 0.260% 1.210%
International Stock................. 1.050% 0.200% 1.250%
International Value................. 1.000% 0.230%(A) 1.230%(E)
Mid Cap Blend....................... 0.850%(F) 0.060% 0.910%
Small Company Value................. 1.050% 0.170% 1.220%
Global Equity....................... 0.900% 0.160% 1.060%
Growth.............................. 0.850% 0.050% 0.900%
Large Cap Growth.................... 0.875%(F) 0.100% 0.975%
Quantitative Equity................. 0.700% 0.060% 0.760%
Blue Chip Growth.................... 0.875%(F) 0.050% 0.925%
Real Estate Securities.............. 0.700% 0.070% 0.770%
Value............................... 0.800% 0.070% 0.870%
Tactical Allocation................. 0.900% 0.127%(A) 1.027%
Equity Index(I)..................... 0.250% 0.150%(I) 0.400%(I)
Growth & Income..................... 0.750% 0.050% 0.800%
U.S. Large Cap Value................ 0.875% 0.070%(A) 0.945%(E)
Equity-Income....................... 0.875%(F) 0.060% 0.935%
Income & Value...................... 0.800%(F) 0.080% 0.880%
Balanced............................ 0.800% 0.070% 0.870%
High Yield.......................... 0.775% 0.065% 0.840%
Strategic Bond...................... 0.775% 0.095% 0.870%
Global Bond......................... 0.800% 0.180% 0.980%
Total Return........................ 0.775% 0.060%(A) 0.835%(E)
Investment Quality Bond............. 0.650% 0.120% 0.770%
Diversified Bond.................... 0.750% 0.090% 0.840%
U.S. Government Securities.......... 0.650% 0.070% 0.720%
Money Market........................ 0.500% 0.050% 0.550%
Small Cap Index..................... 0.525% 0.075%(AG) 0.600%
International Index................. 0.550% 0.050%(AG) 0.600%
Mid Cap Index....................... 0.525% 0.075%(AG) 0.600%
Total Stock Market Index............ 0.525% 0.075%(AG) 0.600%
500 Index(J)........................ 0.525% 0.039%(AG) 0.564%
Lifestyle Aggressive 1000(D)........ 0.075% 1.060%(B) 1.135%(C)
Lifestyle Growth 820(D)............. 0.057% 1.008%(B) 1.065%(C)
Lifestyle Balanced 640(D)........... 0.057% 0.928%(B) 0.985%(C)
Lifestyle Moderate 460(D)........... 0.066% 0.869%(B) 0.935%(C)
Lifestyle Conservative 280(D)....... 0.075% 0.780%(B) 0.855%(C)
</TABLE>
- -----------------
(A) Based on estimates to be made during the current fiscal year.
(B) Reflects expenses of the Underlying Portfolios.
(C) The investment adviser to the Trust, Manufacturers Securities Services, LLC
("MSS" or the "Adviser") has voluntarily agreed to pay certain expenses of
each Lifestyle Trust (excluding the expenses of the Underlying Portfolios)
as follows:
If total expenses of a Lifestyle Trust (absent reimbursement) exceed 0.075%,
the Adviser will reduce the advisory fee or reimburse expenses of that
Lifestyle Trust by an amount such that total expenses of the Lifestyle Trust
equal 0.075%. If the total expenses of a Lifestyle Trust (absent
reimbursement) are equal to or less than 0.075%, then no expenses will be
reimbursed by the Adviser. (For purposes of the expense reimbursement total
expenses of Lifestyle Trust includes the advisory fee but excludes: (a) the
expenses of the Underlying Portfolios, (b) taxes, (c) portfolio brokerage,
(d) interest, (e) litigation and (f) indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Trust's
business.)
10
<PAGE> 15
This voluntary expense reimbursement may be terminated at any time. If such
expense reimbursement was not in effect, Total Trust Annual Expenses would be
higher (based on current advisory fees and the Other Expenses of the
Lifestyle Trusts for the fiscal year ended December 31, 1999) as noted in the
chart below:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
--------------- ---- -------- ---------------
<S> <C> <C> <C>
Lifestyle Aggressive 1000........ 0.075% 1.090% 1.165%
Lifestyle Growth 820............. 0.057% 1.030% 1.087%
Lifestyle Balanced 640........... 0.057% 0.940% 0.997%
Lifestyle Moderate 460........... 0.066% 0.900% 0.966%
Lifestyle Conservative 280....... 0.075% 0.810% 0.885%
</TABLE>
(D) Each Lifestyle Trust will invest in shares of the Underlying Portfolios.
Therefore, each Lifestyle Trust will bear its pro rata share of the fees
and expenses incurred by the Underlying Portfolios in which it invests, and
the investment return of each Lifestyle Trust will be net of the Underlying
Portfolio expenses. Each Lifestyle Portfolio must bear its own expenses.
However, the Adviser is currently paying certain of these expenses as
described in footnote (C) above.
(E) Annualized - For the period May 1, 1999 (commencement of operations) to
December 31, 1999.
(F) Management Fees changed effective May 1, 1999. Fees shown are the current
management fees.
(G) MSS has voluntarily agreed to pay expenses of each Index Trust (excluding
the advisory fee) that exceed the following amounts: 0.050% in the case of
the International Index Trust and 500 Index Trust and 0.075% in the case of
the Small Cap Index Trust, the Mid Cap Index Trust and Total Stock Market
Index Trust. If such expense reimbursement were not in effect, it is
estimated that "Other Expenses" and "Total Trust Annual Expenses" would be
0.022% higher for the International Index Trust, 0.014% higher for the
Small Cap Index Trust, 0.060% higher for the Mid Cap Index Trust and 0.005%
higher for the Total Stock Market Index Trust. It is estimated that the
expense reimbursement will not be effective during the year end December
31, 2000 for the 500 Index Trust. The expense reimbursement may be
terminated at any time by MSS.
(H) Formerly, the Mid Cap Growth Trust.
(I) The Equity Index Trust is available for Policies issued to clients
(corporations or other entities) who as of May 1, 2000 have at least one
currently effective variable life insurance policy with the Company. Under
the Advisory Agreement, MSS has agreed to reduce its advisory fee or
reimburse the Equity Index Trust if the total of all expenses (excluding
advisory fees, taxes, portfolio brokerage commissions, interest, litigation
and indemnification expenses and other extraordinary expenses not incurred
in the ordinary course of the Trust's business) exceeds an annual rate of
0.15% of the average annual net assets of the Equity Index Trust. The
expense limitation may be terminated at any time by MSS. If this expense
reimbursement had not been in effect, Total Trust Annual Expenses would
have been 0.55%, and Other Expenses would have been 0.30%, of the average
annual net assets of the Equity Index Trust.
(J) For any policyowner who has allocated premiums to the 500 Index Trust, the
Company will waive contract charges by an amount sufficient so that the
total trust annual expenses for the 500 Index Trust will not exceed 0.40%
per annum on an annualized basis. This waiver may be terminated at any time
by the Company.
TABLE OF INVESTMENT OPTIONS AND INVESTMENT SUBADVISERS
The Trust currently has nineteen subadvisers who manage all of the portfolios,
one of which subadvisers is Manufacturers Adviser Corporation ("MAC"). Both MSS
and MAC are affiliates of Manufacturers Life of America.
<TABLE>
<CAPTION>
SUBADVISER PORTFOLIO
<S> <C>
A I M Capital Management, Inc. Aggressive Growth Trust
All Cap Growth Trust (C)
</TABLE>
11
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C>
AXA Rosenberg Investment Management LLC Small Company Value Trust
Capital Guardian Trust Company Small Company Blend Trust
U.S. Large Cap Value Trust
Income & Value Trust
Diversified Bond Trust
Fidelity Management Trust Company Mid Cap Blend Trust
Large Cap Growth Trust
Overseas Trust
Founders Asset Management LLC International Small Cap Trust
Balanced Trust
Franklin Advisers, Inc. Emerging Small Company Trust
Janus Capital Corporation Dynamic Growth Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Equity Index Trust(B)
Money Market Trust
Index Trusts
Lifestyle Trusts(A)
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Mitchell Hutchins Asset Management Inc. Tactical Allocation Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Munder Capital Management Internet Technologies Trust
Pacific Investment Management Company Global Bond Trust
Total Return Trust
Rowe Price-Fleming International, Inc. International Stock Trust
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
State Street Global Advisors Growth Trust
Lifestyle Trusts(A)
T. Rowe Price Associates, Inc. Science & Technology Trust
Blue Chip Growth Trust
Equity-Income Trust
Templeton Investment Counsel, Inc. International Value Trust
Wellington Management Company, LLP Growth & Income Trust
Investment Quality Bond Trust
Mid Cap Stock Trust
</TABLE>
12
<PAGE> 17
(A) State Street Global Advisors provides subadvisory consulting services to
Manufacturers Adviser Corporation regarding management of the Lifestyle
Trusts.
(B) The Equity Index Trust is available for policies issued to clients
(corporations and other entities) who as of May 1, 2000 have at least one
currently effective variable life insurance policy with the Company.
(C) Formerly, the Mid Cap Growth Trust.
Each of the Trust's Subadvisers, except Capital Guardian Trust Company, Fidelity
Management Trust Company and State Street Global Advisors, is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.
GENERAL INFORMATION ABOUT MANUFACTURERS
MANUFACTURERS LIFE OF AMERICA
We are a stock life insurance company organized under the laws of Pennsylvania
on April 11, 1977 and redomesticated under the laws of Michigan on December 9,
1992. We are a licensed life insurance company in the District of Columbia and
all states of the United States except New York. Our ultimate parent is Manulife
Financial Corporation ("MFC") a publicly traded company, based in Toronto,
Canada. MFC is the holding company of The Manufacturers Life Insurance Company
and its subsidiaries, collectively known as Manulife Financial. The
Manufacturers Life Insurance Company is one of the largest life insurance
companies in North America and ranks among the 60 largest life insurers in the
world as measured by assets. However, neither Manufacturers Life nor any of its
affiliated companies guarantees the investment performance of the Separate
Account.
RATINGS
Manufacturers Life and Manufacturers Life of America have received the following
ratings from independent rating agencies:
<TABLE>
<CAPTION>
<S> <C>
Standard and Poor's Insurance Ratings Service: AA+ (for financial strength)
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)
</TABLE>
These ratings, which are current as of the date of this prospectus and are
subject to change, are assigned to Manufacturers Life of America as a measure of
the Company's ability to honor the death benefit but not specifically to its
products, the performance (return) of these products, the value of any
investment in these products upon withdrawal or to individual securities held in
any portfolio.
THE SEPARATE ACCOUNT
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
13
<PAGE> 18
Separate Account. These assets may not be charged with liabilities which arise
from any other business Manufacturers Life of America conducts. However, all
obligations under the variable life insurance policies are general corporate
obligations of Manufacturers Life of America.
REGISTRATION
The Separate Account is registered with the SEC under the Investment Company Act
of 1940 ("1940 Act") as a unit investment trust. A unit investment trust is a
type of investment company which invests its assets in specified securities,
such as the shares of one or more investment companies, rather than in a
portfolio of unspecified securities. Registration under the 1940 Act does not
involve any supervision by the SEC. of the management or investment policies or
practices of the Separate Account. For state law purposes the Separate Account
is treated as a part or division of Manufacturers Life of America.
THE TRUST
Each sub-account of the Separate Account will purchase shares only of a
particular Portfolio of the Trust. 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 policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met. A
full description of the Trust, its investment objectives, policies and
restrictions, the risks associated therewith, its expenses, and other aspects of
its operation is contained in the accompanying Trust prospectus, which should be
read together with this prospectus.
ELIGIBLE PORTFOLIOS
The Portfolios of the Trust available under the Policies are as follows:
The PACIFIC RIM EMERGING MARKETS TRUST seeks long-term growth of capital by
investing in a diversified portfolio that is comprised primarily of common
stocks and equity-related securities of corporations domiciled in countries in
the Pacific Rim region.
The INTERNET TECHNOLOGIES TRUST seeks long-term capital appreciation by
investing the portfolio's assets primarily in companies engaged in
Internet-related business (such businesses also include Intranet-related
businesses).
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital by investing at
least 65% of the portfolio's total assets in common stocks of companies expected
to benefit from the development, advancement, and use of science and technology.
Current income is incidental to the portfolio's objective.
14
<PAGE> 19
The INTERNATIONAL SMALL CAP TRUST seeks capital appreciation by investing
primarily in securities issued by foreign companies which have total market
capitalization or annual revenues of $1 billion or less. These securities may
represent companies in both established and emerging economies throughout the
world.
The AGGRESSIVE GROWTH TRUST seeks long-term capital appreciation by investing
the portfolio's asset principally in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies which in the opinion of
the subadviser are expected to achieve earnings growth over time at a rate in
excess of 15% per year. Many of these companies are in the small and
medium-sized category.
The EMERGING SMALL COMPANY TRUST seeks long-term growth of capital by investing,
under normal market conditions, at least 65% of the portfolio's total assets in
common stock equity securities of companies with market capitalizations that
approximately match the range of capitalization of the Russell 2000 Index
("small cap stocks") at the time of purchase.
The SMALL COMPANY BLEND TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalizations
that approximately match the range of capitalization of the Russell 2000 Index
at the time of purchase.
The DYNAMIC GROWTH TRUST seeks long-term growth of capital by investing the
portfolio's assets primarily in equity securities selected for their growth
potential. Normally at least 50% of its equity assets are invested in
medium-sized companies.
The MID CAP STOCK TRUST seeks long-term growth of capital by investing primarily
in equity securities with significant capital appreciation potential, with
emphasis on medium-sized companies.
The ALL CAP GROWTH TRUST (formerly, Mid Cap Growth Trust) seeks long-term
capital appreciation by investing the portfolio's assets, under normal market
conditions, principally in common stocks of companies that are likely to benefit
from new or innovative products, services or processes, as well as those that
have experienced above-average, long-term growth in earnings and have excellent
prospects for future growth.
The OVERSEAS TRUST seeks growth of capital by investing, under normal market
conditions, at least 65% of the portfolio's assets in foreign securities
(including American Depositary Receipts (ADRs) and European Depositary Receipts
(EDRs)). The portfolio expects to invest primarily in equity securities.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by investing
primarily in common stocks of established, non-U.S. companies.
The INTERNATIONAL VALUE TRUST seeks long-term growth of capital by investing,
under normal market conditions, primarily in equity securities of companies
located outside the U.S., including emerging markets.
The MID CAP BLEND TRUST seeks growth of capital by investing primarily in common
stocks of U.S. issuers and securities convertible into or carrying the right to
buy common stocks.
The SMALL COMPANY VALUE TRUST seeks long-term growth of capital by investing,
under normal circumstances, at least 65% of the portfolio's assets in common
stocks of companies with total market capitalization that approximately match
the range of capitalization of the Russell 2000 Index and are traded principally
in the markets of the United States.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by investing
primarily in equity securities throughout the world, including U.S. issuers and
emerging markets.
15
<PAGE> 20
The GROWTH TRUST seeks long-term growth of capital by investing primarily in
large capitalization growth securities (market capitalizations of approximately
$1 billion or greater).
The LARGE CAP GROWTH TRUST seeks long-term growth of capital by investing, under
normal market conditions, at least 65% of the portfolio's assets in equity
securities of companies with large market capitalizations.
The QUANTITATIVE EQUITY TRUST seeks to achieve intermediate and long-term growth
through capital appreciation and current income by investing in common stocks
and other equity securities of well established companies with promising
prospects for providing an above average rate of return.
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of capital (current
income is a secondary objective) by investing at least 65% of the portfolio's
total assets in the common stocks of large and medium-sized blue chip companies.
Many of the stocks in the portfolio are expected to pay dividends.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of long-term
capital appreciation and satisfactory current income by investing in real estate
related equity and debt securities.
The VALUE TRUST seeks to realize an above-average total return over a market
cycle of three to five years, consistent with reasonable risk, by investing
primarily in common and preferred stocks, convertible securities, rights and
warrants to purchase common stocks, ADRs and other equity securities of
companies with equity capitalizations usually greater than $300 million.
The TACTICAL ALLOCATION TRUST seeks total return, consisting of long-term
capital appreciation and current income, by allocating the portfolio's assets
between (i) a stock portion that is designed to track the performance of the S&P
500 Composite Stock Price Index, and (ii) a fixed income portion that consists
of either five-year U.S. Treasury notes or U.S. Treasury bills with remaining
maturities of 30 days.
The EQUITY INDEX TRUST seeks to achieve investment results which approximate the
aggregate total return of publicly traded common stocks which are included in
the Standard & Poor's 500 Composite Stock Price Index. (The Equity Index Trust
is available for policies issued to clients (corporations and other entities)
who as of May 1, 2000 have at least one currently effective variable life
insurance policy with the Company.)
The GROWTH & INCOME TRUST seeks long-term growth of capital and income,
consistent with prudent investment risk, by investing primarily in a diversified
portfolio of common stocks of U.S. issuers which the subadviser believes are of
high quality.
The U.S. LARGE CAP VALUE TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalization
greater than $500 million.
The EQUITY-INCOME TRUST seeks to provide substantial dividend income and also
long-term capital appreciation by investing primarily in dividend-paying common
stocks, particularly of established companies with favorable prospects for both
increasing dividends and capital appreciation.
The INCOME & VALUE TRUST seeks the balanced accomplishment of (a) conservation
of principal and (b) long-term growth of capital and income by investing the
portfolio's assets in both equity and fixed-income securities. The subadviser
has full discretion to determine the allocation between equity and fixed income
securities.
The BALANCED TRUST seeks current income and capital appreciation by investing in
a balanced portfolio of common stocks, U.S. and foreign government obligations
and a variety of corporate fixed income securities.
16
<PAGE> 21
The HIGH YIELD TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in high yield debt securities, including corporate bonds and
other fixed-income securities.
The STRATEGIC BOND TRUST seeks a high level of total return consistent with
preservation of capital by giving its subadviser broad discretion to deploy the
portfolio's assets among certain segments of the fixed income market as the
subadviser believes will best contribute to achievement of the portfolio's
investment objective.
The GLOBAL BOND TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing the
portfolio's asset primarily in fixed income securities denominated in major
foreign currencies, baskets of foreign currencies (such as the ECU), and the
U.S. dollar.
The TOTAL RETURN TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing, under
normal market conditions, at least 65% of the portfolio's assets in a
diversified portfolio of fixed income securities of varying maturities. The
average portfolio duration will normally vary within a three- to six-year time
frame based on the subadviser's forecast for interest rates.
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by investing
primarily in a diversified portfolio of investment grade corporate bonds and
U.S. Government bonds with intermediate to longer term maturities. The portfolio
may also invest up to 20% of its assets in non-investment grade fixed income
securities.
The DIVERSIFIED BOND TRUST seeks high total return consistent with the
conservation of capital by investing at least 75% of the portfolio's assets in
fixed income securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income
consistent with preservation of capital and maintenance of liquidity, by
investing in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
derivative securities such as collateralized mortgage obligations backed by such
securities.
The MONEY MARKET TRUST seeks maximum current income consistent with preservation
of principal and liquidity by investing in high quality money market instruments
with maturities of 397 days or less issued primarily by U.S. entities.
The SMALL CAP INDEX TRUST seeks to approximate the aggregate total return of a
small cap U.S. domestic equity market index by attempting to track the
performance of the Russell 2000 Index.*
The INTERNATIONAL INDEX TRUST seeks to approximate the aggregate total return of
a foreign equity market index by attempting to track the performance of the
Morgan Stanley European Australian Far East Free Index (the "MSCI EAFE Index").*
The MID CAP INDEX TRUST seeks to approximate the aggregate total return of a mid
cap U.S. domestic equity market index by attempting to track the performance of
the S&P Mid Cap 400 Index.*
The TOTAL STOCK MARKET INDEX seeks to approximate the aggregate total return of
a broad U.S. domestic equity market index by attempting to track the performance
of the Wilshire 5000 Equity Index.*
The 500 INDEX TRUST seeks to approximate the aggregate total return of a broad
U.S. domestic equity market index by attempting to track the performance of the
S&P 500 Composite Stock Price Index.*
The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long-term growth of capital
(current income is not a consideration) by investing 100% of the Lifestyle
Trust's assets in other portfolios of the Trust ("Underlying Portfolios") which
invest primarily in equity securities.
17
<PAGE> 22
The LIFESTYLE GROWTH 820 TRUST seeks to provide long-term growth of capital with
consideration also given to current income by investing approximately 20% of the
Lifestyle Trust's assets in Underlying Portfolios which invest primarily in
fixed income securities and approximately 80% of its assets in Underlying
Portfolios which invest primarily in equity securities.
The LIFESTYLE BALANCED 640 TRUST seeks to provide a balance between a high level
of current income and growth of capital with a greater emphasis given to capital
growth by investing approximately 40% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 60% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE MODERATE 460 TRUST seeks to provide a balance between a high level
of current income and growth of capital with a greater emphasis given to current
income by investing approximately 60% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 40% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of current
income with some consideration also given to growth of capital by investing
approximately 80% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 20% of its assets
in Underlying Portfolios which invest primarily in equity securities.
*"Standard & Poor's(R)," "S&P 500(R)," "Standard and Poor's 500(R)" and
"Standard and Poor's 400(R)" are trademarks of The McGraw-Hill Companies, Inc.
"Russell 2000(R)" is a trademark of Frank Russell Company. "Wilshire 5000(R)" is
a trademark of Wilshire Associates. "Morgan Stanley European Australian Far East
Free" and "EAFE(R)" are trademarks of Morgan Stanley & Co. Incorporated. None of
the Index Trusts are sponsored, endorsed, managed, advised, sold or promoted by
any of these companies, and none of these companies make any representation
regarding the advisability of investing in the Trust.
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 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 coverage takes effect under the Policy and 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 approves issuance of the Policy and the date the Company
receives at least the minimum initial premium. The Issue Date is the date from
which the Suicide and Incontestability provisions of the Policy are measured.
If an application accepted by the Company is not accompanied by a check for the
initial premium and no request to backdate the Policy has been made:
18
<PAGE> 23
(i) the Policy Date and the Effective Date will be the date the Company
receives the check at it's service office, and
(ii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Issue Date, and
the policyowner must be in good health on the date the initial premium is
received. If the premium is not paid or if the application is rejected, the
Policy will be canceled and any partial premiums paid will be returned to the
applicant.
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 Trust. 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 Trust for the duration of the Right to Examine period.
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.
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
19
<PAGE> 24
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.
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.
20
<PAGE> 25
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. However, the Company
reserves the right to require satisfactory evidence of insurability before
accepting any premium that would increase the net amount at risk under the
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 ("CVA Test") and the Guideline Premium
Test ("GLP 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 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>
GLP TEST CVA TEST GLP TEST CVA 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%
</TABLE>
21
<PAGE> 26
<TABLE>
<CAPTION>
GLP TEST CVA TEST GLP TEST CVA TEST
AGE PERCENT MALE FEMALE AGE PERCENT MALE FEMALE
--- ------- ---- ------ --- ------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
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>
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.
22
<PAGE> 27
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 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)
initial 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
23
<PAGE> 28
(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.
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
24
<PAGE> 29
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
AMOUNT DEDUCTED FROM PREMIUMS
Manufacturers Life of America deducts an amount from each premium payment equal
to 2.00% of the premium. Premium Loads are deducted in order to cover federal,
state and local taxes on premium payments.
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:
- -- 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.
25
<PAGE> 30
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.
Depending upon the circumstances, including the premiums paid under the Policy
and the performance of the underlying investment options, the Policy may have no
Cash Surrender Value and, therefore, the policyowner may receive no surrender
proceeds upon surrendering the Policy.
SURRENDER CHARGES ON A PARTIAL WITHDRAWAL
A partial withdrawal 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 is deducted as a result of a partial
withdrawal, the Policy's remaining surrender charges will be reduced in the same
proportion that the surrender charge deducted bears to the total surrender
charge immediately before the partial withdrawal.
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:
(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 changes 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.
26
<PAGE> 31
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; and
- - 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.
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
27
<PAGE> 32
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 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.
28
<PAGE> 33
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 transaction 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.
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.
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 under the Dollar Cost Averaging and Asset Allocation Balancer
programs, discussed below, do not count against the number of free transfers
permitted per Policy Year.
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.
29
<PAGE> 34
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.
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>
<S> <C>
Policy Year Loan Spread
</TABLE>
30
<PAGE> 35
<TABLE>
<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
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
31
<PAGE> 36
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. Therefore, a Policy could lapse eventually if
increases in Policy Value (prior to deduction of Policy charges) are not
sufficient to cover Policy charges. A lapse could have adverse tax consequences
as described under "Tax Treatment of the Policy - Tax Treatment of Policy
Benefits - Surrender or Lapse." Manufacturers Life of America will notify the
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 applicable
premium load. If the required payment is not received by the end of the grace
period, the Policy will terminate with no value.
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 SEC. has not reviewed the disclosures in this
prospectus relating to the general account. Disclosures regarding the general
account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in a prospectus.
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
32
<PAGE> 37
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 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 the Company in a form satisfactory to us. If the life insured
dies and there is no surviving beneficiary, the policyholder, or the
policyholder's estate if
33
<PAGE> 38
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.
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:
34
<PAGE> 39
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.
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.
35
<PAGE> 40
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.
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 excludable 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
36
<PAGE> 41
(c) the amount of any loan from, or secured by a Policy that is a Modified
Endowment Contract or "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.
If, at the time of lapse, a Policy has a loan, the loan is extinguished and the
amount of the loan is a deemed payment to the policyholder. If the amount of
this deemed payment exceeds the investment in the contract, the excess is
taxable income and is subject to Internal Revenue Service reporting
requirements.
DISTRIBUTIONS
The tax consequences of distributions from, and loans taken from or secured by,
a Policy depend on whether the Policy is classified as a MEC.
DISTRIBUTIONS FROM NON-MEC'S
A distribution from a non-MEC is generally treated as a tax-free recovery by the
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
37
<PAGE> 42
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 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.
38
<PAGE> 43
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.
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.
39
<PAGE> 44
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
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 MFC, will act as the
principal underwriter of, and continuously offer, the Policies pursuant to a
Distribution Agreement with Manufacturers Life of America. ManEquity, Inc. is
registered as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers. ManEquity, Inc. is
located at 200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5 and was
organized under the laws of Colorado on May 4, 1970. The directors of ManEquity,
Inc. are: John Richardson, Roy Bubbs, Bruce Gordon, Gary Buchanan and Douglas
Myers. The officers of ManEquity, Inc. are: (i) Douglas Myers - President, (ii)
Gary Buchanan - Vice President, Compliance, (iii) Thomas Reives - Treasurer,
(iv) Brian Buckley - Secretary and General Counsel. The principal business
address of each director and officer of ManEquity, Inc., except Brian Buckley,
is Manulife Financial, 200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5.
The principal business address of Brian Buckley is Manulife Financial, 73
40
<PAGE> 45
Tremont Street, Boston, MA 02108. 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. 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 The Manufacturers Life Insurance Company (U.S.A.),
("Manufacturers USA") have entered into an agreement with ManEquity, Inc.
pursuant to which Manufacturers Life or Manufacturers USA, on behalf of
ManEquity, Inc. will pay the sales commissions in respect of the Policies and
certain other policies issued by Manufacturers Life of America, prepare and
maintain all books and records required to be prepared and maintained by
ManEquity, Inc. with respect to the policies and such other policies, and send
all confirmations required to be sent by ManEquity, Inc. with respect to the
Policies and such other policies. ManEquity, Inc. will promptly reimburse
Manufacturers Life or Manufacturers USA for all sales commissions paid by
Manufacturers Life or Manufacturers USA and will pay Manufacturers Life or
Manufacturers USA for its other services under the agreement in such amounts and
at such times as agreed to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and recordkeeping functions on behalf of
Manufacturers Life of America with respect to all of its insurance policies
including the Policies.
Finally, Manufacturers USA has entered into a Stoploss Reinsurance Agreement
with Manufacturers Life of America under which Manufacturers Life (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.
41
<PAGE> 46
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 the Company 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 SEC. and one
or more state insurance departments may be required.
Manufacturers Life of America also reserves the right (i) to combine other
separate accounts with the Separate Account, (ii) to create new separate
accounts, (iii) to establish additional sub-accounts within the Separate Account
to invest in additional portfolios of the Trust or another management investment
company, (iv) to eliminate existing sub-accounts and to stop accepting new
allocations and transfers into the corresponding portfolio, (v) to combine
sub-accounts or to transfer assets in one sub-account to another sub-account or
(vi) to transfer assets from the Separate Account to another separate account
and from another separate account to the Separate Account. The Company also
reserves the right to operate the Separate Account as a management investment
company or other form permitted by law, and to de-register the Separate Account
under the 1940 Act. Any such change would be made only if permissible under
applicable federal and state law.
RECORDS AND ACCOUNTS
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 and fund transfers on behalf of
the Company.
All records and accounts relating to the Separate Account and the Portfolios
will be maintained by the Company. All financial transactions will be handled by
the Company. All reports required to be made and information required to be
given will be provided by 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.
42
<PAGE> 47
INDEPENDENT AUDITORS
The consolidated financial statements of The Manufacturers Life Insurance
Company of America at December 31, 1999 and 1998, and for each of the three
years ended December 31, 1999 and the financial statements of Separate Account
Four of The Manufacturers Life Insurance Company of America at December 31, 1999
and 1998, and for each of the two years ended December 31, 1999, appearing in
this prospectus, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their reports thereon appearing elsewhere herein. Such financial
statements have been included herein in reliance upon such reports given upon
the authority of such firm as experts in auditing and accounting.
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 SEC also
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC
which is located at http://www.sec.gov.
For further information you may also contact Manufacturers Life of America's
Home Office, the address and telephone number of which are on the first page of
the prospectus.
OFFICERS AND DIRECTORS
The directors and executive officers of the Company, together with their
principal occupations during the past five years are as follows:
<TABLE>
<CAPTION>
POSITION WITH MANUFACTURERS
NAME LIFE OF AMERICA PRINCIPAL OCCUPATION
<S> <C> <C>
Sandra M. Cotter (37)* Director Attorney, Dykema Gossett, PLLC, 1989 to present.
(since December 1992)
James D. Gallagher (45)** Director (since May 1996), President, The Manufacturers Life Insurance
Secretary and General Counsel Company of New York, August 1999 to Present;
Vice President, Secretary and General Counsel,
The Manufacturers Life Insurance Company (USA),
January 1997 to present; Secretary and General
Counsel, Manufacturers Adviser Corporation,
January 1997 to present; Vice President, Legal
Services - U.S. Operations, The Manufacturers
Life Insurance Company, January 1996 to present;
Vice President, Secretary and General Counsel,
The Manufacturers Life Insurance Company of
North America, 1994 to present;
Donald A. Guloien (42)*** Director (since August 1990) Executive Vice President, Business Development,
and President The Manufacturers Life Insurance Company,
January 1999 to present, Senior Vice President, Business
Development, The Manufacturers Life Insurance Company,
1994 to December 1998.
</TABLE>
43
<PAGE> 48
<TABLE>
<CAPTION>
POSITION WITH MANUFACTURERS
NAME LIFE OF AMERICA PRINCIPAL OCCUPATION
<S> <C> <C>
James O'Malley (54)*** Director (since November 1998) Senior Vice President, U.S. Pensions, The
Manufacturers Life Insurance Company, January
1999 to present; Vice President, Systems New
Business Pensions, The Manufacturers Life
Insurance Company, 1984 to December 1998.
Joseph J. Pietroski (61)*** Director (since July 1992) Senior Vice President and Corporate Secretary,
The Manufacturers Life Insurance Company, 1999
to present; Senior Vice President, General
Counsel and Corporate Secretary, The
Manufacturers Life Insurance Company, 1988 to
1999.
John D. Richardson (62)*** Director (since January 1995) Senior Executive Vice President, The
and Chairman Manufacturers Life Insurance Company; January
1999 to present; Executive Vice President,
U.S. Operations, The Manufacturers Life
Insurance Company, November 1995 to December
1998; Senior Vice President and General
Manager, U.S. Operations, The Manufacturers
Life Insurance Company, January 1995 to
October 1997.
Victor Apps (52)*** Vice President, Asia Executive Vice President, Asia Operations, The
Manufacturers Life Insurance Company, November
1997 to present; Senior Vice President and
General Manager, Greater China Division, The
Manufacturers Life Insurance Company, 1995 to
1997; Vice President and General Manager,
Greater China Division, The
</TABLE>
44
<PAGE> 49
<TABLE>
<CAPTION>
POSITION WITH MANUFACTURERS
NAME LIFE OF AMERICA PRINCIPAL OCCUPATION
<S> <C> <C>
Manufacturers Life Insurance Company, 1993 to 1995.
Felix Chee (53)*** Vice President, Investments Executive Vice President and Chief Investment
Officer, The Manufacturers Life Insurance
Company; November 1997 to present; Chief
Investment Officer, The Manufacturers Life
Insurance Company, June 1997 to present, Senior
Vice President and Treasurer, The Manufacturers
Life Insurance Company, August 1994 to May 1997.
Robert A. Cook (45)** Vice President, Marketing Senior Vice President, U.S. Individual
Insurance, The Manufacturers Life Insurance
Company, January 1999 to present; Vice
President, Product Management, The
Manufacturers Life Insurance Company, January
1996 to December 1998; Sales and Marketing
Director, The Manufacturers Life Insurance
Company, 1994 to 1995.
Douglas H. Myers (45)*** Vice President, Finance and President, ManEquity, Inc., April 1994 to
Compliance, Controller present; Assistant Vice President and
Controller, U.S. Operations, The Manufacturers
Life Insurance Company, 1988 to present.
John G. Vrysen (44)** Vice President, Appointed Chief Financial Officer and Treasurer,
Actuary Manulife-Wood Logan Holding Co., Inc., January
1996 to present; Vice President and Chief
Financial Officer, U.S. Operations, The
Manufacturers Life Insurance Company,
January 1996 to present; Vice President and
Chief Actuary, The Manufacturers Life
Insurance Company of New York, March 1992 to
present; Vice President and Chief Actuary,
The Manufacturers Life Insurance Company of
North America, January 1986 to present.
Denis Turner (44)*** Vice President and Treasurer Vice President and Treasurer, The Manufacturers
Life Insurance Company of America, May 1999 to
present; Vice President & Chief Accountant, U.S.
Division, The Manufacturers Life Insurance
Company, May 1999 to present; Assistant Vice
President, Financial Operations, Reinsurance
Division, The Manufacturers Life Insurance
Company, February 1998 to April 1999; Assistant
Vice President & Controller, Reinsurance
Division, The Manufacturers Life Insurance
Company, November 1995, to
</TABLE>
45
<PAGE> 50
<TABLE>
<CAPTION>
POSITION WITH MANUFACTURERS
NAME LIFE OF AMERICA PRINCIPAL OCCUPATION
<S> <C> <C>
January 1998, Assistant Vice President,
Corporate Controllers, The Manufacturers
Life Insurance Company, January 1989 to
October 1995.
</TABLE>
* Principal business address is: Dykema Gossett, 800 Michigan National Tower,
Lansing Michigan 48933
** Principal business address is: Manulife Financial, 73 Tremont Street,
Boston, MA 02108
*** Principal business address is: Manulife Financial, 200 Bloor Street,
Toronto, Ontario, Canada M4W 1E5
YEAR 2000 ISSUES
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect us, including those
related to customers, suppliers, or other third parties, have been fully
resolved.
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 beginning 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".
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
46
<PAGE> 51
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.
47
<PAGE> 52
Appendix A
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 regular underwriting. Tables 4, 5, and 6 assume
short form underwriting.
- - The Cash Value Accumulation Test is used.
- - 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.
- - 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 0.931% 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 -1.670% 4.230% 10.130%
of Return 11+ -1.323% 4.598% 10.519%
</TABLE>
Current cost of insurance charges are not guaranteed and may be changed.
The illustrations reflect the expense reimbursements in effect for the Lifestyle
Trusts, the Equity Index Trust and the Index Trusts. In the absence of such
expense reimbursements, the average of the Portfolios' current expenses would
have been 0.943% per annum and the gross annual rates of return of 0%, 6% and
12% would have corresponded to approximate net annual rates of return of
- -1.682%, 4.218% and 10.117% for Policy Years 1-10 and -1.335%, 4.585% and
10.505% for Policy Years 11 and after. The expense reimbursements are expected
to remain in effect during the fiscal year ending December 31, 2000. Were the
expense reimbursements to terminate, the average of the Portfolios' current
expenses would be higher and the approximate net annual rates of return would be
lower.
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
48
<PAGE> 53
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 September 11, 1998. 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.
49
<PAGE> 54
Table 1 - Regular Underwriting
Hypothetical Gross Investment Return of 0.00%
<TABLE>
<CAPTION>
Current Charges
- --------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 733 -319 18,404 2,000 16,404 365,000
2 20,000 43,050 18,404 19,600 144 980 -624 36,256 3,000 33,256 365,000
3 20,000 66,203 36,256 19,600 144 1,197 -921 53,594 3,000 50,594 365,000
4 20,000 90,513 53,594 19,600 144 1,286 -1,209 70,555 4,000 66,555 365,000
5 20,000 116,038 70,555 19,600 144 1,320 -1,492 87,199 5,000 82,199 365,000
6 20,000 142,840 87,199 19,600 144 1,381 -1,769 103,505 5,000 98,505 365,000
7 20,000 170,982 103,505 19,600 144 1,431 -2,041 119,489 4,000 115,489 365,000
8 0 179,531 119,489 0 144 1,598 -1,979 115,768 3,000 112,768 365,000
9 0 188,508 115,768 0 144 1,792 -1,916 111,916 2,000 109,916 365,000
10 0 197,933 111,916 0 144 2,034 -1,849 107,889 0 107,889 365,000
11 0 207,830 107,889 0 144 2,081 -1,411 104,253 0 104,253 365,000
12 0 218,221 104,253 0 144 2,088 -1,363 100,658 0 100,658 365,000
13 0 229,132 100,658 0 144 2,040 -1,316 97,158 0 97,158 365,000
14 0 240,589 97,158 0 144 1,857 -1,271 93,886 0 93,886 365,000
15 0 252,619 93,886 0 144 1,517 -1,230 90,995 0 90,995 365,000
16 0 265,249 90,995 0 144 1,678 -1,191 87,982 0 87,982 365,000
17 0 278,512 87,982 0 144 1,853 -1,150 84,835 0 84,835 365,000
18 0 292,438 84,835 0 144 2,046 -1,107 81,538 0 81,538 365,000
19 0 307,059 81,538 0 144 2,244 -1,062 78,088 0 78,088 365,000
20 0 322,412 78,088 0 144 2,453 -1,014 74,477 0 74,477 365,000
25 0 411,489 57,434 0 144 4,364 -728 52,198 0 52,198 365,000
30 0 525,176 25,057 0 144 8,466 -270 16,177 0 16,177 365,000
</TABLE>
<TABLE>
<CAPTION>
Guaranteed Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 1,570 -312 17,574 2,000 15,574 365,000
2 20,000 43,050 17,574 19,600 144 1,612 -605 34,813 3,000 31,813 365,000
3 20,000 66,203 34,813 19,600 144 1,652 -892 51,724 3,000 48,724 365,000
4 20,000 90,513 51,724 19,600 144 1,687 -1,174 68,319 4,000 64,319 365,000
5 20,000 116,038 68,319 19,600 144 1,723 -1,451 84,601 5,000 79,601 365,000
6 20,000 142,840 84,601 19,600 144 1,753 -1,723 100,582 5,000 95,582 365,000
7 20,000 170,982 100,582 19,600 144 1,792 -1,989 116,257 4,000 112,257 365,000
8 0 179,531 116,257 0 144 1,985 -1,922 112,206 3,000 109,206 365,000
9 0 188,508 112,206 0 144 2,208 -1,852 108,001 2,000 106,001 365,000
10 0 197,933 108,001 0 144 2,465 -1,780 103,613 0 103,613 365,000
11 0 207,830 103,613 0 144 2,745 -1,350 99,374 0 99,374 365,000
12 0 218,221 99,374 0 144 3,054 -1,292 94,884 0 94,884 365,000
13 0 229,132 94,884 0 144 3,386 -1,230 90,124 0 90,124 365,000
14 0 240,589 90,124 0 144 3,751 -1,164 85,065 0 85,065 365,000
15 0 252,619 85,065 0 144 4,153 -1,095 79,673 0 79,673 365,000
16 0 265,249 79,673 0 144 4,611 -1,020 73,897 0 73,897 365,000
17 0 278,512 73,897 0 144 5,135 -940 67,679 0 67,679 365,000
18 0 292,438 67,679 0 144 5,742 -853 60,940 0 60,940 365,000
19 0 307,059 60,940 0 144 6,449 -759 53,588 0 53,588 365,000
20 0 322,412 53,588 0 144 7,264 -656 45,524 0 45,524 365,000
25 0 411,489 4,018 0 144 13,234 42 0 0 0 0
30 0 525,176 0 0 0 0 0 0 0 0 0
</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.
- - No representations can be made that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
<PAGE> 55
Table 2 - Regular Underwriting
Hypothetical Gross Investment Return of 6.00%
<TABLE>
<CAPTION>
Current Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 731 809 19,534 2,000 17,534 365,000
2 20,000 43,050 19,534 19,600 144 973 1,630 39,647 3,000 36,647 365,000
3 20,000 66,203 39,647 19,600 144 1,179 2,476 60,400 3,000 57,400 365,000
4 20,000 90,513 60,400 19,600 144 1,246 3,353 81,963 4,000 77,963 365,000
5 20,000 116,038 81,963 19,600 144 1,253 4,265 104,431 5,000 99,431 365,000
6 20,000 142,840 104,431 19,600 144 1,272 5,215 127,830 5,000 122,830 365,000
7 20,000 170,982 127,830 19,600 144 1,273 6,205 152,218 4,000 148,218 372,935
8 0 179,531 152,218 0 144 1,370 6,405 157,109 3,000 154,109 373,919
9 0 188,508 157,109 0 144 1,486 6,609 162,088 2,000 160,088 376,043
10 0 197,933 162,088 0 144 1,621 6,817 167,140 0 167,140 376,065
11 0 207,830 167,140 0 144 1,599 7,642 173,039 0 173,039 378,956
12 0 218,221 173,039 0 144 1,547 7,914 179,262 0 179,262 381,828
13 0 229,132 179,262 0 144 1,458 8,203 185,863 0 185,863 384,736
14 0 240,589 185,863 0 144 1,289 8,510 192,940 0 192,940 389,738
15 0 252,619 192,940 0 144 1,033 8,842 200,605 0 200,605 395,193
16 0 265,249 200,605 0 144 1,113 9,193 208,541 0 208,541 400,399
17 0 278,512 208,541 0 144 1,198 9,555 216,754 0 216,754 405,331
18 0 292,438 216,754 0 144 1,288 9,931 225,253 0 225,253 409,961
19 0 307,059 225,253 0 144 1,394 10,319 234,034 0 234,034 416,581
20 0 322,412 234,034 0 144 1,505 10,720 243,105 0 243,105 423,003
25 0 411,489 282,184 0 144 2,323 12,914 292,631 0 292,631 453,577
30 0 525,176 336,701 0 144 3,711 15,386 348,232 0 348,232 491,007
</TABLE>
<TABLE>
<CAPTION>
Guaranteed Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 1,568 790 18,678 2,000 16,678 365,000
2 20,000 43,050 18,678 19,600 144 1,602 1,580 38,112 3,000 35,112 365,000
3 20,000 66,203 38,112 19,600 144 1,627 2,401 58,342 3,000 55,342 365,000
4 20,000 90,513 58,342 19,600 144 1,637 3,257 79,418 4,000 75,418 365,000
5 20,000 116,038 79,418 19,600 144 1,638 4,148 101,384 5,000 96,384 365,000
6 20,000 142,840 101,384 19,600 144 1,619 5,078 124,299 5,000 119,299 365,000
7 20,000 170,982 124,299 19,600 144 1,591 6,048 148,212 4,000 144,212 365,000
8 0 179,531 148,212 0 144 1,700 6,228 152,596 3,000 149,596 365,000
9 0 188,508 152,596 0 144 1,822 6,410 157,040 2,000 155,040 365,000
10 0 197,933 157,040 0 144 1,957 6,595 161,534 0 161,534 365,000
11 0 207,830 161,534 0 144 2,093 7,372 166,668 0 166,668 365,004
12 0 218,221 166,668 0 144 2,232 7,604 171,896 0 171,896 366,139
13 0 229,132 171,896 0 144 2,368 7,841 177,226 0 177,226 366,858
14 0 240,589 177,226 0 144 2,510 8,083 182,655 0 182,655 368,963
15 0 252,619 182,655 0 144 2,657 8,329 188,183 0 188,183 370,721
16 0 265,249 188,183 0 144 2,815 8,579 193,803 0 193,803 372,102
17 0 278,512 193,803 0 144 2,983 8,834 199,509 0 199,509 373,083
18 0 292,438 199,509 0 144 3,163 9,092 205,294 0 205,294 373,636
19 0 307,059 205,294 0 144 3,391 9,352 211,111 0 211,111 375,778
20 0 322,412 211,111 0 144 3,637 9,613 216,944 0 216,944 377,482
25 0 411,489 240,476 0 144 4,817 10,934 246,449 0 246,449 381,996
30 0 525,176 269,875 0 144 6,501 12,243 275,474 0 275,474 388,418
</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.
- - No representations can be made that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
<PAGE> 56
Table 3 - Regular Underwriting
Hypothetical Gross Investment Return of 12.00%
<TABLE>
<CAPTION>
Current Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 730 1,938 20,664 2,000 18,664 365,000
2 20,000 43,050 20,664 19,600 144 967 4,019 43,172 3,000 40,172 365,000
3 20,000 66,203 43,172 19,600 144 1,158 6,289 67,759 3,000 64,759 365,000
4 20,000 90,513 67,759 19,600 144 1,203 8,777 94,789 4,000 90,789 365,000
5 20,000 116,038 94,789 19,600 144 1,175 11,516 124,586 5,000 119,586 365,000
6 20,000 142,840 124,586 19,600 144 1,188 14,535 157,389 5,000 152,389 398,194
7 20,000 170,982 157,389 19,600 144 1,357 17,849 193,337 4,000 189,337 473,675
8 0 179,531 193,337 0 144 1,479 19,498 211,212 3,000 208,212 502,684
9 0 188,508 211,212 0 144 1,620 21,302 230,750 2,000 228,750 535,339
10 0 197,933 230,750 0 144 1,770 23,273 252,109 0 252,109 567,244
11 0 207,830 252,109 0 144 1,787 26,411 276,589 0 276,589 605,731
12 0 218,221 276,589 0 144 1,784 28,986 303,647 0 303,647 646,769
13 0 229,132 303,647 0 144 1,768 31,833 333,568 0 333,568 690,486
14 0 240,589 333,568 0 144 1,703 34,984 366,705 0 366,705 740,744
15 0 252,619 366,705 0 144 1,622 38,475 403,414 0 403,414 794,726
16 0 265,249 403,414 0 144 1,945 42,318 443,643 0 443,643 851,794
17 0 278,512 443,643 0 144 2,326 46,529 487,702 0 487,702 912,003
18 0 292,438 487,702 0 144 2,772 51,139 535,925 0 535,925 975,383
19 0 307,059 535,925 0 144 3,328 56,180 588,633 0 588,633 1,047,768
20 0 322,412 588,633 0 144 3,969 61,689 646,209 0 646,209 1,124,404
25 0 411,489 934,690 0 144 8,263 97,852 1,024,135 0 1,024,135 1,587,409
30 0 525,176 1,468,988 0 144 16,850 153,578 1,605,572 0 1,605,572 2,263,856
</TABLE>
<TABLE>
<CAPTION>
Guaranteed Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 1,565 1,893 19,784 2,000 17,784 365,000
2 20,000 43,050 19,784 19,600 144 1,591 3,896 41,544 3,000 38,544 365,000
3 20,000 66,203 41,544 19,600 144 1,600 6,100 65,500 3,000 62,500 365,000
4 20,000 90,513 65,500 19,600 144 1,582 8,527 91,901 4,000 87,901 365,000
5 20,000 116,038 91,901 19,600 144 1,540 11,204 121,021 5,000 116,021 365,000
6 20,000 142,840 121,021 19,600 144 1,505 14,157 153,129 5,000 148,129 387,416
7 20,000 170,982 153,129 19,600 144 1,892 17,389 188,082 4,000 184,082 460,802
8 0 179,531 188,082 0 144 2,190 18,926 204,674 3,000 201,674 487,125
9 0 188,508 204,674 0 144 2,511 20,589 222,608 2,000 220,608 516,450
10 0 197,933 222,608 0 144 2,856 22,386 241,994 0 241,994 544,487
11 0 207,830 241,994 0 144 3,262 25,259 263,847 0 263,847 577,826
12 0 218,221 263,847 0 144 3,720 27,530 287,514 0 287,514 612,405
13 0 229,132 287,514 0 144 4,209 29,990 313,151 0 313,151 648,222
14 0 240,589 313,151 0 144 4,785 32,651 340,873 0 340,873 688,563
15 0 252,619 340,873 0 144 5,417 35,529 370,841 0 370,841 730,556
16 0 265,249 370,841 0 144 6,124 38,637 403,210 0 403,210 774,164
17 0 278,512 403,210 0 144 6,911 41,993 438,149 0 438,149 819,338
18 0 292,438 438,149 0 144 7,794 45,614 475,824 0 475,824 866,000
19 0 307,059 475,824 0 144 8,887 49,509 516,302 0 516,302 919,017
20 0 322,412 516,302 0 144 10,096 53,691 559,753 0 559,753 973,970
25 0 411,489 767,254 0 144 17,965 79,586 828,732 0 828,732 1,284,534
30 0 525,176 1,116,526 0 144 32,580 115,360 1,199,161 0 1,199,161 1,690,817
</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.
- - No representations can be made that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
<PAGE> 57
Table 4 - Short Form Underwriting
Hypothetical Gross Investment Return of 0.00%
<TABLE>
<CAPTION>
Current Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 840 -318 18,298 2,000 16,298 365,000
2 20,000 43,050 18,298 19,600 144 1,024 -622 36,108 3,000 33,108 365,000
3 20,000 66,203 36,108 19,600 144 1,235 -918 53,411 3,000 50,411 365,000
4 20,000 90,513 53,411 19,600 144 1,454 -1,205 70,208 4,000 66,208 365,000
5 20,000 116,038 70,208 19,600 144 1,623 -1,484 86,557 5,000 81,557 365,000
6 20,000 142,840 86,557 19,600 144 1,677 -1,756 102,580 5,000 97,580 365,000
7 20,000 170,982 102,580 19,600 144 1,685 -2,024 118,327 4,000 114,327 365,000
8 0 179,531 118,327 0 144 1,840 -1,958 114,385 3,000 111,385 365,000
9 0 188,508 114,385 0 144 2,030 -1,890 110,321 2,000 108,321 365,000
10 0 197,933 110,321 0 144 2,247 -1,820 106,110 0 106,110 365,000
11 0 207,830 106,110 0 144 2,286 -1,386 102,294 0 102,294 365,000
12 0 218,221 102,294 0 144 2,274 -1,336 98,540 0 98,540 365,000
13 0 229,132 98,540 0 144 2,220 -1,287 94,889 0 94,889 365,000
14 0 240,589 94,889 0 144 2,042 -1,240 91,463 0 91,463 365,000
15 0 252,619 91,463 0 144 1,721 -1,197 88,401 0 88,401 365,000
16 0 265,249 88,401 0 144 1,870 -1,155 85,232 0 85,232 365,000
17 0 278,512 85,232 0 144 2,034 -1,112 81,942 0 81,942 365,000
18 0 292,438 81,942 0 144 2,204 -1,067 78,527 0 78,527 365,000
19 0 307,059 78,527 0 144 2,369 -1,021 74,993 0 74,993 365,000
20 0 322,412 74,993 0 144 2,538 -973 71,338 0 71,338 365,000
25 0 411,489 54,326 0 144 4,409 -686 49,087 0 49,087 365,000
30 0 525,176 21,877 0 144 8,545 -227 12,961 0 12,961 365,000
</TABLE>
<TABLE>
<CAPTION>
Guaranteed Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 1,570 -312 17,574 2,000 15,574 365,000
2 20,000 43,050 17,574 19,600 144 1,612 -605 34,813 3,000 31,813 365,000
3 20,000 66,203 34,813 19,600 144 1,652 -892 51,724 3,000 48,724 365,000
4 20,000 90,513 51,724 19,600 144 1,687 -1,174 68,319 4,000 64,319 365,000
5 20,000 116,038 68,319 19,600 144 1,723 -1,451 84,601 5,000 79,601 365,000
6 20,000 142,840 84,601 19,600 144 1,753 -1,723 100,582 5,000 95,582 365,000
7 20,000 170,982 100,582 19,600 144 1,792 -1,989 116,257 4,000 112,257 365,000
8 0 179,531 116,257 0 144 1,985 -1,922 112,206 3,000 109,206 365,000
9 0 188,508 112,206 0 144 2,208 -1,852 108,001 2,000 106,001 365,000
10 0 197,933 108,001 0 144 2,465 -1,780 103,613 0 103,613 365,000
11 0 207,830 103,613 0 144 2,745 -1,350 99,374 0 99,374 365,000
12 0 218,221 99,374 0 144 3,054 -1,292 94,884 0 94,884 365,000
13 0 229,132 94,884 0 144 3,386 -1,230 90,124 0 90,124 365,000
14 0 240,589 90,124 0 144 3,751 -1,164 85,065 0 85,065 365,000
15 0 252,619 85,065 0 144 4,153 -1,095 79,673 0 79,673 365,000
16 0 265,249 79,673 0 144 4,611 -1,020 73,897 0 73,897 365,000
17 0 278,512 73,897 0 144 5,135 -940 67,679 0 67,679 365,000
18 0 292,438 67,679 0 144 5,742 -853 60,940 0 60,940 365,000
19 0 307,059 60,940 0 144 6,449 -759 53,588 0 53,588 365,000
20 0 322,412 53,588 0 144 7,264 -656 45,524 0 45,524 365,000
25 0 411,489 4,018 0 144 13,234 42 0 0 0 0
30 0 525,176 0 0 0 0 0 0 0 0 0
</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.
- - No representations can be made that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
<PAGE> 58
Table 5 - Short Form Underwriting
Hypothetical Gross Investment Return of 6.00%
<TABLE>
<CAPTION>
Current Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 839 807 19,424 2,000 17,424 365,000
2 20,000 43,050 19,424 19,600 144 1,016 1,624 39,488 3,000 36,488 365,000
3 20,000 66,203 39,488 19,600 144 1,216 2,469 60,197 3,000 57,197 365,000
4 20,000 90,513 60,197 19,600 144 1,410 3,340 81,583 4,000 77,583 365,000
5 20,000 116,038 81,583 19,600 144 1,541 4,242 103,740 5,000 98,740 365,000
6 20,000 142,840 103,740 19,600 144 1,545 5,179 126,830 5,000 121,830 365,000
7 20,000 170,982 126,830 19,600 144 1,494 6,157 150,949 4,000 146,949 369,824
8 0 179,531 150,949 0 144 1,573 6,346 155,578 3,000 152,578 370,276
9 0 188,508 155,578 0 144 1,673 6,540 160,301 2,000 158,301 371,898
10 0 197,933 160,301 0 144 1,779 6,737 165,115 0 165,115 371,508
11 0 207,830 165,115 0 144 1,743 7,545 170,773 0 170,773 373,992
12 0 218,221 170,773 0 144 1,670 7,807 176,766 0 176,766 376,512
13 0 229,132 176,766 0 144 1,569 8,085 183,138 0 183,138 379,095
14 0 240,589 183,138 0 144 1,400 8,382 189,976 0 189,976 383,752
15 0 252,619 189,976 0 144 1,150 8,703 197,385 0 197,385 388,848
16 0 265,249 197,385 0 144 1,216 9,042 205,067 0 205,067 393,729
17 0 278,512 205,067 0 144 1,284 9,393 213,032 0 213,032 398,370
18 0 292,438 213,032 0 144 1,353 9,758 221,293 0 221,293 402,753
19 0 307,059 221,293 0 144 1,430 10,136 229,855 0 229,855 409,141
20 0 322,412 229,855 0 144 1,513 10,528 238,726 0 238,726 415,384
25 0 411,489 277,120 0 144 2,272 12,682 287,386 0 287,386 445,449
30 0 525,176 330,708 0 144 3,629 15,113 342,048 0 342,048 482,287
</TABLE>
<TABLE>
<CAPTION>
Guaranteed Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 1,568 790 18,678 2,000 16,678 365,000
2 20,000 43,050 18,678 19,600 144 1,602 1,580 38,112 3,000 35,112 365,000
3 20,000 66,203 38,112 19,600 144 1,627 2,401 58,342 3,000 55,342 365,000
4 20,000 90,513 58,342 19,600 144 1,637 3,257 79,418 4,000 75,418 365,000
5 20,000 116,038 79,418 19,600 144 1,638 4,148 101,384 5,000 96,384 365,000
6 20,000 142,840 101,384 19,600 144 1,619 5,078 124,299 5,000 119,299 365,000
7 20,000 170,982 124,299 19,600 144 1,591 6,048 148,212 4,000 144,212 365,000
8 0 179,531 148,212 0 144 1,700 6,228 152,596 3,000 149,596 365,000
9 0 188,508 152,596 0 144 1,822 6,410 157,040 2,000 155,040 365,000
10 0 197,933 157,040 0 144 1,957 6,595 161,534 0 161,534 365,000
11 0 207,830 161,534 0 144 2,093 7,372 166,668 0 166,668 365,004
12 0 218,221 166,668 0 144 2,232 7,604 171,896 0 171,896 366,139
13 0 229,132 171,896 0 144 2,368 7,841 177,226 0 177,226 366,858
14 0 240,589 177,226 0 144 2,510 8,083 182,655 0 182,655 368,963
15 0 252,619 182,655 0 144 2,657 8,329 188,183 0 188,183 370,721
16 0 265,249 188,183 0 144 2,815 8,579 193,803 0 193,803 372,102
17 0 278,512 193,803 0 144 2,983 8,834 199,509 0 199,509 373,083
18 0 292,438 199,509 0 144 3,163 9,092 205,294 0 205,294 373,636
19 0 307,059 205,294 0 144 3,391 9,352 211,111 0 211,111 375,778
20 0 322,412 211,111 0 144 3,637 9,613 216,944 0 216,944 377,482
25 0 411,489 240,476 0 144 4,817 10,934 246,449 0 246,449 381,996
30 0 525,176 269,875 0 144 6,501 12,243 275,474 0 275,474 388,418
</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.
- - No representations can be made that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
<PAGE> 59
Table 6 - Short Form Underwriting
Hypothetical Gross Investment Return of 12.00%
<TABLE>
<CAPTION>
Current Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 837 1,932 20,551 2,000 18,551 365,000
2 20,000 43,050 20,551 19,600 144 1,010 4,005 43,002 3,000 40,002 365,000
3 20,000 66,203 43,002 19,600 144 1,194 6,269 67,533 3,000 64,533 365,000
4 20,000 90,513 67,533 19,600 144 1,362 8,745 94,372 4,000 90,372 365,000
5 20,000 116,038 94,372 19,600 144 1,445 11,459 123,842 5,000 118,842 365,000
6 20,000 142,840 123,842 19,600 144 1,440 14,446 156,304 5,000 151,304 395,449
7 20,000 170,982 156,304 19,600 144 1,613 17,725 191,872 4,000 187,872 470,087
8 0 179,531 191,872 0 144 1,728 19,337 209,337 3,000 206,337 498,223
9 0 188,508 209,337 0 144 1,868 21,099 228,424 2,000 226,424 529,944
10 0 197,933 228,424 0 144 2,003 23,025 249,302 0 249,302 560,929
11 0 207,830 249,302 0 144 2,018 26,103 273,243 0 273,243 598,403
12 0 218,221 273,243 0 144 2,004 28,622 299,717 0 299,717 638,396
13 0 229,132 299,717 0 144 1,979 31,408 329,002 0 329,002 681,034
14 0 240,589 329,002 0 144 1,905 34,493 361,446 0 361,446 730,122
15 0 252,619 361,446 0 144 1,799 37,912 397,415 0 397,415 782,908
16 0 265,249 397,415 0 144 2,117 41,678 436,832 0 436,832 838,718
17 0 278,512 436,832 0 144 2,483 45,804 480,009 0 480,009 897,616
18 0 292,438 480,009 0 144 2,909 50,322 527,278 0 527,278 959,645
19 0 307,059 527,278 0 144 3,412 55,266 578,988 0 578,988 1,030,599
20 0 322,412 578,988 0 144 4,000 60,673 635,517 0 635,517 1,105,799
25 0 411,489 919,213 0 144 8,127 96,232 1,007,174 0 1,007,174 1,561,120
30 0 525,176 1,444,648 0 144 16,570 151,033 1,578,967 0 1,578,967 2,226,343
</TABLE>
<TABLE>
<CAPTION>
Guaranteed Charges
- ---------------------------------------------------------------------------------------------------------------------------
Premium Policy plus less less plus Policy Net Cash Death
Pol Annual Accum Value Net Admin Cost Invest Value Surr Surrender Benefit
Year Premium at 5% Beg Yr Premium Fees of Ins Earning End Yr Charge Value End Yr
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 0 19,600 144 1,565 1,893 19,784 2,000 17,784 365,000
2 20,000 43,050 19,784 19,600 144 1,591 3,896 41,544 3,000 38,544 365,000
3 20,000 66,203 41,544 19,600 144 1,600 6,100 65,500 3,000 62,500 365,000
4 20,000 90,513 65,500 19,600 144 1,582 8,527 91,901 4,000 87,901 365,000
5 20,000 116,038 91,901 19,600 144 1,540 11,204 121,021 5,000 116,021 365,000
6 20,000 142,840 121,021 19,600 144 1,505 14,157 153,129 5,000 148,129 387,416
7 20,000 170,982 153,129 19,600 144 1,892 17,389 188,082 4,000 184,082 460,802
8 0 179,531 188,082 0 144 2,190 18,926 204,674 3,000 201,674 487,125
9 0 188,508 204,674 0 144 2,511 20,589 222,608 2,000 220,608 516,450
10 0 197,933 222,608 0 144 2,856 22,386 241,994 0 241,994 544,487
11 0 207,830 241,994 0 144 3,262 25,259 263,847 0 263,847 577,826
12 0 218,221 263,847 0 144 3,720 27,530 287,514 0 287,514 612,405
13 0 229,132 287,514 0 144 4,209 29,990 313,151 0 313,151 648,222
14 0 240,589 313,151 0 144 4,785 32,651 340,873 0 340,873 688,563
15 0 252,619 340,873 0 144 5,417 35,529 370,841 0 370,841 730,556
16 0 265,249 370,841 0 144 6,124 38,637 403,210 0 403,210 774,164
17 0 278,512 403,210 0 144 6,911 41,993 438,149 0 438,149 819,338
18 0 292,438 438,149 0 144 7,794 45,614 475,824 0 475,824 866,000
19 0 307,059 475,824 0 144 8,887 49,509 516,302 0 516,302 919,017
20 0 322,412 516,302 0 144 10,096 53,691 559,753 0 559,753 973,970
25 0 411,489 767,254 0 144 17,965 79,586 828,732 0 828,732 1,284,534
30 0 525,176 1,116,526 0 144 32,580 115,360 1,199,161 0 1,199,161 1,690,817
</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.
- - No representations can be made that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
<PAGE> 60
AUDITED CONSOLIDATED
FINANCIAL STATEMENTS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
Years ended December 31, 1999, 1998 and 1997
<PAGE> 61
The Manufacturers Life Insurance Company of America
Audited Consolidated
Financial Statements
Years ended December 31, 1999, 1998 and 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors .......................................... 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets ............................................. 2
Consolidated Statements of Income ....................................... 3
Consolidated Statements of Changes in Shareholder's Equity .............. 4
Consolidated Statements of Cash Flows ................................... 5
Notes to Consolidated Financial Statements .............................. 6
</TABLE>
<PAGE> 62
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
The Manufacturers Life Insurance Company of America
We have audited the accompanying consolidated balance sheets of The
Manufacturers Life Insurance Company of America as of December 31, 1999 and
1998, and the related consolidated statements of income, changes in capital and
surplus and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Manufacturers
Life Insurance Company of America at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young, LLP
Philadelphia, Pennsylvania
March 3, 2000
1
<PAGE> 63
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As at December 31 ($ thousands)
ASSETS 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS:
Securities available-for-sale, at fair value: (note 3)
Fixed-maturity (amortized cost: 1999 $73,780; 1998 $45,248) $ 73,081 $ 49,254
Equity (cost: 1999 $0; 1998 $19,219) -- 20,524
Short-term investments 6,942 459
Policy loans 26,174 19,320
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $ 106,197 $ 89,557
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 17,383 $ 23,789
Deferred acquisition costs (note 5) 201,642 163,506
Due from affiliates 2,851 --
Income taxes recoverable -- 2,665
Deferred income taxes (note 6) 1,596 --
Other assets 11,318 9,062
Separate account assets 1,399,527 1,075,231
- ---------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,740,514 $ 1,363,810
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES, CAPITAL AND SURPLUS 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES:
Policyholder liabilities and accruals $ 75,688 $ 60,830
Due to affiliates -- 5,133
Deferred income taxes (note 6) -- 763
Income taxes payable 11,122 --
Other liabilities 29,006 18,656
Separate account liabilities 1,399,527 1,075,231
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 1,515,343 $ 1,160,613
===================================================================================================
CAPITAL AND SURPLUS:
Common shares (note 7) $ 4,502 $ 4,502
Preferred shares (note 7) 10,500 10,500
Contributed surplus 195,596 193,096
Retained earnings (deficit) 19,256 (2,664)
Accumulated other comprehensive loss (note 4) (4,683) (2,237)
- ---------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS $ 225,171 $ 203,197
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 1,740,514 $ 1,363,810
===================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 64
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Premiums $ 10,185 $ 9,290 $ 8,607
Consideration paid on reinsurance terminated (note 9) -- (40,975) --
Fee income 77,899 55,322 38,682
Net investment income (note 3) 6,784 6,128 8,275
Realized investment gains (losses) 1,051 (206) 118
Other 152 307 544
- --------------------------------------------------------------------------------------------------------------
TOTAL REVENUE $ 96,071 $ 29,866 $ 56,226
- --------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES:
Policyholder benefits and claims $ 14,820 $ 16,541 $ 6,733
Reduction of reserves on reinsurance terminated (note 9) -- (40,975) --
Operating costs and expenses 41,617 41,676 41,742
Commissions 2,189 2,561 2,838
Amortization of deferred acquisition costs (note 5) 2,718 9,266 4,860
Interest expense 50 1,722 2,750
Policyholder dividends 171 221 1,416
- --------------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 61,565 31,012 60,339
- --------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 34,506 (1,146) (4,113)
- --------------------------------------------------------------------------------------------------------------
INCOME TAX (EXPENSE) BENEFIT (NOTE 6) (12,586) 392 477
- --------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 21,920 $ (754) $ (3,636)
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 65
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
ACCUMULATED
COMMON AND RETAINED OTHER TOTAL
FOR THE YEARS ENDED DECEMBER 31 PREFERRED CONTRIBUTED EARNINGS COMPREHENSIVE CAPITAL AND
($ thousands) SHARES SURPLUS (DEFICIT) INCOME (LOSS) SURPLUS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 15,002 $ 98,569 $ 1,726 $ 1,333 $ 116,630
Comprehensive loss (note 4) -- -- (3,636) (6,225) (9,861)
- -----------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $ 15,002 $ 98,569 $ (1,910) $ (4,892) $ 106,769
Capital contribution (note 7) -- 94,527 -- -- 94,527
Comprehensive income (loss) (note 4) -- -- (754) 2,655 1,901
- -----------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 15,002 $ 193,096 $ (2,664) $ (2,237) $ 203,197
Capital contribution (note 7) -- 2,500 -- -- 2,500
Comprehensive income (loss) (note 4) -- -- 21,920 (2,446) 19,474
- -----------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $ 15,002 $ 195,596 $ 16,655 $ (4,683) $ 225,171
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 66
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ 21,920 $ (754) $ (3,636)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Additions (deductions) to policy liabilities and accruals 6,563 (36,217) (2,147)
Deferred acquisition costs (39,540) (43,065) (33,544)
Amortization of deferred acquisition costs 2,718 9,266 4,860
Realized (gains) losses on investments (1,051) 206 (118)
(Increases) decreases to deferred income taxes (1,592) (1,796) 2,730
Income taxes 13,787 3,014 4,870
Other 2,866 53 2,788
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ 6,671 $ (69,293) $ (24,197)
- ---------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Fixed-maturity securities sold, matured or repaid $ 1,193 $ 27,852 $ 73,772
Fixed-maturity securities purchased (29,498) (6,429) (89,763)
Equity securities sold 20,284 8,555 10,586
Equity securities purchased (14) (8,082) (11,289)
Net change in short-term investments (6,483) 1,671 4,558
Net policy loans advanced (6,854) (4,647) (4,851)
Guaranteed annuity contracts -- -- 171,691
- ---------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities $ (21,372) $ 18,920 $ 154,704
- ---------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Receipts from variable universal life and annuity policies
credited to policyholder account balances $ 11,526 $ 7,981 $ 7,582
Withdrawals of policyholder account balances on
variable universal life and annuity policies (3,231) (5,410) (3,252)
Bonds payable repaid -- -- (158,760)
Issuance of promissory note -- -- 33,000
Capital contribution -- 51,709 --
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities $ 8,295 $ 54,280 $(121,430)
- ---------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS:
(Decrease) increase during the year (6,406) 3,907 9,077
Balance, beginning of year 23,789 19,882 10,805
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF YEAR $ 17,383 $ 23,789 $ 19,882
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 67
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(IN THOUSANDS OF DOLLARS)
1. ORGANIZATION
The Manufacturers Life Insurance Company of America (hereafter referred
to as "ManAmerica" or the "Company") is a direct wholly-owned U.S.
subsidiary of The Manufacturers Life Insurance Company (U.S.A.)
("ManUSA"), which is an indirect wholly-owned subsidiary of The
Manufacturers Life Insurance Company ("MLI"), which in turn is a
wholly-owned subsidiary of Manulife Financial Corporation, a publicly
traded company. Manulife Financial Corporation and its subsidiaries are
known collectively as "Manulife Financial."
The Company issues and sells variable universal life insurance products
in the United States. The Company also has a branch operation in Taiwan
to develop and market traditional life insurance products for the
Taiwanese market.
The Company owns 100% of Manulife Holding Corporation ("Holdco"), an
investment holding company. Holdco has primarily three wholly-owned
subsidiaries, ManEquity Inc., a registered broker/dealer, Manufacturers
Advisor Corporation ("MAC"), an investment fund management company, and
Manulife Capital Corporation ("MCC"), an investment holding company.
In October 1997, the Manufacturers Life Mortgage Securities Corporation
("MLMSC"), a subsidiary of Holdco, was absorbed into Holdco, and all of
the assets and liabilities of MLMSC were transferred to Holdco at their
respective book values. MLMSC had historically invested amounts
received as repayments of mortgage loans in annuities issued by ManUSA.
These annuities were collateral for the 8 1/4 % mortgage-backed bonds
payable outstanding as at December 31, 1996. On March 1, 1997 the
annuities matured and the proceeds were used to repay the bonds
payable.
2. SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company have
been prepared in conformity with accounting principles generally
accepted ("GAAP") in the United States and include the accounts and
operations, after intercompany eliminations, of the Company and its
wholly-owned subsidiary, Holdco.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those
estimates.
Certain reclassifications have been made to 1998 and 1997 financial
information to conform to the 1999 presentation.
6
<PAGE> 68
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
b) RECENT ACCOUNTING STANDARDS
i)In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain insurance contracts, are also addressed by the Statement. SFAS
No. 133 requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. In July 1999, the FASB issued
Statement 137, which delayed the effective date of SFAS No. 133 to
fiscal years beginning after June 15, 2000. The Company is evaluating
the accounting implications of SFAS No. 133 and has not determined its
impact on the Company's results of operations or its financial
condition.
ii)In December 1997, the American Institute of Certified Public
Accountant's Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments." SOP 97-3 provides
guidance on the recognition and measurement of liabilities for various
assessments related to insurance activities, including those by state
guaranty funds. The Company adopted SOP 97-3 during 1999. Prior to the
adoption of SOP 97-3, the Company expensed and recognized liabilities
for such assessments on a "pay-as-you-go" basis. The effect of adopting
SOP 97-3 did not have a material impact on the results of operations
and financial condition of the Company for the year ended December 31,
1999.
iii)In March 1998, AcSEC issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires the capitalization of certain costs incurred in connection
with developing or obtaining internal-use software. The Company adopted
SOP 98-1 during 1999. Prior to the adoption of SOP 98-1, the Company
expensed internal-use software-related costs as incurred. The effect of
adopting SOP 98-1 did not have a material impact on the results of
operations and financial condition of the Company for the year ended
December 31, 1999.
c) INVESTMENTS
The Company classifies all of its fixed maturity and equity securities
as available-for-sale and records these securities at fair value.
Realized gains and losses on sales of securities classified as
available-for-sale are recognized in net income using the specific
identification method. Changes in the fair value of securities
available-for-sale are reflected directly in accumulated other
comprehensive income after adjustments for deferred taxes and deferred
acquisition costs. Discounts and premiums on investments are amortized
using the effective interest method.
Policy loans are reported at aggregate unpaid balances, which
approximate fair value.
Short-term investments include investments with maturities of less than
one year at the date of acquisition.
7
<PAGE> 69
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d) CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
an original maturity date of three months or less to be cash
equivalents. Cash equivalents are stated at cost plus accrued interest,
which approximates fair value.
e) DEFERRED ACQUISITION COSTS (DAC)
Commissions and other expenses which vary with and are primarily
related to the production of new business are deferred to the extent
recoverable and included as an asset. DAC associated with variable
annuity and variable universal life insurance contracts is charged to
expense in relation to the estimated gross profits of those contracts.
The amortization is adjusted retrospectively when estimates of current
or future gross profits are revised. DAC associated with traditional
life insurance policies is charged to expense over the premium paying
period of the related policies. DAC is adjusted for the impact on
estimated future gross profits assuming the unrealized gains or losses
on securities had been realized at year-end. The impact of any such
adjustments is included in net unrealized gains (losses) in accumulated
other comprehensive income. DAC is reviewed annually to determine
recoverability from future income and, if not recoverable, it is
immediately expensed.
f) POLICYHOLDER LIABILITIES
For variable annuity and variable universal life contracts, reserves
equal the policyholder account value. Account values are increased for
deposits received and interest credited and are reduced by withdrawals,
mortality charges and administrative expenses charged to the
policyholders.
Policyholder liabilities for traditional life insurance policies sold
in Taiwan are computed using the net level premium method and are based
upon estimates as to future mortality, persistency, maintenance expense
and interest rate yields that were established in the year of issue.
g) SEPARATE ACCOUNTS
Separate account assets and liabilities represent funds that are
separately administered, principally for variable annuity and variable
universal life contracts, and for which the contract holder, rather
than the Company, bears the investment risk. Separate account assets
are recorded at market value. Operations of the separate accounts are
not included in the accompanying financial statements.
h) REVENUE RECOGNITION
Fee income from variable annuity and variable universal life insurance
policies consists of policy charges for the cost of insurance, expenses
and surrender charges that have been assessed against the policy
account balances. Policy charges that are designed to compensate the
Company for future services are deferred and recognized in income over
the period benefited, using the same assumptions used to amortize DAC.
Premiums on long-duration life insurance contracts are recognized as
revenue when due. Investment income is recorded when due.
8
<PAGE> 70
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
i) EXPENSES
Expenses for variable annuity and variable universal life insurance
policies include interest credited to policy account balances and
benefit claims incurred during the period in excess of policy account
balances.
j) REINSURANCE
The Company is routinely involved in reinsurance transactions in order
to minimize exposure to large risks. Life reinsurance is accomplished
through various plans including yearly renewable term, coinsurance and
modified coinsurance. Reinsurance premiums, policy charges for cost of
insurance and claims are accounted for on a basis consistent with that
used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums, fees and claims are reported net
of reinsured amounts. Amounts paid with respect to ceded reinsurance
contracts are reported as reinsurance receivables in other assets.
k) FOREIGN EXCHANGE
The Company's Taiwanese branch balance sheet and statement of income
are translated at the current exchange and average exchange rates for
the year respectively. The resultant translation adjustments are
included in accumulated other comprehensive income.
l) INCOME TAX
Income taxes have been provided for in accordance with SFAS No. 109
"Accounting for Income Taxes." The Company joins ManUSA, Manulife
Reinsurance Corporation ("MRC") and Manulife Reinsurance Limited
("MRL") in filing a U.S. consolidated income tax return as a life
insurance group under provisions of the Internal Revenue Code. In
accordance with an income tax sharing agreement, the Company's income
tax provision (or benefit) is computed as if the Company filed a
separate income tax return. Tax benefits from operating losses are
provided at the U.S. statutory rate plus any tax credits attributable
to the Company, provided the consolidated group utilizes such benefits
currently. Deferred income taxes result from temporary differences
between the tax basis of assets and liabilities and their recorded
amounts for financial reporting purposes. Income taxes recoverable
represents amounts due from ManUSA in connection with the consolidated
return.
9
<PAGE> 71
3. INVESTMENTS AND INVESTMENT INCOME
a) FIXED-MATURITY AND EQUITY SECURITIES
At December 31, 1999 and 1998, all fixed-maturity and equity securities
have been classified as available-for-sale and reported at fair value.
The amortized cost and fair value is summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED UNREALIZED FAIR VALUE
AS AT DECEMBER 31, GAINS LOSSES
($ thousands) 1999 1998 1999 1998 1999 1998 1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED-MATURITY SECURITIES:
U.S. government $50,714 $27,349 $ -- $ 2,578 $ (936) $ -- $49,778 $29,927
Foreign governments 13,218 9,353 385 709 -- -- 13,603 10,062
Corporate 9,848 8,546 39 719 (187) -- 9,700 9,265
-------------------------------------------------------------------------------------------------------------------
Total fixed-maturity securities $73,780 $45,248 $ 424 $ 4,006 $(1,123) $ -- $73,081 $49,254
===================================================================================================================
Equity securities $ -- $19,219 $ -- $ 3,217 $ -- $(1,912) $ -- $20,524
===================================================================================================================
</TABLE>
There were no sales of fixed-maturity securities during 1999. Proceeds
from sales of fixed-maturity securities were $26,105 and $70,914 for
1998 and 1997, respectively. Gross realized gains and gross realized
losses on those sales were $362 and $107 for 1998 and, $955 and $837
for 1997, respectively.
Proceeds from sales of equity securities during 1999 were $20,284 (1998
$8,555; 1997 $10,586). Gross gains of $1,051 and gross losses of $0
were realized on those sales (1998 $16 and $477; 1997 $0 and $0,
respectively).
The contractual maturities of fixed maturity securities at December 31,
1999 are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties. Corporate
requirements and investment strategies may result in the sale of
investments before maturity.
<TABLE>
<CAPTION>
($ thousands) AMORTIZED COST FAIR VALUE
-----------------------------------------------------------------------
<S> <C> <C>
Fixed maturity securities
One year or less $ 1,743 $ 1,772
Greater than 1; up to 5 years 27,321 27,185
Greater than 5; up to 10 years 29,468 28,549
Due after 10 years 15,248 15,575
-----------------------------------------------------------------------
TOTAL FIXED MATURITY SECURITIES $73,780 $73,081
-----------------------------------------------------------------------
</TABLE>
10
<PAGE> 72
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
b) INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
---------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 3,686 $ 4,078 $ 4,545
Equity securities - 227 331
Guaranteed annuity contracts - - 2,796
Other investments 3,371 2,082 772
---------------------------------------------------------------------
Gross investment income 7,057 6,387 8,444
---------------------------------------------------------------------
Investment expenses 273 259 169
---------------------------------------------------------------------
NET INVESTMENT INCOME $ 6,784 $ 6,128 $ 8,275
=====================================================================
</TABLE>
4. COMPREHENSIVE INCOME
Total comprehensive income was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME (LOSS) $19,319 $ (754) $(3,636)
-------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized holding gains (losses) arising during the period (3,965) 2,435 (1,030)
Reclassification adjustment for realized gains and losses included in
net income (loss) 683 134 77
Foreign currency translation 836 86 (5,272)
-------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (2,446) 2,655 (6,225)
-------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) $19,474 $ 1,901 $(9,861)
-------------------------------------------------------------------------------------------------------
</TABLE>
Other comprehensive income (loss) is reported net of taxes recoverable
(payable) of $1,767, ($1,430), and $513 for 1999, 1998, and 1997,
respectively.
Accumulated other comprehensive income is comprised of the following:
<TABLE>
<CAPTION>
AS AT DECEMBER 31
($ thousands) 1999 1998
----------------------------------------------------------------------
<S> <C> <C>
UNREALIZED GAINS (LOSSES):
Beginning balance $ 2,949 $ 380
Current period change (3,282) 2,569
----------------------------------------------------------------------
Ending balance $ (333) $ 2,949
----------------------------------------------------------------------
FOREIGN CURRENCY:
Beginning balance $(5,186) $(5,272)
Current period change 836 86
----------------------------------------------------------------------
Ending balance $(4,350) $(5,186)
----------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE LOSS $(4,683) $(2,237)
----------------------------------------------------------------------
</TABLE>
11
<PAGE> 73
5. DEFERRED ACQUISITION COSTS
The components of the change in DAC were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, $163,506 $130,355 $102,610
Capitalization 39,540 43,065 33,544
Accretion of interest 14,407 11,417 9,357
Amortization (17,125) (20,683) (14,217)
Effect of net unrealized gains (losses)
on securities available for sale 1,039 (784) 1,268
Foreign currency 275 136 (2,207)
-----------------------------------------------------------------------------------
BALANCE AT DECEMBER 31 $201,642 $163,506 $130,355
===================================================================================
</TABLE>
6. INCOME TAXES
Components of income tax (expense) benefit were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current (expense) benefit $(13,178) $(1,404) $ 3,207
Deferred (expense) benefit 592 1,796 (2,730)
-----------------------------------------------------------------------------------
TOTAL (EXPENSE) BENEFIT $(12,586) $ 392 $ 477
===================================================================================
</TABLE>
Income before federal income taxes differs from taxable income
principally due to tax-exempt investment income, dividends-received tax
deductions, policy acquisition costs, and differences in reserves for
policy and contract liabilities for tax and financial reporting
purposes.
The Company's deferred income tax asset (liability), which results from
tax effecting the differences between financial statement values and
tax values of assets and liabilities at each balance sheet date,
relates to the following:
<TABLE>
<CAPTION>
AS AT DECEMBER 31
($ thousands) 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Differences in computing policy reserves $ 47,884 $ 38,888
Investments 246 708
Other deferred tax assets 2,768 333
-----------------------------------------------------------------------------------
Deferred tax assets $ 50,898 $ 39,929
-----------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Deferred acquisition costs $ 49,103 $ 38,778
Investments 136 1,859
Policyholder dividends payable 63 55
-----------------------------------------------------------------------------------
Deferred tax liabilities $ 49,382 $ 40,692
-----------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS (LIABILITIES) $ 1,596 $ (763)
===================================================================================
</TABLE>
12
<PAGE> 74
6. INCOME TAXES (CONTINUED)
At December 31, 1999, the consolidated group has utilized all available
operating loss carryforwards and net capital loss carryforwards. The
losses of the Company, MRC and ManUSA may be used to offset the
ordinary and capital gain income of MRL. However, losses of MRL may not
be used to offset the income of the other members of the consolidated
group.
7. CAPITAL AND SURPLUS
The Company has two classes of capital stock, as follows:
<TABLE>
<CAPTION>
AS AT DECEMBER 31:
($ thousands, except per share amounts) 1999 1998
----------------------------------------------------------------------------
<S> <C> <C>
AUTHORIZED:
5,000,000 Common shares, Par value $1
5,000,000 Preferred shares, Par value $100
ISSUED AND OUTSTANDING:
4,501,861 Common shares $ 4,502 $ 4,502
105,000 Preferred shares 10,500 10,500
----------------------------------------------------------------------------
TOTAL $15,002 $15,002
----------------------------------------------------------------------------
</TABLE>
On January 29, 1999 and in exchange for one common share, ManUSA
contributed $1,722 which represented a receivable from a subsidiary to
the Company. On April 15, 1999, ManUSA contributed an additional amount
receivable of $778 from a subsidiary to the Company, which was recorded
as a capital contribution.
In 1998, the outstanding promissory note in the amount of $33,000 plus
interest at 6.95% issued on December 5, 1997 payable to ManUSA was
discharged and the amount due of $34,318 ($33,000 plus interest of
$1,318) was recorded as a capital contribution.
On December 31, 1998, the Company issued one common share to ManUSA in
exchange for a capital contribution of $60,209. Included in this
capital contribution was the discharge of the surplus debenture in the
amount of $8,500 issued on December 31, 1995 to ManUSA.
The Company is subject to statutory limitations on the payment of
dividends to its Parent. Under Michigan Insurance Law, the payment of
dividends to shareholders is restricted to the surplus earnings of the
Company, unless prior approval is obtained from the Michigan Insurance
Bureau.
The aggregate statutory capital and surplus of the Company at December
31, 1999 was $137,039 (1998 $121,799). The aggregate statutory net
income (loss) of the Company for the year ended 1999 was $5,770 (1998
$(23,491); 1997 $(2,550)). State regulatory authorities prescribe
statutory accounting practices that differ in certain respects from
accounting principles generally accepted in the United States followed
by stock life insurance companies. The significant differences relate
to investments, deferred acquisition costs, deferred income taxes,
non-admitted asset balances and reserve calculation assumptions.
13
<PAGE> 75
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and the estimated fair values of certain of the
Company's financial instruments at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
($ thousands) VALUE FAIR VALUE
---------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Fixed-maturity securities $ 73,081 $ 73,081
Short-term investments 6,942 6,942
Policy loans 26,174 26,174
Cash and cash equivalents 17,383 17,383
---------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used to estimate the fair
values of the above financial instruments:
FIXED-MATURITY SECURITIES: Fair values of fixed maturity securities
were based on quoted market prices, where available. Fair values were
estimated using values obtained from independent pricing services.
SHORT-TERM INVESTMENTS AND CASH AND CASH EQUIVALENTS: Carrying values
approximate fair values.
POLICY LOANS: Carrying values approximate fair values.
9. RELATED PARTY TRANSACTIONS
The Company has formal service agreements with MLI and ManUSA which can
be terminated by any party upon two months' notice. Under the
agreements, the Company will pay direct operating expenses incurred
each year by MLI and ManUSA on its behalf. Services provided under the
agreement include legal, actuarial, investment, data processing and
certain other administrative services. Costs incurred under these
agreements were $28,214, $34,070 and $32,733 in 1999, 1998 and 1997
respectively. At December 31, 1999 and 1998, the Company had a net
receivable from MLI and ManUSA for these services of $2,552 and $2,617,
respectively. In addition, there were $10,489, $12,817 and $11,249 of
agents bonuses allocated to the Company during 1999, 1998 and 1997,
respectively, which are included in deferred acquisition costs.
The Company shares office facilities and personnel with its affiliates.
Such shared costs and expenses are allocated to the Company and its
subsidiaries based on time and usage studies; such allocations would
vary depending on the assumptions underlying those studies.
The Company has several reinsurance agreements with affiliated
companies which may be terminated upon the specified notice by either
party. These agreements are summarized as follows:
(a) The Company cedes the risk in excess of $25 per life on its
variable and single premium variable life products to MRC under
the terms of an automatic reinsurance agreement. Under the same
treaty the Company cedes a substantial portion of its risk on its
flexible premium variable life and variable universal life
policies via stop loss reinsurance.
14
<PAGE> 76
9. RELATED PARTY TRANSACTIONS (CONTINUED)
(b) The Company cedes the excess of a $10 million retention limit up
to the consolidated group retention limit of $15 million on
survivorship cases via yearly-renewable-term (YRT) reinsurance.
Effective February 28, 1999, the Company recaptured the excess of
the $10 million retention limit up to the consolidated group
retention limit of $15 million on survivorship cases, effectively
retaining the full $15 million.
(c) The Company cedes the risk in excess of NTD$2,500 per life on its
Taiwan individual and group life business to MRL under the terms
of a YRT reinsurance agreement. The Company also cedes a small
portion of the Taiwan accident and health business under the same
treaty.
(d) On December 31, 1998, the coinsurance treaties under which the
Company had assumed two blocks of insurance from ManUSA were
terminated. The Company's risk under these treaties was limited to
$100 of initial face amount per claim plus a pro-rata share of any
increase in face amount. Upon the termination of the treaties, the
Company paid consideration in the amount of approximately $41.0
million to ManUSA and policyholder reserves totaling $41.0 million
were recaptured by ManUSA. No gain or loss resulted from the
termination of these treaties.
Selected amounts relating to the above treaties reflected in the
financial statements are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------
<S> <C> <C> <C>
Life and annuity premiums assumed $ - $ 48 $ 509
Life and annuity premiums ceded 84 76 69
Policy reserves assumed - - 40,975
Policy reserves ceded 84 145 130
-----------------------------------------------------------------------
</TABLE>
Reinsurance recoveries on ceded reinsurance contracts to affiliates
were $0, $0 and $3,972 during 1999, 1998 and 1997 respectively.
The Company and MLI have entered into an agreement whereby MLI provides
a claims paying guarantee to the Company's U.S. policyholders. This
claims paying guarantee does not apply to the Company's separate
account contract holders
10. REINSURANCE
In the normal course of business, the Company cedes reinsurance as a
party to several reinsurance treaties with major unrelated insurance
companies. The Company remains liable for amounts ceded in the event
that reinsurers do not meet their obligations.
15
<PAGE> 77
10. REINSURANCE (CONTINUED)
The effects of reinsurance on premiums were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
---------------------------------------------------------------------
<S> <C> <C> <C>
Direct premiums $10,699 $9,723 $8,607
Reinsurance ceded 430 405 440
---------------------------------------------------------------------
TOTAL PREMIUMS $10,269 $9,318 $8,167
---------------------------------------------------------------------
</TABLE>
Reinsurance recoveries on ceded reinsurance contracts with unrelated
insurance companies were $1,707, $1,362 and $909 during 1999, 1998 and
1997 respectively.
11. CONTINGENCIES
The Company is subject to various lawsuits that have arisen in the
course of its business. Contingent liabilities arising from litigation,
income taxes and other matters are not considered material in relation
to the financial position of the Company.
16
<PAGE> 78
Audited Financial Statements
The Manufacturers Life Insurance
Company of America
Separate Account Four
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
<PAGE> 79
The Manufacturers Life Insurance Company of America
Separate Account Four
Audited Financial Statements
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Independent Auditors.............................................. 1
Audited Financial Statements
Statement of Assets and Contract Owners' Equity............................. 2
Statements of Operations and Changes in Contract Owners' Equity............. 3
Notes to Financial Statements............................................... 19
</TABLE>
<PAGE> 80
Report of Independent Auditors
To the Contract Owners of
The Manufacturers Life Insurance Company
of America Separate Account Four
We have audited the accompanying statement of assets and contract owners' equity
of The Manufacturers Life Insurance Company of America Separate Account Four as
of December 31, 1999 and the related statements of operations and changes in
contract owners' equity for each of the years presented therein. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Manufacturers Life
Insurance Company of America Separate Account Four at December 31, 1999, and the
results of its operations and the changes in its contract owners' equity for
each of the years presented therein, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young
Philadelphia, Pennsylvania
February 4, 2000
1
<PAGE> 81
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Assets and Contract Owners' Equity
December 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments at market value:
Sub-Accounts:
Emerging Small Company Trust - 2,052,231 shares (cost $45,718,578) $ 83,607,893
Quantitative Equity Trust - 1,625,300 shares (cost $34,096,421) 45,768,457
Real Estate Securities Trust - 1,088,666 shares (cost $17,699,791) 14,032,899
Balanced Trust - 2,970,199 shares (cost $50,945,983) 52,928,961
Money Market Trust - 2,781,197 shares (cost $27,811,969) 27,811,969
International Stock Trust - 1,072,678 shares (cost $14,220,959) 16,551,423
Pacific Rim Emerging Markets Trust - 502,107 shares (cost $4,422,642) 5,462,921
Equity Index Trust - 2,079,653 shares (cost $32,381,212) 37,704,112
Mid-Cap Blend Trust - 417,448 shares (cost $8,122,149) 9,142,129
Equity Income Trust - 571,988 shares (cost $9,981,797) 9,752,393
Growth and Income Trust - 898,185 shares (cost $24,669,858) 29,343,696
U.S. Government Securities Trust - 191,208 shares (cost $2,555,178) 2,531,572
Diversified Bond Trust - 126,496 shares (cost $1,415,552) 1,368,687
Income and Value Trust - 266,642 shares (cost $3,422,205) 3,442,353
Large Cap Growth Trust - 346,203 shares (cost $5,101,249) 5,965,084
Blue Chip Growth Trust - 1,537,674 shares (cost $28,169,476) 33,275,270
Science & Technology Trust - 978,513 shares (cost $22,884,782) 35,392,816
Aggressive Growth Trust - 63,560 shares (cost $817,792) 1,102,140
Mid Cap Growth Trust - 223,935 shares (cost $4,228,210) 5,573,744
Global Equity Trust - 168,902 shares (cost $3,156,947) 3,173,669
Growth Trust - 288,982 shares (cost $6,452,326) 7,767,857
Value Trust - 251,131 shares (cost $3,598,916) 3,322,459
Overseas Trust - 35,061 shares (cost $439,526) 558,175
High Yield Trust - 269,257 shares (cost $3,598,259) 3,457,255
Strategic Bond Trust - 114,787 shares (cost $1,309,669) 1,278,721
Global Bond Trust - 27,861 shares (cost $328,077) 323,189
Investment Quality Bond Trust - 1,655,343 shares (cost $19,465,024) 19,201,985
Lifestyle Aggressive 1000 Trust - 55,428 shares (cost $711,215) 805,917
Lifestyle Growth 820 Trust - 127,688 shares (cost $1,730,140) 1,938,299
Lifestyle Balanced 640 Trust - 109,928 shares (cost $1,473,080) 1,565,366
Lifestyle Moderate 460 Trust - 25,557 shares (cost $357,460) 361,126
Lifestyle Conservative 280 Trust - 37,435 shares (cost $484,291) 492,268
International Small Cap Trust - 70,542 shares (cost $1,356,595) 1,986,465
Small Company Value Trust - 91,842 shares (cost $1,025,367) 1,126,903
U.S. Large Cap Value Trust - 111,059 shares (cost $1,377,308) 1,426,011
Mid Cap Stock Trust - 14,353 shares (cost $182,399) 180,847
Small Company Blend Trust - 14,977 shares (cost $196,876) 236,041
International Value Trust - 38,077 shares (cost $454,493) 494,241
Total Return Trust - 24,261 shares (cost $299,740) 300,108
------------
Total assets $470,755,421
============
CONTRACT OWNERS' EQUITY
Variable life contracts $470,755,421
============
</TABLE>
See accompanying notes.
2
<PAGE> 82
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity
<TABLE>
<CAPTION>
SUB-ACCOUNT
EMERGING SMALL COMPANY QUANTITATIVE EQUITY
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Dividends $ 803,802 $ 879,733 $ 3,879,881 $ 4,420,030
Expenses:
Mortality and expense risks, and
administrative charges 379,062 374,898 274,779 238,491
Net investment income (loss) during the
year 424,740 504,835 3,605,102 4,181,539
Net realized gain (loss) during the year
4,060,457 1,613,232 4,912,245 1,715,267
Unrealized appreciation (depreciation)
during the year 31,619,181 (2,477,479) (30,408) 2,626,256
---------------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 36,104,378 (359,412) 8,486,939 8,523,062
---------------------------------------------------------------------------------
Change from principal transactions:
Transfer of net premiums 7,671,430 10,095,423 3,232,515 3,887,475
Transfer on terminations (5,786,669) (7,645,380) (4,266,534) (3,507,300)
Transfer on policy loans (593,870) (281,289) (385,967) (227,928)
Net interfund transfers (12,504,266) (5,175,422) (1,996,057) (2,590,590)
---------------------------------------------------------------------------------
Net increase (decrease) in assets from
principle transactions (11,213,375) (3,006,668) (3,416,043) (2,438,343)
---------------------------------------------------------------------------------
Total increase (decrease) in assets 24,891,003 (3,366,080) 5,070,896 6,084,719
Assets beginning of year 58,716,890 62,082,970 40,697,561 34,612,842
---------------------------------------------------------------------------------
Assets end of year $ 83,607,893 $ 58,716,890 $ 45,768,457 $ 40,697,561
=================================================================================
</TABLE>
See accompanying notes.
3
<PAGE> 83
<TABLE>
<CAPTION>
SUB-ACCOUNT
REAL ESTATE SECURITIES BALANCED CAPITAL GROWTH BOND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 891,478 $ 2,921,055 $ 3,948,555 $ 6,701,569 $ 1,127,241 $ 789,202
108,666 142,970 372,889 353,472 33,753 95,779
------------------------------------------------------------------------------------------------------------------------------
782,812 2,778,085 3,575,666 6,348,097 1,093,488 693,423
(225,546) 515,184 1,671,479 784,905 (44,948) 74,442
(2,009,468) (7,390,867) (6,565,173) (322,095) (1,237,887) 268,561
------------------------------------------------------------------------------------------------------------------------------
(1,452,202) (4,097,598) (1,318,028) 6,810,907 (189,347) 1,036,426
------------------------------------------------------------------------------------------------------------------------------
2,273,286 3,172,812 7,828,360 7,779,255 923,685 2,121,220
(2,001,726) (2,063,583) (5,350,233) (5,263,498) (419,351) (1,358,276)
(97,819) (158,565) (437,651) (166,218) (41,697) (52,477)
(3,836,514) (2,267,624) (6,044,490) (516,113) (15,989,477) 266,572
------------------------------------------------------------------------------------------------------------------------------
(3,662,773) (1,316,960) (4,004,014) 1,833,426 (15,526,840) 977,039
------------------------------------------------------------------------------------------------------------------------------
(5,114,975) (5,414,558) (5,322,042) 8,644,333 (15,716,187) 2,013,465
19,147,874 24,562,432 58,251,003 49,606,670 15,716,187 13,702,722
------------------------------------------------------------------------------------------------------------------------------
$ 14,032,899 $ 19,147,874 $ 52,928,961 $ 58,251,003 $ -- $ 15,716,187
==============================================================================================================================
</TABLE>
4
<PAGE> 84
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
MONEY MARKET INTERNATIONAL STOCK
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Dividends $ 961,677 $ 618,267 $ 1,366,973 $ 162,650
Expenses:
Mortality and expense risks, and
administrative charges 138,259 81,828 79,622 58,840
---------------------------------------------------------------------------------
Net investment income (loss) during the
year 823,418 536,439 1,287,351 103,810
Net realized gain (loss) during the year
-- -- 647,233 330,639
Unrealized appreciation (depreciation)
during the year -- -- 1,684,577 698,766
---------------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 823,418 536,439 3,619,161 1,133,215
---------------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 7,082,683 9,080,518 4,383,338 4,424,007
Transfer on terminations (3,222,729) (1,630,779) (745,024) (873,572)
Transfer on policy loans (836,807) (241,862) (71,835) (33,326)
Net interfund transfers 6,291,758 3,412,497 (1,436,262) (559,362)
---------------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 9,314,905 10,620,374 2,130,217 2,957,747
---------------------------------------------------------------------------------
Total increase (decrease) in assets 10,138,323 11,156,813 5,749,378 4,090,962
Assets beginning of year 17,673,646 6,516,833 10,802,045 6,711,083
---------------------------------------------------------------------------------
Assets end of year $ 27,811,969 $ 17,673,646 $ 16,551,423 $ 10,802,045
=================================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 85
<TABLE>
<CAPTION>
SUB-ACCOUNT
PACIFIC RIM EMERGING
MARKETS EQUITY INDEX MID-CAP BLEND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 91,583 $ -- $ 909,767 $ 558,787 $ 945,696 $ 1,580,782
21,588 14,226 186,998 75,611 51,669 49,176
----------------------------------------------------------------------------------------------------------------------------
69,995 (14,226) 722,769 483,176 894,027 1,531,606
(303,549) (366,914) 1,279,721 494,230 (60,193) (354,193)
1,953,611 242,269 3,317,397 1,991,508 1,138,871 (411,003)
----------------------------------------------------------------------------------------------------------------------------
1,720,057 (138,871) 5,319,887 2,968,914 1,972,705 766,410
----------------------------------------------------------------------------------------------------------------------------
569,478 602,999 11,677,308 5,759,699 1,546,812 1,882,059
(362,876) (205,435) (1,432,735) (1,427,792) (667,965) (659,930)
3,238 (41,088) (55,679) (167,037) (87,722) (57,084)
1,230,820 (258,865) 4,026,837 4,120,011 (919,573) (2,647,372)
----------------------------------------------------------------------------------------------------------------------------
1,440,660 97,611 14,215,731 8,284,881 (128,448) (1,482,327)
----------------------------------------------------------------------------------------------------------------------------
3,160,717 (41,260) 19,535,618 11,253,795 1,844,257 (715,917)
2,302,204 2,343,464 18,168,494 6,914,699 7,297,872 8,013,789
----------------------------------------------------------------------------------------------------------------------------
$ 5,462,921 $ 2,302,204 $ 37,704,112 $ 18,168,494 $ 9,142,129 $ 7,297,872
============================================================================================================================
</TABLE>
6
<PAGE> 86
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
EQUITY INCOME GROWTH AND INCOME
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Dividends $ 781,192 $ 439,236 $ 683,192 $ 687,431
Expenses:
Mortality and expense risks, and
administrative charges 64,646 54,912 148,390 80,279
---------------------------------------------------------------------------------
Net investment income (loss) during the
year 716,546 384,324 534,802 607,152
Net realized gain (loss) during the year
345,133 293,379 1,008,826 560,486
Unrealized appreciation (depreciation)
during the year (675,079) (214,094) 2,180,310 1,566,533
---------------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 386,600 463,609 3,723,938 2,734,171
---------------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 3,340,138 3,319,426 5,660,404 3,712,205
Transfer on terminations (883,815) (837,249) (1,211,402) (1,272,523)
Transfer on policy loans (74,633) (5,179) (206,558) (68,077)
Net interfund transfers (2,322,477) 764,417 5,001,996 3,032,604
---------------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 59,213 3,241,415 9,244,440 5,404,209
---------------------------------------------------------------------------------
Total increase (decrease) in assets 445,813 3,705,024 12,968,378 8,138,380
Assets beginning of year 9,306,580 5,601,556 16,375,318 8,236,938
---------------------------------------------------------------------------------
Assets end of year $ 9,752,393 $ 9,306,580 $ 29,343,696 $ 16,375,318
=================================================================================
</TABLE>
See accompanying notes.
7
<PAGE> 87
<TABLE>
<CAPTION>
SUB-ACCOUNT
U.S. GOVERNMENT SECURITIES DIVERSIFIED BOND INCOME AND VALUE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 125,143 $ 34,788 $ 102,127 $ 61,639 $ 344,990 $ 276,382
19,463 10,351 6,973 4,793 20,857 15,938
-------------------------------------------------------------------------------------------------------------------------
105,680 24,437 95,154 56,846 324,133 260,444
(43,062) 20,033 (11,663) (9,736) (3,448) 40,580
(86,051) 52,458 (79,430) 15,327 (88,733) 13,891
------------------------------------------------------------------------------------------------------------------------
(23,433) 96,928 4,061 62,437 231,952 314,915
------------------------------------------------------------------------------------------------------------------------
931,141 368,181 404,943 111,885 1,201,432 741,631
(111,231) (76,557) (24,590) (144,859) (426,670) (196,822)
(1,783) (476) -- -- 9,522 (12,957)
(1,908,556) 2,596,506 98,839 290,044 (220,174) (60,740)
-------------------------------------------------------------------------------------------------------------------------
(1,090,429) 2,887,654 479,192 257,070 564,110 471,112
-------------------------------------------------------------------------------------------------------------------------
(1,113,862) 2,984,582 483,253 319,507 796,062 786,027
3,645,434 660,852 885,434 565,927 2,646,291 1,860,264
-------------------------------------------------------------------------------------------------------------------------
$ 2,531,572 $ 3,645,434 $ 1,368,687 $ 885,434 $ 3,442,353 $ 2,646,291
=========================================================================================================================
</TABLE>
8
<PAGE> 88
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
LARGE CAP GROWTH INTERNATIONAL SMALL CAP
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Dividends $ 321,797 $ 445,314 $ 3,477 $ 1,473
Expenses:
Mortality and expense risks, and
administrative charges 25,655 19,046 7,349 5,414
-----------------------------------------------------------------------------
Net investment income (loss) during the
year 296,142 426,268 (3,872) (3,941)
Net realized gain (loss) during the year
20,062 91,347 136,316 42,617
Unrealized appreciation (depreciation)
during the year 741,348 21,809 667,674 (22,670)
-----------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 1,057,552 539,424 800,118 16,006
-----------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 1,078,127 1,188,269 187,515 210,960
Transfer on terminations (247,991) (216,987) (90,713) (59,723)
Transfer on policy loans (13,546) (1,768) (9,869) (8,482)
Net interfund transfers 1,383,164 (2,012,227) (39,003) 425,368
-----------------------------------------------------------------------------
Net increase (decrease) in net assets
from principal transactions 2,199,754 (1,042,713) 47,930 568,123
-----------------------------------------------------------------------------
Total increase (decrease) in net assets
3,257,306 (503,289) 848,048 584,129
Net assets beginning of year 2,707,778 3,211,067 1,138,417 554,288
-----------------------------------------------------------------------------
Net assets end of year $ 5,965,084 $ 2,707,778 $ 1,986,465 $ 1,138,417
=============================================================================
</TABLE>
See accompanying notes.
9
<PAGE> 89
<TABLE>
<CAPTION>
SUB-ACCOUNT
BLUE CHIP GROWTH SCIENCE & TECHNOLOGY AGGRESSIVE GROWTH
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 852,462 $ 163,206 $ 2,459,232 $ -- $ -- $ --
152,654 62,944 111,705 25,363 4,009 2,341
-------------------------------------------------------------------------------------------------------------------------------
699,808 100,262 2,347,527 (25,363) (4,009) (2,341)
955,115 403,568 1,200,045 159,942 4,279 (16,990)
2,787,049 2,082,817 10,833,388 1,706,363 231,555 54,619
-------------------------------------------------------------------------------------------------------------------------------
4,441,972 2,586,647 14,380,960 1,840,942 231,825 35,288
-------------------------------------------------------------------------------------------------------------------------------
10,118,553 7,650,835 7,569,309 3,784,735 264,328 188,214
(1,220,684) (836,755) (835,547) (307,967) (53,536) (16,593)
(90,784) (12,374) (128,372) (5,733) 1,030 (9,931)
5,500,388 620,404 7,353,863 291,311 165,704 6,266
-------------------------------------------------------------------------------------------------------------------------------
14,307,473 7,422,110 13,959,253 3,762,346 377,526 167,956
-------------------------------------------------------------------------------------------------------------------------------
18,749,445 10,008,757 28,340,213 5,603,288 609,351 203,244
14,525,825 4,517,068 7,052,603 1,449,315 492,789 289,545
-------------------------------------------------------------------------------------------------------------------------------
$ 33,275,270 $ 14,525,825 $ 35,392,816 $ 7,052,603 $ 1,102,140 $ 492,789
===============================================================================================================================
</TABLE>
10
<PAGE> 90
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
MID CAP GROWTH WORLDWIDE GROWTH
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Dividends $ 424,170 $ -- $ 6,399 $ 2,514
Expenses:
Mortality and expense risks, and
administrative charges 23,442 12,596 1,502 1,535
-----------------------------------------------------------------------------
Net investment income (loss) during the
year 400,728 (12,596) 4,897 979
Net realized gain (loss) during the year
279,819 98,578 46,114 20,520
Unrealized appreciation (depreciation)
during the year 903,615 483,130 (17,078) 18,714
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 1,584,162 569,112 33,933 40,213
-----------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 800,199 579,891 40,904 112,933
Transfer on terminations (141,560) (111,777) (13,226) (29,603)
Transfer on policy loans (23,845) (9,073) (2,288) --
Net interfund transfers 883,131 (354,048) (568,190) 184,048
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 1,517,925 104,993 (542,800) 267,378
-----------------------------------------------------------------------------
Total increase (decrease) in assets 3,102,087 674,105 (508,867) 307,591
Assets beginning of year 2,471,657 1,797,552 508,867 201,276
-----------------------------------------------------------------------------
Assets end of year $ 5,573,744 $ 2,471,657 $ -- $ 508,867
=============================================================================
</TABLE>
See accompanying notes.
11
<PAGE> 91
<TABLE>
<CAPTION>
SUB-ACCOUNT
GLOBAL EQUITY GROWTH VALUE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 170,310 $ 283,512 $ 180,570 $ 88,404 $ 104,384 $ 189,862
14,066 15,149 31,123 14,183 29,270 27,317
------------------------------------------------------------------------------------------------------------------------
156,244 268,363 149,447 74,221 75,114 162,545
(98,806) 362,299 454,764 156,634 (107,245) 19,873
21,590 (147,744) 1,040,751 231,843 25,016 (296,205)
------------------------------------------------------------------------------------------------------------------------
79,028 482,918 1,644,962 462,698 (7,115) (113,787)
------------------------------------------------------------------------------------------------------------------------
850,651 977,760 1,712,932 819,142 1,736,465 4,558,587
(126,551) (197,507) (270,861) (118,387) (346,470) (402,675)
(30,830) (604) (22,232) (6,515) 1,434 (25,308)
998,353 (3,258,055) 1,991,577 (199,981) (3,882,692) 431,082
------------------------------------------------------------------------------------------------------------------------
1,691,623 (2,478,406) 3,411,416 494,259 (2,491,263) 4,561,686
------------------------------------------------------------------------------------------------------------------------
1,770,651 (1,995,488) 5,056,378 956,957 (2,498,378) 4,447,899
1,403,018 3,398,506 2,711,479 1,754,522 5,820,837 1,372,938
------------------------------------------------------------------------------------------------------------------------
$ 3,173,669 $ 1,403,018 $ 7,767,857 $ 2,711,479 $ 3,322,459 $ 5,820,837
========================================================================================================================
</TABLE>
12
<PAGE> 92
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
OVERSEAS HIGH YIELD
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Dividends $ -- $ 2,310 $ 274,823 $ 147,116
Expenses:
Mortality and expense risks, and
administrative charges 2,131 1,074 17,262 10,890
Net investment income (loss) during the
year (2,131) 1,236 257,561 136,226
Net realized gain (loss) during the year
-----------------------------------------------------------------------------
4,626 (1,036) (46,236) (16,657)
Unrealized appreciation (depreciation)
during the year 135,006 (15,260) (7,289) (111,067)
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 137,501 (15,060) 204,036 8,502
-----------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 96,022 37,028 1,554,579 1,047,209
Transfer on terminations (33,807) (9,110) (148,261) (111,277)
Transfer on policy loans (2,559) (417) (12,933) (3,925)
Net interfund transfers 91,840 235,679 (199,115) 279,547
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 151,496 263,180 1,194,270 1,211,554
-----------------------------------------------------------------------------
Total increase (decrease) in assets 288,997 248,120 1,398,306 1,220,056
Assets beginning of year 269,178 21,058 2,058,949 838,893
-----------------------------------------------------------------------------
Assets end of year $ 558,175 $ 269,178 $ 3,457,255 $ 2,058,949
=============================================================================
</TABLE>
See accompanying notes.
13
<PAGE> 93
<TABLE>
<CAPTION>
SUB-ACCOUNT
STRATEGIC BOND GLOBAL BOND INVESTMENT QUALITY BOND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 70,133 $ 41,408 $ 3,386 $ 5,515 $ 218,156 $ 62,454
7,044 5,989 872 319 95,809 10,846
-----------------------------------------------------------------------------------------------------------------------------
63,089 35,419 2,514 5,196 122,347 51,608
(32,990) (19,920) (8,982) (3,550) (132,850) 996
(11,082) (30,537) (5,265) 190 (339,279) 70,756
-----------------------------------------------------------------------------------------------------------------------------
19,017 (15,038) (11,733) 1,836 (349,782) 123,360
-----------------------------------------------------------------------------------------------------------------------------
270,594 372,334 13,248 10,166 3,725,347 1,117,077
(48,315) (56,296) (5,238) (3,976) (1,167,642) (123,130)
(7,840) (8,000) (292) (104) (56,091) (7,602)
(217,962) 563,277 284,481 26,715 14,066,025 1,404,610
-----------------------------------------------------------------------------------------------------------------------------
(3,523) 871,315 292,199 32,801 16,567,639 2,390,955
-----------------------------------------------------------------------------------------------------------------------------
15,494 856,277 280,466 34,637 16,217,857 2,514,315
1,263,227 406,950 42,723 8,086 2,984,128 469,813
-----------------------------------------------------------------------------------------------------------------------------
$ 1,278,721 $ 1,263,227 $ 323,189 $ 42,723 $ 19,201,985 $ 2,984,128
=============================================================================================================================
</TABLE>
14
<PAGE> 94
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
LIFESTYLE AGGRESSIVE 1000 LIFESTYLE GROWTH 820
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
Income:
Dividends $ 40,136 $ 28,212 $ 146,899 $ 177,818
Expenses:
Mortality and expense risks, and
administrative charges 4,878 3,611 15,004 18,498
-----------------------------------------------------------------------------
Net investment income (loss) during the
year 35,258 24,601 131,895 159,320
Net realized gain (loss) during the year
(11,996) (924) (73,346) (110,403)
Unrealized appreciation (depreciation)
during the year 75,477 18,120 232,254 (31,817)
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 98,739 41,797 290,803 17,100
-----------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 73,879 70,842 449,067 406,823
Transfer on terminations (53,935) (63,229) (458,963) (237,067)
Transfer on policy loans (4,406) (9,477) (78,888) (5,252)
Net interfund transfers (29,882) 210,882 (1,234,984) 475,327
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions (14,344) 209,018 (1,323,768) 639,831
-----------------------------------------------------------------------------
Total increase (decrease) in assets 84,395 250,815 (1,032,965) 656,931
Assets beginning of year 721,522 470,707 2,971,264 2,314,333
-----------------------------------------------------------------------------
Assets end of year $ 805,917 $ 721,522 $ 1,938,299 $ 2,971,264
=============================================================================
</TABLE>
See accompanying notes.
15
<PAGE> 95
<TABLE>
<CAPTION>
SUB-ACCOUNT
LIFESTYLE BALANCED 640 LIFESTYLE MODERATE 460 LIFESTYLE CONSERVATIVE 280
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C> <C>
$ 60,854 $ 65,526 $ 2,368 $ 4,852 $ 10,742 $ 319
7,273 7,070 524 495 1,979 130
-----------------------------------------------------------------------------------------------------------------------------
53,581 58,456 1,844 4,357 8,763 189
(7,766) 5,620 11,079 572 3,924 812
88,932 (13,823) 2,460 845 5,136 2,842
-----------------------------------------------------------------------------------------------------------------------------
134,747 50,253 15,383 5,774 17,823 3,843
-----------------------------------------------------------------------------------------------------------------------------
752,004 227,592 9,334 12,212 23,038 12,677
(104,617) (46,788) (5,225) (4,396) (11,055) (1,796)
(221) (13,308) (1,053) (83,848) (160) --
(337,941) 53,428 309,004 6,509 382,542 65,356
-----------------------------------------------------------------------------------------------------------------------------
309,225 220,924 312,060 (69,523) 394,365 76,237
-----------------------------------------------------------------------------------------------------------------------------
443,972 271,177 327,443 (63,749) 412,188 80,080
1,121,394 850,217 33,683 97,432 80,080 --
-----------------------------------------------------------------------------------------------------------------------------
$ 1,565,366 $ 1,121,394 $ 361,126 $ 33,683 $ 492,268 $ 80,080
=============================================================================================================================
</TABLE>
16
<PAGE> 96
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
U.S. LARGE MID CAP
SMALL COMPANY VALUE CAP VALUE STOCK
YEAR PERIOD PERIOD PERIOD
ENDED ENDED* ENDED** ENDED**
DEC. 31/99 DEC. 31/98 DEC. 31/99 DEC. 31/99
<S> <C> <C> <C> <C>
Income:
Dividends $ 248 $ -- $ -- $ --
Expenses:
Mortality and expense risks, and
administrative charges 4,096 168 4,379 462
-----------------------------------------------------------------------------
Net investment (loss) income during the
year (3,848) (168) (4,379) (462)
Net realized gain (loss) during the year
34,012 (4,254) (10,928) 19
Unrealized appreciation (depreciation)
during the year 99,631 1,904 48,703 (1,552)
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
operations 129,795 (2,518) 33,396 (1,995)
-----------------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 249,987 11,881 48,789 27,792
Transfer on terminations (30,096) (4,420) (37,726) (2,165)
Transfer on policy loans (6,213) (41) (15,190) (38)
Net interfund transfers 704,288 74,240 1,396,742 157,253
-----------------------------------------------------------------------------
Net increase (decrease) in assets from
principal transactions 917,966 81,660 1,392,615 182,842
-----------------------------------------------------------------------------
Total increase (decrease) in assets 1,047,761 79,142 1,426,011 180,847
Assets beginning of year 79,142 -- -- --
-----------------------------------------------------------------------------
Assets end of year $ 1,126,903 $ 79,142 $ 1,426,011 $ 180,847
=============================================================================
</TABLE>
* Reflects the period from commencement of operations May 1, 1998 through
December 31, 1998.
** Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
See accompanying notes.
17
<PAGE> 97
<TABLE>
<CAPTION>
SUB-ACCOUNT
SMALL COMPANY INTERNATIONAL
BLEND VALUE TOTAL RETURN TOTAL
PERIOD PERIOD PERIOD YEAR YEAR
ENDED** ENDED** ENDED** ENDED ENDED
DEC. 31/99 DEC. 31/99 DEC. 31/99 DEC. 31/99 DEC. 31/98
<S> <C> <C> <C> <C>
$ 4,498 $ -- $ -- $ 22,318,341 $ 21,841,366
530 885 1,187 2,472,704 1,896,542
--------------------------------------------------------------------------------------------------------------
3,968 (885) (1,187) 19,845,637 19,944,824
960 (11,916) 4,906 15,845,664 6,901,178
39,165 39,749 368 48,759,040 684,860
--------------------------------------------------------------------------------------------------------------
44,093 26,948 4,087 84,450,341 27,530,862
--------------------------------------------------------------------------------------------------------------
25,426 40,220 15,252 90,460,514 80,455,962
(2,182) (7,916) (5,447) (32,383,279) (30,123,014)
(41) (7,407) -- (3,391,895) (1,725,325)
168,745 442,396 286,216 (471,653) (63,699)
--------------------------------------------------------------------------------------------------------------
191,948 467,293 296,021 54,213,687 48,543,924
--------------------------------------------------------------------------------------------------------------
236,041 494,241 300,108 138,664,028 76,074,786
-- -- -- 332,091,393 256,016,607
--------------------------------------------------------------------------------------------------------------
$ 236,041 $ 494,241 $ 300,108 $ 470,755,421 $ 332,091,393
==============================================================================================================
</TABLE>
18
<PAGE> 98
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements
1. ORGANIZATION
The Manufacturers Life Insurance Company of America Separate Account Four (the
Account) is a separate account established by The Manufacturers Life Insurance
Company of America (the Company). The Account operates as a Unit Investment
Trust under the Investment Company Act of 1940, as amended and invests in thirty
nine sub-accounts of Manufacturers Investment Trust (the Trust). The Account is
a funding vehicle for allocation of net premiums under variable universal life
insurance contracts (the Contracts) issued by the Company. The Account was
established by the Company, a life insurance company organized in 1983 under
Michigan law. The Company is an indirect, wholly-owned subsidiary of The
Manufacturers Life Insurance Company (Manulife Financial), a Canadian life
insurance company. Each investment sub-account invests solely in shares of a
particular portfolio of the Trust. The Trust is registered under the Investment
Company Act of 1940 as an open-end management investment company.
The Company is required to maintain assets in the Account with a total market
value at least equal to the reserves and other liabilities relating to the
variable benefits under all contracts participating in the Account. These assets
may not be charged with liabilities which arise from any other business the
Company conducts. However, all obligations under the variable contracts are
general corporate obligations of the Company.
Additional assets are held in the Company's general account to cover the
contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
As the result of portfolio changes, effective May 1, 1999, the following
sub-accounts of the Account have been replaced with a new fund as follows:
PREVIOUS FUND
Emerging Growth Trust
Conservative Asset Allocation Trust
Moderate Asset Allocation Trust
Aggressive Asset Allocation Trust
Pilgrim Baxter Growth Trust
Small/Mid Cap Trust
International Growth & Income Trust
Global Government Bond Trust
Equity Trust
NEW FUND
Emerging Small Company Trust
Diversified Bond Trust
Income & Value Trust
Large Cap Growth Trust
Aggressive Growth Trust
Mid Cap Growth Trust
Overseas Trust
Global Bond Trust
Mid-Cap Blend Trust
19
<PAGE> 99
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
Effective May 1, 1999, the following sub-accounts of the Account were merged
with existing funds as follows:
Capital Growth Bond Trust merged with Investment Quality Bond Trust
Worldwide Growth Trust merged with Global Equity Trust
The following sub-accounts of the Account were added as investment options for
variable universal life insurance contract holders of Manufacturers Life of
America:
<TABLE>
<CAPTION>
COMMENCEMENT OF
OPERATIONS OF THE
SUB-ACCOUNTS
<S> <C>
U.S. Large Cap Value Trust May 1, 1999
Mid Cap Stock Trust May 1, 1999
Small Company Blend Trust May 1, 1999
International Value Trust May 1, 1999
Total Return Trust May 1, 1999
Small Company Value Trust May 1, 1998
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
Investments are made in the portfolios of the Trust and are valued at the
reported net asset value of such portfolios. Transactions are recorded on the
trade date. Income from dividends is recorded on the ex-dividend date. Realized
gains and losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
In addition to the Account, a contract holder may also allocate funds to the
Fixed Account, which is part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933, and the Company's general
account has not been registered as an investment company under the Investment
Company Act of 1940.
20
<PAGE> 100
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The operations of the Account are included in the federal income tax return of
the Company, which is taxed as a life insurance company under the provisions of
the Internal Revenue Code (the Code). Under the current provisions of the Code,
the Company does not expect to incur federal income taxes on the earnings of the
Account to the extent the earnings are credited under the contracts. Based on
this, no charge is being made currently to the Account for federal income taxes.
The Company will review periodically the status of such decision based on
changes in the tax law. Such a charge may be made in future years for any
federal income taxes that would be attributable to the contract.
The preparation of financial statements in conformity with accounting principals
generally accepted in the United States requires management to make estimates
and assumptions that could affect the amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could impact the amounts
reported and disclosed herein.
3. MORTALITY AND EXPENSE RISKS CHARGE
Manufacturers Life of America deducts from the assets of the Account a daily
charge equivalent to annual rates between 0.55% and 0.65% of the average net
value of the Account's assets for mortality and expense risks.
4. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges for state, local, and
federal taxes from the gross premium before placing the remaining net premiums
in the sub-accounts.
21
<PAGE> 101
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
5. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares purchased and proceeds from
sales of each Trust portfolio for the year ended December 31, 1999:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Emerging Small Company Trust $ 8,830,178 $19,618,814
Quantitative Equity Trust 12,349,619 12,160,560
Real Estate Securities Trust 3,912,162 6,792,121
Balanced Trust 15,347,865 15,776,213
Money Market Trust 32,552,209 22,413,885
Capital Growth Bond Trust 2,879,240 17,312,593
International Stock Trust 13,455,553 10,037,984
Pacific Rim Emerging Markets Trust 2,505,891 995,234
Equity Index Trust 26,777,409 11,838,909
Mid-Cap Blend Trust 5,214,535 4,448,956
Equity Income Trust 6,373,056 5,597,298
Growth and Income Trust 16,604,078 6,824,836
U.S. Government Securities Trust 3,721,183 4,705,931
Diversified Bond Trust 1,292,710 718,366
Income and Value Trust 3,100,976 2,212,732
Large Cap Growth Trust 4,569,975 2,074,079
Blue Chip Growth Trust 26,032,442 11,025,161
Science & Technology Trust 23,235,756 6,928,976
Aggressive Growth Trust 878,895 505,376
Mid Cap Trust 5,114,584 3,195,930
Worldwide Growth Trust 522,410 1,060,314
Global Equity Trust 3,676,292 1,828,425
Growth Trust 7,219,867 3,659,003
Value Trust 7,630,377 10,046,526
</TABLE>
22
<PAGE> 102
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
5. PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Overseas Trust $ 327,892 $ 178,527
High Yield Trust 4,583,289 3,131,458
Strategic Bond Trust 1,544,223 1,484,657
Global Bond Trust 596,548 301,835
Investment Quality Bond Trust 24,233,053 7,543,067
Lifestyle Aggressive 1000 Trust 297,498 276,585
Lifestyle Growth 820 Trust 1,355,903 2,547,778
Lifestyle Balanced 640 Trust 1,346,079 983,273
Lifestyle Moderate 460 Trust 636,617 322,713
Lifestyle Conservative 280 Trust 806,379 403,250
International Small Cap Trust 1,973,366 1,929,308
Small Company Value Trust 1,501,975 587,857
U.S. Large Cap Value Trust 1,717,106 328,870
Mid Cap Stock Trust 217,462 35,083
Small Company Blend Trust 211,066 15,150
International Value Trust 1,023,784 557,375
Total Return Trust 772,908 478,076
------------ ------------
Total $276,942,410 $204,158,239
============ ============
</TABLE>
6. UNIT VALUES
A summary of the accumulation unit values at December 31, 1999 and 1998 and the
accumulation units and dollar value outstanding at December 31, 1999 for the
variable universal life contracts are as follows:
<TABLE>
1998 1999
UNIT UNIT
VALUE VALUE UNITS DOLLARS
<S> <C> <C> <C> <C>
Emerging Small Company Trust:
Individual Variable Life Type K Contracts $ 62.63 $ 107.98 774,282 $83,607,893
Quantitative Equity Trust:
Individual Variable Life Type K Contracts 51.82 62.97 726,887 45,768,457
<CAPTION>
Real Estate Securities Trust:
Individual Variable Life Type K Contracts 34.85 31.86 440,492 14,032,899
Balanced Trust:
Individual Variable Life Type K Contracts 33.65 32.88 1,609,782 52,928,961
</TABLE>
23
<PAGE> 103
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
UNIT UNIT
VALUE VALUE UNITS DOLLARS
<S> <C> <C> <C> <C>
Money Market Trust:
Individual Variable Life Type K Contracts 16.77 17.43 1,595,413.20 27,801,940
Corporate Variable Life Type L Contracts -- 12.57 797.98 10,029
----------
27,811,969
International Stock Trust:
Individual Variable Life Type K Contracts 13.58 17.50 946,036.60 16,551,423
Pacific Rim Emerging Markets Trust:
Individual Variable Life Type K Contracts 7.06 11.42 478,484.77 5,462,921
Equity Index Trust:
Individual Variable Life Type K Contracts 19.35 23.18 1,624,831.03 37,670,418
Corporate Variable Life Type L Contracts -- 12.94 2,604.73 33,694
----------
37,704,112
Mid-Cap Blend Trust:
Individual Variable Life Type K Contracts 14.56 18.48 493,648.28 9,120,529
Corporate Variable Life Type L Contracts -- 13.73 1,573.61 21,600
----------
9,142,129
Equity Income Trust:
Individual Variable Life Type K Contracts 15.79 16.23 601,052.36 9,752,393
Growth and Income Trust:
Individual Variable Life Type K Contracts 19.37 22.88 1,280,842.18 29,307,697
Corporate Variable Life Type L Contracts -- 12.81 2,809.50 35,999
----------
29,343,696
U.S. Government Securities Trust:
Individual Variable Life Type K Contracts 11.72 11.62 217,907.61 2,531,572
Diversified Bond Trust:
Individual Variable Life Type K Contracts 12.74 12.75 106,414.99 1,356,248
Corporate Variable Life Type L Contracts -- 12.40 1,003.14 12,439
----------
1,368,687
Income and Value Trust:
Individual Variable Life Type K Contracts 14.01 15.13 226,217.19 3,421,815
Corporate Variable Life Type L Contracts -- 12.66 1,622.46 20,538
----------
3,442,353
</TABLE>
24
<PAGE> 104
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
UNIT UNIT
VALUE VALUE UNITS DOLLARS
<S> <C> <C> <C> <C>
Large Cap Growth Trust:
Individual Variable Life Type K Contracts $ 15.21 $ 18.93 315,045.97 $ 5,965,084
International Small Cap Trust:
Individual Variable Life Type K Contracts 13.96 25.65 77,434.31 1,986,465
Blue Chip Growth Trust:
Individual Variable Life Type K Contracts 20.35 24.15 1,376,320.29 33,241,417
Corporate Variable Life Type L Contracts -- 12.90 2,623.64 33,853
-----------
33,275,270
Science & Technology Trust:
Individual Variable Life Type K Contracts 19.94 39.51 894,204.23 35,334,321
Corporate Variable Life Type L Contracts -- 15.00 3,898.90 58,495
----------
35,392,816
Aggressive Growth Trust:
Individual Variable Life Type K Contracts 15.00 19.81 55,619.98 1,102,140
Mid Cap Trust:
Individual Variable Life Type K Contracts 19.37 27.85 199,648.44 5,559,966
Corporate Variable Life Type L Contracts -- 14.43 954.53 13,778
----------
5,573,744
Global Equity Trust:
Individual Variable Life Type K Contracts 16.19 16.68 190,276.47 3,173,669
Growth Trust:
Individual Variable Life Type K Contracts 18.36 25.02 310,444.26 7,767,857
Value Trust:
Individual Variable Life Type K Contracts 14.06 13.57 244,747.64 3,322,459
Overseas Trust:
Individual Variable Life Type K Contracts 13.34 18.64 28,779.52 536,316
Corporate Variable Life Type L Contracts -- 14.38 1,520.15 21,859
----------
558,175
High Yield Trust:
Individual Variable Life Type K Contracts 14.09 15.11 228,581.13 3,454,742
Corporate Variable Life Type L Contracts -- 12.71 197.59 2,513
----------
3,457,255
</TABLE>
25
<PAGE> 105
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
UNIT UNIT
VALUE VALUE UNITS DOLLARS
<S> <C> <C> <C> <C>
Strategic Bond Trust:
Individual Variable Life Type K Contracts $ 13.65 $ 13.87 92,210.47 $ 1,278,721
Global Bond Trust:
Individual Variable Life Type K Contracts 14.07 13.04 24,777.84 323,189
Investment Quality Bond Trust:
Individual Variable Life Type K Contracts 14.61 14.26 1,346,597.13 19,201,985
Lifestyle Aggressive 1000 Trust:
Individual Variable Life Type K Contracts 14.86 16.92 47,640.05 805,917
Lifestyle Growth 820 Trust:
Individual Variable Life Type K Contracts 14.95 17.32 111,946.34 1,938,299
Lifestyle Balanced 640 Trust:
Individual Variable Life Type K Contracts 14.75 16.47 95,036.53 1,565,366
Lifestyle Moderate 460 Trust:
Individual Variable Life Type K Contracts 15.04 16.12 22,399.23 361,126
Lifestyle Conservative 280 Trust
Individual Variable Life Type K Contracts 14.94 15.47 31,819.99 492,268
Small Company Value Trust:
Individual Variable Life Type K Contracts 8.49 9.11 123,672.84 1,126,903
U.S. Large Cap Value Trust:
Individual Variable Life Type K Contracts - 12.78 111,538.37 1,426,011
Mid Cap Stock Trust:
Individual Variable Life Type K Contracts - 12.55 14,414.44 180,847
Small Company Blend Trust:
Individual Variable Life Type K Contracts - 16.00 14,750.22 236,041
International Value Trust:
Individual Variable Life Type K Contracts - 12.92 38,241.00 494,241
Total Return Trust:
Individual Variable Life Type K Contracts - 12.32 24,365.60 300,108
-------------
Total $ 470,755,421
=============
</TABLE>
26
<PAGE> 106
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
7. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly-owned subsidiary
of Manulife Financial, acts as the principal underwriter of the Contracts
pursuant to a Distribution Agreement with the Company. Registered
representatives of either ManEquity, Inc. or other broker-dealers having
distribution agreements with ManEquity, Inc. who are also authorized as variable
life insurance agents under applicable state insurance laws, sell the Contracts.
Registered representatives are compensated on a commission basis.
The Company has a formal service agreement with its affiliates, Manulife
Financial and The Manufacturers Life Insurance Company (U.S.A.), which can be
terminated by either party upon two months notice. Under this Agreement, the
Company pays for legal, actuarial, investment, and certain other administrative
services.
27
<PAGE> 107
PART II
OTHER INFORMATION
<PAGE> 108
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 Policy issued pursuant to this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
Cross Reference Sheet
The Prospectus, consisting of [47] pages;
Representation of Insurer pursuant to Section 26 of the Investment
Company Act of 1940;
The Signatures;
Written consents of the following persons:
Ernst & Young LLP-Filed Herein
Opinion and Consent of Actuary- Filed Herein
The following exhibits are filed, or are incorporated by reference to the
designated filings, as part of this registration statement:
1. Copies of all exhibits required by paragraph A of the instructions as
to exhibits in Form N-8B-2 are set forth below under designations based
on such instructions:
<TABLE>
<S> <C>
A(1) Resolutions of Board of Directors of The Manufacturers Life Insurance Company of
America establishing Separate Account Four. Previously filed with pre-effective
amendment no. 1 to this registration statement, filed August 28, 1998.
A(3)(a)(i) Distribution Agreement between The Manufacturers Life Insurance Company of America and
ManEquity, Inc. dated August 11, 1987. Previously filed with pre-effective amendment
no. 1 to this registration statement, filed August 28, 1998.
A(3)(a)(ii) Amendment to Distribution Agreement between The Manufacturers Life Insurance Company
of America and ManEquity, Inc. dated July 2, 1991. Previously filed with pre-effective
amendment no. 1 to this registration statement, filed August 28, 1998.
A(3)(a)(iii) Supplemental Agreement to Distribution Agreement between The Manufacturers Life
Insurance Company of America and ManEquity, Inc. dated October 1, 1992. Previously
filed with pre-effective amendment no. 1 to this registration statement, filed August
28, 1998.
A(3)(b)(i) Specimen agreement between ManEquity, Inc. and registered representatives. Previously
filed with pre-effective amendment no. 1 to this registration statement, filed August
28, 1998.
A(3)(b)(ii) Specimen agreement between The Manufacturers Life Insurance Company of America and registered
representatives. Previously filed with pre-effective amendment no. 1 to this registration statement,
filed August 28, 1998.
A(3)(b)(iii) Specimen agreement between ManEquity, Inc. and dealers. Previously filed with
pre-effective amendment no. 1 to this registration statement, filed August 28, 1998.
</TABLE>
<PAGE> 109
<TABLE>
<S> <C>
A(3)(b)(iv) Specimen agreement between The Manufacturers Life Insurance Company of America and dealers. Previously
filed with pre-effective amendment no. 1 to this registration statement, filed August 28, 1998.
A(3)(c) Schedule of Sales Commissions. Previously filed with pre-effective amendment no. 1 to this registration
statement, filed August 28, 1998.
A(5)(a) Form of Flexible Premium Variable Universal Life Insurance Policy FTIO Rider form 121 and Unisex
endorsement form. Previously filed as Exhibit A(5)(a) to the initial registration statement on Form S-6,
file number 333-51293, filed April 29, 1998.
A(6)(a) Restated Articles of Redomestication of the Company. Incorporated by reference to Exhibit A(6)(a) to
post-effective amendment no. 20 to the registration statement on Form S-6, file number 33-13774, filed
April 26, 1996.
A(6)(b) By-Laws of the Company. Incorporated by reference to Exhibit A(6)(b) to post-effective amendment no. 20
to the registration statement on Form S-6, file number 33-13774, filed April 26, 1996.
A(8)(a)(i) Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life
Insurance Company of America dated June 1, 1988. Previously filed with pre-effective amendment no. 1
to this registration statement, filed August 28, 1998.
A(8)(a)(ii) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The
Manufacturers Life Insurance Company of America dated December 31, 1992. Previously filed with
pre-effective amendment no. 1 to this registration statement, filed August 28, 1998.
A(8)(a)(iii) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated May 31, 1993. Previously filed with pre-effective amendment no. 1
to this registration statement, filed August 28, 1998.
A(8)(a)(iv) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated June 30, 1993. Previously filed with pre-effective amendment
no. 1 to this registration statement, filed August 28, 1998.
A(8)(a)(v) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated December 31, 1996. Previously filed with pre-effective amendment
no. 1 to this registration statement, filed August 28, 1998.
A(8)(a)(vi) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated May 31, 1998. Previously filed with pre-effective amendment no. 1
to this registration statement, filed August 28, 1998.
</TABLE>
<PAGE> 110
<TABLE>
<S> <C>
A(8)(b) Stoploss Reinsurance Agreement between The Manufacturers Life Insurance Company of
America and The Manufacturers Life Insurance Company dated January 1, 1988.
Previously filed with pre-effective amendment no. 1 to this registration statement,
filed August 28, 1998.
A(8)(c)(i) Service Agreement between The Manufacturers Life Insurance Company and ManEquity, Inc.
dated January 2, 1991. Previously filed with pre-effective amendment no. 1 to this
registration statement, filed August 28, 1998.
A(8)(c)(ii) Amendment to Service Agreement between The Manufacturers Life Insurance Company and
ManEquity, Inc. dated March 1, 1994. Previously filed with pre-effective amendment
no. 1 to this registration statement, filed August 28, 1998.
A(8)(d) Service Agreement with McCamish Systems, L.L.C. Previously filed with pre-effective
amendment no. 1 to this registration statement, filed August 28, 1998.
A(10) Form of Application for Flexible Premium Variable Life Insurance Policy. Previously
filed with pre-effective amendment no. 1 to this registration statement, filed August
28, 1998.
</TABLE>
2 Consents of the following:
A. Opinion and consent of James D. Gallagher, Esq., Secretary and
General Counsel of the Manufacturers Life Insurance Company of
America. Previously filed as Exhibit 2A to pre-effective
amendment no.1 to this registration statement, filed August
28, 1998.
B. Opinion and Consent of Paul Smalley, Actuary. -Filed Herein
C. Consent of Ernst & Young LLP- Filed Herein
3 No financial statements are omitted from the prospectus pursuant to
instruction 1(b) or (c) of Part I.
4 Not Applicable
6 Memorandum Regarding Issuance, Face Amount Increase, Redemption and
Transfer Procedures for the Policies. Previously filed with
pre-effective amendment no.1 to this registration statement, filed
August 28, 1998.
7 Power of Attorney.
Incorporated by reference to Exhibit 12 to post-effective amendment no.
10 to the registration statement on Form S-6, file number 33-52310,
filed February 28, 1997.
James P. O'Malley - Incorporated by reference to Exhibit 7 to initial
registration statement made on Form S-6, file number 333-82449, filed
July 8, 1999.
Incorporated by reference to Exhibit 7 to post effective amendment no.
1 to the registration statement on Form S-6, file number 333-69719,
filed February 25, 2000.
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant and the Depositor certify that they meet all the requirements for the
effectiveness of this amendment to the Registration Statement pursuant to rule
485(b) under the Securities Act of 1933 and have duly caused this amendment to
their Registration Statement to be signed on their behalf in the City of
Toronto, Province of Ontario, Canada, on this [27th] day of April, 2000.
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> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
amended Registration Statement has been signed by the following persons in the
capacities indicated on this [27th] day of April, 2000.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
*___________________________________ Chairman and Director
JOHN D. RICHARDSON
/s/ Donald A. Guloien President and Director
___________________________________ (Principal Executive Officer)
DONALD A. GULOIEN
*___________________________________ Director
SANDRA M. COTTER
/s/ JAMES D. GALLAGHER Director
____________________________________
JAMES D. GALLAGHER
*___________________________________ Director
JAMES O'MALLEY
*___________________________________ Director
JOSEPH J. PIETROSKI
*___________________________________ Director
THEODORE KILKUSKIE, JR.
/s/ Denis Turner Vice President, and Treasurer
____________________________________ (Principal Financial and Accounting Officer)
DENIS TURNER
*/s/ JAMES D. GALLAGHER
____________________________________
JAMES D. GALLAGHER
Pursuant to Power of Attorney
</TABLE>
<PAGE> 113
EXHIBIT INDEX
<TABLE>
<CAPTION>
Item No. Description
- -------- -----------
<S> <C>
2A Opinion and Consent of Actuary
2B Consent of Ernst & Young
</TABLE>
<PAGE> 1
April 27, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Actuarial Opinion on Illustrations Contained in Post-Effective
Amendment No. 2 to a Registration Statement on Form S-6 (File No.
333-51293) (the "Amendment")
Dear Sirs:
This opinion is furnished in connection with the above-referenced Amendment
under the Securities Act of 1933, as amended, describing a flexible premium
variable life insurance policy (the "Policy") that is offered and sold by The
Manufacturers Life Insurance Company of America.
The hypothetical illustrations of death benefits, Policy values and surrender
values used in this Amendment are consistent with the provisions of the Policy
and the Company's administrative procedures. The rate structure of the Policy
has not been designed so as to make the relationship between premiums and
benefits, as shown in the illustrations, appear disproportionately more
favorable to a prospective purchaser of the Policy for the age and risk class
illustrated than for any other prospective purchaser. The particular
illustrations shown are for a commonly used risk class and for premium amounts
and ages appropriate to the markets in which the Policy is sold.
I hereby consent to the use of this opinion as an exhibit to the Amendment.
Sincerely,
/s/Paul N. Smalley
Paul N. Smalley, ASA, MAAA
Actuary
<PAGE> 1
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated March 3, 2000 accompanying the consolidated
financial statements of The Manufacturers Life Insurance Company of America and
our reports dated February 3, 2000 with respect to the financial statements of
Separate Account 4 of The Manufacturers Life Insurance Company of America, in
Post Effective Amendment No. 2 to the Registration Statement No. 333-51293 on
Form S-6 and related prospectus of Separate Account Four of The Manufacturers
Life Insurance Company of America.
Ernst & Young LLP
Philadelphia, Pennsylvania
April 24, 2000
